Private trader response to market
            liberalization in Tanzania's cashew nut industry
Between World War II and the early
            1970s, Tanzania developed one of the world's largest
            cashew nut industries.  In 1973-74, marketed production
            reached 145,000 tons (about 30 percent of world production),
            with cashews providing an important source of income to some
            250,000 farmers and being the country's fourth largest
            source of foreign exchange.  This trade was originally
            developed and organized by private traders (of Indian and
            Arab origin), although in the 1960s a multitiered marketing
            system - involving local cooperative societies, regional
            cooperative unions, and a marketing board - was imposed,
            with private traders gradually removed from the market
            system.  Despite a buoyant international market,
            Tanzania's cashew nut industry underwent a steady and
            massive decline through the 1970s and 1980s. The author
            examines the factors that contribute to this downward spin:
            Tanzania's village program, a decline in real producer
            prices, and inefficiencies in cooperative and marketing
            board crop collection and downstream activities.  With the
            decline in production, living standards in the main
            cashew-growing regions worsened, and most of the
            large-scale, donor-funded, government-owned processing
            factories became "white elephants." With the
            industry on the brink of collapse, in 1991 the government
            announced the liberalization of the cashew nut market,
            permitting private firms to once again buy and sell the
            nuts.  According to the author, the reform process has been
            characterized by confusion, uncertainty, and latent
            government controls and interventions, though the industry
            shows some signs of recovery.  Based on a recent survey, the
            author examines the liberalization process - including its
            implementation at the national and local levels, the private
            sector response to renewed trading opportunities, and the
            resultant patterns of competition, price discovery, and
            marketing channel formation. The liberalization experience
            in Tanzania's cashew nut industry offers interesting
            insights for other sub-Saharan African countries where
            uncertainty remains about the appropriate roles (if any) for
            marketing boards in liberalized markets, about the ability
            of cooperatives to compete in such markets, and about the
            ability of indigenous firms to take advantage of new trading
            opportunities. In Tanzania, neither the cooperatives nor the
            marketing board have fared well in the liberalized market.
            Although a relatively large number of private traders have
            recently entered into cashew buying and selling, successful
            entry into export marketing has proven viable only for a
            small number of companies. Their characteristics: medium to
            large in scale, diversified across commodities, involved in
            trading and agroindustry, not indigenous, and with strong
            financial and trading links abroad.