Wednesday, December 14, 2016
By Mfonobong Nsehe
Cashews are a major export crop for Tanzania and a significant source of income for many small farmers.
The East African country produces about 200,000 tons of cashews a year and is considered one of the best quality cashews in the world. But value addition in the form of processing of raw cashew and capacity building in this sector is wanting. The lack of local processors in Tanzania means there are very few jobs created from this valuable commodity; cashews are an important foreign exchange earner for the country.
Fahad Awadh, an ambitious 29-year old entrepreneur from Tanzania, recently moved back home from Canada to set up a cashew processing facility in Tanzania in an effort to bring international standards and traceability to the cashew nuts. He is the founder of YYTZ Agro-Processing, a cashew processing company that is adding value locally while creating jobs and boosting the income of farmers and the community as a whole. The company’s flagship processing facility in Zanzibar has an installed capacity of 2,500 Tons per annum.
YYTZ Agro-Processing recently raised a $500,000 investment from the Africa Enterprise Challenge Fund to establish another processing facility in Mtwara, southeastern Tanzania.
I recently chatted with him in Arusha where he recounted his journey and told me that he plans to change the way cashews are being processed in Tanzania.
What’s your educational and professional background?
I am a young Tanzanian entrepreneur. Growing up, I attended St. Christopher’s, a private British school in Bahrain, where we lived for 8 years. We later moved to Canada when I was 10. There, I was accepted to an International Business and Technology program at the age of 11. It was a foundational experience that instilled and nurtured in me an entrepreneurial spirit. I started learning about Accounting, Business Marketing and Entrepreneurial studies from a young age. By the age of 12 I had created a business with a product and was selling at the District School Board.
I went on to study Business Marketing at York University. While at university I started making t-shirts with two friends, Lavado Stubbs and Momarr Taal (recently Forbes Africa 30 under 30). We called it Malyka Clothing, which means Angel in Swahili. It was all about positive, powerful messages and it became popular in Toronto. We were distributing in Canada, The Bahamas and Gambia. I traveled to Bangladesh and secured a manufacturing contract to produce our pieces from the cut & sew stage. This gave us more creative control over the product and allowed us to expand our line.
I understand you’ve been in Canada for a while; what were you doing there and what informed your decision to return to Tanzania and venture into cashew processing?
Yes, I grew up and lived in Canada for the majority of my former years. I recently returned to Tanzania with the intention to invest. It was always a dream of mine to come home and set up a business. After a visit to Tanzania in late 2012, I decided that I would explore opportunities in processing and value-addition. Tanzania is very resource rich country, but like many in Africa it lacks local value addition. I saw this as an opportunity. I spent a lot of time travelling around rural Tanzania, meeting with farmers and understanding the cashew sector. I practice a principle I learned from The Toyota Motor Corporation called genchi genbutsu; this means going to the source and seeing for your self. This thorough research helped me make informed decisions about our business. After the extensive research into the cashew nut sector, I concluded there was a real need for processing and value addition.
Tanzania is the fourth/fifth largest producer of cashews in the world, yet we were/are exporting 80% of our crop raw. Further more our crop is being processed in other countries and then re-exported to the developed markets.
Walk me through your startup story. When exactly did you launch the factory; how did you set up, and who provided the funds for you to begin?
After deciding to invest, I partnered with my father, who was retiring after a career as a commercial pilot. I developed a thorough business plan. We decided to invest in a modern processing plant that would utilize automated equipment. This would make our operation more efficient and give us economies of scale. We travelled to Vietnam, which is the largest cashew exporter in the world. The Vietnamese have been able to achieve tremendous growth by advancing the mechanization of cashew processing. We visited one of the top-five largest factories and studied their operations, learning best practices. We purchased our cashew-specific equipment from reputable Vietnamese manufacturers.
At the same time the commercial viability of our project depended on having an export market. I began researching and cold-emailing companies in Europe and North America. My goal was to get interest from a buyer. This would help us when we later needed to access financing. I was able to secure a buyer in Netherlands. They came to visit us this past September, at which time we finalized our export contract. We are now in the final stages of installing our equipment and beginning production in our Zanzibar factory.
Cashew nut processing involves many stages before getting the final cashew kernel that most people know. It is hardly recognizable in its raw form. The outer shell is the most difficult to remove. The process starts with the steaming of the raw cashew nut, this softens the outer shell to make it easier to cut. The next step is cutting the shell, but without damaging the kernel inside. Now when the kernel is removed from the shell, it is dried to bring down the moisture. The kernel still has an outer testa, which needs to be peeled. The peeling is now done by machine, with any un-peeled kernels being finished by hand. After peeling the cashews are ready to be graded. Grading is done by size and color. There are 26 different grades, ranging from white whole pieces to broken small pieces, the latter being used in desserts and confectionery. The most common cashews are WW320, this is Whole White 320, which means 320 kernels in a pound. After grading the cashews are flushed with nitrogen and vacuum packed in 50lb or 25lb cartons and exported to Europe and North America.
You recently raised $500,000 from the AECF Africa Challenge fund to establish a new processing factory. How do you intend to deploy these new funds?
We recently won funding of $500,000 from the Africa Enterprise Challenge Fund. We have been working with cashew farmer groups in the Mtwara region to help them add value to their own crop and earn more income. We will be using these funds to build a Cashew Farmer Processing Centre. Our facility will have modern equipment and adequate storage facilities. Farmers will be assured of a market, as we will be the sole off-takers. We will purchase the semi-processed cashews and finish the processing in our Zanzibar factory. We will be providing financial literacy and business skills training for our farmer groups, as well as food safety training. By integrating them in the cashew value chain, the farmers will be able to earn more from their crop. By empowering farmers we can help to alleviate poverty in rural Tanzania.
Where are your major markets for your cashews?
Our major export market is Europe, we currently have an export contract with a company in Netherlands. Netherlands is the main importer of cashews into Europe, accounting for 42% of imports. We have also received interest from other companies in Europe. Global demand for cashews is growing, European imports of cashew kernels is up 12% p.a. over the last 4 years. Tanzanian cashews are considered amongst the best in the world, which gives us an added advantage in the market.
What’s your fundamental objective in cashew processing?
Our fundamental objective in cashew processing is to create value in the Tanzanian cashew industry. We are working with cashew farmer groups to ensure that they become part of the cashew value chain. We have plans to add more value to the cashews, roasting, flavoring and retail packing. We are focused on running an efficient operation with an emphasis on quality and food safety. We have built our factory and designed our processes to meet and exceed international food safety standards. Food safety is an important aspect of the cashew sector that is being emphasized by discerning buyers.
Is your cashew processing facility currently running at optimization, and how much cashews are you producing annually?
Our cashew Zanzibar cashew factory will start production this season. Our installed capacity is 2,500 Tons per annum. We are planning to utilize our full capacity by the second year, with plans to add additional equipment to grow our capacity. Our goal is to reach 10,000 Tons per annum by 2021.
You are an avid reader. What are some of the lessons you have picked up that have helped you in your business?
Yes, I am an avid reader. I enjoy reading business books that profile successful entrepreneurs and businesses. I have taken many lessons from ‘Good to Great’ by Jim Collins, one of the most important being about getting the right people. Dave Packard, founder of Hewlett Packard said, “No company can consistently grow revenues faster than its ability to consistently get the right people to grow those revenues.” This highlights the importance of having a great team and recruiting talented individuals in your organization. I have also applied many principles of lean manufacturing and continuous improvement that I have learned from Toyota Motor Corporation.
I often seek advice and mentorship from successful entrepreneurs. I am always learning from their experiences and internalizing the lessons to apply them in my own business. I have set up an advisory board that includes an expert with 25 years experience in the cashew sector, whose experience and insights have been invaluable to us.
How do you deal with the challenges and setbacks you may have faced as an entrepreneur?
As an entrepreneur I have had my fair share of challenges, without them I wouldn’t be where I am today. I am a firm believer in God, none of this would have been possible without him. In the last year, I have become a student of ancient Stoic philosophy, which teaches that within every obstacle and challenge there is an opportunity. In practice, I have learned to acknowledge there will always be challenges and setbacks. I have now prepared myself to learn from them and use them to my advantage. A great book about Stoic philosophy is ‘The Obstacle is the Way,’ by Ryan Holiday. By having the right mentality when faced with seemingly insurmountable obstacles, you can remain objective and choose to see the good in a situation. It’s a philosophy that has been practiced by many great leaders, including John D. Rockefeller, Steve Jobs, James Stockdale and Marcus Aurelius. As Marcus Aurelius put it nearly 2000 years ago, “The impediment to action advances action. What stands in the way becomes the way.”
Another thing that helps me in my day-to-day is practicing gratitude and mindfulness. I practice meditation every morning, if even for just 10 minutes. I always take time to reflect and align my focus with my goals.