The tobacco industry plays a major role in the Malawi economy. Tobacco is the main cash
crop and the main foreign exchange earner in the economy. Tobacco exports account for
more than 60 percent of export earnings. The main type of tobacco grown in Malawi is burley
which in 2010 accounted for 94 percent of total tobacco production. Other types of tobacco
grown in Malawi are northern division dark fired, flue-cured, southern division dark fired,
sun-air and oriental tobacco. Prior to liberalisation in 1992, burley tobacco was only
cultivated by large scale estate owners while smallholder farmers were only allowed to grow
fire-cured, air-cured and oriental tobacco. Since liberalisation, the smallholder sector has
dominated burley cultivation producing about 98 percent in 2009 from 63 percent in 2006.
There are several stakeholders in the tobacco industry at various stages of the value chain
interfacing with the regulatory institutions and other service providers. The institutional
arrangements in the industry and the structure of the industry have implications for the
promotion of competitive behaviour.
The main objective of this study is to analyse the context, the structure and functioning of the
tobacco sector in terms of competition at various stages of the tobacco value chain. Some of
the issues highlighted in the study include the structure of the tobacco industry, the nature of
the competitive process, the institutional and regulatory framework and capacity issues in the
regulatory institutions. The main limitation of the study is the lack of data at firm level that
would have enabled a multivariate analysis of the relationships between market structure,
conduct and performance at various stages of the tobacco value chain. This lack of data partly
reflects the capacity constraints and weaknesses in the regulatory regime in the tobacco sector.