Date Of Article: 3/19/2003
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K17 billion from tobacco this year
By: Ayam Maeresa
The Commercial Bank of Malawi (CBM) has said at an average price of K109.20 (US$1.20) per kilogramme, the country will this year realise K16.9 billion (US$175 million) from tobacco sales. The bank said in its latest economic report current statistics based on crop assessments indicate that a total of about 145.6 million kilogrammes of tobacco will be produced this season, representing a 5.4 percent increase over last year’s tobacco volume. The bank said the industry, whose proceeds remain the last option to prop up the economy from a two-year recession largely stemming from a freeze of about K6.8 billion (US$75 million) of donor aid in budgetary support, will produce 127 million kilogrammes of flagship burley tobacco. An estimated 15.8 million kilogrammes of flue cured, 2.2 million kilogrammes of Northern Division Dark Fired (NDDF) and 586,000 kilogrammes of Southern Division Fired (SDF) tobacco are anticipated this year. The bank said this growth represents an increase of 1.3 percent for burley, 41.7 percent for flue cured and 63.5 and 125.4 percentages for NDDF and SDF respectively. “Flue cured tobacco will increase because growers of this type had access to cheap capital, which attracted both new and old growers who had switched to growing other types,” said the bank. The industry expects an increase in volumes of flue cured tobacco in the light of anticipated shortages on the Zimbabwean industry, whose production is expected to hit all-time low levels because of Harare’s controversial land resettlement programme that has crippled the once vibrant industry and sent the entire economy downhill. This situation is expected to raise Malawi’s position to the world market as an alternative source of tobacco, industry experts say. Zimbabwe will produce only 75 million kilogrammes compared to 234 million last year. But this will come with a high price to commercial growers as curing of the variety needs firewood, which will be a headache to the industry given the intensive fight environmental activists are waging against wanton cutting down of trees. Said the bank: “Last year’s prices of western tobaccos could be behind the positive industrial response as evidenced by the estimated increased production of the varieties this year.” Last year the industry realised K14.5 billion (US$160 million) from sales after protracted price wrangles with the buyers that caused suspensions of markets earlier in the season when the price per kilogramme fell to about K22 (US 30 cents then). When the markets opened last week the story was not different as ‘growers’ — whom the Tobacco Association of Malawi (Tama) disowned as tobacco vendors who had beat the ban government effected on intermediate tobacco buyers — argued that opening prices of K163.80 (US$0.80) per kilogramme were lower than expected. The growers said they wanted to see an minimum of K91 (US$1.00) per kilogramme this year, which Tama executive secretary Sigman Chirambo countered in an earlier interview as “asking for a little too much”. He said these demands would have been sensible for good quality tobacco, which the growers are reserving for future presentation at the auction floors, but not the bottom leaf currently on sale. Meanwhile, authorities have said auction floors, currently experiencing low supply, will only open for business when there is enough leaf on the market and close on dry days until the industry gets into full swing. “We shall be there only when there is enough tobacco,” said Chirambo. Auction floors need to have at least 5,000 bales of tobacco to commence sales. At least all the three auction floors in Limbe, Lilongwe and Mzuzu are seeing low supplies of tobacco, which led to the authorities aborting sales in Lilongwe soon after opening last week. Economic analysts say government, which is in hard times following a freeze of about US$75 million (K6.8 billion) donor aid, opened floors early this year as opposed to month of April in a bid to get foreign exchange. The crop accounts for about 75 percent of the total foreign exchange and gets close to K14.5 billion a year in earnings.
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