Govt, BAT in tussle over 'illegal' insurance for tobacco farmers

Sunday May 16 2010

A tobacco farmer in Migori District, South Nyanza. Out of BATs 5,000 contracted growers, 1,000 have signed up for the contentious insurance. File Photo

A tobacco war is looming in Kenya. The government and cigarette maker, British American Tobacco are embroiled in a tussle over an insurance policy for farmers which the local control body has declared illegal.

Following the introduction of farmer insurance last year, BAT is now offering its 5,000 contracted growers crop insurance against extreme weather conditions and pest outbreaks.

While farmers have lauded the move, the Tobacco Control Board has come out guns blazing and declared the development an attempt to promote tobacco which they say is against the law.

The policy developed by UAP Insurance in partnership with Chancery Wright has been introduced to farmers in Western Province and is set to roll out to other regions.

The control board, however, say BAT and UAP have gone against the anti-tobacco legislation introduced in 2007 which bars the promotion of cigarettes.

“We will make sure that BAT and UAP Insurance do not get away with this because we have the law on our side,” said Prof Peter Odhiambo, the chairman of the board.


“We will deal firmly with companies that collude with cigarette manufacturers to break the law. Insuring tobacco farmers is another way of increasing the production of tobacco which is detrimental to public health. Farmers should consider alternative crops,” said prof Odhiambo.

BAT says the board’s move has caused panic among its businesses partners who are asking whether the tobacco business is now illegal and risky.

“Our suppliers are worried and want clarification on what services tobacco manufactures are allowed, if they cannot sell insurance to farmers,” said Julie Adell-Owino, BAT’s head of corporate and regulatory affairs.

BAT says its farmers sign a binding code of conduct which restricts tobacco growing to 1/4 of the size of the farm while they must grow woodlots for fuel and environmental care.

“We provide the farmers with seedlings to grow trees, which is a condition for getting into a grower-supplier contract,” Ms Adell-Owino said adding that the farmers are closely supervised by its field officers to ensure they do not employ child labour, that they take their children to school and grow food crops as well.

The possible action the state agency might take includes stopping the marketing of the insurance cover and taking the twin firms to court in what promises to be a protracted legal battle.

Anti-tobacco crusaders say the new insurance product marketed by BAT and UAP Insurance violates section 24 of the Act which prohibits the promotion of tobacco products by means of testimonials or endorsements.

But Ms Adell-Owino charged: “The Tobacco Control Act does not dictate what crops anyone should grow neither does it dictate the parameters of business association or communication between industry players. It is, therefore, perfectly legitimate for us to engage our contracted farmers and continually work together for their welfare.”

Already, about 1,000 farmers contracted by the multinationals have signed up for the product.

BAT says the cover is part of its corporate social responsibility seeking to protect contracted farmers who have incurred financial losses to the magnitude of Ksh150 million ($1.94 million) over the past three years as a result of natural calamities.

“Our contracted tobacco farmers are not compelled to take up the cover. If any party were forcing the hand of the tobacco farmers, then all 5,000 farmers would have had to take it up,” said Ms Adell-Owino.

BAT says earnings by its contracted tobacco farmers have been on the increase pointing to the benefits of the crop to farmers in Nyanza and Western regions.

In 2008, BAT paid its contracted farmers Ksh369 million ($4.79 million) while in 2009, it paid Ksh532 million ($6.9 million) and this year’s projection is pegged at Ksh660 million ($8.57 million).

The company is also among the country’s top tax payers. Last year it paid Ksh8 billion ($102.5 million) in taxes.