More emphasis on value addition needed to spur economy
Posted Monday, May 21 2012 at 22:00
Moving away from dealing in primarily raw commodities and trying to develop the commodities through the value addition will boost not only the sector’s growth but also farmers’ profits; making Uganda’s products internationally competitive.
Every year, trucks laden with millions of bags of raw coffee, beans, maize and other agriculture products are shipped out of Uganda to different export markets. But when you walk around supermarkets, shelves are filled with the same imported commodities, well packaged and branded as specialties commanding high prices.
Yet if they were processed locally, more jobs would be created right from the firm all through the value chain till they are consumed. Although there are no actual figures of how much Uganda loses from exporting raw commodities, experts say millions are lost. So are the jobs that would have been created within the value chain.
For coffee — the country’s leading export earner; recent statistics from the Uganda Coffee Development Authority show that Uganda exported 3.2 million bags of coffee (red beans each 60kg) earning the country $266 million.
However, experts say if just 20 per cent of the exported coffee had undergone the full value addition process of roasting and grinding, it would earn the country a mind boggling $443 million.
Mr Daniel Joloba, Project Manager – Inclusive Markets in Agriculture and Trade at Enterprise Uganda explains: “This implies that if all our coffee, using the 2009/10 figures, was fully processed and exported, it would earn the country a tidy sum of $2.2 billion. But because we export our coffee in raw form, the country is earning only a paltry 12 per cent of the potential earnings from its coffee.”
Globally, the total value of coffee drank annually contributes over $100 billion. But out of this, Uganda and other coffee producing countries get about $12 billion in revenue. When unprocessed coffee is sold internationally, it earns only $2 per Kilogramme compared to $10-$70 per Kilogramme for the processed one. Coffee is just a representative of other commodities that Uganda can add value to and be able to earn a premium price.
Processing milk into yoghurt, cream, ghee, powdered milk and butter would stem milk wastage, creating a ‘creamy’ future for dairy farmers. Ditching the export of raw cotton for finished fabrics/clothes or tanning hides and skins into leather and eventually make shoes, bags and other accessories would earn them higher profit.
Value addition has remained a song on many people’s lips with government and the private sector discussing how the country can earn a premium price, create more jobs and earn the country international recognition.
Uganda Export Promotion Board, Executive Director, Ms Florence Kata, says the country is still lagging behind in value addition especially in agricultural products. “We can’t do much and this is rendering us less competitive even in the regional markets where we have a comparative advantage,” Ms Kata said.
However, this doesn’t mean that Uganda is disaster-prone. Some private companies have gone out of their way to follow the value chain approach from the farm to processing coffee and packaging it to UK supermarkets like Waitrose, the US, Asia, South Africa and within the region.
Good African Coffee (GAC)and Star Café are some of the companies which have seen coffee value addition become a reality. Both companies have established processing plants and manage a well-established command of farmers along the value chain.
“We as a new generation of African entrepreneurs believe that we can bring quality products to the global market. We believe we have what the consumer in the North Atlantic market is looking for in coffee; … we have the capacity to design the packaging to make it attractive,” said Andrew Rugasira, CEO Good African Coffee, as quoted in the New York Times magazine in April.
Fish, one of Uganda’s lead exports, has reached the European, US and Asian market not as whole fish but with value added into fillets and packaged to make fish sausages.
Ms Ovia Matovu, Chief Executive Officer, Uganda Fish Processors Association (UFPEA) shares their experience: “Our members have been able to penetrate these markets because we consider value addition very vital right from the resource (lake)-handling, cutting and packaging and these command a good price.”
Jesa Dairies and Sameer Agriculture and Livestock Limited, are the other companies adding value to Uganda’s milk through processing it into different products which are now sold regionally and in India.
SALL’s Chief Executive Officer, Mr Anoop Sharma said that the company is trying to be more innovative by bringing new products on the market, but adds that there is still a gap which needs to be filled.
Ms Kata said: “For Uganda to be competitive, government has to avail more resources to what it has allocated so far.”
In the financial year 2012/13, Budget Framework-Ministry of Finance has placed agriculture as one of its priority funding areas. In its entirety, the framework mentions that unlocking value chains in agricultural produce by extending credit facilities to agro-processors to increase access to sustainable markets will be done.