The size of the South African tobacco industry has been shrinking over the last 20 years. Tobacco production has decreased by 54% between 1990 and 2014. Along with the decline in the area of tobacco planted, the number of primary producers and tobacco processors have dwindled. South Africa serves as a case study to support the working committee for economically sustainable alternatives to tobacco growing (COP 6) in understanding the factors that impact producers exit decisions and the agricultural commodities that producers introduce once they leave tobacco production.
The Framework Convention on Tobacco Control seeks to find practical and cost effective control measures to reduce both the demand and supply of tobacco products. To achieve these ambitions, the working group for economically sustainable alternatives to tobacco growing was established. This working group seeks to understand all the elements of tobacco growing and the elements that drive the demand of alternative crops. The findings of this study supports the working group for economically sustainable alternatives to tobacco growing by providing insights on the factors that drive production and exit decisions. Additionally, it also identifies alternative crops that former tobacco producers have introduced. At the time of this study no literature detailed the effects of the restructuring of the South African tobacco industry. This study details the impact that the restructuring of the South African tobacco industry had on tobacco producers and their production decision. Globally no research existed on the factors that drive tobacco producers exit decisions and the enterprises that they have switched to after they left tobacco production.
This study investigates which agricultural commodities former producers have changed to and what impacted their decision to make this change. Although profitability was cited as the primary reason to leave tobacco production and to change to the production of another crop; only 18% of producers were making a loss with tobacco at the time of their exit from tobacco production. The study found that the profit margin realised on tobacco had declined when compared to other crops. Further investigation found that the profitability of tobacco was influenced by a number of variables, in particular low producer prices, the rising cost of inputs and the availability of alternative crops. Another factor that impacted producers tobacco production decision was co-operative politics this had a major impact on producers decision to leave tobacco production; not only had a number of former producers declined to participate in the survey because of co-operative politics but a number of current producers had left tobacco production during the restructuring of the South African tobacco industry. The events during the restructuring of the South African tobacco industry (the merger of three co-operatives and the closure of two co-operative owned processing facilities) created instability in the industry.
While investigating the alternative crops that producers had introduced, once they had left tobacco production or had diversified to while producing tobacco, it was found that there were regional differences in the agricultural commodities that were introduced and that there is no clear trend of the commodities that producers have introduced. Along with profitability other factors impacting producers' decisions to change to the production of an alternative agricultural commodity is detailed in the study.
Dissertation (MCom)--University of Pretoria, 2017.