Three cashew processing plants to spur sector growth

Dar es Salaam. Tanzania cashew nut industry is set to improve following the country’s plans to construct three new processing industries this year.

This will help add value to cashew nuts produced in the country, a vital step towards improving economic wellbeing of farmers.

Speaking to BusinessWeek, the Cashew Nut Board of Tanzania director general, Mfaume Juma, told BusinessWeek over the phone from Mtwara earlier this week that all necessary processes for construction of the three processing industries were complete.

The factories will be built in Mtwara, Mkuranga and Tunduru.

Later, this year, he said, the factories may become operational.

“The funds for operating the three new industries will be sourced from the Cashew nut Industry Development Trust Fund,” said Mr Juma without specifying the total cost.

It is estimated that only two per cent of Tanzania’s cashew nuts is processed locally. The rest is exported raw, in essence denying over 300,000 farmers added value for their products.

Statistics indicate that Tanzania is Africa’s second largest cashew nut grower after Nigeria. Despite increased production however, the industry has been characterized by many challenges, some unresolved for years.

Lack of adequate processing plants is a long time cry for farmers.

A 2008 study entitled: “Reform of the Tanzanian Cashew Nut Business Environment”, the Agricultural Non-State Actors Forum (ANSAF) estimates that the country loses $110 million annually due to exports of raw cashew nuts.

Mr Juma urged farmers to prepare their cashew nuts properly. This will make sure that they sell cashews that are of good quality and get better prices.

“It is very unfortunate that some misguided farmers go far to the point of mixing cashew nuts with waste matter so that they may record extra weight hence be able to earn more. This trend is unacceptable….it makes buyers suspicious of Tanzania’s cashew nuts and in turn negotiate for poor prices for the products,” said Mr Juma.

According to ANSAF, Tanzania grows high quality cashew nuts in quantities sufficient to support a national processing sector which would be welcomed by buyers.

“The impediments to the development of credible processing factories have been due to poor policy decisions, lack of financial services and a supply chain which lacks linkages with the international kernel markets,” reads a statement in ANSAF report.

The report is titled ‘Short Summary Advocating Effective Regulation for the Cashew Nut Industry in Tanzania.’

In the period between 2007 and 2012, it states, over 461,000 tons of in shell cashews have been exported with handling costs of $85 million (Sh136 billion).

“These costs are in effect paid by farmers. National processing would mean that these costs would be part of selling prices charged for an export market and therefore, the overseas buyer would incur the cost,” says the ANSAF report.

Jim Fitzpatrick, an independent international consultant and advocate specialising in the cashew nut industry, said recently that lack of a conducive market environment is another challenge facing cashew nut farmers in Tanzania.

With over 30 years experience in the field, Jim authoritatively says that cashew Farmers in countries where processing of cashews is carried out locally are paid higher prices than cashew farmers in countries where the in shell nuts are exported for processing.

The result of processing the entire crop over five years, according to the 2008 ANSAF report, would be an inflow of value to the rural communities of over $750 million (Sh1.2 trillion).

This would make a massive impact on the economy of the southern regions.

According to Mr Fitzpatrick the percentage a farmer receives is between 57 per cent and 65 per cent of the sale price and approximately 15 per cent less than the Cashew nut Board of Tanzania’s indicative farm gate price.

“The level of transaction costs compare very unfavourably with similar costs in other countries,” said Mr Fitzpatrick.

“When we consider the price at which the nuts are eventually sold in India, the farmers’ share falls to an unusually low level in the context of the international market,” he said.

And according to the report, it appears that Tanzanian farmers are not receiving a price which is in line with the quality they produce as compared to their counterparts in West Africa who function in an open market.

Meanwhile, Mr Juma said that chronic complaints from cashew nut farmers in Tanzania on effective regulations have decreased significantly following a proper supervision strategy and education among farmers.

For years, the cashew nut industry in Tanzania has been experiencing lack of quality information which has been triggering chronic complaints from farmers.

But Mr Juma told BusinessWeek earlier this week that due to proper management of the cashew sector, complaints decreased significantly in the last season.

“The 2009 regulations have proved to be excellent and effective…the problem was on the implementation stage. We have limited number of experts but with support from the board, things have improved significantly,” said Mr Juma.

He said that currently there are 42 districts cultivating cashew nuts but the country has only 70 experts.

Statistics indicate that cashew consumption in the world is growing by eight per cent every year, creating an urgent need for Tanzania to improve the cashew investment climate.