INDUSTRIAL POLICY AND CASHEWNUT PRODUCTION IN TANZANIA

 

Tanzania is the eighth among the largest growers of cashew nut in the world and ranks fourth in Africa. As one of the largest Cashew nut producers in Africa, Tanzania’s cashew nut exports provide 10% to 15% percent of the country's foreign exchange. Main production regions are Mtwara, Lindi, Coast as well as Ruvuma and Tanga. The country provides 20% of Africa's cashew nuts (2012, FAO). Cashew nuts have been grown on a commercial scale in the country since the 1950s, developing infrastructure and lack of jobs in the southern region, as a result cashewnut cultivation was highly favored. 

The industry almost collapsed in the 1980s. This was largely due to, various government interventions in the harvest, marketing processes and the nationalization of cashew nut processing factories. Also Insufficiency of agricultural inputs and presence of low level of processing to meet critical volumes required in the international markets. Low level of diversification of Cashew nuts products, High borrowing interest rates and small domestic market for kernels were the problems associated

Cashew nut Market exchange failure caused a tragedy in Tanzania Economy during 1980s lead to inefficient distribution of cashew nuts products in the market. Presence of high unemployment rate, reduction of Government revenue, economic decline were among the problems associated by the market failure.

Economic reforms began to take place after near collapse with the goal of reviving the troubled industry. There has been a remarkable recovery since then. In just 10 years from 1990-1999 Tanzania used both industrial policies and other trade policy measures for reforming cashew nut industry. Tanzania applied different policies to revive the industry including Trade liberalization, private sector (privatization) was permitted (1991-1992), Export oriented industrialization, and other industrial policies.

Through vertical industrial policy, government supports cashew nut firms. Government attempts to alter the sectoral structure of production towards sectors that are expected to offer better prospects for economic growth by adopting an industrial policy to promote cashew nut industrial sector by taking various strategies.

Government established Cashew nut Board of Tanzania (CBT). CBT’s main functions as set out in the Cashew Act No. 21 of 1984 (As amended in 1993) is to advise government on cashew industry policies and strategies, promote the development of cashew nut production, processing and marketing, assist research and development for the industry, to regulate and control the quality of cashew nuts, to collect and disseminate information on the industry, to facilitate the formation of associations, to enforce regulations, to provide technical services to cashew farmers, processors, buyers or exporters and to represent the government in international forums. In particular the board licenses growers, buyers, sellers, processors and exporters, grants permits for buying and exporting of cashew nuts and appoints inspectors.

The National Agricultural Research Institute as well as various institutions supports development of appropriate technologies for production and processing cashew value chains. However, they are facing financial and technical resources to effectively undertake the support responsibilities.

Financial institutions play a substantial role in the chain. Government guarantee the National Microfinance Bank and CRDB Bank having been providing credits to primary cooperative societies for procurement of cashew nuts from farmers. Processors are also requiring loans for buying products and capital investments but access to financial products has been reportedly rather difficult.

 

Marketing of raw cashew nuts to external markets is largely monopolized by buyers from India. With regard to marketing of kernels individual processors are left without support to reach out to buyers in domestic market and from abroad. As a result failure to process, package and advertise final products adequately. Marketing of kernels therefore is still erratic, ad-hoc and unprofessional. The domestic and East African market may constitute a huge potential but there are shortcomings with regard to Structure, Finance and associated problems.

 Government failure for finding potential investors is still a issue. Tanzanian government has been facing challenges for finding potential investors in order to revive the cashew processing industry in Tanzania. The challenges of design, implementation of an industrial policies and the importance of integrating the interests of both society and the private sector has caused problem in Market exchange.

Fiscal pressures; More than eighty-five percent of the farmers are small holder farmers and have an average farm size of 1 hectare with Small capital. Tanzania as a small country is faced with Lack of access to affordable finances for funding the cashew nut industry. Dealing with limited institutional capacity and restricted fiscal space is a challenge.  Instruments cost in financial and fiscal terms, financial risks are supposedly highest in the processing segment where investors find it difficult to do monitoring and control the return on investment.

Political Interference causes hindrance in implementation of the industrial policies. Mistrust between members and leaders of primary societies and between leaders of primary societies and Unions originate from inadequate flow of cashew nut market information among them. There is no stability in political strategies to be applied in order to Successful achieve the targeted goals.

Lack of accountability associated problems, like corruption in the system have result to delay in the Industrial policy processes. Tanzania’s government established Warehouse Receipt System (WRS), this legally established system by Act of parliament No.10 of 2005 that came into being in the 2007/08 season. The system was established to control the then flourishing free-riding in the industry in order to improve producer prices and prevent collapse of industry. Most of government officials are allegedly involved in corruption, irresponsibility in handling their duties.

Tanzania still has a competitive advantage in Cashew nut Industry on the global market. It is recommended that the government should concentrate on strengthening laws and technology application in cashew nuts industry to reduce the risk of fraud and discrimination by foreign traders.