The Economist - UK - 09.14.2019

52 Middle East & Africa The EconomistSeptember 14th 2019

1

I

ndustrialisation, up close, is organ-

ised monotony. For eight hours a day

workers at a cashew factory in northern

Mozambique scoop nuts from their oily

shells. It is hard to talk above the thrum of

machines. The pay is a modest 4,600 met-

icais ($76) a month. But it is a job. There are

precious few good ones in Mozambique.

African countries are trying to climb the

industrial ladder, and the processing of ag-

ricultural commodities seems a natural

first step. By roasting coffee and spinning

cotton they hope to boost export earnings

and create jobs. For example, a fifth of the

retail price of cashews goes to primary pro-

cessors (see chart). By reviving its industry,

Mozambique has captured some of that

value. But its story also shows why indus-

trial policy is hard to get right.

In the 1960s Mozambique produced half

the world’s raw cashew nuts and processed

much of the crop domestically. Then the

industry was brought to its knees by a long

civil war. The knockout punch came in the

1990s, when the World Bank told the gov-

ernment to remove controls and cut taxes

on the export of raw nuts. Trading firms

shipped out cashews and processed them

elsewhere. Domestic processors shut down

and 8,000 jobs were lost. Mozambique’s ca-

shew industry became a cause célèbre for

anti-globalisation activists.

Then the government changed tack.

Since 2001 it has levied an export tax of

18-22% for raw nuts, and zero for processed

kernels. It also bans exports entirely during

the first months of the harvest. In practice,

many nuts are smuggled out, hidden in

crates of beans. Industry insiders say this

informal trade helps launder money for

politically connected cartels, which ship

heroin the other way. Even so, the export

tax has revived the processing industry.

With less competition from foreign buy-

ers, processors can squeeze farmers to sell

them nuts more cheaply. There are now 16

factories employing 17,000 people, which

process about half the cashews sold.

Without the export tax the domestic

processing industry would not survive,

says one factory-owner. After each season

he buys enough nuts to last for the full year

ahead, paid for with costly bank loans. His

competitors in India and Vietnam import

nuts from all over the world, so need inven-

tories of only 4-6 weeks.

Of course, the export tax hurts nut-

growers by pushing down the price of their

crop. Most cashews in Mozambique are

grown by smallholders. The government is

neglecting these 1.3m families to protect a

few thousand jobs in processing, says Car-

los Costa, a cashew expert in Maputo, the

capital. Farmers have little incentive to re-

place old trees or use anti-fungal sprays,

despite subsidies, and the quality of raw

nuts is one of the lowest in the world. Har-

vests have increased more slowly than in

other African countries.

This is a classic dilemma for agro-pro-

cessing: governments that want to protect

a nascent industry end up hurting much

larger numbers of farmers. Past World

Bank reforms came down on the side of the

nut-growers. And yet the trade-off is rarely

as simple as theory predicts, because farm-

ers connected to markets by rutted roads

are often at the mercy of a small number of

middlemen. “It is a Wild West,” says Daria

Gage of TechnoServe, a non-profit helping

to develop the cashew industry. “Usually

the farmers don’t win out.” The reforms of

the 1990s made the average cashew-grow-

ing household richer by just $5.30 a year.

The government is holding consulta-

tions about changes to the export tax. Ilidio

Bande, the head of the state-run cashew in-

stitute, harrumphs that the tax is “crucial”

to the survival of the industry. He points

out that nobody else is playing fair. India,

the biggest consumer and processor in the

world, raised its import duty on processed

kernels to 70% this year. Mozambique’s ex-

port tax is likely to stay.^7

NAMPULA

Nut firms are making a cracking

comeback. Farmers are being squeezed

Mozambique’s nutcrackers

Cashews and cash

Nut jobs

Source: Technoserve *Figures do not add up due to rounding

Mozambican cashews, share of supermarket

price ($15/kg) by stage of production*, 2015, %

Farmers

Traders

Processors

Importers

Roasters

and packers

Retailers

2442172023

W

aving fightingsticks, improvised

spears and shields, they advanced

like an army through the streets of central

Johannesburg, chanting and singing in

Zulu: “Foreigners must go back to where

they came from.” As they went they looted

and burned shops, attacked a mosque and

killed two people. The murders on Septem-

ber 8th came after more than a week of at-

tacks—mostly by South Africans against

migrants from other African countries—

that had already led to ten deaths.

This is not the first time South Africa

has experienced such horrors. Dozens of

people were killed in anti-foreigner riots in

2008 and 2015. But the most recent out-

break of violence shines a particularly

harsh light on the rabble-rousing of South

African politicians, some of whom have

blamed migrants for supposedly taking

jobs from locals and committing crimes.

Two years ago the deputy minister of

police complained in a press conference

that South Africans had allowed foreigners

to take over the centres of cities such as Jo-

hannesburg. “We fought for this land...we

cannot surrender it to the foreign nation-

als,” he said. Aaron Motsoaledi, then the

health minister but now in charge of home

affairs, last year blamed overcrowded hos-

pitals and the spread of infectious diseases

on sick foreigners.

Anti-foreigner sentiment is not con-

fined to politicians from the ruling African

National Congress. Herman Mashaba, who

was elected mayor of Johannesburg for the

opposition Democratic Alliance, regularly

scapegoats foreigners for crime in the city.

The killings are straining diplomatic,

trade and cultural relations between South

Africa and others on the continent. Nigeria

has started flights to evacuate hundreds of

its citizens affected by the violence. Some

Nigerian lawmakers have called for South

African firms operating in their country to

be nationalised. Rioters have attacked

South African-owned companies in Nige-

ria and prompted the closure of South Afri-

ca’s diplomatic outposts. Protests have also

been staged outside South African embas-

sies in Zambia and the Democratic Repub-

lic of Congo.

Some locals whisper that clandestine

forces are whipping up the violence in

South Africa for political ends. Perhaps, but

it is not unusual for riots to break out spon-

taneously. Youth unemployment is a stag-

gering 40%, so there are plenty of frustrat-

JOHANNESBURG

How politicians have fuelled

xenophobic violence in South Africa

Anti-foreigner attacks flare

Hate thy

neighbour