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Benefits of agro industrialisation to farmers
An agronomist demonstrates how to operate a machine invented for agro industrial processors to chip fresh cassava. Photo | Lominda Afedraru.
What you need to know:
- Recognising the enormous potential of adding value to the country’s sizeable agricultural output as a means of boosting inclusive growth and creating productive employment across the country, the government is aggressively promoting agro-industrialisation.
Most of the farming initiative in the country is based on small scale agriculture where most of the products are commercialised as raw material.
However experts from Economic Policy Research Center (EPRC) think it is important to boost the agro industrial sector where farming produce for the various agricultural products can be processed as agro industrial product to boost the economy.
Background
As with most countries in Sub-Saharan Africa, agriculture is Uganda’s key economic sector.
Despite the sector accounting for only about one-quarter of the country’s overall economic output, agriculture provides livelihoods for the vast majority of the population and generates the raw inputs needed to fuel a small yet growing industrial sector dominated by agro-based manufacturing enterprises. Recognising the enormous potential of adding value to the country’s sizeable agricultural output as a means of boosting inclusive growth and creating productive employment across the country, the government is aggressively promoting agro-industrialisation.
For example, the upcoming National Development Plan III, Uganda’s five-year plan for economic development, identifies, natural resource-led industrialisation, especially agro-industrialisation as one of its priority programs. These efforts also enjoy support at the highest political level, with policy maker declaring that in order to eliminate hunger, famine and poverty traditional subsistence agriculture must be restructured into modern commercialised agriculture.
It’s against this background that experts from EPRC conducted a research about the potential of agro industrial agriculture in the country to benefit farmers and the consuming communities and below are details of the report.
Benefits
In the report compiled by a team of researchers at EPRC which include among others Madina Guloba, Julius Kiiza, Francis Mwesigye, Mildred Barungi and Florence Nakazi they analysed various benefits of agro industrialised farming system.
The benefits include adoption of better production technologies such as irrigation and fertiliser application by farmers, use of improved seed, mechanisation and use of drones to monitor crop pest and diseases.
Others are increasing the supply and reliability of agricultural raw materials for agro manufacturing industries, expanding the export and domestic revenue and creating on farm employment.
Agro-industry outlook
The Report recognises that there are several government initiatives supportive of the agro industrialisation agenda.
Some of these initiatives include support to the production base through input subsidies such as coffee seedlings, oil palm and cotton under the National Agricultural Advisory Services (Naads).
Others are risk mitigation measures such as increased public investment in irrigation and piloting of the Uganda Agricultural Insurance Scheme, support toward value addition such as BIDCO Uganda Limited for oil palm.
The Presidential Initiative on Banana Industrial Development and Soroti Fruit Factory including Nakaseke Tomato processing plant, Kisoro Potato Processing Industries and Egypt- Uganda Food Security Company Limited for beef processing.
The experts note that for the agro industries to operate well, there is need for Agricultural credit facility under Bank of Uganda to support processing and marketing as well as financial support to Research and Development through national research institutions where breeder materials are generated.
The experts however observe that to revamp the agro industrial agenda public funding for agro-industry remains inadequate, uncoordinated and focused on non-transformative activities.
Another key source of development funding is through development partners however, this is increasingly being channelled through projects rather than programmes.
What needs to be done?
The experts recommend that for agro industrialisation to work out well, there is need to identify markets for the products as well as well financing the sector.
Markets for the products
It is important for the government to access external markets for the agricultural products and this is by signing several trade agreements with countries such as Turkey, China, Egypt and other regional agreements
However since some of the regional trade agreements have been signed there is the challenge market penetration in terms of complying with the standards of the products. A case in point is that nearly 73 percent of the agro industries lacking international quality certificates coupled with supply capacity lacking.
Financing for agro industry
This therefore calls heavy investment in financing the sector in the entire agro industrialisation value chain.
Analysing the statistics the team observed that 86 percent of agro manufacturing industries use retained earnings for working capital and to finance fixed assets.
It suggests that access to finance remains a binding constraint that needs to be addressed to expand the production base in order to improve the processing capacities.
However the good news is that the share of agro industrialisation in total private credit increased from 13.9 percent in 2010 to 18.9 percent in 2017.
Specifically the supply of private credit towards agro industrialisation increased from Shs785 million from 2010 to Shs2.317 billion in 2017.This means if agro industrialised agriculture is financed well, there is potential for its growth.
