Tobacco loans under threat

There are fears that some tobacco farmers may default on their loans owing to the poor performance of the cash crop.

In a written response, JTI corporate affairs and communications director LimbaniKakhome said it has been a challenging year for both growers and buyers due to the weather impacts.

He said: “We have a total loan exposure of about $10 million [K8.25 billion] given out in inputs to growers and this is coupled with an expected lower crop volume.

“On top of that, we released in February over K500 million to growers of the cash collaterals they had deposited with us to access the loans. Those growers that were hugely impacted at the beginning of the season were encouraged to return the loaned inputs that were not going to be used to reduce their loan debt”.

The most affected growers are those contracted by buying companies under the Integrated Production System (IPS) and those producing on their own, but got loans elsewhere.

In a written response, Limbe Leaf Tobacco Company legal and corporate affairs director FebbieChikungwa said most of their contracted farmers will manage to supply the volumes and meet their financial obligations as well as make margins on their volumes.

She said where non-repayment of loans is as a result of forces beyond farmer’s control, the company implements a win-win strategy where the farmer continues to grow tobacco and the loan is recovered over an agreed period.

Speaking separately, Tama Farmers Trust chief executive officer Nixon Lita said the growers are concerned with loan repayment because the December dry spell affected production levels.

Tobacco is Malawi’s main forex earner, but its performance hasslumped owing to a number of factors, including strict global regulations and the anti-smoking lobby championed by the World Health Organisation.