Tanzania’s Cashewnuts – Echoes Of Groundnut Scheme And Kwame Nkrumah’s Screwing Of Farmers

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This is really very good indeed, Tanzania’s John Magufuli seems to be combining two of Africa’s past development horrors into the one single failure. What’s worse is that one of those horrors occurred in the very country we’re talking about. OK, it was called Tanganyika back then, before the absorption of Zanzibar created Tanzania but still. People should still recall the Goundnut Scheme, yes? And it really wouldn’t take all that much reading around to find how Kwame Nkrumah screwed the Ghanaian cocoa farmers either.

But it seems that Magufuli has decided to use the two not as the warnings they are but as a guidebook as to how to make all poorer. Well done Mr. President, well done indeed.

So, the background, Tanzania today grows a lot of cashewnuts. There used to be a thriving network of agents who bought from the farmers and prepared and bundled for export. Magufuli thought this was a very bad idea and so nationalised the entire trade. The State would be able to sell and gain a better price:

Tanzanian President John Magufuli had waded into the affair with a directive that threw all private cashewnut buyers out of the market in favour of his government, promising the farmers better earnings for their produce. But shortly thereafter, the Tanzanian government, which had earlier promised to process the nuts and sell the finished product at a premium to increase the farmers’ earnings, appeared to have changed tack. It set out to find a bulk buyer for the more than 200,000 tonnes of cashewnuts it had collected from the farmers, in what looked like an international invitation for bids.

Well, quite, a government that fails even in the basic tasks of paving the roads and taking the trash out knew less about, was less effective at, an international business than the network of people who had been doing this all their lives. Who could have forseen that?

So, what happens then? The nuts are sold off wholesale to, umm, well, no one’s really quite sure:

But while Tanzanian officials and farmers found relief in the fact that they had finally found a buyer at what was deemed the fairest price possible in the marketplace, across the border in Nairobi questions immediately arose over the identity of the firm at the centre of the transaction. “Indo who?” …was the common question on many Kenyan lips on hearing that the little-known company had pulled through a $180 million deal in Arusha.

We really are seeing the replay of those two disasters here. The Groundnut Scheme as a particularly harebrained English one to grow groundnuts – peanuts to most of us – as a way of developing Tanzania. One of those vast pieces of socialist planning so beloved post-WWII and just as with the entirety of the socialist world that socialist planning didn’t work. Vast sums wasted on making Tanzania poorer than it had been when it started.

Groundnuts, cashewnuts, not a huge difference, right?

But then we’ve got to add in Kwame and his schemes in Ghana. At independence the place made a fortune off cocoa exports. Again we had myriad small farmers none of whom were large enough to be exporting directly. Have a cocoa export board then – which they did. Nkrumah then continually widened the gap between that international price paid to the government for the cocoa and the internal price paid to the farmers for the cocoa. Everything went just fine until the farmers decided it wasn’t worth it any more and they stopped bothering with cocoa. Collapse of government revenues.

Magufuli’s not really understood this developing an economy through exports thing already, as his troubles with Acacia Mining and gold show. Here we’ve just another example of his repeating the earlier development mistakes that have been made in Africa. And it’s not going to work out any differently this time either.

Note that this is all true even if we assume those Kenyan buyers are on the up and up, that there’s no corruption or bribery here at all. It’s still a bad idea even if it’s honest.