A STUDY OF THE TERMS OF TRADE AMONG FARMERS , INVESTORS AND TRADERS IN UGANDA

FOR ACHIEVING INCLUSIVE AGRICULTURAL

DEVELOPMENT

ByMwambutsya Ndebesa

Email: ndebesam@yahoo.com

Introduction

The presentation will cover the following: Profile of the Agricultural sector in Uganda The policy and legal framework of the sector Identifying stakeholders in the value chain Agricultural sector challenges Agricultural Sector Actor-relations Conclusion and Recommendations

PROFILE OF AGRICULTURE SECTOR IN UGANDA

Share of Agriculture to GDP Share of agriculture to total GDP in Uganda has been

declining since 2001 as shown in the figure below Has declined from 50% in the 1990’s to 23.7% in 2008/09

and yet it is where 80% of the population is employed. Agriculture as a share of total exports is falling compared

to other sectors as shown in the figure below.

PROFILE OF AGRICULTURE SECTOR IN UGANDA

Share of Agriculture to GDP Share of agriculture to total GDP in Uganda has been

declining since 2001 as shown in the figure below Has declined from 50% in the 1990’s to 23.7% in 2008/09

and yet it is where 80% of the population is employed. Agriculture as a share of total exports is falling compared

to other sectors as shown in the figure below.

Cont’dAgricultural Contribution to GDP in Uganda

Data Source: UNCTAD Statistical Handbook (2010)

Cont’d Percentage share of Agriculture in Uganda’s Exports 1995-2010

1995 2005 2009 20100

10

20

30

40

50

60

70

80

90

100

90.4

68.7 66.4

45

9.6

31.3 33.6

55

Agriculture Others

Data Source: UNCTAD Statistical Handbook (2010)

POLICY AND LEGAL FRAMEWORK

NDP is the overall guiding national plan Country agricultural plan (CAP) launched in 2010 SME Development policy of 2009 Plan for modernization of Agriculture (PMA) of 2000 National Agricultural Advisory Development Services

launched in 2005 National Trade policy (NTP) and national export strategy of

2007. Rural development strategy (RDS) of 2006 Prosperity for all (PFA) of 2006 Agricultural sectors development strategy and investment

plan 2010/11- 2014/2015. The national trade sector development plan (NTSDP

2008/09-2012)

INTERNATIONAL TREATIES AND AGREEMENTS

The various WTO Agreements the UN Millennium Development Goals (MDGs) the African Growth opportunity Act of US, everything but Arms initiative of EU, the cotonun Agreement between EU and African caribbean and pacific states , bilateral investment agreement with countries such as China etc COMESA and EAC treaties.

OBJECTIVES OF THE STUDY

Examining the relationships existing between the agriculture policy makers, farmers, investors and traders as well as their role/contribution to the policy formulation and implementation; 

Identifying both the positive and negative elements in the relevant policy, institutional and legal framework

To encourage and promote dialogue among farmers, investors, traders and policy makers through inclusive research methodology; and

Generating a set of practical recommendations directed at all relevant stakeholders

METHODOLOGY

The methodology placed emphasis on creating synergies and ensuring domestic buy-in and had the following key elements:

Inclusivity: involvement of relevant national stakeholders through regular reporting and feedback to members of the country FEAD National Reference Group (FNRG);

Cross-fertilization of ideas and experiences: regular exchanges among country researchers with international experts through CUTS GRC and members of the FEAD Project Advisory Committee (PAC); and

Grassroots-based: collection of primary data through field visits, surveys and focussed group discussions.

Literature search to expand and annotate research questions;

Data collection, fact finding and testing of hypotheses through FNRG consultations. Field visits, targeted surveys, and focussed group discussions;

Consultation with the FEAD PAC and CUTS research team.

AGRICULTURAL SYSTEMS IN UGANDA

Livestock Farming: The production systems form a continuum ranging from ranching, semi-nomadic pastoralism to stall-feeding only or zero-grazing systems

Smallholder crop agriculture: In Uganda the predominant form of farming is smallholder agriculture. This is practiced on a subsistence basis with little commercial consideration. The other type of small holder farmers are engaged in cash crop production.

Plantation Farming: Uganda also has some large-scale farming mainly in the cash crops of tea, sugarcane and of late flowers. This is mainly practiced by national and foreign entrepreneurs.

FARMERS CHARACTERISTICS AND ROLES Large-scale commercial and generally plantation

farmers. These generally operate/cultivate 15 ha of land and above, use advanced technology and have reasonable control over their marketing

 Small- scale commercial farmers. These normally have 5 to 15 ha under cultivation, produce to sell, and have reasonable control over their produce

Semi-commercial farmers. These have small land holdings than the small scale commercial farmers, use minimum inputs and have limited control over marketing

Subsistence plus farmers. These generally operate less than 2 ha, mainly produce for home consumption, rarely hire labour and have little or no control over marketing.

STAKEHOLDERS IN THE VALUE CHAIN

Private Sector Stakeholders: There are a number of Private Sector Stakeholders who include; 1) Farmers 2) Traders both rural and urban who include; brokers or agents, retailers and whole sellers 3) Transporters 4) Packaging Material Suppliers 5) Private Extension Service Suppliers 6) Processors and millers 7) Exporters 8) Agricultural Input supplies etc.

Private Sector and Advocacy Organisations: (PSFU), (UNCCI), (UMA), (UNFFE) etc. Examples of CSOs are; (CSWGT), FRA), DENIVA), (SEATINI), Oxfam Uganda, VDCO etc.

Community Based Organisations: At the grassroots level there are a number of Farmer Group Organisations and marketing cooperatives also engaged in promoting farmers’ rights and organise production and marketing.

Institutions: Schools, Hospitals, Prisons, WFP who buy produce.

AGRICULTURAL SECTOR CHALLENGES 

Uganda’s agriculture sector experiences numerous challenges. The major ones are;

Unreliable and expensive power which increases the cost of production and leads to high rates of spoilage

Very low-levels of farm mechanization. Less than 1 % of Uganda’s farmers use tractors for ploughing land and hardly use other agricultural machinery. The rest (Over 98% depend on the hand hoe and oxen plough

Foot and mouth disease in livestock which limits export capacity

Crop diseases that have greatly affected agricultural productivity especially for coffee and banana yields

Seasonal fluctuations in the supply and quality of feed resources and water for livestock and crops

Lack of quality and standards awareness. High cost of inputs, equipment and packaging materials.

Cont’d Limited value-addition Small holder farmers are weakly organised into

cooperatives, unions and Farmers associations. Lack of clear land tenure policy which occasions land

fragmentation and insecurity over land especially for small holders.

Lack of trade finance Inadequate cold-chain including refrigerated trucks, storage

facilities with cold rooms etc. Lack of market information Lack of or limited market access Low and unstable prices especially paid to the farmers Weak or absence of market linkages among farmers

traders and processors Poor branding and ineffective marketing and packaging Limited capacity to negotiate better prices and

international issues

FARMER, TRADERS, INVESTOR RELATIONS

The positive functions of intermediaries Provide Agricultural Financing, especially market finance,

market information, storage including cold storage, packaging materials, transport and other services etc.

Plantation owners/processors provide production funding to contract farmers as well as extension services and value addition

Provide education on quality and hygiene standards as well as distribution of inputs such as improved seeds, breeds, animal drugs, chemicals, machinery, feeds, vaccines etc

The intermediaries balance economies o f large scale which is necessary among dispersed farmers

Cont.

Intermediaries access international market on behalf of farmers including the use of E-commerce to link farmers to the global market

Negative Relations The farmers generally believe the other actors in the value

chain under pay them The farmers are usually the price takers and not price

makers Some unscrupulous input traders sell to farmers

adulterated or fake drugs, vaccines, seeds, feeds, substandard animal breeds and even counterfeit machinery

Some buyers use fake weighing scales and lie to the farmers about market prices

Cont’d

Produce buyers sometimes advance credit to farmers at very high interests taking advantage of the immediate financial needs of the farmers

On the other hand farmers also adulterate their produce, do not observe hygiene and quality standards and these practices make traders and processors incur business loses

Some contract farmers short-change their creditors and breach the contract by selling to other buyers who never invested capital into crop farming

Benefits of Farmer-Stakeholder Linkages

Access to produce market and market information

Access to input markets Access to credit markets Access to services Promotion of bargaining skills Promotion of networks Acquisition of agronomic skills and ideas

Negative Aspects of Linking/Networks

Can be abused by the powerful through the patronage practice

Linking may prevent evolution of accountability practices

May lead to “gate-keepers” syndrome May stifle organizational development Externally induced associations may be a

site of corruption

CONCLUSION The overarching aim of this study was to assess the

relationship between farmers and other actors in the VC. Furthermore it was to find ways and means of how to

balance needs of each of the actors in an inclusive manner The study established that there are positive and negative

aspects in their relationships. Farmers themselves are not empowered and have limited

advocacy skills capacity and information to struggle for and achieve equitable terms of trade. 

The advocacy institutions such as the Uganda Farmers Federation have limited scope and capacity challenges.

The farmers also complained about representativity challenges

Some large scale contract farmers and investors are inclined towards supporting farmers to improve farm level productivity

However the relationship between traders and farmers is largely characterised by high levels of mistrust and near antagonism.

RECOMMENDATIONS Focus on value chain development particularly shortening

the VC Promotion of autonomous (not co-opted and politicised)

farmer groups and co- operatives. Building a symbiotic relationship through formal linkages

between the small holders and the market leaders  Initiatives towards exploiting the full potential in terms of

productivity and competitiveness of the smallholder agricultural sector

Proactive commercialisation of agriculture sector produce Bulking production and marketing to attain economies of

scale Assistance with certification schemes Provision of more and transparent market information. There is also a case for establishing Market Linkage Centres (MLCs) Establish formal , effective , and inclusive interactive institutional

mechanisms where all the stakeholders (traders, farmers, processors) commit themselves to addressing equity issues

Cont’d

Farmer education on effective marketing should be done frequently through Agricultural TV and Radio and print media programmes

 Improve rural marketing infrastructure to enable farmers reach final consumer markets directly where possible or at least reduce on the number of middlemen

Improving market conditions through enforceable regulations, contracts and legislations.

Trade advocacy should improve its goals and shift from over prioritizing external trade policy and prioritize domestic advocacy as well

Agricultural Marketing research should be prioritized. Educate farmers on the need to observe proper and

hygiene standards as these affect the market.

Cont’d

Reduce imbalance in market power by providing farmers access to services.

The high level fora such as the Presidential Investors Round Table should address farmers concerns.

There is need to promote a non paternalistic and formal interaction sanctioned by law or an accord or MoU.

Central as well as local/municipal governments should construct whole sale markets and stores near urban centres

Educate farmers on the need to observe proper and hygiene standards as these affect the market.

Provision of transparent market information should be done Reduce imbalance in market power by providing farmers

access to marketing services Farmers should be empowered to engage power structures

THANK YOU