We’re going to need a tobacco buyout for the developing world

We’re going to need a tobacco buyout for the developing world
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Millions of smallholder farmers and their families in Africa and other parts of the developing world are going to lose their livelihoods due to the coming (welcome) fall in global demand for tobacco. This decrease will come as a result of changing technologies (e.g. moving from tobacco to vaping). A number of poor countries are surprisingly dependent on tobacco for jobs and hard currency. The coming end of tobacco products is a major social and economic disruption in these societies.

African and other farmers are going to have to make radical changes to their livelihoods, with consequences that are hard to predict. Displaced farmers could move to nearby cities, speeding up the already rapid rate of urbanization, or migrate to South Africa and Europe.

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This disruption, if managed properly, could be an opportunity for African farmers to switch to non-tobacco agricultural products and increase the global food supply. The world population is expected to reach 9 billion by 2050, of which 2.2 billion will live in Africa alone. On the path the world is headed, we will not be able to meet agricultural demand to feed this population. To meet demand for 2050, we will have to produce 50 percent more food, feed, and biofuel than we did in 2012 and invest $265 billion per year.  Former tobacco farmers if trained, equipped and supported to switch to something other than tobacco could help feed the world.

In the meantime, the United States and other wealthy countries are struggling to address the rise of vaping. E-vapes and e-cigarettes are vapor-releasing products that electronically heat nicotine and contain fewer chemicals than regular cigarettes. The rise in vaping’s popularity has been partly driven by changing anti-smoking norms over the past 25 years. Traditional smoking is less socially acceptable – and vaping is gaining traction.

There were 35 million “vapers” in 2016, and this figure is predicted to increase to 55 million by 2021. Similarly, the global vaping market will surpass $43 billion in revenue by 2023. These numbers are still small, considering there are over 1 billion cigarette smokers in the world. The cigarette market in the U.S. alone is worth $120 billion.

Yet, major tobacco companies are shifting away from smoke-based products. Tobacco giant Philip Morris has announced plans for a “smoke free future,” shifting entirely away from cigarettes sometime in the unannounced future, so the Marlboro cigarette of one’s misspent youth will no longer exist. Instead, there will be a Marlboro-flavored vaping product.

Most of the discussion in the United States has been led by the real health concerns of tobacco. Each year, smoking-related illnesses incur billion-dollar costs in medical care and productivity loss and cause more than 6 million deaths globally. Now, there is a growing debate on whether vaping products could produce similar effects. Moreover, there is mounting concern over teenagers vaping and the prospect of nicotine addiction. The FDA estimates that there are over 2 million middle and high school student “vapers”, and it recently gave top e-cigarette brands sixty days to submit plans on how to curb youth vaping or face potential removal from the market.

The current debate in the US misses the fact that tobacco is a cash crop. This rise in vaping means a decrease in demand for tobacco, which could disrupt the livelihoods of millions of farmers in developing countries that have nothing to do with the health debate in the U.S.

One of the regions that could be most affected is Africa. The total land area used for cultivating tobacco has been decreasing globally, yet it rose by 65 percent in Africa from 1995 to 2012. While only 10 percent of the global tobacco supply is produced in Africa, three of the top ten world producers of tobacco are located in the continent – Zimbabwe, Zambia, and Tanzania.

Concrete statistics on the number of tobacco farmers in Africa are unavailable and, ultimately, it is hard to tell how many people will be affected by the decrease in demand for tobacco. Several East African economies heavily depend on tobacco exports, such as Malawi. $495 million worth of unmanufactured tobacco comprised 46 percent of all Malawian exports in 2015. Tobacco contributed to 11 percent of Malawi’s GDP in 2010 and employed 2.5 percent of the population. This corresponds to over 450,000 workers – and their families – who could lose their livelihoods due to teens preferring Juuls over Parliaments.

Similarly, tobacco accounted for roughly one third of Zimbabwe’s exports in 2016. There are now more than 98,000 tobacco farmers in Zimbabwe – a 21 percent increase from 2016 – and tobacco exports recently surpassed $900 million. In Zambia, there are over 10,000 tobacco farmers producing $87 million worth of tobacco exports.

In theory, if land used to grow tobacco were used to grow other agricultural products, an opportunity would arise to nourish Africa’s millions today and prepare to feed the world’s billions tomorrow. Africa needs to be a hub of major agricultural productivity, as it is currently not meeting its potential. Yields in land and labor productivity are significantly lower in Sub-Saharan Africa than in other regions of the world – and the gap seems to be widening. However, there is potential to increase productivity. Africa has the capacity to produce an additional 100 million tons of grain per year.

Farmers cannot act alone. A diverse set of stakeholders will need to act to promote sustainable change.

One potential solution would be a multistakeholder partnership among companies including tobaocco companies, NGOs, governments, universities and aid agencies to design something like a “tobacco buyout” for the developing world. In 2004, the U.S. released the Tobacco Transition Payment Program, also known as the “tobacco buyout.” To help tobacco farmers transition from federally-controlled prices and limited production to a free market, the U.S. Department of Agriculture devoted $9.6 billion in payments to farmers over a ten-year period. As a result, the number of tobacco farmers in the U.S. decreased by half. From 1997 to 2015, the area harvested for tobacco in the U.S. decreased by 60 percent.

A similar program for Africa would aid farmers’ transition to different types of agricultural products, decreasing nations’ dependence on tobacco exports and increasing the world’s food supply with incentives for smallholder farmers.

The disruption has already begun. In Malawi, tobacco exports fell in quantity by 30 percent between 2012 and 2016. In the same period, farm-gate prices of tobacco fell by 54 percent. This was during the time Juul was introduced in the U.S. market (2015) and before it got a $15 billion valuation and captured 68 percent of the nearly $2 billion U.S. e-cigarette market.

Addressing this overlooked issue will be a tremendous challenge and will require a variety of stakeholders to solve it. The challenge is to get people to stop smoking cigarettes without letting others lose their livelihoods. We can either collectively prepare for this disruption or watch as thousands of people lose their jobs.

Daniel Runde is a Senior Vice President and William A. Schreyer Chair in Global Analysis at the Center for Strategic and International Studies. He previously worked for the U.S. Agency for International Development, the World Bank Group, and in investment banking, with experience in Africa, Asia, Europe, Latin America, and the Middle East.