As Guinea Bissau’s processing industry has similar foundations but is in many ways more advanced, how does its industry compare with Senegal ‘s and what clues might it offer for the future development of Senegal ‘s processors? Guinea Bissau already exports processed cashew to Portugal . What strategies have the Guinean processors under Enterprise Works developed to export and can the same strategies be applied to the Casamance? Can Senegalese processors benefit from the Guineans or is there a danger that they will find themselves in direct competition?
Even after a brief glance in this country, one of the world’s poorest where revenues from cashew cultivation bring in over 80% of the country’s foreign exchange, the possible avenues for development of cashew processing in Senegal are clear. The processing sector is developing rapidly and is several steps ahead of Senegal’s. In Guinea Bissau there are currently 22 processing units in full operation, with another 30 either on temporary hiatus or waiting to open. At least three of the operational units – all which have opened up since September, 2002, employ between 50 and 500 people and produce enough high-quality kernels for export. At least one of the units is working with Handicapped International to obtain Fair Trade certification, and Agri-Bissau, the largest unit, has achieved organic certification in Lisbon . So far, at least 6 containers have been shipped to Portugal from Bissau in 2003.
Both Guinea Bissau and Senegal enjoy certain advantages and disadvantages in comparison with each other for the development of their processing industries. The Guineans’ first advantage is their more extensive cultivation and experience with the product. It is generally acknowledged that Guinean nuts are higher in quality than most nuts found in Senegal , and none of the Guinean processors interviewed for this paper expressed any anxiety about the provision of quantity and quality raw product for their year-round processing activities. Second, the opening of Guinea ‘s new export markets were made available largely through close relations with Portugal and Portuguese investment. Third, Guinean labour costs are on average lower than Senegal ‘s. As of July, 2003, most Guinean units pay their shellers 200 CFA/ kilo of kernels produced, and the majority of Casamance processors are paying 300 CFA. As a result, Guinean wholesale prices are lower than Senegalese.
However, the Senegalese enjoy some long-term advantages that help to explain the relatively rapid and smooth development of their embryonic processing industry. First, overall infrastructure is better in the Casamance than in Guinea Bissau. Many traders operating in Guinea base themselves in Ziguinchor because of improved political security and the availability of a reliable and efficient banking system – neither of which is available in Guinea . Second, Senegal’s domestic market is infinitely greater than Guinea Bissau’s, and for the time being that market has not been satisfied while demand within is increasing as more product is being made available. Third, as a more developed economy, fixed costs for Senegalese processors are sometimes a fraction of what they are in Guinea . Guineans have to import many raw materials such as steel sheeting from Portugal to make their processing equipment, whereas this material is cheaper and readily available in Senegal . As an example, Senegalese shelling machines made in Ziguinchor cost 30000 CFA, whereas they are twice that in Guinea Bissau. Nevertheless, this reality has not yet offset the price advantage Guinea Bissau enjoys in terms of lower overall labour costs.
6.1 Profile of Processors in Guinea Bissau
Following is a brief description of some of the most important processors, many which typify Guinea Bissau’s processing sector and each unique in its approach to that sector’s development:
Marcelino Gomes is a trader living in Bafata, Bissau ‘s second capital. He has renovated an old colonial-era depot to make a factory that has just begun operations. He has rooms for storing up to 100 tonnes of nuts, a large, airy room for processing and a streetfront room he plans on converting into a boutique/factory outlet. Starting with just 4 shelling machines and employing 20 men and women from Bafata, he wants to be cautious before upgrading operations. As with other processors in Bissau , he has neither problems finding employees from within the town, nor does he encounter any difficulties with the provision of raw nuts for production. As an elderly and respected long-time resident, he wants to provide employment for as many young people as possible in Bafata. He will sell on the domestic market for the time being, but with increased production he will even export. The size and planning of his unit is average to large for Bissau .
Less than 10 km outside of Bafata is Guinea Bissau’s largest agricultural plantation, some 1,500 hectares of fruit trees and sugarcane belonging to the family of Carlos Capé. Originally (and still in operation) the plantation served as the country’ principleagua ardente distillery for the domestic market, with hundreds of hectares of sugarcane. The plantation also produces mangoes, citrus and other fruit tree products for international sale. Capé began planting cashew after 1996 during the boom years, and as his plantations have grown and matured he has developed a production capacity of 70 tonnes of nuts, and this he predicts should increase to 100 tonnes by 2004. Until last year he sold all his nuts to Indian exporters in Bissau . With unpredictable prices in raw nuts he contacted Enterprise Works and has opened a large unit of 20 machines. He has stocked 50 tonnes from his fields and is buying from other farmers and traders in the area. His goal for this first year of operations is to process 125 tonnes of raw nuts, which he will package and sell wholesale to Portugal in two containers.
This unit, located in central Bissau near the port, started operations in summer, 2002. It has 16 shelling machines (which translates into 50 employees), the best locally-manufactured ovens, and ample storage grounds and has exported one container wholesale to Portugal and also sells limited amounts in Bissau, mostly splits and brokens not desired internationally. Until Carlos Capé opens up full operations this year, B&B Caju will be the single largest processor using all locally-manufactured machinery.
By far the most ambitious of all processors in Guinea Bissau is Agri-Bissau, a consortium managed by Daniel Nunes, a Portuguese investor, and co-financed by the World Bank with Agri-Bissau. Employing up to 500, the factory serves as a showcase for Guinea-Bissau’s cashew nut processing industry. In many ways it is not representative of the more grass-roots, small-scale units around the country. It has all the most modern, sophisticated machinery for drying, skinning, sorting and packaging. In contrast to E-Works-generated processing units, all machinery is imported and includes a vibrating drum to skin brokens and splits and a grinding machine to process low-quality kernels into cashew flour. Shelling and skinning is done manually by hundreds of young people from the capital, local villages and even Senegal . There is much demand for employment at Agri-Bissau, and many employees are housed on-grounds. All are fed and paid wages between 25,000 and 50,000 CFA. Starting operations in September, 2002, the factory is located on the grounds of the country’s single largest cashew plantation of 1,500 hectares producing nearly 1000 tonnes of raw nuts. Since March, 2003, Agri-Bissau has exported 6 containers to Portugal and wants to be able to ship one container/month in order to satisfy international demand. They have also obtained international organic certification for their nuts. , Agri-Bissau also plans to make a non-alcoholic cashew apple beverage to sell domestically.
Each of these units represents different avenues for development of Guinea Bissau’s processing industry and offer clues for Senegal ‘s processors. Clearly these processors, their ambitions and activities are at least two or three years ahead of those in Senegal . Agri-Bissau and Carlos Capé are unusual for both Guinea Bissau and Senegal in that they are large plantations and cannot be classed as small enterprises. They are self-contained, large-scale enterprises with available capital and good market connections. As plantation-cum-processing unit it has been easier for Agri-Bissau to obtain organic certification, which is likely to increase access to this niche market. In some cases their advancement could be interpreted as potentially limiting for the many smaller processors with less resources available.
There are concerns in value chains that as demand from end-users for highly specified products increases, market access shifts from smallholder producers to large-scale and/or multinational-owned plantations, a trend already visible in horticulture processing in Kenya (Dolan, Humphrey, Harris-Pascal, 1999). To preserve the integrity of small-scale processors, Enterprise Works has identified a mutually beneficial co-existence for both the large-scale processors and the numerous small units around the country. According to Enterprise Works, even the quantities Capé and Agri-Bissau produce do not warrant regularity to satisfy international market demand. With contracts to fill one container a month translating to 16 tonnes/shipment, neither Agri-Bissau nor Capé can always count on being able to fill a whole container. Sometimes Agri-Bissau produces 11 or 12 tonnes and could benefit from other processors “topping up” to complete the shipment of at least 16 tonnes. Their advantage based on quantity does not includequality of product: both small-scale processors and the larger plantation processors like Capé use the same system for shelling and processing and produce the same percentages of whole white nuts. International buyers are often fickle and demand quantity and regularity if they are to continue buying from a given client. In turn, Agri-Bissau and/or Capé can provide an outlet to lucrative international markets as a “central unit”. This “central unit” will have the important function of unifying quality through a unitary classification system. Foreign buyers will have much more confidence in a given country’s specific product if that country can produce a single standard. Where this is not possible through a government board or ministry as is the case in Guinea Bissau, private enterprise can fill this vacuum. Therefore, in a “win-win” situation it has been proposed that either of the large units offer smaller processors shipping opportunities to fill up their containers, minus the cost of classifying the nuts.
The central unit system has yet to coalesce, and which factory should serve as the central unit will be decided as market and production relations evolve. There may be more than one in the end, although this might not be desirable in terms of efficiency and coordination of national product. Much depends on who is the more dynamic producer and who is more willing or able to cooperate with other processors. As of June, 2003, Agri-Bissau is the single largest processor with the most resources at its disposal to perform this function, and they are working closely with Enterprise Works.
Such possibilities do not yet exist in the Casamance, although in theory all it takes is for one unit with the ability to produce the same levels as the larger Guinean factories to serve as this central unit. Elimane Drame already serves as president of the Casamance processors, and he and several other processors are in the process of expanding operations. Within the next year they might expand to a sufficient degree to form a “central unit” system similar to Guinea Bissau’s. It is unlikely for a unit like Agri-Bissau or Carlos Capé to emerge within that timeframe, although it is more plausible for large processors similar in size to B&B Caju to emerge. For this to happen soon, more investment is necessary. Indeed, recently there has even been investment from the Senegalese government: through close political connections a new processor based in Goudomp (Dept. Sedhiou) has obtained a large grant of 31,000,000 CFA (USD 17,000) to open three new units.
An equally realistic possibility is even simpler: the Casamance processors could link up with the Guineans. Carlos Capé has ties with farmers and traders even in Senegal , and has expressed initial interest in collaborating with some of the Casamance processors who are looking to buy processed whites wholesale to process into buttered and salted wholes for Senegalese consumption. This could easily develop into a relationship where the Senegalese processors are in some fashion included in the Guinean system for any possible international sales. Indeed, some of the Senegalese processors have alluded directly to this possibility, although for the time being they are more concerned with securing their portions of the still unsatisfied domestic Senegalese market.
Notwithstanding the prospects for development of the Casamance processing industry, proximity with Guinea Bissau may have consequences that could distort or even impede the development of the smaller units in Senegal . In August, 2003, Guinea Bissau’s production of kernels is not only much higher in quantity than Senegal ‘s, but it is also more cost efficient. Some Guinean producers like Carlos Capé are ready to sell their whole whites to Senegalese entrepreneurs like Elimane Drame for further value addition at lower wholesale prices than the smaller Senegalese units are willing and/or able to offer. If this trend continues, this could have serious implications for smaller producers and newer processing units in the Casamance.
One scenario is that Elimane Drame and other successful processors will be discouraged from primary processing and concentrate more on value addition in the form of roasting, salting and packaging for resale as distributors. This would be an encouraging sign of a maturing industry. They would not likely eliminate primary processing altogether because of concern for hedging their bets, preserving supply channels even if they are more expensive than others and the inability of Bissau suppliers to fulfill their demand.
However, instead of increasing their units as they have been planning, several processors might find it more lucrative to develop their businesses in less labour-intensive forms of value addition: distribution and marketing. This can be called upgrading, but is it at the cost of all the potential employment that primary processing provides?
In the long run, the single greatest potential challenge from Bissau might stem from the ability of the more sophisticated Guinean processors to invade the Senegalese market directly, bypassing even larger processors like Elimane Drame who wish to do business with Guinea Bissau. So far, neither Agri-Bissau nor Carlos Capé – the two largest processors in Guinea Bissau – have expressed much interest beyond primary processing for whole whites for export to markets in Europe . However, with his entrepreneurial skills and available capital, it is conceivable that once Capé’s enterprise gets underway he will seek further value addition by packaging locally and selling at more competitive prices in Senegalese markets currently held or prospected by Casamance processors.
In such a scenario, what could force Elimane Drame to buy wholesale from struggling new processors in the Casamance when he can procure these kernels cheaper in Guinea Bissau? Aside from the economic returns they seek for themselves, all the Casamance processors interviewed so far identify the creation of local employment as a prime motivation for opening their units. In particular, rural-based, cooperative processors in Senghalene and Affiniam are motivated primarily to process for the development of their rural communities, and their labour costs are considerably lower than those of the Ziguinchor processors. They will likely begin to compete with the Guineans, perhaps even lower their own returns along with maintaining lower labour costs in order to maintain the integrity and viability of their processing units. Some urban-based processors identify other potential strategies: hiring more women, who demand less money and, they claim, are harder workers than men. Drame is also confident that with time his and other processors’ employees will become more productive, and this will help lower production costs.
Finally, it is important to note that some of the machinery currently employed by Senegalese processors is not yet as advanced as the machinery used in Bissau . This includes high-volume steamers and shelling machines made from higher quality steel. Enterprise Works has also just introduced a pedal-less shelling machine to the Casamance processors that permits the shelling of all sizes of raw nuts with even less breakage. Once all this machinery is made available Senegalese processors’ productivity should increase substantially.
All the scenarios outlined above are based on conjecture, and it is still anyone’s guess as to how the markets will develop, and what form interaction between Senegalese and Guinean processors will take. Whatever the case, most people from Enterprise Works staff to Senegalese processors do not yet see the potential challenges offered by the Guinean processors as a threat to the development of processing in the Casamance. The Senegalese, while presently behind the Guineans in terms of quantities produced, enjoy numerous advantages that in the long run will give them various avenues to develop their processing industry.
As far as invading the larger Senegalese domestic market, Moise Bassene points out that the Guineans are at a natural disadvantage in terms of access. Their mistake, he claims, was to immediately seek far-away export markets in Portugal instead of exploring markets nearby. Therefore, he argues, the larger processors like Agri-Bissau and Carlos Capé have organised their entire businesses around exporting large quantities wholesale to Portugal . The Senegalese processors have been rapidly developing their contacts in Dakar , Thies and The Gambia. The latter is an easy market to access and offers lucrative outlets owing to a large tourist industry. By “starting small” and building up over a domestic base, the Senegalese will have a surer footing in this industry and be immune to unpredictable fluctuations in demand that characterise distant export markets. Over the long run they will be much more familiar with demand and sales channels. They will cultivate closer relations with their distributors or even develop their own distribution. One processor based in the village of Fanda is in the process of moving to Dakar to distribute his product, leaving the processing unit to be managed by one of his employees.
Mr. Bassene’s assertion has validity as far as Guineans accessing Senegal is concerned but fails to take into account that many smaller Guinean processors have also opened markets in Conakry, where they enjoy geographic and cultural proximity. They are already selling in Cape Verde , which has a huge tourism industry and the highest per capita GNP in West Africa . Perhaps this serves to illustrate why the Guineans and the Senegalese industries, both in their infancy, have been evolving in different ways. Whereas the Guineans have little domestic markets to speak of and have been forced to seek export markets from almost the beginning, most of the Senegalese processors are not yet in any rush to export. The Guineans enjoy seemingly infinite quantities of raw nut production that facilitate and encourage large-scale processing. The Senegalese have to work harder at marketing smaller quantities and have lower expectations than Guinean exporters like B&B Caju or Agri-Bissau. This could be an asset to their advantage in the long run.
Thus, it is conceivable that several Senegalese processors will develop a more extensive distribution network within Senegal rather than concentrate on primary processing. At least three are already doing so. Gilbert Pouho, the rural processor in the village of Fanda , put it thus:
“You cannot be a processor and a good marketer at the same time. I am a better marketer. Living in the village is difficult, I am used to more urban settings and enjoy many good contacts in the Dakar expatriate community and will develop my business from there.”
Over time, this will help to consolidate the Senegalese processing industry while being a useful link to the Guinean processors as well.
To conclude this section, whichever way the Casamance processors develop, it is hard to imagine that contacts with Guinean processors will not evolve, and hopefully into some form of cooperation. There is much both can learn from each other.