Little known Kenya firm buys Tanzanian cashew nuts for $180m

business.jpgTanzania will earn $180.2 million from its stock of cashewnuts after it entered into an agreement with a little known Kenyan-registered firm, Indo Power Solutions Ltd, for the purchase of 100,000 tonnes of the product last week.

The deal was signed on January 30 between the Cereals and Other Produce Board director Hussein Mansour and Indo Power’s chief executive Brian Mutembei.

Also at the signing, at the East African Community headquarters in Arusha, were Minister for Justice and Constitutional Affairs Palamagamba Kabudi, Industry and Trade Minister Joseph Kakunda and Bank of Tanzania Governor Florens Luoga. It was not clear why the deal was being signed there.

The Kenyan company was among nine private buyers that bid to buy the crop from farmers last year. This was before President John Magufuli ordered the Agricultural Development Bank to buy the country’s entire output and sent the army to truck it into depots.

Indo Power is not known to trade in or process cashewnuts. There is currently no company in the region with the capacity to process 100,000 tonnes. The capacity of Tanzania’s factories to process cashews stands at around 50,000 tonnes a year.

Indo Power will directly pay the central bank for the raw cashewnuts and shipment of the cargo to Kenya will begin this week, after the payments are made. Mr Kakunda said there was another 113,000 tonnes of cashewnuts in warehouses and the government was negotiating with 18 potential buyers.

Tanzania produced about 240,000 tonnes of cashewnuts during the 2017/2018 season, of which the government bought 213,000 tonnes for which it paid farmers Tsh416.4 billion ($180.2 million). Indo Power has offered Tsh418 billion ($180.89 million).

Cashew prices

Last week’s deal came a day after the matter came up in parliament on January 29, where Deputy Minister for Agriculture Innocent Bashungwa told MPs that the government was planning to sell 200,000 tonnes of cashewnuts as it looks for international markets.

He was responding to a question by Mtwara Urban MP Maftaha Nachuma (opposition CUF) who sought to know why the government’s pace of buying cashewnuts from farmers had slackened.

Before President Magufuli ordered the collection of the crop, cashewnut farmers — growing the most valuable export crop for the country — had been holding back from selling after prices fell below production costs.

President Magufuli then ordered a 94 percent increase in the local price and told government officials to buy the crop after private buyers baulked at the higher price.

Military personnel ferried truckloads of the crop to selected storage areas. The price of the commodity then rose to $1.80 a kilogramme from $1.15 in less than 10 days. Global kernel prices hit a high of $2.40 per kilogramme at the beginning of 2018, but as demand from the United States and Europe fell, they declined to $1.60 in October.

Traders said they were waiting to see how Tanzania, a top 10 global producer, would get its cashews to the main buyers in India and Vietnam before the end of the year, after which harvests from other producers in South Africa and West Africa would start entering the market.

The bulk of the raw cashewnuts, which are yet to be shelled, are shipped from Tanzania and other African countries to be processed, mainly in Vietnam and India.

According to Bank of Tanzania, the subsector brought in $340.9 million in foreign exchange in 2017 — superseding earnings from coffee, cotton, tea, cloves and sisal combined at $270 million.

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