According to the Malawi Nation research conducted by government with World Bank’s support has revealed that there is a cartel of major tobacco buyers in Malawi and that this is to the disadvantage of farmers in the country.

According to the Malawi Nation research conducted by government with World Bank’s support has revealed that there is a cartel of major tobacco buyers in Malawi and that this is to the disadvantage of farmers in the country. Four consultants who carried out the research looked into tobacco institutions and marketing arrangements, and established that the tobacco farmers do not have adequate representation in the governance of various institutions in the tobacco industry. The research  reportedly revealed that, among other things, buyers have a monopoly on processing of tobacco, the country’s major foreign exchange earner. The research findings, contained in a document called Pathways to Greater Efficiency and Growth in the Malawi Tobacco Industry and released by the World Bank in Lilongwe this week, show that the tobacco industry’s institutional structure has conflicts of interests, monopolies and oligopolies. “Tobacco buyers operate as a cartel; they have a monopoly on processing and Malawi does not benefit at all from the tariff preference granted by the European Union,” said the report. The research also discovered that there is a governance structure in the tobacco industry that is not aligned to sector stakeholders. It therefore recommended that government should undertake a comprehensive overhaul of the sector’s institutional structure, improve domestic marketing and pass-through to farmers through increased competition and better control of monopolies. “A review of barley and flue-cured operations should be carried out to strengthen producers’ bargaining power and eliminate the requirement of going through the auction holdings floors when auctioning tobacco,” says the report. The consultants have also recommended that there should be an investigation instituted and a reduction to be made on the two per cent charged by banks for stop orders and transfers of money to grower’s accounts, as well as an abolition of production quotas which they said increases costs for farmers and creates illegal trade of tobacco. The findings have come at a time when there is controversy over the pricing of tobacco by the buyers in Malawi. President Bingu wa Mutharika threatened to send the tobacco buyers packing if they continued offering low prices to the farmers. A British renowned lawyer Clive Stanbrook alleged there is a cartel and price fixing by the tobacco buyers, a statement which chairman of the Tobacco Buyers Association of Malawi Charles Graham denied. Deputy Minister of Agriculture Henry Mumba in an interview said the findings from the research will be considered by government in its reform process.
TCC General Manager Evans Chapola refused to comment on the issue, saying his commission was only there to implement policies put in place by government. “Such reports are normal and when government approves them, the recommendations will be implemented,” said Chapola. President of the Bankers Association of Malawi Ian Bonongwe said the reduction of bank charges can only be made depending on how much the member banks feel will benefit them in terms of costs. “The recommendations are there, but every bank is at liberty to negotiate individually after looking at how much it is costing on the services rendered to their customers,” said Bonongwe. He however said the reduction of the fee will mean a big shift of customers from one bank to another and the development will leave other banks at a disadvantage.
World Bank’s agricultural specialist Stanley Hiwa in an interview said the Bank has approved the research recommendations and has so far given government financial support of close to K6 billion for implementation. “We backed them [recommendations] with conditionalities after the analysis was done and we have given government support on Balance of Payment (BOP) through the structural adjustment loan,” said Hiwa. He said the recommendations are expected to be effective next year.