REGULATORY IMPACT ASSESSMENT ON TOBACCO REGULATIONS FOR THE TOBACCO ACT NO.10 OF 2022

1. BACKGROUND

The Tobacco Board of Zambia (TBZ) is a statutory body under the Ministry of Agriculture (MoA) established in 1968 through an Act of Parliament Tobacco Acts, Cap 237 and 238 of the laws of Zambia. These two (2) pieces of legislation mandated the TBZ to promote, control and regulate the production, marketing and packing of tobacco in the country, as well as the control of the export of tobacco from and import of tobacco into the country.  Further, the Tobacco Acts Cap 237 and Cap 238 mandated the TBZ to direct and promote research in tobacco related matters in the country.

However, due to the regulatory burdens presented by these two pieces of legislation and the volatility of the modern industry in August, 2022 the Tobacco Acts Cap 237 and 238 were repealed and replaced by the Tobacco Act No.10 of 2022 which gave Tobacco Board of Zambia under section 4 the following Mandate:

1. 1. promote, protect and maintain the production, sale, preparation for subsequent use and export of tobacco grown in the Republic;
   2.  regulate and monitor the production, marketing, import and export of tobacco;
   3. carry out tobacco research and ensure quality standards of tobacco as approved by the Zambia Bureau of Standards;
   4. collect information relating to the production, marketing, manufacture and consumption of tobacco within and outside the Republic;
   5. provide and operate services and other facilities that may be necessary for the tobacco industry
   6.  facilitate the production of tobacco or tobacco seed as and when the Tobacco Board of Zambia is of the opinion that it is in the best interests of the tobacco industry of the Republic to do so;
   7. buy tobacco, in consultation with the Minister, if it is in the best interests of the tobacco industry to buy that tobacco;
   8.  promote, protect and maintain the sale of tobacco grown in the Republic, having regard to buyers and trade interests and the stability of the market; and
   9. advise the Minister on matters relating to tobacco.

In undertaking its mandate, TBZ provides various services to tobacco growers and buyers. The Board registers farmers to ensure traceability of the tobacco and enable estimation of expected yields. TBZ also oversees all tobacco-marketing processes on the sales floors, provides extension services to self-sponsored tobacco farmers, and carries out research on adaptability of seed varieties in collaboration with other Government Entities such as Zambia Agriculture and Research Institute (ZARI) and Seed Certification and Control Institute (SCCI), tobacco quality control, sustainable forest management and prevention of use of child labour. Following Zambia’s ratification to the World Health Organisation Framework Convention on Tobacco Control (WHO-FCTC), the Board is responsible for coordination of activities on adherence to the protocol by players in the tobacco value chain.

The production of tobacco in Zambia can either be self-sponsored or sponsored. The tobacco that is grown under sponsorship in Zambia accounts for over 90 percent of the national tobacco production with less than 10% being grown under self-financing arrangements. 

Tobacco production is one of the lucrative agriculture investment opportunities in Zambia. The crop in the Seven National Development Plan (7NDP) was identified as a quick win crop which is 7.5 times more profitable per hectare than maize production and 14 times more profitable than cotton. Thus, tobacco production has great potential to contribute to the growth of the economy through employment, wealth creation and providing income support as well as food security to rural communities. Suffice to state that tobacco directly employs an average of 48,000 people with 288,000 directly benefiting from the growing of tobacco, and the total value chain contributing about 450,000 direct jobs to the Zambian economy. Furthermore, tobacco is 100% export cash crop and therefore, contributes greatly to foreign earnings of the country. For instance, in 2022 tobacco was the highest and major contributor to the agricultural products under the Non-Traditional Export earnings amounting to 9.5% of the total share representing a total contribution of ZMW 158 million to the Country’s foreign exchange. This was followed by corn seed being at 8.3% of the total share, sugar at 5.7% and cotton being at 1.6% of the total share (Zamstat,2022).

1. PROBLEM STATEMENT

The production of tobacco in Zambia has stagnated for the past 10 years compared to other tobacco producing countries such as Malawi and Zimbabwe. The highest the country has produced in the last 10 years is 42 million Kgs compared to Zimbabwe with 250 million Kgs and Malawi producing 180 million Kgs during the same period.

This stagnation in the growth of the sub sector can be attributed to lack of investor confidence arising from the irresponsive legal framework, tobacco side-selling, tobacco vending, marketing challenges for self-sponsored growers and weak tobacco traceability mechanism.

The focus of the current regulations does not take in to consideration these contractual arrangements and mainly focus on tobacco which is grown by self-sponsored growers. This limitation has presented some challenges such as provision of extension services to contracted growers by TBZ to ascertain the non-use of   prohibited chemicals, uncertified seeds and sub-standard fertilizers which poses a risk to the industry. For example, two tobacco companies closed down due to the use of prohibited tobacco chemicals by some growers in 2014. 

Side selling and vending has over the years led to an increase in poor loan recoveries by the financiers which has resulted in some of the major buyers to reduce their sponsorship capacities leading to reduced tobacco production. Side-selling is an industry vice where a grower under a loan sponsorship agreement decides to sale the sponsored crop to a different buyer thereby defaulting on the loan repayment to the sponsoring buyer. Where as vending is an industry vice where the growers that are not registered and did not grow the tobacco buy tobacco from the registered growers in  the field and or  near by tobacco producing countries illegally present the tobacco for sale on a licensed sales floor.

Currently the sector players are required to renew their certificates and licenses annually this process has been cumbersome and costly to the growers and merchants, this makes the industry unattractive to new growers and investors in the sub sector leading to lower-than-expected growth output over the last ten years.

Additionally, the self-sponsored tobacco growers do not have a readily available market; this is because the tobacco buyers or merchants prefer to buy their pre-financed tobacco from contracted growers as they assume that self-sponsored tobacco lacks traceability in case of disputes on the international market and does not meet the type or style demanded by their international market. These factors have led to low tobacco production levels in the country and failure to the increase of the number of self-financed tobacco growers to help grow the industry.

Another challenge that has also contributed to low tobacco production has been the failure to attract new investments into the country over the last 30 years in areas of tobacco buyers/merchants, processing and manufacturing which has been attributed to the legal framework which is unable to address the current and emerging industry trends.

The Ministry of Agriculture and the Tobacco Board of Zambia wishes to issues a preliminaly notice of intention to introduce regulations. Draft regulations are not available at this stage. We as stakeholders to submit issues that require regulation or areas where reforms are needed.