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