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Malawi chokes in tobacco smoke

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The message all along has been that tobacco is the highest paying sector for Malawian farming communities.

Buyers, the government and other economists have promoted this message with practised ease.

But a new study breaks with this tradition and finds that tobacco isn’t actually a high earner as it is widely perceived to be.

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Stanlas Gabadu, 46, from Traditional Authority Wimbe in Kasungu bears testimony to the findings of the study.

He has been in tobacco farming for over 20 years now. Yes, he has managed to send his six children to school on earnings from tobacco farming but Gabadu has nothing more to show in terms of material gains as would be expected.

Gabadu cites challenges like unfair prices at the auction floors being a major contributing factor to his continued romance with poverty. For him, tobacco farming has just been some labour of love.

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“I just take pride in having managed to send my children to school. But in real sense, there is nothing tangible I can show you as having managed to get from the 20 years I have been farming tobacco,” he admits.

Gabadu’s experience that tobacco farming is not as rewarding business as many people perceive it to be is one of the findings of a research titled Economics of Tobacco Farming in Malawi. The study was conducted by the Centre for Agricultural Research and Development (Card) of the Lilongwe University of Agriculture and Natural Resources (Luanar).

Based on interviews and analysis of livelihoods of tobacco farmers in four of the major six tobacco growing districts of Rumphi, Dowa, Kasungu and Lilongwe between the months of November and December 2014, the report cites labour costs as one of the many production costs that push the farmers’ balance sheet deep into the negative.

It shows that both contract (those under Integrated Production System) and independent farmers largely depend on family labour in leaf production.

“In particular, around 90 percent of all labour that is used in leaf production among independent farmers is family labour, while for contract farmers, the family contributes 89 percent of the total labour used in leaf production,” said Principal Investigator Dr Donald Makoka of Luanar when he launched the report in Lilongwe on May 5 2016 before industry players.

Dr Makoka who led a four member task team said when labour cost is incorporated in the production costs, many farmers cart home losses.

“Many independent farmers generated a loss (amounting to US$37.30/acre). When labour is not taken into account, however, independent farmers perceive that they make a profit (US$417/ acre).

“Similarly, for contract farmers, their levels of profit are much lower (US$224.30) when labour costs are take into account than when labour is not incorporated (US$630.10). Therefore, without accounting for family labour in the calculation of profits, tobacco farmers think that tobacco farming is a lucrative enterprise. The reality, however, is that the costs of production are so high because of the high intensity of labour that is required in the production process,” he said.

According to Makoka, when independent and contract farmer profits are averaged, the amount of profit accumulated by tobacco farmers is equivalent or even slightly less than what soybean and chilli farmers get.

Given that there is a relatively small difference between the profits of these crops, he said, there is reason to believe that policy interventions could support crop transition for tobacco farmers while moving towards more sustainable and less socially problematic crops.

“The levels of profitability for the other cash crops, such as soyabean and chillies can significantly improve if their supply chains get well developed to ensure timely and lucrative markets for the smallholder farmers,” he said.

The report also carries testimonies of some of the farmers that were engaged during the research.

A farmer from Mhuju in Rumphi said when it comes to tobacco marketing, the major problem is pricing of the grades.

“Since minimum prices were introduced in tobacco marketing, we are able to know when minimum prices have been released that this grade is being sold at such a price. But the major problem is that when tobacco buyers want to buy the tobacco at a low price, they don’t follow the minimum prices for the grades that are given by TCC (Tobacco Control Commission).

“Instead of buying the tobacco at the recommended price, you just hear that there is an increase in the number of bales at auction floors written ‘No Sale’ [rejection]. They simply do this because they don’t want to buy the tobacco at the recommended price. So that’s what happens at the markets,” he said.

He said tobacco cultivation is a highly demanding enterprise and they therefore expect the buyers to offer good prices for the leaf.

“We are in perpetual poverty because of the low prices,” remarked another farmer from Dowa, adding. “Tobacco prices have always been very low. The only year when tobacco farmers were happy with the prices was in 2008. That year the price went as high as $11/kg.

Another farmer also from Rumphi is quoted in the Card report saying “tobacco prices are very low, especially among independent farmers.”

“They will offer you very low prices for the same grade that attracts a good price for contract farmers. They do so because they want you to become a contract farmer next year. When they are able to do so, they know they will make money from you by giving you inputs at a very high cost,” said the man from Mhuju EPA.

The economics of tobacco production, according to the results from the study, show that leaf cultivation is a challenging and involving investment for smallholder farmers in comparison with that for other crops.

If the supply chain of cash crop, such as soybean and chillies were to get well developed like that of tobacco, these crops could offer excellent alternatives for tobacco producers, who are at risk of losing their main source of livelihood due to the global tobacco control movement, it says.

The research findings also show that a significant proportion of tobacco farmers are growing tobacco because it is the only viable crop but they have considered switching to another livelihood.

Up to 42.2 percent of all the sampled farmers reported that they do not see themselves growing tobacco in the next 5 years.

“There is a daunting task for policymakers to support tobacco farmers, some of whom are making some profits to other more viable and healthier cash crops. The supply chains for the alternative crops need to be well established to allow the farmers produce at relatively low cost, with high rates of productivity and allow them to sell at profitable prices,” reads the report in part.

Among others, Card recommends that contract tobacco farmers under the IPS need to be trained on how to understand the contracts they sign with the leaf companies, including the actual costs of inputs, the interest on the loans and other requirements under the contract. This, it says, will assist them in making informed choices on whether to take up the contract or not.

Chairperson for the Parliamentary Committee on Agriculture Felix Jumbe who was present during the launch of the report said the findings would contribute to the review process of the Tobacco Bill ahead of its tabling in Parliament.

“You have observed that independent smallholder farmers who are just growing haphazardly, without a contract, and even without the skills to grow, their profitability is very low, because the quality of the leaf they are producing is poor, fetching poor prices at auction floors,” he said.

Jumbe observed that when Malawi liberalised tobacco market in 1994, the crop had a minimal threshold of landholding that people were supposed to grow.

“So this economic side of it (Card report) is actually justifying what was happening before, that if you are growing barley, this is the minimum landholding. Perhaps when we were changing that everybody can start growing tobacco, we needed to put a minimum landholding size so that these problems that we are seeing today could be reduced.

“Even at smallholder level, it’s not profitable, and it’s contributing to poverty, and it is not surprising to you today that Malawi has grown poorer over the past 20 years. Our poverty levels have increased. It’s because people are growing tobacco in hope, or in anticipation that this is money-making crop, but it is not making money for them because they are not able to live to its quality requirements,” observed Jumbe.

Malawi’s economy is agro-based with the agricultural sector contributing over 29 percent of the country’s Gross Domestic Product (GDP), accounting for over 82.5 percent of its foreign exchange earnings.

The sector supports the livelihoods of over 90 percent of the population, according to the government. Further, 84.5 percent of the total labour force in the country is employed in the agricultural sector, with the majority working as smallholder farmers.

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