Moving Africa Up the Value Chain, One Factory at a Time

Mauritian-born Salma Seetaroo has lived in London, Harare and Kinshasa, passionately spending her career on African ventures even when not on the continent. Then in September 2018, she went to Côte d’Ivoire to oversee the transfer of ownership of a part-built factory. She never left.

She was disturbed that Africa produces more than half the global supply of raw cashew nuts. Yet, it languishes well down on the production and processing value chain. The opportunity presented itself, and she chose to do something about it.

Seetaroo is now CEO and shareholder in that business, called Cashew Coast. She has charted a new direction by transforming the operation into a wholly organic nut production in central Côte d’Ivoire and processing facility in the southeast. And it has been a journey of note.

As she relates in the profile piece we published on her a few days back, when she walked onto the site for the first time, it was an empty shell. A facility conceived as a mechanised plant for processing 6,000 tonnes of cashew nuts annually was, in reality, just a few large, empty, debt-ridden warehouses with some equipment stashed in a corner.

The historical perspective

Interestingly, climate change may be the instigator of Côte d’Ivoire’s cashew nut industry. It began as recently as the turn of the century when cashew trees were introduced to the Bondoukou region for reforestation.

The local population soon realised that cashew cultivation was much less demanding than cocoa cultivation. Furthermore, the agricultural plots required little maintenance.

The nuts could be sold at more attractive prices than cocoa or cotton, whose prices were falling. A plus was that cashews could be traded for cash during the civil war from 2002 to 2014. Two decades later, the country is the top exporter in the world, having shipped 840,000 tonnes at the end of the cashew campaign in June 2021.

Climate change was the trigger

The Food and Agriculture Organisation (FAO) of the United Nations (U.N.) reveals that in 2019, Africa produced more than half of the world’s cashew nuts. And a little under 25% of the almost three-and-a-quarter million tonne global harvest came from Côte d’Ivoire.

“The reason that we got involved in this business…[is] because it makes [better] sense, from a climate perspective, to export [cashew nuts] directly to Europe and the U.S.,” she explains. It is reasonable to deduce that the more than 12,000km trip from West Africa to Vietnam for processing and then the shipment back to Europe – and the U.S. and Canada – directly impacts climate change and carbon footprint.

The Centre for the Promotion of Imports from developing countries (CBI) reports that 40% of global imports of processed kernels are into Europe. Another 35% of those imports end up on retail shelves in North America.

A U.N. Conference on Trade And Development (UNCTAD) report, Commodities at a Glance: Special issue on cashew nuts, indicates that the price for raw cashew nuts in 2019 averaged at around US$1.5 per kilogram while the imported price (it takes 5kg of raw cashews to make 1kg of marketable product) hovered a bit over US$8 per kilogram that year. It eventually resells in Europe for twice that amount.

Cutting out the middleman

Seetaroo believes the only solution – for producing countries and Africa as a whole – is to move those countries up the value chain. Suppose all the processing and packaging of the nuts could be performed in Africa. In that case, the continent could create jobs and derive more significant export revenues from its share of the global harvest, she says.

Like so many things, it began almost by accident. “We understood that our farmers could not afford fertiliser and thought, hang on, if we go organic, we do not need fertiliser in the first place. The next step was to find out how we go about converting their land into organic farming, training and certifying them over three years. In exchange for their commitment, [we would pay them] a premium for their organic cashews,” she explains.

That process was completed in February 2020, so they did not miss a beat when Covid-19 hit – Côte d’Ivoire went into lockdown for four months starting in March 2020. “Because we had already been BRC-certified a month before, the Covid-19 containment measures were easier to implement.” The BRC food safety standards were just part and parcel of the course.

“We were one of the few factories that didn’t have to close [because of] Covid, and we were able to double our capacity in 2020,” notes Seetaroo. “Suddenly buyers in Europe woke up to the opportunity in West Africa, only two weeks away and certified.” Other places such as Vietnam were just too far away, so they diversified sourcing.

“We understood that our farmers could not afford fertiliser and thought, hang on, if we go organic, we do not need fertiliser.”

Cashew Coast is now a fully-certified organic cashew nut supplier to European markets, representing and achieving her goal to move up the cashew nut value chain. The company employs 700, has a processing capacity of 9,000 tonnes, and has just seen its first profitable half-year in 2021. There is still a long way to go with plans to expand with more factories in the region.

Seetaroo explains: “Although Côte d’Ivoire is the largest exporter of raw nuts in the world, it doesn’t yet have the expertise needed for large-scale local production. Currently, only 10% of the local crop is processed locally. The other 90% is still exported to India and Vietnam.”

That is the challenge that lies ahead. To build the expertise to enable the country to process the other 90% of its annual harvest and ship it directly to consumer markets in Europe and the Americas.

And the lesson in this tale? Sometimes it is the most unexpected part of the business that instigates transformation. In this case, if prices of some parts of the production process – fertilisers, for instance – are too high, it is time to shift focus.

 

AUTHOR: Brian Bakker
DATE PUBLISHED: Feb 04, 2022
SOURCE: incafrica.com
PHOTOCREDIT: istock.com

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