Tobacco contribution to forex down to 47%

The contribution of tobacco to the country’s foreign exchange revenue has dropped from around 60 percent to an average of 47.4 percent for the past three years, according to Business News calculations.

The drop in the leaf’s contribution to total export earnings is contrary to the widely quoted figures by authorities at Capital Hill that tobacco contributes between 60 and 70 percent to Malawi’s total foreign exchange earnings.

Business News calculations show that export earnings from tobacco—currently under pressure from the global anti-tobacco smoking campaign—for the past three years since 2011 has plummeted to an average of 47.4 percent, which is way below the 60 and 70 percent quoted figures.

Despite the drop, tobacco continues to dominate Malawi’s export basket, but economic analysts believe the increase in revenue generated in 2012 and 2013 could particularly be attributed to the favourable market prices for tobacco.

But the Malawi Government 2014 Annual Economic Report shows that besides tobacco, sugar, coffee, tea and pulses constitute Malawi’s top five export products and their contribution has been rising over the past years.

Cotton export earnings have also been on the increase from K7.6 billion in 2011 to K12.1 billion in 2012, but declined to K8.9 billion in 2013 due to poor prices and low output, according to the annual report.

Figures also show that tea export earnings have been fluctuating. In 2011, the crop contributed K13.5 billion, before picking up to K173.1 billion in 2012 and dropping to K31 billion the year after. Sugar contributed K33.5 billion in 2011, K10.3 billion in 2012 and 41.1 billion in 2013 while coffee’s contribution has been on the rise and its contribution  in 2011 was at K14.8 billion and rose to K19 billion 2012 and went up again to K33.6 billion in 2013.

The rise in other commodities’ contribution to foreign exchange earnings’ buffer could partly explain why the contribution of tobacco to forex earnings has been plummeting.

Tobacco Association of Malawi (Tama) chief executive officer Graham Kunimba yesterday said the declining trend in dollars from tobacco signals the subdued demand for the leaf coupled with poor prices.

“For sure, we are experiencing lower demand for tobacco than was the case a few years ago and we think this is because of the anti-tobacco smoking lobby,” he said.

The annual report shows that Malawi earned K88.9 billion from tobacco against total merchandise exports of K213.2 billion, representing the commodity’s contribution of 41.7 percent, according to our calculations.

In 2012, Malawi’s total exports were valued at K292 billion and tobacco dominated the export basket with a K157 billion export value, which accounted for 53.8 percent.

Last year, official figures show that out of K434.7 billion total export earnings for Malawi, tobacco share was K202.8 billion, representing 46.7 percent contribution from tobacco.

Minister of Agriculture, Irrigation and Water Development Allan Chiyembekeza yesterday said tobacco still remains Malawi’s greed gold, but insisted that government is looking for other crops such as legumes to compliment tobacco.

Analysts have said tobacco farming used to be a viable national economic activity in the 1980s and early 1990s, but argue that the crop is facing many challenges that have eroded economic benefits Malawi used to accrue then.