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During colonial times, Uganda’s economy was largely driven by cotton and coffee, but 60 years since the East African country’s independence, the former has fallen on hard times while the latter, despite various setbacks, has kept the pace, Derrick Kiyonga writes.
Uganda is largely an agrarian economy, with Uganda Bureau of Standards (Ubos) estimates indicating that about 70 percent of Uganda’s working population is employed in agriculture. But between 2019 and 2020, trade figures came with a shocker; gold, with $1.7b, had eclipsed coffee to become Uganda’s most noteworthy export.
Coffee and cotton, Uganda’s two traditional cash crops, are normally attached to the emergence of British colonists, but coffee had been grown behind people’s houses long before John Speke, the first Briton to arrive, had set foot in Buganda in 1862.
What the British ended, in 1894, was the casual growing of coffee when they crafted a plan to join and combine the region’s communities, chiefdoms and kingdoms into a single governable state, ultimately leading to the creation of the nation of Uganda.
The British commoditised coffee by discouraging the habit of chewing coffee beans, telling them it’s better to pound it into powder and drink it. With the passage of time the indoctrination bore fruits with coffee transitioning into a cash crop after losing its cultural worth.
On the other hand, the roots of cotton in Uganda have historically been shrouded in inaccuracies with many text books attributing the introduction of the crop to Kristen Eskildsen Borup of the Church Missionary Society (CMS) in 1903, but this was far from the truth.
Cotton was in existence before the colonialist and this was documented by Sir Harry Johnston, who arrived in Uganda in 1899 as the first British commissioner, in his book The Uganda Protectorate in which he said Uganda’s cotton grows wild but like tobacco, might conceivably not be worth exportation.
British aristocrat and philanthropist, Sir Thomas Victor Buxton, in his 1904 memoirs corroborated Johnston’s narrative.
“Cotton is found growing wild in Uganda and a sample recently submitted to a Manchester expert was pronounced by him to have a distinct commercial value. It is intended to make experimental plantings of several of the best varieties of cotton and should these plantings be successful, steps would be taken to promote the growth of the article on a large scale for export,” said Buxton.
While it’s not true that Borup introduced cotton in Uganda, what is not to be denied is that the Europeans introduced a better type of cotton they wanted grown in Uganda.
In the book Handbook of Uganda, HB Thomas and R Scot say exotic cotton seeds into Uganda were imported from Khedivial Agricultural Society of Egypt, but they didn’t say the precise date.
It is said that in March 1904, Borup kicked off distribution of the two and a half tonnes of cotton seeds earlier imported from the British Cotton Growing Association (BCGA) which was instituted in 1902 with the sole purpose of introducing cotton growing in the British Empire.
In his book Uganda an Indian colony, Prof Samwiri Lwanga Lunyiigo says cotton growing in Uganda took centre stage in the plans of the British empire because it was seeking alternatives after the American civil war of 1860 had remarkably led to the drastic reduction of coffee production.
“The USA was the main source of cotton for British textile mills and when the war led to the cotton famine, the British began to look seriously for other potential sources,” Prof Lunyiigo writes, adding that Egypt would have been the other alternative but it was politically not feasible. “And here was virgin Uganda where cotton was growing wild!” Prof Lunyiigo writes.
In their paper Three decades of trade policy in Uganda: Two generations of reforms in the quest to become part of the global market, Dany Jaimovich and Dick Kamuganga say, “When Uganda effectually became a British protectorate in 1894 the colonial government encouraged a dual economy in which indigenous crops growers in Buganda and eastern provinces complemented the European owned plantations in western province, particularly Bunyoro.
“The formulation of economic policy was a prerogative of the sitting governor, but the basic premise was to maximise supply of raw materials like cotton, coffee, sugar, rubber and tea for the British Empire and diversify the economy to increase the protectorate revenues from taxing the peasant export crop growers,” Jaimovich and Kamuganga wrote.
The peasant growers of cotton and coffee, according to Jaimovich and Kamuganga, only received a small portion of the receipts by government from these export crops, averaging 36 percent throughout the entire period.
That small indigenous trader, they say, was systematically and forcibly excluded from the market and/or coerced largely through intermediaries such as Buganda chiefs.
In 1902, Prof Giuliano Martiniello says, the international markets were forged through the completion of the Ugandan Railway, spanning thousands of miles from the Indian Ocean to Lake Victoria and facilitating the circulation of commodities, which could now be exported at advantageous costs.
To give an indication of how cotton was critical to the Ugandan economy, Prof Lunyiigo says in 1925, about 94 percent of exports were cotton; in 1947, about 63 percent of Uganda’s exports were cotton and, in 1950, at least 64 percent of the exports, were cotton.
“The importance of cotton to the economy of Uganda between 1904 and the late 1950s is comparable to the importance of oil to the economies of the oil-producing countries of the Middle East,” Prof Lunyiigo wrote.
After World War I, Indians, according to Prof Lunyiigo, began to dominate the ginning of cotton and by 1930, they were ginning 77 percent of the cotton and reached 90 percent after World War II.
Indian domination is further expounded by Prof Martiniello when he writes that British surplus extraction from Ugandan peasants was facilitated by the help of Indian middlemen who controlled the marketing of cotton to Europe and acted as intermediaries in the cotton business: buying cheap from remote zones and selling dear on the European markets.
It was these economic grievances that birthed the Uganda African Farmers’ Union (UAFU) on April 2, 1941. It had Ignatius Musaazi at its wheel, spearheading riots that spread across Buganda. The rioters demanded the right to circumvent the price controls on the export sales of cotton imposed by the colonial government and removal of the local Asian monopoly over cotton ginning.
Musaazi’s UAFU morphed into the Bataka Party in 1946, and it advocated the interests of farmers while rejecting foreign control of the Ugandan economy.
“Pamphlets distributed throughout the countryside attacked the ‘Indian millionaire ginners’,” writes Prof Mahmood Mamdani in his book, Politics and class formation in Uganda. “Ginnery owners found groups of people requisitioning their trucks, cash and petrol, and Indian shops in semi-urban trading areas were sacked.”
In respect to coffee, Prof Lunyiigo says the newly formed federation of partnership of Uganda African farmers sent a petition to the colonial government pointing out inequalities in the coffee industry.
“They pointed out the discrimination between African and non-African coffee growers. African coffee was dried but non-African coffee was pulped and hulled. Now the African farmers wanted to process coffee the same way the non-African coffee farmers did,” Prof Lunyiigo says.
In 1952, there were changes when the coffee industry ordinance was enacted providing for the operation of six coffee curing works of co-operatives.
In 1954, Bugisu was the first cooperative to be formed, but by 1959 about 273 co-operative societies and their input was immediately felt. “By 1956, cooperative unions controlled two coffee curing works and 10 ginneries,” Prof Lunyiigo writes. “In 1960, cooperatives had a turnover of nearly £9m.”
All this was possible because governor Andrew Cohen introduced reforms that favoured African participation in the processing of coffee under the auspices of the Coffee Industry Ordinances.
“A common price structure for similar grades of coffee was introduced thus eliminating the dual structure of prices for African and non-African produced coffee. From 1958 on-wards, natives were allowed to build and own coffee processing factories either as individuals or companies,” Prof Lunyiigo says.
Economic data for the early years after Uganda got its independence in 1962 is scarce, but it’s safe to say that economic growth appears to have been remarkable for the first eight years.
Though copper had been discovered in the western district of Kasese, agriculture dominated the economy, with cotton and coffee comprising 76 percent of exports.
“The export of coffee, cotton and cocoa was complemented by an incipient mining sector in the south and the production of some other raw materials that reflected in a positive balance of trade. Uganda had a relative literacy rate advantage over the other newly independent states in the region as well as good road, communication systems and reasonable medical services,” Jaimovich and Kamuganga write.
Nevertheless, these projections of economic success reversed in the mid-1960s, political factions based on ethnic and religious groups began to emerge, which led to the ouster of Uganda’s first president Edward Muteesa by Apollo Milton Obote, his prime minister who had executive powers.
When Obote took charge of the country, he directed the economic system toward socialism, and in effect adopted a control regime, that’s to say, a mixture of anti-market policies which were largely characterised by the movement toward the closed economy and import substitution policies, heavy handed regulation, sponsorship and promotion of indigenous industry and widespread intervention in the market.
Obote’s impact on the coffee and cotton sectors were immediate. In 1963 he revoked Cohen’s 1952 Cooperatives Societies Ordinance and swapped it with the Cooperative Societies Act, which did away with the critical Cooperative Development Council.
“All the powers now rested with the minister. By 1986, members of cooperatives had lost their cooperatives to managers, politicians and government officers,” Prof Lunyiigo says.
On the upside, cotton and coffee still did well with Obote maintaining support for cooperatives as he gave them money they needed to buy the two cash crops. By 1970, records show that cotton was ginned and marketed through the Lint Marketing Board and also coffee was not far behind cotton.
Nationalisation of corporations and creation of public enterprises narrowed the scope of the private sector in the country’s economic growth process.
More than 90 percent of the population lived in rural areas eking a living mainly from agriculture.
However, the agriculture sector was well structured under the cooperative movement, which played an instrumental role in ensuring access to agricultural inputs and marketing of agricultural products.
“During this period, the economy recorded modest growth that averaged about 5 percent per annum. With foreign aid, literacy rates began to improve and the burden of disease reduced as a result of increased access to health services,” Corti Paul Lakuna, a research analyst with the Economic Policy Research Centre, says.
In 1971, Uganda’s army commander Idi Amin, with the help of Israelis and the British, ousted his boss Obote. Amin immediately declared an economic war, emphatically telling the Indian community that Uganda is not an Indian colony.
In 1972, Amin ultimately expelled Indians, a move that was largely welcomed by natives who scampered to grab property and businesses left by the Indians, but in the long term it had a chilling effect on the economy, more so the coffee and cotton value chain where Indians were a key cog.
The production of cotton fell from 410,800 bales in 1970 to just 74,300 bales in 1977 as farmers gave up on cash crops and concentrated on food crops to feed their families.
When President Museveni’s National Resistance Army (NRA) marched from the Luweero jungles, they adopted the controversial Structural Adjustment Programmes and, among other things, liberalised coffee and cotton marketing by breaking the monopolies of Uganda Coffee Marketing Board and Lint Marketing Board (LMB).
Nonetheless, in the early 1990s, the cotton sector collapsed under the burden of out-dated machinery and other operational constraints, especially unreliable and expensive electricity.
At its peak production period from 1965 to 1970, Uganda’s cotton sector was responsible for 40 percent of Uganda’s export earnings but it has since maintained a low economic profile.
Though the coffee sector thrived between 1994 and 1995, momentarily giving hope for a revival of the sector, the ensuing price flop in 1996 accentuated Uganda’s dependence on the crop in the national economy.
To make up for shortfalls in export earnings, Uganda had to rely in part on compensatory financing from the European Union, funding made available through the Stabex mechanism which was the European Commission compensatory finance scheme to stabilise export earnings of the African, Caribbean and Pacific Group of States, or ACP countries.
With coffee and cotton exports dwindling, Uganda chanced onto other crops such as maize, beans, vanilla, flowers, fruits and vegetables for its export earnings.
“As the diversification drive took shape, alternate marketing channels such as organic, fair trade and other specialty criteria (Utz Kapeh, shade-grown coffee, etc.) also picked up, as did vertical integration activities for the commodity value chains,” the Economic Policy Research Centre (EPRC) says.
According to official records, Uganda has more than 1.3 million family coffee farms, which provide livelihoods to 5.5 million Ugandans, which has catapulted coffee as the economy’s leading foreign income earner .
Though gold had emerged as Uganda’s leading foreign income earner, Uganda Revenue Authority (URA) came clean this year and admitted most of the gold attributed to Uganda is mined from neighbouring countries and dispatched here for refining.
“This implies that the major part of the gold exported is not part of the local and formal production,” the URA report read in part.