Tuesday, 14 June 2016

The 2016/17 Uganda National Budget Debate In Summary

"Budgeting for Future Generations" was the theme for the 2016/17 National Budget Debate. It centred around three critical interventions; Debt Sustainability, Agriculture and Human Development.  Dr. Sarah Ssewanyana, the Executive Director of Economic Policy Research Centre (EPRC) and interim head of Uganda Economics Association (UEA) gave the opening remark. 

Dr. Sarah Ssewanyana: 

Quite often we forget the young ones as we budget. 
Our population structure is wide at the bottom
We have 55% of the population which is below 18.
Gov’t is committed to working smarter for greater impact in our economy
The budget highlights agriculture, tourism and human development
Proposed interventions are mainly around tertiary education (trying to support the new universities). Is this what we really require as a country? 
Proposed financing of the 2016/17 finance budget. Is it sustainable? How about our children and future generations. 

Dr. Joseph Muvawala (Executive Director of National Planning Authority)
Whether the budget is the instrument that will deliver the NDP. 
At the national level, the objectives of the budget and the allocation of the budget are very much aligned. However the devil is in the details. 

At the sectoral level, the budget has serious challenges of alignment. Sectoral alignment for some of sectors couldn’t even hit 40%. Yet at National Level, last measurement was at over 70%. 

It is duty of parliament to have sanctions on sectors that have not been aligned. Growth figures presented are not adequate to achieve the NDP. We should be growing at 7% constantly if we are to achieve middle income status. 

The budget has been good enough to cut on internal borrowing. Yet as we cut on this, we are expanding ministries.

The budget has been very generous to the agricultural sector. However main funding is for inputs. We are increasing inputs without dealing with the institutional bottlenecks. Unless we deal with agriculture as a chain. How efficient is the delivery mechanism? The 500Bn put could be lost through inefficiencies.

Non-concessional financing is increasing. For generational budgeting, effective and fast implementation will determine. As a gov’t we are not doing so well in that area. It is the achilles heel for this government. 

We benefit less per dollar of investment.
For health unless we go for impact, we are likely to miss the target. It is not enough to construct hospitals that have no drugs. Better we construct a few that have real impact. 

Wherever we have democratised primary education, we have lost out on quality. The allocation per capita per child has reduced in real terms. Are you saying that when you increase the teachers’ salaries without supporting the teaching, you will get better results?

The budget ought to be aligned at the sectoral level. 

Should we continue as a country to allow sectors and institutions that don’t have strategic plans to spend as they wish? 

Andrew Rugasira (Good African Coffee) 
  1. Orientation of the economy. An export-oriented economy is the ambition of the government. Yet there’s a disconnect with the how-to. It’s not so much about the commodity, it’s about how much value we can extract from the commodity. We have to be competitive in access to capital. There is a mindset shift that is needed by our policy thinkers. 
  2. There were 12 graduates in cambodia when the new president took over. 

Ambition alone will not get us anywhere. The challenge is how do we unlock the incentives for small-scale producers? How do we create the conditions that make them more profitable? One of the key issues we have here is property rights. The small-scale farmer can’t generate capital from that asset that he has. How do we create those property rights for these farmers? 

Small-scale farmers are not going to bring the transformation in the rural economy. It’s agri-business that’s going to do that. It’s a value chain. You can’t address these issues in isolation. Distribution of seeds is not going to solve this problem. 

You build a road without thinking of production? You construct a dam without thinking about the users of that energy? No transformed and modernized economy has ever been built on foreign investment alone. It’s been first through incentivisation of the local investors who then partner with the foreign investors? 

100bn every year leaves Africa in tax-evasion related profit repatriations. 

The reason why capital is expensive is because they can invest their funds in treasury bills which are absolutely secure. In every country that has been rapidly grown and was in the same situation as we are now, the government has become the venture capitalist. I don’t know why we are ashamed of that. 

Management and Execution. There should be a convergence with what is right and what is being done. What do we need to do and what is being done? There is an opportunity for priority setting. The actions of govt must be consistent with the economic realities of our country. 

There is a huge role for a voice in civil society, in private sector because doing business is about solving problems. 

Thursday, 14 April 2016

The Urgent Need For Uganda To Pass and Implement The Fertilizer Policy

On 13th of March, a number of stakeholders came together for a validation workshop. The workshop was regulatory impact assessment for the National Fertilizer policy for Uganda. As she opened the workshop, Dr. Sarah Ssewanyana, the executive director of EPRC revealed that there was need to increase fertilizer usage by small holder farmers in Uganda.

Her comments were further enhanced by a Ministry official who said that “70% of the fertilizer imported into Uganda is used by large scale farms especially tea and sugarcane plantations.” It was Drake Rukundo’s presentation that called for an urgent need to pass and implement the fertilizer policy.

In his submission, it was noted that out of the required 50kg/Ha/Annum, Uganda was adding only 1kg/Ha?Annum making the country one of the least in fertilizer use in the whole world. Rwanda farmers use 29kg/Ha/annum, Kenya 35kg/Ha/annum while South Africans were at 60kg/Ha/annum. To Rukundo, if government does nothing, there was a risk of having an unregulated sector. This would result in a high cost of fertilizer among other things. “Ugandan soils are not as great as they were 30 years ago, however applying fertilizer alone won’t cut it,” he emphasized.

Even though 51.2% of arable land in East Africa is in Uganda, most of it remains unutilized. Adding salt to injury, the agricultural sector which contributes 26% to the national cake continues to receive 2% as its budget allocation. Rukundo thus wondered how government expected more from the agricultural production sector when it was not investing.

When passed and implemented, the National Fertilizer Policy will get Uganda at least 30kg of nutrients per hectare per annum by 2020. But to do this, Rukundo noted there will also be need to have a fertilizer market development unit in the Ministry of Agriculture. This would also roll out punitive action for those who cheat the system.

It now remains to be seen whether the policy will finally be adopted despite its evolution having started in 2010. With a phosphate industry in motion in Tororo District, the need for the policy has never ached more than ever before. 

Thursday, 4 February 2016

How can domestic private sector investments support climate risk management (CRM) along agricultural value chains in Uganda?

To answer this question, a Qualitative, participatory, research was undertaken by Economic Policy Research Centre (EPRC) by engaging different rice value chain stakeholders.

Research was conducted through two case studies on domestic private sector investment: Equator Seeds Ltd., a domestic seed company investing in new rice seeds in Northern Uganda Centenary Bank, a commercial bank providing financial services for rice value chain actors in Eastern Uganda

The study is timely because of the following reasons:
The meeting comes after launch of Sustainable Development Goals and Paris Agreement. The two seek to leave no one behind in climate change risk management.
64 percent of global swamps have been depleted. In Uganda, particularly Kampala, the cost of treating water has gone up by five percent. This constrains the already poor budget. 

Climate change is real and Uganda has had its real share as seen in recent mountain slides, floods and droughts. Studies point out that between 2013 and 2050, climate change will seriously affect all crops particularly in the Northern and Eastern regions of Uganda. The 11-Model also reveals that nearly all major crops will be affected.  Under Animals, the effect of climate change will be in form of diseases and pests. 

Measures undertaken by government to address climate change
Government of Uganda has undertaken several measures to address climate change. These include: the formation of a climate change department and climate change Unit and the Uganda Metrological Authority (under formulation).  These institutions have played role in drafting policy guidelines and climate change policy framework.

Vision 2040 and just launched National Development Plan (NDPII). In these two policy papers, government underscores climate change. Specially, government has already formed the National climate resilient committee. Several policies are also underway to address climate change.

The role of private sector in addressing climate change
The study points out that private sector’s role can be inform of financing  technology for example, irrigation and water saving technology. These are crucial especially in dry season. Uganda’s agriculture is remains largely rain-fed.
Private sector players that include seed manufacturers can also carry out research to produce drought resilient and disease resistant crops. Disease and pests remains the other key obstacle affecting farmer produce during after harvest.

The study reveals that financial institutions including commercial banks can through affordable interest rates play get role in fight against climate change. Affordable loans for example on irrigation system will reduce swamp clearing for agriculture. 
Financial institutions can also finance international ventures that seek to address climate change.
Effects of climate change in Uganda
From the observed climate changes, Uganda is experiencing increased frequency and intensity of drought. There are also cases of rising temperatures. This is mainly caused by clearing of natural forest and vegetation for human settlement and agriculture. 
And the future is not bright. Weather experts predict that by 2080, temperatures will rise, decreasing rainfall in most parts of the country, serious change in seasonal rainfall. Over the years, Uganda has had two known rainfall seasons. This is gradually becoming a thing of the past. Experts also predict increased frequency and intensity of weather events.
Case study of impact of floods on rice growing
Production level: Like floods, drought has heavy consequences on farmer produce. When they come the destroy crops. And this results in reduced quality of produce. They have increased costs of production as farmers have to incur more costs on weeding, harvesting and drying the produce.
At processing stage; there is reduced volume available for milling. The high moisture content in produce increase cases of breaking at milling. There are also noticed delayed deliveries. All these have negative impacts of earnings of farmer. Take into account that some of farmers are using borrowed money.

Transport: floods lead to destruction of transport routes which makes it difficult for value chain players to transport their produce. This evidently results in rotting of produce and high transportation costs. In effect, this reduces margins of players.
The reduced and delay for produce to reach the market leads to scarcity in the market which leads to rising prices. Unfortunately these are not passed on to the farmers.

What is important to value chain actors to manage climate risks?
A number of approaches are used by players to address climate change. These include: as strategy, rice farmers are combining rice production and processing with other types of crops. When one crop fails, another will save the day.

The players are also advocating for informed decision making and preparedness. This specially involves knowing when to plant (planting high yielding varieties) and sell their rice for best results. Farmers are also beginning to grow enough rice to sell and save some cash

Farmers are also advocating for regular supply of high quality; drought-tolerant, early maturing rice seed varieties pest resistant rice varieties. These help farmers to maximize income from their produce.

Approaches players  are using to guard against climate change

As a key strategy, the players are diversifying their Livelihood/income: Some input suppliers, farmers, millers and traders keep buffer stocks of rice .Consumers substitute other staples for rice.

Authors of the report say, some players during drought relocate rice farming activities to swamps while others sell off assets to manage the situation

Key important issues in chain value chain of rice growers
Farmer cooperatives, commercial farmers and agro-dealers are asking stakeholders for the following as strategy to address climate change.

The farmers are asking for more droughts tolerant/less water intensive seed, early maturing seeds pest and disease resistant seeds.

Farmers are also advocating for quality yielding seeds (purity, germination, moisture content.

Opportunities and challenges for implementing priority investment options

From the perspective of farmer cooperatives, commercial farmers, agro-dealers and seed companies.

Stockists and distributors can contribute to improving the linkage between seed companies and farmers but need to be trained to provide relevant information on new seeds.

Radio programs on agronomic practices (including on seed variety characteristics) and market information already exist for farmers in local languages

Seed demonstration plots need to be located closer to the stock shops. Receiving climate information from seed companies was perceived as a priority very differently across chain actors (some do not trust the information they received).

Lessons learned on the role of finance in value chain climate risk management (CRM)

Financial services already contribute to supporting CRM by value chain actors, for example: Credit facilitates diversification of income sources. Savings provide a buffer when shocks occur.
Capacity to access and use climate and weather information for decision-making is a priority for value chain actors (this needs to be linked to market information)

Financial service providers also require capacity building on CRM to support their clients and inform their investment decisions

Better CRM by value chain actors will also benefit financial service providers by reducing defaults on loans.

Value chain actors are already integrating climate concerns in their decision-making process when selecting rice seeds. But various trade-offs involved between climate resilient characteristics and other characteristics (aroma, high value)

To reduce the impacts of climate hazards on their rice activities and on their clients, seed companies need to invest in a combination of options because actors along the value chain are diverse. Example: combine radio programs and demonstration plots.

Stockists and distributors have a key role to play in supporting CRM along the value chains (e.g. info about new seeds, storage).

CRM priority investment of seed companies call for improved collaboration among various actors along the value chain (including seed breeders, stockists and distributors, media and other seed companies).

From the findings, we notice that climate change impacts the entire value chain. The domestic private sector has a role to play in supporting CRM along agricultural value chains

Integrating climate change into policies and strategies related to agricultural value chain development is critical for Uganda to achieve its development objectives.

SMEs and commercial banks must be involved in the process of integrating climate change into relevant policies and strategies
Climate information (including historical observations, forecasts, longer-term projections) is a necessary input for the mainstreaming process

Wednesday, 3 February 2016

Risks and Uncertainty from Climate Change affect Actors along the entire Rice Value Chain

A new collaborative study conducted by the Economic Policy Research Centre (EPRC) and the International Institute of Sustainable Development (IISD) has revealed that risks and uncertainty from climate change impacts the entire rice value chain. The study was code-named; ‘Private sector investment in a changing climate: Resilient rice value chain development (PSI-Climate).

The study focused on rice value chains since rice is one of the priority crops for the Government of Uganda in improving food security and household income. The research was conducted through two case studies on domestic private sector investment. This involved Equator Seeds Ltd, a domestic seed company investing in new rice seeds in Northern Uganda and Centenary Bank, a commercial bank providing financial services for rice value chain actors in Eastern Uganda.

Among the impacts of climate change included the increased drought frequency and intensity, rising temperatures, and change in seasonal rainfall distribution. The most significant finding was the impact of floods on rice value chains. In inputs, floods resulted in a reduced quality of rice seeds and delayed deliveries. For production, there were reduced yields, destruction of crops and reduced quality among others. At the consumption end of the value chain, floods resulted in reduced food availability and higher food prices.

For the value chain actors such as farmers, millers and traders, there were three major factors in managing climate risks. The value chain actors noted a need for diversification of crops, products and income sources. Informed decision making, planning and preparedness for shocks were issues of importance to them. Finally, there was a need to ensure rice supply and quality.

The study concluded that climate change impacted the entire value chain. One of the lessons learned was that the domestic private sector has a role to play in supporting Climate risk management along agricultural value chains. Other lessons included the integration of climate change into policies and strategies, the involvement of SMEs and commercial banks and finally a need for climate information was a necessary input for the mainstreaming process.

Wednesday, 2 December 2015

aBi Trust to Shift from Just Grants to More Sustainable Services

aBi Trust, an agriculture investment fund in Uganda has revealed plans to step away from just offering grants to more sustainable services such as loans. These remarks were made by Josephine Mukumbya on the second day of the Uganda Agriculture Financing Conference.

Among its future plans, the aBi Trust will progress to offering improved integration of services as it seeks to attain sustainability. There will also be a more structured approach to agribusiness knowledge with aBi trust planning a one-stop centre for agribusiness information. Above all, the Trust will broaden its prospective and include more middle income upcoming agripreneurs.

Mukumbya also explained that as far as sustainability is concerned, the fund will promote socially responsible investing. "We are also keen on social responsibility investment in terms of environmental, audit, and gender among others,"she explained.

aBi Trust has 63 partners in value chain development and 18 partners especially financial institutions.   They currently work to increase and improve quality and production in Uganda's agriculture sector.

PearlCapital to launch $30 million Agribusiness Investment Fund in Uganda in 2016

Deloitte and PearlCapital have revealed that Uganda will be the lucky recipient of a $30 million agribusiness investment fund in 2016. The fund code-named; "Small and Medium Agribusiness Development Fund" is targeting 20-30 SMEs in Uganda. Speaking about the fund, Tom an official from PearlCapital revealed that additional employment and improved access to markets for 26,000 will be the target impact metrics. 

PearlCapital has invested in substantial seed companies among which is KK fresh produce and Bee Natural Uganda. Their
model is to invest risk-capital in the sector while working actively with the investees. 

"Although we are an impact investing business, we measure our success depending on a number of metrics such as employment but we also consider the financial criteria. We structure our investment to give our invests the best chance of success but also ensure best ROI for our investors," PearlCapital clarified. 

Quick Summary of the Fund 

PearlCapital is in a consortium with Deloitte and EU. 

It is going to be a $30 million investment fund. $18 million to be invested by DFI, public and private sector. 10 million euros will be invested by European Union. 

The fund is targeting 20-30 SMEs. 

Target Impact Metrics
-additional employment
-improved access to markets for 26,000 farmers 

We will have our own BDS matching facility, providing technical assistance to those we are funding. 

What they are looking for:
  1. Investors: DFIs, Public and Private to invest $18 million
  2. Investees: Ugandan based SMEs involved in Agribusiness to invest $200,000 up to $2 million

Investees: SMEs involved in Agribusiness
We will base our assessment on the following
  1. Firms with less than 500 employees
  2. Firms with annual turnover of less than 100 USD million
  3. Total assets up to 50 USD million
  4. Equity of up to 10 million
  5. SMEs with sound governance systems
  6. producers, processors, importers, exporters, 
  7. Value chain partners up and down streams 

Questions and Answers

Q: What is the role of Deloitte in this?
A: Deloitte are the lead partners in the consortium to raise capital and lay the initial structures of the fund. 

Q: Do you work with the cooperatives or you only work with individual companies?
A: Yes, we haven’t in the past but it is important that we do so. Cooperatives present a challenge to the investors largely because of their structure. Perhaps in some sort of differed participating loan. 

Q: Where do we find you? What are the minimum qualifications for one to get funding? 
What we are really interested is who, what and how. Who is managing the business, what is the business, what selling point does it have. How does the management implement that plan. We want to see people that we believe in with a good quality plan. When we come to do due diligence, we need to see all kinds of evidence. We don’t want to be driven by ticking bosses. We want to be driven by people and their ideas. There’s no real criteria on size. 

Q: Does it include joint ventures?
A: Yes we can invest in joint ventures. As long as the investment structure is right.

Q: You said you can fund companies at early stage. Can you consider in future to fund startups and ideas? 

A: Startups are extremely difficult to invest in. Two of our most successful investments though were startups. Gives an example of a Tanzania startup. However we have to look very careful on our investment appraisal and ensure that the alignment is right and the business model of the startup has worked somewhere else. Startups are risky and we can’t do many of them. 

Tuesday, 1 December 2015

Quotes From Deputy Governor of BOU at Launch of 2015 Agricultural Finance Yearbook

Dr. Louis Kasekende, the Deputy Governor of Bank of Uganda made interesting remarks at the launch of the 2015 Agricultural Finance Yearbook. Here are some of the highlights of his speech as Guest of Honour. 

  1. Budgetary resources are scarce, investment is prioritised on goods/services that benefit the public for example extension services. 
  2. Public expenditure on goods and services particularly on  research and extension services must be increased.
  3. Farmers need a holistic support package of improved seeds, provision of fertilisers etc and not limited to just finance 
  4. If we are to solve the problem of unemployment in Uganda, we must focus on Agriculture.