How the tobacco industry in Mozambique evolved from cash crop to a strategic commodity

The tobacco industry in Mozambique has always been an integral part of the country’s economic activity, serving as a subsistence crop bartered among its communities. In the early 20th century, the Portuguese traders introduced a commercial system that tied the crop to their colonial taxation system and export market, which still relied on forced labour.

Today, Mozambique ranks among the world’s largest tobacco-growing countries and is the fourth-largest producer of tobacco leaf in Africa. In 2025, tobacco leaf output fell by 22% to 72,380 tonnes (t) from 92,343t in 2024, yet exports rose by 16% to US$258.3m from US$217.2m in 2024, reflecting strong, external demand, this is according to the latest Who Owns Whom report on the tobacco industry.

Mozambique’s tobacco sector is a strategic asset for the country, which is still predominantly rural. It provides for extensive employment in a rural setting through support for small-scale agricultural enterprises, critical for the livelihood of farmer families.

The modern tobacco production with smallholders at the core

Mozambique is the third-largest producer of tobacco in Africa. The country’s tobacco industry is largely smallholder-based and made up of about 130 000 to 150 000 tobacco farmers.

The weak state of the economy in Mozambique has resulted in the industry’s dependence on multinationals providing inputs and offtake agreements that guarantee market access. While this approach reduces market uncertainty, it places local farmers in a weak position, making it difficult to negotiate better terms for their produce.

By-products and waste from leaf processing, such as stems, dust, and offcuts, are frequently diverted into illicit trade, with rejected or low-grade material used in unregulated cigarette production. The British American Tobacco (BAT) company, as a result, decided to wind down operations in Mozambique as it did in South Africa, due to the increase in illicit cigarette trade, which has eroded formal sales across southern Africa.

Government taxes and weak regulatory compliance and enforcement are the main causes of illicit trade. Illicit trade in this context also encompasses a grey area involving rejected leaves that locals use to produce their own products. Government has declared these rejected leaves used in artisanal settings as illicit simply because no government taxes are paid on them. Could this be the government overextending its mandate? In other words, would the voters agree to such a tax were they to have a say in such tax, through a referendum or public consultation?

Key trends shaping the future of the tobacco industry

The global declining consumption of cigarettes, driven mainly by stricter health regulation, combined with several economic and environmental challenges such as droughts, limited curing practices, and market concentration that limits farmer profitability, puts tremendous pressure on the domestic tobacco industry.

Multinational dominance continues to deepen as companies expand their influence through input provision and processing, providing the Mozambican tobacco industry with an opportunity to enhance its value-adding capabilities and increase farmer profitability.

There are other trends shaping the industry, the first being the gradual shift toward lower-cost African agricultural producers, with Mozambique at the centre, given its endowment with arable land, most of which is still lying fallow. This provides the country with an advantage to diversify its crops and reduce over-reliance on tobacco, which has declined over the years as illustrated in the graph here.

The Mozambican government needs to balance the global shifts driven by the World Health Organisation (WHO) Framework Convention on Tobacco Control with the country’s priorities of economic and industrial development.

Diversification and value addition as potential growth opportunities

Mozambique’s tobacco industry is facing both risks and opportunities requiring forward-looking and progressive policies that will encourage investment into alternative crops like soy, which show more stable, profitable demand and processing of a variety of alternative crops that could improve food security for a country that ranks. The World Bank also states that with the right support, agriculture in Mozambique can be a sustainable source of growth, poverty reduction and food security.

Way forward for Mozambique’s tobacco industry

While the country has seen economic growth, it has not translated effectively into poverty reduction, with 74.5% of people living below the poverty line in 2023, and around 70% of the workforce in agriculture. If strategically managed, Mozambique’s tobacco industry can remain an economic pillar that supports rural incomes, creates employment, and drives value addition. This will require judicious regulation, curbing illicit trade without damaging production incentives, and promoting crop diversification; the tobacco sector remains a significant contributor to poverty reduction in rural settings.