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African cashews: stimulating an entrepreneurial approach

Cashew nuts
Cashew nuts

Mozambique was once the world's largest producer of cashew nuts supplying 20 per cent of global production. At its peak, the country was supplying 240,000 tonnes a year and a significant proportion was processed before export. Civil conflict, ailing trees and the impact of trade liberalisation policies resulted in the virtual collapse of this once prosperous industry. However, cashew processor and entrepreneur Antonio Miranda has demonstrated the effectiveness of a business model for smallscale manual processing plants, which is now being replicated by other plant owners in Mozambique, Kenya, Tanzania and Ghana.

The African cashew industry employs three million households, but whilst world production continues to increase, Africa's share has declined producing only 300,000 tonnes, most of which is exported raw. Processed cashews are, however, a high value food ingredient in the lucrative markets of Europe, the US and China and demand is continuing to grow. Technoserve, an NGO which has played a key role in the successful revitalisation of the cashew processing industry in Mozambique, estimates that improved cashew processing in Africa could generate annual revenues of US$500 million by 2015, of which 40 per cent would pay for manual labour. But, if African countries are to have an increased share of the global market, African processors have to produce good quality and competitively priced kernels.

Cashing in on cashews

The achievements realised in Mozambique over the last five years certainly give hope for other cashew producing countries in Africa. Cashew nut production is Mozambique's single largest industry providing the primary source of income for over 900,000 smallscale farmer households, many of whom live in poor, marginalised areas. But the lessons drawn out by Technoserve show that creating a profitable and competitive industry is dependent on implementing well designed business models based on what it takes to compete effectively in the global marketplace, as well as having the support of highly motivated entrepreneurs like Miranda.

Just over five years ago, Miranda invested in a processing plant and adjoining overgrown cashew plantation in the northern coastal district of Mogincual. With technical and practical support from Technoserve, a simple but effective manual processing unit was developed based on technology used in Kerala, India - the world leader in cashew processing - but adapted to Mozambican conditions. In comparison to available mechanical technologies, the manual processing proved significantly cheaper and provided superior quality and higher economic returns. Within the first year of business, all production was sold at premium prices for the European market generating profits of over US$25,000.

By 2004, Miranda had opened a second plant. With continued assistance from Technoserve the original factory was used as a working laboratory to improve the model and train other interested entrepreneurs to develop another ten plants. Processing capacity soon reached 7,000 tonnes and processors were buying cashew nuts from over 100,000 smallholder farmers.

Raising the standard

Manual processing of cashews (Technoserve)
Manual processing of cashews
Technoserve

Seven of the plant owners, including Miranda, have since formed a private services company, Agribusiness Industries Association (AIA), which has taken over Technoserve's role in supporting existing processors and training new entrants, and is the primary marketer of kernels for its members. It has also undertaken an advocacy role addressing key policy issues of quality and standards, taxation and export tariffs. To further raise its profile for producing superior quality Mozambican kernels, AIA launched its "Zambique" brand for the US market in late 2005.

Using the lessons learned from Mozambique, a Regional Cashew Team has been formed by Technoserve to replicate the model in other cashew producing countries. In Tanzania, with support from the Team and funding from USAID, the government has signed a formal agreement with the Cashew Producers of Tanzania to revitalise cashew processing. The projected goal is to increase production by 10,000 tonnes/yr over the next five years and create 30,000 new jobs for manual workers. Recent policy changes to adjust fees and taxes in favour of Tanzanian processors have allowed a major facility to reopen after a one-year closure. Premier Cashew Industries employs over 1,700 workers and is planning to work with growers to improve tree management in order to increase yields and quality of production and reduce input costs. Through another integrated initiative in Kenya, Technoserve will link over 7,000 smallholders along the Mombassa coast to rural processing firms and will work with stakeholders and the government to develop a national cashew policy.

Africa may not regain its dominant share in global production of cashews but exports of processed cashews certainly have a promising future. The support of governments is, however, crucial to allow smallscale processors to support local farmers whilst maintaining efficiency and quality of production. The newly-formed African Cashew Alliance (ACA) should help to attract government support and will co-ordinate the planning, funding and implementation of new development strategies for the benefit its members and the cashew nut industry across the continent.

Date published: September 2006

 

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