Tanzania, Africa’s fourth-largest producer and the world’s eighth-largest grower of cashew nuts, has taken a significant step in transforming its cashew trade by launching the sale of this prized commodity on its newly established Tanzania Mercantile Exchange (TMX). This development has sparked optimism among farmers, traders, and policymakers, as the TMX promises to bring efficiency, transparency, and better pricing structures to the sector, while also addressing long-standing issues that have hindered growth.

Tanzania’s Cashew Sector and Global Standing

Tanzania has established itself as a leading cashew producer, with the crop being a major contributor to the economy. The cashew industry plays a vital role in Tanzania’s foreign exchange earnings, accounting for around 10-15% of the country’s total export revenue. The country has consistently ranked among the top global producers, thanks to the highly fertile lands of the Mtwara and Lindi regions in the south, which are key production hubs. On average, Tanzania produces around 253,000 tonnes of cashews per year, with recent projections by the Cashew nut Board of Tanzania (CBT) indicating that this could rise to between 280,000 and 300,000 tonnes for the 2024/2025 farming season.

Launch of TMX and Auction System

Under the new TMX framework, raw cashew nuts are sold through special auction markets established by the Tanzanian government as of early October 2024. This system guarantees quality, timely delivery for buyers, and secure payments for sellers, ensuring stability for stakeholders across the value chain. The initial auction for the 2024/2025 season saw a sale of 18,000 tonnes of cashews at an average price of $1.53 per kilogram, a notable increase from the $1.09 per kilogram seen in the 2022/2023 season. This 38% price increase has been attributed in part to reduced yields caused by recent El Niño conditions, which impacted several agricultural regions.

Benefits to Farmers and Quality Control

The TMX has been welcomed by farmers and the Main Cooperative Union (Mamcu), which represents many cashew growers. For years, cashew farmers in Tanzania faced challenges due to poor regulation, unreliable payments, and market instability. Through TMX, the government aims to mitigate these challenges by offering a structured and transparent marketplace that provides better value for farmers. The Cashew nut Board of Tanzania’s director-general, Francis Alfred, emphasized that CBT has worked to secure higher prices by eliminating middlemen and addressing value chain inefficiencies. By ensuring direct sales through the TMX, Tanzanian farmers can expect more predictable incomes and a fairer share of the export revenues.

Alfred also highlighted that the TMX system will push for higher quality standards in Tanzanian cashews, which is essential for sustaining demand in the international market. The board is encouraging farmers and processors to uphold high standards of quality, packaging, and timely shipments, as the demand for cashews in the global market continues to grow.

Global Demand and Market Dynamics

Global demand for cashews has surged, driven by changing consumer preferences and increasing awareness of the nut’s health benefits. Major markets such as the United States, Europe, and Asia have all seen a rise in cashew consumption, driven by a shift towards plant-based diets and the popularity of cashews as a versatile ingredient in snacks, dairy alternatives, and confectionery products. This demand is reflected in rising prices, with Tanzanian cashews increasingly sought after for their high quality and flavor.

However, Tanzania has faced challenges in competing with other top producers like Côte d’Ivoire, which has emerged as the leading cashew producer in Africa, largely due to its efficient processing capabilities and government incentives for farmers. With the TMX now operational, Tanzania aims to bolster its competitiveness by addressing supply chain inefficiencies and improving the pricing framework, making its cashew exports more attractive.

Policy Reforms and Challenges in the Cashew Sector

Tanzania’s cashew production has seen periods of growth and stagnation due to policy challenges and a complex regulatory environment. In the past, farmers and local leaders have voiced concerns over government policies that allowed middlemen to exploit smallholder farmers. This exploitation included delayed payments and lower-than-expected prices. In 2020, tensions flared when a company granted an export license failed to raise funds for the exports, further exacerbating frustrations among producers in the southern regions.

To address these challenges, the government has proposed a series of reforms aimed at streamlining the sector and empowering local producers. One notable reform involves consolidating export levies into the national treasury, with funds redirected towards the development of infrastructure and support services for the cashew sector. This approach aims to strengthen institutional support for cashew farmers while enhancing the industry’s overall competitiveness.

Financial Support and Market Access Initiatives

As part of the government’s commitment to the cashew sector, efforts are underway to provide financial assistance and improve access to regional and international markets. The TMX is expected to play a crucial role in connecting Tanzanian cashews to buyers worldwide, thereby increasing demand and ensuring stable income for local farmers. According to CBT, new funding mechanisms are also being explored to support cooperative societies and individual farmers, which will provide much-needed financial liquidity during the planting and harvesting seasons.

The Tanzanian government is also working with international organizations like the United Nations Food and Agriculture Organization (FAO) to introduce better farming techniques, sustainable land practices, and improved seed varieties. This collaboration aims to enhance yields and ensure long-term sustainability for the cashew sector, particularly in the face of climate challenges such as droughts and fluctuating rainfall patterns.

Cashew Processing and Value Addition

One of the main challenges for Tanzania’s cashew industry has been the limited capacity for local processing. The majority of Tanzania’s cashew exports are shipped in raw form, which deprives the country of the added revenue that comes from processing cashews into higher-value products. Recognizing this, the government is exploring partnerships with private investors to establish processing facilities within the country. Increased local processing would create jobs, retain a larger share of the value chain within Tanzania, and potentially attract higher prices for Tanzanian cashews in international markets.

Local processing also aligns with Tanzania’s broader industrialization goals, which prioritize the development of agro-industrial capabilities. By investing in processing plants and incentivizing local businesses to enter the cashew processing sector, the government hopes to unlock more economic benefits for cashew-growing regions.

Economic Impact and Future Prospects

The introduction of the TMX and associated reforms represent a new chapter for Tanzania’s cashew sector, with the potential to transform it into a more robust and profitable industry. This shift is particularly significant for the Mtwara and Lindi regions, where the cashew industry is a primary source of livelihood. Increased revenues from cashew exports are expected to stimulate economic growth in these areas, improving access to education, healthcare, and other essential services.

Experts project that, with effective implementation of the TMX system, Tanzania’s cashew exports could see a sustained increase over the next decade, supported by high global demand and improved market access. Additionally, the government’s focus on value addition and local processing will further strengthen Tanzania’s position in the global cashew market.

In conclusion, the launch of the Tanzania Mercantile Exchange for cashew sales signals a positive shift for the country’s agricultural exports, promising economic growth, enhanced market access, and more equitable returns for farmers. The TMX’s success, however, will depend on continued government support, effective regulation, and collaboration with international partners. As Tanzania positions itself to capture a larger share of the global cashew market, the TMX is expected to play a key role in unlocking the full potential of the cashew sector, benefitting not only farmers but also the country’s economy at large.

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Photo source: Google

By: Montel Kamau

Serrari Financial Analyst

29th October, 2024