President ordered increase in nut prices, in an attempt by the government to safeguard farmers from ‘exploitative’ traders.
By Tullah Stephen
In November, Tanzania’s president John Magufuli ordered the country’s military to buy to buy an estimated 220,000 tonnes of the crop after private traders in the country baulked at higher prices. The move that shocked many and rocked headlines across the continent, was in a bid to solve the cashew nut impasse that had gripped the country.
Farmers in the east African country had for several weeks preceding Magufuli’s directive, halted selling the crop. The farmers protested offers presented to them by the private traders. Cashew farmers felt the prices were too low to even meet production cost.
The directive to the military was one of the decisions President Magufuli made. The tough-talking president had previously disbanded the country’s cashew board and sacked two cabinet ministers. Charles Tizeba, the Minister of Agriculture and his counterpart Charles Mwijage, Minister for Trade were all shown the door for failing to handle the issue. President Magufuli, while announcing the disbandment of the board, accused the board of failing to manage the industry properly, leading to the low prices of the crop.
According to the president, the move to direct the military to buy the crop was to ensure that Tanzanian farmers got a fair price for their cashew nuts and secure vital export earnings. The private sector had offered farmers a price of USD1.3 per kilo however, the president declined the price and ordered the military to instead buy the nuts at USD 1.43 per kilo.
“If private buyers fail to respond to the government and tell us how many tonnes they will buy by Monday, the government will buy all cashew nuts and we have the money for it,” the president said.
Tanzanian government’s decision to order the military to buy the crop has, however, received criticism from businessmen and a section of politicians in the country. Critics denounced the move as interference in trade liberalization.
Opposition politicians accused the President Magufuli, of trying to use the cashew nut crisis for political advancement in regions where the crop is grown such as Mtwara, an opposition stronghold.
Zitto Kabwe Tanzanian opposition MP, twitted from his official page saying “The government needs 600 billion Tanzanian shillings (£200m) to pay farmers. This money requires parliamentary approval,” He added, “If the president wants to do this without following the law we will oppose him.”
According to global traders, Tanzanian government’s move could lead to a global shortage hence driving prices higher in other markets such as India and Vietnam. The raw nuts that are yet to be shelled are exported from Tanzania to India and Vietnam to be processed. Falling prices for processed kernels means that cashew nut buyers importing the crop, have been reluctant to pay the high prices. Sector players believe cashew market is likely to improve as the tree nuts from Nigeria, Vietnam and India begin flowing into the market early in 2019. However, things could get tough before eventually getting better. International kernel prices hit a high of USD4.8 per pound at the start of the year 2018. However, with the demand from US and market across Europe fell prices declined to USD3.2 in October.
It was not until recently that cashew becomes Tanzania’s most coveted traditional export crop. According to the International Nut and Dried Fruit Council Foundation, East Africa accounts for around 10 per cent of global cashew nut production. Tanzania exports about 75 per cent of the region’s cashew crop.
Since his election three years ago President Magufuli nicknamed ‘Bulldozer’ has picked numerous fights with private businesses that he accuses of giving Tanzanians a raw deal. The mission to safeguard the welfares of cashew nut farmers in Tanzania was first fronted by policymakers from the regions that grow the commodity. This is said to be in response to the government’s proposal to change the Cashew nut Industry Act (Cap, 203) – through the Finance Bill 2018. The idea was to ensure that export levies are collected in the consolidated fund.
This was a change from the current position whereby 65 per cent of the crop export levy is settled to farmers through the Cashew nut Board of Tanzania (CBT). The government on the hand remains with 35 per cent of the levy.
Official data shows that the country’s export revenues from cashew nuts doubled to USD540 million in the year 2017 from USD270 million the previous year. The good performance was helped by the country’s introduction of a new warehousing system.
In the year 2018, Tanzania expects production of 210,000 to 220,000 tonnes for the year 2018. However, there are fears the country may not meet the target. According to Naliendele Agricultural Research Institute (NARI) cashew nut harvest is expected to decline in 2018 compared to 2017.
National cashews research coordinator Fortunus Kapinga, says bad weather, pests and diseases are likely to affect the year’s harvest. “Strong winds that hit several parts of the country would affect crops in terms of both quality and quantity.”