The Sunday Mail
TOBACCO has become the country’s top agricultural export, but this year yields might be affected by the El Nino-linked drought. Experts forecast production to fall 20 percent this year.
However, the projected decline in output has not dampened expectations at Savanna Tobacco, the country’s biggest indigenously-owned cigarette manufacturer. In fact, the company is planning to spread its tentacles into the region. Our Business reporter Enacy Mapakame spoke to Savanna Tobacco chair Mr Adam Molai on the sector and its prospects. The following are excerpts of the interview:
The tobacco sector expects prices to satisfactory during the upcoming marketing season
Q: How was Savanna Tobacco conceived and when?
A: I have always been passionate about making a positive contribution to the sustainable development of my country. From my time abroad in the UK and Canada in the 1990’s, I noticed that entrepreneurs and their ventures were the major engine for growth of national economies.
I also noticed that many Western countries and multi-national companies owed their success to their ability to value-add and beneficiate raw materials. In most cases, these raw materials were sourced from developing countries.
This was especially true with tobacco and cigarettes. The global cigarette companies all get their raw materials from the developing world and earn billions doing so.
So I found myself wondering why we in Zimbabwe could not create this value for ourselves. After all, we have entrepreneurs. We have the tobacco. Why was nobody seeing and acting on this opportunity to create a 15-times value multiplier between tobacco and cigarettes? Why were we leaving the industry in the hands of foreign buyers and multi-national companies?
Q: What was the thinking behind the business? How many people do you employ?
A: My mission was to change the African narrative, to migrate ourselves from exporters of raw materials to finished goods, to stem the criminality of exporting jobs and values from our economy to other economies. My mission was to migrate our people from the poverty that still pervades our continent.
This can only be achieved through beneficiation of our raw materials.
In my last year in university in Canada I was asked to do a paper on how the West developed Africa. I tried very hard to do this paper and I found it impossible to write.
Instead, I wrote an anti-thesis on how Africa developed the West. I shared how, for example, the Picadilly tube line in London was built from hut tax from the then Rhodesia.
It was then that I decided to change this narrative of Africa continuing to develop other nations, and returned home to start to play my small role in Africa developing itself.
Our first step, incidentally, was to pioneer the contract tobacco-grower scheme, which brought over 75 000 indigenous small-scale farmers into the lucrative sector. But again, seeing the opportunities for entrepreneurial success further up the value chain, we started Savanna Tobacco in 2002, as the first indigenous cigarette-manufacturing company in the country.
Today, we directly employ hundreds of people, and create indirect employment and livelihoods for tens of thousands more.
Q: How much tax does Savanna Tobacco pay in a year?
A: This is strategic business information that is confidential to the company and our regulatory authorities.
Q: Smoking causes many illnesses, including lung cancer. Statistics show that each year, six million people die from smoking-related illnesses worldwide. As an executive in the tobacco industry, how do you live with yourself knowing fully well that you are selling to consumers a product that could kill them?
A: The cigarette industry is certainly not the only industry that creates harmful products. Even the automobile industry can be accused of something similar. Our consumers are fully-informed adults who make the choice to consume the product.
I believe an inordinate and disproportionate level of attention has been placed on tobacco.
Twenty-seven percent of deaths in the UK are related to diseases that emanate from obesity and so, by extension, fast food-related illnesses against 11 percent reflected as being from smoking related illnesses.
How many people smoke a cigarette and then go on to have a car crash that kills families, as happens from drunk driving?
Unfortunately, most things now seem to cause cancer, diabetes, obesity, heart disease, strokes and most of these items do not warn you of the dangers of their consumption.
There is no health warning on the packaging that tells you eating greasy hamburgers can kill you.
In our instance, every packet of cigarettes we sell warns you of the dangers of smoking, as do those in the liquor industry.
Q: How much do you plan to spend on capital projects in 2016?
A: Again, this is strategic business information that we cannot divulge.
Q: The electronic-cigarette industry is growing fast amid global calls for an end to tobacco use. How do you plan to counter this? Further, how soon is the local market likely to see Savanna Tobacco’s e-cigarette?
A: The end of tobacco use will ultimately be dictated by the consumer, not by “global calls”. E-cigarettes are just one alternative innovation in the industry. As entrepreneurs, we assess any innovation that our consumers demand and that will contribute to our country’s economic development.
Q: Experts have warned of subdued agriculture production due to the El Nino-induced drought. What are your prospects?
A: The drought has had a negative effect on our national crop, which is our key concern as Zimbabwean tobacco is known to be the best in the world.
However, we are a resilient company in a resilient global industry. Where tobacco volumes drop globally, prices increase. So there are some positive aspects that can be exploited.
In addition, Savanna Tobacco is embarking on an expansion into the region and the continent. The opportunities are there. And the consumers are there. Why shouldn’t we be there?
Our vision for global success will not be deterred by temporary circumstances. We have no doubt that our industry and our company will adapt, adjust and thrive. As will our country and its economy.
Q: How do you intend to counter the effects of falling global prices of commodities and slowdown in the China’s economy, the largest consumer of Zimbabwe’s tobacco?
A: There is a distinction between tobacco and cigarettes. While the world’s biggest purchasers of tobacco are in China, the cigarette industry is a truly global one and will survive the normal fluctuations of global demand.
Your question places a significant responsibility on you as a member of the media fraternity to differentiate between tobacco and cigarettes. Unfortunately it does not help that the word in Shona and Ndebele for tobacco and cigarettes is the same.
Savanna Tobacco is in the value addition and beneficiation sector as enunciated in Zim-Asset. It’s just that Savanna started its own journey towards Zim-Asset 10 years before it was enunciated by Government.
Q: What is your view on Zimbabwe’s investment environment?
A: We are a stable, highly literate and hard-working nation. We are still able to attract foreign investment, so it seems to me that it is fundamentally sound.
However, we can always improve our ease of doing business and looking at ways to create employment for our people, especially the youth. Every environment is a work in progress and needs to continue to adapt to emerging global phenomenon.
Government must play a more facilitative and regulatory role, it is up to business and entrepreneurs to play their part as the engine for economic development.
To use a soccer analogy, Government is the referee. Government policy sets out the rules.
But the players and teams on the field should be businesspeople and entrepreneurs. And the paying customers, the supporters in the grandstands, get to benefit from the value and innovation that emanate from such an arrangement.
That approach has been the reason for the success of the world’s strongest economies, the world’s brightest businesspeople, and the world’s biggest businesses.
Economic success, in my humble opinion, will not come from Government.
The failure of an economy falls on the lap of business. It is our role to influence the economic environment to be able to meet our economic objectives.
