Ghana wants more for its cashews, but it's a tough nut to crack

In Accra, the capital of Ghana, a street vendor looked at me with confusion. I was trying to figure out why her meager 30-gram packet of roasted cashews cost the equivalent of 75 US cents (60 pence) beside a sweltering highway in the Ghanaian capital.

This didn't seem like much to me, a tourist from the UK. But what astonished me was the incredibly high profit margin. The price was at least 4000% higher than the cost of buying the equivalent weight of raw, unshelled cashews from Ghanaian farmers.

"This is unbelievable," I protested. However, she understood neither my English nor my logic. After all, the price of the nuts was printed on the packet. And it was no easy task to explain why I thought it was too much.

Ghana is the world's third-largest exporter of raw cashews, after Côte d'Ivoire and Cambodia. Approximately 300,000 Ghanaians rely at least partially on cashew farming for their livelihoods. Nashiru Seydou, whose family owns a farm in the northeast of the country (about 800km from Accra), is one of them.

He says the work is hard, and unreliable supply chains and volatile wholesale prices make it difficult to survive. "We are struggling. We can use the sunshine and fertile land to create more jobs," he says. "I would be happy if the government could help us and support our industry." He told me that he currently only gets about $50 for every 100kg of unshelled cashews.

Bright Simons, an entrepreneur and economic commentator in Accra who has studied the figures, says: "Bakers and retailers buy the nuts from farmers for $500 a tonne, and then sell them on to customers (both domestic and foreign) for $20,000 to $40,000 a tonne."

Overall, Ghana grows about 180,000 tonnes of cashews each year. More than 80% of these are exported in raw, unshelled form. This generates about $300m in export revenue, but it also means that Ghana is missing out on the higher returns from roasted, ready-to-eat cashews.

Mildred Akotia is working to increase the amount of cashews that are shelled and roasted in Ghana. She is the founder and CEO of Akwaaba Fine Foods, which currently processes only 25 tonnes of cashews per year. Ms. Akotia denied claims that she and others like her are price gouging. She says that the packaging and roasting machinery that Western businesses would automatically use in this industry is simply unaffordable for her, due to Ghana's high cost of credit.

"If you go to the local banks, the interest rate you'll get for a loan will be as high as 30%," she complained. "As a manufacturer, can you tell me what your profit margin is that will allow you to afford that kind of interest rate? We have to rely on what we can get: soft loans from relatives and grants from donor agencies." She says this situation is why less than 20% of Ghana's cashews are processed locally. The bulk of the nuts are shipped to large factories in countries such as India, Thailand, and Vietnam.

Surprisingly, some of these packaged nuts are then exported back to Ghana, and sold at the same price as domestically roasted cashews. This is despite requiring a 20,000-mile round trip by sea, and the payment of import costs. The situation is similar with rice, which is exported from Asia to Ghana, and sold cheaply, even though Ghana also grows rice itself.

Back in 2016, the Ghanaian government tried to ban the export of raw cashews, in order to encourage domestic processing. However, the policy was abandoned within weeks, due to strong protests from farmers and traders. Without cheap loans available, not enough new Ghanaian roasters entered the market. As a result, the price of raw nuts plummeted, and many nuts began to rot because there were no buyers.

Recently, there have been proposals to increase export duties on raw cashews, and to ban exporters from buying cashews directly from farms. But Mr. Simons believes that all of these policy interventions miss a key point. He says that one of the biggest challenges facing local producers is to work harder on the business fundamentals, and to develop their companies.

"To be efficient, you need scale," he says, adding that companies need to promote the eating of cashews to make them more popular in the country. "You need a large population of Ghanaians consuming the nuts, not just a small middle class."

Professor Daron Acemoglu, a Turkish-American economist, also believes that building a strong local market is crucial for Ghana's cashew industry. He was one of the winners of last year's Nobel Prize in Economics, for his work on the plight faced by low-income economies, particularly their indigenous businesses.

But he says the priority should be improving Ghanaian processors' access to international markets. "These companies face an unskilled workforce, infrastructure that doesn't work properly, they are always worried about corrupt officials or changes in the rules, and it's hard to access foreign markets," he says. "They need foreign markets because the domestic market is small, and their own government has very little capacity [to promote it]."

He would also like to see the Ghanaian government improve road and rail networks, to reduce transport costs. But Mr. Simons thinks the focus now should be on Ghanaian businesses themselves, doing the groundwork of branding and marketing. He says that because Ghana is so mired in red tape and cronyism, many of the country's most enterprising businesspeople simply leave Ghana to seek higher-paying opportunities abroad.

"There is a massive brain drain," he says. "I think the reason why African economies are slow to develop is that we are over-focused on the supply side, but the real magic is on the demand side, creating a consuming class of cashew lovers, and you don't have an entrepreneurial class that can create that demand transformation." He says the same argument applies to Ghana's other bigger exports, such as gold and chocolate, which do not have much value added to them within Ghana before they are exported to the West.

Mildred Akotia hopes she can be one of the entrepreneurs who breaks this trend. She now wants to set up her own logistics division, so she can process cashews directly from the farms. "I get so many calls from the United Arab Emirates, Canada, and the US. We can't meet the demand at the moment. We can't get enough cashew kernels to roast. "There is a ready market, both locally and internationally. My branding is good, my marketing is good. My dream is to revamp processed foods in Ghana."