Tobacco earnings under microscope

Affected by dry spells, there are fears that tobacco earnings will shrink further this year due to expected low output despite prospects of good prices.

But in an interview yesterday, Tobacco Control Commission (TCC) chief executive officer Kaisi Sadala argued that while issues of pricing are regulated by government, weather changes may bring a turnaround in crop outlook.

Results of the first round crop assessment show that output for tobacco is estimated at 149 million kilogrammes (kg), which is 12.8 percent below the international trade requirements or buyers’ demand of 171 million kg for 2018 marketing season.

The development also comes against the backdrop of reduced number of growers compared to the previous season.

TCC figures show that 41 784 farmers have grown the crop this season with a total licensed quota of 162.6 million kg.

Last year, buyers demanded 158 kg, where 45 000 tobacco farmers were registered. However, output was only recorded at 126 million kg.

Over the past seven years, earnings from the leaf halved from $410 million (K300 billion at the current exchange rate) in 2010 to $212 million (K155 billion) last year, according to TCC figures.

There is a new threat to the tobacco market as the government of Qatar has banned a number oftobacco products and its derivatives, a development players in the tobacco industry argue will have implications on the global tobacco trade.

In a statement, Secretary for Information and Communication Technology Erica Maganga said while the ban is not specific to Malawi, possessing, transferring or smuggling of such items, including electronic cigarette and advertising, promotion, sponsorship or publicity of such while entering Qatar would expose their holders to legal accountability.

Tobacco Association off Malawi (Tama) chief executive officer Mathews Zulu yesterday said while the low output may be good news to growers in terms of better than expected prices for those with quality tobacco, the country could end up getting less foreign exchange.

On the ban, he said while farmers pray this ban is not emulated by more countries, the impact such a decision would have could affect consumption of cigarettes made from the country’s tobacco.

“These are finished products, and as Tama, we are not sure how much of our tobacco is used in making these products.

“However, in simple analysis, yes we will be affected from the export side and consumption of cigarettes as well, thus revenue lost,” said Zulu.

But Sadala thinks otherwise. He believes the impact of the ban may not be direct because Malawi does not export tobacco to Qatar.

“However, such messages may escalate to other countries that are a destination of Malawi’s tobacco. In addition, cigarettes from Malawi tobacco used in Qatar market will have its share shrink.”

Tobacco is Malawi’s main export crop with figures from RBM showing that the crop brings about 50 percent of the country’s foreign exchange.

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