Food demand surpasses supply in oil pipeline area

A new study shows that a significant demand for most food items has been recorded in the so-called pipeline region, with meat (66,660 tonnes), eggs (532,800) and milk (76,800 litres) taking the major share of food items demanded in the first year of pipeline construction. A review of the food demand and supply situations in the oil districts during the oil development phase (2018-2020) indicates that the supply of cereals, pulses (legumes), vegetables and fruits increased more than tenfold from the oil exploration stage to the development stage.

The study undertaken by Makerere University’s Economic Policy Research Centre (EPRC) puts the unmet demand for beef in the pipeline region alone at up to Shs500b. It valued the available supply at Shs37b only.

Mindset change

While the forthcoming oil production comes with multiple opportunities, Mr Christopher Omara, the Nwoya Resident District Commissioner, regrets that farmers in the district have not taken the opportunity seriously. He says very few farmers’ associations and groups are registered with the Petroleum Authority of Uganda (PAU) as suppliers and the production of specific crops targeted for supplies during the period is still in very low quantities.

“Last week, Total E&P came to Nwoya main market and bought all the tomatoes in the market and they still needed more. They had just bought all the tomatoes from Pakwach main market.

Now, this tells you that both districts cannot even supply tomatoes for a day,” Mr Omara disclosed.

“For our farming communities to tap into these opportunities, it will require high levels of organisation and hard work because the vegetables consumed in the district are those shipped from eastern, western and parts of central Uganda. The indigenous communities still have a low mindset of producing cereal crops alone,” Mr Omara adds.

According to the EPRC study, the pipeline districts account for more than one half of the food types demanded by the O&G sector. For instance, the estimated total value of demand for cereals in the pipeline districts is at Shs405b compared to Shs152b demanded for the same product in the O&G districts. The demand for meat in the pipeline districts is estimated at Shs507b compared to Shs163b for the O&G districts.

“The demand for meat and milk also increased substantially, while supply remained low. This disparity shows a wide scope for improving the supply of meat through support to local production systems in both the oil and gas and pipeline regions,” the report reads in part.

Unmet needs

Although there were deficits in the supply of vegetables and fruits in the O&G districts during the oil exploration stage one and two, the overall demands for vegetables and fruits remain unmet, the report further states.

The demand for vegetables and fruits in the O&G districts is expected to grow from 89,000 tonnes in the development phase to 158,000 tonnes in the first phase (first five years) of production and 270,000 tonnes in the second phase of production (10 years).

For cereals, in the pipeline region, the demand will increase from 204,000 tonnes in the oil development phase to 341,000 tonnes in the first phase of oil production and 615,000 tonnes in the second phase of oil production, the survey reveals.

In the O&G districts, the demand for cereals is expected to grow the most. It will climb from 180,000 tonnes in the oil development phase to 317,000 tonnes in the first five years of oil production, and 539,000 tonnes in the second 10-year phase of oil production.

Similarly, in the pipeline region, cereals represented the biggest growth in demand from 501,000 tonnes in the oil development phase to 854,000 tonnes in the first phase of oil production, and 1,503,000 tonnes in the second phase of oil production.

“This forecast suggests that there is an opportunity to export cereals, pulses and vegetables in both regions and an opportunity to invest in the supply of milk and meat in the O&G region, and meat in the pipeline region,” the EPRC report notes.

Purchase drivers

At this stage, more than 80 percent of all food types are to be sourced from within the region by purchasing locally-grown foods. The sourcing of the foods is linked to safe food supply, low prices and low transport costs.

A disaggregation suggested that the overall largest driver of local food purchases of cereals, pulses (legumes), chicken, other foods, and cooking oil is freshness (29.4 percent), low transport cost

(27.8 percent), and low price (22.3 percent).

The O&G, as well as the agriculture sectors, identified in Uganda’s Third National Development Plan (NDP III) as key ingredients to spur economic transformation and development, have the potential to unlock strong development linkages, the report reveals.

While agricultural products account for a noteworthy portion of Uganda’s foreign exchange earnings, and contribute the largest share (71 percent) of merchandise exports, according to a 2021 report by the Uganda Bureau of Statistics (Ubos), more than two-thirds of Uganda’s population is engaged in the agricultural sector.

It is estimated that close to one million people will be attracted by the intensification of several investment and development activities in the O&G districts, as well as the pipeline regions.

Deficits

Whereas experts predict that the exodus will cause a sharp boost in demand and market opportunities for food products in the oil regions, studies have suggested that persistent challenges constrain the exploitation of the various linkages between the two sectors. According to the EPRC, while most business enterprises are small and registered with local governments, they cannot meet the pre-qualification required to register on the National Supplier Data Base.

The EPRC study also suggests that inadequate articulation of the standards criteria for products required by O&G sector players has constrained producers from meeting quality expectations, including insufficient infrastructure such as community feeder roads, storage and processing facilities and irrigation.

Poor adherence to production practices, low input standards and quality, inadequate financing, lack of easily accessible long-term credit, insufficient transport infrastructure, poor coordination and implementation of policies are also listed as bottlenecks by the EPRC.

“Poor farmer coordination and capacity have affected their ability to tap into and benefit from the opportunities presented by the linkages yet farmer organisations are a platform for access to credit and support from government programmes such as ACDP, Emyooga and Parish Development Model (PDM),” the report reads.

Solutions

To surmount the hurdles, the researchers suggest that the government should recognise, digitalise and simplify intermediate and temporary legal status for firms’ registration. This, the EPRC adds, will ease small firms’ participation, including facilitating farmer associations at the district level to set up and manage storage and processing facilities to help maintain a stable food supply, export surpluses, among others.

“The O&G sector, in collaboration with Uganda National Bureau of Standards (UNBS), should articulate and disseminate required food standards to create awareness, which enables adaptation and implementation among local producers,” the EPRC says.

The Petroleum Authority of Uganda (PAU), in collaboration with local governments, should support the creation of strong farmer organisations to enhance linkages and build complementarity in disseminating information, technology, standards, etc, the EPRC further notes.

Ms Linda Auma, the chairperson of the Parliament’s Committee on Agriculture, fears that farmers could lose a lot of opportunities due to the conflicting priori[1]ties of the government.

“When we are to compete, we have to move in a more actionable manner other than sweet statements without action. The government should plan, prioritise and finance these initiatives,” Ms Auma says.

Whereas for three consecutive budgeting cycles, the government has been focusing on agro-industrialisation as part of an effort to prepare farmers to tap from the oil production activities by trading their produce, she says financing has been limited.

“We have good plans but priorities in financing sometimes deter the progress of these plans,” she says.

Oil and gas

According to Petroleum Authority of Uganda, over the past three years, the country’s Oil and Gas industry has made significant strides.

The body estimates that at least 14,900 Ugandans are employed in the O&G sector and local companies securing contracts worth $1.7b. To date, nine production licences have been awarded to more than 14 fields in the Albertine Graben.

The nine fields, including Ngiri, Jobi-Rii, Gunya, Kasamene-Wahrindi, Kigogole-Nsoga, and Kingfisher fields are planned to be brought on stream.

The remaining five fields with production licences (Ngara, Ngege, Mputa, Nzizi and Waraga) are planned to be brought on stream five to eight.