ANTI-TOBACCO SMUGGLING SCHEME/DRIVE “ Standing on One Strong Leg is Better Than on None- Jaffee, S. 2003.” ‘ Let’s prote

1. ANTI-TOBACCO SMUGGLING SCHEME/DRIVE“Standing on One Strong Leg is Better Than on None- Jaffee, S. 2003.”‘Let’s protect our green gold’ GEORGE H. KAINJA, D.C.P. Community Policing Services Branch National Police Hqrs Bag 305 Lilongwe.

2. Purpose of the presentation • Briefly examine the ‘Nature and Extent’ of the Problem of Illegal Selling (Smuggling) of Malawi grown Tobacco to other countries’. • Specific focus is paid to: • Magnitude of the problem • Push Factors/Factors that contribute to the Problem • Who is involved in such illegal dealings • Tentative Short and Long Term Interventions.

3. What kind of problem are we dealing with???? • Social • Economic • political

4. TOBBACCO: MALAWI’S GREEN GOLD • Represents 60 to 70 % of Malawi’s Foreign exchange earnings • Malawi’s Economic Lifeline (about 350, 000 farmers in 2003) • 23 % of Malawi’s Tax base comes from tobacco • 1 in every 5 Malawians rely substantively on income from tobacco production or employment (Jaffee, 2003). • ‘Despite the growing anti-smoking campaign, tobacco remains our main foreign exchange earner, we can-not phase it out, all we need is to supplement it’; SO LETS PROTECT IT FROM SMUGGLERS!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

5. MAGNITUDE OF THE PROBLEM OF TOBACCO SMUGGLING • The problem is real and ‘Cross Cutting’ • At the bottom, the problem affects us all • The problem is caused by myriad factors • The problem is Huge: • For example, in 2002 there was a demand of 135 million kgs of Burley Tobacco, • Only 103 million kgs were legally sold at our Auction floors • Gap of 25% (The Courier ACP-EU-Nov-Dec 2003).

6. Estimates of Smuggled Tobacco (World Bank, 2003; Nation News Paper, 2005) • Estimates of Total Trade in Smuggled Raw Tobacco, ‘up to 10, 000 tons (91 million kgs.) in 2003 • The same leaf is eventually imported as Zambian or Mozambican Tobacco. • In 2005, 50, 000 tons valued at US$ 59 million was smuggled out of Malawi. This is an equivalent of 34% of 145, 000 tons sold at auction floors in that year. • 15% of tobacco on Zambia’s market is smuggled from Malawi (According to Zambia’s Eastern Province Tobacco Sponsors Association in Tobacco Farm Quarterly, 2005).

7. Causes or push factors for the problem • Claims of Better Net Prices • No deductions from illegal sales (e.g. taxes, levies for membership, transport, etc) • Quick and Fast Cash (unlike the process of taking the leaf to auction floors where it takes long to be sold, then the money is deposited in Bank Accounts). Slow process. • Avoid storage fees • By-Passes Corrupt Auction Floors officials • Long Distances to auction floors • Avoids transport costs • Congestion at auction floors • Avoid poor prices by colluding buyers • Avoid handling queries • Proxy markets by major buyers • Importation licences issued to major buyers • Unexpected closures of auction floors • Corrupt Customs (MRS) and Border Police Patrollers. (Nsiku & Botha, 2007)

8. Additional Reasons • In addition to the auction fees, Malawi growers pay a series of institutional cesses which are also deducted by AHL from the gross revenues obtained by farmers. • These include a levies for ARET (1%), associations (0.85%), TAMA’s classification system (0.5%), and the Tobacco Control Commission (0.13%), as well as a payment of US $0.92 per bale to cover the cost of a hessian bag replacement scheme. These levies amount to some 3.58% of the farmer’s gross revenues. These charges are high (Jaffee, 2003).

9. Practical Case • Evidence shows that smugglers alongMalawi’s borders with Zambia in 2006 earned an estimated net return of US$0.60/kg oftobacco after receiving US$1.10/kg) at illegalmarkets in Zambia and deducting costs for transportation,fertilizers and other production costs. • A farmer selling histobacco at auction for US$1.18/kg a higher priceper kilogram than what smugglers receive, only earned a netreturn of US$0.34 after subtracting deductions www.tobaccocontrol.com(2007).

10. Who is involved in this shadowy deals?? • Big Multinationals in the Tobacco sector • Independent traders and farmers • People at high level e.g. Government officials and politicians • Small scale farmers, Tenants, Transporters. • Those involved sell their tobacco to Subsidiary Companies of well established MNCs with import permits in Malawi. (Sandramu, R. in Tobacco Farm Quarterly, 2006).

11. One Reason Why Prices Are better Across the Borders • The trading system used in neighbouring countries such as Mozambique and Zambia differs from the auction system used in Malawi. • In these countries, tobacco is bought at buying stations established by merchants at strategic points in the growing districts. (Nsiku & Botha, 2007) http://www.iisd.org/trade/commodities/price.asp .

12. Some of the early harvested tobacco leaves drying in the sun/air: (Nelson Nsiku, 2007)

13. Reference List • Jaffee, S. (2003) ‘Malawi’s Tobacco Sector: Standing on One Strong Leg is Better Than on None’, Africa Region Working Paper Series No. 55, June 2003, http://www.worldbank.org/afr/wps/index .htm accessed in Jan, 2010. • (Nsiku & Botha, 2007; Tobacco Revenue Management: Malawi case study. The University of Malawi – The Polytechnic) http://www.iisd.org/trade/commodities/price.asp . • World Bank for the Republic of Malawi. Washington, DC: World Bank, 2003,http://www-wds.worldbank.org/servlet/WDSContentServ r/WDSP/IB/2004/02/09/000160016_20040209130747/R ndered/PDF/ 259060MAI.pdf (accessed , Jan 29, 2010).

14. Questions that need our answers • Where specifically is the problem of smuggling most rampant in the country? • Who are additional perpetrators and how do they do their business? • What are the names of Market places where tobacco is sold in Zambia and Mozambique? • What are the known interventions to deal with the problem? • What do consider as Short and Long Term Remedies?

15. Lets Critically Examine Each of the 4 Questions and Find Remedies to the Problems Highlighted Above. THANK YOU FOR YOUR ATTENTION