Tobacco Value Chain- COMESA business forum 2012 11 12 final

Value Chains in Agriculture

COMESA Business Forum 20-21 November 2012

What is tobacco?

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What is tobacco? • Tobacco is an annual field crop • It is grown in rotation with other crops using Good Agricultural Practices • Tobacco Growers are therefore mixed farmers producing several other crops • Tobacco as a cash crop is the platform making the growth of other crops possible

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Why farmers want to grow tobacco • Tobacco has an organized supply chain which provides inputs, agronomic extension, and a ready market • Tobacco provides the cash flow which allows farmers to diversify into other crops • The other crops do not provide the same profit that tobacco does • Like any other producer, farmers need a market for their goods • This is lacking for most other crops 4

The value of tobacco farmers • +/- 1 million farmers in COMESA countries • Producing maize, soybean, groundnuts, cassava, vegetables • +/- 0.5 million hectares • Insufficient markets and value-adding processing exists for these products

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Some figures for tobacco Several independent studies have analysed the competitiveness of different crops: • In only five COMESA countries the farm-gate value of tobacco production is US$ 875 million • For three COMESA countries (Malawi, Zambia, Zimbabwe), tobacco counts for 14-50% of their agricultural GDP • In six COMESA countries (Ethiopia, Kenya, Malawi, Uganda, Zambia, Zimbabwe) there are 951,600 tobacco farmers 6

Some figures for other crops In these six COMESA countries (Ethiopia, Kenya, Malawi, Uganda, Zambia, Zimbabwe) there is also production of approximately: • 3 million MT beans & peas of various types • 16 million MT maize • 11 million MT cassava • 11 million MT plantains • 5 million MT potatoes • 0.8 million MT groundnuts • 0.5 million MT sesame seed There is very little, if any, added value or organized market for these crops 7

The pressure on tobacco • Regardless of its advantages, tobacco as a crop is under great legislative pressure • Many governments look for increased diversification • At the same time many governments rely on tobacco for employment in rural areas, foreign exchange and revenues • Farmers would be happy to diversify more but they do not have a similar alternative market chain for other crops 8

What to grow?

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How tobacco farmers are supported • Growers are organized into clubs/groups of 1530 farmers • Clubs are supported by tobacco extension services • Registration involves accurate collection of Grower data for storage and use in a Grower data base • Inputs distributed • Crop production monitored and recorded • Tobacco provides the cashflow 10

An example of what databases offer • GPS farm location • Hectarage under cultivation • Production capital – inputs, barns, equipment, etc. • Number of people living and working on the farm • Crop forecast • Monitoring of labour practices • Forestry progress 11

The value of market knowledge • Grower data base developed by the tobacco sector provides advance knowledge of crop production plans • Assists other organizations to source produce and arrange markets for non-tobacco crops • Information can be shared to help: the establishment of food processing units transporters to establish logistics network to move produce establish market centers the development of suitable export produce

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How can we partner to support COMESA farmers?

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Possible opportunities

• Enabling legislation environment • Support to create trade flow of other crops based on mapping of tobacco production • Create warehousing network • Creation of small local processing units to add value • Animal husbandry

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Challenges of the Sector a) Disconnect between international policy proposals and socioeconomic realities, regional & national strategies/laws on agriculture, trade, fiscal development and public participation in policy formulation b) Lack of evidence and science based regulation that takes into consideration both health and trade obligations of the Member States i. Policy formulation before undertaking robust impact assessments on socio-economic development, revenue, trade and agriculture c) Conflict between the FCTC proposals and other multilateral obligations such as WTO, EAC, COMESA, AU e.g. Canada, Brazil and Australia’s cases at the WTO d) Lack of proper consultative mechanisms involving all stakeholders with fair representation and participation of affected sectors at all international, regional and local fora

Recommendations 1. Need to recognize pivotal role of tobacco farmers in the rural economy, their skill level and as engine of diversification 2. Need to capitalize on the tobacco supply chain for what it can offer in terms of good agricultural practices and labour practices 3. Opportunity to discuss with COMESA CBC and with the tobacco supply chain how to build non-tobacco value chains 4. Need to prevent discriminating measures against tobacco farmers that will prevent any competitive advantage. 5. Need for COMESA to follow closely the developments in tobacco regulation by applying for Observer Status at the FCTC 6. Compatibility of the FCTC proposals with other multilateral obligations such as WTO, EAC, COMESA, AU 7. Policy formulation taking into consideration international regulatory best practices and implemented as pragmatic technical regulations that balance all multi-lateral commitments 16

Thank you for your interest

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