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Last Updated: Monday, 23 July 2007, 05:16 GMT 06:16 UK
Haggling over Malawi's green gold
By Joe Lynam
Business reporter, BBC News, Lilongwe, Malawi

Seeing a Malawian man actually running at full tilt is a rare thing.

Tobacco auction house in Lilongwe, Malawi
Malawi's tobacco changes hands in a huge warehouse

They are a relaxed nation and because most of the economy is agriculture-based, there's rarely a need to rush anywhere.

But when it comes to the East African state's main cash crop, tobacco, the pace picks up quite a bit.

At auction day in Lilongwe, Malawi's capital city, "green gold" - as the farmers here like calling their raw harvest - goes on sale.

Dozens of bare-chested young men sprint with wheelbarrow-like trolleys into and out of a giant hall in the late morning heat.

Half of them have large bales of canvas sacks, but if you follow those with empty carts, you arrive at an enormous warehouse - the largest in the country.

There, your senses are accosted by the sights and sounds of hundreds of people buzzing around thousands of yellowing sacks, as the pungent mix of freshly harvested tobacco competes with human body odour.

The auction process itself is a fascinating mix of theatre and business. On one side of a long row of open tobacco sacks stands the auctioneer, barking out the price per kg.

I read about health problems in Europe and wonder what it will mean for the people here
Ponsiano Kaomba, tobacco farmer

Opposing him and swiftly moving up the line is the buyer and his team, haggling over that price in a series of gestures and grunts - more akin to a cattle mart than to anything at Christie's or Sotheby's.

The farmers, who have grown and delivered these sacks of tobacco, wait in the wings - like expectant fathers - for an agreed price.

They and their families and their workers' families depend hugely on what transpires in front of their eyes.

Today, there are universal smiles in the wings. Near-record prices are being paid for this summer's crop. At $1.80 a kg, it's more than double last year's prices.

Asian expansion

The buyers aren't smiling, though. They blame a scarcity of supply and government intervention for the high prices.

Even though they feel they are paying too much, they have to buy anyway. The demand from soon-to-be rich countries, such as China and India, is too great to abstain from purchasing.

They will be passing on this bad news to tobacco giants such as Altria (makers of Marlboro), BAT (Lucky Strike) and Gallahers (Benson & Hedges), who will have to pay more to turn these shabby-looking leaves into expensive cigars and branded cigarettes.

Ponsiano Kaomba, tobacco farmer
Ponsiano Kaomba is at the mercy of world tobacco markets

And they have a willing and waiting market in East Asia. One in every four smokers in the world lives in China alone - dwarfing most Western countries.

And there's room for expansion for the big multinationals. Only 1.2 billion of the 700 billion cigarettes that were sold by BAT last year went to China.

It is also a more receptive market. Unlike Europe and much of North America, smoking is still widely popular in China. There is only a partial ban on tobacco advertising in place, and there are few restrictions on smoking in public places - which are more or less the norm in the EU now.

Whether or not Big Tobacco succeeds in making major inroads into East Asia or South Asia matters a lot in Malawi.

For farmers such as Ponsiano Kaomba, his very livelihood depends on it. He worries that health fears surrounding tobacco may damage his earnings.

"I read about health problems in Europe and wonder what it will mean for the people here [at the auction]," he says, "but so far it has not affected us too badly."

Consumption curbs

Most of the 27,000 Malawian tobacco farms (down from 45,000 five years ago) reap meagre rewards compared with their Western counterparts.

But the government of President Bingu wa Mutharika is trying to play its part, by raising the minimum price at which tobacco can be sold at auctions.

"The president was very disappointed by the prices achieved last year," says Dr Evans Chipale, who runs Auction Holdings, the body designed to sell Malawi's main source of foreign income.

"He introduced higher prices for farmers and guaranteed that they would all be paid within 24 hours of the sale."

But the vagaries of the world market will have a far great impact than any government action. And it doesn't bode well for poor African tobacco farmers.

Even China is moving towards curbing cigarette advertising and discouraging its consumption. That will almost certainly trickle down to places such as the auction house in Lilongwe.

The farmers may have been smiling at record prices today, but for how long?

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