4 February 2017

Malawi: Overproduction Strangles Malawi's Tobacco Industry

Photo: Daily News
(FIle photo).

Despite being major a foreign export earner, the future of Malawi's tobacco is uncertain, President Peter Mutharika has observed. Malawi News Agency's MARY MAKHIRINGA and EMILY BANDA of csjnews.org write.

Mutharika said the continued dwindling prices of Malawi's tobacco at the auction floor demands that farmers should start growing other cash crops.

"As a country we need to move away from tobacco as it is the buyers who suggest prices for the tobacco.

"Many times I have been meeting the buyers in person where they promise to provide good prices but they only do that in few days of opening the tobacco market and later go back to the lower prices," he said.

Mutharika said this on Thursday when he met the International Fund for Agriculture (IFAD) president Kanayo Nwanze.

Mutharika said when prices of products are dictated by buyers and not producers, something is completely wrong.

"The writing is on the wall that we need to move on and start focusing on other crops such as legumes which are fetching good prices in Asia," said Mutharika.

Malawi's tobacco's future uncertain

There are a number of factors that have resulted in tobacco fetching low prices.

Overproduction due to wrong policies is one of the factors responsible for poor prices of the golden leaf.

At the time there is little demand for the leaf Malawi continues to over-produce forgetting the basic economic law of demand and supply.

An attempt to bolster the prices through an initiative called Integrated Production System or IPS is failing to change the situation.

The problem of overproduction came in when the government decided to stop its strict regulation of the industry in the 1990s.

The liberalisation of Malawi's tobacco market resulted in almost anyone else who wished to grow tobacco to do so.

Malawi produced 169 million kilogrammes of the leaf in 2008, 208-million in 2009, 193-million kgs in 2010 and another high of 208 million kgs in 2011.

Such quantities are produced when demand is still low. The global demand for Malawi's burley brand is at around 140 million kilogrammes every year. Every time farmers produce more than that prices immediately nosedive.

It is an economic game of high supply, low demand and low supply, high demand.

Anti-smoking campaign

Another challenge for tobacco exports in Malawi is the global pressure from anti-smoking groups, spearheaded by the World Health Organisation's Framework Convention on Tobacco Control.

Policies to control tobacco use, including tobacco tax and price increases, can generate significant government revenues for health and development work, according to a new landmark global report from WHO and the National Cancer Institute of the United States of America.

WHO says that if left unchecked, the tobacco industry and the deadly impact of its products cost the world's economies more than US$ 1 trillion annually in healthcare expenditures and lost productivity, according to findings published in The economics of tobacco and tobacco control.

Currently, around 6 million people die annually as a result of tobacco use, with most living in developing countries.

"The economic impact of tobacco on countries, and the general public, is huge, as this new report shows," says Dr Oleg Chestnov, WHO's Assistant Director-General for Noncommunicable Diseases (NCDs) and mental health.

"The tobacco industry produces and markets products that kill millions of people prematurely, rob households of finances that could have been used for food and education, and impose immense healthcare costs on families, communities and countries," a WHO news release quoted Chestnov as saying.

Globally, there are 1.1 billion tobacco smokers aged 15 or older, with around 80 percent living in low- and middle-income countries. Approximately 226 million smokers live in poverty.

With about 400,000 farmers growing tobacco in Malawi as much as they wish and strong anti-smoking campaigns underway by WHO's Framework Convention on Tobacco Control, chances of the leaf fetching high prices remain slim.

Malawi

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