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Captains of the tobacco industry have warned that production of the country’ major forex earner is threatened by high production costs and growers’ reluctance to pay back farm input loans.
Godfrey Chapola, Tobacco Control Commission (TCC) general manager, said on Thursday farmers will continue to have problems in accessing farm inputs through loans unless they start repaying loans.
Chapola, whose organisation administers an agro-input credit scheme on behalf of Farmers' World and Norsk Hydro, said the number of beneficiaries for the scheme has been reduced from 12,000 in 2000 to 3,000 last season because it is only open to credit-free farmers.
“The reduction means that the other growers did not repay the loans and we only service those who are credit free after looking at their production records in the past three years,” he said.
Asked how government will ensure that production is improved to meet the demand, Chapola said it is up to farmers to practise credit discipline and start repaying loans because the loans will only be open to credit free farmers. He, however, said there is potential to improve production if farmers dedicate themselves to their work.
Chapola also said, other than emphasising on increasing tobacco prices, there is also need to reduce production costs for farmers to earn more from their tobacco, saying “prices will never be good because they are determined by demand and supply”.
He said unless Malawi tobacco is produced efficiently, the revenue from the tobacco industry will continue to decline because the leaf will not be competitive as tobacco prices are determined by the international market trends.
He said since TCC has realised that some farmers fail to repay the loans because of low returns from sales, government will help by reducing levies and taxes deducted at source when selling the crop.
In a related development, Tobacco Exporters Association of Malawi (Team) have said the reduced production of burley tobacco from 142.3 million kg in 2000 to 102 million kg this year has translated into a loss of K4.6 billion in revenue.
Team identified high transport, input and marketing costs, bank charges, low prices at the auction floors and the devaluation of the kwacha as some of the factors that led to the reduced production of burley tobacco.
Team urged farmers, including those who abandoned the crop in the previous years, to grow more burley tobacco this year.
The buyers pledged to ensure that the crop is bought at reasonable prices next year, depending on the quality of the leaf.
“Team is committed to developing a meaningful price spread in which better quality will attract higher prices. It is our intention to work with other stakeholders to rectify inefficiencies and in so doing improve the net return to the grower,” said Team in a statement.
Albert Kamulaga, president of the Tobacco Association of Malawi (Tama) which recently announced that it has stopped acting as a guarantor for farm inputs loans for its members, said tobacco farmers should learn to invest their own capital and stop relying on loans.
Tama public relations officer George Mituka said Tama stopped guaranteeing loans for farmers because this year Tama will have to repay about K400,000 to suppliers—among them Farmers' World, Norsk Hydro and Admarc—on behalf of defaulting members.
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