Total factor productivity of agriculture in Uganda has been negative since 2000, a new World Bank report has shown. Total factor productivity is the efficiency and utilisation of inputs in production, which means that Uganda has been putting in more than it has got out.
This comes as a surprise for a sector that has been credited as the backbone of Uganda’s economy, contributing to most aspects of Ugandan’s social and economic lives.
The World Bank’s Closing the Potential-Performance Divide in Ugandan Agriculture report offers an analysis of the structural factors in agriculture in the last two decades and how they have evolved over the years. Written in collaboration with the Ministry of Agriculture, Animal Industry and Fisheries and associated agencies, the report also examines the country’s agricultural policies, implementation and the utilisation of public finance and resources.
Holger Kray, the Head of Agriculture Policy Unit Africa Region for the World Bank Group, said that the team was surprised that total factor productivity was negative. “But the numbers were very clear.”
Efficiency is affected by several structural challenges in the sector especially in relation to the resilience of agrosystems and access to finance for farmers that reduce the efficiency and ultimately affects farmers’ income.
Data shows that agriculture annual growth started dropping after 2002, reducing to 1.1% during the period 2004-2008 from 5.4% during 1998-2002.
A 2012 sector policy report on inclusive growth by the World Bank economists said that the growth post-2001 happened despite unfavourable conditions. Most fertilisers in Uganda at the time, they found, were 50% more expensive than in Kenya – same for most seeds and chemicals. Combined with poor infrastructure (especially electricity and roads in rural areas), volatile weather and low technology adoption, farmers were investing more than they were earning.
This remains especially true for the smallholders who are Uganda’s majority farmers.
Some of the reforms that the new World Bank report suggests target complementary goods like rural roads and agricultural research to make agriculture more profitable.
“Ugandan farmers will invest when they can trust the distribution system, and gain access to finance and markets. This requires clear policies that are implemented. It also requires politics to exit the agriculture sector,” Christina Malmberg Calvo, the World Bank country manager for Uganda said on Tuesday.
Malmberg Calvo said that the negative trend in total factor productivity was “something that everyone should do something about.”
The report advises that the government also change its engagement with the sector and take a more regulatory role, lessening its participation as an actor. It critiqued the efficiency of agencies like the National Agricultural Advisory Services and the National Agricultural Research Organisation – for which it provided initial support and funding – and proposed adjustments in operations.
Suggested reforms target the involvement of the private sector (which will bring in the finance needed) and the refocusing of public agencies and spending on complementary goods and regulation.
“We have left our private sector gambling with the difficulties of doing business in agriculture,” former director of Crop Resources for the agriculture ministry, Okaasai Opolot said at the launch. He referenced the unresolved payments to the Uganda South Sudan Grain Traders and Suppliers Association Ltd whom he said “should have been protected by their home government” when the civil war broke out and the South Sudan could not clear payments.
Restructuring agricultural financing to foster reforms in financial institutions would also enable farmers to commercialise and engage along the value-added agrifood chain.
While several banks are starting to become more sensitive to agriculture financing, the farmers continue to find finance accessible. Collateral in a country troubled with land issues, very few smallholder farmers have fixed assets – or when they have access to land, land titles – that they can use remains an issue.
Commonly known after her trade in piggery as “Mama Pig”, veterinarian Emma Naluyima said, “Loan payment schedules are not in line with agricultural seasons. They require coffee farmers to pay monthly instalments even before the coffee season.”
In order for the country to reverse the negative trend in efficiency for the sector, there will have to be concerted efforts across the value chain from all sectors and agencies. Financial investment from the private sector will be one of the major ways that will allow reform.
“Agriculture is a business and must be treated as a business,” said the agriculture ministry’s permanent secretary Pius Wakabi Kasajja.