Primary commodities post negative growth

Uganda will continue depending on donor funds for development should the agricultural sector continue exporting primary commodities whose volumes have registered negative growth for the first time in 10 years.

Traditional cash crops comprising of coffee, cotton, tea and tobacco recorded a -15.8 per cent growth in 2011 down from 12.5 per cent recorded in 2001 and 2002, leaving the economy vulnerable to external shocks arising from prices of primary commodities at international markets.

Coffee that has for long led in agricultural export earnings has declined sharply. In 2008, the country exported over 200,000 tonnes-earning about $400m, but that has since slumped to 145,168 tonnes valued at $284m in 2010. While food crops dropped from 5.7 per cent in 2001/2002 to 2.7 per cent in 2010/2011, a scenario that spells doom to food security.

“This means that the country will continue to depend on the foreign aid and it will be catastrophic for the government to continue ignoring the agriculture sector that employs more people because inequality gap will widen and government criticism will increase,” said Mr. Lawrence Bategeka, a researcher at Economic Policy Research Centre(EPRC).

Although donor support has been declining from about 50 per cent to about 30 per cent in national budget support, it is unlikely that the country will be donor independent any time soon going by the difficult economic terrain characterized by double digit inflation and reduced exports.

Uganda is an agricultural economy employing over 70 per cent of the rural population. The country’s exports are largely dominated by raw agricultural produce, implying that it fetches low values at international markets.

Last year, International Monetary Fund (IMF) predicted a second round of global economic recession, citing weakened recovery from the 2008 global financial crisis and increased downside risks. Africa and Asia are likely to be affected this time, exposing Uganda’s export sector with products like coffee, cocoa, fish and flowers that traditionally enjoyed demand in the European markets at risk.

“A big macroeconomic implication is that the balance of payment for Uganda will be affected negatively. Uganda will earn less as a result of decline in agriculture. This will bring depreciation pressures on our currency as the shilling will continue to struggle against the dollar,” said Mr. Moses Asasira, Project Development Consultant at Reev Consult.

An EPRC study on Institutional Constraints to Agriculture Production in Uganda attributes the negative growth to structural constraints within the agriculture ministry and uncoordinated efforts among public entities that has seen issues of increasing productivity neglected. For instance issues of irrigation to address deteriorating climatic condition, access to genuine seeds and fertilizers have all be neglected, yet are paramount to increase productivity and improve food security.

cap: Much as the country has diversified exports to include non-traditional commodities like fish and fish products, hides and skin, livestock, cut flowers and cereals, the earnings remain meager.

The sector’s contribution to gross domestic product now stands at 0.9 per cent down from seven percent recorded 10 years ago. This implies that Uganda will have to surrender her position as a regional food basket to countries that have better agricultural policies. With increasing numbers of foreign supermarkets, Ugandans are likely to support other countries’ agricultural sectors by buying imported foodstuffs.

editorial@ug.nationmedia.com