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  • Ivory Coast aims to harvest more value from farmed goods

    Sep 27th, 2015

    Cashews could hold the key to Ivory Coast’s agricultural future. The country wants to gain greater value from the vast quantities of cash crops it grows by processing them at home instead of exporting them raw. And it is looking to its booming cashew industry to provide much of a “value-added processing” push.

    With production growing at 10 per cent annually for the past five years, Ivory Coast is the world’s second-largest producer. All this in a country that only started planting cashew trees less than 40 years ago. President Alassane Ouattara says he wants half of Ivory Coast’s 1.7m tons of cocoa grown yearly to be processed in the country by 2020, up from only 30 per cent now. “Our objective should be to process more of the raw materials we produce,” he told the Financial Times.

    Currently some 95 per cent of the nuts produced are exported in raw form to India and Vietnam, the global centres for processing and significant producers in their own right. In the next five years, the government wants 30 to 40 per cent of nuts to be processed locally, says Malamine Sanogo, managing director of the government’s marketing board, the Cotton and Cashew Council (CCA).

    “The raw product is there (in Ivory Coast) and there are currently very few factories,” Mr Sanogo says.

    He argues that, in addition to creating factory jobs, local processing boosts sustainability and guarantees a stable market for future production. “It’s important to process locally because, if we don’t, some day India and Vietnam might say ‘we produce enough and we don’t want your cashews’. We need to process our own nuts and send them to markets in Europe and the US in order to compete with India and Vietnam.”

    The billions of dollars made in India and Vietnam by processing Ivory Coast’s cashews could be brought home, says Sunil Dahiya, business advisory manager at the African Cashew Alliance. “The Ivorians are exporting all of the positive socio-economic impacts.” Singapore-listed soft commodities trader Olam is the first leading multinational to start processing cashews in Ivory Coast. In the central city of Bouake, Olam’s plant employs more than 2,000 people with another 1,000 working at a second facility. The need for a significant input of manual labour means many more staff will be hired if operations are scaled up by Olam or others, potentially creating tens of thousands, if not more, jobs.

    Olam’s project is “opening the door to many new investments in cashew processing”, says Partheeban Theodore, Olam’s country head for Ivory Coast. “We are bringing infrastructure, technology, employment and skills development.”

    He says the company also benefits from processing the raw nuts locally because of reduced transport costs.

    In Bouake, new restaurants, banks and stores are a sign of a lively local economy, boosted by the increased purchasing power of the factory workers and their families.

    Mr Dahiya says that, in the short term, both foreign and local companies need export incentives and tax exemptions on some materials that must be imported, just as the government once did with the cocoa sector. Ivorian companies, in particular, need access to working capital loans, he says, which neither local or international commercial banks are currently offering.

    Aside from financing constraints for would-be investors, the eating habits of Ivorians and their neighbours in the region are another significant downside.

    In the green fields near the factory in Bouake, farmers grow mangos, yams — and cashews. But when they choose a snack at roadside stands, they buy peanuts — not cashews — for 50 CFA (5p).

    The reason is simple, says Mr Sanogo: “Cashews are produced by the poor and consumed by the rich. The price is very high and our purchasing power is weak.” Much scepticism remains. “Africa needs to get more from its commodities, but a blanket approach to processing won’t work,” says Victoria Crandall, soft commodities analyst at Ecobank in Abidjan. “One model does not fit all, and the approach needs to be, ‘where do we get the most out of processing?’ Otherwise governments are bending over backwards to get investors here and the governments lose money.”

    Ms Crandall says cashew nuts and chocolate are generally not eaten by west Africans and the prospects of growing a local market remain slim.

    In contrast, palm oil is profitable for local processors for the simple reason that west Africans are big consumers as it is a key ingredient of the local diet.

    DekelOil, a UK-listed company producing palm oil in Ivory Coast and exporting it in the region, leapt into the market in 2008, beginning a long and delicate negotiation process with rural communities effectively to arrange joint ownership of land for palm tree growing carried out by the local farmers, says Youval Rasin, Dekel’s chief executive. “We found a way to secure the land . . . (so) that we feel safe and can invest.”

    He adds: “There is a deficit of 800,000 tons yearly of palm oil in west Africa, so all our oil is sold locally.”