By Akanimo Sampson
Head of Enhanced Integrated Framework’s (EIF) Partnerships, Outreach and Resource Mobilisation, Violeta Gonzalez, says West African cashew farmers were worse hit by measures to contain the rampaging COVID-19 pandemic.
EIF is working closely with governments, development organisations and civil society to assist Least Developed Countries (LDCs) use trade as an engine for development and poverty reduction.
According to Gonzalez, ‘’COVID-19 containment measures meant closures – of international borders, stopping major buyers travelling to West Africa – as well as domestic markets, leading to violent clashes between police and traders.
‘’It goes without saying that the impact of these border and market closures came at a great cost to the livelihoods of many West African cashew farmers, producers, and traders.
‘’Small businesses faced plummeting revenues or were at the brink of bankruptcy. Instead of offering support, local banks and financial institutions supporting West African cashew producers slashed lending during the pandemic.’’
April is usually cashew marketing season across West Africa, a lively affair where traders tout bags of recently harvested raw nuts to buyers, most of whom have flown in from Vietnam and India. But 2020 was not a usual year.
Agriculture is a risky business at the best of times – good prices depend on good yields, which depend on good weather.
While speciality crops like cashews can generate high returns, the risk of capital loss is also high, meaning many banks are hesitant to provide the capital that’s needed for small businesses in West Africa’s cashew sector to flourish.
‘’The cashew businesses that have weathered the economic storm created by COVID-19 have something in common, the long-term backing of impact investors who not only provide capital and technical assistance, but who also have a deep understanding of the challenges of the agricultural sector.
In Burkina Faso and Togo, two LDCs, ‘’companies such as Anatrans and Cajou Espoir were able to access equity and long-term debt financing from a number of impact investors during COVID-19.
‘’This enabled them to purchase the factory equipment required to abide by physical distancing regulations, which meant they could stay operational. It also meant they had cash available to keep staff employed and still pay farmers upfront, despite order delays and cancellations’’, Gonzalez says.
Moreover, they were able to invest in training for farmers, keeping their relationships with farmer co-operatives strong. And when market demand picked up, they were still able to quickly source raw cashews from the farmers they worked with.
Relationships with farmer co-operatives like the ones Anatrans and Cajou Espoir have built are not achieved overnight. They spent years investing in farmer training, environment and social certifications, fair-trade principles and women’s employment because these are part of the metrics that impact investors use to assess their business performance.
The pandemic also exposed the fragility of the cashew sector’s increasingly globalised supply chain – close to 90% of West Africa’s raw cashews are exported to Vietnam and India where they are processed, packaged and sold to EU and US markets.
Building West Africa’s capacity to process and package cashews locally would not only increase local incomes, but it will also increase the sector’s resilience to market volatility, improve product traceability, and reduce the product’s carbon footprint.
These are qualities that European and American retailers and consumers are increasingly seeking in their products. However, without financial backing, too many West African cashew businesses will struggle to stay operational, let alone innovate.
A powerful way to encourage more private investment in West Africa’s cashew sector is for governments to strategically invest aid funding to get projects off the ground, even if that means accepting larger risks or lower returns. This innovative financing approach, known as blended finance, makes a project more attractive to private investors who seek higher financial returns but require lower risk.
For example, the Agri-Business Capital Fund, which is a blended finance vehicle focused on supporting agricultural small and medium businesses, was so impressed with Anatrans’ track record of delivering positive social and environment impacts alongside profit, they chose to provide them with additional financing during the pandemic.
This made it possible for Anatrans to support farmers to receive organic and fair-trade certifications and obtain a higher price for their products. Anatrans was also successful in renewing credit lines from other impact investors during this period.
With the impact investment market currently estimated at US$715 billion, there are ample resources available. Governments in LDCs in West Africa have a vital role to play to create a strong investment climate in their countries to attract impact investment.
Now is the time for governments to strengthen the business case for West African produced and processed cashews to ensure that no West African cashew farmer, producer or trader gets left behind.
