Trade Investment: Where Do We Stand?

A MOUNTAIN of bulging jute bags hides the far wall of a vast shed. A deafening rattle comes from the machine by the open door, a green contraption of conveyors and rotating metal drums that sorts cashews by size and drops them into sacks. Amid the din, an engineer (Italian, like the machine) explains how it works.

The new factory at Techiman in western Ghana belongs to Rajkumar Impex, an Indian company which processes more cashews than anyone else: 8-10% of the global crop and 20% of Africa’s. Venkatesan Rajkumar, its founder and boss, says that by 2014 he intends to have 18% of the global total. When the Techiman factory is fully open, which it is due to be in November, it will be one of Africa’s few fully mechanised processing plants, drying, roasting shelling and grading some 50 tonnes of raw nuts a day.

African farmers grow about 40% of the world’s cashews, but only around 10% of the crop (less in the west, more in the east) is processed in Africa, according to the African Cashew Alliance, an industry group. Most African nuts go to India or to Vietnam, which grows and prepares more cashews than any other country. The Alliance wants the continent to process 35% of its own raw nuts by 2020.

Mr Rajkumar too believes that “west African nations should develop their own processing capacity” and sees an opportunity for his firm. He is investing $9m in the Techiman factory, expecting to save the cost of transporting bulky material by sea all the way to India. He intends to open factories in Benin and Côte d’Ivoire, and maybe another in Ghana. He is also expanding in southern and east Africa, buying a factory in Mozambique and hoping to build one in Tanzania.

West Africa seems a good base from which to serve Americans and Europeans with pre-prandial nibbles or beer-friendly fistfuls. India has a huge domestic market to satisfy—the world’s biggest, which grew more than 9% a year in the past decade. Vietnam, where Rajkumar Impex also has factories, is best placed for East Asia.

Locals, as well as Rajkumar Impex, stand to gain from the Techiman factory. It will employ 1,000 people, 90% of them women. Mr Rajkumar says their pay will depend on how much they process, but he expects it to be four to five cedis ($2.40-3.00) a day, plus food: a good wage by local standards. The company says it can improve farmers’ incomes as well. It reckons there is a margin of up to 20% between what agents pay them for their nuts and what it pays the agents. By dealing with farmers’ co-operatives instead of middlemen, the company can both pay farmers more and get raw nuts more cheaply.

As well as a boost to its economy, Techiman should also see a green boost to its power supply. Rajkumar Impex is spending another $9m on generating electricity from biomass, using nut waste and other material to be bought in. Of the 6MW it plans to generate, it expects to use 0.6MW and to give some of the rest to the local community. (The remainder will be sold into the national grid.) The government, though, will have to provide the wires. As travellers on the bumpy road to Techiman know, west Africa needs infrastructure as well as factories.

Correction: Originally the last paragraph of the article stated that all the surplus electricity would be given to the local community. This was corrected on October 20th 2011

http://www.economist.com/blogs/baobab/2011/10/cashews-ghana?fsrc=scn/fb/wl/bl/nutcluster