We had a discussion with Fahad Awadh, the CEO of Zanzibar-based YYTZ Agro-processing about the opportunities, challenges and market trends in Tanzania’s cashewnut industry.
Who is Fahad Awadh?
I am a young entrepreneur from Zanzibar running a company called YYTZ Agro- Processing, whose objective is to build an all-inclusive cashew nut value chain in Tanzania.
We work with small scale farmers and women groups to help them participate in the value addition and to make sure that more value reaches these rural communities.
Given that the young generation is really eyeing investments in tech-oriented ventures, what made you go into agriculture?
I moved back to Tanzania in 2012 and my goal was to simply add value somewhere. I didn’t know what or how. I began by looking at what Tanzania produced in plenty, while being very cognizant that most of our African countries produce agricultural commodities with very little value addition.
At the time of my come-back, the traditional big exports were tobacco, cotton, coffee and cashew nuts. The first three looked a bit more challenging because of their fragmented value chains.
I didn’t know much about cashew nuts, but I learnt that Tanzania was the fourth largest producer of cashew nuts in the world then (the third today).
Ninety percent of what is produced locally is taken out of the country to be processed elsewhere like in India and Vietnam. I thought this was crazy and set out to know why and try to change that.
What is your educational/professional background? How did you set up your enterprise?
I studied Business Marketing; I have no background in agriculture but was very keen to learn.
Something that I practice and learnt from Toyota Motors Corporation is a principle called Genchi Genbutsu – “Go and See”, which suggests that in order to truly understand a situation one needs to go to the “real place” – where work is done.
I went to the southern part of the country where most cashew is grown. I met farmers and also got to understand the regulatory environment and the local market systems. Since cashew is traded globally, I needed to understand the global market system too.
On that I went to the largest cashew nut exporter, Vietnam. There I visited one of the top five cashew processors who processes 60,000 tonnes per annum – nearly a quarter of what we produce as a country. I had a chance to see first-hand the automation, mechanization and what makes them successful. If we have to compete and build our industry, we have to learn from the best; we have to go and seek that knowledge and bring it back.
Strangely, as soon as the owner of the that factory knew I was from Tanzania, he asked if I could help him get cashews from Tanzania because they are rated highly in quality – they are big, white and peel comes off easily; their customers love Tanzanian cashew nuts.
What came out of this is that we have a valuable commodity, but we are neither generating nor getting our true value from it.
Setting up the enterprise was challenging especially on the financial part, because no bank wanted to support us in setting up the factory. To date I am not able to get a loan from a local bank.
Nonetheless I got funding from Netherlands through Rabobank. This is a bank that isn’t in Tanzania and never took any collateral. This shows you the stiff challenge upcoming entrepreneurs getting into agro-processing are faced with in trying to get funding.
Which kind of facility did you come up with finally after overcoming the financing hurdle?
We had to pool our finances especially from the family. I partnered with my father and set up a factory in Zanzibar with a capacity of 2,500 tonnes per annum.
This year (2019) we are putting up a second facility in southern Tanzania, which is mainly for the women groups and the farmers because we want them to participate in the value addition.
We are giving out de-shelling machines that will up their productivity many times over. Manually, a farmer can shell 40kg/day but with the machine one can do up to 600kg/day. This also means that we pay a higher price for the shelled, value-added cashew nuts.
What is the status of technology in the cashew nut value chain in Tanzania?
It all starts with knowledge, which is information at the point of action or application. Knowing the right technology and how efficient it is going to be for that particular process is important.
It has to be appropriate and globally competitive to match prevailing global status. The importance of technology cannot be stressed enough. If you look at Vietnam, their cashew nut industry is the biggest in the world. Africa produces 60% of the world’s cashew nuts but processes less than 10%.
Vietnam imports over 1 million tonnes of Africa’s cashew to process. What makes them successful is the fact that they started making their own machines by reverse-engineering Italian machines and with time owning the machines and technology.
One of the challenges in the cashew nut value chain, just like many other commodities, is traceability. When I was in Rwanda, I bought some cashew nuts from a store that said they were from Belgium! Belgium produces no cashew nuts!
They were probably imported after processing in Vietnam having originally come from somewhere in Africa, almost certainly Tanzania, roasted in Belgium, then found their way to Kigali via Dar es Salaam!
However, what we are doing now is we are using technology to trace the product and connect it with the origin. We are using blockchain technology to guarantee single origin. Each pack we produce has a QR code that connects with the origin and journey through the value chain of the nuts in the pack.
For this technology we are working with a startup in Netherlands who had developed this technology for designer furniture to combat counterfeit furniture.
We asked them to help us adopt it for our cashew nuts to create a traceable and transparent system because the modern-day consumers want to connect with the origin of what they consume.
What is the process involved in getting a finished product from raw cashew nuts?
Raw cashew comes with a hard shell. The first process is to steam the raw cashew nuts to soften the shell then cut it open to unravel the nut. The nuts are then dried and during this process the peel starts detaching from the nut making the next step of peeling easier. Peeling results in white cashew kernels that are graded by size, color and wholesomeness.
The kernels are then vacuum packaged for export. The finished kernels can be roasted, flavored and repackaged under various brands and sold to consumers.
Production volumes for cashew nuts have gone up in Tanzania. How has this been achieved and what is the role of government in the value chain?
Tanzania is the third largest global producer of cashew nuts, but most importantly, we harvest at the peak of global demand at the end of the year when there is a spike in consumption because of the winter in the northern hemisphere, holidaying in the USA and religious festivals in India.
Tanzania produces quality nuts and the processors know that. All these factors make Tanzania a favorable place to procure cashews and this has spurred growth. However, with all these low hanging opportunities we haven’t been able to brand Tanzanian cashew nuts to our advantage.
The government of Tanzania has done really well in research and development on cashew nut growing. Tanzania has the best cashew nut resource program in Africa. We were the first country to release hybrid varieties which are early maturing.
The government is expanding cashew nut growing in areas that were traditionally not cashew nut growing zones e.g. Singida in central Tanzania. Researchers agree that the best conditions for cashew growing in Tanzania are even better than in the southern regions of the country.
The government has given over 20 million seedlings to farmers over the last three years, and it is projected that in the next 5-10 years, we will double our production figures.
This has made the government to focus now on processing and value addition of cashew nut in the country. Hardships bring out areas where you are exposed, and we must put measures in place to avoid that recurring.
What are the gaps that still exist in this sector?
Technology is a major issue. Ivory Coast, the leading African producer, invites cashew nut equipment manufacturers to showcase their machines and technologies every two years in a fully paid-up government show to the Ivorian cashew nut value chain.
The other issue is finance. In Ivory Coast again, the government will guarantee up to 25% on loans to cashew nut processors to a ceiling of US$8 million. This de-risks the banks and encourages them to engage and get involved in the cashew nut sector.
The third is the commitment to create an environment that really favors the processors. In Mozambique, they open up for export only after the local processors have procured all their needs. They are now processing 50% of what they produce; the highest in Africa. We need policy interventions that support the cashew nut sector to attract investment.
What is the opportunity beyond Tanzania to boost the growth of this crop in Africa?
Beyond Tanzania, there are elaborate projects in Kilifi, Kenya; Mozambique, Zambia and in many west African countries like Benin, Mali and Senegal. There is great opportunity and potential continentally, but it has to be tied to processing.
The cashew crop is very versatile requiring minimal rainfall. As they say, “if nothing else can grow there, cashew will”.
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