Malawi’s tobacco sector is facing mounting structural weaknesses driven by oversupply, weak market governance, declining competition among buyers and rising production costs, findings of a new study show.
The development has raised fresh concerns about the sustainability of the country’s tobacco-led economic model.
The study indicates that Malawi produced 197 million kilogrammes of tobacco this year against buyer demand of 170 million kilogrammes (kg), creating an oversupply of about 27 million kg.
The study warns that the mismatch is depressing prices, weakening farmer bargaining power and worsening economic vulnerability for smallholder farmers.
“The mismatch between production volumes and market demand continues to depress prices and weaken farmer incentives,” reads the study in part.
It further said the pressure is being worsened by soaring production costs, with some farmers reportedly spending up to K4 million on two hectares while fertiliser prices continue to rise.
The study titled ‘Maximising tobacco farmers’ returns in Malawi under declining global demand: Evidence-based policy insights for pricing, contracts and market governance’ was jointly produced by researchers Innocent Pangapanga-Phiri, Moses Chitete, Lathiff Sesay and Derrick Kapolo from Lilongwe University of Agriculture and Natural Resources Centre for Agricultural Research and Development and the Farmers Union of Malawi.
Further, the study said the number of active tobacco-buying companies has declined from 11 to eight, reducing competition on the market and giving farmers fewer pricing alternatives.
Speaking in an interview on Tuesday, agriculture policy development expert Tamani Nkhono-Mvula said the oversupply of tobacco reflects deeper weaknesses in the country’s tobacco production system following the liberalisation of tobacco farming in the 1990s.
“This oversupply to a great extent is showing some weaknesses in terms of coordination of production of tobacco as a crop,” he said.
Nkhono-Mvula argued that while liberalisation expanded participation among smallholder farmers, it also weakened production controls and quality management systems that previously existed under estate-based production models.
He warned that Malawi’s long- term dependence on burley tobacco remains increasingly uncertain due to tightening international anti-smoking regulations and declining global demand.
The study has raised concerns over arbitrary bale rejections, hidden deductions, grading inconsistencies and post-loan price manipulation, issues researchers said are undermining trust in the formal market system.
Field evidence cited in the study showed that some farmers in border districts sold flue-cured tobacco informally to Zambian buyers at prices as high as K10 000 per kilogramme, more than double prevailing domestic contract prices.
The researchers said side-selling and cross-border trade are increasingly becoming rational economic responses to delayed payments, low net returns and restrictive contract systems.
Mwapata Institute research fellow Christone Nyondo said in an interview on Tuesday that the oversupply exposes serious weaknesses in Malawi’s tobacco planning and quota systems.
“One would have hoped the tobacco quota system would have easily eliminated this problem,” he said.
Nyondo warned that Malawi’s continued dependence on tobacco-generated forex remains increasingly risky amid declining global demand and anti-smoking campaigns.
However, he cautioned against simplistic calls to replace tobacco entirely, arguing that the sector’s forex contribution remains too large to substitute quickly.
“The answer is not necessarily about diversifying away from tobacco but with tobacco,” he said.
According to Nyondo, soybeans and groundnuts could potentially generate up to 75 percent of Malawi’s forex requirements if the country invests more aggressively in industrialisation and value addition.
