Tobacco plant opens in Lilongwe

by Thom Khanje

Lilongwe, Malawi August 17, 2009 -- A new US$24 million tobacco processing factory has opened at Kanengo Heavy Industrial Site in Lilongwe under the joint venture between the Tobacco Association of Malawi (Tama) and tobacco merchants Premium Tama Tobacco Limited, creating 1,200 jobs.

The vast factory shells, spread on a 6.7 hectare piece of land with 34,000 square meters of factory space, have housed machinery with a capacity to process 40 million kilogrammes of tobacco a year, making it the third largest tobacco plant of its kind in Malawi after those of Limbe Leaf and Alliance One.

Operating under the trading name Kanengo Tobacco Processors Limited, the factory will in addition to processing tobacco from Premium Tama, also open its plant to any other tobacco merchant without own machinery to mill their leaf for export to international markets.

“We want to open a new business opportunity for Malawians to be able to create their own buying companies at the auction floors and bring their leaf to us for processing and packaging. All they have to do is to find markets and buy tobacco at the auction floors, we will do the rest for them,” said Thom Malata, Chief Executive for Premium Tama, the main shareholder in the venture.

He said the company is ready to double its processing capacity even by next year to 80 million kilogrammes of tobacco per year should there be enough demand for third party processing at its plants.

“We have the space and the means to increase the capacity,” said Malata, assuring the merchants that rates charged to them will not be different to those Premium Tama will be paying to process its leaf at the factory.

The establishment of Kanengo Tobacco Processing Factory has increased Malawi ’s tobacco processing capacity to 260 million kilogrammes up from 220 million kg previously, creating enough ability for the country to process on time all the 224 million kiligrammes of tobacco projected to have been grown in the country this year.

Under the venture, Premium Tama was expected to invest US$16 million as part of its 75 percent shareholding in the factory while Tama has been allocated a 24 percent stake worth US$8 million.

However, Premium Tama has financed the full project costs, with an agreement that Tama would refund its partner once it raises its financing in the project.

Tama’s Director of Finance and Administration Lemson Chitawo said the association was already in the process of raising the capital from its membership through a special company called Tama Processors Limited where tobacco growers can by shares at a minimum subscription of K10, 000, with each share valued at K2 .

He said the association has partnered with the NBS Bank where Tama members can buy the shares in the company. He said the association expects to raise the capital by the end of the tobacco trading season in March next year since most of them were still selling their leaf at the floors.

“We want to give our members a chance to also have a stake in tobacco processing because that is where a lot of tobacco money is earned,” said Chitawo, adding, “That is why companies like Limbe Leaf even have aeroplanes for their executives, because they make a lot of money there. We want growers too to start enjoying from tobacco money.”

Chitawo said Premium Tama was even ready to increase Tama’s stake in Kanengo Tobacco Processing Limited to 50 percent, should there be demand from the association’s members for more shares.

He said should its members fail to fully subscribe to the equity, Tama will find ways of raising it elsewhere for warehousing so that they could be offered to its grower members in future.