Uganda’s Budget suitable for Agribusiness. It’s time to invest.

The recently passed budget for 2019/20 by the Government of Uganda registered some major positives that are crucial for all Ugandans to know, appreciate and act upon. On the whole, it is a budget that is transitioning our economy from being hell bent on consumption to a production oriented one.

The Agriculture sector looks to be garnering attention from the powers that be considering it employs the bulk of the populace and hence can play a key role in the poverty alleviation agenda. Information got from the Background to the Budget and the budget speech reveals some of the following highlights:

Agro-produce trends

• There is heavy reliance on primary commodity agricultural exports (largely unprocessed).

• Uganda’s formal exports to the East African Community (EAC) partner states have been on the rise, increasing from US$ 425.2 Million in 2010 to US$ 1,255.28 Million in 2018.

• Exports to Kenya and South Sudan registered the fastest growth.

• Uganda still has significant room for growing her exports to non-EAC COMESA countries.

• Uganda’s informal exports to neighbouring countries were at US$ 550.4 Million in 2018.

• Export earnings from non-traditional agricultural exports have recorded a significant increase e.g. beans and maize that increased by 123 and 59 percent respectively.

General outlook

• One third of Uganda’s population (approx. 20 million) is expected to be living in cities by 2040.

• Agricultural productivity is far below its potential level.

• Uganda has one of the youngest populations in the world.

• The highest percentage of the working population is engaged in Agriculture, Forestry and Fishing at 65% according to the Uganda National Household Survey of 2016/17.

• Enhancing value addition and industrialisation is one of the Government’s Agricultural sector policy objectives under implementation.

• Approval of the Buy Uganda Build Uganda policy has improved Uganda’s trade balance significantly

• Government’s mission is to transform subsistence farming into commercial agriculture.

• A key agro-industrialisation pillar by the government is to support the development of Product Value Chains that link nucleus entrepreneurs to out grower farmers. An example is the Citrus fruit factory in Teso sub region currently producing Teju Juice.

• Affordable credit is to be availed by Government to the tune of UGX 40 Billion Shs through the Microfinance Support Centre for onward lending at not more than 12% interest.

• Post harvest facilities are to be built by Government in some districts.

The extracts I have shared above are part of the Budget for 2019/20 and very indicative of where we seem to be headed as a nation. The more highly productive elite have tended to gravitate towards being consumers and hence adjusted their tastes to rely on largely foreign products. Take the case of opting to purchase imported canned beans or groundnut paste despite having a lot of local alternatives that need support to grow. This has led the government to consider increasing taxes on some of the items it believes are or can be sufficiently produced locally.

The Uganda Revenue Authority released a list of products with increased tax and staying in line with Agro-products, below is an extract;

By ring fencing some products and increasing the tax for their importation, a loud message is sent out to us citizens to produce them locally. From the above list, most of the product items can comfortably be produced by Small and Medium Enterprises. Add onto that the various initiatives being put in place by the government as well as the general regional economic trends that indicate a growing market base.

This is the time for those interested in investing to consider getting into areas like Agro Processing in order to take advantage of the commercial production push by government among farmers. The draft National Investment Policy (2018) observes that the trend of investment in Uganda has been increasingly skewed in favour of the non tradable economy and buildings in particular. This trend is definitely unfavourable because the return on investment from buildings is generally much lower than that from equipment and machinery that are closely linked with modern tradable sectors in GDP.

Investing in Groundnut, Honey, Tea, Grains, Coffee, Milk processing costs significantly less than setting up multi-storied structures in urban centres and yet offers better returns over the years whilst guaranteeing employment for many individuals along the agricultural value chain.

This should sound as a wakeup call to those with interest in benefitting from this economy in a productive manner. There are numerous low hanging fruits in the Agricultural sector that you can take advantage of especially at the processing level. The items extracted from the budget at the start of this article should give you a good indication of what to do next.

James Wire is a Technology and Business Consultant based in Kampala, Uganda.

Follow him @wirejames on Twitter

Email – lunghabo [at] gmail [dot] com