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For how long will tobacco farmers cry over poor prices in Malawi?


By Lowani Mtonga

For many years tobacco farmers have cried foul over starvation tobacco prices. Every year the story is the same: high rejection rate, 90c per kg or highest US$ 2.90 etc. Farmers and all Malawians are accustomed to this information.  And the gravy train continues unabated!

Tobacco Control Commission is just watching. The Ministry of Agriculture is just watching and the whole government machinery is just watching as tobacco buyers continue to exploit farmers while they make billions out of the sweat of the poor farmers.

The only time tobacco farmers enjoyed the fruits of their labour when President Bingu Wa Mutharika was in office. He fixed the minimum prices! He refused tobacco to be sold less than US$1.50. He knew that tobacco buyers sell more than US$4 at the international market. Robert Mugabe equally used to fix the price of tobacco knowing fully well that tobacco buyers were making a lot of money out of the leaf. Those of us who live in border districts know that vendors smuggle tobacco into Zambia where it fetches as high as US$ 6 per kg. No wonder during tobacco season you will find vendors from Zambia buying tobacco from farmers while vendors and growers also smuggle tobacco into Zambia. 

The Tobacco Commission and the Ministry of Agriculture have failed in their duty because of the inability to defend farmers from buyers. Instead, they have chosen to listen to the lies of supply and demand and contract farming.  In Malawi whether the supply is low or high or whether the demand is high or low the prices are the same. One of the principles of supply and demand is that both the buyer and supplier negotiate the price and the transaction must take where both agree on the price. This does not happen in the tobacco industry.

Buyers dictate the price to the detriment of the farmers who are saddled with a lot of costs: annual licence fee, feeding tenants, fertilisers, insecticides, pesticides, transport, rent etc.  Owing to this unequal and exploitative relationship many farmers have ended up as losers with no real profit from their sweat.   Usually, buyers use flimsy excuses such as low quality of the leaf to reject the tobacco. They end up buying at a cheaper price. Those who sell through the auction system get even poor prices. 

Contract farming is also a fallacy and problematic. Tobacco growers are given inputs and other materials to grow tobacco. However, the farmers are price takers. They do not negotiate the price.  The only advantages are that their tobacco is given priority to be sold and that the price is slightly higher than those who sell at the auction system.  Contract farming is a disguised form of thangata. In practical terms, farmers grow tobacco on behalf of buyers. This system has left many farmers in debt and destitute. The buyer deducts all the expenses, and the balance is given to the farmers. Some farmers incur losses and end up in debt while others fail to pay their tenants which has led to labour conflicts. 

How did things get to this level? Both the Ministry of Agriculture and the Tobacco Commission are to blame for allowing tobacco growers to exploit farmers hitherto.  The two institutions should have stepped in to defend the farmers against the exploitation by discussing, on behalf of farmers, with tobacco buyers the minimum prices at the beginning of each tobacco season.  Everyone knows that farmers are too weak to discuss prices with buyers.

Surely, we cannot be hearing of tobacco being bought at 90, $1.50 or $1.90 per kg in this present day and age. We have heard these prices for more than two decades. Its high time they changed. But this can only happen with intervention.  There is no real competition among buyers to pay better prices. Is it a cartel?

From now on, government should start announcing minimum prices and stop listening to lies of supply and demand. This is a gimmick that buyers use to buy tobacco at unreasonably low price.  Even when the supply is low, or demand is high prices are inelastic.

Government should also consider liberalising the sale of tobacco. Why force farmers to sell to buyers who are paying them exceptionally low?  The Tobacco Industry Act (2019) should be amended to allow   farmers to sell their tobacco wherever they want just like they do with other crops. This will give them an opportunity to find external market on their own. Admarc should also come in to find external market and buy from farmers at better prices.  Then Admarc can sell to external buyers.

The act, in its present form, favours buyers more than farmers. It even punishes farmers for something beyond their control. For example, Clause 60 (1) imposes a fine on farmers for exceeding their quota. Yet exceeding a quota may be due to favourable weather conditions and improved farming methods.  Why should farmers be punished for that?  Instead, there should have been a clause to ban buyers from growing tobacco. Let them stick to their role as buyers.

The tobacco industry needs serious reform. That tobacco is a dying industry is open to debate. What is clear is that tobacco farmers have been exploited for a long time to the level where growing tobacco is unprofitable. Many farmers have stopped growing tobacco because of being exploited. But when you see the same tobacco (from Malawi) fetch good prices, (as high as $6 per kg) in neighbouring countries you realise that tobacco farmers in Malawi are cheated! And this must be checked!

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