Tobacco in Malawi

Tobacco in Malawi

The country is one of the two countries worldwide that is significantly dependent on raw tobacco for their export earnings. About 70% of Malawi’s export earnings come from this single commodity, contributing about 33% of the GDP and 23% of total tax revenue. It is estimated that about 52% of the Malawi population derive their livelihood from the tobacco industry. Tobacco growing in the country is encouraged and supported by the tobacco industry, financial institutions and the government through the provision of technical, material and financial support to tobacco growers. The Malawi government and tobacco industry has pumped in a lot of resources to improve production of the crop; institutions have been established to provide farm input loans, research and extension services. Tobacco is the only crop that enjoys such support.

Tobacco is of great importance for Malawi economy. Tobacco in Malawi remains the major industry having the highest foreign earnings. Tobacco remains the major cash crop for Malawi accounting for 70% of the foreign exchange earnings that are needed to procure goods and services of the county.

There are many constraints facing the tobacco industry right now in Malawi. These problems range from the production to the point when the tobacco is sold. Of these problems, some have greatly affected the industry. These problems can be listed as follows:

ØNon-Tobacco Related Material (NTRM).

ØLow input accessibility amongst tobacco growers.

ØLow tobacco prices at the Auction Floors.

Of these the three major ones are Non-Tobacco Related Materials and Nesting, decline in prices and Over-dependence on Fuelwood.

NON-TOBACCO RELATED MATERIAL (NTRM) AND NESTING.

These are foreign matter found in graded and baled tobacco either on the Auction or in the processing factory. Such materials may include plastic strands from woven polypropylene bags used for containing fertilizers, maize or Sal; feathers; stones; metal objects; eggs; bricks; grass; and MT9 or MT12 strings. The materials may be left in graded and baled tobacco deliberately or accidentally. Plastic materials and feathers are toxic to smokers, hence, the need to consider only NTRM free tobacco at the Auction floors.

This fact is very much related to nesting which is the deliberate placement of NTRM/ foreign matter, sub-standard cured tobacco hands or scraps and any other material in graded and baled tobacco with the intention of obtaining more weight from a small amount of quality tobacco. The material is placed in such a way that only thorough checking on the floors or in the factory is required to spot the malpractice. There has been a particular sharp increase in the cases of NTRM so far, recorded by Tobacco Control Commission (TCC) on the Kanengo floors this year (2004) as compared to the past two years. This sharp increase is due to the cases of plastic contamination detected in bales. Checking for plastic contamination on the Kanengo floors has been rigorous this year because international buyers are unhappy with the amount of plastic contamination in Malawi tobacco. Some tobacco has been rejected abroad and it has so far been sent back to Malawi because of the tobacco contamination.

Demerits of This Malpractice to Tobacco Industry

i.NTRM contamination has slowed down tobacco sales on the auction floors because of congestion in the factories as the “green leaf” is meticulously being checked for plastic and other NTRM mechanically as well as manually. Some processing factories have established new departments to handle the NTRM contamination problem. All these measures are costly and the tobacco farmer at the end of the day bears the cost.

ii.This malpractice also spoils our reputation on the international markets and the result of this is that there are reduced prices for our tobacco. This results in low profit amongst farmers.

Farmers need to be sensitized why putting foreign matter in the graded tobacco is bad. On top of this they need to be advised to check the tobacco carefully before bailing it. This can be in terms of storage place and facilities.

It is expensive especially if the public media are used.

Ø Establishing separate sections, which should be checking the tobacco for the NTRM and any foreign material. Some processing factories have already established new departments to handle the NTRM contamination problem.

This measure is costly and the tobacco farmer at the end of the day bears the cost.

A lot of factors have contributed to the dwindling prices in our Auction floors making the tobacco industry facing a lot of problems as of the past five years ago. Some of the reasons that have contributed to this fall in prices are:

This is a campaign, which is trying to reduce tobacco smoking by people. This campaign has mainly gained grounds in the western countries, which are the largest buyers of our tobacco. As a result there is reduce number of buyer and reduced prices as a result of fall of tobacco prices at the international market. This has greatly affected Malawi’s tobacco industry. The trend of the tobacco prices has gone down since the past five years. This trend is likely to continue and the tobacco industry in Malawi is likely to face a lot of problem due to the reduced interested in the buyers, which has resulted in the reduced prices.

Tobacco is one of the crops that are very demanding in terms of input. Production is very much dependent on how much input you have invested. The fertilizer marketing was characterized by a dual marketing system before liberalization in 1994.Fertiliser for smallholder farmers was imported by smallholder Fertilizer Revolving Fund (SFFRMF) and was distributed by ADMARC. The fertilizer imported by SFFRFM and distributed by ADMARC were subsidized by government. Some fertilizers for smallholder farmers were distributed by ADMARC at subsidized prices. Following the liberalization in 1994, the fertilizer market subsidies were phased out and pricing decontrolled thereby creating a unified fertilizer market. The liberalization of the fertilizer market only improved the ability of the industry to supply. However the major constraints is the affordability of the fertilizers due to high fertilizer prices after repeated devaluation and low purchasing power due to limited access to credit. Data on the use of fertilizers show that only 20% to 35% of the smallholder farmers use fertilizers. Before collapse of the credit system, 60% of the fertilizer was purchased on credit.

The credit sales have drastically been reduced to 11% and 20%. And the overall result of this is the poor production due to low accessibility to input and the tobacco that is offered at the market is of very low quality and, thus, attracting very low prices.

Strategies of Improving Input Accessibility

The problem affecting the accessibility of inputs can be solved in short, medium term removing supply and demand constraints. The liberalization of the inputs market has least removed some of the supply constraints. As of now the main constraint is the availability of the credit for importers as well as distributors. The constraint is important for emerging importers and distributors.

Most of the problems in the input market is on the demand side. The low profitability of the fertilizer, the low purchasing power and limited access to credit are the major constraints. As mentioned above higher output prices may serve to increase demand.

There are also a number of other steps that may stimulate the demand.

ØIncreased access to credit through improvement in supply of the financial resources to MRFC and the establishment of farmers’ savings and credit cooperatives.

ØGovernment/donors safety net programs distributing fertilizers to poorest and providing input for work.

ØEncourage farmers to form cooperatives, associations or clubs which could be used as credit, bulk procurement of inputs and marketing of output.

ØIntroduction of 25kg and 15kg fertilizer bags.

Tobacco farming requires substantial amounts of wood for a variety of purposes, such as curing, and poles and sticks for barn construction. To varying degrees, wood usage was found to be widespread in nearly all developing countries. Expressed in percentages of global tobacco production in the first half of the 1990s, major consumers of wood were dark air/sun-cured tobaccos (15%), burley (12%), flue-cured (12%), oriental tobacco (9%), fire-cured and dark as well as light air-cured tobaccos, being minor consumers (around 1% each). In many countries, including Malawi, where flue-cured tobacco is grown, fuelwood demand is not sustainable.

Among the underlying causes of tobacco-related deforestation are:

ØThe usage of wood in the farm-based process of curing the crop that is, drying the leaves.

ØThe global shift of production into low-cost producer countries of the developing world, which typically have fragile natural environments.

Not considered here, but relevant especially under tropical conditions, are the agricultural practices of topping and desuckering, that is, designing the tobacco plant as a consumer product that will have high nicotine content. The result is a uniquely high uptake of all macronutrients from the soil, and tobacco’s regular need for fertile (virgin) soils, which are often provided by land clearances involving deforestation.2 11

Increased efforts of afforestation/reforestation together with lower rates and higher efficiency of wood used in curing tobacco for example, improvements in barn technology, growing use of agricultural wastes as fuel sources can help to reduce tobacco’s round wood consumption and impact upon deforestation.

ØReduced impacts, which come as a result of deforestation.

ØThe time taken for the method to be effective is very long.

ØIt is high labour demanding and costly.

The tobacco industry in Malawi is currently faced with a lot of problems as outlined above. These problems have deteriorated the standard of the tobacco industry since the past five years. The problems facing the tobacco industry reached great levels last year, 2003/2004, growing season due to the Non-Tobacco Related Material (NTRM) and Nesting.

Ø Global assessment of deforestation related to tobacco farming, Tobacco Control 1999; 8:18-28

Ø The Nation News Paper Article “The tobacco sales Finally come to an end.”

The country is one of the two countries worldwide that is significantly dependent on raw tobacco for their export earnings. About 70% of Malawi’s export earnings come from this single commodity, contributing about 33% of the GDP and 23% of total tax revenue. It is estimated that about 52% of the Malawi population derive their livelihood from the tobacco industry. Tobacco growing in the country is encouraged and supported by the tobacco industry, financial institutions and the government through the provision of technical, material and financial support to tobacco growers. The Malawi government and tobacco industry has pumped in a lot of resources to improve production of the crop; institutions have been established to provide farm input loans, research and extension services. Tobacco is the only crop that enjoys such support.

Tobacco is of great importance for Malawi economy. Tobacco in Malawi remains the major industry having the highest foreign earnings. Tobacco remains the major cash crop for Malawi accounting for 70% of the foreign exchange earnings that are needed to procure goods and services of the county.

There are many constraints facing the tobacco industry right now in Malawi. These problems range from the production to the point when the tobacco is sold. Of these problems, some have greatly affected the industry. These problems can be listed as follows:

ØNon-Tobacco Related Material (NTRM).

ØLow input accessibility amongst tobacco growers.

ØLow tobacco prices at the Auction Floors.

Of these the three major ones are Non-Tobacco Related Materials and Nesting, decline in prices and Over-dependence on Fuelwood.

NON-TOBACCO RELATED MATERIAL (NTRM) AND NESTING.

These are foreign matter found in graded and baled tobacco either on the Auction or in the processing factory. Such materials may include plastic strands from woven polypropylene bags used for containing fertilizers, maize or Sal; feathers; stones; metal objects; eggs; bricks; grass; and MT9 or MT12 strings. The materials may be left in graded and baled tobacco deliberately or accidentally. Plastic materials and feathers are toxic to smokers, hence, the need to consider only NTRM free tobacco at the Auction floors.

This fact is very much related to nesting which is the deliberate placement of NTRM/ foreign matter, sub-standard cured tobacco hands or scraps and any other material in graded and baled tobacco with the intention of obtaining more weight from a small amount of quality tobacco. The material is placed in such a way that only thorough checking on the floors or in the factory is required to spot the malpractice. There has been a particular sharp increase in the cases of NTRM so far, recorded by Tobacco Control Commission (TCC) on the Kanengo floors this year (2004) as compared to the past two years. This sharp increase is due to the cases of plastic contamination detected in bales. Checking for plastic contamination on the Kanengo floors has been rigorous this year because international buyers are unhappy with the amount of plastic contamination in Malawi tobacco. Some tobacco has been rejected abroad and it has so far been sent back to Malawi because of the tobacco contamination.

Demerits of This Malpractice to Tobacco Industry

i.NTRM contamination has slowed down tobacco sales on the auction floors because of congestion in the factories as the “green leaf” is meticulously being checked for plastic and other NTRM mechanically as well as manually. Some processing factories have established new departments to handle the NTRM contamination problem. All these measures are costly and the tobacco farmer at the end of the day bears the cost.

ii.This malpractice also spoils our reputation on the international markets and the result of this is that there are reduced prices for our tobacco. This results in low profit amongst farmers.

Farmers need to be sensitized why putting foreign matter in the graded tobacco is bad. On top of this they need to be advised to check the tobacco carefully before bailing it. This can be in terms of storage place and facilities.

It is expensive especially if the public media are used.

ØEstablishing separate sections, which should be checking the tobacco for the NTRM and any foreign material. Some processing factories have already established new departments to handle the NTRM contamination problem.

This measure is costly and the tobacco farmer at the end of the day bears the cost.

A lot of factors have contributed to the dwindling prices in our Auction floors making the tobacco industry facing a lot of problems as of the past five years ago. Some of the reasons that have contributed to this fall in prices are:

This is a campaign, which is trying to reduce tobacco smoking by people. This campaign has mainly gained grounds in the western countries, which are the largest buyers of our tobacco. As a result there is reduce number of buyer and reduced prices as a result of fall of tobacco prices at the international market. This has greatly affected Malawi’s tobacco industry. The trend of the tobacco prices has gone down since the past five years. This trend is likely to continue and the tobacco industry in Malawi is likely to face a lot of problem due to the reduced interested in the buyers, which has resulted in the reduced prices.

Tobacco is one of the crops that are very demanding in terms of input. Production is very much dependent on how much input you have invested. The fertilizer marketing was characterized by a dual marketing system before liberalization in 1994.Fertiliser for smallholder farmers was imported by smallholder Fertilizer Revolving Fund (SFFRMF) and was distributed by ADMARC. The fertilizer imported by SFFRFM and distributed by ADMARC were subsidized by government. Some fertilizers for smallholder farmers were distributed by ADMARC at subsidized prices. Following the liberalization in 1994, the fertilizer market subsidies were phased out and pricing decontrolled thereby creating a unified fertilizer market. The liberalization of the fertilizer market only improved the ability of the industry to supply. However the major constraints is the affordability of the fertilizers due to high fertilizer prices after repeated devaluation and low purchasing power due to limited access to credit. Data on the use of fertilizers show that only 20% to 35% of the smallholder farmers use fertilizers. Before collapse of the credit system, 60% of the fertilizer was purchased on credit.

The credit sales have drastically been reduced to 11% and 20%. And the overall result of this is the poor production due to low accessibility to input and the tobacco that is offered at the market is of very low quality and, thus, attracting very low prices.

Strategies of Improving Input Accessibility

The problem affecting the accessibility of inputs can be solved in short, medium term removing supply and demand constraints. The liberalization of the inputs market has least removed some of the supply constraints. As of now the main constraint is the availability of the credit for importers as well as distributors. The constraint is important for emerging importers and distributors.

Most of the problems in the input market is on the demand side. The low profitability of the fertilizer, the low purchasing power and limited access to credit are the major constraints. As mentioned above higher output prices may serve to increase demand.

There are also a number of other steps that may stimulate the demand.

ØIncreased access to credit through improvement in supply of the financial resources to MRFC and the establishment of farmers’ savings and credit cooperatives.

ØGovernment/donors safety net programs distributing fertilizers to poorest and providing input for work.

ØEncourage farmers to form cooperatives, associations or clubs which could be used as credit, bulk procurement of inputs and marketing of output.

ØIntroduction of 25kg and 15kg fertilizer bags.

Tobacco farming requires substantial amounts of wood for a variety of purposes, such as curing, and poles and sticks for barn construction. To varying degrees, wood usage was found to be widespread in nearly all developing countries. Expressed in percentages of global tobacco production in the first half of the 1990s, major consumers of wood were dark air/sun-cured tobaccos (15%), burley (12%), flue-cured (12%), oriental tobacco (9%), fire-cured and dark as well as light air-cured tobaccos, being minor consumers (around 1% each). In many countries, including Malawi, where flue-cured tobacco is grown, fuelwood demand is not sustainable.

Among the underlying causes of tobacco-related deforestation are:

ØThe usage of wood in the farm-based process of curing the crop that is, drying the leaves.

ØThe global shift of production into low-cost producer countries of the developing world, which typically have fragile natural environments.

Not considered here, but relevant especially under tropical conditions, are the agricultural practices of topping and desuckering, that is, designing the tobacco plant as a consumer product that will have high nicotine content. The result is a uniquely high uptake of all macronutrients from the soil, and tobacco’s regular need for fertile (virgin) soils, which are often provided by land clearances involving deforestation.2 11

Increased efforts of afforestation/reforestation together with lower rates and higher efficiency of wood used in curing tobacco for example, improvements in barn technology, growing use of agricultural wastes as fuel sources can help to reduce tobacco’s round wood consumption and impact upon deforestation.

ØReduced impacts, which come as a result of deforestation.

ØThe time taken for the method to be effective is very long.

ØIt is high labour demanding and costly.

The tobacco industry in Malawi is currently faced with a lot of problems as outlined above. These problems have deteriorated the standard of the tobacco industry since the past five years. The problems facing the tobacco industry reached great levels last year, 2003/2004, growing season due to the Non-Tobacco Related Material (NTRM) and Nesting.

Bibliography:

ØGlobal assessment of deforestation related to tobacco farming, Tobacco Control 1999; 8:18-28

ØARET annual Report, 2002

ØThe Nation News Paper Article “The tobacco sales Finally come to an end.” REFERENCE

ØGlobal assessment of deforestation related to tobacco farming, Tobacco Control 1999; 8:18-28

ØARET annual Report, 2002

ØThe Nation News Paper Article “The tobacco sales Finally come to an end.”