Samia launches $300 million cigarette factory in new boost to Tanzanian farmers

Dar es Salaam. President Samia Suluhu Hassan yesterday laid the foundation stone for a new cigarette processing factory in Morogoro, signalling a pivotal advancement in Tanzania's tobacco industry.

The project, spearheaded by the Serengeti Cigarette Company (SCC), is set to transform Tanzania into a key player in the global tobacco market while providing a reliable market for local farmers.

The SCC factory, with a total investment of $300 million (approximately Sh800 billion), represents a major boost for the sector, according to Minister for Agriculture Mr Hussein Bashe.

This initiative is expected to enhance the country’s position in the global tobacco industry and ensure a steady market for Tanzanian tobacco farmers.

The SCC will serve as a sister company to the Mkwawa Leaf Factory, which is also undergoing a significant expansion.

The expansion aims to increase the facility's green leaf processing capacity from the current 80,000 tonnes per year to 200,000 tonnes.

The Mkwawa Leaf Factory had been closed during the previous administration due to financial difficulties and regulatory challenges, including fines totalling Sh2 trillion imposed by the Fair Competition Commission (FCC) and the Tanzania Revenue Authority (TRA).

The closure created a market void for local farmers, leading to considerable distress in the agricultural sector.

However, since President Hassan's administration took office in March 2021, efforts to revive and expand the tobacco processing industry have been prioritised.

Discussions and planning have been underway to address past issues and restore stability and growth in the sector.

“Under your capable guidance and intervention, as we sought a lasting solution to the challenges facing tobacco farmers, the government has decided to abolish fines totalling over Sh2 trillion, thus enabling the companies to operate,” said Mr Bashe.

However, the past owner of the factory could not make any decision that would revitalise the factory and instead, they decided to leave the country.

“That was why we decided to give the opportunity to the Mkwawa Leaf Factory,” Mr Bashe said, noting that as a result of the decision, tobacco production rose from only 65,000 tonnes three years ago to 122,000 tonnes during the just-ended growing season.

“Today, Tanzania is the second largest producer of tobacco in Africa after Zimbabwe. Tanzania earned $400 million in tobacco exports during the last season….Our target was to produce 200,000 tonnes, but we ended up producing 122,000 tonnes due to El Nino rains,” he said.

With a ready market, said Mr Bashe, the price has also gone up from $1.4 per kilogramme three years ago to $2.4 per kilogramme during the just-ended season.

“The decision you [President Hassan] made enabled this company to raise its processing capacity. If you consider Mkwawa Leaf and AllianceOne, Tanzania will now have the capacity of processing 300,000 tonnes of tobacco….This is the target that we have set ourselves in as far as the tobacco sector is concerned,” he said.

The leaf processing capacity, along with the ongoing construction of the $300 million cigarette factory, said Mr Bashe, will raise the number of tobacco farmers and the amount in exports could also rise to anything between $600 million and $700 million per year.

The factory employs 5,000 people, including those that work on a contractual basis.

Upon completion of the ongoing expansion, the factory will employ a total of 12,000 people.

“This is a huge revolution for the tobacco sector. Upon completion of the ongoing expansion, Tanzania will have the second largest single factory in the processing of green leaf in the world,” said Mr Bashe.

He said globally, the number one factory in terms of processing green leaves is in Brazil, which processes 500,000 tonnes.

“Ours, which will process 200,000 tonnes, will be the second one,” he said.

Speaking during the event, the owner of the company, Mr Ahmed Huwel, said when they acquired the factory, it was processing only 16 tonnes per hour.

“We then upped its capacity and started processing 28 tonnes per hour. As stated by the Minister, the ongoing expansion will process 200,000 tonnes, making us the number one processer of green leaf in Africa…,” said Mr Huwel.

He said the company was investing massively in Tanzania due to the faith it has in the predictability of the country’s business climate.

Single Borrower Limit

“We are making a huge investment in a very short period,” he said, asking President Hassan to help raise the Single Borrower Limit (SBL).

He said, being a Tanzanian investor, they were being obliged to abide by the SBL as required under the Bank of Tanzania (SBL) requirements.

Being a Tanzanian investor, he said he wants all the loans and investment proceeds to remain in Tanzania, but the SBL was dealing a heavy blow on their resolve to complete the project within the shortest possible period.

Speaking during the event, President Hassan said the factory was an important one for Tanzania in terms of job creation.

As such, she said she would sit down with the Minister for Agriculture, the BoT and experts from the Ministry of Finance to see what could be done.

“It is true that we cannot have a blanket policy for all local investors while there are differences in terms of the amount required for various investments,” he said.

Besides, if local investors are empowered, she said, most of the proceeds remain in the country.

President Hassan commended the company for coming up with the initiative of drying tobacco in the sun other than through the usual system where trees are cut down and used in the process.

Under the new initiative, the company is determined to ensure that at least 30 percent of the farmers from whom it buys the tobacco are capable of drying the crop in the sun.

With about five percent of the cigarettes that will be produced at the factory to be smoked by Tanzanian smokers, President Hassan asked the company to ensure that it contributes to the country’s Universal Health Insurance scheme.

“We want you to support us in this so that we can treat those that will be affected by the investment,” she said.

The government, she said, was with the investor and that it would support them in their endeavours.

She told the investors to ensure that their operations depicted what one would expect from such respected names as Mkwawa and Serengeti.

Chief Mkwavinyika Munyigumba Mwamuyinga, more commonly known as Chief Mkwawa, was a Hehe tribal leader in Tanganyika, which was at that time known as German East Africa.

Based at Kalenga, Iringa region, Mkwawa became the symbol of Africans’ opposition to the German colonial rule. In July 1891, the German commissioner Emil von Zelewski led a battalion of soldiers of 320 askaris with officers and porters to suppress the Hehe.

On 17 August, they were attacked by Mkwawa's 3,000-strong army at Lugalo, who, despite only being equipped with spears and a few guns, quickly overpowered the Germans and killed Zelewski.

On 28 October 1894, the Germans, under the new commissioner, Colonel Freiherr Friedrich von Schele, attacked Mkwawa's fortress at Kalenga. Although they took the fort, Mkwawa managed to escape.

Subsequently, Mkwawa conducted a campaign of guerrilla warfare, harassing the Germans until 1898, when, on July 19, he was surrounded and shot himself to avoid capture at the site of the Mlambalasi Rock Shelter.

As for the Serengeti, it is one of Tanzania’s best tourism sites and hosts the world's most massive land animal migration, which helps secure it as one of the Seven Natural Wonders of Africa.

The Serengeti is also renowned for its large lion population and is one of the best places to observe pride in their natural environment.

“These are respected names. We expect you to operate in a manner that conserves the respect that these names carry,” she said.

Increasing number of factories

In his remarks, the Minister for Industry and Trade, Mr Selemani Jafo, said the number of factories in Tanzania has been on the rise since President Hassan came to power.

“The number of factories in Tanzania has gone up from 62,000 three years ago and currently, the number stands at 80,000... It is an increase of 18,000 factories within three years,” he said.

The number includes 618 large-scale factories, while others are in the micro, small and medium ones.

“The number of large-scale factories has increased by 116 during the past three years….This represents an increase of 27 percent in just three years...It is possible that some Tanzanians do not know about the great work that you have done, Madam President...,” said Mr Jafo.