How Tanzania loses billions in raw cashews exports

Mtwara. Tanzania lost Sh216 billion for exporting Raw Cashew Nuts (RCN) in the 2020/21 season instead of kernels, according to a recent study report by the Agricultural Non State Actors Forum (Ansaf).

The study conducted between 2019 and 2021 shows that in the 2020/21 season Tanzania exported 206,719 tonnes of RCN that, if processed, could yield 51,680 tonnes of kernels.

Following the export, the country lost 63,058 jobs that could be created during the processing exercise that could significantly address the challenge of unemployment not only facing the country, but also the world at large.

The findings of the Ansaf report dubbed: Economic opportunities in cashew processing and the costs of exporting RCN follows the 2013 outcomes that showed $110 million was lost on RCN exports.

According to the document availed to The Citizen, if Tanzania could process 50 percent of the 206,719 tonnes, the country would serve Sh109 billion.

“However, only 10 percent of RCN were processed from which means only Sh22 billion was earned,” reads part of the study findings.

Furthermore, the report shows that once one kilo of RCN is processed, it produces 0.25 kilo of kernels, hence processing the 206, 719 tonnes would produce 51,680 tonnes of kernels.

According to the study, in the 2020/21 season RCN was traded at a maximum price of Sh2,707 per kilo, while kernels attracted a minimum price of Sh15,000 per kilogramme.

“The analysis has considered nuts as the main traded commodity with exclusion to by-products like shell liquid and apples,” says report findings.

Study findings further show that despite the 50 percent country’s processing capacity, only 59,057 tonnes was processed out of the actual 104, 205 tonnes.

The failure to process all the 104,205 tonnes was attributed to a number of reasons including obsolescence that prohibited proper functioning of most processing units.

Regarding the issue of employment, the report says that the current 10 percent RCN processing capacity creates 6,306 jobs instead of 63,058 if processing would be done by 100 percent.

About 31,787 jobs could be created if installation capacity was fully utilised, but with the current working capacity only 18,005 opportunities were created.

“These findings suggest that there is a potential of more than 60,000 job opportunities in cashew processing lost with RCN exports,” says the report.

Furthermore, the study findings suggest that RCN exports led to a revenue loss collected by Local Government Authorities (LGAs) in terms of cess which is not more than three percent of the value and export levy.

RCN is chargeable to export levy at 15 percent of Free on Board (FOB) value or $160 per tonne, says the report.

“However, there is no levy on kernel exports, but companies are required to pay corporate tax at a rate of 30 percent of the profit.

“Therefore, there is an opportunity for the government to collect revenue from existing 15 large scale and 12 medium scale cashew processing factories that account for 80 percent of kernels. It is assumed that processors can earn more than 15 percent of its revenue,” says the report

According to the study, exporting nuts instead of RCN can increase direct sources of government revenue including corporate tax, Pay as You Earn (Paye) and cess from LGAs.

Others are charges collected by government agencies such as Occupation Safety and Health Authority (Osha), Fire and Rescue Brigade, land rents and other regulatory fees.

Based on Sh319,000 minimum wage for a factory worker, the government could earn over Sh3 billion in terms of paye; Sh28 billion corporate tax and over Sh23.3 billion cess to LGAs for kernel exports.

This is against Sh16.8 billion that could be collected from RCN which is the only government’s loss for RCN exports.

“It is an opportunity for RCN traders to consider processing the product locally in order to enjoy tax heaven in the industry,” reads part of the report.

According to the report, existing marketing modal promoting RCN trading through auctions than kernels was among the factors limiting growth of cashew processing in the country.

Other limitations are the absence of improved small scale processing technologies, limited incentives on importation of processing equipment and low political drive.

“Limited capital among medium and small scale processors, barriers from taxations and regulatory frameworks and inadequate market linkage with investors in major kernel importing countries except India and Vietnam where there are establishments,” according to the report.

The lack of quality, affordable and reliable supply of power, depreciation of nominal exchange rates, shortage of continuous supply of raw materials and inadequate skilled labour.

In the recommendations, study commends that agro-processing centres to accommodate a number of small agro-processing chain actors, LGAs and Small Industries Development Organization (SIDO) should be established and strengthened.

That will facilitate quick win employment creation, easy collective actions and linkages as well as simplifying delivery of regulation and support services.

“Linkages between farmers, small, medium and large scale processors should be strengthened. Investment by small scale processors should be focused to primary processing while medium and large scale processors to secondary and tertiary processing stages,” says the report.

Furthermore, it suggests that contract farming should be strengthened in order to link farmers and processors, noting that marketing systems should trade kernels through Amcos like what is done with RCN.

The study also recommends that investment in cashew processing should be increased and encourage partnerships as well as securing supply chains for local processors.

The regular supply chain relationships directly with farmers, support investment in processing and review specific processing capacity as well as addressing malpractices to ensure an enabling environment for value addition, according to the document.

The document also recommends the promotion of RCN increased production through improved extension services and incentives on production of inputs.

“Also, strengthening capacity building to the youth and women, investment on research, value addition and marketing of kernels and other cashew by-products; shell liquid and cashew apple.

Speaking to The Citizen, Ansaf executive director Audax Rukonge said they worked with the Cashewnut Board of Tanzania (CBT) through provision of various information.

“As different regions will start producing cashews, there is no reason for the country to continue selling raw cashews. The country should formulate a policy and laws banning the exports of raw cashews because the country is losing a significant amount,” he said.

He said his institution was planning to hold meetings with different parliamentary committees including the Agriculture, Livestock and Water Committee; Industries, Trade and Environment Committee and MPs from cashews processing regions.

“This is despite the last groups of stakeholders (MPs) turning out to be a hindrance to cashew processing,” he said in a telephone interview.