•THE establishment of the cigarette manufacturing factory in Zambia will eliminate the practice of price transfer being perpetrated by the foreign companies operating in Zambia, to externalise the foreign currency.

By JUDITH NAMUTOWE
THE Tobacco agriculture sub-sector has continued to be one of the most important cash crops in Zambia as it contributes significantly to the country’s Gross Domestic Product (GDP).
The industry currently employs more than 450,000 people and this has been necessitated by the demand for Zambian produced tobacco at international and regional markets.
The country has vast potential to increase tobacco production because of the suitable climatic conditions that include enough land, suitable soils, water and labour.
Zambia produces some of the best tobacco varieties in the world and boasts of Virginia, burley, dark fire and oriental which are among the highest earning cash crops compared to other crops.
Tobacco growing has been steadily growing in volume, for the past four years.
Much of the tobacco grown in Zambia is exported in raw form and during the 2013 farming season, this averaged at US$100 million in monetary terms.
The Government through the Ministry of Agriculture and regulatory agencies such as Tobacco Board of Zambia (TBZ) has invested in tobacco growing through setting up of revolving funds, allocation of land to mostly peasant farmers and establishment of institutions such as Popota Tobacco Training School in Choma.
This is all in an effort to promote the growing of Tobacco in Zambia.
The support from the Government is meant to empower the farmers to be self-sustaining.
This, however, cannot be attained as there is no ready market for this “Green Gold” due to lack of local manufacturing infrastructure that would provide the ready market and add value, to earn the peasant farmers higher revenue than what they are currently getting.
In Zambia there are two major players in the cigarette market, namely, Roland Imperial Tobacco Company Limited (RITCO) and British American Tobacco (BAT) with other smaller players.
Roland Imperial Tobacco Company Limited is the only player that has a cigarette manufacturing factory that produces the Life Full Flavour brand, launched in October 2013 and most recently, Life Menthol launched in March, 2014.
Other brands are to be introduced onto the Zambian market later in the year.
Apart from Roland Imperial Tobacco Company Limited, the other players are mere traders, importing cigarettes from countries such as Kenya, South Africa, Zimbabwe, Malawi and Tanzania.
Zambia spends its hard-earned currency to import numerous brands of cigarettes from all these countries and in addition to this, all the profits realised from this sale are externalised by the multinationals, operating in Zambia, in form of foreign currency.
All the above lost foreign currency could be retained in the country.
Roland Imperial Tobacco Company (RITCO) Limited general manager-trading division, Pingilani Mwenda observed that, despite being a world renowned tobacco grower of immense quality and flavour, Zambia has had no cigarette manufacturing plant for many years.
Mr Mwenda noted that Zambia has only one threshing plant which does not produce Cut Rag (the tobacco form needed to feed into a Cigarette Making Plant).
British American Tobacco (BAT) shut down the last cigarette manufacturing factory in Zambia. It is against this background that Roland Imperial Tobacco Company Limited embarked on the establishment of what is the only cigarette manufacturing plant in Zambia.
The set up will incorporate a Primary Processing Plant in the near future. The cigarette making plant in Makeni Industrial Park was commissioned in October 2013.
The factory established by Roland Imperial Tobacco, has an installed capacity to produce between 5,000 to 7,000 Cigarettes per minute, with a running time of 15 hours per day.
The factory is thus able to produce two billion Sticks per year, whereas Zambia’s consumption is only one billion sticks per year, at the moment. From the above, the surplus from production is one billion sticks of cigarettes.
The company investment in the cigarette manufacturing plant is approximately US$8 million, with more investments projected in the primary tobacco processing plant.
The establishment of the cigarette processing plant and primary processing plants in Zambia will spur the tobacco farmers, the majority of whom are peasant farmers (over 450,000) to increase their hectarrage grown and many more new ones shall be encouraged to engage in tobacco growing too.
Mr Mwenda said the resultant effect of this is increased employment creation especially in areas where farming activities take place.
He said there shall, therefore, be increased labour requirement at cultivation stage, weeding, harvesting and curing of tobacco.
The jobs thus created are permanent and in this case largely in the rural areas or communities where farming takes place.
“From the foregoing, it is evident that value addition to the tobacco grown in Zambia would fetch a triple return in monetary value than what the country is currently earning through export of raw tobacco,” Mr Mwenda said.
Roland Imperial Tobacco Company Limited, general manager-manufacturing division Aliport Ngoma noted that Zambia’s tobacco production per annum far exceeds its tobacco and cigarette consumption requirements in one single year.
He said the company is also exploring the export market to earn the much needed foreign currency.
There is a huge market potential in COMESA and SADC member countries, Africa and Asia.
Mr Ngoma said tobacco constitutes 70 per cent of the product cost and the non-tobacco imported materials make up 30 per cent of the cost, in the cigarette manufacture.
The drain on foreign currency reserves cannot be justified by the so called “high taxes” said to be paid by these foreign companies or multinationals as the damage to the economy through loss of huge quantum of foreign currency is irreparable.
It is without any doubt that the establishment of cigarette manufacturing plants and related Tobacco Processing Plants must be encouraged in Zambia.
The benefits mentioned above are of great importance to the social, economic and political well-being of the country.
This is notwithstanding the fact that the Zambia Development Agency (ZDA) Act number 11 of 2006, classifies any investment of not less than US$500,000.00 in the processing of agricultural products as being in the priority sector and is entitled fiscal incentives.
Mr Ngoma said the establishment of the cigarette manufacturing factory in Zambia will, therefore, not only earn foreign currency for the country, but will also retain foreign currency, currently being consumed through the importation of cigarettes.
It will also eliminate the practice of price transfer currently being perpetrated by the foreign companies operating in Zambia, to externalise the foreign currency.
But Zambia Consumer Association (ZACA) is saddened by the new entrant in tobacco industry, who has set up a cigarette manufacturing plant in Lusaka.
ZACA executive secretary Samuel Simutunda said that his association was saddened by the new entrant RITCO.
Mr Simutunda said much as the Government was raising revenue from the sale of tobacco, the product was harmful to people’s health, adding that tobacco was an industry that should not be encouraged.
“We have seen a lot of people suffering from cancer resulting from tobacco consumption and government was spending more than what is being raised from tobacco sales.
So we are saddened as ZACA because we have been against tobacco production,” he said.
He, however, expressed hope that RITCO would comply with the laid down procedure.
The company’s adverts should not focus on attracting children to cigarettes as they easily get attracted and eventually get hooked to smoking.
“So we are saying that the company should be strict in the way it places adverts and ensure all its brands have warning signs labelled clearly that the product is harmful,” he said.