Supply chain ripping off tobacco growers
The presence of multiple and profiteering players in the tobacco supply chain in the country constitutes a large body of factors that are ripping off tobacco growers leaving them in perpetual misery, Malawi News can report.
Worse still, the growers are also saddled with a minimum of seven statutory levies which they pay through deductions from their tobacco proceeds from the auction floors.
In addition, the growers come up against a catalogue of informal expenses to meet between tobacco production and tobacco selling, expenses which eat further into their proceeds.
And the Tobacco Control Commission (TCC), a body which regulates and promotes the tobacco industry in Malawi, has since admitted the problem of proliferation of players in the supply chain.
According to the commission, the supply chain is littered with unscrupulous players who have been fleecing the growers of their money.
The tobacco industry regulator has since indicated there is a crackdown on the cards to be based on findings of a study it has commissioned in response to traffic of complaints of dubious dealings in the supply chain.
As the tobacco marketing season draws to a close, we sought views of some tobacco farmers from Zomba and Mangochi on their impression of the season thus far.
The farmers, among other problems, highlighted how “too many levies and too many players in the supply chain” have been unduly reaping from their sweat.
One of the growers we engaged, Action Chimpeni, from Dzaone in Zomba, said:
“It’s a fact that prices which tobacco buyers have been offering us have not been good for a long time now. But making matters worse is the fact that we have a contingent of players demanding their portion from the same little price. In my view, this is one of the most serious problems for tobacco growers in Malawi.
“It is as if we are hired to produce tobacco on behalf of someone who has the entitlement to grab all our earnings and then decide what small change to give us. Tobacco production is such a daunting task and these occurrences are unfair to us.”
Various tobacco market structure analysis reports which we have gone through show that between the tobacco grower and the auction floors, there are not less than seven players.
These include banks, input providers, extension and market service providers, warehousing service providers, transporters, marketers and processors –each of which demand their pound of the grower’s flesh.
And a tobacco pricing analysis from within the industry which we have seen shows that transportation is one of the players in the chain which bleeds the grower.
According to the analysis, although transport costs are gazetted by the TCC, transporters dictate the prices and put them higher than those that are gazetted.
The analysis shows that in comparison with any other agricultural commodity, charges for tobacco are far much higher. For instance, for a transport charge of K800 for 100 kgs of maize, K2,900 is charged forthe same quantity of tobacco.
Information sourced from recent sales receipts we have seen from some of the growers and study reports for the industry also show that growers pay 2.5 percent of gross revenue for Auction Holdings cess levy, 3 percent of gross revenue for government withholding tax, one percent of gross revenue for ARET cess, 0.35 cents per kilogramme for TCC classification and 10 cents per kilogramme for TCC levy.
They also pay levy for their membership to a grower association and for the hessian scheme.
In addition, the pricing analysis says the grower loses up to 10 percent of the proceeds from their tobacco to unscrupulous individuals and organisations through informal charges such as exorbitant transport rates, payment for facilitation for transport, offloading of bales at the market, facilitation for better price “or other aspects at marketing such as avoidance of rejection or preferential treatment.”
“Growers also lose money in undue facilitation for access of information,” it says.
A farmer from Mangochi admitted that paying a bribe is a culture in the industry if a grower has to get things done.
“The supply chain is so congested and players so selfish. They act like vultures and they are not kind. If you don’t bribe them, you can’t get things done in your favour. So yes, I have paid bribes,” said the grower, opting for anonymity.
TCC’s Chief Executive Officer, Bruce Munthali, admitted the challenge of supply chain ripping off farmers.
“I agree we have some unscrupulous players in the supply chain. These include some transporters who overcharge growers, which ends up with the grower realising too little from their toil.
“We have commissioned a study which will guide us on how to make the supply chain more disciplined and efficient so that growers can get the best out of their sweat,” Munthali said.
While TCC promises reforms, various studies show that between 1990 and 2011, the tobacco sector in Malawi has been subject of about 25 reform measures, probably the largest number of reforms to have been directed to an agricultural industry in Malawi in that period.
Asked why the reforms have seemingly failed to put a smile on the grower’s face, Munthali suggested their being specific to just the tobacco sector could have been part of the problem.
“There is also need for broader reforms, reforms such as value addition and ensuring efficiencies in the general marketing sector within which the tobacco industry would find itself,” he said.
A 2011 Tobacco Market Structure Analysis by a local NGO called Facilitators of Change Interventions (FOCI) recommended that the current market structure should be revised “along with a comprehensive policy and regulatory framework that facilitates an approach which integrates the tobacco value chain”.
“The approach should cover the entire process from production, logistics and marketing; in order for the industry to work in a complementary and supportive manner and represent a win-win situation as opposed to the current predatory, silo and win-lose approach,” it said.
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