Columnists

Tobacco smugglers a threat

BENEDICT Tembo.

Analysis: BENEDICT TEMBO
ASIDE the World Health Organisation Framework Convention on Tobacco Control (WHO FCTC), smuggling poses a huge challenge to the tobacco industry in Zambia.
Through the WHO FCTC, the first international treaty negotiated under the auspices of WHO, Zambia and other countries have made great progress in tobacco control since then as a result of fulfilling their obligations under the convention.
The WHO FCTC is the first international treaty negotiated under the auspices of WHO adopted by the World Health Assembly on May 21, 2003 and entered into force on February 27, 2005.
Zambia acceded to the treaty on May 23, 2008.
It has since become one of the most rapidly and widely embraced treaties in United Nations history.
It was developed in response to the globalisation of the tobacco epidemic and is an evidence-based treaty that reaffirms the right of all people to the highest standard of health.
The convention represents a milestone for the promotion of public health and provides new legal dimensions for international health cooperation.
The treaty has limited tobacco trading in Zambia.
But the biggest threat to the tobacco industry in the country is the smuggling of tobacco products, which has negatively affected the contribution of tobacco to the gross domestic product (GDP).
Currently, Zambia has three major players in the tobacco sector – British American Tobacco, JTI and Roland Imperial Tobacco, the country’s indigenous firm.
Ephraim Mwenda junior, a director at Roland Imperial Tobacco, said smuggled tobacco deprives Government of the much-needed taxes to develop the country.
Mr Mwenda wants the local industry protected through stringent border controls.
He said there are some companies which double as producers and importers.
They mask as producers but import as well.
Because their production is not enough to satisfy the local demand, they also import, creating competition within themselves.
The company’s general manager Ray Subhendu said smuggled tobacco products have taken up a huge chunk of the market share.
“Our sales have gone down, we cannot pay that much revenue,” Mr Subhendu said.
Sydney Malunga, the Key Accounts manager, said tobacco is expensive, therefore, consumers should be wary of cheap products.
“It gets down to the consumer, they should be aware of the health hazards,” Mr Malunga said.
He said Roland Imperial Tobacco is willing to work with government agencies in curbing smuggling of tobacco.
“Government should support us. If we support local farmers, there will be value added and we will grow the tobacco industry,” Mr Malunga said.
Mr Subhendu added that some smuggled tobacco products are not written in English.
He also said some smuggled tobacco contains a lot of non-tobacco material which causes blindness, cancers and impotence among men.
Apart from health impacts, Mr Subhedndu regretted that smuggled tobacco deprives local farmers of income.
“Zambian farmers are deprived. Their space is occupied by foreign tobacco, our farmers are affected,” Mr Subhendu said.
He said Government is also losing foreign exchange because the illegal tobacco traders take away the money in convertible currencies.
Despite the challenges, Mr Mwenda said Roland Imperial Tobacco is willing to grow the tobacco industry and make Zambia one of the biggest producers of the crop.
Currently, the country produces 36 million kilogrammes of tobacco, well behind its neighbours Malawi and Zimbabwe.
Malawi produces 150 million kilogrammes annually while Zimbabwe mints 250 million.
While Zambia’s tobacco contributes a paltry three percent to the GDP, Zimbabwe accounts for about 40 percent and Malawi accounts for 60 percent.
Tobacco is the mainstay of Malawi’s economy and the major foreign exchange earner.
Mr Mwenda said Roland is working hard to ensure that tobacco begins to make a meaningful contribution to Zambia’s GDP.
He said the company is building a US$15 million manufacturing plant in the Lusaka South Multi-facility Economic Zone, which is sitting on 12,000 square metres.
The company is also building an 8,400 square metres warehouse.
Mr Mwenda said Malawi and Zimbabwe are perfect examples of tobacco’s seamless potential but there is need for protection of companies with large investments like Roland Imperial.
He said the factory at the multi-facility economic zone will spawn huge outgrower schemes in Zambia and create employment opportunities for citizens.
He said it will add value to the locally grown tobacco as well as give impetus to the ‘BuyZambia Campaign’ which Government is promoting.
Economist Chibamba Kanyama said smuggled tobacco hurts the economy.
“First, some companies have invested heavily in tobacco processing plants in Zambia. The British American Tobacco, for example, recently opened its factory in one of the economic zones to process the cutrug into processed tobacco.
The investment should be recouped within reasonable time depending on the economic circumstances remaining the same,” Mr Kanyama said.
He said if smuggling continues, the sales from tobacco players will significantly drop, hurtling their growth prospects, job creation as well as their capacity to pay due taxes, both sales taxes as we may call them soon and company taxes.
“Second, Government is itself not getting any revenue from smugglers.
The potential loss in revenue averages US$20 million per annum or even more. Also remember that investment in tobacco processing plants helps the value chain significantly,” Mr Kanyama said.
He said Zambia has huge potential to make tobacco the leading non-traditional crop, earnings hundreds of thousands of Kwacha to big commercial and peasant farmers. “Zimbabwe across the border has survived economic turmoil on the back of tobacco farming.
“With a growing tobacco industry, we foresee increasing investment in processing factories, particularly in cutrug processing. At the moment, tobacco farmed in Zambia is exported for mini-processing before it is imported back,” Mr Kanyama said.
The author is editorials editor at the Zambia Daily Mail.

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