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Is Vaping Really Helping You Quit Traditional Tobacco Cigarettes?

It’s 5AM in the northern hills of Malawi where its tobacco is grown. Chifundo Ndilowe is awake and ready for the day. Dressed in grey shorts and a blue NBA vest, still filthy from yesterday’s long day on the farm, Ndilowe has hours of hard labor ahead. He is just 15 years old and has been planting and picking tobacco since he was 10.
“I came here in 2011 because rural life is hard. We were battling at home and I had to start contributing for us to survive. I stopped going to school to work. It is very tough working under these conditions because it is hot and we easily get tired and I am often sick,” he says.
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Ndilowe moved 567 kilometers from Mulanje to Mpherembe, 300 kilometers north of Malawi’s capital, Lilongwe, to work in a tobacco farm five years ago. It means long hours, missing school and breaking the law for little pay. He earns a little more than $140 and $280 a year depending on the harvest.  That’s less than $1 a day.
“We work for the year and only get paid after harvest. During the year, we get 20 kilograms of maize for 12 days because we don’t grow crops for consumption. They also give us salt and then we have to figure out the rest ourselves. I get to eat once a day and I take whatever is there,” he says.
Ndilowe is just one of an estimated 800,000 youngsters in the tobacco fields; voices that are seldom heard. One of an army of children who sweat for millions of cigarettes lit all over Africa.
A study on child labor in the tobacco industry in two areas of Malawi, Suza in the Kasungu district and Katalima in the Dowa district, found 57% of all children were being used as child labour in the tobacco fields.
George Kube, an adult tobacco worker, works with Ndilowe and two other children.
“There is no money for the children to go to school and if they don’t work to help we wouldn’t survive. We farm on two acres of land and the produce is auctioned to tobacco companies. You have to be very strong if you are going to do this job because sometimes we have to cut down trees and look for water,” says Kube.
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A study, published by the British Medical Association, says contract farmers, like Kube and Ndilowe, cultivating tobacco in Malawi, live below national poverty lines, while independent farmers operate at a loss.
“Even when labor is excluded from the calculation of income less costs, farmers’ gross margins place most households in the bottom income [groups] of the overall population. Tobacco farmers appear to contract principally as a means to obtain credit, which is consistently reported to be difficult to obtain,” says the study.
Tobacco farmers may struggle to make a living but tobacco manufacturers thrive. The world tobacco industry is worth billions of dollars. Cigarette retail values in 2014 were worth $744 billion and over 5.6 trillion cigarettes were sold to more than one billion smokers according to the Campaign for Tobacco-Free Kids. But, very few farmers make money from it.
The market is controlled by a few international companies; China National Tobacco Corporation, Philip Morris International, British American Tobacco, Japan Tobacco International and Imperial Brands. They buy tobacco from cheap emerging markets, like Malawi, for profit.
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For years, governments around the world have been trying to clamp down on smoking because of its health implications, through stringent laws and higher taxes, yet tobacco use is increasing in some countries, says Zambian economist Grieve Chelwa.
“African incomes have been rising over the last couple of years and we know that tobacco consumption responds to rising incomes. Further, tobacco companies have put in place strategies (subtle advertising) to take advantage of rising incomes.”
And they flourish.
This year, British American Tobacco (BAT) announced its revenue went up 8.1% at constant rates of exchange, cigarette volume from subsidiaries was 497 billion, up by 2.2%, cigarette market share in key markets increased by 40 basis points and its brands performed exceptionally well with cigarette volume up 9.8% year ending September 30.
BAT plans to merge with its US partner R.J. Reynolds Tobacco Company, the company behind the famous camel cigarette brand, in a deal valued at $47 billion. It hopes to create a stronger global presence and move into new ventures like e-cigarettes.
<div id="attachment_5471" style="width: 310px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-5471" class="size-medium wp-image-5471" src="/wp-content/uploads/2017/05/Grieve_Chelwa_picture-300x300.jpg" alt="" width="300" height="300" />Grieve Chelwa</div>
In its third quarter, Philip Morris International reported net revenues of $19.9 billion, up by 2.6%, net revenues, excluding excise taxes, of $7 billion, up by 0.8%, operating income of $3 billion, up by 0.6%, and operating company’s income of $3.1 billion, up by 1.2%. In Africa, companies thrive because of weak regulation.
The World Health Organization (WHO) has a 75% benchmark of tax on the retail price, yet the African average is way below. Nigeria taxes cigarettes at only 20% of the retail price. Chelwa says ideally increasing taxes to reduce tobacco use should work anywhere because of the law of demand, increasing price reduces demand.
“But, the important point is the increases have to be real-inflation adjusted increments,” he says.
In Africa, high tobacco taxes are rare. WHO says only 33 countries, with 10% of the world’s population, have introduced taxes on tobacco products of more than 75%. Tobacco tax revenues are on average 269 times higher than spending on tobacco control.
Tobacco companies are also good at finding new markets, with new smokers and weak regulations. According to an article published by The Lancet, a UK medical journal, tobacco use is declining in higher income countries, but nearly 80% of the world’s smokers live in low and middle income countries.
“Tobacco control regulations are not strong across most of the continent. Countries have ratified the Framework Convention on Tobacco Control (FCTC) but that’s all they have done. And sadly the tobacco industry is an important player in the setting of tobacco control policy in most African countries,” says Chelwa.
For years, tobacco companies argue they market merely to convince smokers to switch brands, but evidence published by the National Center for Biotechnology Information shows advertising drives smoking.
<div id="attachment_5483" style="width: 310px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-5483" class="size-medium wp-image-5483" src="/wp-content/uploads/2017/05/Christo-van-Staden-142-300x200.jpg" alt="" width="300" height="200" />Christo Van Staden</div>
According to a WHO study, smoking has increased in 27 countries over the past 15 years. Seventeen of these are in Africa. In Cameroon, smokers more than doubled from 7% in 2000 to 22% last year. Congo-Brazzaville has seen the biggest spike. Nearly half of Congolese men smoke. Last year, 22% of its people admitted to smoking regularly, up from 6% in 2000.
“Only 42 countries, representing 19% of the world’s population, meet the best practice for pictorial warnings, which includes the warnings in the local language and cover an average of at least half of the front and back of cigarette packs,” says WHO.
In South Africa, cigarette advertising is banned. There are also restrictions on point of sale product display, vending machines and sponsorship of events, activities, individuals, organizations or governments. Now, Health Minister Aaron Motsoaledi has pledged to take it further by strengthening the Tobacco Products Control Act.
Motsoaledi says there should be no branding, no logos and no colors on cigarettes to discourage smoking. If the law is introduced, all cigarettes will be in a brown package with graphics that show the damage they can cause.
This is worrying for the tobacco industry. Christo van Staden heads the only primary tobacco processing factory in South Africa, Limpopo Tobacco Processors, that processes 12 million kilograms of tobacco. He says the effects could be catastrophic.
“The biggest impact [of tougher regulations] is the increase in illicit cigarettes which is a huge dent in the business of BAT and in the whole market. About 20 to 30 percent of cigarettes in Gauteng are illicit and they are paid way below the price,” he says.
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As we meet, in Rustenburg, a two-hour drive from Johannesburg, Van Staden’s farmers have lost 30 hectors of tobacco to a passing storm. On this day, the sun blazes down from a cloudless azure sky. A sprinkler keeps the glossy lawns and flowers alive. Inside the factory, it is dark and you can hear a pin drop. The silence is almost tangible. There is no bustle and machines that usually crackle stand still. It is not tobacco season. All employees are upstairs in the offices working. Dressed in khaki shorts and shirt, Van Staden says tobacco farming is hard.
“For every hector, you need two people to work there and pick it by hand, it is very expensive. One hector costs about R130,000 ($9,500) to plant and the farmer needs to make at least 20 to 25 percent profit. Last year was a very tough year. There were very tough conditions and an average farmer did not make any profit at all.”
“Now they are supporting the local market but if they don’t get any benefit out of that, they have to compete with everyone else in plain packaging, then there is no reason for them to buy South African tobacco, they will literally walk out of here overnight and source their product from Brazil, India and China where they can buy a lot cheaper. We are not ready for that. We would close these doors,” he says.
For Van Staden, closing doors means 10,000 farmers lose their income. He thinks there should be more education about the dangers of tobacco and efforts to keep youngsters away from smoking.
“I am a non-smoker and will not advise anyone to smoke. Most of my staff members don’t smoke. Unfortunately, people smoke everyday but see the warning on the packets and turn a blind eye.  Because it’s such an unhealthy product, the governments around the world will try and eradicate it but I don’t think it will happen in the next 20 years. There are laws in this country that allow people to smoke and to close down the primary sector is not going to stop smoking overnight,” adds Van Staden.
South Africa will follow the UK, Ireland, Australia and France in banning branded packaging.
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In Uganda, 4,800 kilometers from South Africa, it’s even tougher. If you light up in bars, restaurants or hotels, you will be fined $60 or jailed for up to two months. Smokers must be at least 50 meters away from public spaces, such as schools, hospitals and taxi ranks.
Uganda’s new laws also ban the sale of electronic cigarettes, flavored tobacco for water pipes, the sale of single cigarettes and tightened rules on labeling, advertising and selling tobacco to under-21s.
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“We are strongly opposed to plain packing as we feel that there hasn’t been enough consultation and research on it. Our concern is the serious adverse consequences that it will have on the economy, jobs and investment; as well as potentially making counterfeit easier. It trounces fundamental intellectual property rights and freedoms guaranteed by the constitution,” says Joe Heshu, Acting Head of External Affairs at BAT.
According to Heshu, counterfeit cigarettes are a bigger issue. In 2015, South Africa’s Treasury lost R5.1 billion ($373 million) due to illicit trade. The trade accounts for about 24% of the market.
South Africa has been increasing tobacco taxes since 1994 and the big impact has been the reduction in consumption and prevalence, but Chelwa agrees there has been a minimal impact of the taxes on illicit trade.
“Illicit trade often has to do with tax administration and not taxes. Even if taxes were a cent, you’d still have illicit trade showing that it is not a tax level or tax rate issue but a tax administration issue,” he says.
On jobs, Chelwa argues “there are very few tobacco manufacturing jobs, very few given how mechanized manufacturing of cigarettes is.”
The big worry he says is in the field.
“Governments have to consciously find ways of transitioning tobacco farmers into growing other types of crops. This will require a lot of work,” says Chelwa.
Asked if he thinks cigarettes are killers, Heshu argues his company has launched e-cigarettes, which are supposedly less harmful products, in the UK, France, Germany, Italy and Poland.
“We are committed to the research and development of Next Generation Products (NGPs) and globally have invested over half a billion pounds during the past five years. There is a growing body of evidence that NGPs do pose significantly fewer risks than cigarettes.”
For now, tobacco companies continue to thrive. Only 29 countries, representing 12% of the world’s population, have completely banned all forms of tobacco advertising, promotion and sponsorship, according to WHO.
Some of Malawi’s tobacco, grown by the likes of Ndilowe and Kube, is shipped 2,000 kilometers south of Mpherembe. In South Africa, 19% of the population, over the age of 15, smokes according to the World Bank. That’s almost one in five people and it is dangerous.
Tobacco is responsible for six million deaths each year. Of those, 600,000 die from the effects of second-hand smoke. This number is expected to increase to eight million by 2030 if current trends continue, says WHO.
Alexandra chain smoker, Mpho Ndlovu, knows this, yet he goes through three packs of cigarettes a day.
“I have been smoking since I was 15. It started as just playing with friends at school because we knew we weren’t allowed to. It was a way of being cool. I got hooked and have been smoking for 40 years,” says Ndlovu.
What started as a game became a habit and then an addiction.
“Smoking helps me when I’m nervous and I just enjoy it. I have tried to stop many times but have failed. I know this might one day kill me but, at this point, there is nothing I can do.”
Ndlovu spends R110.50 ($8) per day on cigarettes. That’s R766.50 ($56) per week and R3,066 ($225) per month and R36,792 ($2,700) per year and R183,960 ($13,500) in five years. If he continues smoking the same number of cigarettes per day for another 40 years, at this current price, he will spend around $100,000 on cigarettes. If invested, he could buy a house.
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Ndlovu spends close to half of his R7,000 ($500) salary he makes working as a driver for a logistics company in Sandton.
“By the last week of the month, I would be out of money and sometimes I have to ask people if I can borrow or take some on credit from the spaza shop,” he says.
“When I smoke, especially on weekends, I drink as well. So the money I earn is never enough. My children get angry because they think I should be using the money on them. I don’t know how to stop.”
Ndlovu buys his cigarettes from Ntando Debeza, a hundred metres from his home.
Debeza’s spaza shop sells cigarettes, pipe tobacco, snuff, chewing tobacco, hookah and shisha.
“I make about R6,000 ($440)  a month from this small shop. Most of the money comes from tobacco sales but I also sell other day-to-day products like bread and milk. People come to buy and sometimes on credit and I collect money at the end of the month,” says Debeza.
This means Ndlovu’s debt grows. But, that’s not all. Smoking does not only affect the smoker. High levels of nicotine exposure from handling tobacco leaves may cause nicotine poisoning called Green Tobacco Sickness, with symptoms including nausea and vomiting.
Back in Mpherembe in Malawi, Kube says he is aware of the dangers of working in a tobacco field without protective clothing, and mostly its effects on minors. “I know children can get sick but what can we do? We need a lot of hands on the farm because this isn’t an easy crop to plant and prepare. It needs three times more people than corn but we don’t make enough money at all,” says Kube.
He is one of the few rural farmers who know this. And it gets worse. A 2009 survey in China revealed that only 38% of smokers knew that smoking causes coronary heart disease and only 27% knew that it can cause strokes.
“Among smokers who are aware of the dangers of tobacco, most want to quit. Counseling and medication can more than double the chance that a smoker who tries to quit will succeed. National comprehensive cessation services with full or partial cost coverage are available to assist tobacco users to quit in only 24 countries, representing 15% of the world’s population,” says WHO.
Cape Town-based entrepreneur Gareth Carter saw this crisis as an opportunity. He founded WeDoRecover, a company that helps patients who suffer from psychiatric and addiction problems.
“Finding the right addiction program to meet someone’s specific needs is a complex process. The crisis and chaos synonymous with active addiction are overwhelming and the multitude of choices in the marketplace adds to the confusion,” says Carter.
According to Carter, people who smoke are more likely to drink alcohol and vice versa. He says alcoholics frequently present with a co-morbid nicotine addiction.
“As many as 80 percent of people addicted to alcohol and other drugs are frequent smokers, but the bulk will die of smoking-related disease rather than alcohol and drug-related disease…”
The damage doesn’t stop there. Carter adds that major depressive episodes among adults are highest in those addicted to nicotine and lowest in those who have quit or never started smoking.
“With nearly 80 percent of the world’s one billion smokers living in low- and middle-income countries, this is a very real public health care problem for us in Africa. Making nicotine addiction prevention and treatment readily accessible to the youth counteracts a wide range of potential mental, physical and mood-disorder problems with far-reaching ramifications to families, communities and our economy,” he says.
Carter thinks if tobacco was “invented” today it would be classed with other illegal drugs. That’s not the case. The lucrative industry in Africa puffs on unfettered.

The Price  Of Puff

As the third-generation owner of Zippo Manufacturing Co., one question always dogs George Blaisdell Duke: “You guys are still in business?” It’s not that people want to be nasty, he says. It’s just that America doesn’t light up as much as it used to, so it’s a reasonable question for the most famous maker of cigarette lighters in the world. And he has a well-worn answer handy. “Well, of course we are,” he says, reaching across his office desk for Marlboros and his own personal Zippo, a silver one with waves engraved on it. “Business is doing very, very well.”
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Never better, actually. Despite the 50% downturn in the number of U.S. smokers since the heyday of cigarettes in the 1950s, Zippo booked more than $200 million in sales last year – a record – and had the best May and June sales in its history in 2014. FORBES estimates revenue has increased by a compounded 14% in the past three years, thanks to a new, non-smoking CEO, Greg Booth, who pushed the 82-year-old manufacturer’s legendary lighters at a younger audience and expanded business in China. New products – a (legitimately appealing) clothing line and camping gear – and its first retail stores added fuel to the fire. “Zippo has maintained its iconicness,” says Timothy Donahue, an industry observer and editor at Tobacco Reporter, “and it has diversified quite well.” It’s a long way from the first Zippo, created by George Blaisdell after watching a friend struggle to light a cigarette on a windy day in 1932 in Bradford, Pa., a small town in the Allegheny Mountains where Zippo is still based.
He came up with a windproof chimney and the distinctive hinged lid – and guaranteed the lighter for life, meaning Zippo would continue to fix the lighter as long as its owner sent it to the factory. After soldiers received the lighters in WWII, Zippo successfully marketed itself with a utilitarian, made-in-America image for the following half-century.
Nonfamily CEOs ran it after the 1978 death of Blaisdell, who left Zippo to his family. By the 1990s his daughter Sarah Dorn and her son, Duke, had bought out the rest of the clan. “The more family members that are owners, the more directions that they think the company should go. Sometimes the privately owned companies don’t make it,” says Duke, who has since acquired his mother’s stake, too. “Sometimes people get impatient with the lack of temporary success, shall we say.”
Zippo hit just that kind of a rough patch in the 2000s. Duke won’t comment on how far sales plummeted, but his displeasure with Zippo’s  performance can be felt in his decision to make Booth CEO in 2001. (Booth had been running Zippo’s knife making subsidiary.) With only himself to please, Duke could wait for Booth to find the solution. The average age of Zippo’s customers then still hovered between 30 and 50 years old. It needed to think younger. Or else, Booth thought at the time, “all the buyers will have Zippos in their caskets, like Frank Sinatra.” (The crooner was buried with his trusty silver Zippo in 1998; replicas were handed out at his wake.)
It needed to reach the generation – ages 18 to 24 – who were children when Sinatra died.
To do it the company shifted ad dollars from print to Google AdWords and sponsored music concert series. They churned out lighters with Jack Daniel’s imagery and others inspired by the TV show Sons of Anarchy. (Skull images have proved especially popular.) All told Zippo produced 30,800 unique designs last year – up from 8,900 a decade ago, a 246% increase partly owing to a new Zippo.com feature where you can design your own lighter from scratch.
Zippo has positioned itself as a maker of talismans, lucky charms – or something akin to customized belt buckles. “The Zippo lighter is a thing of taste,” Booth says. “Sometimes it’s used by folks just as a fashion statement.”
That’s also the guiding light Zippo is following in China. When Booth took over, the Chinese business didn’t exhibit so much as a pulse. Now it’s 13% of Zippo’s revenue (60% of sales come from overseas). Zippo first put boots on the ground there in 2012, and today it has a 15-person team in Beijing. It has opened 14 retail stores in China – Zippo’s first plunge into creating its own stores – with another 35 to come by 2015, all riding the idea of Zippo as an all-American lifestyle brand. The stores carry a Zippo-designed clothing line (logos on the interior tags only), with gear resembling J. Crew’s preppy woodsman style. The stores worked well enough for Zippo to open two Las Vegas stores – in the Luxor hotel and Planet Hollywood casino – earlier this year. Zippo has its eye on several more Vegas locations.
Another brand extension: camping products (grills, stoves, LED lanterns). It launched in 2012, and sales were around $3 million last year; Zippo hopes to hit $20 million by 2016. For now those products are partly made in China. Greater sales would make it economically feasible to move those overseas jobs to Bradford (pop. 8,600), where Zippo remains the greatest source of blue-collar jobs, employing around 950 workers. The Blaisdell family remains the town’s greatest patron, even making up the difference at the perennially lossmaking country club.
Not everything Zippo tried caught fire. Booth originally created an ambitious plan to hit $300 million in sales by 2010: “We had the economic downturn. That set us back dramatically in terms of sales.” Zippo also planned to acquire more companies. It largely hasn’t.
Success enough, though, for Duke to dread Booth’s retirement at the end of 2015. A replacement will likely come from within the company. Duke has no plans to step down himself, but he is actively cajoling both his twentysomething sons to take his place. One has already worked at developing new lighter designs while on his college breaks. “This is just a metal box,” Duke says, twirling his Zippo in his hands and drawing deep on a cigarette. But, he says, “there’s a lot you can do with a metal box.”

Sparking Zippo

A giant tobacco leaf carving greets visitors to Boka Tobacco Auction Floors, a few kilometers outside Harare city center, along the road to the Beitbridge border with South Africa. Carved by sculptor Dominic Benhura, the towering tobacco leaf is an embodiment of the past and present of the biggest tobacco auction floors in Africa.
The tobacco auction floor is part of a diverse business empire that was built by Roger Boka, one of Zimbabwe’s most controversial and successful black businessmen. Rudo Boka, the eldest of seven children, has been the CEO of Boka Tobacco Auction Floors since 2011, but only after an acrimonious battle to have the family inherit their father’s business, after he died onboard a private jet in February 1999. The 54-year-old was returning from the United States, where he had undergone treatment after a lengthy illness.
He is said to have been the first black Zimbabwean to own a chauffeur-driven Rolls Royce and was no stranger to controversy. At the time of his death, he was under investigation by the central bank for alleged money laundering. For 34-year-old Rudo Boka, and her siblings, who are co-shareholders, it has been a bumpy ride. Growing up, they had no interest in his business empire, which spans gold and chrome mining, agriculture, transport and construction. Rudo was more interested in the photography sessions her father, a former teacher, conducted. Today, Rudo and her sister, Chido, who is 10 years her junior, have a keen interest in photography when they are not busy during the peak tobacco selling season that runs from mid-February to October. When the auction floors open, Rudo spends seven days a week at work and rarely has time to relax.
“I literally live here when it’s auctioning season. I start at five in the morning and don’t go home until there is an acceptable level of satisfaction for clients. It’s always a long day,” says Rudo.
Boka Tobacco Auction Floors is the biggest and most lucrative entity under the family’s wings. It handles 15% of Zimbabwe’s tobacco crop of around 148 million kilograms. The company auctions 10,000 bales on peak days and pays up to $2 million a day. In 2013, the company auctioned tobacco worth $92 million, according to Rudo.
“This year we should exceed this because we have a bigger crop. It is our ability to function through all conditions that makes us the preferred auction floor for tobacco in Zimbabwe.”
Rudo’s first day at the company was also the worst of her career.
“My dad built this place in 1996 and he first operated as an auction floor in 1997. When he died, his other businesses, especially the bank, collapsed. ”
With the collapse of the bank, the liquidation process attempted to liquidate everything that Roger Boka had.
“I was only 19 years old and I had to start defending what my father had built. From 2000, these premises were leased to ZITEC and we battled, they didn’t pay rent and they ran the facility down. We eventually won the court case in 2010.”
Just when the family thought their troubles had ended, the following day they discovered that this was only the beginning of another taxing period.
“We had just won the court case and thought we are going to patch up the place and rehabilitate it, only to be told that the farmers wanted the place opened because they wanted to sell their tobacco,” she says.
Rudo had plans to use the premise for warehousing, while contractors worked to rehabilitate the sections that were in bad shape. And there was no money to start. So how did the company manage the situation?
“By the grace of God, I must say, the farmers were very understanding. They knew that we were not fully prepared, but they had pressures and they wanted money.”
The advantages of a family-run business is that the family motivates each other when times are tough. While some family businesses crumble due to fights over inheritance, this has not touched Roger Boka’s empire.
“All of us [the children] are accountable. All of us are involved in certain areas where we are qualified, some in accounts, others in marketing and we all go through performance appraisals. But we have external people who run this company and keep it going, like our finance manager and managers, they are all professionals whom we are not related to,” she says.
The credit for building the empire goes to the late businessman, but Rudo says that it was her late mother, who inspired him to pursue his dream of becoming one of Zimbabwe’s wealthiest black businessmen.
“A good man leaves an inheritance for his children’s children. It was my mom who said to him, ‘why don’t we start something of our own?’ Sometimes it takes a woman to tell a man that you will do it. Not that you can do it, but that you will do it.”

Turning Over A New Leaf

President Joyce Banda took, what many call, the worst and hardest job in Africa, at a time when Malawians needed a savior. Malawi was on the brink of economic collapse after months of petrol shortages, price rises and unrest.
Discontent lingers, but the economy is improving. Despite jubilation on political podiums; the technocrats are more cautious. Expectations remain high, but much needs to be done if there is to be an economic turn-around.
Banda inherited Malawi’s deteriorating economy from late President Bingu wa Mutharika. Aid dried up when Malawi failed to secure an Extended Credit Facility (ECF) with the International Monetary Fund (IMF), after disagreements over political and economic governance. In 2011 and 2012, problems with foreign exchange meant problems with petrol. It led to rationing and queues. Production fell as key firms left the country.
“Malawi is still teetering on the edge of an economic abyss. It is obviously not out of the woods economically yet [&#8230;],” says Dalitso Kubalasa, an executive director at the Malawi Economic Justice Network.
The administration in Malawi has taken bold steps to turn around the economy. This has been far from the dangerous economic trajectory the economy was destined for, particularly with the infamous Zero-Deficit Budget (ZDB) of 2011/12 fiscal year. The ZDB stance hindered the economy more than helped it; punitive tax measures were introduced, invoking a huge outcry.
The ZDB framework was supported by around MK30 billions ($87.9 million) of printed money printing, with MWK20 billion ($58.6 million) domestic borrowing and around MWK72 billion ($211.1 million) in arrears to private sector and banks, according to the quarterly expenditure reports from Malawi’s central bank.
“The Malawi economy was virtually collapsing a year ago. The economy is heavily import-dependent in production. Imports account for about 42% of GDP, among the highest in the world, and yet 60% of exports earnings are accounted for by one commodity: tobacco, which is not only a primary commodity but also has endangered demand. The gap between imports bills and export earnings has been widening at an alarming rate and we had been relying on external aid payment arrears to fill this. Malawi relies on external aid to cover 40% of government expenditure, which is again very high. Poor tobacco prices and a drying up of aid automatically results in an inability to pay for imports, hence accumulation of arrears and loss in credit ratings,” says Ben Kaluwa, an economist at the University of Malawi.
Banda’s decision to devalue the Malawian kwacha, to stabilize the economy, was hailed by the IMF, but led to protests, including a nationwide strike by civil servants in February.
“The biggest challenge has been living up to the people’s expectations of dealing with all the challenges as fast as possible; including the issue of dealing with the negative impact of the economic reforms through some cushioning programs and interventions,” says Kubalasa.
Banda, established a controversial employment scheme in July, attempting to decrease the country’s 50% unemployment rate. One hundred thousand migrant workers will be sent to South Korea, Dubai and Kuwait as unskilled agricultural workers or to work in the hospitality sector. Critics worry that the scheme may result in modern day slavery. Around 40% of Malawians live on less than $1 a day, those who will work in South Korea could earn up to $1,000 a month.
Other key measures undertaken include: the scrapping of the zero-deficit budget; the restoration of fiscal incentives, the absence of which had made the business environment unbearable for new investors; the removal of subsidies by liberalizing the prices of strategic goods.
“Liberalization of the exchange rate and fuel prices were meant to obviate rationed access in favor of market-priced allocation. The liberalization of the utility tariffs was meant to incentivize the utilities to invest and also make the sectors attractive to new private sector investors, including public-private partnerships (PPP). Queues for both forex and fuel have been eliminated and there is expressed interest by the private sector to invest in utilities. Manufacturing firms—which had been operating with excess capacity because of imports and fuel shortages—are now believed to be operating close to capacity,” says Kaluwa.
More governmental measures came in May 2012. They included loosening the executive grip on monetary policy, thereby giving a good measure of decision-making authority and independence to the central bank, which is the requisite authority. This resulted in the adoption of a market-led foreign exchange rate regime. These two moves attempt to reconcile huge macro-economic imbalances, due to the overvalued currency that was further crippling the economy.
When the kwacha depreciated by around 50%, an immediate flotation of the exchange rate followed. It aimed to rein in on the huge disparities between the official and parallel forex market and to free up the forex that was being hoarded. The restrictions on forex transactions by banks and forex bureaus, an increased bank rate and a tight monetary policy helped to monitor the progress.
“Beyond the pre-economic reforms it is therefore a fact that we are still a long way off, from comprehensively dealing with the whole list. All of the challenges are structural in nature and quite huge and terminal to the economy, let alone to any efforts, in need of real and meaningful policy consistency for urgent and sustainable consolidation of the gains being realized at restructuring of the economy,” says Kubalasa.
There was support from fiscal policy side, aimed at austerity and recovery. Civil servants demanded a pay rise of more than 65%, saying that the devaluation has caused inflation, which had eroded their salaries.
“On the down side, because of import-dependence in production, production costs have gone up since the devaluation and domestic prices have followed. The cost of living has risen and this has affected all Malawi Kwacha earners and this will be the case for time, until the economy attracts sufficient investment transformation and import-substitution and export diversification,” says Kubalasa.
Banda was ranked 47th on FORBES’ ‘The World’s 100 Most Powerful Women’ 2013 list and was also one of five short-listed contenders for the FORBES AFRICA Person of the Year award in 2012. She is expected to seek re-election in May.
Stakeholders expect economic progress to be mirrored in public service delivery, as well as through the lowering of commodity prices.
A source of discontent is the dislike of austerity, across the board by government. The president has been traveling extensively; most trips are not in tandem with the austerity measures.
Civil society has called for balanced programs; they want extra-budgetary funded interventions to be integrated into other already established programs.
“These include those such as the Green Belt Initiative, the One Village One Product (OVOP) [movement] that needed to be fully sustained and supported by operationalizing the National Export Strategy; if we are to sustain the promise for maximum potential gains they seem to have if properly harmonized and rationalized,” says Kubalasa.
It seems that Malawi and its first woman president have a long way to go.

Banda On The Abyss, In Africa’s Toughest Job

The narrow tar road, pockmarked by potholes and covered in dust here and there, meanders through the Beatrice farming area, just outside Harare, the capital of Zimbabwe. This competition between tar and dust is a microcosm of what is happening in the country. Vast acres of idle land lie cheek by jowl with well-managed farms churning out tobacco—a picture of progress and regression.
The lack of government and financial support is curtailing some new farmers’ hopes, but others are making hay—or rather growing tobacco—while the sun shines. This wealth was once the preserve of around 4,000 white farmers. Ragtag bands of militants and war veterans seized these rich commercial farms in 2000, when President Robert Mugabe abandoned the slow land redistribution process, as he felt the pinch from unrest and political pressure. It was a swift smash-and-grab that cost many lives. A mere handful of white farmers clung onto their farms.
Agriculture has taken a battering since those desperate days, but it still accounts for around a fifth of Zimbabwe’s GDP. Tobacco is the king of the crops.
Analysts say it is possible for agriculture, with the help of tobacco, to surpass mining in foreign currency earnings. This is likely to take time and more investment.
For now, new tobacco growers are slowly turning the corner. There are around 150,000 new black farmers dotted around the country, of which around 60% are tobacco growers.
Tobacco production this year alone is set to increase by around 20%, against last year, reaching the 170 million per kilogram mark. Zimbabwe is set to rake in $600 million in tobacco earnings this year, according to the Tobacco Industry and Marketing Board. It is still a long way from where production was in 2000, when production peaked at 237 million kilograms.
In those desperate days, the economy crashed and so did tobacco. The worst output since independence in 1980, was in 2008, when a mere 48 million kilograms were produced. This was a far cry from the years when hundreds of millions of dollars changed hands at the bustling tobacco sales floor in Harare.
In 2013, the growers are fighting back, according to ZB Bank chief economist, Best Doroh.
“That appears to be true, if we go by the current sales figures at the auction floors. Even the quality of tobacco being delivered appears to have improved as well. But the new black farmers still face significant challenges in terms of technical know-how, lack of financial support and equipment viability,” says Doroh.
In the bush-lined fields around Beatrice, at the end of the dusty road, farmers are toiling away towards the next crop.
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Forty-eight-year-old Edson Makina is plowing with the help of knowledge accumulated in years living on a commercial farm—the very farm he now tills. He says his father worked this land for a white farmer. He is one of the thousands who took over land in President Mugabe’s land grab.
“I feel empowered; I’m now richer than a British professor. I’m getting richer each day I wake up. To me, President Mugabe is my hero, a political messiah,” he says.
With a scarcity of tobacco on the international market, most black farmers are cashing in. The Chinese have increased their consumption, snapping up 45% of Zimbabwe’s crop, the largest share after the West.
Many in the industry believe the government could do more to help agriculture out of the doldrums. Doroh says the agricultural producer price-setting mechanism needs to be refined so that it acts as a guide for farmers before they invest.
“There is need for government to make prompt payments for inputs supplied by the sector’s main input suppliers such as fertilizer companies, seed houses and agriculture chemical suppliers,” he says.
This tobacco-selling season, Makina sold around 170,000kg of tobacco.
“With each bag going for $467 a kilogram, you can imagine how rich I am now. It has changed my lifestyle. My children are attending the best universities around the world, and those that are here are at private schools. I pay all the fees without any hassle,” he says.
It is in contrast with the poverty Makina grew up in.
“The land reform was a revolution to me. I grew up on the farm. My father… was treated like a slave. I’m told at surrounding farms, if you couldn’t maintain the correct temperatures at the tobacco barns, the white farmer would flog you,” he says.
But the circumstances under which Makina obtained his farm were marred by violence. Beatrice was one of the country’s most dangerous farming districts in the land grab of 2000. Makina downplays the violence calling it a mere exaggeration by the media.
“There wasn’t the scale of violence you people reported. It was distorted. In most cases, white farmers were provoking the new settlers that were merely demonstrating against land imbalances,” he says.
Makina may be working his way to the wealth of a British professor, but across Beatrice, there are vast tracts of land lying idle. It is often difficult to ascertain who owns it. Many in these farming districts complain land reform has given rise to part-time farmers and a new breed of “cellphone farmers” or absentee landlords, often civil servants, who struggle to invest from their meager salaries.
“There are many successful stories in this area; of course others are still struggling, here and there. Most banks are reluctant to finance new black farmers. It’s because the media has been despising the new farmer. Farming is not an easy business,” says Makina.
Back in the banks of Harare, the view is less emotion, more balance sheet.
“I don’t think banks are intentionally denying black farmers access to loans. Rather, what most banks are looking at is the viability of the particular farmers or clients. Where viability is not evident, then banks have no option but to look at other sectors and clients where risk is better mitigated. Most small-scale farmers do not have sufficient security to back up borrowings, and this makes it difficult for banks to be able to extend credit on an unsecured basis at a time when there are tight liquidity conditions in the market,” says Doroh.
The Commercial Farmers Union is training new farmers.
“We began to train many of them.Some of them are now producing more than me. Those farmers still limping, it’s due to banks failing to support them,” says Makina.
Makina is a living example of how well-trained, new farmers can be a symbol of success. He attended the best agricultural schools in the country. Makina says he has built 21 houses for his workers; they admit that there is little difference in pay from the days when they worked for a white farmer.
“The salaries are okay, just that the difference is that we can easily relate well to Mr Makina, because he is black, he is quick to understand our concerns, unlike the white man,” says Keeper Martin, a worker on Makina’s farm.
So life tilling the land in Zimbabwe remains harsh. Whoever wins the elections this year would do well to help the hard working tobacco farms of the country invest in restoring the shimmer of the golden leaf.

“President Mugabe  Is My Hero”

Adam Molai is a tobacco entrepreneur. The Zimbabwean born-and-bred entrepreneur is the co-owner and executive chairman of Savanna Tobacco who has enjoyed a life that has rarely been dull. He studied in Canada and Britain; he did his articles in accounting, owned and operated garages, a stationery and copy shop, as well as a chicken farm. It was a friend who introduced this non-smoker to the tobacco industry.
As the land reform program of President Robert Mugabe forced out large-scale white commercial farmers, in favor of black workers, Molai realized that it would be a gamble going into business with his white friend when he founded the Zimbabwe Tobacco Growing Company. Now he is the director along with his wife. In 2002, he acquired a tobacco threshing plant with some partners. It did not make sense to Molai and his partners that the plant was being grown in Zimbabwe, shipped overseas and the finished product imported into the country. He decided to do something about it.
Savanna Tobacco launched its first brand of cigarettes in 2004. Two years later, it had brought in high-speed manufacturing equipment and won both bronze and silver at an international brand competition. By 2008/2009, the company had grabbed the largest share of the Zimbabwean market and was importing new and specialized equipment. This was at a time when Zimbabwe could not import paper from Germany to print its money.
<div id="attachment_1107" style="width: 484px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-1107" class="size-large wp-image-1107" src="/wp-content/uploads/2017/04/Cigarette-Packer1st-of-its-kind-in-Africa-1024x678.jpg" alt="" width="474" height="314" />Cigarette Packer,1st of its kind in Africa</div>
“We felt proud to be heads and shoulders with the big multi-nationals,” boasts Molai.
The company introduced the contract system to the country as a way to help boost the tobacco industry. It worked like this: there is an agreement between the contractor and the grower; the contractor supplies the grower with all the inputs and the grower grows, reaps, cures and delivers the crop. The grower receives preferential interest rates and the contractor is guaranteed a crop. This system got around the problem of finding finance to buy tobacco inputs in US dollars. Although the contract system is still operational, alongside the auctions, Savanna pulled out when they felt the financial system was capable of providing finance. This year a commercial bank in Zimbabwe—MBCA Bank Limited—made available $65 million worth of lines of credit to support the industry.
Zimbabwe is the largest producer of tobacco in Africa. It exports to China, South Africa, Belgium, the United Kingdom, Indonesia and Germany and imports some tobacco from Malawi and South Africa.
China is the biggest producer of cigarettes and has the largest tobacco company in the world. It started using the Zimbabwean leaf in the 1980s and in 2005 Tian Ze Tobacco Company was established in Zimbabwe. Chinese companies came in and financed small-scale farmers under the contract system. Their presence has since increased the price of tobacco per kilogram. This year, the average price increased to $3.67.
Molai feels that China has played its role in the growth of the industry but that the relationship with China needs to be symbiotic and not perpetuate the mere exportation of raw tobacco and jobs.
“China protects their market more than anything else. We’re running with people that are already at the half-way line&#8230; You’ll never win, you have no chance,” he says.
Around 100 countries produce tobacco; the major producers are China, India, Brazil, the United States, Turkey, Zimbabwe, Zambia and Malawi.
Zimbabwe has some domestic issues that were raised at the National Tobacco Workshop held last year. These included the poor conditions of amenities and accommodation at the auction floors, constant power cuts, deforestation, the limited credit and poor infrastructure.
The industry however does not have to worry about tight regulation in the marketing of cigarettes. The global legislation on tobacco has decreased global consumption over the years. The World Health Organization’s Framework Convention on Tobacco Control—which is “the international health treaty that guides national efforts to counter the tobacco epidemic…”—now has 168 signatories. Zimbabwe is not one of them.
“I make no apologies for it,” says Molai, “we are strong marketers.”

Tag: tobacco

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