Gains, pains from tobacco in 2013

Ask Daniel Lambulira, a burley tobacco grower from Chinthonje Village in Ntchisi about his views on the performance of this year’s tobacco market.

With a smile on his face, he will simply tell you that he has never witnessed a lucrative tobacco season than that of 2013.He is stuck to tobacco business even beyond 2013, he proclaims.

Ask the same question to Akumkwindira Mpinganjira, also a long-time tobacco grower from Kapedzera Village, Traditional Authority (T/A) Kalumbu in Lilongwe.

You should count yourself lucky if he will even bother to open his mouth for any possible utterance, let alone responding by slapping your face hard.

Mpinganjira is simply vexed and annoyed with tobacco industry dynamics in 2013 and he is contemplating looking for other sectors to invest his energy. He is purely not joking.

“To me, tobacco business this year has advantaged tobacco buyers and government,” he launches a flurry of his misery.

But a visit at a dusty Chinthonje Village in Ntchisi will automatically present you with a picture that tobacco farmers such as Lambulira had good returns from the leaf because the industry is the preserve for special growers.

This is a true reflection of this year’s tobacco market based on Business Review’s analysis of the entire market conduct.

Tobacco industry experts, politicians, on one hand, will also choose to subscribe to their respective conclusions of the sector’s performance since you cannot detach politics from tobacco business. Malawi politics of course.

At a populous resort in Mangochi called Sun and Sand beginning Sunday this week, tobacco buyers, growers, transporters, officials from the Tobacco Control Commission (TCC), commercial banks, police and all other players in the tobacco value chain met for three days till Wednesday simply to provide a glimpse of the industry’s performance this year and map the way forward.

A critical peep into their business, seemingly rekindled my fresh memories of two antagonising school of thoughts subscribed by Lambulira and Mpinganjira on how tobacco business national wide has conducted itself.

Statistics speak volumes, successes

The Lilongwe Auction Floors, the largest in the country opened on March 11 to August 2,a period of 2 weeks,while Mzuzu Auction Floors,which was to last to wind up business, opened on April 8 and closed business on August 30.

Tellingly, as TCC boss Bruce Munthali put it on Tuesday, this year’s tobacco marketing has been ‘a short marketing season.

Apparently, Munthali recallls the times when the marketing of tobacco could extend to December due to intermittent market interruptions, among other challenges.

Most importantly, the issue of revenue, volume sold and average price was the talk of the day at the 2013 tobacco industry seminar.

Figures reflect that the market has injected $361.8 million against earnings at national level of $177.8 million which represents 103 percent increase.

Such a situation is sweet news to the economy with a dirty history of accumulating foreign exchange of less than one month of import cover.

Alone, the inflow of $361.8 million from tobacco represents over two months of import cover which, if well managed, such resources could help anchor the economy especially during the lean period, and help the country meet its import demand.

The same has happened to the volume which has climbed from 79.8 million kg last year to 168.7 million kg this year representing a 111 percent jump. This is massive.

But on a low note is the indicator of average pricing which has seen a slight decrease by 4 percent from $2.22 last year to $2.15 this year to the chagrin of most growers such Mpinganjira.

Even an attempt by the TCC boss on the slight drop in average price seemed not convincing to many during the seminar as they continued to nod their heads in disagreement.

Said Munthali: “This year we had protected prices and what happened is that when we introduced minimum prices for all tobacco this year, most merchants complained that prices were on higher side and we had to go back to the drawing board before we agreed to revert to the 2012 price matrix.”

Belated farmers’ dues

A general outcry is first heard from the roofs of the Tobacco Association of Malawi (Tama) premises City Centre in Lilongwe, where the country’s oldest tobacco grower body is bitterly complaining about delays by banks and other service providers in executing payments to its ordinary members-most of whom tobacco is their oxygen.

Tama officials in Mangochi brought forward complaints of payment delays which their members experienced serious delays to have their payments ready this year, even if after full repayments of their respective loans were made.

Payment forms on the market include remittance to market provider, sales proceeds to growers, grower refunds, loan recovery, due payments to stakeholders, payment to transporters, among others.

According to Tama, it takes some days before getting their dues from merchants and services providers which is contrary to what their counterparts in Zimbabwe are going through as it only takes few minutes before they rub-off their annual sweat.

New tobacco policy thrust under srutiny

The 2013 tobacco year was unique to the history of Malawi in the sense that President Joyce Banda approved the Integrated Production System (IPS) to guide the growing and marketing of tobacco.

Under the system, government set the 80 to 20 percent share in favour of contract marketing.

It was evident from the word go that some stakeholders in the tobacco sector would be uncomfortable with the system while others would smile.

Institutions such as Auction Holding Limited (AHL) which is a key player in the country’s tobacco industry forewarned last year that the adoption of IPS, without proper care, could lead to most tobacco growers ‘economically disastrous.’

But as is the case now, Business Review understands that while the system has been messy in some instances, it has also helped in issues of good tobacco quality as most contracted growers strived to follow good agricultural practices.

But on this policy shift, Mpinganjira is not sympathetic but rather gnashes his teeth.

“IPS has proved to be too bad to many of us small-scale tobacco growers but has advantaged tobacco buyers who have reached the extent of producing the leaf on their own and not buying from us,” he claimed.

In the 2013 season, however, with the implementation of IPS, the outturn shows that 69 percent of tobacco sold was on contract while 31 percent of the leaf was auctioned, according to TCC’s Fred Kamvanzina.

He says, on prices, their analysis shows that contract prices were higher by 21 percent over minimum prices against 15 percent higher for auction.

This simply means those growers on contract enjoyed relatively higher prices than their friends on auction.

Newly appointed minister of Agriculture James Munthali will tell you that IPS has improved the inflow of tobacco on the market, has led to very low rejection rates and also improve capacity utilisation of auction floors.

The Central Region Tobacco Growers Association (CRTGA) President Ernest Chadzunda is of the view that the 2013 tobacco season had good tidings and only hopes that government will panel beat the IPS system in the next growing season to avoid some shortfalls encountered this year.

Agony inflicted on tobacco transporters

On the flipside of a coin, tobacco transporters are singing a desolate song with respect to what they have experienced in the tobacco industry this year.

Most of the transporters whom Business Review spoke to during the week shared no mercy on IPS.

Dick Malikha a long-time tobacco transporter feels cheated by the IPS but blames it on the mushrooming of ‘the so-called’ tobacco growers associations. He claims that with the introduction of IPS, the associations have robbed the authentic transporters of their glory.

He narrates: “With the introduction of IPS, most grower associations were given the responsibility by buyers to identify the growers and it was this period when independent growers opted out for auction system. But what later happened was that during tobacco delivery time, buyers were left with a duty to transport tobacco to the auction and this created a loophole as it saw tobacco grower associations turning themselves as transporters. We were left out big time.”

Prince Kasambara, another transporter from General Transporters Association on Tuesday called on government to ensure transparent system of engaging transporters in IPS if the playing field is going to be levelled.

Solace for the injured?

Bygones are bygones such that a word of hope and comfort will be crucial to those that felt injured by the 2013 tobacco season.

The TCC boss explained in Mangochi that as the industry regulator, they will strive towards ensuring that delays in paying growers, especially contract growers after they have fully repaid their loans are eliminated from the tobacco system in the country.

He also believes that time is ripe that tobacco stakeholders work together to avoid a mix up of contracted farmers among merchants including associations.

Munthali also vows that government will ensure implementing IPS in line with revised regulations incorporated in the revised Tobacco Act.

Munthali is aided by his namesake, Minister of Agriculture in comforting and assuring tobacco farmers that government will not sit idle but pleaded with tobacco buyers on improved prices.

“Yes we have had good prices this year but if look back in the 1990’s, prices were very high and as a ministry, our expectation is that we should improve prices in line with dynamics of the economy,” said the minister.

Whatever the case, policy makers in the tobacco industry need to sit down and offer remedies which should see embattled souls like Mpinganjra brought back to life.