LILONGWE-(MaraviPost)-The country’s social monitoring body, Center For Social Concern (CFSC) has emphasized the need for crop diversification coupled with proper structured markets in a bid to avert exploitation among tobacco tenants.
The call cements on what other players in the tobacco industry have been advocating amid also low proceeds farmers gets from the green.
In a report titled; The Burley Tobacco Value Chain Analysis; mobilising for the tabling, enactment and effective adoption of legal protection for tenant farmers, CFSC finds out that farmers and farm workers (tenants) are not adequately compensated for their contribution in the value chain considering the total value of the industry.
Not only that but also that the majority of the value seem to rest in the hands of the leaf merchants leaving tenants suffer.
This is despite that eight percent of the value production comes from the tenants according to the CFSC study.
The scenario comes as the policy framework governing the industry structure and the conduct of tobacco buying companies has a huge bearing on the performance and benefits accruing to players in the value chain.
Sharing the findings on Thursday with Media Network on Tobacco (MNT) in the capital Lilongwe, CFSC says it is clear that the overwhelming majority of value is created and managed by the leaf merchants as a collective.
“This does not necessarily mean that the leaf merchants make supernormal profits at the expense of other players, but rather that they have greater opportunity to do so given the wide control they have over the chain. The biggest merchants in Malawi are involved in everything from production through marketing and processing to exporting. The leaf merchants enjoy low industry rivalry by cooperating through the Tobacco Exporters Association of Malawi (TEAM).
“In an industry of less than 10 players (with 3 of them having over 70 percent share of the market), there have been concerns that this cooperation can potentially drift into anti-competition tendencies that work to keep leaf prices low (Chirwa, 2011). They collectively face fragmented players with low bargaining power, hence they are price setters, rather than price takers,” reads part of the report.
The study adds, “On the other hand, the farmers have very little wiggle room in their activities as they get even lesser control over their enterprise with each passing year. Out of the value they create, there are different players that get a cut amounting to $10 million as shown in table 5 above. Unfortunately, there is very little they can do to fight for a reduction in these levies. From the labour side, they are facing more and more pressure to pay a fair wage to their tenants and workers – thanks to the efforts of advocacy organisations like Centre for Social Concern and the Tobacco Allied Workers Union of Malawi (TOAWUM). The net return that farmers made at the end of the season is an average of MK169,124 (US$229) per year.
“It should be appreciated that tobacco earnings are very erratic due to annual climate variability, dynamics of the global market and some apparent tacit collusion in tobacco marketing. Despite this, the study found fairly low levels of crop or enterprise diversification. The farmers understand the need to diversify their range of crops grown and most of them already do grow other crops, most popular ones being maize (for food) groundnuts, soybean, and beans. However, the consensus of the farmers was that as a cash crop, there is currently no viable alternatives to tobacco”.
CFSC Programs Officer Lucky Mfungwe appealed for crop diversification among citizens for alternative among dwelling of the tobacco industry coupled with exploitation from merchants.
“There are so many factors suggesting the leaf processing companies enjoy wider profit margins which can be passed on to other players through higher prices on the Auction Floors. The Malawi Government needs to be more resolute in enforcing minimum prices to make this happen.
“Though the industry is consolidated, there needs to be continuous efforts to bring in more buyers at the Auction Floors to help build up competition for the tobacco grown by independent farmers. There should also be a review of the contract farming mechanism to ensure that it remains beneficial to the industry in the long term,” urges Mfungwe.
The Centre for Social Concern (CfSC) is implementing a project called “Mobilising for the tabling, enactment and effective adoption of legal protection for tenant farmers”, with funding from the Catholic Agency for Overseas Development (CAFOD).
The aim of the project is to mobilise and advocate for tabling an up-to-date legal and labour policy framework that adequately protects tenancy labour workers against abuse and exploitation in agricultural sector with specific interventions in tobacco growing areas.