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July 27, 2008

Cashew in Mozambique: a model of international development gone wrong

The drive to this port city where the Limpopo River meets the Indian Ocean is lined with cashews.
First come the vendors with their cashew-filled buckets, waving at cars with the tin mugs used to scoop $2 portions. Then, the women who sit behind wide reed baskets piled with the nut – they’re quiet and calm from a distance, but ready to pounce on any car that stops, crowding, insisting upon their products’ superiority.
Closer to town are the large branches stuck vertically into the dusty ground, draped with bags of cashews and looking like some sort of modern art Christmas trees. Sellers wave at passing cars; young boys plead with drivers to buy.
Along this road, it seems, cashew is king. But in a nation that once was the world’s largest cashew producer, the king is a mere shadow of its former self.
On the other side of this bustling city of faded Portuguese buildings, Derek Higgo sits in the empty boardroom of his Mocita cashew processing factory and sighs: “Everything you see on the road there – it’s subsistence. It’s actually quite a sad situation.”
Ten years ago, Mocita was the largest employer in Xai Xai, with 1,500 workers processing thousands of tons of cashews a year – part of a nationwide effort to regain Mozambique’s dominance in the cashew industry. But today, Mocita is quiet – a model not of economic resurgence, says Mr. Higgo and many others, but of international development gone wrong.
The story of the cashew is, in many ways, the story of modern Mozambique and many other developing countries. It is a tale of colonialism, commerce, and war, and of the perils – and potential – of aid.
It is a contested story, and, in Mozambique, still a highly emotional one. But what is clear, regardless of one’s position, is that the legacy of the cashew looms large.
The cashew itself is an ornery nut to crack. Its kernel grows on the green, shady cashew trees cultivated along Mozambique’s 1,500-mile coastline. It is encased in a hard shell so acidic that it can burn through fabric and damage skin. Getting to the tasty part is no easy task.
One method is to heat the cashews in a tin over a fire until the cashew oil ignites and the shells split – that’s the preferred method of most subsistence cashew sellers. Another way is to freeze the nuts in liquid nitrogen and crack them. The Mocita factory heated the nuts in a 195 degree Celsius oven, spun them in a centrifuge, dried them, and blew off the remaining shells with compressed air. These days, inexpensive hand processing is back in favor.
Mozambique was the world’s top cashew producer when it won independence from Portugal in 1975. More than a dozen large factories using mechanical processes to remove the kernel turned out 150,000 to 200,000 tons annually.
But civil war soon engulfed the country and decimated the industry. By the time of the country’s peace agreement in 1992, the ruling government was courting private investors in hope of reviving the cashew economy. It had also planned a massive cashew tree-planting campaign (kernel yield decreases as cashew trees age) and put a high tax on cashew exports to encourage local processing.
“It made enormous sense from the country’s point of view to invest in cashews,” says Higgo. “Cashew trees were growing. The population knew what to do. It was a dollar-earning export.”
And businesses like his were keen to get a piece of the action. The Anglo American Corporation had operated Mocita from the 1960s through the early 1980s, when the war made it impossible to continue. After the peace accord, Higgo says, the company was eager to return. It spent millions of dollars to revamp the factory, which Higgo and other investors later bought, and started producing cashews.
But in 1995 the World Bank changed the playing field. The Bank, which was heavily involved with Mozambique’s rehabilitation and in control of much of the government’s access to aid money, decided that it would be more beneficial to Mozambique to export raw cashews without processing. This decision fitted in with the Bank’s inclinations toward economic liberalization, bolstered by a sense that the large, often foreign-owed, cashew factories here were exploiting Mozambican workers.
Former President Joaquim Chissano contends that the World Bank told Mozambican officials to end protective tariffs on cashews or face cancellation of hundreds of millions of dollars in loans. Although bank officials denied coercing the government, Mozambicans at the time made it clear they were cutting taxes only grudgingly. Factory owners also protested, saying that they’d been promised industry protection.
The price of raw cashews did rise, as primarily Indian buyers came and offered higher prices for the nuts than Higgo says local factories could buy them. So factories like Mocita started closing.
“Despite renewed hopes, the industry was killed again by World Bank and IMF zealotry in imposing a free trade policy,” wrote Mozambique scholar Joseph Hanlon in his book, “Do bicycles equal development in Mozambique?” “Cashew became one of the emblematic examples of harmful policies imposed on poor countries….”
Later, the World Bank officials acknowledged that they’d tried to do too much, too fast, but maintained that the mission of liberalization was sound and did improve the livelihoods of cashew farmers.
In their report, “When Economic Reform Goes Wrong: Cashews in Mozambique,” professors from Tufts, Stanford and Harvard universities said that Mozambique gained about $6.6 million annually from the lowered cashew export restrictions – an amount almost entirely negated by the costs of unemployment from closed factories.
So emotional is the cashew business here that TechnoServe, a nonprofit that tries to find business solutions for rural poverty, almost avoided it altogether. But, says Jake Walter, TechnoServe’s Mozambican director, there was no avoiding the profitability that research suggested the industry holds.
“We decided it was so important to so many peoples’ lives in Mozambique that we should tackle it, even though it was a very hot issue and there was this ideological argument around it,” he recalls. If smaller-scale factories locate closer to rural cashew stands, and if these smaller factories form cooperatives in order to fill the large container orders that are the bread and butter of the industry, industry-wide profitability is possible, Mr. Walter says.
TechnoServ helped a few entrepreneurs set up small factories as well as financing from USAID and other groups.
Now, in the country’s “cashew triangle,” a section of northern Mozambique where these new-style factories are most common, more than 6,000 cashew-related jobs have been created in the past six or seven years, Walter says. According to the government’s Cashew Promotion Institute, Mozambique produced 95,000 tons of cashews in the recent harvest; it says that two-thirds is processed in-country by factories and subsistence farmers.
Meanwhile, the government refused to cut taxes further on cashew exports – giving the smaller fledgling factories a bit of protection.
“I think this is important for development,” Walter says. “The kind of life that’s been created in the cashew industry is different than it was before, but I think it’s qualitatively better.”
Here in Xai Xai, however, it’s hard for residents to share that sentiment.
Past the Mocita gates where trucks filled with cashew nuts once lined up to make deliveries, it’s eerily quiet. Most of the people fired from the factory never found new work, people here say.
One of the few employees left from the massive 2001 layoffs, security guard and former soldier Mario Fernando Raimundo, recalls: “You’d hear the noise of the machines, the noise of people singing while they were working. It was producing, bustling.
“That’s over now.”
But he smiles when he talks about the diminished “king”: “Ah, the cashew,” he says. “When you see the cashew, your stomach sings.”
Though his cashew factory stands silent, he says he eats the nuts regularly – buying from the subsistence sellers on the street.
CS Monitor

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