Malawi foreign tobacco buyers expulsions open can of worms

malawi_bingu_wa2President Bingu wa Mutharikas (pictured) decision to send packing the countrys foreign tobacco buyers for offering Malawian famers much lower prices than those offered in neighbouring countries has received mixed reactions from the population.

The buyers a South African and three British buyers were deported for flouting minimum-price rules which were introduced last year for burley and flue-cured tobacco, Malawis main export earners.

We are gripped with fear on the decision to deport our colleagues because really what the President has done is to close down the respective companies from operating in Malawi, managers of companies are only employees and not shareholders..this is the beginning of very poor investment climate in a country which is struggling to attract investors and where the cost of doing business is very high, commented a manager of Lilongwe based foreign company.

The President has run out of ideas and failing to appreciate the open market policy because prices for goods and services are never fixed at cabinet level because those that buy tobacco like any other product will need to sell that product to a buyer who may not be prepared to buy it at exorbitant prices so easily hence the usage of the principle of market forces. explained a lecturer in business administration.

Wa Mutharika earlier in the week ordered immediate deportation of four expatriate managers for Limbe Leaf Tobacco Kelvin Stanton and his deputy Van de Merwe, for Alliance One and Premium TAMAs Collins Armstrong and Alex Muckay, respectively.

Mutharika then defended his action in a special address to the nation: You will also recall that the government of Malawi has declared tobacco to be a crop of national importance to our economy. Therefore anyone sabotaging our economy is an enemy of the people of Malawi and does not deserve to be in this country.

But many Malawians Nyasa Times talked to on vox pop covering a sample of about 150 people ranging from investors, economists, tobacco farmers, business men and some commentators, the majority of the sample on a relative scale have condemned Mutharika in engaging in what one businessman described as primitive economics where you are fixing the price of raw material like tobacco which is already suffering immense anti-smoking lobby.

Within the farmers category estate farmers, while thriving for good prices, they expressed serious worries about the future of tobacco saying that tobacco buyers like all buyers of some raw materials operate cartels worldwide and they agree on a lot of things and Malawi stands to lose if it enters into a fight with companies like Limbe Leaf, Alliance One, etc whose international business is larger than Malawis yearly budget.

The tobacco estate farmers were of the view that government should have extended the fertiliser subsidy and general tobacco inputs reduction through removal of taxes so that the government helps the farmers reduce their cost of production which would in turn compensate on the auction floor.

Besides the farmers complained that government stopped providing serious extension work for tobacco farmers and this is affecting quality of the leaf.

President Mutharika should have satisfied his side of the deal by reducing the prices of all inputs into the tobacco production and this would help us cut down the cost of production. During Kamuzus time there was concentration of extension workers who helped produce a better leaf. The president should look for more buyers and if there are Chinese let them compete with traditional buyers and this way the farmers will get a better price. said an estate tobacco farmer at a Press agriculture farm.

On the other hand, small farmers have since hailed the decision by Mutharika to chase the executives out of the country whilst being very cautious about the ramifications of the deportations.

We applaud the Ngwazi for chasing these people because tobacco production is very difficult exercise and it is sad when buyers pay us peanuts for our sweat.but will the prices improve? asked Johns Bengo a Dowa-based farmer.

It is a good decision but it is too late.why didnt the President bring in alternative buyers to buy our tobacco so that they compete? quizzed Mtendere Anamgwagwa a farmer in Kasungu.

Supposing these companies close their factories in Malawi what will happen..because most of them have been in this country for a long time?

Can we trust the Chinese to buy our tobacco? We could be creating our own problem and president Mutharika may be throwing the country from the frying pan into the fire, pointed out Clement Kandaya (real name) of Ntchisi.

Is deporting managers the best solution? Why not call for round table meetings where the companies and government engage in dialogue based on a win-win solution so that companies recover their costs through government waiving duty on some input costs and then government ensuring that the tobacco industry is better supervised through adequate provision of extension the same time government should attract more buyers, commented a finance director at one of the tobacco companies who refused to be named for fear that because he is Malawian he will be thrown into jail over the matter.

Commenting on the same issue Blantyre based tobacco and cotton farmer a Mr. Chita told Nyasa Times that chasing the buyers out of the country would have been the last decision to be taken by a country that rely heavily on tobacco.

I was talking to my friend from Mozambique, he wanted to come to Malawi to buy cotton but with the events that are unfolding regarding foreign buyers he is no longer interested.thats the problem with this government it has no time for discussions. Yes, the president may have been right i mean it is not fair for Malawians to be suffering but the president would have taken special initiative to reach out the buyers but it seems the president is also advised by an angry man Dr. Bruce Munthali, commented Chita.

These sentiments by farmers (both small and estate farmers) have been echoed throughout the Nyasa Times vox pop with some complaining that the President has overstepped his boundaries in deporting the tobacco bosses before exhausting the discussion process.

The farmers also complained that the Presidents decree will strain the good relationship that has existed between the tobacco buyers and farmers citing an example of tobacco buyers funding some activities of the farmers.

On their part, foreign investors have expressed serious reservations in that Malawi President is fast becoming too intolerant and dictatorial because matters of business should be handled in the due process of business.

The investors also claimed that the country is developing a very negative investment climate because the Mutharika looks at every one doing business in Malawi as a criminal.

Weve come here to run our businesses on our own behalf or on behalf of shareholders abroad.the only two incentives in Malawi are political stability and the good people otherwise there is very little that Malawi offers.

It is clear that the leadership has started bullying investors in the way they bully each other in politics. During the past three months there have been a lot of threats to investors and were all looked at as thieves.were not. The leaders should politely tell us if we have overstayed our welcome and if it is the view that Malawi just needs the Chinese, complained a group of expatriates to Nyasa Times reporter at Lilongwe golf club.

The views of the concerned expatriates have been echoed by so many investors particularly those that have been doing business in Malawi for a long time. Two Malawians of Asian decent personally complained that they were bullied into helping the ruling DPP by being forced into buying bicycles and party cloth but today they are at the receiving.

These people used to come everybody from district governors to ministers to whoever, you name it, asking for assistance for the party but today we are being called all sorts of names. Some have even borrowed money from us and when you ask for your money they refer you to the President knowing for sure that you cant reach him, complained the two Asians based in Lilongwe.

Political commentators have said Wa Mutharika promised tobacco processing industries which would have created local demand for tobacco apart from adding value to local material so that the country exports finished products at a better price adding that the idea of asking for a mountain of a price for just a raw material may be chicken economics

The commentators have in unison further advised Wa Mutharika to avoid estranging Malawi during his last term of office which ends in 2014 saying some of the decisions would have a long bearing on the country because today countries compete for FDIs and their numbers are largely dependent on how you manage those companies that too the earlier risk to invest in Malawi hence chasing managers creates a hazardous investments climate.

The business community also raised issues of government clouding-out the private sector in financial support; continuing existence of grey imports particularly from China, poor service delivery especially performance of parastatals like Escom, Water boards, etc; security being probably the poorest in 30 years; high operating costs and the effects of some trade agreements; the continued artificial holding of the Malawi kwacha; lack of job creation efforts and general fear amongst members of business community that the countrys graft bursting body has replaced the notorious forfeiture act where an individual can lose a business empire by being a mere suspect.

The complaints against the behaviour of Anti Corruption Mureau in forfeiting peoples property was a matter of business community, the academia, political commentators, investors and most individuals with interest to own personal property because they observed that being a mere suspect should not create forfeiture.

According to Mutharika, Malawi government entered an agreement with tobacco companies in Malawi that burley tobacco would not be sold at prices lower than US$2.50 per kilogramme while flue cured tobacco would be sold at not less than US$3.09 per kilogramme.

However, tobacco buyers have refused to accept the set prices because they have no market for tobacco to be purchased at such a high price.

The survey by Nyasa Times has revealed that there is interest based support for the Presidents decision whilst the majority see no merit in chasing managers who ordinary respond to their shareholders and to the principles of supply and demand.

The respondents have also attacked the decision as a scapegoat for Mutharika failure to fulfil a political promise which he made with full knowledge that he had no authority to make on behalf of the buyers who are not a department of government.

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