Tobacco farmers remain poor

Working for a private corporation based in the heart of Malawi’s commercial city of Blantyre, Bakaya smokes only Peter Stuyvesant cigarettes ‘ also a favourite of the company executives he drives around.

He has to shell out nearly US$1,40 for a packet of 10 of these cigarettes ‘ more than a day’s wages for most people in Malawi, one of the world’s poorest countries.

While Bakaya can afford to pay for his expensive smoke, Malawian farmers growing the tobacco that ends up in these cigarettes are finding it hard to survive.

For three years, tobacco growers in this Southern African country have fought pitched battles with buyers on the auction floors, claiming tobacco prices are artificially depressed, and frequently rioting and disrupting trading.

Bakaya may not be aware of this, but Malawian tobacco not only holds a pre-eminent position in the national economy, it also accounts for much of the stuffing that goes into cigarettes sold around the world.

It is also the backbone of Malawi’s trade with the rest of the world ‘ something that in theory is meant to benefit the country’s poorest, but in reality is leaving them worse off.

The reason, say a lot of people from Malawian President Bingu wa Mutharika downwards, is that the market is being skewed in favour of big companies involved in tobacco buying.

Official figures from Auction Holdings Limited (AHL), a state-owned company that runs the country’s three major auction floors and sells the leaf on behalf of growers, show that prices have been sliding on the auction floors for the last three years.

Burley tobacco, which is the commonest variety grown by small farmers and is used in American-style blended tobacco, fetched an average of US$0,60 per kg at the beginning of the selling season in April this year, down from US$0,67 last year and US$0,78 in 2004.

In comparison, the minimum price set by the government this year is US$1,10 for low grade and US$1,70 for top grade tobacco.

“This (low price) is attributable to lack of strong competition under auction and a calculated desire not to compete in order to buy the tobacco cheaply,” says the Tobacco Control Commission general manager Dr Godfrey Chapola.

He says the situation is worsened by the fact that buyers know that growers have no market alternatives ‘ even when prices are not acceptable.

There are some 300 000 registered smallholder farmers growing tobacco across Malawi’s three regions (North, Centre and South). Most of them earn less than US$300 a year after deductions.

While poor growers have no option but to sell on the auction floors, big farmers deal directly with buyers and grow tobacco under contract.

At an average of US$1,06 per kg, the price of contract tobacco is higher than that on the auction floors and is agreed before the start of the selling season.

Since the choice of who to contract is left to the buyer, only good growers are contracted, says Dr Chapola, adding, “unless everyone is accommodated equitably, the poor and not-so-good farmers will be disenfranchised”.

In turn, the buyers supply multinational cigarette manufacturers such as Philip Morris and British American Tobacco (BAT) for even higher prices.

The situation appeared to reach a boiling point in March when President Wa Mutharika, an economist, threatened to expel the largest tobacco buyers if they continued to offer prices lower than the government’s minimum.

“Poor smallholder farmers in Malawi have remained poor because they are cheated by an international cartel that connives to buy our tobacco at exploitative prices and yet they sell the same tobacco at huge profits in their countries,” he said.

“If you dare to threaten me some of you will find yourselves in handcuffs,” he told buyers.

August 2006
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