Making the connection - Value Chains for transforming smallholder agriculture 6–9 November 2012, Addis Ababa, Ethiopia 1 1 CONCEPT NOTE 4: SUBCONTRACTING IN CASHEW PROCESSING Joseph HAULE Cashewnut Processors Association of Tanzania Panel on Chain development through value addition: Transforming Smallholder Agriculture through agro-food processing and post-harvest handling

Making the connection - Value Chains for transforming smallholder agriculture 6–9 November 2012, Addis Ababa, Ethiopia 2 Brief description of the Value Chain Development Intervention Significance: Tanzania produces ca. 7% of the worlds cashew Ca. 70% raw export, mainly to India Value is added in India. Tanzanian Government now promotes cashew processing Subcontracting in processing adds value on the village level, mainly for women and young people living at the poverty line. Model 1: Small processor company (e.g. farmer cooperative) sells semi-finished nuts to larger end-processing company. Model 2: Small processor company provides processing service for end-processor, which owns & delivers the raw nuts. Model 1 may have bigger VC development impact: small processors responsibly operate a processing company.

Making the connection - Value Chains for transforming smallholder agriculture 6–9 November 2012, Addis Ababa, Ethiopia 3 Entry point: Support to small scale community level semi- processors who are centrally located in the value chain. Support to pilots: Training, coaching, fair contracts, access to finance, equipment, foster an enabling business environment. How does the Intervention intend to foster value chain development? farmer small semi-processor (farmer/entrepreneur) end- processor market Business environment, VC governance VC finance

Making the connection - Value Chains for transforming smallholder agriculture 6–9 November 2012, Addis Ababa, Ethiopia 4 How the Intervention so far contri- buted to value chain development Vertical integration incentive to farmer-processors: Better raw nut quality improves processing result. Higher income enables to pay for school fees, health expenses, improve living standard. Support to an enabling business environment: –market access support, –Stakeholder interaction (e.g. regulatory authorities, market partners), –capacity building along the value chain provided, –funding facilitation, –trust and dependability in the VC through documentation and formal business operations.

Making the connection - Value Chains for transforming smallholder agriculture 6–9 November 2012, Addis Ababa, Ethiopia 5 Collaboration and Partnership with other initiatives Domestic collaboration with Regional and District Authorities, Cashewnut Board of Tanzania, UNIDO, SIDO (Small Industries Development Organization), Cashew nut Company 2005 (Equal Opportunities for All Trust Fund). International collaboration with the African Cashew Alliance. The initiative benefits from governments commitment to processing. Small-scale cashew processors benefit from the initiatives activities related to e.g. an enabling business environment or access to finance.

Making the connection - Value Chains for transforming smallholder agriculture 6–9 November 2012, Addis Ababa, Ethiopia 6 Success of the Intervention, challenges +Cashewnut Board of Tanzania now starts to support more small scale processors and link them to end-processors. +Value addition and income creation on the community level enables young people to remain in the villages. +Financial institutions are interested to fund small scale pilots due to improved management of the companies. -Availability of raw nuts for processing is still not easy due to the current regulations (warehouse system is mandatory). -Funding small processors is still a challenge (no title deeds exist, raw nuts not easily accepted as collateral). -Sufficient management training for formalized and improved business operations is needed.

Making the connection - Value Chains for transforming smallholder agriculture 6–9 November 2012, Addis Ababa, Ethiopia 7 THANK YOU