COFFEE WAR WILL BE WON IN LONDON, NOT LWENGO

For three decades, Uganda’s coffee story has been told as a triumph of liberalisation. The state retreated from direct marketing. Private exporters flourished. Volumes climbed to roughly seven million 60kg bags annually. The sector became more efficient and competitive.

That reform worked.

But liberalisation solved the efficiency problem. It did not solve the value problem.

Because in a global coffee economy worth hundreds of billions of dollars annually, the real constraint has never been how much we grow. It has been where we sit in the value chain.

Consider scale. Starbucks operates more than 35,000 stores globally and is estimated to consume in the range of 15–20 million 60kg bags annually. One global retail chain can theoretically absorb Uganda’s entire annual output almost three times over.

Pause there.

The issue is not demand. The issue is access and ownership of the channels that convert beans into branded beverages.

Once Ugandan coffee leaves Mombasa, it enters a sophisticated ecosystem. Prices are referenced to futures markets in New York and London. Contracts are structured in Geneva trading houses. Branding decisions are made in Seattle and Milan. By the time a cappuccino is sold for four dollars, value has been multiplied several times, yet the Ugandan farmer remains exposed to the most volatile and least remunerative segment of the chain.

We have invested in agronomists and soil scientists. We have improved yields and quality. But we have not invested with equal seriousness in market professionals fluent in futures contracts, risk management and global procurement strategy. We have been farming with 20-20 vision and marketing with one eye closed.

This is not entirely new terrain for Uganda.

The story of the Bugisu Cooperative Union offers both inspiration and caution. At its peak, Bugisu Cooperative Union (BCU) demonstrated that organised farmers could move beyond simply selling parchment coffee. Through aggregation, branding, particularly under the “Bugisu Arabica” identity and structured marketing, BCU showed that producers could exercise influence and capture a measure of value beyond the garden gate.

Its relative success lay in organisation and brand recognition. Farmers were not isolated sellers; they were part of an institution that could negotiate, aggregate volume and maintain quality standards linked to a geographic identity.

Yet BCU’s struggles, governance challenges, political interference, debt overhang and operational inefficiencies reveal the fragility of cooperative-led market ambition without professional management and financial discipline. The lesson is not that market participation is impossible. It is that ambition without governance is unsustainable.

That is precisely why the next phase must be more sophisticated.

The instinctive response today is to push for “roast at origin.” It is not a pipe dream. It can be done. But breaking into supermarket shelves in Europe or North America from scratch is costly and slow. Those markets are mature, defended by incumbents with decades of brand equity and distribution networks.

There may be a more efficient route.

Rather than attempting to rebuild the entire value chain independently, Uganda could pursue strategic equity participation in downstream firms — roasters, traders or retail chains. Ownership provides market entry without absorbing the full learning curve.

Examples exist globally. Pachamama Coffee integrates cooperatives into ownership of roasting and retail operations. Pachamama Coffee is a 100% farmer-owned cooperative offering a range of organic, single-origin coffees and blends sourced directly from smallholder farmers in five countries.

Colombia’s farmers, through Procafecol, own the Juan Valdez chain. uan Valdez is a multi-national coffeehouse chain and premium coffee brand owned by the National Federation of Coffee Growers of Colombia (FNC). While originally a fictional advertising icon created in 1958, the brand now represents over 540,000 Colombian coffee-growing families and operates more than 400 stores worldwide.

Both cases involved farmers coming together to improve productivity, bulking for improved bargaining power and owning retail stores in export markets. Producers shifting from being price takers to shareholders.

But why reinvent the wheel? Why not buy interest in some of the major players instead and leverage existing brand and distribution channels in the short term and building our own  recognizable brands as part of a long term plan to capture more value for ourselves?

Equity is leverage. Dividends can supplement volatile farm-gate prices. Ownership aligns sourcing incentives. Market intelligence flows back to origin. Meaningful stakes can influence procurement frameworks in ways that purely transactional relationships cannot.

In a liberalised coffee economy like Uganda’s, government’s role in this transition should be catalytic, not commercial. There is no need to resurrect monopoly boards. Instead, government can facilitate the creation of a professionally governed Coffee Investment Fund designed to deploy capital strategically into global value chains -- something NSSF is already working on. Anchor capital could crowd in institutional investors, provided governance standards are robust and insulated from political interference — a lesson reinforced by BCU’s past.

Government can also invest in market intelligence infrastructure. Just as we fund agricultural research, we should cultivate expertise in commodities trading, hedging and global retail negotiation. Financial literacy for exporters and cooperatives is as important as agronomic literacy for farmers.

Stronger cooperative governance frameworks would make producer institutions investable and capable of pooling capital for strategic stakes. Policy stability, above all, must be maintained; equity strategies require long horizons, and regulatory unpredictability undermines investor confidence.

Uganda has proven it can grow coffee at scale.

The next test is whether it can grow influence at scale, without repeating the governance missteps of the past.

If one global retail chain can absorb our production multiple times over, then the decisive battleground is not acreage. It is access, expertise and ownership.

Bugisu showed us that producers can organise and move up the chain. Its shortcomings showed us what happens when governance falters.

The soil will always matter.

But in a half-trillion-dollar industry, markets and the institutions that navigate them, matter more.

IN THE NEXT FIVE YEARS: AFTER THE INCH, UGANDA MUST MIND THE MILE

Last week, President Yoweri Museveni was re-elected for another term in office, extending a political era that has now spanned four decades. 

Few administrations in the developing world have presided over such a long arc of economic change, and fewer still can credibly point to the turnaround Uganda has experienced since the late 1980s.

Whichever way one looks at it, today’s economy is a far cry from the dark days of super-inflation, commodity shortages and broken infrastructure. There was a time when prices doubled almost on a whim, when basics vanished from shop shelves, and when moving produce from farm to market was an exercise in endurance rather than commerce. Contrast that with the present: inflation that has largely been tamed, markets stocked with goods from across the region and beyond, and an infrastructure network that—while still incomplete—would have been unimaginable to an earlier generation...

At the core of this shift has been macroeconomic stability and the liberalisation of markets. These ideas may sound technocratic, even dull, but they are the quiet enablers of progress. Stable prices allow households to plan and businesses to invest. Liberalised markets, imperfect as they are, unlocked private initiative and forced efficiencies into an economy once strangled by controls. 

Over the years, billions of dollars have flowed into Uganda—some from foreign investors, many from local businessmen who finally felt confident enough to risk their own capital. The results are visible across banking, telecommunications, retail, construction and services.

But history offers a stern warning: success breeds temptation. Or, as the proverb goes, give them an inch and they will take a mile. With achievement come expectations; with stability come louder demands. That is natural. People who have known stability demand prosperity; those who have tasted growth demand inclusion. The challenge for the next five years is to meet these expectations without destroying the foundations that made them possible...

The first test is maintaining macroeconomic stability. Uganda has enjoyed such a long period of relatively low inflation that many have forgotten what inflation feels like. Amnesia is dangerous. It invites policy flirtations with ideas that sound compassionate but are fiscally reckless—most notably pouring billions into failing state enterprises. Inflation does not announce its return politely; it creeps in through budget indiscipline and explodes through excess. When it arrives, it punishes the poor first and hardest.

The second test is the management of oil revenues. Oil offers a once-in-a-generation opportunity to upgrade social services and the general business environment. Used wisely, it can finance healthcare, education, roads and energy—investments that raise productivity long after the last barrel is pumped. Used badly, it becomes a curse: consumption over assets, patronage over productivity. The difference is not oil itself, but discipline, transparency and execution.

A third temptation is to roll back liberalisation simply because government now has more resources. The argument that the state should “get back into business” resurfaces whenever revenues rise. It ignores history. Many state-owned enterprises did not collapse for lack of money; they collapsed due to poor management, weak incentives and terrible oversight. Fresh capital injected into unreformed governance structures is not reform, it is denial.

Then there is corruption—the tiger we do not want to ride. Corruption widens inequality, erodes trust and convinces citizens that the system is rigged. In the short term it masquerades as grease; in the long term it becomes sand in the gears. Left unchecked, it feeds resentment that can spill into unrest and political instability. Investors can price risk; they struggle with unpredictability born of public anger.

Yet even as we guard these fundamentals, there is another danger: resting on our laurels. Stability is not an end state; it is a platform. To sustain momentum—and, crucially, to spread the gains more equitably, we must take calculated risks. Not reckless leaps, but deliberate stretches that deepen inclusion without undermining the stability we have worked so hard to build...

Nowhere is this more urgent than agriculture, the livelihood of roughly seven in every ten Ugandans. For too long, our debates have stopped at production—plant more, harvest more. Productivity matters, yes, but production alone does not build prosperity. Farmers remain poor not merely because they produce little, but because they are disconnected from markets, locked out of processing, and squeezed in distribution.

The next phase must take a hard look at the entire value chain. Productivity on the farm must be matched by access to inputs and finance, reliable storage, processing capacity, logistics, branding and marketing. Markets must be enabled so that higher yields translate into higher and more stable incomes. When farmers see clear pathways to buyers, incentives change: investment rises, quality improves and risk becomes manageable. That is how agriculture becomes a business rather than a subsistence trap—and how wealth disparities begin to narrow.

If we get this right, another long-standing anxiety begins to fade: the youthful bulge. A young population is often spoken of as a threat, something we constantly look over our shoulders for. But youth are only a threat in an economy that cannot absorb their energy. In an economy that creates productive work, connects effort to reward and opens pathways up value chains, they become our greatest asset. The same reforms that deepen agricultural value chains and strengthen the business environment are the ones that turn demography into destiny.

The delicate task ahead is balance. We must continue doing what brought us this far—discipline, openness and stability—while stretching our capacities to include more Ugandans in growth. Get too excited and we risk inflation, waste and reversal. Move too cautiously and we risk stagnation, inequality and a squandered demographic dividend.

The story of the last forty years shows what sensible economics can achieve. The question for the next five is whether we can protect those gains, take calculated risks, and spread prosperity more evenly. The inch has been taken. The challenge now is to resist the mile—while still daring to move forward.

UGANDA TRANSFORMATION WILL START ON THE FARM

Every so often, a report lands on the table and quietly confirms what the numbers — and lived experience — have been telling us all along. The World Bank’s December 2025 Uganda Economic Update is one such document.

It acknowledges the good news first: Uganda is growing at about 6.3 percent, inflation is contained, exports — especially coffee, gold and tourism are doing the heavy lifting, and poverty has edged down. Then it delivers the uncomfortable truth. Most Ugandans are still trapped in low-productivity activity, and the centre of that trap is agriculture.

This matters because development is not a story of averages. It is a story of where people work, how much value they create there, and whether that value allows them to move. Nearly seven in ten Ugandans earn their livinag from agriculture. Yet the sector contributes roughly a quarter of GDP. That imbalance alone explains why growth often feels abstract to rural households, why inequality persists, and why every election cycle comes with the same anxieties.

An economy cannot transform when the majority of its people are producing too little to accumulate, save, invest or graduate to higher-value work.

For years, this column has argued that Uganda’s development arithmetic has been upside down. We talk industrialisation, services and digital futures, while leaving the foundation — farm productivity largely untouched.

The World Bank puts some hard numbers to it. Fertiliser use averages between 3 and 8 kilograms per hectare. Irrigation covers less than one percent of potential farmland. Only a sliver of farmers use improved seeds. These are not marginal gaps; they are structural failures. They explain why agriculture absorbs labour without creating wealth.

Low productivity is not a moral failing of farmers. It is an economic outcome shaped by policy, incentives and neglect. A farmer producing just enough to eat has no surplus to sell. Without surplus, there is no cash flow. Without cash flow, there is no investment in better inputs, tools or practices. The result is a cycle where effort does not translate into progress. That cycle is what keeps poverty stubbornly rural and growth stubbornly urban.

This is where the fashionable argument that Uganda should simply “move beyond agriculture” collapses. No country has ever transformed by abandoning the sector that employs most of its people while it is still unproductive. The historical record is unambiguous. Structural transformation begins when agriculture becomes more productive, not when it becomes irrelevant. Productivity raises incomes, lowers food prices, expands domestic markets and releases labour. Only then do factories, logistics and higher-value services become viable at scale.

The World Bank’s emphasis on agro-industrialisation is therefore not a contradiction of agriculture; it is its logical extension. But agro-industrialisation without productivity is a hollow slogan. You cannot process what is not produced in sufficient quantity or quality. You cannot build value chains on thin, volatile supply. Coffee illustrates this clearly. Where yields and quality have improved, processing capacity has followed, exports have surged and foreign exchange has flowed in. Where productivity lags, everything downstream weakens.

There is also a fiscal dimension that this column has warned about before and which the World Bank now highlights politely. Rising debt service and recurrent spending are crowding out the very investments that raise productivity — extension services, irrigation, rural infrastructure, research and quality control. Interest payments are visible and unavoidable; productivity gains are slow and quiet. One gets prioritised, the other postponed. The cost of that postponement is borne not in spreadsheets but in villages.

Raising agricultural productivity is not glamorous work. It requires getting the basics right at scale. Inputs must be genuine and affordable, not counterfeit and politicised. Extension must be present, practical and continuous, not episodic workshops. Water must be controlled, even at small scale, so farming stops being a bet on the weather. Markets must reward quality and consistency, not desperation. And institutions must function with boring reliability.

Climate change sharpens the urgency. Low-productivity systems are the first to collapse under stress. Productive systems adapt, diversify and recover. In that sense, productivity is not just an economic imperative; it is a resilience strategy. A country whose poor depend on rain-fed subsistence farming cannot afford to treat climate adaptation as an afterthought.

What the World Bank’s update does — and what Shillings & Cents has long insisted, is remind us that Uganda’s transformation will not be announced; it will be built. Acre by acre. Yield by yield. Farmer by farmer. No amount of rhetoric about middle-income status can substitute for the quiet revolution of producing more with the same land and labour.

Uganda’s choice is therefore stark, even if uncomfortable. Either we raise productivity where most Ugandans actually work, or we accept an economy that grows on paper while leaving millions behind. Transformation does not begin in boardrooms or conference halls. It begins on the farm.

BIDCO: A DEVELOPMENT DILEMMA

One year after the inception of a $150m (sh278.2b) palm oil development on Kalangala island, project sponsors BIDCO are soldiering on, despite incessant attacks from environmentalists and sniping from entrenched local industry interests.

One year after the inception of a $150m (sh278.2b) palm oil development on Kalangala island, project sponsors BIDCO are soldiering on, despite incessant attacks from environmentalists and sniping from entrenched local industry interests.

But despite being the most vocal opposition to the project, the environmentalists admit they are hard pressed to put a monetary value to preserving the island’s ecosystem that would outweigh the anticipated value BIDCO is bringing to the island.

They argue that by slashing forest cover to make way for the plantation, the islands will lose out on their unique species of vegetation, alter the climate of the area and suffer massive soil erosion.

In 2004, the Government gave BIDCO a go-ahead to establish an oil palm project. Under the terms of the project, BIDCO was to establish a 26,500-hectare oil palm growing operation and set up a plant to process the palm oil from the plantations.

BIDCO would provide the expertise and the funds to get the project off the ground, while for its part, the Government would make the land available allow a 25-year Corporate Tax holiday and 12-year Value Added Tax (VAT) deferral for the plantation project.

Currently, about 3,500 hectares have been put under palm trees out of the 5,500 hectares provided by the Government so far most of which has been on land reclaimed from the forest.

"First of all, we are not burning the forests. We just cut down the trees and leave them in the fields to rot. The bio diversity is not being lost. It is just migrating to the forests we are not touching," Kalangala plantation manager Lim Choon Meng said on a recent tour of rows and rows of plantation.

"Secondly, the impression is that most of the island is covered in forest. That is not true. So far, we have planted about 1,500 hectares of grassland with the palm trees," he said.

Meng also pointed out that they are adhering to an agreement to maintain a 200-metre strip of trees between the plantation and the lake shore and growing cover crops between the palm trees as preventative measures against erosion.

He said he plans to plant an additional 1,000 hectares before the end of the year, but he was desperate for more land on which to plant seedlings.

"I have about 500,000 seedlings waiting for transfer to the fields, some of which are more than a year old and need to be transferred now or I will have to lose them but the land is not forthcoming," Meng said.

According to the managing director of the Uganda project, Kodey Rao, under the agreement, the Government was supposed to have provided the whole 26,500 hectares within a year of signing the agreement, which has not happened.

"We have about 5,500 hectares available, but need the whole component as soon as possible to ease planning," he said.

Partly as a result of BIDCO’s activities, the island is experiencing an economic boom.

"Land prices are rising, Kalangala town is growing and immigrant labour is swelling the island’s numbers.

"The wage bill for our workers is higher than the wage bill for Kalangala district administration and we have not even begun commercial production," Rao said.

BIDCO employs about 1,500 workers whom it pays twice a month, which invariably leads to higher sales for shops in the nearby trading centres.

"The improvements around here since BIDCO touched down are amazing," the district agricultural officer, David Balilonda, said.

While agreeing that the workers’ salaries have brought increased liquidity into the Island’s economy, he sees more fundamental benefits.

"The project has opened up roads where there were none. Communication and trade across the island has been greatly improved," Balilonda said.

A new ship, the 108-passenger MV Kalangala, was commissioned in February and sets sail from Entebbe compared to the old one which docked in Masaka. That has improved access to the mainland.

"We are seeing more tourists especially Ugandan tourists since the new ship started," former MP Mulindwa Birimaso, who owns the 30-room Palm Beach Hotel Resort said.

"Everything has an impact on the environment, even your breathing. The question is: what is being done to mitigate this impact?" Rao asked.

"We think we have put together an environmentally-friendly package while at the same time putting together a project that will have a transformative impact on the island’s economy, ".

Rao estimates that the $150m injected into the project will have a six-fold multiplier effect on the economy through saved foreign exchange, job creation and support services.

On the project’s outgrowers scheme, the company projects that on a hectare of land (about 2.5 acres), a farmer will be able to get $1,000 (sh1.85m) per month.

Environmentalists are having a hard time countering these benefits with evidence of their own that shows that the islands trees will have as great an economic impact.

"Building a case for non-monetary benefits is difficult," National Forestry Authority’s spokesman Gastor Kiyingi said.

"But the calamities that come with such environmental degradation do not take long to show themselves," he said refering to the ill- advised move to build a dam parallel to the old Kiira power dam, a situation that has caused a larger than usual outflow and is partly responsible for the reduced water levels on Lake Victoria.

Today, people are looking for political advice but neglecting professional advice, Kiyingi said.

That maybe but for the time being, the locals remain unconvinced.

PS This was published in teh New Vision 20 years ago.... an update long overdue

BANKS AS THE SOLUTION TO OUR PROBLEMS

Last month the Uganda Bankers Association (UBA) had their annual general meeting, in which they reported on the sector’s status.

Generally the industry is still making money hand over fist.

 The industry made a net profit of sh1.41trillion off revenues of sh6.82trillion, a credible net margin of about 20 percent, in this hard economy. As a sign of the times bad loans were up above five percent, as a lot of the bad debt carried over from the pandemic continue to be resolved. Despite that, lending to the private sector grew 7.5 percent, a normalization from 2022’s 19 percent growth, that could be attributed to a recovery after the covid lockdown.

But the real story of the last week was the demonstrations on the street by youth urging an end to corruption.

For the last decade or so this column has singled out corruption as the biggest challenge for seeing the economic growth of the 40 years spread more equitably among Ugandans. Corruption concentrates wealth in a few hands, hinders service delivery and distorts markets, all leading to the unfair distribution of the economic gains we have made as a country since 1986. Hence the youth harping on the issue. Corruption is denying them opportunity.

While the banking industry is battling corruption in its own ranks (last week the second financial fraud forum was convened in Kampala) the banks can and are helping with leveling the playing field for beneficiaries of economic growth.

Or at least, that is what the numbers suggest.

The last year’s results in and of themselves, do not say much about the industry’s role in economic growth, leave alone distribution of this growth.

However, if you look back five years even a decade, there are clues that point to this benevolent tendency.

We know while the economy has grown in leaps and bounds over the last 40 years, most of this growth has come from services, construction and manufacturing, which growth has mainly been seen in the urban areas, that is how more than half of Uganda’s GDP is generated in Kampala.

The problem with this is that more than 70 percent of the population are rural based and derive their livelihood from agriculture. Agriculture over the last 40 years has rarely if ever grown beyond single digits annually, if ever.

While there are structural issues that ensure this persists and which affect the ability to finance the sector, for instance that we are mostly a small holder farm economy, the banks have been increasing support to the sector.

A decade ago agriculture accounted for eight percent of the industry’s loan book, but last year this share had increased to 13.8 percent. In nominal terms, the loans dealt out to agriculture more than quadrupled to about sh3 trillion from about sh650b in 2013.

We can debate about which part of the value chain – production, logistics or agroprocessing these funds are going to, but it would be full hardy to support one part of the value chain if production, where most Ugandans are employed, is not growing.

By inference while the sector’s share of GDP has dwindled to about 20 percent from more than 70 percent in 1986, in nominal terms its producing more and more. The successes in coffee and milk production are but one example.

So the trick for this country is how can we facilitate this increasing of shift of resources to agriculture from the banks?

The risks in supporting production are many. As mentioned above most of our farmers are small holders and still use traditional farming techniques whose yields are anaemic. Secondly, farmers need to be helped to negotiate with the market from a stronger position. And finally, access to market must be improved in terms of improved infrastructure.

The banks that have increased their interest in agriculture are finding they have to spend considerable sums to train farmers in improved farming methods and business practice. In the absence of a nationwide extension services system government would do well to offset these costs for the banks, as one way to lower the cost of loans but with the same stroke increase the adoption of improved farming practices across the country.

The government water for production scheme should be rolled out with more urgency. A World Bank report in the last decade showed that the biggest investments in agriculture should be in extension services and irrigation.

While the government struggles to beef up its extension services, relief to the banks already doing this would make sense.

The point is that while financing to the sector can make meaningful change, some things have to be set in place to speed this up.

CLIMATE CHANGE; NO MORE FUN AND GAMES

I remember it like it was yesterday. This was 1983. At first the dry weather never bothered us. In fact we welcomed it. We wanted to play soccer and the rain was a hindrance to our childhood enjoyment and ambitions.

The year before the football World Cup had been held in Spain and our imagination was still fired up by man-of-the-tournament Paulo Rossi. We all wanted to play in the World Cup one day. Rain would only slow down our ambitions in that direction.

But soon playing soccer was nearly impossible as the school field was rendered unplayable by a network of cracks wider and deeper than  I had ever seen before or since. By the time the rains came, the field was a dust bowl with yellow and white patches, the only proof of grass.

"Across the border from us Ethiopia and Somalia were suffering the brunt of the drought. It was so bad it took an international response, triggered by the song “We are world" performed by the world’s leading artists of the time....

That same drought also brought with it the photograph seared in our collective memories of the vulture perched on a dried log, watching a badly emaciated  child,  who squatting on its haunches, had as if stopped to give up on life, its final breath seemed imminent. And the vulture knew it.

If ever there was a case for the cliche a picture is worth thousand words, that was it.

Forty years later the horn of Africa is faced by the worst drought since that drought of my  childhood, and  an ongoing “Safal Eye in the Wild Photography competition" sponsored by Uganda Baati is timely. The competition that was launched in July and ends 15^th September it is hoped in its small way, can help galvanise opinion in support of environmental conservation.

God forbid a similar award-winning photograph will present itself, but now more than ever world opinion needs to be mobilised to fight back the existential threat of climate change.

Already this year the hottest temperatures in recent  memory have been recorded . It has been so hot that forest fires have been raging in North America laying waste to half of Hawaii and much of western Canada. No lesser fires ave been reported in Spain, France and Romania this year.

On the flip side California is enjoying rain for the first time in five years but it has come with hellacious intensity resulting in flooding and massive displacement.

Nearer to home climate change has led to the aforementioned drought in the horn of Africa but also apocalyptic flooding in Malawi, Mozambique, Madagascar South Africa and Zimbabwe.

But the doubters remain, blinded to the looming threat by ignorance or worse, by self-interest.

"Climate change is being driven by growing consumerism which has led to wanton destruction of the environment, especially indiscriminate depletion of forest cover, which in the past helped to mitigate against climate change...

The trees absorbed the carbon emissions from the atmosphere, which are largely responsible for the rising temperatures and the changes in the climate that come with it.

In case you have not worked it out, for a country like Uganda which is largely agricultural there is no way we can  ignore the growing trend.

Climate change can very well affect our capacity to produce food. An issue of concern especially as our population continues to grow by leaps and bounds, putting added strain our natural resources. We have had the luxury of continuing with our inefficient farming methods because we have fertile soils and rains year around. Climate change means among other things, our soils are losing their vitality and our water sources are dwindling.

Uganda for example has seen its forest cover plummet to 9 percent in 2015 from 24 percent in 1990. Recovery to 12.5 percent has been reported but clearly the reforestation is just barely keeping up with the destruction.

But the real challenge of the battle to beat back climate change is that there has to be a global response. Environmental degradation or irresponsible carbon emissions in New Zealand or Alaska can affect Uganda’s climate in the middle of Africa.

We can plant all the trees we want, reduce our emissions through the use of clean energy and energy saving technologies, but this will count for nothing if western economies  continue with their unsustainable lifestyles.

"The case can be made that climate change is driving even the break out of civil unrest and war around the world and particularly in Africa, as governments fail to facilitate greater efficiencies in exploitation and distribution of existing resources.  Matters will not get any better with the environmental degradation and the ensuing climate change.

The need for a global response is a moot point and cannot be overemphasised. The use of visual images transcend language, culture or ideology as a means to drive the point home about the urgency of w collective call to action against climate change.

 

TAKE LESSONS FROM MILK INDUSTRY TO PRODUCE FOR EXPORTS

It was reported recently that milk production had reached record levels at 3.2 billion liters in 2022. Prior to the covid lockdown the Dairy Development Authority (DDA) announced the country had passed South Africa as the leading exporter of dairy products on the continent.

When history is written the exponential leap in milk production – it was 460 million liters in 1990, will have pride of place and may very well serve as template for the increased production of other commodities.

"Apart from coffee, which like milk’s success is due largely to small holder farmers, there is no other commodity, that has seen a leap in its fortunes like milk....

This was not by mistake and is all the more surprising given the decimation of the herds in eastern Uganda due to insurgency and cattle rustling in the 1980s and 1990s.

So, it was left to Western Uganda to carry the load. A long period of peace helped to boost milk production, but also an adoption of higher yielding exotic breeds, a program to dot the region with milk collection centers, at once created a market for milk that was previously poured down the village paths for lack of market and set the foundation for milk processing industry.

From a solitary processor, Dairy Corporation, which was itself privatized in 2006, there at are more than 135 processors to day with an installed daily capacity of above 2.89 million liters. Dairy Corporation had the capacity to process only 60,000 liters a day when it was a monopoly.

The formula can be used on any other commodity – Increase production, have collection sectors to lower logistical costs, set up processing units to suck up the increased production and open new markets for our processed output

As it is now barely a third of what we produce is consumed locally.

There two thirds of the produce is what is giving president Yoweri Museveni sleepless nights, criss crossing the globe in search of markets.

Maybe for the first time in a long while the president has something to hawk that has export-size production. Coffee is top of eth list but also sugar. The latter though has been canibalised by questionable policies that threaten our national sugar surpluses.

The trade ministry licensed other operators in the Busoga region who are poaching sugar cane from the Kakira and Sugar corporation of Uganda ltd (SCOUL) making previous investments in farmer subsidies, research and development increasingly unviable.

"Unlike coffee and milk whose back bones are the small holder farmer, if the math doesn’t add up for our biggest sugar producers, sugar shortages will not be far behind....

However, the dairy industry is far from ironing out all its glitches.

Dairy farmers in Kikuube district western Uganda were lamenting the slide in milk farmgate prices. They complained the fall from sh900 a liter to the current sh600 by their cooperative was making the enterprise unfeasible. They said with the cost of drugs and pesticides, margins are now paper thin or non-existent at all.  They inevitably called on government to put a floor under the falling prices.

This is a good indicator that despite the explosion in dairy processing capacity there are still demand-supply imbalances that need to be addressed. Hopefully by the private sector and not the government.

Thankfully we can not export raw milk. So unlike coffee we need to turn into long life milk or milk powder or its constituent proteins like Casein to export it. In theory it’s the one industry we can capture most of the value addition for ourselves.

People in the know say that for successful animal husbandry tow things are key feeding and genetics. The gains our dairy farmers have made may be down largely to feeding.

In more developed markets the genealogy of the animal, genetics, are value in themselves. Tracking an animals ancestry as far back as possible is good for several reasons but two jump to mind. That it can be certified that there has been no inbreeding, that would affect the health and quality of the animal and relatedly, that the animal has been bred for its best qualities.

Some of our best farmers are now importing semen from as far a field as the Netherlands to improve the quality of their herds, because they do not trust the local breeds. An investment in genetics and its management can ensure we get to the next level of the sector’s development and open all sorts of new markets for us....

While the sugar industry is mostly large plantation farming and our coffee bushes are rather hardy in surviving years of neglect, the delicate nature of dairy production may hold some useful lessons for us in how to increase production in other commodities and develop industry and export markets around them.

 

HACKING THE AGRICULTURE CODE

We met to talk about something else. When that was done, I found out about his farm.

I tend to roll my eyes at stories of urban elite running farms. Often, they are vanity projects, subsidized by their paychecks, that can not stand on their own without the subsidy.

My friend, I will call him Jack, made me seat up and listen when he said he had opted for crop farming over cattle farming, though he is from Kashari, long horn Ankole cow country.

I asked him why, he said he wanted to make money and the mathematics of cows did not add up for him...

So, he went off hundreds of kilometers away and got himself land in Masindi, a large expanse of which he now has 230 acres under maize.

I asked whether he went so far for fear of being laughed out of Kashari, he just laughed.

He tried soya bean, it failed. He tried coffee, the environment was too harsh, before eventually settling on maize. He has a few cows of course, wondering around, more for the aesthetics than anything, I think. They are already costing him, they have been responsible for breaking though his fence to get at the maize. Ten acres he has lost to his cows this last season.

Jack, a lawyer, who spent most of his career working abroad, counsels that it would be suicidal to go into an enterprise his size first time.

“I have been studying this for at least 20 years. I worked in Zambia for 18 years and learnt from my friends the ins and out of commercial agriculture there,” he said. And even on his current land he tried out on a small scale, things he thought would work, before jumping in with both feet.

There is a visible gleam in his eyes when he talks about how his experiment has turned out. He has so far done three years and he is keen to build up to 500 acres. Renting land in the area is about sh150,000 an acre per season. There are two maize seasons March to July/August and again from August to December.

“I think another 70 acres for maize will be good, the rest I will leave for the cows, coffee and I want to get back into soya bean,” he says in between sips of his tea.

Jack is looking forward to next season, which planting season will soon be under way, because he discovered and tested a ferterliser that will significantly increase his yields in the next season.

“I am doing about one ton an acre now, with good rain about 1.2 tons with this new ferterliser I am seeing up to two tons an acre,” he says gleefully.

But back to why he cannot be bothered with cows.

“There is no grading as a determination of quality in this country. So the beef from scrawny cows sells at the same price of that cow’s meat which has good genetics and has been looked after well. As long as that continues, a real beef market is hard to see here,” he said.

He points to South Africa where President Cyril Ramaphosa’s Anklole cattle are selling for hundreds of millions of shillings each.

With milk, the wild price fluctuations mean one probably has to set up an processing plant, that means building a large enough herd to do that, a huge capital outlay, which again is a discouragement. It can be done but crop farming is the low hanging fruit.

“Here I have two seasons a year, my friends in southern Africa had only one. It is a nobrainer.”

However, he does not live on the farm. He visits it once every two months, leaving the day-to-day running to his manager.

“I got a young man who was willing to work, had him trained at a agiculture school and sent him off. During the week we talked a lot about integrity and long-term thinking. He has turned out very well,” he said.

In addition to his salary, he is paid a commission on every crop and Jack has helped him get land in his home area and build a house.

In addition, he has an app which monitors his tractor, the biggest asset in his farm. He showed me where it was in real time. The app also monitors fuel consumption, mileage, whether the tractor is due for service and any number of metrics.

"Other than expansion of his farm he is now building storage facilities, mainly to be in control of the price he gets for his crop. Crop prices fluctuate according to seasonal patterns. Prices fall during the harvest and jump when the harvest crop is exhausted....

During his journey Jack was also surprised to find a lot of help for agriculture available.

“I borrowed using the ACF (Agriculture Credit Facility) to buy my tractor and also insured my first failed crop and got reimbursed what I put in. I think these facilities are just not marketed well,” he said.

With the ACF his bank dragged their feet for two months before a chance meeting at the golf course, after which a few calls were made and he had his tractor within the week.

He acknowledges that it is still early days and that he continues to learn, but he is convinced the future is bright.

“I think the urban elite should seriously consider taking up crop farming. Whichever way you look at it, it works,” he said

 

UCB; FLOGGING A DEAD HORSE

Easily half of all Ugandans alive today were born after 2000. This is a source of great opportunity for the country, in that if managed well, this young population will deliver a boom in the economy in coming years as they become productive citizens. 

On the flip side, it also gives opportunities for revisionists to confuse the youth about the country’s history.

In the last week the fate of the defunct Uganda Commercial Bank (UCB) and the role of former central bank governor Emmanuel Tumusiime Mutebile in its demise came up. It was suggested, no, forcefully declared, that Mutebile’s closure of the UCB was part of an imperialist plot to weaken the economy.

I personally reported on the UCB privatization process, but before that the seeds of its destruction were laid by bank and government officials who thought they could suspend the laws of economics, politics and good sense to keep the bank afloat, accelerating its demise instead...

By the time the NRM came to power in 1986, UCB like the rest of the economy was on its knees. It was the biggest bank by deposits and with 36 branches – a branch in almost every district, was the biggest by branch network as well. But the huge branch network was more a liability than an asset as they were not connected and could not activate the synergies that would come with the branch network.

To illustrate, as recently as 2000 before it was privatized, if you drew a check in UCB Kasese and came to cash it in Kampala, it would take at least a month before your account was credited.

It does not take a detective to surmise the shenanigans that would go on to speed up the process.

This is important, because in the 1988/89 budget, then finance minister Dr Crispus Kiyonga announced the launch of the Rural Farmers Credit Scheme (RFCS), which was supposed to avail credit to small farmers, he however lamented that the UCB network, through which the scheme was being implemented, was too limited. He reported with glee that the Bank was set to open 136 new branches in the coming year to facilitate the scheme.

This was obviously a political decision.  There was no mention of how much government was going to give UCB to aid this project, which would have been necessary to shoulder the four-fold expansion of its network. In the next budget he reported that the bank branches had actually risen to 170.

Bankers tell me that to open a new branch anywhere in the country today would take at least $350, 000 or more than sh1.2b and that’s before salaries and overheads. So even if we reduced the cost of opening a bank by a factor of 10 to about $35,000 the bank was going to lay out at least $4.8m in a year to make the minister’s wish come true. Even the government of Uganda would be hard pressed to come up with these figures at the time. In the previous year government had collected sh17b in tax revenues or about $113m at the official exchange rate of sh150 to the dollar.

So, the bank must have dipped into its already strained resources to meet this commitment and it would not be a stretch to imagine that, they used depositors' money as well, in the hope they would put it back before customers realized it.

This did not happen, as the RFCS was a spectacular disaster that accelerated the bank's downward spiral. The general economy did not benefit from the scheme , the evidence being that 40 years later we are still a subsistence agricultural economy....

It was no wonder then, that one-time UCB boss Professor Ezra Suruma reported in his book “Advancing the Uganda economy” that cash was short in the bank at one time, that to cash your check at the main branch, you would be asked to wait as depositors came in and their money given to you. No bank would reach that state of illiquidity now before it was shut down. Which is as it should be.

While the connected types are blamed for borrowing the money and running, the unsustainable expansion of the branch network egged on by armchair economists, takes the bigger blame for the bank’s troubles.

And the government tried to save the bank. It swallowed all the bad loans that resulted from the RFCS, and placed them in the Non-Performing Assets Recovery Trust (NPART), filling the ensuing hole in UCB’s books with sh100b.

Finance minister Jehoash Mayanja Nkangi lamented that with those funds, he would be able to build three new classrooms for all schools around the country. That’s the cost of government intervention the critics do not factor in their musings.

But after cleaning the balance sheet, UCB went right back into its evil ways, accumulating bad debt and generally acting as a weight around the neck of the industry and the economy.

"So, to stop further hemorrhage government stopped the bank from lending, with all deposits it got going into buying treasury bills, which in 1992/93 were traiding at more than 20 percent, explaining how UCB became profitable again just before its privatization...

 But the bank was supposed to lend to the public and not to the government. People in the know discount the profitability of the bank at this time, as it was not serving its core function.

In a nutshell that is what led to the privatization of UCB, government could not support it and it was leading to the inefficiency of the entire banking sector.

The government insistence and Mutebile’s eventual disposal of the bank has actually ensured that the bank serves its role. So much so that UCB, now Stanbic, pays in taxes every year for the last three years, the equivalent or more than $20m. This is the amount Stanbic paid for UCB.

The revisionists want us to believe that selling the bank to foreign capital, has been a disservice to the economy, while presenting no evidence. It is just sexy to abuse foreign capital. The evidence paints a very different picture.

UCB was privatized in 2002 since then across the industry, deposits have increased to sh30.2trillion as of June last year from sh1.33trillion in 2000 (I couldn’t find 2002 figures in time for this). But more importantly lending jumped to sh18.3trillion from sh0.53trillion during the same period. This growth is not solely attributable to economic growth, as credit grew by about 17 percent annually, almost thrice as high as the average 6 percent growth shown by the economy during the comparable period.

While credit to real estate development, personal lending, trade and manufacturing are still ahead of agriculture, it is safe to say it is Ugandans who have benefited the most from this trend. Personal lending grew to sh3.7trillion in June last year from an insignificant number in 2000.

The critics seem to suggest that if banks were locally owned we would have done better, suggesting maybe locals would be given favourable rates and managers would look away when they default, is that the kind of banking industry we want? Especially since the beneficiaries would be an even narrower base of connected people as we have seen in the past.

If as Ugandans we are failing to gain funding for our personal projects the evidence shows it is more a function of our poor business acumen than that UCB is dead.