INVESTING IN VALUEADDED TOBACCO
(as a way toward industry sustainability)
JOSHUA NTHAKOMWA, DIRECTOR
INVESTMENT PROMOTION
Malawi Investment and Trade Centre (MITC)
[email protected]
www.malawi-invest.net
Presented at Sun n’ Sand Resort, Mangochi. 8th September, 2013
Revealing Statistics
 Global Tobacco Industry generated sales of
almost US$721 billion in 2010 (Report Linker www.reportlinker.com)
 US$681 billion from cigarettes sales, which
represents almost 95% of the total industry
market
 Cigarettes represent the leading market segment
Revealing Statistics (Continued)
 Currently, there are 1.3 billion smokers in the
world and figure is expected to increase by 4%
annually – 52 million smokers annually
 Around 12 million cigarettes are smoked every
minute around the world
 Around 35% of men in developed nations
smoke against 50% in developing nations
Market Trends in the Industry
 About 5.5 trillion cigarettes are produced
globally each year (Source: B.A.T)
 Biggest Single market is China (about 350
million smokers – 40% of global total)
 Four biggest international tobacco companies:
BAT, Imperial Tobacco, Japan Tobacco and
Phillip Morris account for 45% of global market
 Research reveals that while cigarette sales in
developed countries continue to decline year
after year, sustained volume growth is widely
predicted in emerging markets
 These are driven by population growth and
increasing disposable income
 Consequently, according to the report, the
overall value of the tobacco market
continues to growth
 Statistics indicate that more tobacco
companies are being pushed by regulatory
factors in developed countries and are
exploring investment in Africa, where the
market seems to be emerging
 Anticipation is that some of such
investments could locate in Malawi being a
locational country
Value-addition Prospects
 Market trends and investment push factors
in the developed world provides huge
prospects for local value addition for export
(Sub- and extra-region)
 Optional strategy could be value addition
(cigarette manufacturing) under subcontractual arrangements
Market Access
 EBA into European Market
 SADC and COMESA
 AGOA
 Bilateral trade agreements with Zimbabwe,
Mozambique, China, India, Japan etc.
Government Support Policies
 Tobacco being main forex earner,
government has huge interest for its value
addition particularly for export market
 For such value addition exclusively for
export, GoM offers the EPZ status under
which such export-oriented companies
import their machinery/raw materials
duty/tax/surtax -free
 Industrial Rebate Scheme – covers
manufacturing which does not qualify
under EPZ – capital equipment/raw
materials duty/surtax/excise exempt
 Various tax allowances that will lower
effective taxable income
 Some can be negotiated with GoM,
particularly for export-oriented ventures
Diversified Investment
 GoM encouraging tobacco companies to also
consider investment into non-traditional
areas, e.g. soy-bean processing; groundnut
processing etc
 Also non-agricultural areas e.g. importsubstituting areas in electrical accessories,
production of tires (rubber sourced locally),
energy generation using renewable sources
etc.
 Specific incentives exist for these: e.g. up to
10 years tax holiday for investment in energy
and agro-processing – in addition to other
incentives..
Thank you for your attention