British American Tobacco Uganda (BATU) last week announced that by the end of the year, it will stop growing tobacco leaf, causing anxiety among tobacco farmers across the country, especially those contracted by the company.
The news means that the 14,700 farmers who are contracted by BATU across the tobacco growing areas in the country will cease to supply the company with the cash crop beginning next season, 2015.
The decision to cede leaf growing also means 138 people BATU employs in the leaf department will be rendered jobless if Alliance One International, the new company taking over the operations, does not take them on board as expected.
The spokesperson of tobacco farmers in Uganda, Mr Morris Chandia, in an interview on Friday last week said although the news that BATU was ceding its leaf growing operations in Uganda was hard to swallow, it did not discourage farmers from growing the cash crop.
He said: “We have been talking to the farmers about the new development and all of them are prepared to work with whoever is available including the new company—Alliance One International.”
He continued: “Most farmers were shuttered by the news and they thought that was the end of life for them, but they have since recovered and are excited about the prospect of working with a new company.
“There are also several other companies that are already taking aantage of the situation, so the vacuum will not be felt as earlier feared.”
According to the managing director of BATU, Mr Jonathan D’Souza, the proposal to discontinue the leaf growing and export business in Uganda was considered and approved by the board after Alliance One International the new company that will be taking over the operations informed BATU that it will no longer be buying the cash crop from them.
“They were our biggest customers. And once they said they will not be buying from us anymore then the board had to take a decision,” Mr D’Souza said last week.
He continued: “We expect that the farmers will be taken on board by the new company because they [Alliance One international], have assured us that they will be looking at our employees for recruitment.”
He also said BATU will keep its shop open in the country, only that it will be focusing on the cigarette business more.
BATU finance director, Mr Paul Claude Sine, said in a news conference in Kampala last week that the move to discontinue leaf operations is a wise decision because the new company is in a better position to absorb the tax burden and other related issues compared to BATU.
Being an agricultural commodity, the risks involved range from the price volatility to unpredictable weather and other costs such as loans for fertilisers injected in production, let alone making the farmers contented all the time, BATU is relived that an expertise in the area is taking over the operation.
Industry analyst, Mr Lawrence Bategeka is, however, afraid that the farmers could be the biggest losers here.
He said: “The new company could come in with new technology and would want to grow the cash crop by themselves—using technology to cultivate the crop, and that means thousands of farmers will be rendered with no market for their harvests.”
He continued: “The aantage with BATU was that it had a value chain and I don’t see it happening with the new company, meaning so many jobs could be lost.”
According to Bategeka, the new development could prompt the tobacco farmers to think of new alternatives.
The permanent Secretary in the Ministry of Trade, Amb Julius Onen, said the new company will increase the production of the crop because it is not only a global player in this kind of business but well capitalised as well.
“There will be no problem for the farmers because the alternative is much more solid and they stand to benefit even much more. Soon they will submit their papers and we shall look at them and have them start business immediately,” Mr Onen said last week.
About the company
Alliance One International provides worldwide service to large cigarette manufacturers. Multinational manufacturers of consumer tobacco products rely on independent merchants such as Alliance One to supply the majority of their leaf. They purchase tobacco in more than 45 countries and serve manufacturers of cigarettes and other consumer tobacco products in over 90 countries.
SOURCE: Daily Monitor