Study exposes gaps in contract system
Tobacco farmers on contract with buying firms are being subjected to unfair trading practices contrary Competition and Fair Trading Act, which prohibits business enterprises from engaging in unfair conduct, it has emerged.
This is according to a study conducted by the Competition and Fair Trading Commission (CFTC) on contract system, which allows tobacco buyers to offer farmers inputs, extension services and loans as well as providing direct facilitation of growers by processors and buyers.
The contract system runs side by side with the traditional auction system, whereby tobacco growers are not under the watch of tobacco buyers and are left at the mercy of tobacco merchants.
But findings by CFTC show that the contracts farmers sign are contrary to the provision of the Consumer Protection Act, which, among others, stipulate that they must be drafted in terms which are clear and understandable and signed by both parties.
The study further established that most of the contracts are in English and use technical legal language, which the farmers cannot understand.
It also established that loan inputs prices are not indicated, loans are quoted in US dollars, and that some of the mandatory inputs supplied to farmers are not necessary since they can be sourced locally and cheaply, but are priced way above prevailing market prices.
Speaking in an interview on Tuesday, Tama Farmers Trust president Abiel Kalima Banda said farmers feel exploited on some of the provisions under contract farming, especially on inputs.
He said: “In terms of inputs, we are forced to take inputs yearly despite having some left from the previous season.
“This means we pay for something which we already have. It is, thus, our hope that these revelations will compel authorities to work towards addressing the cited concerns.”
In a separate interview, Tobacco Commission spokesperson Telephorus Chigwenembe said the regulator made similar observations and the proposed the tobacco law review which seeks to promote a win-win situation for both the grower and the buyer.
He said: “It is true that some practices in the industry disadvantage tobacco growers, most of whom are voiceless. To address some of these concerns, we have made sure that provisions in the proposed new law governing the tobacco industry directly addresses these issues.
“The new law will ensure growers have the right to choose which input loans they should get as opposed to the current practice. In addition, a contracted farmer will be free to sell their leaf to another buyer if disagreements over prices are not resolved.”
CFTC spokesperson Innocent Helema said in a written response on Tuesday the commission has since intensified efforts to engage companies to review the contracts.
“We shall also continue to collaborate with market regulators and other stakeholders to ensure that there is a level playing field so that everyone benefits from the trade,” he said.
Malawi adopted the contract system of growing tobacco in 2012 to ensure sustainable production of tobacco, the country’s main foreign exchange earner.
