Tobacco loses its charm, earnings drop 23%

Revenue from tobacco—Malawi’s main foreign exchange earner—has slumped by 23 percent to $212 million (K155 billion) this year from last year’s $275 million (K201 billion) largely due to reduced output.

Figures from Tobacco Control Commission (TCC) show that this year’s volume dropped to 124 million kilogrammes (kg) from last year’s 194 million kg.

Over the past five year’s earnings from tobacco, which brings in about 60 percent of the country’s foreign exchange earnings, have been on the downward spiral largely due to poor prices resulting from overproduction.

Explaining the reduced earnings on Wednesday, TCC chief executive officer David Luka said revenue drop this year is a reflection of reduced volumes.

“This season has run smoothly with no market interruptions as well as low rejection rates averaging between 10 and 20 percent.

“Again, prices were good this season as on average, the leaf fetched $2 (K1 466) per kg against last year’s $1.50 (K1 099) per kg,” he said.

In a separate interview, Tobacco Association of Malawi (Tama) chief executive officer Mathews Zulu said it is sad that the crop has this year failed to generate enough foreign exchange despite better prices on the market.

He said: “Of all the tobacco sold at the market, dark fired tobacco got the least pricing at an average of $1.36 (K966) per kg while burley at $1.80 (K 1 319) per kg and flue-cured at $2.92 (K2 140) per kg got the best prices.

“Looking ahead, we are hoping the season will be far much better than it was with the intervention of authorities where farmers will be restricted to produce according to their quotas as well as ensuring that only registered farmers grow the crop.”

Secretary to Treasury Ben Botolo is on record as having said that government is encouraging diversification of foreign exchange earnings, adding that though tobacco brings in more foreign exchange, the extent at which the cash crop has played a part in foreign reserves has been minimal of late; hence, looking at alternatives to boost the foreign reserves.

Government has been banking its hopes on legumes, which have potential to bring in $2 billion (K1.4 trillion) a year, but export cap in India for pigeon peas has put the diversification strategy in jeopardy.

But during the opening of this year’s Agriculture Fair in Blantyre on Wednesday, President Peter Mutharika said they will talk with the Indian Government to reconsider its decision.