Growth of cashew nut sector: Why Tanzania must add value to its nuts

Tanzania, known as one of the largest exporters of cashew nuts globally, is facing a significant loss of revenue due to exporting raw cashews instead of processed kernels. According to a recent study report by the Agricultural Non State Actors Forum, Tanzania lost a staggering 216 billion Tanzanian shillings in the 2020-2021 season by not adding value to its cashew nuts. The key factors contributing to this loss include the lack of quality, affordable and reliable power supply, depreciation of nominal exchange rates, shortage of continuous raw material supply, and a deficiency in skilled labor in the cashew nut sector. In a recent interview on CNBC Africa, Professor David Yange, a Professor of International Development at Michigan State University, shed light on the challenges and opportunities faced by Tanzania in the cashew nut industry. Professor Yange highlighted that cashews are a vital export commodity for Tanzania, with approximately 750,000 farming households involved in its production. Cashew nuts represent the country's primary export, generating annual earnings ranging between $300 million to half a billion dollars. One of the major issues raised by the study is that 90% of Tanzanian cashew nuts are exported in their raw state. The price of raw cashews is significantly lower compared to processed cashew kernels, with raw cashews priced at around $1,500 to $2,000 per ton, while processed kernels can fetch prices between $10,000 to $12,000 per ton in global markets. This stark difference underscores the importance of value addition in the cashew nut sector. The potential for job creation and increased value from cashew nut exports is substantial if Tanzania were to process a significant portion of its raw nuts domestically. Professor Yange noted that processing 50% of the total production could save Tanzania approximately 109 billion Tanzanian shillings and create over 60,000 jobs in the sector. In order to encourage local processing and attract private sector investment in the industry, Tanzania must address several key issues. One crucial factor is mitigating the cost of production, particularly in terms of electricity supply. The government has made efforts to increase investment in the power sector to reduce production costs. Additionally, regulatory environments need to be improved, fiscal incentives should be provided to investors, and the development of skilled labor and entrepreneurship is essential for the growth of the industry. Regarding international trade and market access, Tanzania's raw cashew nut exports are predominantly directed towards Asian countries, with India being a major market. However, there is a missed opportunity in the value chain, as processed cashews from these countries are further exported to Western markets like the US. To enhance competitiveness and access new markets, Tanzania needs to diversify its investor base and reduce dependency on Asian markets. The impact of adding value to cashew nuts and enhancing the competitiveness of the sector extends beyond revenue generation. Investments in agro-processing, particularly in export processing zones, can lead to job creation, especially for the youth, who currently face high levels of unemployment in Tanzania. By empowering smallholder farmers through cooperatives and linking them with private sector investors, a mutually beneficial relationship can be established that benefits both the farmers and the processors. As Tanzania looks towards the future, the government is focusing on revising its cashew nut industry strategy to promote domestic processing and explore new global markets in response to evolving consumer trends, such as the increased demand for healthy foods post-COVID-19. With strategic investments and policy initiatives, Tanzania's cashew nut sector has the potential to unlock significant economic growth and job opportunities for its citizens.