Tobacco auction floors evolution

From the very first corrugated iron warehouse built in 1936 in Limbe near the present microwave transmitter, AHL Group, formerly Auction Holdings Limited (AHL), has come a very long way.

In 1939 Tobacco Auctions Limited and Producers Warehouse Limited were both operating tobacco auction floors in Limbe. These two companies operated in competition with each other until 1962, when they were amalgamated as Auction Holdings Nyasaland Limited. Following Malawi’s Independence, the company was renamed Auction Holdings Limited.

With increasing demand for quality tobacco and the expansion of tobacco–growing, the Limbe-based auction, the floor’s capacity was fully utilised, and the need to expand became paramount.

A major development took place in 1978, with the establishment of the Lilongwe Auction Floor. This modern, purpose-built floor became operational in 1979 and was further extended in 1981.

The last major reconstitution and consolidation of the various companies took place between 1981 and 1982, when AHL Group acquired the majority shareholding in Central Tobacco Properties Limited. The Auction Holdings Group now comprises Auction Holdings Limited, Agricultural Trading Company, Tobacco Investments Limited and Malawi Leaf.

The most important function of the group continues to be operations of the tobacco auction floors in Muzu, Chinkhoma, Limbe and Lilongwe, in accordance with the terms of their licence.

In accordance with this licence, the farmer is charged a percentage of the value of the tobacco they sell. Out of this selling charge, AHL Group meets operating costs, pays its shareholders a small fixed dividend, retains a nominal amount for off-season expenses and pays the balance back to the farmers.

Over the years, the original building in Limbe has been modified and expanded. This building is now equipped with electronic weighing scales, computers and conveyor equipment and has potential to sell, with single sales, 4 500 bales of tobacco per day.

The Lilongwe Auction Floor complex has been modified and enlarged over the years and with concurrent sales, has the potential to deal with more than 12 500 bales of tobacco per day.

Grower woes

The selling season commences in late March or early April every year and continues until the last tobacco leaf has been sold, usually finishing sometime in September.

Every onset of tobacco marketing brings excitement among growers. But not all growers tell a good story of a day at the auction floors.

In 2007, tobacco grower, Jayiseni Sayizi, from Sendela village in Mponela withdrew a sum of K600 000 at one of the commercial banks in Lilongwe Old Town after selling his crop.

He went on a shopping spree in the city in the company of two other friends from his village who also had drawn some funds from their respective banks.

They wanted to treat themselves to good things after a tough growing season. The trio bought bicycles, radios and car batteries that would power the big stereo cassette players.

But as Sayizi was waiting for a bus to take him back home, from the ‘blues’ a man reached for his pockets and  ran out of the bus depot, taking away with him more than K300 000 (about $467) in cash.

“It was the only remaining money that I was left with for the year. It was the money I wanted to take home for other family needs, including paying the tenants who had helped me in the farm,” he recalls.

It is an experience he cannot erase from his mind.

Being robbed after selling tobacco was a common tale in Lilongwe.  Another grower, Hale M’baya from Dowa shares a similar experience.

In 2001, M’baya was nearly robbed after he had cashed his tobacco proceeds in Lilongwe.

“I went to Lilongwe Old Town where I withdrew K210 000 (about $327). From the bank I went to the bus depot to catch a bus back home, but then I noticed that two men had been following me.

“Despite several attempts to evade them by switching buses, the two still followed me up to Dowa turn- off when they gave up. It was a lucky escape,” he says.

Stories of farmers being mugged and having their hard earned tobacco proceeds stolen from them are so rife even these days when technology has changed the way growers can access money.

AHL Group has been carrying out several initiatives to ensure that tobacco farmers are not vulnerable and preyed upon by pick-pockets and thieves.

For example, AHL Group has brought at the auction floors numerous innovations which have eased farmers’ shoulders in turn reducing costs and risks of losing their proceeds.

Evolution

According to corporate affairs manager at AHL Group, Mark Ndipita, some of the products the company has brought on the auctioning floors are the SMS facility which makes it possible for farmers to get alerts and trace progress on their tobacco while at the AHL floors. Through the SMS system, growers know the exact date their tobacco will be sold.

“This eases the troubles for the farmers, especially on the part of travelling from their home districts, to check progress on their tobacco at the auction floors,” Ndipita said.

He said to avoid travelling back and forth between their villages and the auction floors, some farmers could simply camp at Kanengo awaiting the sale of their tobacco, thereby spending even more of their resources on accommodation and food.

It was during waiting periods that some growers would engage in risky sexual behavior with commercial sex workers.

Another innovation is a business centre just within the floors premises where growers can access secretarial services.

“Now we have banks on our campus so that growers do not have to go to town to withdraw their money where they fell prey to robbers and petty thieves,” he explained.

Today, M’baya can attest to the fact that it is now easier for him to know the progress on his tobacco while on the auction floors than was the case before.

“Sometimes I do not go to monitor my tobacco sales in Kanengo. All the information, including serial numbers of the tobacco bales which have been sold, rejected or whatever activity are given to me through an SMS alert system,” he said.

AHL has also installed a system called Info Direct to reduce corruption by employees.

Info Direct helps farmers to get details of their tobacco bales, such as whether it when was sold or rejected. Tobacco related information is made available via Info Direct at the touch of a button and it is displayed on the touch screen.

“Knowing that most farmers only get their returns once a year after selling their farm produce, AHL, we introduced a medical scheme where we link farmers with Medical Aid Society of Malawi (Masm) and they are allowed to pay once a year instead of monthly premiums,” Ndipita said.

All of this, according to Ndipita, is being done to help tobacco farmers enjoy their tobacco farming business.

He says the majority of these developments and modernisation has taken place to improve the service provided to tobacco farmers and buyers.

Other current improvements include a new “on-line” computer system, which enables Auction Holdings’ staff to answer to farmers’ queries almost instantaneously, and to provide a complete up-to-the-minute report on sales.

Fueling the future

The evolution in the auction system has not spared the growth of the group. Since February 2015 AHL Group boasts to be one of Malawi’s key strategic partners for local and international investors.

AHL Group apart from operating the tobacco markets in Malawi wholly owns Malawi Leaf Company Limited (MLCL), TIL Limited, Agricultural Trading Company (ATC), AHL Chemicals and Steel Limited (ACSL), and AHL Commodities Exchange (AHCX).

Through these investments, AHL Group is positioned to contribute in driving Malawi’s economy to another level. n