British American Tabacco Expects more from Kenya

Alex Clute
February 24, 2011
1100 EST

According to Reuters Africa, British American Tobacco (BAT), operating in Kenya, has just posted a 29% increase in profits, which makes their profits $33 million at the end of their fiscal year. BAT is planning to pay out a dividend of 22 cents per share. Meanwhile, the Kenyan government is rising the excise tax on tobacco, which is displeasing to BAT. BAT states that is has paid $122 million in taxes and that they find an increase in taxes unacceptable. Report revenue for BAT in FY 2010 is $165 million, which, after taxes amounts to $43 million. Subtracting their profits leaves $33 million dollars to cover overhead. At first consideration these numbers do not seem very favorable for BAT, which has paid quite a large sum of money to the government. In a detached sort of way it would appear that BAT is not really receiving a fair shake.

But consider the crop being grown. It seems reasonable to say that most people are well aware of the negative health impacts linked to smoking. And there is also the negative health impacts experienced by farmers. In addition to the human impacts there are environmental impacts as well. In a report to the International Lung Heal Conference and Annual General Meeting of the International Union Against Tuberculosis and Lung Diseases the detrimental aspects of tobacco cultivation for export are summarized, and include deforestation and the release of pesticides into the environment.

The perspective from the point of view of Kenyan farmers is one of desperation. Originally pastoralists that raised cattle, they have mostly given up their cattle and shifted to growing cash crops for export. According to Mwangi Muiruri there are 17,500 small farmers on 15,000 hectares growing tobacco under a contract system where BAT, and some smaller operations, give farmers loans to buy supplies. The price for tobacco is volatile with a low of 5 cents per kilogram to a high of 49 cents. The usual pay out is $37 to $61 yearly for a family of three to five people. sometimes, after BAT deducts for the cost of inputs, people are paid nothing.

There are those in the Kenyan government that wish to see tobacco phased out. Yet BAT holds immense political sway and is quick to sow fear and uncertainty. But taking into account the growing problem of food shortages, can one really justify growing a harmful and destructive crop like tobacco while there are shortfalls of food around the world. I suggest that, rather than cutting down more forests to plant more food crops, we should instead scale back, or eliminate all together crops like tobacco. In reality, the whole model of cash crop production is very likely untenable in its entirety as future increases in oil prices will make in too expensive to to ship food around the global.