‘No tobacco farmer would be motivated under a current declining price trend environment’—DCG Chief Economist Chifipa Mhango

* According to RBM data that the end of April 2025, 20.2 million kgs of tobacco were sold at an average price of US$2.30 per kg — thus earning US$46.5 million as a country

* This is a decline as last year, during the same period, average price of tobacco was US$2.66 per kg. We earned US$45.2 million from a lower sale of 17 million kgs

* If this situation is not addressed, soon Malawi will even lose its very bedrock of forex generation, for there will be no farmer left to grow tobacco

By Duncan Mlanjira

According to data collected from the Reserve Bank of Malawi (RBM), the sales of the 2025 tobacco industry declined as compared to last year, which South Africa-based Don Consultancy Group (DCG) Chief Economist, Chifipa Mhango contends it is “very concerning”.

He quotes the RBM data that the end of April 2025, 20.2 million kgs of tobacco were sold at an average price of US$2.30 per kg — thus earning US$46.5 million as a country.

“This is a decline as last year, during the same period, average price of tobacco was US$2.66 per kg,” says Chifipa. “We earned US$45.2 million from a lower sale of 17 million kgs.

“What would be our advice to a tobacco farmer? No tobacco farmer would be motivated under a current declining price trend environment.

“However, a self-centred government politician will encourage a farmer to grow more for it generates more earnings in dollars despite falling prices. 

“A good politician that cares should fight for the plight of our tobacco farmers to be the key beneficiaries of tobacco sales earnings in Malawi — than a narrow approach of forex earnings for the country.

“What story can we tell to motivate a tobacco farmer in Malawi when the average price has moved from US$2.66 per kg down to US$2.30 per kg? Maybe it’s time to consider contract-based pricing for future production to guarantee better returns for our tobacco farmers.

“Only a responsible government can fight for such for its people. In an environment where inflation rate is above 25%, like Malawi, surely the costs of tobacco farming/production is also very high, and no farmer will be motivated by declining price trend.

“If this situation is not addressed, soon Malawi will even lose its very bedrock of forex generation, for there will be no farmer left to grow tobacco.

Chifipa advised the Malawi tobacco industry players to take a leaf and learn from what Zimbabwe is doing “to protect tobacco farmers on pricing and even payments rule” through its Tobacco Industry & Marketing Board.

“I may not be an expert in tobacco farming, but I know when market dynamics are not benefitting the person that suffers on the ground. The tobacco farmer in Malawi needs support.”

A few days ago, the DCG director of economic research & strategy, also presented the worrisome picture of the Malawi economic based on latest key data from the RBM and Malawi National Statistics Office (MNSO) as follows:

* A Gross Domestic Product (GDP) in current market prices of US$14.13 in April 2025 (equivalent to only 0.01% of the global GDP), with Real GDP growth rate of 3.2% in April 2025 (Data source: RBM);

* Real GDP per capita of US$695.78 in April 2025, which is only 4% of the global average (Data source: RBM);

* An elevated headline inflation rate of 27.7% in May 2025, with food inflation rate of 32.7%, which has eroded the purchasing power of most Malawians and also hindered investment into the country (Data source: RBM).

* As of April 2025, a decline to a total of MK927.8 billion (US$530 million) in total foreign exchange reserves (gross official reserves — MK176.1 billion plus total held by commercial banks — MK751.7 billion), limiting access to essential imports such as fuel, machinery, medicines, fertilizer among other products, with official import cover now at only 0.4 months or less than 15 days (Data source- RBM);

* Total Government expenditure of MK2.2 trillion just within the first four months of 2025, with April 2025 being the highest at MK565.5 billion, with a revenue total of MK1.6 trillion during the same period.

Of concern is that only MK457.1 billion (21.1%) expenditure in total towards development projects and a massive MK1.7 trillion (78.9%) in recurrent (administrative) expense. (Data source: RBM);

* A high public debt, reaching 87.7% of GDP in 2024, fuelled by deficits and massive borrowings, thus putting a massive burden on the economy (Data source: RBM);

* Malawi’s trade deficit widened to MK395.7 billion in April 2025, from MK315.9 billion in the corresponding month of the previous year, as exports decreased by 17% year-on-year to MK44.9 billion, while imports increased by 19.1% to MK440.6 billion.

Among commodities, the largest exports were tea (26.5%) followed by tobacco (13.4%) and macadamia nuts (12.8%). In terms of imports, the main commodities were nuclear reactors, boilers and machinery (17.4%), petrol (10.5%), and vehicles other than railways (10%).

Exports are declining month on month in the whole of 2025, since the month of January, cementing the fact that devaluations of the Malawi kwacha never support the trade position of the Malawi economy (Data source: RBM, MNSO);

* Since 2020, the level of Foreign Direct Investment into Malawi has never surpassed a US$250 million level on an annual basis, which was last achieved in 2020 (US$252.2 million) — Data source: RBM.

Chifipa that advised leaders that will take over the Malawi government administration after the September 16, 2025 elections the “to effectively address the structural challenges facing the country’s economy, it will need a strong political will to deliver, supported by a merit-based appointment approach into key positions”.

And to the electorate, he advised that their choice should be towards a government administration “that will offer Malawi with a new direction on the economy” — through implementation of the following:

1. A more diversified Gross Domestic Product base, away from heavy dependence on agriculture;

2. Offer conductions for macroeconomic stability, with an aligned approach towards monetary policy, fiscal discipline, and viable trade and industry policy framework;

3. High quality infrastructure investment in transportation, roads, energy, water, railway, ICT;

4. Human capital development, focused on youth and women, with more investment in the health sector;

5. Enhanced Institutional Capacity and Governance, with policy consistency;

6. Enhanced access to markets and finance for SMMEs and women/youth;

7. A merit-based appointment approach in Government and key agencies’ positions.

“Malawi will need to focus on the above economic strategic objectives in order to be on a path towards economic prosperity that is sustainable and inclusive for the entire nation,” advises Mhango.