Support value addition to address falling maize prices

Eric Ssempabo

What you need to know:

  • Competitiveness. Government has moved to stabilise prices through Shs100 billion loan facility to maize dealers with an intention of buying off the excess produce. This is a desperate fix, but is not a solution to the problem because it does not address traditional demand against supply mismatch and is not sustainable. Local maize surplus has always surpassed local demand.

With the high amount of rains we received early this year, everyone can say it has been a good season, because of the bumper harvests by farmers.
Indeed it is a bumper harvest with an estimated 1.7 million metric tonnes produce received in the season. Over the years and according to the East African Regional maize supply and market outlook report 2017, Uganda is ranked as one of the maize surplus-producing countries in East Africa.
Typical of such a bumper harvest, the quality of maize in most places is poor with high levels of aflatoxins due to post-harvest handling constraints.

Unlike Kenya, local demand for maize products does not match the supply due to culture diversities regarding food varieties and low value addition. Most of this surplus has traditionally been offset by export markets such as Kenya, South Sudan and Rwanda.
This, however, is being challenged due to agriculture revolution being initiated for maize self-sufficiency from Kenya, our main trade partner.
Value addition on the product is still very low with a few beer companies, few developed product lines (maize snacks maize flour) and a nascent livestock sector.

Government has moved to stabilise prices through a Shs100 billion loan facility to maize dealers with an intention of buying off the excess produce. This is a desperate fix, but is not a solution to the problem because it does not address traditional demand against supply mismatch and is not sustainable. Local maize surplus has always surpassed local demand and due to quality constraints, our maize has been attracting low prices on the export markets.
What is the cause? The FY 2016/17 Budget, put a 30 per cent Excise duty tax on opaque beer and this saw the prices of the traditional beer products such as Chibuku increase to match the prices of other cleaner beer products such as Senator at Shs2500.

Opaque beer was created to support government fight illicit beer such as waragi sachets and it is made out of maize. Because the product has close substitutes such as malwa, bushera, tonto, among others, it became uncompetitive on the market.
This led to the closure of the Shs14 billion factory, which was purchasing 7,000 metric tonnes of maize and working with more than 1,000 farmers, providing employment and paying VAT of Shs5 billion taxes to government.

The company’s demand for maize was expected to grow to about 25,000 metric tons in two to three years. Consequently, the 7,000 metric tons of maize has not been bought and prices have reduced to Shs150 from Shs200 per kilogramme in many places.
As a solution, government needs to support value addition for this sector to take off through addressing competitiveness constraints such as favourable tax regime for agirprocessing, address access and cost to industrial power, address post-harvest handling aspects of storage and promote livestock development through improved breeds.

Mr Ssempabo is a senior private sector development officer, Private Sector Foundation Uganda (PSFU).