In every Malawian related agriculture article the opening sentence has over the years been: Malawi’s economy heavily depends on Agriculture and the three most important export earners are tobacco, sugar and tea. Tobacco has over the years been a prominent contributor to the economy; it employs over 50% of the agriculture population and contributes 80% to the agriculture related GDP to the economy. Three years ago I came across an article whose title caught my attention. The title read; “Standing on one foot is better than none” and this was referring to the benign role the tobacco sector plays towards the country’s economy. Today, more is left desired whether this is still true or its something the government should comfortably rely upon. Three years down the line after I read that article, the tobacco sector’s performance has (especially on the market) been a misery and economically I guess there are more negative implications that this article is going to articulate.
Last year..... 2010
Having been privileged to study my Master of Science Degree in Agricultural and Applied Economics, I took it to myself that I should do a thesis of this economy driving sector. I embarked on an “Impact study of Contract Marketing[1] on the Profitability and Production of Smallholder Tobacco Farmers in Lilongwe[2]”. Theoretically, the arrangement has more advantages than there are disadvantages to the smallholder farmer as well as the sponsoring company and thus my hypotheses were based on the fact that the arrangement has positive implications wherever applied. In Malawi the arrangement is applied extensively in tobacco and was at one time tried in groundnuts. Considering that tobacco as earlier said, has been an economy driving sector, my confidence to accept my hypotheses rose. But what I learnt and got through my study was shocking (allow me to use this subjective word)! The arrangement had flaws right from the beginning to the end. The clauses were not clearly spelt and therefore potentially disadvantaged the poor-illiterate farmers ( Most smallholder farmers in Malawi fall in this category). The famers in this first case blindly signed the contracts with a blurred understanding. Coming to the market the contracts were grossly violated and the farmer had no say whatsoever. The farmers got the same price or even lower compared to the one gotten by farmers following the customary[3] channel of selling tobacco. In addition, the agreed quota was not bought and farmers were left with unsold tobacco bales which they would later resort to sale through the customary system. Would I be wrong to call that shameful on the part of the contracted farmer in the face of the non-contracted farmer? I guess not, because even a random sample of non-contracted tobacco farmers which I interviewed were at one point contracted and spoke strongly rather vehemently against the arrangement and would not recommend anyone to participate.
I got frustrated at their revelations and I prepared myself for tough times if my results indicated positive implications. The revelations were not long to be proved. From the analysis, with the application of econometric and statistical models, the arrangement indicated negative impact on both production and profit levels. To make sure I was not jeopardizing the growth agribusiness strategies as regards tobacco, I contacted a few people working closely around the arrangement and similar sentiments were aired and they went further to tell me why this was so: The arrangement is stagnating at infancy and the environment[4] is not entirely conducive for its promotion. The prices are also getting lower by season.
This Year 2011.......
I was still in dilemma why the tobacco sector could produce such results when this year it got more shocking....! Tobacco production and marketing is under untold threat, Was this real? I thought and it was. The lowering of production levels was expected considering how tobacco faired on the market last year ( the cob-web effect) and the anti-smoking lobbies which have been on the rise, but now why low prices again? Politics, politics and politics and I guess the anti-smoking campaigns. The buyers were at one time asked to pack and go because of the lower prices they were offering. The severing of our ties with the British government worsened the situation; prices went and have gone down up to now, there have been high reoffer rates and according to the Tobacco Control Commission of Malawi sales have gone down by over 50% from last year ( more than shocking I guess and objectively so).
Any room for diversification?....
This is not a new concept in agriculture development in the country and it has been talked of over and over again but the foot called the tobacco has hindered its implementation. Cotton farmers have over the years been crying over lower prices they receive for the crop. This year the story was different; low supply and higher prices. Going back to cob-web effect of prices, we expect more farmers to grow cotton this year and to some extent diversify away fro tobacco.
Having noticed the above explained trend in the two years my conclusion is: How long one can stand one foot (as the article I read put it) depends on how long the foot can hold you, otherwise you are as good as not standing at all (In the case of Malawi, how long the tobacco sector can sustain or maintain being an economy driving sector depends on how immune it can stand against political and policy lobbies levelled against it).
Check me out as I continue bringing you the issues roaming the agriculture sector in Malawi.
[1] An arrangement when the producer and the established buyer of a commodity make an undertaking to do the sell of the commodity before delivery of the produce. The agreement can either be in a written and signed contract, a verbal contract or an implied contract.
[2] Lilongwe happens to be the country’s Capital City and one of the predominant tobacco growing districts.
[3] There is an Auction floor where every farmer can sell tobacco. Selling through the contracts is a choice made by an individual farmer or a group of farmers.
[4] The contractors for fear of risking cannot provide the farmers with inputs and/ or guarantee them pre-arranged prices in case things do not work as planned.
