Tanzania’s government sent in the army last week, not to repel an invading force nor crush a terrorist threat. The army’s instructions were clear: buy cashew nuts.
The intervention, which sent global cashew prices higher, was intended to resolve a dispute between buyers of the unprocessed nut and farmers. John Magufuli, Tanzania’s president and an African Hugo Chávez in the making, was reacting to a fall in prices. Because of a bumper west African harvest, raw cashew prices had fallen across the world. Tanzania, the seventh-largest producer, is a swing supplier of the chattering classes’ favourite cocktail snack. After requisitioning the east African country’s entire supply, prices rose.
This is not the first time Mr Magufuli has intervened in global commodity markets. Last year, he accused Acacia Mining — majority owned by Barrick Gold — of massively understating the mineral levels in its gold and copper exports. Acacia had operated in the country for years, made good profits and paid its executives handsomely, Mr Magufuli noted. But it had somehow avoided paying much tax in Tanzania.
In retaliation, he banned exports of unrefined gold and slapped Acacia with back taxes and fines of an implausible $190bn. Acacia vigorously denies accusations of wrongdoing, though Barrick did agree to make a $300m “good faith” payment and hand over a 16 per cent stake in each of Acacia’s three Tanzanian mines.
Mr Magufuli is a thoroughly nasty man. His policies on freedom of expression, teenage pregnancy and gay rights are reactionary, to put it mildly. Like Chavez, the late Venezuelan leader, his resource nationalism is likely to end badly. Companies will hardly be lining up to invest in Tanzania.
But like populist leaders the world over, Mr Magufuli is tapping into something real. Tanzanian farmers do indeed receive far too little for their cashew nuts. One only has to compare the lives of the people who eat the delicacy with those who produce them, many of whom cannot afford to send their children to school or pay for rudimentary healthcare. That is true of those who produce most agricultural commodities in poor countries, from coffee and tea to cocoa and vanilla.
What is true of soft commodities is even truer of hard ones, such as gold, copper, diamonds and cobalt. In much of Africa, the miners who dig up these materials live short and brutish lives. They are often threatened by violence and environmental degradation. Meanwhile, those who benefit — which includes anyone with a nice wedding ring, an iPhone or indoor plumbing — live longer and more comfortably.
The commodities on which we rely for our modern existence are too often the result of collusion between unscrupulous businesses and unsavoury politicians. People from the countries that produce that wealth — whether the Democratic Republic of Congo or Tanzania — do not share widely in their national patrimony.
There is another lens through which to look at the issue: that of national accounts. Africa — together with many other nominally poor countries from Papua New Guinea to Peru — plays a much larger role in the global economy than either output or trade figures suggest. Although Africans make up 16 per cent of the world’s population, in conventional national accounting terms they contribute less than 3 per cent of the world’s nominal gross domestic product.
Yet this is vastly to underestimate Africa’s true participation in the global economy. GDP measures value-added. But Africa exports most of its commodities — including in-shell cashew nuts — in raw form and at prices heavily influenced by powerful companies armed with tax experts, transfer-pricing wizards and lawyers. Most of the value-added occurs outside the continent. John Ashbourne of Capital Economics calculates that Bangladesh earns as much from exporting clothes as does all of Africa exporting precious metals.
That staggering anomaly is exacerbated by the fact that, on the African side of the table, negotiators are often on the take themselves. While Mr Magufuli’s approach is most unlikely to work, his basic instinct in trying to redress the balance is correct. Unfortunately for Tanzanians, grandstanding is not the answer. Only when nations install the physical and, especially, institutional infrastructure to extract more value at home will Africans benefit.
For centuries, the world’s most advanced economies used African slaves to pick their cotton and harvest their sugar in places such as the US and the Caribbean. Slavery has been banned. The west would now prefer to leave these workers where they are to produce what the world needs. The power relations remain essentially unchanged.
