74 fired at Malawi’s tobacco companies

A drop in tobacco production this season has not spared Malawi’s tobacco companies, especially at Kanengo in Lilongwe, where the firms have started retrenching staff.

Limbe Leaf Tobacco Company Limited alone has since fired 69 employees from across its departments. Premium Tama had fired five leaf managers by last week and retrenchments loom at Alliance One Tobacco (Malawi) Limited by October end.

But the regulator, Tobacco Control Commission (TCC), has contradicted the argument that this year’s production levels have caused the retrenchments.

TCC spokesperson Juliana Chidumu says the affected companies may have “their own institutional reasons rather than production levels.”

But Willie Zingani, Limbe Leaf Tobacco corporate affairs manager, on Thursday said: “Limbe Leaf has closed two of its three factory machines and although we are optimistic business will pick up next season, it is doubtful the situation will quickly return to normal.”

He attributed the development to a 50 percent drop in tobacco production this year.

Some sources at Premium Tama, which is another key tobacco firm on the market, said the company has fired its senior leaf buyers as the weak crop output in the 2012 tobacco season reduced workload.

Tobacco Association of Malawi (Tama) chief executive officer Graham Kunimba, whose grouping is a shareholder in Premium Tama, confirmed the retrenchments in an interview last week, but declined to provide details.

Sources at Alliance One also said on Thursday, so far, the company has not yet retrenched anyone, but argued informal communication indicates that a restructuring process cannot be ruled out under the circumstances.

Said a source: “Right now, most tobacco companies are undergoing a restructuring process. As you know, there is a new tobacco production system which will basically mean the elimination of auction system in favour of contract farming.

“This simply means that most of the buyers will be eliminated as there will be few growers who will be growing tobacco on their own. Under integrated tobacco production system, farmers will be directly sponsored by some few tobacco buyers.”

The tobacco market was officially closed on August 14 2012, with a 79.8 million kilogrammes total volume, down from 237 million kilogrammes in the previous season, representing a 66 percent decrease.

Total tobacco proceeds for this season stood at $177.8 million (nearly K50 billion), down from $293.7 million (K82 billion) last year, representing a 40 percent decline.

Tobacco is Malawi’s most important economic activity, accounting for about 13 percent of gross domestic product (GDP), over 60 percent of foreign currency earnings and has two million people making a living out of it, which means the industry is the largest employer.