ARE FARMERS & BANKERS SPEAKING AT CROSS PURPOSES?

Two events within days of each other, served to highlight the struggle of agriculture to take its rightful price as a key driver of the economy.

To begin with debate on the Coffee Bill begun in parliament’s agriculture committee. The bill that was presented to the house by government earlier in the year has kicked up a storm. One of the offending clauses in the bill was a provision that all coffee farmers be required to register their farms and coffee trees.

The bill stipulates that this will apply to farmers with 50 or more trees to make planning for the sector easier, as well as ease the delivery of services to them.

The bill also prescribes deregistration of coffee farmers who do not look after their farms or nurseries.

The critics have complained that the law is too restrictive and may fail efforts to grow production by disadvantaging small farmers, who would miss out on planned assistance to the sectors.

Related to this the Uganda Bankers Association had their annual conference where they grappled with the puzzle of why more isn’t being lent to agriculture.

"Going by Bank of Uganda statistics in the last 12 months lending to agriculture has accounted for 12% of total loans disbursed. Of that less than half or 36%, goes into production, which is what most people think about when they are talking about agriculture. The other 64 percent goes to processing and marketing of agricultural produce...

The theme of the bankers’ conference, “Derisking financing and investment in agriculture to provide youth employment and inclusive growth” was appropriate. Lending to agricultural production – in the way we do it in this country, is too risky.

Reporting on the meeting the New Vision had a headline “You do not understand us, farmers tell bankers”. I could imagine a banker reading the paper that morning and thinking the headline should actually be “You do not understand us, bankers tell farmers”.

It is an interesting relationship. The bankers are doing just fine without trying to push for business in agriculture. Lending to manufacturing, trade, real estate and personal loans accounts for seven in every ten shillings they lend, so from where I am sitting, the farmers have all the work to do to make the bankers take them more seriously.

At the very basic level the banker lends to those who can pay him back. This means one has to have a proven income that will be consistent into the future.

The challenge for most farmers is to prove that they even have an income. Secondly, given our overreliance on, rain, the natural fertility of the soils and the good nature of neighbours, vermin and pests not to raid our farms, a future income is hard to project.

A farmer in the Netherlands controls the climate and water intake of his plants by growing his crops in a greenhouse or zero grazes his cows and his feeding and milking process are automated. When such a farmer heads to the bank he will not only have his revenues, but a complete set of audited accounts going back a generation or two from which plotting projections will not be like playing the lottery. In addition either Dutch farmer will have invested in security of his property, giving the bank comfort that the future revenues have a good chance of being collected.

These are additional costs that will raise the cost of production, but will very well increase the value of the products.

Which brings us nicely around to the registration and regulation of farmers as proposed in the coffee bill.

The intention is that this will bring us in line with international standards of agricultural production. In western markets the concept of traceability is gaining traction. Buyers want to know where the coffee beans come from, are they grown organically, are child labourers being employed and a host of other qualifications we may shrug off but which could mean the difference between getting $10 cents more or less for your product.

So yes, the small farmer has cause for alarm.

If you have your five trees and are unregistered, coffee buyers would not want to mix your untraceable coffee with their own, for fear of a market backlash.

 A few years ago a tobacco exporter was blacklisted by international buyers because one consignment was contaminated with plastics and other debris. The exporter was able to trace where the problem well and remedy it, because all its farmers are registered. But this was after losing millions of dollars in export contracts.

I suspect all sugar outgrowers are registered too. For ease of management in that case, as we consume our won sugar.

Understandably opposition to these new proposals has its basis in the history of the crop, which was mostly grown on small holdings in Uganda. We have a choice to adopt the new law to our practices, however painful they maybe, with the promise of greater competitiveness of international markets or reject them and forgo increased revenues we would earn up and down the value chains.

Clearly leadership will be required to get the small coffee farmers on board. Either they expand their holdings – the Marie De Antoinette option or come together through cooperatives to adapt to the new regulations.

Coffee is obviously the pilot on this kind of law, one can expect it will be rolled out to all other crops and agricultural produce --- birth certificates for livestock, necessary, even critical, if our products are to compete internationally.