Reduced commission affects AHL Group

The Malawi government’s decision in January 2004 to reduce AHL Group’s commission on tobacco sales from 3.95 percent to the current 2.50 percent has negatively affected the company’s operating capital, making it difficult for it to effectively support farmers and fund its operations.
The decision to reduce the commission was contrary to the advise from external consultants and the ministerial task force which recommended an adjustment of only up to 3.27 percent.
Despite the advice, government went ahead to arbitrarily cut the commission down to 2.50 percent without any further consultations with AHL Group. Coincidentally, Malawi went for its third multiparty elections in May 2004.
The move has since proven devastating as it has been followed by a downward trend on overall national revenue from tobacco, which last year hit a new record low of US$212 million from an average of US$400 million around 2004. The cost of doing business has also steadily gone up, with the minimum wage alone going up three times since then.
AHL Group has since lost US$52.9 million in commission revenue to date, with a full loss value calculated at US64.7 million with interest.
From a financially independent company it used to be prior to 2004, AHL Group now depends on borrowing to not only ensure that the tobacco market operates smoothly but to also help the country strategically roll out diversification of the economy.
Ironically, even after getting its commission reduced significantly, the government pushed the company to open new markets for tobacco. It constructed a new auction floor at Chinkhoma in Kasungu and opened satellite markets at Kabwafu in Karonga and Mgodi in Mangochi, at a time it was yet to complete the Mzuzu Auction Floors extension project.
Since 2004, the company has been pleading with the government to review the decision and reinstate the original commission. But the appeals have not yielded any positive response even though in 2011 the government increased commissions for other beneficiaries of tobacco levies, excluding AHL Group.
The company has since engaged the office of the Attorney General to discuss appropriate remedies.
Meanwhile, tobacco merchants have also been refusing to pay for services related to use of the tobacco marketing facilities at the floors