ips - Tobacco Control Commission

TOBACC0 PRODUCTION AND
MARKETING- REVIEW AND
POLICIES
Ministry of Agriculture, Irrigation & Water
Development:
A presentation during the 2014 Tobacco Industry
Annual Seminar
Presentation outline
 Introduction
 Background to Contract Farming and
Marketing
 Salient Features of IPS
 Implementation Arrangement
 Implementation of IPS
 Achievements
 Problems
 Policy actions
 Conclusion
Introduction
Tobacco Production and Marketing System
• Tobacco production in Malawi is liberalized and
can be produced by anybody- managed
liberalization;
 Before liberalisation, TCC was able to effectively
regulate production and marketing - now
production has been fluctuating over the years;
 The uncontrolled volumes in relation to trade
requirements (demand) is contributing to the
current tobacco marketing problems;
Background to Contract
• In 2006, Burley tobacco contract marketing was piloted
•
5.2 million Kilograms purchased out of 124.1 million kilograms
• widely accepted
• demand for it had been increasing over years as follows:
Year
2007
2008
2009
2010
2011
2012
Contract
12.9
43.0
58.6
39.7
64.1
29.1
Auction
73.7
126.2
149.7
153.5
144.2
35.6
Total
86.6
169.2
208.3
193.2
208.3
64.7
Contract (cont.)
• The
Government approved in principle the
introduction of the Integrated Production System
in October, 2011 and adopted fully in May, 2012 with
80% of the total volume on IPS and 20% on
Auction.
• To address the following challenges:
 Fluctuations in leaf pricing;
 declining global demand due to emerging strict
global regulatory regimes;
 global oversupply;
 strong regional competition;
 need to improve yields and quality of leaf.
SALIENT FEATURES OF THE IPS
• Crop planning;
• Use of Certified Seed of Approved Varieties:
Emphasis on locally produced;
Imported through ARET;
Preferred by tobacco customers.
• Technology Development and Verification;
• Harmonization of messages:
 availability of several extension service
providers;
Coordination by ARET- committee
SALIENT FEATURES OF THE IPS (cont.)
 Training of Staff and Farmers- certification of
technicians;
 Use of Recommended and Approved Pesticides and
Fertilizers ;
 Cost review and price negotiations;
 Afforestation and soil conservation;
 Guaranteed purchase of the entire contracted crop;
and
 Corporate social responsibility.
IMPLEMENTATION ARRANGEMENT
Blue Chip
customers
TOBACCO PROCESSING FACTORY
SELLING FLOOR
BALING CENTRE/SATELITE
DEPOT
CLUB
SMALLHOLDER
FARMER
SMALLHOLDER
FARMER
SMALLHOLDER
FARMER
ESTATE
FARMER
ESTATE
FARMER
Implementation of IPS
 It is running concurrently with the auction marketing
system officially starting from the 2012/13 growing
season;
 It covered 69% (100.3 million kilogrammes) of the
total sales of 144.8 million kilogrammes in 2013 and
77% this season out of 159.0 million kilogrammes as
at 29th August, 2014 for burley tobacco;
 All the tobacco is being sold in the existing marketing
structures/selling floors
 Implementation guidelines gazetted in January, 2014
as Government Notice No. 4 and will fully be used
during 2014/15 growing season;
Implementation of IPS (Cont)
 The Tobacco Control Commission (TCC) has maintained




its mandate as a regulator of the tobacco industry;
AHL has maintained its mandate as a marketing
organisation;
The government continued collection of taxes/levies
through the AHL;
Tobacco
buyers
recruited
their
own
technicians/extension workers to mobilize and train
farmers on the various production technologies as well as
tracking of contracted tobacco;
Tobacco grower associations are involved in price
negotiations,
tobacco
transportation,
farmer
mobilization and other extension activities deemed
necessary;
Implementation of IPS (Cont)
 Tobacco buyers are facilitating tobacco growers’ access
to farm input loans including an input package for
maize and legumes such as soya beans, beans,
groundnuts and pigeon peas;
• Smallholder farmers are being contracted as clubs to
effectively facilitate training, access to loans, tobacco
baling and others;
• The farmers are still responsible for transporting
tobacco to a selling floor;
 ARET has continued with its mandate of technology
generation, harmonisation and dissemination.
Achievements of IPS
According to the assessment which was done by Imani
Development after the 2012/13 growing season, the
following positives were identified:
• Policy shift towards IPS after many efforts by
manufacturers and merchants
advocating for its
implementation;
• Increased buyer and merchant confidence –PMI vs
AO;
• Increased merchant investment - a total US
$54,500,000 invested into IPS by merchant
companies (loans, extension services and others) in
the first year of implementation;
Achievements of IPS (cont.)
• Shorter marketing seasons since the introduction
of IPS;
• Increase in agronomy extension services;
• Recruitment of about 1,000 agronomy workers by
tobacco merchants;
• Stringent labour compliance – non use of child
labour as a condition;
• Improved transport and delivery for contracted
tobacco;
• Farmer empowerment in price determination;
• Increase in the levels of financing growers;
Achievements of IPS (cont.)
• Improvements in the quality of tobacco produced;
• Increased productivity- 800 t0 1800 kg per hectare
for small holder farmers;
• Sustainable tobacco production/security of supply;
• Traceability of farmers;
• Increased reforestation drive
• Increased
diversification efforts in order to
increase income and food security.
Problems associated with IPS
 Registration problems (duplication of contracted
growers among companies, system slowness);
 Banks - high interest rates, exchange rates,
insurance, etc;
 lack of transparency in loan portfolios and
administration;
 Late payment of funded farmers;
 Weak enforcement of regulations;
 Activities of both value (graders) and non-value
stakeholders are negatively affected;
 Entry of new buyers is restricted to only those farmers
outside IPS especially within the marketing season;
Problems associated with IPS
 Reduced competition among buyers farmers get low prices especially when demand is high
enough to attract higher prices;
 Low bargaining power among smallholder famers for
good prices due to:
 high illiteracy levels
 Limited advocacy levels;
 Depressed prices and delayed sales on auction
marketing system .
Policies Actions
• Finalisation of the revision of the Tobacco Act;
• Full implementation of the gazetted IPS regulations;
• Establishment of a monitoring and evaluation unit
within TCC to be responsible solely for the
management of IPS;
• Review of registration system to make it more efficient
and farmer friendly;
• Contract Farming Policy and Regulatory Framework to
be finalised and enacted;
• Strengthen the arbitration unit within TCC with
proper and transparent arbitration procedures –
Production to marketing (auction and IPS);
• Strengthen advocacy levels among famers-Farmer
Organisations.
Conclusion
 Emerging challenges are short lived and are
being addressed through a coordinated
approach;
 With IPS, the nation stands to benefit in that
there is guaranteed tobacco market but both
auction and IPS marketing systems will
continue running concurrently;
 The future of Malawi tobacco industry in
relation to anti smoking campaign is
contingent on alignment of production to trade
requirement and value addition.
Thank you for your attention

Download Report