Agriculture is the most important sector of the Uganda’s economy. Out of a population estimated at about 34 million, agriculture employs over 4.5 small holder farmers with another 2.5 million people in agricultural related activities such as transportation, processing and manufacturing; and altogether 77% of Ugandan population depends on Agriculture. The sector has been resilient to major domestic and global shocks, with a growth rate of 3% which contributed 21% to GDP.
The agricultural sector objectives
Given the importance of the agricultural sector, the National Resistance Movement (NRM) Government decided to set five key objectives to be achieved in five years between 2011 – 2015. These are:
- To increase income of the majority farming households targeting shs. 20million per family per year by increasing production and productivity through appropriate enterprise mix.
- To ensure household food and nutrition security by deliberately targeting specific crop and animal enterprises.
- To create on-farm and off-farm employment opportunities especially for the youth.
- To promote value addition to agricultural products as a way of minimizing post harvest loses and increasing shelf life; and
- To promote domestic and external trade in agricultural products.
Why invest in agriculture
The most important consideration for investing in agriculture in Uganda lies in its comparative advantages in a competitiveness world.
- It has unique agro-ecological location, lying astride the equator and have both tropical and temperate climate making it possible to raise a wide range of tropical and temperate crops and animals.
- There is rising demand in domestic, regional and international markets for agricultural commodities generally, and Uganda cannot afford to be left out of these markets.
- Specially, there is global demand for Food which offers an opportunity to grow more food stuffs.
- Uganda is a member to bigger markets for which access is duty and quota free. For example, East African Community which covers Uganda, Kenya, Tanzania, Rwanda and Burundi has over 125 million people; the COMESA region 19 counties has over 400 million people and European Union as well as the Middle East counties.
- NRM government has put in place and maintained sound macro and micro-economic frame work conducive for investment; such as liberalization, privatization, tax holidays and abolition of export taxes.
- There are also supportive Research Technology developments in the areas of planting and stocking materials for crops, livestock and fish, animal biotechnology exist.
- There is ample arable land, good for mechanization and with plenty of fresh water for irrigation when necessary. In most parts of Uganda there are two cropping seasons with a possibility of a 3rd crop in some places.
- Perhaps, one of most important factors for an investor is the availability in plenty of skilled and semi-skilled labour.
Area for investment
There are many areas of investment but broadly, they are placed into the following categories:
- Cotton and Textiles
There is Potential for over 1,000,000 bales which can be produced annually and turned into high class textile manufacture especially for regional markets, mixed fiber production e.g. fiber yarn and fabrics are all huge opportunities.
- Cocoa, Coffee and tea
Cocoa production during 2011/12, was projected at 17,500 MT. Uganda is among the leading countries of the world, 2nd in the Common Wealth after India and 2nd in Africa after Ethiopia. Currently, production stands at 4 million bags. Tea exports is over 92 million US$. There is high return on investment in processing and marketing of the above products e.g. instant coffee, chocolate and branding of Uganda Tea.
- Fruits and Vegetables
There is packaging of fruits and vegetables for export of dehydrated fruits and vegetables and export of fruit concentrates. There is huge potential for citrus, pineapples, mangoes, passion fruits, etc – organically produced.
Expansion of Rose Industry by growing of other floriculture plants other than roses; and manufacture of greenhouse plastics and manufacture of packaging materials are all opportunities in this sector.
- Grain (maize, wheat, rice etc. all those can be manufactured into food for humans and feed animals.
Other viable opportunities
- Honey processing for export, cassava processing for industrial starch, packaging of beans and pulses for export, Gum Arabic, and Bananas. Uganda is 2nd largest producer of Bananas in the world after India.
- Diary and Dairy products
Currently, Uganda is producing 1.8 billion liters of milk annually with potential to double. Opportunities exist for powdered milk production, flavoured and UHT milk, butter and ghee production, cheese, cream and ice-cream and establishment of collection and distribution facilities.
- Meat and Meat products
Cattle stand at 11.4 million, goats 12.4 million, sheep 3.4 million, poultry 52 million all with potential to more than double; all ideal for meat exports, leather processing, animal feeds manufacture and commercial breeding, abattoirs of international standard.
Current exports up to 143 million US$. Uganda has 20% of its surface area as water. Huge potential exists for aquaculture development e.g. aquaculture parks, premium species like cage fish, eel fish, etc.
Success stories in agribusiness trade and investment in Uganda
- Uganda Breweries and Nile Breweries linkage with Barley and Sorghum production, processing and beverage marketing.
- Kinyara Sugar Company linkage with commercial sugar out growers.
- Sameer Agriculture and Livestock Ltd.; Dairy processing linkage with Dairy Cooperatives.
- Tianjin Machinery Company (U) Ltd. Involved in Farm inputs manufacture.
- Bidco Palm Oil Project, involved in Vegetable Oil production and processing.
- Kaweerti Coffee Project, Coffee production, processing and marketing.
- Green Field Uganda Ltd. – Fish processing.
- Tilda Rice production and processing.
Considering the success stories just outlined, developing competitive agro-industries is crucial for generating employment and income opportunities. It also contributes to enhancing the quality of, and the demand for; farm products. Agro-industries have the potential to provide employment for the rural population not only in farming, but also in off-farm activities such as handling, packaging, processing transporting and marketing of food and agricultural products. There are clear indications that agro-industries are having a significant global impact on economic development and poverty reduction, in both urban and rural communities.
The most important thing is that by processing our products in Uganda, the country would significantly earn far more than what is being realized now.
Agricultural constraints in agro-processing, value addition and marketing
Uganda has a huge market potential for agricultural and value-added products. Nevertheless, a number of constraints threaten to undermine this potential, unless they are urgently addressed. The binding constraints are:
- Lack of critical supply capacity so that quantities are in line with orders.
- Failure to comply with quality assurance standards.
- Inadequate flow of market and production information.
- Poor linkage between farmers and agribusinesses especially for niche markets.
- Lack of affordable and accessible export finance. The conventional commercial banks are reluctant to finance agriculture and agro-based export business due to its unpredictability.
- Inadequate market infrastructure.
- Insufficient national export development competencies: Exporters should be able to negotiate and execute export orders properly as well as have reasonable knowledge in strategic export planning, management and marketing.
- These are the issues where attracting experienced investors would help to sort out these constraints and would also train our Ugandans.
Investment Incentives under Domestic Taxes:
Uganda has incentive regime in the form of initial allowances, generous depreciations deductions and internationally competitive 5% deductions for commercial buildings as well as exemptions.