<p></p><p>The Tanzania cashew nut industry appears to be heading for a crisis as it grapples with lopsided policies and frequent political interference, which could cost the economy at least $150 million. The Minister for Regional Administration Captain (Rtd) George Mkuchika is said to have written a letter to the Cashew Board of Tanzania (CBT) instructing that local producers be prohibited from processing the cashew nuts if they are not going to pay a five per cent levy as required by the district councils. But exporters say this policy change could hurt their profitability.In 2007 Tanzania introduced the warehouse receipt system to improve access to end markets in a bid to boost the sector which generates five per cent of the country’s export earnings — approximately $70 million annually — from raw cashew nut exports. Already 11 large scale and three medium cashew processing factories which have the capacity to process 140,000 metric tons annually have closed down for failure to secure markets from exporters of processed cashew nuts.</p> <p>Under the system, farmers could sell their crop to co-operatives, who would then store the produce in warehouses and either export it as raw material or set up an auction where local processors could bid for the nut. Farmers also had the option of selling their crop directly to the processing factories. The advantage of this direct sale is that the farmers would get paid up front, as opposed to the warehouse system where they are paid 70 per cent of the price upon delivering to the warehouse, and the remaining 30 per cent soon after auctioning of the crops. </p><p>With the new policy, farmers are required to sell only through co-operatives, a move ostensibly intended to increase tax collection through a five per cent levy. But there seems to be political interference as a few powerful individuals keen on raking in benefits have moved to increase the co-operatives’ auction price to Tsh2, 000 ($1.2) from Tsh1,750 ($1) per kilogramme. With the increase in prices, the processors’ profit margins are threatened, as they are forced to purchase the nut at a higher price. The situation is made worse by the fact that the new policy denies them an option of buying directly from the farmers. The processors want to buy the crop directly from the farmers at Tsh500 (US cents 30) per kg. </p><p>Anna Abdallah, chairperson of CBT last week denied there were fresh instructions from regional authorities or CBT barring the local producers from processing the cashew nut in the country.” The farmers have already been paid 70 per cent which is Tsh850 (US cents 53) per kilogramme of their money and the remaining 30 per cent which is Tsh350 ($0.21) per kilogramme will be paid as soon as the exporters purchase the remaining cashew nuts,” she said. But the increase in auction price means that exporters (processors) are unwilling to buy the nuts, which means that the co-operatives are unlikely to raise enough money to pay their outstanding debts to farmers. </p><p>Ms Abdallah said that CBT was now in discussion with the government to bail out farmers who have not been paid their last installment and to see how the government will be able to sell the remaining 80,000 tons still in warehouses and in farmers’ hands. Major international exporters, too, have refused to buy the crops at the auction price of Tshs 2000 ($1.2) per kilogramme as ordered by Mtwara region authorities.</p> <p>In contrast, the companies can buy the nut in West Africa, Brazil and India at Tsh550 US cents 34) per kilogram directly from farmers. The Cashew nut Board of Tanzania offered Tsh850 (US cents 53) as the direct-from-farmers price, with an addition of Tsh350 (US cents 21) paid after the cashew nuts have been sold to exporters. The harvest season in Tanzania ended in January and the majority of international traders have shifted their attention to West Africa where the season has just begun. As a consequence, cashew nuts in Tanzania risks rotting in farms and warehouses, a situation, which has escalated to crisis, level due to the new policy.<br></p><p></p>