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

FOR FOR ACHIEVING INCLUSIVE AGRICULTURAL ACHIEVING INCLUSIVE AGRICULTURAL

DEVELOPMENT DEVELOPMENT

ByByMwambutsya Ndebesa Mwambutsya Ndebesa

Email: ndebesam@yahoo.comEmail: ndebesam@yahoo.com

PROFILE OF AGRICULTURE SECTOR IN PROFILE OF AGRICULTURE SECTOR IN UGANDA UGANDA

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

declining since 2001 as shown in the figure belowdeclining since 2001 as shown in the figure below Has declined from 50% in the 1990’s to 23.7% in 2008/09 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. and yet it is where 80% of the population is employed. Agriculture as a share of total exports is falling compared Agriculture as a share of total exports is falling compared

to other sectors as shown in the figure below.to other sectors as shown in the figure below.

Cont’dCont’dAgricultural Contribution to GDP in Uganda

Data Source: UNCTAD Statistical Handbook (2010)

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

Data Source: UNCTAD Statistical Handbook (2010)

POLICY AND LEGAL FRAMEWORKPOLICY AND LEGAL FRAMEWORK

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

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

2007.2007. Rural development strategy (RDS) of 2006Rural development strategy (RDS) of 2006 Prosperity for all (PFA) of 2006Prosperity for all (PFA) of 2006 Agricultural sectors development strategy and investment Agricultural sectors development strategy and investment

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

2008/09-2012)2008/09-2012)

INTERNATIONAL TREATIES AND INTERNATIONAL TREATIES AND AGREEMENTS AGREEMENTS

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

OBJECTIVES OF THE STUDY OBJECTIVES OF THE STUDY

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

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

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

  Generating a set of practical recommendations directed at Generating a set of practical recommendations directed at all relevant stakeholders all relevant stakeholders

METHODOLOGY METHODOLOGY

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

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

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

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

Literature search to expand and annotate research Literature search to expand and annotate research questions; questions;

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

Consultation with the FEAD PAC and CUTS research team.Consultation with the FEAD PAC and CUTS research team.

AGRICULTURAL SYSTEMS IN UGANDA AGRICULTURAL SYSTEMS IN UGANDA

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

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

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

FARMERS CHARACTERISTICS AND ROLESFARMERS CHARACTERISTICS AND ROLES Large-scale commercial and generally plantation Large-scale commercial and generally plantation

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

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

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

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

STAKEHOLDERS IN THE VALUE CHAINSTAKEHOLDERS IN THE VALUE CHAIN Private Sector Stakeholders: Private Sector Stakeholders: There are a number of Private Sector There are a number of Private Sector

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

Advocacy non-state actors: Advocacy non-state actors: The other non state stakeholders in the The other non state stakeholders in the agricultural sector and who have the potential to transform the sector agricultural sector and who have the potential to transform the sector and ensure equity are; Private sector organisations and civil society and ensure equity are; Private sector organisations and civil society organisations engaged in advocacy work. organisations engaged in advocacy work.

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

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

AGRICULTURAL SECTOR CHALLENGESAGRICULTURAL SECTOR CHALLENGES  

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

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

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

Foot and mouth disease in livestock which limits export Foot and mouth disease in livestock which limits export capacitycapacity

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

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

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

Cont’dCont’d Limited value-addition Limited value-addition Small holder farmers are not well organized into Small holder farmers are not well organized into

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

fragmentation and insecurity over land especially for small fragmentation and insecurity over land especially for small holders.holders.

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

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

traders and processorstraders and processors Poor branding and ineffective marketing and packagingPoor branding and ineffective marketing and packaging Limited capacity to negotiate international issuesLimited capacity to negotiate international issues

FARMER, TRADERS, INVESTOR RELATIONSFARMER, TRADERS, INVESTOR RELATIONS

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

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

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

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

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

Cont.Cont.Negative RelationsNegative Relations Intermediaries access international market on behalf of Intermediaries access international market on behalf of

farmers including the use of E-commerce to link farmers to farmers including the use of E-commerce to link farmers to the global marketthe global market

Positive relations Positive relations The farmers generally believe the other actors in the value The farmers generally believe the other actors in the value

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

makersmakers Some unscrupulous input traders sell to farmers Some unscrupulous input traders sell to farmers

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

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

Cont’dCont’d

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

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

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

CONCLUSIONCONCLUSION The overarching aim of this study was to assess the relationship The overarching aim of this study was to assess the relationship

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

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

their relationships.their relationships. Farmers themselves are not empowered and have limited advocacy Farmers themselves are not empowered and have limited advocacy

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

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

The farmers also complained that representativity challengesThe farmers also complained that representativity challenges Some large scale contract farmers and investors are inclined towards Some large scale contract farmers and investors are inclined towards

supporting farmers to improve farm level productivity supporting farmers to improve farm level productivity However the relationship between traders and farmers is largely However the relationship between traders and farmers is largely

characterised by high levels of mistrust and near antagonism. characterised by high levels of mistrust and near antagonism.

RECOMMENDATIONS RECOMMENDATIONS Focus on value chain development particularly shortening Focus on value chain development particularly shortening

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

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

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

productivity and competitiveness of the smallholder productivity and competitiveness of the smallholder agricultural sector agricultural sector

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

scalescale Assistance with certification schemesAssistance with certification schemes Provision of more and transparent market information.Provision of more and transparent market information. There is also a case for establishing Market Linkage Centres (MLCs) There is also a case for establishing Market Linkage Centres (MLCs) Formation of an effective forum(s) where all the stakeholders Formation of an effective forum(s) where all the stakeholders

(traders, farmers, processors) commit themselves to addressing (traders, farmers, processors) commit themselves to addressing equity issuesequity issues

Cont’dCont’d

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

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

Improving market conditions through enforceable Improving market conditions through enforceable regulations, contracts and legislations. regulations, contracts and legislations.

Trade advocacy should improve its goals and shift from Trade advocacy should improve its goals and shift from over prioritizing external trade policy. over prioritizing external trade policy.

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

hygiene standards as these affect the market.hygiene standards as these affect the market.

Cont’dCont’d

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

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

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

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

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

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

access to marketing servicesaccess to marketing services

THANK YOU THANK YOU