Politics of the golden leaf as Ruvuma farmers feel the pinch

Dar es Salaam. There are many reasons why the majority of tobacco farmers in Songea and Namtumbo districts in Ruvuma Region have stopped growing the golden leaf.

Although there is a wide range of factors for this trend, unreliable supply of farm inputs, a poor marketing system and the closure of the Songea Tobacco Processing Firm (Sonamcu) are mainly to blame for the trend that has seen a significant number of farmers calling it quits.

The situation has triggered a significant decline in tobacco production, affecting a sub-sector which remains a major source of employment and income for the majority of peasant households in the region.

Out of the three types of tobacco grown in Tanzania, the production of Ruvuma’s Dark Fire Cured Tobacco (DFC) offered an anomalous story of success until the mid-2000s, before crashing recently.

Tanzania is ranked the second in tobacco production in Africa after Malawi. Tobacco earned Tanzania more foreign exchange than coffee, cotton, tea, cloves and sisal combined in 2017.

Farmers quit farming

“I abandoned tobacco farming in 2015 after the government banned individual buyers from purchasing the raw crop directly from farmers. The changes has killed markets,” says Mr Yasin Mgoto, 46, tobacco grower from Namtumbo district.

Following the prohibition, all the tobacco farmers were instructed to join and sell their tobacco through the cooperatives. “I didn’t want to join the unions because they always delay payments to farmers,” he adds.

Mr Mgoto was selling about 20 tonnes of tobacco to the Tanzania Leaf Tobacco Company Limited (TLTC) every year prior the changes.

According to another tobacco farmer who is under the Minazini Agricultural Marketing Cooperative Society (Amcos) in Namtumbo District, Mr Bashiru Mwera, 48, tobacco farmers in the region faced many challenges, including limitations in production of the crop. He wants leaders of primary cooperative societies to look for other buyers.

“The closing of Sonamcu has dealt us a big blow after leading to unavailability of reliable markets. “We used to sell raw tobacco through the farmers cooperatives before being taken to the Songea firm for processing. Buyers preferred to purchase the processed rather than unprocessed tobacco,” says Mr Mwera.

He says he used to sell between 500kg and 1,000kg of tobacco per year through farmers cooperatives but now he sells only 300kg per year due to lack of markets.

According to him, production of DFC had ceased in Ruvuma since the 2014/15 production season due to lack of markets.

In was only in the 2013/14 seasons when farmers signed agreements to produce 10,000 tonnes of tobacco that was all bought.

Farmers in Ruvuma are also faced with a poor and in most cases unreliable supply of agricultural inputs, particularly fertiliser.

Today, a bag of fertiliser cost $39 (about Sh90,000).

“The market started to fall dramatically after the government disallowed individual buyers from distributing inputs to the farmers and give the task to cooperatives which have proved failure,” says Mr Mwera.

A recent study titled ‘A History of Peasant Tobacco Production in Ruvuma Region’, published in March 2018, show that tobacco production in Ruvuma grew from a paltry 100 tonnes in 1930 to over 1,000 tonnes in the late 1950s.

According to the report, production grew from 2,200 tonnes in 1972/73 to 9,190 tonnes in 1997/98.

The study show that tobacco production dropped from 3,847 to less than 200 tonnes between the early 2010s and the mid-2010s.

The study says the closing of the Songea factory was among big problems that DFC farmer in Ruvuma experienced in recent year.

Closure of Sonamcu

Sonamcu, formerly the Songea Tobacco Processing Factory (Sontop Ltd), is a secondary - level farmers’ cooperative society formed since 1936. Located in Songea Municipality, the factory is owned by several primary - level Agricultural Marketing Cooperative Societies engaged in tobacco contract farming in Ruvuma Region.

The firm’s manager, Mr Juma Mwanga, told The Citizen they stopped operations in 2002 due to lack of raw tobacco after the contracted buyers---TLTC and Alliance One Company ---halted purchase.

“TLTC and Alliance stopped buying raw tobacco from Ruvuma and moved to Tabora and Mpanda. Therefore, we no longer afforded to operate the factory,” he says.

The farmers were selling their tobacco through 42 farmers cooperatives located across Ruvuma region, said Mr Mwanga. He revealed that the firm was contributing Sh25 million every month in Pay-As-You-Earn (Paye).

“The firm offered a reliable market for over 2,552 tobacco farmers in the region, who were capable of supplying 10, 000 tonnes of tobacco per year,” he said.

Comesa withdrawal effect

The fact that tobacco is sold at high prices in the Common Market for Eastern and Southern Africa (Comesa) member States is among factors that impinge efforts to secure a reliable markets for Tanzania’s.

This is because of high tax charged on the crop compared to tobacco of the same quality from Uganda and Kenya.

The Tanzania government cancelled its membership from Comesa over concern that changes in internal tariff arrangements would affect the country.

“Uganda, Kenya, Egypt and Algeria are all members of the Comesa and therefore they enjoy benefits of the mutual partnership,” says Sonammcu’s chairman, Mr Salum Brashi.

He says nothing was forthcoming despite the government’s promise to initiate talks with Comesa member states aiming at securing markets for the Tanzania tobacco.

“We wrote to the ministries of industry and foreign affairs to advise the government to prepare bilateral trade agreements with Comesa member States of Egypt and Algeria,” he said.

Due to the drop in tobacco prices in the world market, firms buying the crop in Tanzania have as well reduced the quantity of tobacco they buy from farmers.

Hopes and setbacks

Efforts by the management of the tobacco factory and the government have seen the Malawi-based Premium Active Tanzania Limited (PATL) showing interest in buying raw tobacco from Ruvuma.

In 2016, the two sides signed a seven year purchase agreement.

In the same year (2016/17) the company bought 250 tonnes of tobacco as trial and exported to Malawi for processing.

This follows, PATL secured government permit to export Tanzania’s raw tobacco to Malawi where its tobacco processing factory is located.

In 2018/19, the company bought 1,000 tonnes of tobacco and had pledged to purchase more, says Mr Mwanga.

“We renew the contract every year. We are also trying to convince the buyer to increase purchase to guarantee a reliable market to the farmers,” said Mr Mwanga.

Plans to revive Sonamcu on the cards

In 2018, the management initiated plans to revive the factory after over ten years of dormancy.

According to Mr Brashi, there are deliberate efforts to revive the factory including applying for a $3.5 million (about Sh8.5 billion) from the National Microfinance Bank (NMB) for purchasing and installing new machines and rehabilitate buildings at the factory.

He says in the process, the bank has asked the management to deposit 30 per cent of the applied loan to the bank as collateral. The management has not meet the requirements so far.

He said PATL was ready to deposit 15 per cent of the demanded deposit but the bank rejected the deal,” said Mr Brashi.

Sh8 billion VAT return question

Mr Brashi also told The Citizen that the government was yet to issue Sh8 billion VAT return to PATL, noting that delayed payment has made it difficult for the investor to support the plans to revive the Songea tobacco factory.

The delay has caused the investor to halt plans to revive the tobacco factory, according to the chairman.

“On June 21, this year, I received a representative from PATL. He informed me that the company was no longer interested in reviving the tobacco factory over delays to issue VAT returns.

The Deputy Industry and Trade minister, Ms Stella Manyanya, recently responded in Parliament to criticism over the government’s reluctance to issue VAT returns to companies, including PATL.

“The government promised that the factory would resume operations on August, 2018, but as I speak nothing has been done.

The closing of the factory denies over 1, 500 residents income and the government huge revenue,” said Ms Ngonyani during the questions and answers session.

The deputy minister was responding to a question from Ms Jacqueline Ngonyani, (Special Seats-CCM) who sought to know the government’s plans to revive the Songea-based tobacco factory.

The minister said the government was yet to issue the VAT returns to the companies because it was contemplating to conduct a thorough verification the accounts to ensure that the money was issued to the specific approved companies.

“There are speculations that some of the companies have submitted false information in attempt to defraud the government and earn billions in fake VAT returns,” said the minister.

Referring to the government’s plans to revive the Songea tobacco firm, Ms Manyanya said the government was in negotiations with a new investor who has shown interest to revive the tobacco firm. She did not disclose the name of the prospective investor.