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Up in Smoke
Malawi needs to diversify its agriculture as tobacco revenue drops
By Edwin Nyirongo | VOL.9 October 2017 ·2017-09-28

Malawi President Peter Mutharika (second right, in suit) inspecting tobacco during the opening of this year's marketing season

Malawi's economy, based on agriculture, has long relied on tobacco as its mainstay crop. However, in the past decade, falling prices have severely affected the country's biggest foreign revenue earner.

The Tobacco Control Commission (TCC) data shows that tobacco contributes about 11 percent of the country's GDP and 60 percent of its foreign exchange earnings, while employing almost 80 percent of the country's rural labor force. When tobacco auction halls closed this August, sales showed a remarkable drop compared to past yields.

Since Malawi's independence from Britain in 1964, the country's leaders have urged people to work hard in the fields knowing that it was the only way the economy could be sustained. This agricultural push worked so well that during the 1970s, 1980s and early 1990s, the Malawi kwacha was 2:1 with the British pound at the time.

At that time, tobacco was what economists described as an economy stabilizer. Every farmer wanted to grow it because it fetched better prices than other crops.

Changing circumstances

But since the global anti-smoking campaign started to gather momentum in the last few years, threats to tobacco as a crop began emerging. Prices fell and tobacco buyers moved away as a consequence. The few that remained bought the crop at far lower prices than the spendings farmers put in growing it.

According to TCC Chief Executive Officer David Luka, while there is no official anti-smoking campaign in Malawi, the global anti-smoking campaign led by the World Health Organization (WHO) and its slogan of "tobacco kills" over the past decade have definitely reduced demand.

Malawi has yet to assent to the WHO's Framework Convention on Tobacco Control (FCTC), which was adopted unanimously by the World Health Assembly on May 21, 2003 and entered into force on February 27, 2005. In 2015, a total of 180 countries had ratified the WHO's FCTC, including 43 in the African Region.

No anti-tobacco campaign

As Malawi's tobacco revenue started to drop, it was worrying not only to farmers but also the country, as forex continued to dwindle.

According to TCC, in 2016, revenue from tobacco dropped by 18 percent, from $337 million in the previous year to $275.7 million. This year, the crop had r­ealized $209 million when auction floors closed in August.

According to the AHL Group, the company that owns and operates Malawi's tobacco auction floors, tobacco sales were 192.5, 195.1 and 106.5 million kg in 2015, 2016 and 2017 respectively.

Luka said there are around 30,000 tobacco farming groups, with five to 10 farmers in each group. He said the exact figure is difficult to know because the number of farmers varies according to prices of tobacco on the market and also the size of the cultivating area. Malawi exports tobacco to 15 countries, including China.

Time to diversify

It's clear that with the drop in demand of tobacco worldwide, Malawi needs to look elsewhere for revenue and should not have all its eggs in one basket.

Felix Jumbe, a farmer and legislator, said the t­obacco planting industry has stagnated and there is need for diversification.

Jumbe, who is former president of the Farmers Union of Malawi, said the government should help farmers diversify into animal husbandry, legumes or other cereal crops, which are helping farmers in other countries to earn money.

"International commodity markets are there for these crops and Malawi can benefit a lot. The biggest problem is that our economy is not investing, but consuming," he said.

AHL Group has also called for crop diversification. Joseph Kawinga, Floor Manager of AHL Group in the northern town of Mzuzu, also appealed to farmers to plant crops that can fetch better prices than tobacco.

"They should stop putting so much energy in t­obacco because it has no future and try other crops like legumes," he said.

An economics lecturer at the University of Malawi, Dr. Martin Phangaphanga said Malawi should p­roperly implement its plans and strategies based on the planned Malawi Growth Development Strategy if it is to realize a bright future.

"The economy still faces challenges including widespread poverty and heavy dependence on primary agricultural products for its export earnings. Currently, the economy has attained some macroeconomic stability," said Phangaphanga.

He said if Malawi can achieve and sustain low levels of inflation and grow its economy faster than the population growth to reduce the poverty levels, then it should be on a promising path.

The economist warned that the anti-smoking lobby will effectively reduce demand for tobacco. He also warned that if Malawi farmers insist on growing tobacco, which will result in saturating the market, prices will fall and they will fail to even break even.

Phangaphanga agreed with the call for crop diversification to avoid relying on tobacco whose future looks bleak.

"Diversification to other exportables and investment in forex-earning activities seems to be the obvious way out of the current vulnerability. Of course there are still over a billion smokers around the world, but this [anti-smoking] campaign will work gradually, perhaps over a period of time since smoking is a behavioral issue. So countries like Malawi should plan and manage their economic transition accordingly," he said.

Principal Secretary for Malawi's Ministry of Agriculture, Irrigation and Water Development Erica Maganga said the government is still looking at alternative crops, but it is increasingly becoming difficult She said whenever a suggestion is made on a particular crop, a negative factor arises resulting in complete abandonment.

"For example, we settled for pigeon peas as a good cash crop to replace tobacco. But prices on the international market have crumbled and farmers who grew it are complaining. So we are still searching, but we do not know how long this will take," said Maganga.

She disclosed that some crops like coffee and macadamia have been proposed, but the government is still researching their suitability for a steady market.

Phangapanga has meanwhile advised the government not to rush to find a replacement for tobacco to avoid disappointing farmers and further denting the economy.

"The market for tobacco still exists and Malawi will continue to export in the foreseeable future. But as an economy, the country should work toward developing its industrial and manufacturing sector in order to be able to offer processed products on the international market, rather than primary agricultural products," he said.

(Reporting from Malawi)

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