The other day it was reported that the Uganda economy may beat projections and grow by 7% above the expected 6.1%. The International Monetary Fund (IMF) thinks that this beating of expectations will come as a result of the completion of certain infrastructure projects, anticipated peace in South Sudan, developments in the oil&gas sector and continued good output from agriculture. Economic growth is not a big story in Uganda.
According to World Bank numbers, the last time the economy did not grow was in 1985 when it contracted by 3.3%. Growth peaked at 11.5% in 1995, but for the most part has averaged about 6% in the last 30 years or so.
For development and improvement in the general standard of living to happen, there has to be growth. There have been two problems for the Uganda economy:
- We started from a low base. It is easier to grow a $4b economy — where it was in 1986 by 10% than it is to do the same to the current $25b economy. So while the numbers have been eye popping, they may not be saying much on the ground.
- Growth has been concentrated in services, construction and industry, meaning the main beneficiaries have been urban dwellers.
This accelerated growth has not been mirrored in agriculture from which seven in ten Ugandans derive a livelihood. This, to a large extent, is why many Ugandans feel the benefits of this economic miracle continue to elude them. Changing times Last week, the Uganda Coffee Development Authority (UCDA) reported that coffee exports have increased by a million bags in the last three years.
In the current coffee season that runs from September to August, it is expected that 5.1 million bags will be exported. This was not by mistake. A plan to export 20 million bags by 2025 has led to a dramatic increase in coffee planting with 318 million seedlings planted.
Distribution this year is up from 45 million in 2014. This is positive on several fronts, but not least of all because most of this new production comes from small holder farmers, with coffee fi elds of fi ve acres or less. Coffee, a highly marketable commodity, will allow more rural families to derive income.
But even more important is that we shall start producing coffee in quantities that can support a robust coffee processing industry. Producing between two and four million bags a year for the last 30 years gave little incentive for the big coffee roasters to come set up shop here or even inspire the creation of a local mega roaster.
The milk industry has been a key player in turning around a trade defi cit with Kenya. Our milk production now stands at about 2.5 billion litres annually, a more than ten-fold increment from 1986 when 200 million litres was produced. The downside is that milk prices have been falling with increased production, but on the bright side, farmers and farmer groups are looking to value addition to make the enterprise viable.
Just like with coffee and milk, there is more than enough scope for expansion and our small holder farmer model means that more and more people will benefi t from robust growth in the sector. We can also expect that out of necessity, the small holder farmer will fade away either by exiting the industry or merging into bigger entities that can better compete and survive in a future of lower farmer gate prices.
Government intervention Interventions by the Government to beef up its extension services are welcome, as are efforts to provide irrigation infrastructure. A lot of work needs to be done in getting the improved varieties of animals and crops out of our labs and onto the market. Farmers need to be helped to operate like businesses.
This is important because in their current state, there is a ceiling on their development as they cannot attract financing or new investors to scale up their businesses. The Government’s intervention of providing inputs through the Operation Wealth Creation (OWC) were necessary and even welcome. While there is room for a lot of improvement, this is only the beginning and one of the interventions the Government can use to boost rural incomes.
Market access is being improved with the widening road network and our improved regional connectivity. So assuming the weather holds up and government officials do not keep too much for themselves, with agricultural production growing exponentially, opening the door for agro-industry and the export of value-added commodities, we might see the more equitable distribution of the benefits of growth in coming years. So for many, this maybe the first time they acknowledge growth in the economy. Fingers crossed.