Global leaf companies control the tobacco market in Malawi.

OBJECTIVE

To examine the influence of US-based tobacco leaf-buying companies, Universal Corporation and Alliance One International, on Malawi's economy and trade policy in 2000-6.

DESIGN

Analyses of ethnographic data and tobacco industry documents.

RESULTS

Universal Corporation and Alliance One International, through their subsidiary companies Limbe Leaf and Alliance One, respectively, in Malawi, control policy-making advisory groups and operate a tobacco cartel to influence Malawi's economic and trade sectors. Limbe Leaf's corporate secretary and lawyer is a member of several policy-making committees that advise the Malawi government on tobacco-related trade policy. The corporate representative's presence prevents other committee members from taking positions against the tobacco industry and ensures government policy that advances industry interests to obtain low-cost tobacco. The World Bank and Malawi's Anti-corruption Bureau report allegations of collusion between Limbe Leaf and Alliance One over prices at tobacco markets. Allegations of collusion between Limbe Leaf and Alliance One prompted Malawi President Bingu Mutharika in 2006 to warn the companies to end non-competitive practices or leave the country, but there was no meaningful follow-up action. Findings from interviews with small-scale tobacco traders in Malawi suggest that Universal and Alliance One International purchase smuggled raw tobacco from the neighbouring countries, Zambia and Mozambique, undermining growers' efforts to benefit from tobacco farming in Malawi.

CONCLUSION

These actions restrict competition, depress tobacco prices for Malawi's farmers and contribute to poverty in Malawi, while keeping the country dependent on tobacco growing.