Public sector dominated agricultural economies in sub-Saharan Africa (SSA), especially those like Tanzania, have taken a U-turn. Structural adjustment programmes (SAPs) with their market-determined prices and resource allocation, economic liberalization, and privatization have all addressed prevalent economic distortions and inefficiency. Exchange rate adjustments and reduced intermediary profits, for example, have increased agricultural producer prices to 60%-80% of world market prices. Additional agricultural reforms should improve efficiency in resource use, smallholder incomes and food security. The study examines the impact of macroeconomic changes and privatization on micro level cashew nut activities in Southeast Tanzania. We examine the privatization of cashew production, especially input supply and marketing through private sector channels, and smallholder welfare gains/losses. Various economic, investment, banking and financial liberalization changes and strategies have been introduced in the 1990s to create an enabling environment for public sector reform and privatization (Sarris and van der Brink, 1993; Ndulu et al., 1995). The Parastatal Sector Reform Commission’s (PSRC) Parastatal Privatization and Reform Master Plan (1993) for parastatal divestiture is being implemented. The privatization of public sector cashew concerns affects the welfare of smallholder producers. The transformation of marketing boards into crop authorities in 1972/73, along with the dissolution of cooperative unions in 1976 and their reinstatement in 1984, ending both the compulsory single channel marketing system and uniform commodity pricing shook the crop production and marketing system. A number of cooperatives and agricultural parastatals collapsed. The procurement, processing and export of cashews by the crop authorities faced mammoth operating costs, excessive overheads and outright corruption. This put pressure on financial institutions, but also depressed producer prices.

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