Firm to fight buying cartel

Malawi Leaf General Manager Melvyn Moyo said in an exclusive interview in Lilongwe his company, a subsidiary of Auction Holdings Limited (AHL), was formed after realising that the tobacco auctioning system was under threat due to the current tobacco reforms.

“Reductions in commission and contract farming are the major issues that affected AHL.

“Since the rate of commission was getting lower, we felt venturing into tobacco buying and exporting was the only business,” he said.

But Moyo said Malawi Leaf, being a new entrant to the market, is facing difficulties to break through the already existing markets since, he said, the old tobacco buyers have formed what he described as a cartel.

“The challenge is to break through the markets where our colleagues have formed more or less a cartel. We are already breaking through some of them, it’s not easy but we will manage and we have already identified new markets which I cannot mention,” he said.

But Moyo dismissed claims that his company has brought no difference in the leaf’s price as widely expected being a local and government-owned company.

“We are in the market not necessarily to push up prices but to operate commercially and at the same time being transparent as much as we can. Being a local company, we are here to support government’s policies and we believe that we are best suited since we do not have any other interest outside Malawi,” he said.

Moyo said his company should be given more time. Todate, Malawi Leaf has bought five percent of the tobacco that has been auctioned.

Malawi Leaf offices are located in AHL’s building behind the Agricultural Trading Centre at Kanengo in Lilongwe. State-owned produce trader, the Agricultural Development and Marketing Corporation (Admarc), is the majority shareholder in AHL with 42.6 percent.

According to Moyo, Malawi Leaf is currently using threshing machines of its competitor-Alliance One-to process its tobacco which is yet to be exported.

Put to him that using Alliance One’s property, Malawi Leaf’s competitor in business, will put the local company in a conflict of interest situation, Moyo said: “It’s business to them. They are making money on us. It’s not that they are doing it for free.”

Malawi Leaf has increased the number of major tobacco buyers to four and was formed as part of government’s initiative to increase competition on the industry as well as to improve prices at the auction which have in recent years been a bone of contention among buyers and growers.

Buyers cry that buyers are giving them a raw deal while the buyers charge that the prices they offer match with the quality of leaf which is said to be poor in most cases.

Moyo said Malawi Leaf is currently facing financial constraints, which are making it difficult for the company to buy more tobacco.

Tobacco Association of Malawi (Tama) Executive Secretary Felix Mkumba, whose organisation has about 2.4 percent shares in AHL, described the coming of Malawi Leaf on the market as a blessing to the farmers.

He said government should pump in more money to enable the company effectively compete on the market. ‘ National online.

July 2006
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