Monday, December 20, 2010
There are other logistical policy and investment issues that must be urgently worked on. For instance, the technical and absorptive capacity in the road fund management through training and recruitment of technical staff must be implemented. The Kasese line and the Busoga railway loop and Pakwach line must be revamped. Portbell pier should be upgraded to meet increased capacity along the central corridor transit route. There is also an urgent need to upgrade Malaba- Kampala line to enable movement of bigger locomotives and longer trains including re-aligning and upgrading of Jinja Kampala section. Mukono Inland Container Depot as a dry port for rail cargo as a pilot project for inland dry port need to be gazzeted and developed with immediacy. The Netherlands, a small country focused on logistics and is reaping big. They put up Schipol airport and port Rotterdam, effectively outcompeting Germany and other economic Ayatollahs’ like France and the United Kingdom in Europe. In the Netherlands, there are some 12,000 companies offering road haulage services, ranging from very small, one-truck outfits to large international players. Nearly 75% of all goods in Europe are transported by road, and some 30% of all cross-border road transportation of goods within the EU is carried by Dutch transport firms. Of these, approximately 500 major and medium-sized operators offer a full range of integrated logistics services. If Uganda focused on logistics, it would double jobs scale in a space of 2 years. Surely Uganda can pull this off!
Of course a developed logistics industry comes with a myriad logistics support services that include banks, leasing companies, terminal facilities etc and preliquisites like highly skilled, flexible, and multilingual labor force; presence of a pro-business government that fosters a favourable operating environment through business-friendly policies on customs procedures and taxation. I know people will be asking- Where will the country get resources/ money to do the above? Well, resources in Uganda are not the problem. With good doing business policies FDI will flow to finance public works through leveraging public-private partnerships. Secondly, the road fund and energy fund can also be tapped. If we stave off corruption and incompetence and thus cut haemorrhage of resources, money will be available to do the above. Anticipated oil resources can partly finance this. And etc.
The Uganda National Chamber of Commerce and Industry will continue to assist Uganda’s business community to take advantage of the emerging immense business opportunities in the region. The reason we exist is to “ENHANCE BUSINESS OPPORTUNITY” through illuminating and amplifying the voice of the business community.
Uganda National Chamber of Commerce and Industry
Sunday, June 13, 2010
For starters, just like graduated tax, hut tax, poll tax etc, PAYE is a mercantilist and colonial tax. It is a direct and non consensual and for the case of Uganda, not commensurate to public good/ priority services that tax payers expect in return from government. This tax which contributes 16% to the national treasury is shouldered by a paltry 4% of the population (employees in formal sectors of the economy- government and private sector)! This also means that 30 million people in Uganda are freewheelers! This tax has a negative bearing on productivity, economic growth and Growth Domestic Happiness on our country.
In my protracted conversations with professionals from around the world on this matter, majority seem to flag a rather naïve narrative that there is no way any government can abandon this easy to collect and guaranteed revenue! That emerging economies like Uganda cannot survive without PAYE! I only recall Prof. Juluis Sen of London School of Economics (LSE), who argued that my proposals would work in countries where tax managment systems are fully developed. I partly agreed with him. I am also comforted by the fact that countries like Honduras and the State of Qatar scrapped PAYE long ago and are shining. Even major economies where levies on personal incomes thrive, these taxes are tagged to social security- contributions to pension and provident funds. I have told proponents of this line that you are wrong! To explain myself, I have presented the following scenarios on how actually scrapping this tax would do economic miracles for this country! Let’s take an example of employee/worker X who earns a gross monthly of 4,000,000UGX, and therefore pays 30% or 1,200,000UGX in PAYE to government every month!
Scenario A: If PAYE is scrapped and therefore employee X retains 1, 200,000UGX and we assume he/she spends his/her money on any sort of consumption. The foregoing means a rise in aggregate demand of the country. In simple terms, increased consumption of goods and services means that industries / factories will increase production, increase number of workers (job creation) and will pay more in cooperate taxes to government. This situation also means that worker/employee X will pay more VAT to Uganda Revenue Authority (For every consumption on consumer and even capital goods and services, VAT is factored and bared by the consumer. Most important of all, the consumer attains satisfaction and happiness. Since scrapping of PAYE means a bigger take home package, the worker/employee is motivated and more productive at work station. This is good for the country.
Scenario B: Let’s assume employee X invests the 1,200,000UGX in stocks, poultry or piggery project/ enterprise e.t.c. The foregoing means that government will earn from issuing license (KCC License if one operates in Kampala), X will create 8 jobs and more at the business installation. There is a multiplier effect here that push more citizens in productive sectors of the economy and adjunct increment in the volume of trade in the country e.tc. If you look at this full circle, government would indirectly collect more revenue from the above scenario as opposed to withholding 1,200,000UGX from X’s gross salary.
Scenario C: If employ X decides to save the 1,200,000UGX in any bank, he/she will consolidate saving and earn interest. He/she will quickly marshal capital finance to invest in small to Cadillac businesses, spread wealth and create employment. The bank will increase loan portfolio pool and thus pay more loan withholding tax to government. More borrowers translate into revenue to government earned on credit facility and bankable projects of borrowers.
The foregoing scenarios demonstrate that by scrapping PAYE government will collect more revenue, increase productivity, create more jobs, spur economic growth and guarantee Gross Domestic Happiness. Instead of relying on inhibitive tax regimes like PAYE, government should instead focus on widening tax base using modernist and rational strategies that don’t hurt aggregate demand and productivity. In a country where majority employees earn peanuts and shoulder extensive social and economic burdens, such a tax –PAYE – is not exactly moral. To broaden the tax base, Government should not encourage selective tax exemptions and tax holidays for large firms. Government should also urgently create an incentive structure that would increase formalization of businesses in Uganda.
Reducing informality would expand the tax base and allow government to increase resources for improving the investment climate and reduce the burden of taxation on the small formal enterprises on the country. To reduce informality, government must reduce the costs of becoming formal and increase the benefits/incentives of becoming formal. For instance, firms that become formal increase chances of access to finance from the formal banking system, allows entrance to higher value supply chains with large formal firms – for lucrative business. Formalization means that SMEs and Big firms will now have ability to seek refunds of their VAT expenditures. The Uganda National Chamber of Commerce and industry will leverage its country wide business networks to deepen business formalization campaign.
Our proposal of expunging PAYE regime was stayed in Minister Bumba’s budget address to the Nation. She however indicated that Income Tax Reforms are on the way. Uganda National Chamber of Commerce and Industry will continue to place this proposal on the table. Let’s continue this conversation.
Uganda National Chamber of Commerce and Industry (UNCCI)
Monday, May 24, 2010
Uganda National Chamber of Commerce and Industry’s Rwakakamba discusses the impact of the dawn of biofuels on food security in Uganda
Activists say increased production of biofuels will lead to increased food insecurity. What is UNCCI's stand on the Biofuel production vis-à-vis food security?What do you consider as the positives and negatives of biofuels?Is it viable for a developing country like Uganda, which normally is faced with food shortages to undertake large scale production of biofuels?
The relationship between biofuel production and food security is largely perception based. It is so because biofuels have both food insecurity and food security causative links. Forexample, since crop production is driven by yield and acrage developments, production of biofuels compete with food crops for arable land and this change in land use may have adverse results. It therefore follows that increased production of biofuels generally leads to substitution of gricultural resources like land, water, labour, fertilzer e.t.c from food crops and this vehemently results in food insecurity. Food scarcity also mean high prices food. However, if you look at some biofuel crops like soyabean or sunflower, they are usually planted at the end of growing season or towards the end of the rain season or after harvesting main food crops such as maize and rice. The implication of this is that farmers will have their main food crops first and then have their biofuel or energy crops for extra incomes to improve their food security. Therefore, the link between the foregoing perceptions lies in puting in place a clear and consensus policy and law on renewable energy that would guarantee a useful co-existance of both food crops and biofuels to contain food insecurity and energy insecurity in Uganda. As a Farmers Federation, we consider food as basic and first line of security for our members and the Country and our primary demand in regard to biofuels is that Government hastens the policy and regulation of biofules. Such a policy should be formulated and implemented with involvement of farmers.
What measures has UNCCI put in place to guard against side effects of biofuel industry on food production?
First of all, our members in farming business in particular have not taken on biofuels in huge proportions. Few farmers are engaged in production of biofuel crops like Jatropha, caster beans, soya beans and sunflower. As for cotton farmers and sugarcane outgrowers we are engaging sugar cane millers and cotton ginners to have farmers benefit from royalties that accrue from use of cotton seed for biofuel and bargasse from sugar cane for energy. We are ofcouse oblivious of side effects or negative effects biofuels can have on environment and food security. This is why, we encourage our farmers to grow food security crops like cassave, engage in production of biofuel crops like caster beans and sunflower during off season, and those farming Jatropha to target barren lands for production. Preservation of environment and ecological integrity of Uganda is central to Uganda National Chamber of Commerce and Industry principles, this is why we consider as unsustainable actions that mean degazzatement and destruction of forests for planting palm oil or sugar cane, unabated destruction of riparian wetlands and degradation of key ecosystems in the country. By mobilising our core agency of farmers and other members in district chambers , we are able to meaningfuly stave off side effects biofuels on food production.
Where (which country) can we cite that has been hit by food shortages yet it produces biofuels?
I only know of Myanmar where the Miltary government leader Than Shwe in 2005 ordered a national drive to plant jatropha, a poisonous nut he hoped would be the cornerstone of a state industry that would capitalise on growing world demand for biofuels. To achieve the foregoing, he forced farmers to stop growing rice for jatropha. Even in cities and townships people were forced to grow it in their yards and along roads. Mynamer will now take decades to jump out of food insecurity and poverty. The lesson for Uganda here is that policy by slogan and top heavy mechanistic methods of work can destroy a country. As a farmers Federation we call upon government and other actors to involve farmers and general citizenry in renewable energy policy formulation, implementation and monitoring to avoid the Mynamer escapade.
If UNCCI believes biofuels will affect food productivity, which other renewable energy sources can you suggest as the way forward?
There are a myraid renewable energy sources like biomas where residues from cropstocks and forests form a feedstock for combustion leading to a powerful energy source. Researchers are also pointing to elephant grass, softwood and cassava waste as cellulose based plants that can produce bioethanol. Our farmers in Rakai and Mukono are using agricultural waste to manufacture chacoal briquettes as a sustainable source of household energy. The foregoing are partly where the wayfoward lies. However, with the right and deeply consultative renewable energy policy and law in Uganda, biofuels may not affect food productivity.
B. Rapid population growth versus food security in Uganda:
According to UNCCI, what is food situation in Uganda i.e. how food secure or insecure is the country (any reports you can provide)
Over the last 10 years, agriculture productivity has been dwindling from 7% to now 1.3% growth! As such agriculture sector contribution to GDP is 21% as of 2009. This is happening at a time when the country is experiencing unprecedented pupulation with fertility rate at 7%. This means that every year there are over a million more mouth to feed. Therefore, once you have a situation where food production fails to match or exceed pupulation growth you have chronic food insecurity as a result. According to FAO the number of households considered food insecure has increased to 124,000 in the Acholi region, up from 86,000, and to 32,000 in Teso, up from 12,000. In Karamoja, the numbers of people who are food insecure are approximately 615,000! If you factor in malnourishment, the numbers double. To this extent therefore, Uganda is still food insecure.
What do you consider as the leading causes of food shortages?
Uganda has immense potential to achieve a food secure status. This will be possible if as a country as a people we foccuss on increased financing for the sector, invest in restoration of our invironmental and ecological integrity (for example Uganda loses , put in place a strategy to contain adjuncts of climate change, resolve the issue of land policy to gurantee ownership and user rights of land by farmers, remove barriers to markets by investing in market infratracture, open up community access roads to link producers to markets, clean up input markets and guarantee rights and access to seed, shift to a more predictable farming systems as opposed to chance based agro systems that feed on rains to survive. We have to invest in value adition, these are neccessary investiments to have surplus
What is UNCCI's view on the rapidly increasing population in Uganda vis-à-vis food security? i.e. how will the population increase affect food security?
Uganda has one of the highest fertility rates and one of the fastest growing populations in Africa. The current population growth rate is 3.2%, compared to the world’s average of 1.2%. At UNCCI, we think that the size of the population perse’ should not cause discomfort. What should concern us is the quality of the population. For instance having a skilled and inspired population in farming would have an indelible positive impact on the agriculture sector and transformation in real terms of our country. However,the rapid growth of low quality population in such a short time can have serious implications for Uganda’s aspiration to evolve as a middle income economy over the next 25 years. The current population growth and fertility rates that are not in consonance with requisite resources have serious implications for food security, energy security, water security, housing security etc. Therefore a rational policy and interventions that addresses the balance between population growth and proportional sustainable resources and technologies is important. And such a syndication should inform this raging debate.
How is the rapidly increasing population and urbanisation likely to impact on food security?
Principles of classical economics project to us a thining that increase in population and urbanisation translate into massive demand for food stuffs and products and as such the new found demand would induce supply. The interplay of demand and supply would also mean increased production and spread of wealth amongst the population. Such a population would be cushioned from food insecurity. This ideal situation would occur if we have requisite policies, inspiration, strong / organised farmer groups, infratructure and skills in place. Our government and other actors must focuss on this to ensure food security.
Reports on population growth and how the rapidly increasing population and urbanization likely to impact on food security? comment on the increasing urbanisation where the food producing population (youth) continues to migrate to urban centres.
The issue of young people shunning agriculture for boda boda and the service sector is increasingly becoming contentious. I think a young person is more attracted to riding a motocycle and making some daily income than holding the hoe that will mke him or her take six month to generate a miserable and unreliable income. Therefore Youth will get attracted to agriculture once government puts in place a package of incentives that makes farming profitable and less muscle power based. As a UNCCI we promote young farmers through involving them in leadership at the highest level, training them in time tasted on farm practices and policy advocacy postions that integrate youth interests. UNCCI, is now running a young achievers awards where excellence is rewarded. This is true for young people in agriculture.
Which way forward? Suggest possible ways how the country can ensure enough food supply, besides controlling population growth.
First, the fundamental role of agriculture is to ensure food security for consumers and secure livelihoods for farmers. Therefore, Uganda government must invest in enabling agriculture infrastructure. For example, Without roads and basic infrastructure; farmers cannot receive basic inputs or get their products to market, Without secure land tenure and modern equipment for farm production and processing, yields will continue to be low and post-harvest losses high and without a firm national commitment to agricultural development and a stable and conducive policy environment in which it can take place, investment will not come. National budget commitment to agriculture must shoot above 15%.
Secondly, to contain food and energy insecurity, factor productivity (land, labour, and capital) will have to be raised substantially. To this end, Uganda should with urgency direct money to eight core ares; Technology Development/Research; Advisory Services and Technology Delivery; Disease, Pest and Vector Control; Sustainable Management of Land and Water Resources; Water for Agricultural Production; Development and Promotion of Labour Saving Technologies including Appropriate Mechanisation; Improved Access to High Quality Inputs and Stocking Materials; and Accelerated Production of Selected Strategic food security crops like cassava.
Thirdly productivity growth without significant improvements in marketing is an opportunity lost. Farmers in Uganda need to be assisted to participate in higher value-added market chains than they can at present.
Finally and most significant, Farmer organisations need be assisted to achieve capacity and independance necessary to make it politically risky for those who are swindling farmers money and those leaders who are not supporting and promoting farmer friendly policies in parliament and other branches of government.
Uganda National Chamber of Commerce and Industry
Wednesday, March 10, 2010
I salute the government for the so far aggressive effort to save lives and resettle survivors. I also know that government cannot do it alone. As a people, we need to mobilize every element of national capability. Besides government, the private sector and the entire business community can and will do a lot to help – We have launched a campaign at the Uganda National Chamber of Commerce and Industry to affect this. The Civil society and religious groups have even a swifter mandate to aid the extraordinary efforts of lifting Bududa. We also need to mobilize Uganda Diaspora to participate in the efforts. It is also critical for East African community member states to give a hand. We know that many hands lighten the load. We have to act in unity to contain devastating forces of nature. And by the way, this could be the beginning of a long spell of nature’s revolt against man. It is at this point that we should also turn our eyes to victims of Kabale landslides. In aftermath of disaster, we are reminded that life can be unimaginably cruel. That pain and loss is so often meted without justice and mercy. But it is also in moments like this when we are brought face to face with our own fragility, that we rediscover our own humanity. Looking at Budada victims and survivors, we truly look at our selves in those circumstances. The foregoing plays to our innate sense of compassion – a basis and fulcrum of our will to help.
Those with inadequate faith will quickly say that God hates Bududa. People will grapple with the problem of what scholars call theodicy. That if God is good and intervenes in the world , then why does he make innocent suffer? Why does he unleash thousands of metric tones of mud on people in the middle of the night? Why, as the biblical Job might have said, would God crush an impoverished people with the tempest and multiply their wounds with out cause? Why? Why? I personally think that God is mysterious and can’t explain everything. This is why a Prime minister of Uganda and a vice President of a neighboring Kenya while in air on a compassion mission and effort to rescue Bududa got life scare when their helicopters developed technical problems. It was a coincidence that raised eyebrows! Therefore, we should not question the will of God. Rather we should do what is humanly possible and lend a hand to people in need. This is why the Uganda National Chamber of Commerce and Industry has opened up a center for collection of material and financial resources necessary to contain the suffering of Mudslide and landslide victims in Uganda. This is a call for action, come to the Chamber plot 1 A Kira road, telephone, +25673503035, email@example.com, www.chamberuganda.com and save humanity. Bududa and Kabale matter.
C.E.O – Uganda National Chamber of Commerce and Industry.
Sunday, March 7, 2010
According to a 2010 World Bank doing Business Report, Uganda is ranked 129th out of 183 economies in the World! Economies are ranked on their ease of doing business, from 1 – 183, with first place being the best. A high ranking on the ease of doing business index means the regulatory environment is conducive to the operation of business. This index averages the country's percentile rankings, made up of a variety of indicators, giving equal weight. Globally, Lee Kuan Yew’s Singapore ranks 1st with Mauritius leading the pack in sub-Saharan Africa. The case of Uganda as 129th is intriguing and curious! Today I will look at why Uganda got the tail in rakings.
Look, it takes six administrative procedures to acquire a construction permit! First one is required to submit project relevant documents( like building plans and site maps), obtaining all necessary clearances (e.g. certificates, permits, licences), completing all required notifications, receiving all necessary inspections and obtaining utility connections (e.g. electricity, water and sewerage) – on the ease of dealing with construction permits, Uganda ranks 84th! This in acceptable, Uganda should move first to conduct a detailed mapping exercise to pinpoint blockages and barriers in construction permit administration procedures. Why should Kampala city council have only 3 building inspectors for the entire 5 Divisions and only one senior architect? Uganda National Chamber of Commerce and Industry inquiry shows the few available inspectors lack transportation equipment to carry out inspection in the field. They only rely on drawings and information provided by architects to decide which projects are accepted or rejected! The foregoing explains the rampant collapsing buildings in the city!
To improve our doing business rankings as a country, the cost and time to connect to utilities must be reduced. In Kampala, it for example takes 54 days and 2,000,000 Uganda Shillings to connect to electricity! It takes 14 days and 255,000 to connect to water. I really think that Electricity Regulatory Authority should outsource electrical inspections and certification in order to increase its efficiency. Registering property in Uganda is also a nightmare. Uganda ranks 149th out of 183 countries. Look, for example, to register property transfer, an entrepreneur in Uganda first has to arrange for a government official to inspect the property and assess its value. Then the entrepreneur has to complete an assessment form to pay the stamp duty at a bank and then another assessment to pay property registration fees. This is an exceedingly cumbersome and costly unnecessary process which encourages informal transactions and underreporting of property values. The government must adopt a new age approach that charges fixed fees based on the property size with an affordable maximum ceiling independent of the property value.
Finally, accessing affordable credit for business in Uganda remains a major hindrance to doing business. Uganda is ranked 113 out 183 ranked countries. Collateral registry needs to be revamped in order to facilitate lenders in moving movable collateral to secure loans. Uganda needs to ratify and codify the Chattels Securities bill in order to expand collateral possibilities other than land is the process of securing loans. Interest rates should also be checked by the Central bank, especially for business and agricultural loans. According to 2010 global competitive index, lending rates in Uganda range between 18% -23%, while in Kenya they can be as low as 8% - 10%. In Uganda, taxes on financial services further aggravate the problem. They include 1% stamp duty on all processed loans, a 15% withholding tax payable to bank funds sourced externally and 0.5% stamp duty on the values of valuation reports. The foregoing presents a million dollar question. How are Uganda’s businesses going to compete with other countries in the region that are offering better incentives? The government and the private sector must continue honest dialogues and engagements in order to come up with enduring solutions.
Chief Executive Officer
Uganda National Chamber of Commerce and Industry
Tuesday, November 17, 2009
What I told African Water Ministers and The Prince of Orange during the 8 to 13th Nov 2009 2nd Africa Water Week in Midrand
I told them that, agriculture, which produces multiple services from food, feed, fuel and fibre, is essentially dependant on water as one of its key strategic resources. Yet water availability and access, like never before is under severe stress due to climate change and other man made environmental degradation tendencies on the continent. I reminded the audience that 95% of the food in Sub-Saharan Africa is grown under rain fed agriculture (call it nature based) and on average, 7% of Sub-Sahara Africans are employed by agriculture. It was important to point out a new recognition viewed through initiatives on the continent that aim at financing agriculture sector like the Maputo Declaration and the Comprehensive Africa Agriculture Development Program (CAADP) where many African Countries committed to the principle of agriculture-led growth as a main strategy though in practice is still a feigned standpoint in many African countries.
I argued in my speech that the fundamental role of agriculture is to ensure food security for consumers and secure livelihoods for producers. Therefore, African Governments and concessional capital agencies like the African Development Bank must invest in enabling agriculture infrastructure. For example, Without roads and basic infrastructure; farmers cannot receive basic inputs or get their products to market, Without secure land tenure and modern equipment for farm production and processing, yields will continue to be low and post-harvest losses high and without a firm national, regional and international commitment to agricultural development and a stable and conducive policy environment in which it can take place, investment will not come. Therefore, the following areas must be financed;
Area 1: Enhancing Production and Productivity.
To contain food and energy insecurity, factor productivity (land, labour, and capital) will have to be raised substantially. To this end, Financing should be directed towards eight core areas; Technology Development/Research; Advisory Services and Technology Delivery; Disease, Pest and Vector Control; Sustainable Management of Land and Water Resources; Water for Agricultural Production ( financing should be scaled up from current $11 billion to $100 billion); Development and Promotion of Labour Saving Technologies including Appropriate Mechanization; Improved Access to High Quality Inputs and Stocking Materials; and Accelerated Production of Selected Strategic Enterprises (including food security crops).
Area 2: Improving Access to and Sustainability of Markets: Productivity growth without significant improvements in marketing is an opportunity lost. Farmers on the continent need to be assisted to participate in higher value-added market chains than they can at present. Therefore Africa must finance major public works like - roads, railways, and telecommunications. To harness Markets, new investments must be directed towards to three core areas, Increased Value-addition in Agriculture, with the emphasizing Strategic Commodities, involving the promotion of Public Private Partnerships (out grower models, the warehouse receipt system, contract farming), and assistance with improving post harvest handling, storage, rural market infrastructure; Increased capacity of farmers’ organizations to build up skills in management, entrepreneurship, and group dynamics so they can engage in higher-level value-chain activities including collective marketing.
Area 3. Farmer Institution Development: Farmer institutions are important forums for mobilizing farmers around a common objective, delivery of services as well as policies that support agricultural development. They form key entry points for service delivery to individual households or communities. Farmer organizations play a leading role in technology promotion, market organization and value addition. Yet Majority farmer institutions in Africa are still characterized by low capacity to effectively perform their roles and to demand for delivery of agricultural advisory/extension services. This therefore means that African financing efforts should focus on strengthening the capacity of these institutions to fully participate in the commodity value chain development and combating climate change and ensuring accountability of public resources in Agriculture. Integrated Support to Farmer Groups, is an effective way of realizing improvements in agricultural production and productivity. Since these activities take place through groups, it also means that advisory services, monitoring and accountability would be more effective.
Area 4: Fund to Reward Farmers for Ecosystem Services and Carbon offsets: Farmers interact with the environment daily and are a center of gravity in climate change mitigation and adaptation. Not only do farmers produce food, feed and fiber, but also a whole range of ecosystem services, including services related to water availability and water quality, directly and indirectly benefiting society and the environment. In order to achieve long-term positive effects, incentives must encourage and enable farmers to continue providing ecosystem services through the adoption of environmentally friendly practices. Stewardship programs offer the necessary positive incentives to encourage farmers to adopt these practices. Farmers should therefore be able to benefit from these programs through which their existing and future activities to enhance water quality and ensure its efficient use are recognized and rewarded. The role of farmers’ organizations in stewardship programs is crucial. Specifically, farmers should be offered financial incentives to invest in renewable energy, farm practices that sequestrate carbon and activities that protect and restore water catchments systems.
Finally, to support the efforts of farmers to improve agriculture and agriculture related water use, public policy makers worldwide need to re-engage with African farmers and other stakeholders to build an integrated approach to agricultural and rural development And farmers' efforts must be harnessed to realize food security in Africa. As governments reaffirmed various commitments, Farmers once more re committed their inherent DNA to feed the World.
Resident Consultant and Manager Policy Research and Advocacy
Uganda National Farmers Federation
Saturday, September 5, 2009
According to Uganda Sugar Cane Technologists Association (USCTA) annual report of 2006, the sugar sector contributes 217 billion shillings to Uganda’s Growth Domestic Product (GDP) thus saving the country of over US Dollars 132 million ($132m) of foreign exchange outflow. This figure is expected to rise up to 350 billion Uganda shillings by 2011. The Sugar sector also contributes over 54 billion shillings in revenue to Government through the VAT and Exercise duty tax regime. The sector employs 20,000 persons directly and 50,000 persons indirectly in the outgrowers farms. The foregoing underlines the importance and centrality of sugar cane sector in Uganda. Despite the impressive figures stated above, outgrowers (farmers) are at the tail in the value and benefit sharing trajectory with a share of only 25%. The main players in the sugar cane economy who are the Millers (Kakira, Kinyara and SCOUL) take 46% before other net gains through undertaking co-generation programmes for energy production (secondary derivative of cane) from baggase are computed.
To understand the dilema of cane out growers (farmers) we need to look at the chain of stakeholders and examine revenue share in the sugar value chain. The key actors in the sugar sector are farmers, millers, governmnet and consumers. The farmer among all the listed stake holders in the value chain takes the longest time (600 days) handling and producing sugar but earns only 25% gross earnings. The Miller who takes the shortest time (only 36 hours) and uses half the resources the farmer uses in producing a tone of sugar earns the biggest proportion of 46% of the over all consumer sugar value! The central government charges value added tax (VAT) of 18% on the Ex factory price of sugar per tonne, and Exercise duty of 50shs per Kg of sugar while local governments in sugar growing districts collect 1500shs per tone of sugar.
As of August 2009, the price of sugar per tonne Ex factory was 1,136,017shs. Out of the foregoing figure, a farmer was paid only 25% of the sugar value as price per tone of uncrushed sugarcane was and is still only 35783shs. The renderment or the percentage of sugar recovered from sugar cane is only 9% in Uganda. The situation is made worse because the miller pays the farmer in two parts; Interim payment which is 90% of the previous final year price at 32,600ushs per tone and the final balance is paid after final averages of the price and renderment of sugar are got which actually means that by retaining farmers revenue, the Miller is earning interest on farmers revenue! Price of sugar to the consumer is 1,600,000shs per tonne.
Sugar cane growers are disturbed by the diabolic and outdated formula used by millers to determine sugarcane price. The formula goes as follows; Pc=Ps X R X35%, Where Pc = Price of Sugar per tone, Ps = Average annual price of sugar per tone (factory gate price) and R = Renderment or Average annual Sugar recovery from sugarcane (Usually between minimum of 9% to maximum of 10.5%). First of all, this formula was made with out involvment of growers or their bodies the Uganda National Association of Sugar Cane Growers(UNASGO) and the Uganda National Farmers Federation. Secondly, the formula does not provide for renumeration of the cane grower as a result of other sugar cane derivatives such as molasses, power generation from baggasse, for which the Miller earns and saves sizable expenses, the formula ignores breakeven analysis as a basis for making price decision and does not reward quality production from more serious farmers because of the use of averages of the renderment and prices in the year. This colonial and contemptuous exploitation of farmers must stop.
Yet compared to Kenya and Tanzania, the situation of sugar cane farmers in Uganda is gloomy. A Ugandan farmer is paid far less. While a farmer in Kinyara in Uganda is paid 32,600Ugshs per tone of sugarcane supplied to the factory, the farmer at Kilombero in Tanzania recieves 49,000 Ugshs per tone and the Kenyan farmer gets an equivalent of 63,000 Uganda shillings! Yet again in the region it is only Uganda that does not have a sugar Act and a Sugar policy to guide sugar sector activities. This situation has denied cane growers an oportunity to achieve their full potential and subsequent prosperity. Sugar is a strategic crop like coffee, cotton, tea and diary for the country yet unlike the mentioned strategic crops, Sugar has no regulatory frameworks to oversee its sectoral operations.
Government and Millers must treat Sugarcane outgrowers fairly through ensuring uniform cane prices by all millers, subsidising infrastructure and farmworks in outgrowers plantations, putting in place a fevourable formula for determining cane price, subsidy for aquisition of small mills for value addition, reaserch and extension services for sugarcane and a importantaly, a Sugar Cane Policy.
Resident Consultant and Manager, Policy Research and Advocacy
Uganda National Farmers Federation