Sunday, June 14, 2009

Uganda to spend more on agriculture

By MALINGHA DOYA - The East African - June 8 2009

Uganda is moving to boost its agricultural capacity to exploit markets beyond the region, and sustain the sector’s contribution to the exchequer in the medium term.

Blueprints that inform the budget speech to be read by newly appointed Finance Minister Syda Bbumba this week propose an increase in funding to the sector by over 20 per cent.

Although the transport sector is expected to keep the biggest share of the budget from this fiscal year — with an increase in 2009/2010 — significant expenditure here is linked to agriculture.

The expectation is that agricultural exports will prove a critical foreign-exchange earner in the efforts to close the budget deficit in the medium term even as the country nurses long-term ambitions of an industrial and service-based economy driven by revenues from the newly discovered oil deposits.

Sources said the case for investing in agricultural standards is boosted by anticipated declines in regional exports, given that a significant portion of food produce is currently exported to neighbours like Kenya, Southern Sudan, DR Congo, Rwanda and Tanzania.

For instance, Kenya’s social and political stability has never been so much in question, while its neighbors invariably feel the pinch when trade is disrupted, as it was during the post-election violence last year.

Secondly, within three years, exports of fresh foods such as potatoes and beans to some markets like Southern Sudan is expected to decline dramatically because farmers in that country are preparing fields to plant crops now that the civil war is over.

For various reasons, the countries in the region have yet to enter into double taxation agreements, making regional trade more expensive tax-wise than international trade with countries in Europe that East African governments have such agreements with.

It is also known that although markets like the United States, Europe and Asia have to a certain extent opened up, Uganda’s agricultural production, especially fresh foods, is wanting in volumes and standards, and does not position the country to engage in lucrative contracts that hinge on standards and supply obligations.

The agricultural sector is dominated by farmers producing for domestic consumption, or for export markets with consumers similar to those at home.

This, coupled with the global food crisis that the government of Uganda thinks is a blessing for agriculture based-economies to improve their terms of trade, could make the need to develop the capacity for commercial agriculture imperative.

In the event that the trading environment in the region improves, economists say that Uganda will still benefit from developing agriculture due to the host of markets where its produce is acceptable.

President Yoweri Museveni, during his state-of-the nation address last week, stated, “Our exports continue to grow, being now estimated at $2.8 billion for financial year 2008/09 compared with $2.6 billion in financial year 2007/08.

Most of the increase was on account of informal cross-border trade, which is estimated at $1.2 billion in this financial year compared with $1 billion in financial year 2007/08.”

He pointed out that exports of fish declined by $36 million because of dwindling stocks although demand and price increased in the international market.

However, cash crop exports like coffee increased by 5.2 per cent although receipts declined due to a fall in prices.

Cotton exports increased by 89 per cent due to more acreage and improved seeds, while tea export volumes increased by 7 per cent.

Exports of food crops like maize and beans, mainly sold to the regional market grew by 55 per cent and 34 per cent this financial year.

But as things stand, 70 per cent of informal regional trade estimated at about $831 million is from industrial products, especially to Southern Sudan and DRC.

Economists warn that this should not mislead the government into thinking that the status quo will continue, because the biggest buyers have emerged out of conflict and have production of goods they currently import like beverages, construction materials, and household utensils on their immediate industrialisation agenda.

Museveni said that in direct support of agriculture, half of the 40,000 km of district roads will have received routine maintenance, 850km will have been re-gravelled by the end of this financial year- to improve farmers access to markets.

Economists are generally supportive of the government’s move to improve agriculture but remain critical of the means, warning of the danger of resources being wasted.

Currently, the government’s goal is to ensure that each rural household in Uganda earns at least $10,000 a year from farming. To do this, President Museveni has proposed to set up six demonstration households in every sub-county and facilitate them to chase this goal, providing a model for other residents in that area to replicate.

“30,000 demonstration farmers organised into farmer groups or co-operatives will every year be provided with the necessary planting or breeding inputs, skills and knowledge to transform their production systems into commercially viable agricultural ventures.

This intervention will ensure that farmers are able to produce economically viable volumes of produce and can more easily be linked to agro-processing industries and consequently access the market with higher value goods,” he said.

Economists think that whereas this intervention should improve food security in the country and enable a small increase in exports, for agriculture to fetch the kind of export earnings that will help close the budget deficit in the medium term, large-scale commercial farming of selected produce is needed.

Charles Ocici, executive director of Enterprise Uganda, said, “Let us concentrate on a few things where we see a comparative advantage like fish, livestock products and fresh foods.”

This will mean securing more land for agriculture through the land fund and acquiring modern technology and other additives like fertilisers.

Mr Ocici however said that such interventions should be designed with market access in mind; what is needed is not just to negotiate to open up markets, but to plan for sustainable supply to those markets.

“For instance, Saudi Arabia has said they want thousands of goats every month, but we cannot commit to supplying them sustainably if we have not built the appropriate foundation,” said Mr Ocici.