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People & Power: How A Zimbabwean Tobacco Executive Sleeps At Night

People & Power: How A Zimbabwean Tobacco Executive Sleeps At Night

There are 90,000 mostly small-scale farmers growing tobacco in Zimbabwe today, and they’re producing over 2 million kilograms of smoke a year — that’s close to the peak for the Zimbabwe tobacco industry, SABC reports.

It wasn’t always that way.

Before the advent of contract farming, tobacco farmers probably numbered less than 100, says Nick Hales, global CEO of Harare-based Savanna Tobacco.

Savanna’s business model — sourcing tobacco from small scale farmers rather than large ones — is considered disruptive, and has helped earn the company a 25-to-30-percent market share in Zimbabwe. In South Africa, its market share is less than 5 percent, Hales said in an SABC interview.

The move to use small-scale farmers is true to Savanna’s philosophy, “which is all about empowerment,” Hales said. “Contract farming has revolutionized tobacco farming in Zimbabwe.”

Led by Adam Molai, Savanna manufactures and markets more than 2 billion cigarettes a year, ZimbabweHerald reports.

Contract farming involves a farmer agreeing to sell all his or her produce to one buyer at an agreed-upon price. Contractors help farmers produce high-quality products that supermarkets demand.

Farmers get to produce more, and they don’t have to worry about finding a market, but there are disadvantages for small-scale farmers associated with their smaller size and lesser market power. Farmers who organize into co-operatives tend to achieve better deals than individual farmers, according to FarmRadio.

The tobacco business is competitive, dangerous and sometimes dirty. Savanna has often been at odds with big players like British American Tabacco (BATZimbabwe) and Phillip Morris. Accusations fly both ways, SABC reports.

Savanna has accused its competitors of trying to sabotage its attempts to penetrate foreign markets. Savanna, for its part, has been accused — but not charged — with smuggling cigarettes. Hales denies smuggling. “We go to great lengths to ensure that all export documentation in correct,” he said. “It is a problem in our industry at border crossings. It happens all over South Africa.”

In business since 2012, Savanna produces the Pacific brand of cigarettes. It exports to South Africa and Zambia, and has made serious inroads in a market previously dominated by British American, which produces popular brands Madison and Kingsgate.

In 2014, Savanna announced plans to set up a $2 million packaging plant in Mozambique. Now it says it’s ready to conquer African and global markets, SABC reports.

The company in September hired Hales as its global CEO and Douglas Mamvura as chief marketing officer.

Hales was retired and living in Togo at the time. He’d already worked in African tobacco for 20 years — including for British American — and got sucked back into the business.

Is it a dirty business?

“It’s a contentious industry, that’s for sure,” Hales said. “You’re generally not welcome at dinner parties if you’re a tobacco executive…I sleep very well at night thank you.”

Hales acknowledges that the World Health Organization has made it their business to stop the world from smoking. “Cigarettes and tobacco are legal products,” Hales said. “For those who choose to smoke it’s a very pleasurable experience. My business is the business of giving pleasure to those people who choose to smoke. My job is not only to give pleasure but to persuade smokers to smoke my brand.”

Savanna has expansion plans. It has seen market-share gains, and is looking to consolidate its position in Southern Africa. It has started looking at markets in West and Central Africa.

“If you have the brands, the people and the desire to assume a little risk, everything is possible,” Hales said.