The Tobacco Commission has registered a new tobacco buying company ahead of this year’s market season bringing the total number of the buying firms to nine.
TC chief executive officer Kayisi Sadala said the new buyer is Voedsel Tobacco Company from Zimbabwe.
“The company will participate in buying burley and FCV tobaccos on auction market in the first year, but will expand to contract marketing in the second year,” he said when he addressed the media on Wednesday in Lilongwe.
According to the company’s website, Voedsel Tobacco Company (known in Zimbabwe as Voedsel Enterprises (Pvt) Ltd) is a Zimbabwean wholly-owned indigenous company which made its inroads into tobacco business in 2008.
It is licensed with The Tobacco Industry and Marketing Board (TIMB) as a Class “A” buyer, and the license permits the company to buy tobacco in Zimbabwe for export.
Since 2008 the company has been buying tobacco on the auction floors on behalf of other tobacco merchants and it is involved in tobacco contracting, processing and exporting.
“The new company will provide competition and options to tobacco growers and is coming at a time the global market is facing competition due to dwindling demand,” said Sadala.
Welcoming the development, Tama Farmers Trust chief executive officer Felix Thole said having more tobacco buying companies on the market induces competition which becomes advantageous to growers.
He said: “When we have a new buyer on the market we celebrate because that means it will boost buying competition. It’s a plus for us and we would love to see more buyers coming onto the market.
“This means when some don’t want to pay much, the new buyer will come in to save the day with better offers resulting in better competition.”
According to Sadala, the consolidated trade requirement for 2020 marketing season stands at 161.4 million kilogrammes (kg) against the licensed volume of 173.4 million kg.
The commission has also set, according to the obacco Industry Act, an allowable variable of 10 percent of the licensed volume within the demand and that the TC expects competitive trading considering the projected low production within the African region.
Currently, the commission has completed licensing of all stakeholders to be involved in the 2020 marketing season which include buyers, grower associations, transporters, floor operators, graders, processors and hessian operators.
Tobacco accounts for the country’s 60 percent foreign exchange earnings and directly and indirectly employ over 50 000 Malawians through farming, marketing, processing and value addition, among others.
Last season, tobacco market officially opened on April 25 2019 and closed on September 27 with an 18 percent decrease in volume sold summed at 165.6 million kilograms from 202 realised during the previous season.
Cumulatively, tobacco fetched an all-type average price of US$1.43 (about K1 058) per kg in 2019 which was 14.3 percent lower than $1.67 (about K1 235) per kg fetched in 2018.
According to mode of sale, 71.6 percent which was 118.6 million kg was sold under contract system compared to 76.6 percent in 2018 against 28.4 percent which was 47 million kg was sold through auction system compared to 23.4 percent in the preceding marketing season.
Total proceeds from the 2019 tobacco sales amounted to US$237 million (about K175 billion), a drop of 29.8 percent from US$337.5 million realised in 2018.