Tag Archives: Agro Processing

Dairy Milk, the woes of Ugandan exporters


Uganda is a naturally gifted agricultural country. When you see the volumes of production under the largely subsistence approach that characterises our agriculture, the potential is immense. One sector whose potential has been proven is the Dairy Sector.

Milk production in the country experienced a nose dive in the 1970s all the way through the 80s. We relied alot on imports especially of milk products like powder milk, cheese among others. The Dairy Corporation used to collect and process 20 million litres of milk per annum in 1972 but this dropped to an all time low of less than half a million litres in 1983.

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Fresh Milk collection by Dairy Corporation 1980 – 1991 (‘000 litres) – Source EPRC

When the Government came up with the Diary Master Plan of 1993, it was a key turning point closely followed by the enactment of the Dairy Industry Act, 1998. As a result of these interventions, the industry monopoly enjoyed by the Dairy Corporation was removed, allowing other private players to venture into processing.

The Dairy market in Uganda is dominated by small scale dairy farmers who contribute 80% to the overall milk production in the nation followed by 20.0% from the large scale dairy farms. Their production is mainly based on low input traditional pasture production systems making the country one of the few low cost producers in the world.

Liberalisation of the sector has seen annual production grow from 9.3 million litres in 1990 to 2.5 Billion in 2019. Production growth is estimated at 18% per annum. This shows the high prospects the sector holds.

Some of the players include; Brookside Dairy, Jesa Farm Dairy, Pearl Dairy Farms, Amos Dairies and GBK Dairies. Due to local market limitations, they have ventured into the export market with Kenya being the leading destination. A move that seems to have disrupted the dairy industry in that country.

According to the Dairy Development Authority (DDA),exports stood at US $ 60 million in 2016 and increased to approximately USD 130 million in 2017/18, a figure expected to hit USD 500 million in a few years from now if trade conditions stabilise. The increase in the net exports has been as a result of increased compliance and meeting standards of Uganda’s milk and milk products on both regional and international markets due to efforts by DDA in regulation and quality assurance. Dairy exports mainly go to EAC, COMESA countries and SADC SADC, UAE, Nigeria, Syria, Egypt, Omen, USA, Nepal & Bangladesh. The exported dairy products include; UHT milk, ghee, casein, whey proteins, and butter oil among others

The East African community was founded to among others foster a large regional market for goods and services through free trade. However, over the years, trade conflicts have cropped up between some member states. In 2019, Kenyan Egg traders came out in arms over the cheap imported Ugandan eggs and wanted a ban placed on their importation but the government refused to cave in to the demand.

Following the assault of dairy products from Uganda on the Kenyan market, tensions begun simmering as the local dairy sector struggled. This culminated in the slapping of a 16% Value Added Tax on Milk imports from Uganda.

Rwanda had already stopped milk imports from Uganda heavily impacting some companies like Pearl Dairy Farms whose Lato Milk product was on demand.

Having nurtured the Dairy Sector from insignificance to the current successes it is enjoying, it would be foolhardy for the Government of Uganda to simply let it struggle through these challenging waters without intervening. Access to a large regional market is an attribute used to lure investors. With an annual production potential of 10 Billion litres of milk the sector is set for further growth. These non tariff barriers are likely to prevent further investment and kill budding businesses that could have used the EAC market to become significant global industry players.

The onus therefore is with the regional governments to come together and address this and other trade issues being affected by Non Tariff barriers.

James Wire

Small Business Consultant

@wirejames on Twitter

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;

Imported Item Description

New Import Duty

Cooked potatoes, fresh or chilled

60%

Honey

60%

Tomato paste and other preserved tomatoes

35%

Ready to drink juices

60%

Processed Coffee

60%

Processed Tea

60%

Ginger

60%

Jams, marmalades, jellies etc

60%

Semi processed edible oils

25%

Frozen meats (chicken, pork, sheep etc)

60%

Peanut Butter

60%

Bread Spreads

60%

Potato and other crisps

60%

Onions, garlic, leeks etc fresh or chilled

60%

Refined Cotton and Sunflower seed oil

60%

Cocoa Powder in packing

60%

Butter, other fats and oils derived from milk; dairy spreads

60%

Chocolates

35%

Biscuits

60%

Mineral Water

60%

Soap and organic surface active products for use as soap

35%

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