Markets for Red Bulb Onions in the East African Community

CHARACTERISTICS OF MARKETS FOR RED BULB ONIONS IN THE EAST AFRICAN COMMUNITY

KILIMO TRUST, 2017 About REACTS

The Regional East African Community Trade in Staples (REACTS) is a 3 year grant project funded IFAD and implemented by Kilimo Trust. The project is working with the IFAD-supported agricultural development projects in the EAC region to accelerate incomes and wealth creation by smallholder (women, men and youth) producers of food commodities.

The mandate of REACTS is to enable agricultural development projects in the EAC Region to align, build core skills, and work with relevant partners in enabling business enterprises of smallholder producers to respond effectively to regional markets for food products, in the East African Community (EAC) Common Market of nearly 160 million consumers. This study contributes to the output on increasing understanding of regional markets.

About this Report The report presents statistics and characteristics of markets for red bulb onions in the East African region to inform beneficiaries of IFAD projects principally and other stakeholders generally to better take advantage of existing maize markets nationally and regionally.

Disclaimer The views and conclusions contained in this report are entirely those of the authors and do not necessarily reflect the policy and views of Kilimo Trust or IFAD.

Citation Kilimo Trust, 2017. Characteristics of Markets for Reb Bulb Onions in the EAC: Regional East African Community Trade in Staples (REACTS) Executive Summary

Key Findings: 1. Demand and Supply of Red Bulb Onions in the EAC ¬¬ Going by 2013 statistics, consumption of red bulb onions in the EAC stood at 497,843 MT a figure that is expected to grow by 49% to reach 743,795 MT in 2020. Around 41% of the regional collective consumption amounting to 206,306 MT was taken up by Uganda followed by Tanzania and Kenya respectively which consumed 180,926 MT and 93,000 MT of onions respectively. Tanzania that will drive the projected growth in consumption at 108%. The limited consumption of red bulb onions in Kenya is because more of spring onions which are cheaper are consumed especially in the rural areas. ¬¬ All over the region, individual consumers prefer well rounded onions that are medium sized as it easier to use in cooking instead of having to cut a small piece from a big one which may contribute to spoilage of the remaining part. However, big sized onions are preferred in institutions such as hotels and hospitals where quite an amount of onions are used in preparation of foods. Consumers in Kenya and Tanzania, and those in urban areas of Uganda also prefer well dried onions that are not susceptible to rooting and without off-shoots. In addition, consumers in Kenya urban areas prefer onions from Arusha and Singida as they are known to be well cured and have a long shelf life. ¬¬ Uganda and Tanzania are structurally onions surplus countries while the opposite is true for Kenya and Rwanda. Annual supply gap in red bulb onions in Rwanda is estimated at 364 000 MT valued at US 194,133. The coastal region in Kenya specifically, where onion consumption is high due the use of a lot of onions in the delicacies prepared in that region. Annual deficit in this region alone are estimated to be close to 4,000MT

i Executive Summary

¬¬ In the same year (2013), the region collectively produced 630,208 MT of red bulb onions with Uganda contributing the largest share at 47% followed by Tanzania at 30%. Over a period of 5 years to 2013, production increased by 12.8%, only a 0.1% lower than growth in consumption. Tanzania experienced the biggest growth rate in both production and consumption of onions over the same period. ¬¬ Consumption of onions in the region is driven by population growth and the fact that it is a commodity that is consumed daily in households and institutions such as schools and hotels.

2. Trade in Onions in the EAC ¬¬ In 2014, the EAC region collectively imported 20, 460 MT of onions from China, India, South Africa and Egypt, 97% of which was in fresh form. However, only 16% of total surplus amounting to 132,365 MT was traded among the EAC countries in 2014, despite existence of structural deficit in Kenya and Rwanda in addition to seasonal deficit in Uganda. Intra-regional trade in onions is led by Tanzania which exported 19,074 MT to her regional partners in 2014. Generally, Tanzania exports 35% of onions produced in the country. ¬¬ Over the period of 5 years to 2014, the region exported an average of 11,578MT of onions to the UK, Somalia, Netherlands and DRC. However, in 2014, the region exported only 1.7% of the total onions imported into these countries exposing a gap that the region can aim to fill. Red Creole is the most exported variety of onions due to its long shelf life. ¬¬ There exists a niche market for 60MT per month of salad onions in Kenya and the EU that actors in the EAC countries can take advantage of. ¬¬ There is a similarity of onions seasons calendar in all countries of analysis- long rains related supplies are in the months between July and September. However, Tanzania has comparative advantage in the months of May , June and October to December. ¬¬ Onions produced in Tanzania are USD 701/MT more profitable than those produced in India in the Kenyan market. However, producers in India get four times more margins than those in Tanzania exposing serious inefficiences at ii Executive Summary

producer level. This is a serious threat to future competitiveness of onions produced in Tanzania compared to those produced in other countries that export onions to countries in the EAC. ¬¬ Retail prices for onions are high in capital cities of the EAC countries. In Kenya, onion prices Nairobi and Mombasa are highest between January and May, in Uganda between May and July, in Rwanda between October and December and in Tanzania between April and June

3. Characteristics of Onion Value chain Actors: Wholesalers ¬¬ More than half of wholesalers of onions procure the commodity from smallholder farmers at farm gate while at least 13% of them source onions from fellow traders who deliver at their premises. However, being a fast moving commodity, middlemen play an important role in the onions value chain especially in Kenya where 25% of wholesalers procure onions from middlemen who also play a role of aggregation from far end markets in Tanzania. ¬¬ Wholesalers in Tanzania and Uganda procure an average of 33 MT and 32 MT and of onions per month respectively during months of high supply. However, during months of low season, they procure considerably smaller amounts at an average of 25 MT and 22 MT per month respectively for Tanzania and Uganda.. ¬¬ Around half of onion wholesalers in the EAC are unregistered operation without any form of license with 90% of them conducting their business as individuals. Over 69% of wholesalers procure the quantities of onions they desire. Insufficiency of onions for wholesalers is caused by seasonal induced shortages and high prices during low seasons. ¬¬ Wholesalers package onions in gunny bags made of sisal or polythene weighing 120Kg. However, those in Kenya predominantly package onions in netted bags of between 20-50kgs. Others sell onions from trucks in which they transport onions from areas where they source them from. ¬¬ Major production areas in individual EAC countries are the biggest source of onions for wholesalers with intra-regional trade mainly between Tanzania and

iii Executive Summary

her regional counterparts happing during low seasons in the latter countries or throughout a year to specific niche markets. Production areas are West Pokot, Isiolo,, Kimana, Mai Mahiu, Nyeri and Kinangop for Kenya, Rubavu Bugesera, Kamonyi and Nyagatare for Rwanda, Mang’ola, Singinda, Njombe, Iringa and Morogoro for Tanzania and Kisoro, Mbale, Ntungamo, Kabale and Kapchorwa for Uganda. Wholesalers all over the region prefer onions produced in Tanzania as they are mature, well dried and consistent in size. Retailers ¬¬ Only 30% of onion retailers in the EAC region operate with a license indicating a high level of informality. Over 80% of retailers procure onion from wholesalers who deliver to their premises. Generally, retailers of onions additionally sell other commodities such as vegetables, a factor that keep them in business during lean onions seasons. ¬¬ Between 15-48% of retailers procure onions from individual smallholder farmers and middlemen both of whom deliver onions to retailers’ premises. ¬¬ Retailers in the EAC do not pre-package onions but sell them loosely in heaps and in containers such as plastic plates and buckets. However, some retailers in urban markets in Kenya sell onions in kilograms while some pre-package them in netted bags weighing between 1-10kgs. 4. Prospects for regional Sourcing of Onions and Contract Farming by Wholesalers in the EAC ¬¬ Around 67% and 33% of wholesalers in Rwanda and Kenya respectively are looking into sourcing for onions from Tanzania citing consistent supply and long self life. ¬¬ In the same light, 61% and 33% of wholesalers in Kenya and Rwanda respectively are interested in contracting onion farmers in a bid to secure a more reliable supply of the commodity. ). A wholesaler in Uganda can procure aroung 570MT of onions per month while a Kenyan counter can procure over 1000MT of onions per month, specifically from Tanzania.

iv Executive Summary

5. Challenges and Recommendations

Challenges Recommendations Poor Post-harvest handling techniques a) Capacity building on choice of onion varieties due to limited knowledge and access to to plant, timing of harvest, storage, curing storage facilities contributing to losses at farm and point of sales level and during at farm level, during transportation and transportation. at points of sale. Existence of cartels which constitute an Put in place policies on fair competition in food enter barrier for other players. markets and enforcement of existing ones

Limited value addition thus limited a) Product development and testing of new onion product differentiation as well as products in domestic markets seasonal induced gluts and shortages. b) Value addition of onions to target export markets

Unstandardized weighing systems and a) Spearhead regional initiatives to educate packaging among countries in the EAC, different players about packaging requirements a factors that may constitutes to more for different market segments and in the long costs for producers and regional traders run, standardization of packaging of onions across the region. Unstructured trade between traders a) Organization of producers and/or improvement and producers of onions which contrib- of governance in existing producers’ uted to increased costs of sourcing for organizations the former. b) Increase onions production in areas with comparative advantage c) Initiatives to link producers of onions with markets e.g. the Trade Networking Platforms spearheaded by REACTS Limited information on dynamics of a) Produce simplified and customized information different market segments. packs on market dynamics targeting different actors of the onions supply chain Limited business orientation of onion a) Capacity building of producers on “Farming as producers which is an avenue for ex- a business” so that they can take up existing ploitation especially by middlemen. market opportunities.

v Executive Summary

5. SWOT of the Onions Markets in the EAC Strengths Opportunities 1) Ability of traders to self-finance to procure 1) Growing population translating to increased volumes of onions that they want at any one demand for onions. point wherever they are. 2) In some countries such as Kenya, there is 2) Consistent demand since onions are an increasing demand for red bulb onion consumed daily in households and institutions from the previously preffered cheaper spring where food is prepared. onions. 3) Onions are grown around many agro-ecologies 3) Expansion of the hospitality industry thus in each country. increase in onion demand. 4) Markets for onions in the region are 4) Increasing integration of the thereby making differentiated only to a limited extent meaning trade in onions nearly “borderless”. that traders sell all onions they procure. 5) Increasing demand for onions in importing 5) Low barriers to trade. countries outside the region eg in Europe 6) Traders have established networks with and Middle East. farmers and/or traders in production hubs Tanzania where other EAC countries import onions from. 7) Limited infestation f onions with pest and diseases Weaknesses Threats 1) Poor Post-harvest handling techniques 1) Increasing tariff and non-tariff barriers to contributing to losses at farm level especially trade in Tanzania-specifically for onions during wet seasons, during transportation and traders who would freely move in and out of at points of sale. Tanzania now have to pay some fees to enter 2) Harvesting of pre-mature onions that are the country. sold cheaply ultimately dampening prices for 2) Increasing competition for onions in onions that are mature. Tanzania from traders coming from 3) Limited storage facilities. importing countries who have established relationship with farmers in major onion 4) Existence of cartels which interfere with production hubs. dynamics of markets such as prices. 3) Competing uses for land for other food crops 5) Limited value addition thus limited product and commercial purposes in major onion differentiation growing areas. 6) Unstandardized weighing systems and 4) Poor road infrastructure in production areas packaging. that hinders seamless transportation of onions to different markets. vi Executive Summary

6. Conclusions Red bulb onions are a “seller” in themselves as they are an important constituent of daily meals and other food preparations at households, processing companies and in some institutions such as schools, hospitals and prisons, not just in the East Africa region but in other parts of the world. Although as a block, the region produces onions in surplus, there are pockets of deficits that drive trade between them and surplus areas.

Being that onions are sold in their fresh form, their supply chain is short, involving movement of the commodity from farmers to traders and finally consumers. Although the supply chain is largely self-functioning, there are inherent inefficiencies that propagate unnecessary gluts in some areas thus poor producer prices and shortages that result to higher consumer prices.

Yet, limited differentiation of consumer segments of onions in the region and similarity of popular varieties of onions demanded in each country of the EAC should be factors that leverage unabated inter-regional trade especially under the framework of East African Common Market. Besides, the fact that onions have an ever-ready market should serve as incentive for traders to always look for the same-in fact, onion farming and business has been hailed in various fora as one of the most profitable compared to other agribusiness ventures.

It is therefore in the interest of agricultural development stakeholders- governments and development bodies- to facilitate opportunities for all actors in the onions value to invest and reap from the opportunity ready market for onions and derived products nationally, regionally and internationally presents. This will translate to welfare impacts in the form of high producer prices without compromising affordable consumer prices.

vii viii Report Outline

 EAbout REACTS

 Executive Summary

 Introduction

 Methodology And Limitations Of Study

 Study Area

 Key Findings  Demand and Supply of Red Bulb Onions in the EAC  Trade in Red Bulb Onion in the EAC  Segmentation Of Markets for Red Bulb Onion in the EAC  Characteristics of Key Actors of the Red Bulb Onions in the EAC  Business Environment and SWOT Analysis of Markets for Red Bulb Onions in the EAC

 Prospects for Regional Trade In Red Bulb Onions and Contract Farming

 Bibliography

 Annexes

ix x Acknowledgement

The authors would like to thank all the organizations, private companies and individuals who provided data and information that went into developing this report. Kilimo Trust would also want to thank IFAD for funding this study.

xi xii Introduction

¬¬ Onions of whatever type, albeit in small quantities are the most consumed vegetable in any household in East Africa. Onions are used daily in households and institutions such as schools and hospital to prepare food and other condiments. Also, although there is little documented information, onions are used in food processing companies to prepare various kind of snacks, condiments and canned foods. ¬¬ Red bulb onions, the interest of this study are grow in many agro-ecologies in the region and are traded between areas of surplus and deficit within and between countries of the EAC. In addition, the commodity is exported outside the region to countries in Europe and the Middle East. As such, red bulb onion is largely a commercial crop that contributes to income of farmers and other down stream actors in its value chain. ¬¬ While this is so, there is little understanding of the needs of different market segments in the EAC, a factor that contributes to mis-match between type of onions that are produced and the needs of different market segments within the EAC. In addition, intra-regional trade in onions, a relatively perishable commodity is largely unstructured and results to inefficient distribution a factor that results to negative welfare impact to actors of the onion value chain. ¬¬ It is against this backdrop that IFAD commissioned Kilimo Trust to conduct a study to characterize markets for red bulb onions in the EAC to guide increased production, competitiveness and trade in the region and beyond. ¬¬ The study was conducted in four of the now six EAC Partner States among traders and key informants in the red bulb onion sub-sector.

1 Methodology and limitations of the study

Review of Primary Data Data Analysis Report writing Secondary data Collection and validation and Literature

A draft Data was Both qualitative Report was report on collected and quantitative generated from characteristics from a sample analysis: Excel supplementary secondary data of onions of onions and SPSS and literature markets in East Wholesalers techniques were and results Africa was Retailers and used to analyze from analysis generated and Key informants data. of primary gaps to be filled in the EAC. data. The by primary data report was then validated identified by key industry players.

Limitations of the Study:  There is very limited literature on onions and even sometimes where it exists, it is bundled up as literature on “vegetables”.  The study was conducted in June and July; a non harvest period. Hence, some of wholesalers and agents were not available in the study areas.  Some traders were reluctant to provide information about their businesses especially regarding sensitive questions such as taxes, bribes, business licenses and prices. Specifically for Kenya, the period coincided with pre- election season during which time traders were on high alert and were not keen on providing personal information.

2 Study Areas

Ntungamo Kampala (Natete, Owino, Kalerwe and Nakasero), Kisoro  UGANDA Busia, Jinja, Gulu and Mbale  KENYA Nyeri, Oloitoktok, Mai Mahiu, Nairobi/ Bugasera, Kigali Wakulima, Mombasa and Rubavu (Kongowea),Karatina and Emali

 RWANDA

 TANZANIA Karatu, Moshi/Same Dar Es Salaam (Kariako) and Singida

Study areas we selected based on prior knowledge of onion production, trade and consumption hubs in the EAC.

3 4 Key Findings 6 DEMAND AND SUPPLY OF RED BULB ONIONS IN THE EAC

Consumption of onions in the region is expected to grow by 49% from 497,843 MT in 2013 to 743,795 MT in 2020 Consumption as an indicator of demand/size of Onions in the EAC

Volumes of Onions Consumed in the Projected growth in Onion by 2020 EAC in 2013 (MT) Consumption in the EAC (MT)

49%

Total consumption

Consumption of Onions in the EAC in 2013 was 497,843 MT. Consumption was projected to grow at a rate of 49% to 743,795 MT by 2020

 In 2013, onion consumption in the EAC stood at 497,843 MT, 41% of which was consumed in Uganda. Collective consumption of onions in the region is expected to grow by 49% from 497,843 MT in 2013 to 743,795 MT in 20201. This growth will be led by Tanzania at 108% 1. In deed, Farm Concern International (FCI)6 reported that 65% of onions grown in Tanzania are consumed in domestic markets.  Although onions are among the most consumed vegetable across the region, diets are generally heavy on starchy staple food (Maize, rice etc). Only 4%, 6% and 8% respectively is spent on fruits and vegetables in Kenya, Tanzania and Uganda5. However, demand for high-value horticulture products and particularly fresh fruits and vegetables has increased as a result of a growing middle class. Fresh fruits and vegetables are more income elastic compared to other crops3.

8 Production Vs Consumption of Onions in the EAC

Onion production (2008-2013) and Onion Consumption (2008-2013) and Growth rate in production Ke:4.8 Growth rate in Consumption Ke:4.4 350

300 Rw: Rw: 11.8 14 250

200 Tz:31 Tz:33 150 Ug: 100 Ug:3.4 0.06

Volumes in ‘000’ MT Volumes 50 0 2008 2009 2010 2011 2012 2013 2008 2009 2010 2011 2012 2013

Source: 1 Kenya Rwanda Tanzania Uganda

Regional growth rate in consumption is just a 0.1% more than that of production indicating a level of sufficiency.

 In 2013, the EAC collectively, produced 630,208 MT of red bulb onion with Uganda producing 47% of the total lot followed by Tanzania at 30%. In the same year, consumption of the commodity stood at 497, 843MT, 79% of what was produced.  During the years of analysis, both production and consumption were on a positive trajectory. However, collective growth in consumption stood at 12.9% compared to a marginally lower rate of production at 12.8%. Tanzania had the biggest growth rate in both production and consumption of onions, the latter at a 2% higher rate.  Among the impetus of increased production in Tanzania was access to local, regional and international markets by farmers through the Commercial Village Model. Indeed, during the study, traders in the other three EAC countries reported that they source onions from Tanzania. In addition there was an introduction of high yielding varieties that resulted in 75% increase in yield7.  Production is higher in Uganda due favourable climate and landscape8. However, as it emerged during the study, onions produced in Uganda are largely for domestic market but even then the country imports the commodity from Tanzania during off-peak seasons.

9 Surplus/Deficit in onion supply in EAC Countries

Onion Surplus/Deficit in the EAC 140,000 120,000 100,000 Average Surplus/Deficit (MT) 2008-2013 80,000 60,000 92,765 Surplus Volumes 40,000 2, 385 4,764 20,000 - 20,000 Kenya Rwanda Tanzania Uganda -996

1 Source: 2008 2009 2010 2011 2012 2013 Deficit Volumes

Tanzania enjoys a competitive advantage in onion production: 20-50% less costs of production and 45-100% more yield. Uganda enjoys a comparative advantage in onion production but need to improve on quality to satisfy local demand and supply regional deficit countries.

 Generally, EAC was an onion sufficient region between 2008-2013 with deficits experienced in Rwanda only. In 2013, there was a surplus of onions of 132,365 MT in the countries of analysis. Uganda consistently experienced surplus during this period. Kenya relies on Tanzania for its onion imports. Despite favourable conditions for local production in Kenya, Tanzanian onions are competitive because of lower production costs (20–50%) and higher yields (45–100% more)6. Farm Concern International (2015)10 noted that annual deficit of onions in Rwanda stands at 364,000 MT valued at US 194,133. The is exacerbated by volatility of onion prices during peak seasons and off season10.  In the coastal region of Kenya, the market deficit is more than 60% with a gap of 3,846 MT annually. In addition, seasonality difference are a source of 85% change during peak to off peak season7. This was confirmed during this study with traders noted that onion consumption in the coastal region is high due to the fact most of the delicacies prepared in that region require quite an amount of onions.

10 Surplus/Deficit in onion supply in EAC Countries

 There are obvious prospects for exploiting comparative advantage of Tanzania and Uganda to supply onions to their deficit counterparts: Kenya and Rwanda. However, it is a long shot for Uganda as the onions produced in the country are of poor quality (small in size and are more susceptible to rotting). However, traders prefer onions from Tanzania which are of medium to large size and well dried. These are characteristics that domestic consumers look out for while buying onions in the country.

11 Sources of Supply of onions in the EAC

Source of Onions consumed in the EAC Production contributes the biggest 350,000 margin of total supply 280,000 210,000 140,000

Volumes in MT Volumes 70,000 0 Exports Exports Exports Exports Imports Imports Imports Imports Production Production Production Production Total Supply Total Supply Total Total Supply Total Supply Total Source: 12 Kenya Rwanda Tanzania Uganda Total Supply = (Production + Imports) - Exports

That EAC countries largely satisfy their demand for onions from production means that should their productive capacities improve, there will be very limited trade in onions among EAC countries. Meanwhile, Uganda and Tanzania can still continue exploiting their comparative and competitive advantages to supply deficit markets in the region.

 Most of the onions consumed in the region are produced locally with only Kenya recording relatively higher imports volumes of the commodity, majorly from Tanzania. Various NGOs such as Farm Concern International (FCI), One Acre Fund and Farm Africa have intervened in increasing production in Kenya though training on better agronomic skills and provisions of improved seed.  Traders interviewed in Kenya and Rwanda noted that importation of onions is based on low season countries in their respectively countries while those in Uganda additionally source for onions from Tanzania because of their superior quality:well dried medium sized and with a long shelf life.  Onions is a highly perishable crop and more so when it has not been handled well post-harvest and/or has to be transported for long distances. As such, it is the onus of stakeholders in the onions subsector to increase production especially in the countries that have a comparative head start and structure trade to allow for seamless regional trade in onions.

12 Unique characteristics of onions traded in the EAC

Premature onions in Kigali, Rwanda Premature Onions from Mbale, Uganda

Twinned Onions in Dar Es Salaam, Tanzania

Poor PHH of Onions in Mbale, Uganda Poor PHH in Mai Mahiu, Kenya

13 14 TRADE IN RED BULB ONIONS IN THE EAC

120,460 of onions mainly in fresh form was imported into the EAC in 2014. 33.2% annual growth rate in onions imported into the EAC

15 Trends in importation of Onions in the EAC

33.2%

Kenya is the biggest importer of onions (fresh form) at 68% of all onions imported into the region.

 In 2014, 20,460 MT of onions mainly in fresh and chilled from small extent was imported in the EAC. During the period 2010-2014 importation of onions increased by 33.2% mainly driven by Kenya’s structural deficit and Uganda due to seasonal related shortages 2 & 17. The region imports onions from China, India, South Africa and Egypt 2.  According to the East African13, poor prices and lack of information on growing bulb onions has seen Kenya depend on imports (for decades) despite favorable climatic and soil conditions.

16 Trends in Onions Exports in the EAC

5.7%

Source,2

The EAC region has a opportunity to export 591,940MT of onions to her traditional importing countries. Currently, EAC commands only 1.7% of this market share.

 Compared to imports, EAC had a negative balance of onion trade only shipping slightly below 10,000 MT of the commodity in 2014 valued at USD3.5 Million. What is more, the growth rate in onion export of only 5.7% was inelastic compared to that of imports at 33.2% over the same period. EAC countries export onions, 74% in fresh/chilled form to S. Sudan (before the country become part of EAC), the UK, Netherlands, Somalia and the DRC 2. USAID3 noted that trade in red onions (Red Creole) is high relative to other horticulture products due to their long shelf life.  Uganda exports 1,407 MT of onions annually, 82% of which is to South Sudan. However, the country informally traded in onions worth USD 10.9 million annually from 2010 to 201311. Also, the global supply online 16 reports that more than 21 Ugandan companies export onions to some unspecified countries abroad implicit of considerable re-exports. This could explain considerable imports of onions to Uganda from other EAC countries specifically Tanzania and to a small extent Kenya despite the country’s high level of onion production compared to other EAC countries. There is also a niche market for around 60MT per month of salad onions as vegetable mixes in pre-packs from Kenya in the EU.  However, this is a far cry from the opportunity the region has to export more onions to these traditional importers. For example, in 2014, UK, Netherlands, Somalia and DRC imported a total of 591,940MT of onions 2 of which the EAC region only took up a paltry 1.7% share.

17 Pictorial Representation of Onions Produced in the EAC Destined for Export Markets

Onions from Mbale, Uganda destined for South Sudan

Onions at Dar Es Salaam port destined for Oman

Source: 17

18 Formal Intra Regional Trade in Onions in the EAC

SOUTH SUDAN

1,222 145 22 64

UGANDA KENYA

188 106 3 8 49 7 127 71 RWANDA 44 10 BURUNDI 3,797 419 100 2 40 115 493 278 14,630 2,634

141 39

13 3

Flow of Fresh TANZANIA MT 000$ or Chilled Onion

MT 000$ Flow of Dried Onion

Direction of Flow

2014 data for Kenya and 2015 data for other EAC Countries Source:2

19 Formal Intra Regional Trade in Onions in the EAC

There is low level of regional trade in onion going by the reported collective average surplus of 132,000 MT annually. In 2014, only 16% (20,932 MT) of the total surplus valued at USD 377,000 was traded regionally in 2014, even with a country like Rwanda having a annual deficit of onions amounting to 364, 000 MT per annum.

 More than 95% of cross border trade in onion in the EAC is in fresh form mainly Tanzania. Around 35% of onions produced in Tanzania end up in regional markets, through local transitional or border markets 6. Between 2009-2014, Kenya was a destination to an average of 68% of all onions traded across borders in the region.  Consumers in Kenya prefer onions from Arusha and Singida Tanzania17 as they are known to be better cured and have a longer shelf life (two to three times-than onions produced in Kenya.) During the study, wholesalers in Arusha complained that Kenyan importers have established long standing relationship with farmers from various onion growing areas in the country where they source onions directly at low prices, thereby rendering uncompetitive.  During this study, traders from the region hailed onions grown in Tanzania as of good quality-mature, well dried and of consistent size (medium to big) qualities that are most preferred by consumers. They also reported that due to agro-ecological suitability of onions growing in many regions in Tanzania, they always get onions from the country.  While this is so, some traders in each of the study countries noted that sourcing from outside their national boundaries is guided by seasonal differences rather than superiority in quality of onions from any other country.

20 Onion in Machakos Kenya imported from Arusha, Tanzania

Onions from Tanzania traded at Kalerwe market in Kampala Uganda

21 Seasonal Complementarities in Onion production and Trade in the EAC

Trade flow of onions between EAC countries Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec UG->KE UG->TZ UG->RW TZ->KE KE->UG TZ->UG Calendar for onions seasons in EAC Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Kenya Uganda Tanzania Rwanda Burundi Timing of harvest from the main (long) rainy season Key Timing of harvest from the secondary (short) rainy season Season of shortage Source:4

Tanzania has a comparative edge in exporting onions to her region counterparts between May and June and October to December . However, all around any year, the latter countries import onions from Tanzania due to seasonal shortages or better quality characteristics.

22 Seasonal Complementarities in Onion production and Trade in the EAC

 In Kenya, the harvesting season for major producing areas is June to September , a season that is characterized by low prices. Onions fetch the prices between October to January when the local market highly depends on imports from Tanzania.  There is a similarity in seasons for availability of onions in all the EAC countries during the long rain-July-September- and short rain season-January-March. These seasons are characterized by low prices within countries.  Tanzania and Uganda supply onions to Kenya all year round. The latter country especially supply onions to markets in Western Kenya due to close proximity between the two countries.  Specifically, demand for onions from Tanzania in Kenya is highest between October and January when the prices for the commodity are also highest.  This is during another bumper harvest season (October - December) in tanzania. However the quality during this period is usually poor because of too much rain and most farming communities do not have proper storage facilities.

23 Average Monthly Retail prices of Onion in some markets in the EAC

Uganda Kenya 0.90 0.80 1.20 0.70 1.00 0.60 0.50 0.80 0.40 0.60 0.30 0.40

Price in USD/KgPrice 0.20

0.10 Price inUSD/Kg 0.20 0.00 0.00 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Busia Kampala Mbale Ntun gamo Karatina Machakos Nakuru Nyeri Nairobi Mombasa

1.20 Tanzania 1.00 Rwanda 0.90 1.00 0.80 0.80 0.70 0.60 0.60 0.50 0.40 0.40 0.30 Price USD/Kg Price in 0.20 Price in USD/KgPrice 0.20 0.00 0.10 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 0.00 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Dar Es Salaam Arusha Moshi Singida Bu gesera Kigali Nyarugen ge

Source:17

Retail prices of onions in the EAC are dictated by seasonal availability of the commodity in each EAC country. Traders can target Kenya between January and May, Uganda between May and July, tanzania between April and June and October to December for Rwanda.

24 Average Monthly Retail prices of Onion in some markets in the EAC

 Prices of onions are highest in the capital cities and low in areas of production in the countries of study except for Rwanda. High prices in capital cities is due to perhaps to the transaction costs that traders incur to get the onions to markets located in the cities. Onion traders can target markets in capital cities when prices are high. These are May to July for Uganda, January to May for Kenya, April to June for Tanzania and October to December for Rwanda.  However, overall, seasonal differences in the countries is dictated by seasons for onions in each individual country so much so the prices are high during off-peak seasons and vice versa.  Consumers in Kenya pay the highest prices for onions compared to their regional counterparts at between USD 0.75 to USD 1.1 per Kg. Tanzania is the second country where retail prices of onions are highest-USD 0.7-USD 1-despite the country being a lead importer into the region.

25 Competitiveness of Onions from Arusha Tanzania Vs those from Maharashtra India in Nairobi Kenya

Onions from Tanzania are 1200 USD 710 more profitable USD 101 The margin for Indian farmers than those from India are 4 times that of Tanzanian 1000 farmers per MT

800 USD 811 600 Total production & marketing costs are higher in Tanzania by USD 400 140/MT than those in India 39 750 5 49 8 Cost/Margin in USD/MT in Cost/Margin 7 39

200 13 11 188 2 1 21 16 3 3 2 4 9 999 61 289 249 117 1,100 250 201 0

There is need for improvement of efficiencies at producer and trading level in Tanzania to make onions produced in Tanzania more profitable for producers and traders as well as make them more competitive in export markets in the region and beyond.

 India (and China ) is a importer of onions in EAC. Maharashtra state specifically is a source of 27% of onions produced in the country and also a lead exporter 24.  Onions production is four time more profitable per MT in Maharashtra than in Arusha. However, due to shipping costs onions from India in Kenya end up being USD 710 less profitable than those.  Although onions from Tanzania are more profitable for traders in Nairobi, serious inefficiencies are exposed at producer level that result to lower margins for farmers and traders in Tanzania.

26 27 28 SEGMENTATION OF MARKETS FOR RED BULB ONIONS IN THE EAC

Individual small holder farmers are a source of onions for over 21% of wholesalers in the EAC

Red Bombay and Red Croel are the most commonly grown and traded varieties of onions.

29 Market segmentation: Who and where are Onions Consumed?

Red bulb onions are amongst the most popular vegetables sold in the Kenyan market especially among the urbanites. However, in the rural households in non-producing areas consume more of spring onions. Kenya Medium sized bulbs are preferred. Well dried, non damaged bulbs with no sign of green sprout fetch much higher prices. Onions are also sold to processing companies of snacks such potato crisp and chevda.

Dar Es Salaam is the biggest market for onion in Tanzania and a transit for the product to other EAC countries such as Europe (UK, Netherland) and Middle East (India, Oman). Reb bulb onions are also Tanzania consumed around production areas. Middlemen from EAC countries such as Kenya, Burundi and Uganda have also a big share of the Tanzania onion market at farm gate.

In addition to growing local demand especially in Kigali, onions from Rwanda are sold in neibouring countries such as Burundi, DRC Rwanda and Uganda as well as other countries abroad such as Belgium, Netherlands and France.

Red bulb onions produced in Uganda are consumed in rural and urban areas with Kampala being the hub of consumption. There is also a considerable export market for onions produced in Uganda in Uganda neighbouring countries such as Rwanda and Kenya. However, urban consumers prefer onions imported from Tanzania as they have superior quality characteristics such as medium size and long shelf life.

30 Market segmentation: Categories of Major customers for Onions by Retailers and Wholesalers in the EAC

Major customers for retailers (% of respondents) Uganda Individual Consumers

Tanzania Fellow Retailers Institutions Rwanda Restaurants Kenya

0 20 40 60 80 100 Source:17 Major customers for wholesalers (% of respondents) Retailers Uganda Wholesalers Tanzania Individual Consumers Rwanda Supermarket Kenya Institution 0 20 40 60 80 100 Source:17

Supply chain of onions is short involving movement of the commodity from farmers to traders and finally to consumers. This is implicit of value chain inefficiences (costs to traders and prices to consumers) especially for the relatively perishable commodity that is seldom processed.

 Over 70% of retailers in the EAC sell onion majorly to individual consumers and their fellow retailers. Restaurants also buy onions from retailers especially in Kenya and Uganda while institutions such as schools also procure onions from retailers albeit to a small extent.  On the other hand, wholesalers trade with each other and with retailers. They sell onions to individuals to a limited extent except in Kenya and Uganda where a considerable proportion (23% and 14% respectively) of wholesalers trade directly with individual consumers.  This was observed in markets such as Naivasha, Emali, Nakuru and Nairobi where wholesalers also sell onions to individual consumers from their stalls as a “side business”. In Uganda, wholesalers in the rural areas sell onions that are considered to be of inferior quality to individual consumers.

31 Market segmentation: Sources of Onions for Traders in the EAC

Suppliers of Onions for Onion Traders (percentage per category of actor)

15 15 20 32 23 23 40 9 9 3 48 9 2 17 33 15 30 0 38 62 66 25 21 59 37 36 25 34 12 4 4 Wholesalers Retailers Wholesalers Retailers Wholesalers Retailers Wholesalers Retailers KENYA RWANDA TANZANIA UGANDA Fellow traders Group of SHF Individual SHF Large SF Middlemen 17 Source: * SHF: Smallholder Farmers Being a fast moving commodity all year round yet with diverse production geographies, it is understandable why middlemen would find onion business attractive. Therefore, unless there is a appreciable structuring of trade in onions whereby farmers are organized and linked with traders, middlemen will continue playing a pivotal role in the onion value chain in the region.

 In Kenya, Rwanda and Tanzania, and Uganda, 21%,30%, 66% and 38% of wholesalers respectively procure onions from individual smallholder farmers while the same is true for between 17-33% of retailers. This is an indication of a considerable level of fragmentation of onion production. It would appear that middlemen are important in the supply chain of onions up to the level of retailers as between 15-48% of them reported procuring onions from them while the same was the case for 15-40% of wholesalers interviewed.  In Kenya, specifically, wholesalers in the biggest fresh produce market in the country (Wakulima Market in Nairobi) reported that they have long standing relationship with middlemen who play a role of sourcing from Tanzania, aggregation and sometimes even transportation to their premises.  There are two types of middlemen in the onion supply chain of onions in Tanzania, the biggest source of imported onions in regional markets:  those in the rural areas who buy onions from farmers and deliver to wholesalers in the markets based in the rural areas and  those mostly stationed in Dar-Es-Salaam who connect traders who bring onions to markets in the city and wholesalers there.  The latter group operate as a cartel and they wield a lot of power in determining who sells onions to wholesalers stationed in the city markets.

32 Variety of Onions according to Traders in the EAC and common varieties grown in EAC

Name of varieties of onions according to Traders Kenya Rwanda Tanzania Uganda

Variety % of Variety % of Variety % of Variety % of Retailers Retailers Retailers Retailers Red Pinoy 41 Red (Creole) 100 Red Bombay 64 Red Bombay 52 Bulb onion Red creole 20 Masere 16 Kabale 22 Jamal 15 Red Bombay 52 Twinned 12 Kitunguru 12 (pacha) Mbale 13 Maji Kasusu kamu 4 Red Bombay 7 Kwasu 8 Karubanda 4 Red wive 2 Russet 2

Most common varieties of onion traded in the EAC are Red Creole and Red Bombay.

 Onion traders in the EAC refer to varieties of bulb onions they deal in by either colour (red or white), seed name or areas where onions are produced.  Red Bombay and Red Creole are common across the region. This finding was corroborated by key informants. Onion varieties known to be grown in various EAC countries Tanzania 6 & 23 Kenya 19 Rwanda 22 &23 Uganda 20 & 21 Red Bombay Jambar F1 (for size and high Red Creole-Common Red Bombay yield) or

Khaki Red Passion F1, Bombay Red and Red Bombay-Common Red Creole Red Pinoy Red Simba Red Comet F1 Jambar 1-Common Red Wave Red passion F1 Others are Neptune, Spineless and Clemson

33 Characteristics of Varieties of Onions Grown and Traded in East Africa and their Market Characteristics

Onion Varieties Characteristics

Jambar F1 (1) Short shelf life, big size and high yield 17, 19 & 22 Red Passion F1, lower yield but are in high demand at the market and fetch a Bombay Red and high price than Jambar F1; they also have long shelf life 17, 19 & 22 Red Pinoy Red Simba long shelf life but it is recommended for low altitude areas 23

Red Wave . Performs well both in low and high altitude areas, . Matures early (65-75 compared to 120 days for other varieties) . High yielding (minimum 24 MT/acre compared to about 7 MT other varierties). . About 1 Kg of seed is enough (compared to about 15 Kgs for other varieties) to produce enough seedlings (28,000 seedlings) required for an acre. . Seed germination rate ranges from 95 to 100% 23

Jambar F1

Red pinoy

Source:17

34 Pictorial presentation of onions grown and traded in EAC

Onion grown in Mbale, Premature Onion from Onions grown and traded Onions-Jambar F1- grown Uganda Kisoro, Uganda in Rwanda in Pokot and Traded in Source:17 Source:17 Source:17 Naivasha Kenya Source:17

Red Bombay grown and traded in Arusha, Tanzania Source:17

35 Market segmentation : Specificity on grades and packaging

Percentage of Onion Retailers and Wholesalers 120 that use packaging materials 98 100 88 80 60 60 51 40 33 21 20 10

Percentage of respondents Percentage 0 0 KENYA RWANDA TANZANIA UGANDA

Source:17 Retailers Wholesalers

Wholesalers in East Africa package onions in 120kg bags of different materials: sisal, plastic or nets. Traders aspiring to trade regionally must understand the packaging needs of the countries which they are selling to.

 More than 33% of wholesaler in East Africa pack their onions while retailers largely do not except for Kenyan urban markets where they do so in netted bags weighing between 1-10kg. These markets target medium to high income consumers.  Wholesalers in Kenya, Tanzania and Uganda package onions in gunny bags weighing 120Kg . In the two former countries gunny bags are made of sisal while in Uganda, they are made of plastic material. However in Kenya, wholesalers package onions more in netted bags that weigh between 20Kg and 50Kg. Traders noted that use of gunny bags made of sisal and netted bags is to prolong shelf live of onions, which are otherwise relatively perishable.  In all the countries of study, other wholesalers sell unpackaged onions from the stalls whereby their customers come with their own packaging materials.

36 Pictorial Presentation of Packaging of Onions by Wholesalers in the EAC

Gunny bags used by wholesalers in Kenya and Tanzania Source:17

Netted bags used by wholesalers in Kenya Plastic bags used by wholesalers in Uganda and Rwanda Source:17 Source:17

37 38

Market Segmentation: Specificty On Grades Preferred By Consumers Source:

17 Country Kenya Rwanda Tanzania Uganda

Quality Grade Grade 1 Grade 2 Grade 3 Grade 1 Grade 2 Grade 3 Grade 1 Grade 2 Grade 3 Grade 1 Grade 3 Parameters 2

Big/ Small Big to Egg Very Size Tiny Small Tiny Big Medium Tiny Tiny Medium size medium size big

Well Well Shape Oval Round Not round Not round Round Round rounded rounded

Mature (Well Not well Not well Not well Well Well Well dried Well dried Well dried dried) dried dried dried dried dried

Injured or Injured or No Wholeness No injury No injury No injury No injury Injured No injury “Twinned” Injured bruised bruised injury

Damage from Pests and Free Free Damaged Free Free Damaged Free Free Damaged Free Damaged diseases Market Segmentation: Specificty On Grades Preferred By Consumers

There are three grades of red bulb onions as recognized by trader: grade 1, 2 and 3. More than 68% of traders look out for both grade 1 and 2 of onions with at least 80% of traders expressing satisfaction with this status.

 Grades of onions are defined by most importantly, size, degree of dryness of the outer layer of the onion and shape. In Kenya, Tanzania and Rwanda, grade 1 is characterized by big/medium sized onions depending on the variety, with a near completely dry outer layer with no shoots and well rounded without off-shoots (“twinned”). In Uganda, grade 1 is of medium size, (the size of an egg) while bigger sizes are regarded as grade 2. For the former three countries, grade 2 is regarded as “small” and the smallest sized onions become grade 3.  Medium sized onions are preferred by households because they just use one onion without having to cut a piece from a large-sized one and reserving the rest for later use, a practice that reduces the shelf live of a piece of onion.  On the other hand, institutions like hotels and schools prefer large-sized onions as they use quite an amount to prepare meals. Small sized onions are considered “rejects” and are sold to low end consumers at the lowest price.

39 Drivers of Consumer Demand for Onions in the EAC

Drivers of Demand for Onions according Onion Retailers in the EAC KENYA RWANDA TANZANIA UGANDA

Change in income 60 50 40 30 Staple food 20 Population growth 10 0

Percentage rank: 0=the lowest rank 60=the highest rank Price of comparable Changes in prices of commodities onion

Source:17 The staple nature of onions in nearly all households in the region and population growth are the biggest drivers of onion consumption the EAC.

 Given that in East Africa, onions are the most consumed form of vegetable in nearly all households and institutions where food is prepared, it is not surprising that its demand is driven by population growth and the fact that it is a staple.  For the same reason in addition to the fact that onions are used in small quantities to prepare foods, their demand is not income elastic. The small extent to which demand for red bulb onions respond to changes in own price and other comparable commodities was especially for Kenya where spring onions are a perfect substitute.  With an average population growth rate of 3%18 in the region in the period 2011-2017, sufficiency of onions produced in the region will depend on how fast production responds to the growth in population.

40 41 42 CHARACTERISTICS OF KEY ACTORS OF THE RED BULB ONIONS IN THE EAC

Only 50% & 30% of onion wholesalers and retailers respectively in Rwanda are registered.

43 CHARACTERISTICS OF WHOLESALERS

44 Onion wholesaling in Kongowea Market Mombasa, kenya Onions wholesaling in Dar Es Salaam, Tanzania Source:17 Source:17

Onions wholesaling in Nakuru, Kenya Source:17

Road side wholesaling in Emali, Kenya Onion wholesaling in Ntungamo, Uganda Source:17 Source:17

45 Level of formality of business of Onion Wholesalers in the EAC

Percentage of Onion wholesalers that Level of Experience in Business of onion are registered (Operate with a license) Wholesalers

KENYA 60 UGANDA 50 40 30 TANZANIA 20 10 RWANDA UGANDA 0 RWANDA

KENYA

0 20 40 60 80 100 Percentage of respondents 5 years and Above 3 to 5 years 1 to 3 years Less than 1 year TANZANIA

Source:17

Only around 50% of onion wholesalers are licensed and over 90% operate as sole proprietors

 With at most 50% of wholesalers in Rwanda are registered, onion businesses in the region are highly informal. Over 90% of wholesalers largely operate as sole proprietors with the remaining ones operating their businesses with other partners. In the countries of study, onion wholesalers are either itinerant supplying onions from production areas to markets based in towns or those that have stall in major markets in the countries who only have to pay market fees at most. Also, the short supply chain usually involving movement of onions from farmers to traders and finally consumers is less demanding of formalization of onion businesses thus, wholesalers do not have an incentive to be registered.  While this is so, over 80% of onion wholesalers have over three years of business experience which is indicative of greater understanding of the way onion business work besides having established customers. Long years in business is also an indicator that a business is profitable. In deed, Farm Concern International 6 noted that onion business in Arusha, one of the biggest production and trading hub of onions in the region is highly profitable, with margins of up to USD 135/MT in 2016.

46 Seasonal Dynamics in ‘Actual’ Versus ‘Desired’ Volumes of onion Procured by Wholesalers

Seasonal Differences in procurement of onions by Wholesalers

160 100 90 80 120 70 60 80 50 40 30 40

Volumes (MT) 20 10 0 0 procured Ap -Jun Jan-Feb Jan-Apr Jul-Sept Jul-Sept Jul-Sept Jul-Sept Jan-Mar Jan-Mar Mar-Ju n Oct -Dec Oct -Dec Oct -Dec Oct -Dec May- Jun May-June High supply Low supply High supply Low supply High supply Low supply High supply Low supply % level of Satisfaction with onions onions with Satisfaction of % level Uganda Tanzania Ken ya Rwanda 17 Source: Actual Desired Percentage of actual procured onions out of the desired volumes

Seasonal-induced high cost of onions and low volumes during low seasons are the biggest hurdles to procurement of desired volumes of onions by wholesalers.  RWholesalers in Tanzania and Uganda procure an average of 33 MT and 32 MT and of onions per month respectively during months of high supply. This comes down to 25 MT and 22 MT per month respectively for the two countries during months of low season.  Regardless of the season, wholesalers reported at least 69% degree of sufficiency in the onions they procure. Level of satisfaction with volumes of onions procured by wholesalers is consistent with sufficiency of production nationally so much so that wholesalers in Tanzania and Uganda were satisfied with the onions they procure more that their counterparts in Kenya and Rwanda. Reasons for not getting onions as  Limited supply from domestic sources desired by wholesalers and high prices during low seasons are High prices 80 70 the twin factors that constrain wholesalers 60 50 the most while procuring desired volumes 40 Poor Quality 30 Competition of onions. In deed, traders noted that 20 10 they incur high cost of procuring onions 0 whenever they have to source for them beyond their national boundaries. Notable, wholesalers of onions are highly liquid (not Limited supply Limited Capital constrained by limited capital)and onions being a perishable commodity with a high Kenya Rwanda Tanzania Uganda turnover, they procure just enough to sell at any one given time.

47 Onion procured by Wholesalers and channels of delivery

Modes of procurement by wholesalers Middlemen UGANDA play an important role in the supply TANZANIA chain of onions by reducing

RWANDA time and transaction costs for KENYA sourcing onions by 0 10 20 30 40 50 60 70 80 wholesalers . Source:17 Traders deliver to Wholesaler Middlemen deliver to trader Procurement from farm gate

Kenya Kimana, Nyeri, Gakoromone, Mai Mahiu, Kinangop, Naivasha, Isiolo, West pokot Rwanda Rubavu, Bugesera, Kamonyi and Nyagatare Tanzania Mang’ola, Moshi, Singida, Arusha, Iringa, Morogoro, Njombe Uganda Kisoro, Ntungamo, Kabale, Mbale, Ntungamo Kapchorwa, Bududa, Manafwa,  In each country of study, more than half of all wholesalers interviewed reported that they go to farms or aggregation centers near farms to source for onions while at most 30% of them have other traders deliver the commodity at their premises.  Middlemen from all the East African countries that border Tanzania move freely to production areas in the country to fetch onion at low price from farm gate. On the other hand, they play a vital value chain role: they offer an alternative market to farmers who consider packaging and transportation of onions to major markets an expensive undertaking.  In Kenya, middlemen act as a go-between between wholesalers and farmers in production areas especially in the Arusha region. In Uganda, middlemen also known as “agents” act on behalf of traders in Tanzania whereby, the latter send onions in trucks which are received by the former to distribute to wholesalers at a commission.  Use of middlemen according to wholesalers is to reduce on transaction costs- aggregation and time taken to look for onions-especially when they have to source for onions outside their countries.

48 49 CHARACTERISTICS OF RETAILERS

50 Onions retailing in Kigali, Rwanda Onions retailing in Dar Es Salaam, Tanzania Source:17 Source:17

Onions retailing in Arusha, Tanzania Road side retailing in Oloitoktok, Kenya Source:17 Source:17

Onions retailing in Mbale, Uganda Onions retailing (in Kgs), in Nyeri, Kenya Onions retailing in Mbale, Source:17 Source:17 Uganda Source:17

51 Level of formality of Onions Retail businesses in the EAC

Percentage of Onion Retailers that Level of Experience in Business of registered (Operate with a license) onion Retailers

UGANDA 11 100 90 80 70 TANZANIA 19 60 50 40 30 RWANDA 30 20 10 0 KENYA RWANDA TANZANIA UGANDA Percentage of respondents KENYA 17 Less than 1 year 1 to 3 years 3 to 5 years 5 years and above

Source:17

There is high level of informality of onion retailing in East Africa with only at most 30% of retailers in Rwanda operating with a license.

 Onion retailers largely operate their businesses without a license with the biggest number of those registered in Rwanda at only 30%. There is a high level of business formalization in the country owing to strict directive to do so and ease of business registration that the government has facilitated over time. All retailers interviewed operate as sole proprietors perhaps due to the fact that the size of their businesses is also small.  More than 50% of onion retailer have at least three years of experience in business. It emerged during the study that unlike wholesalers who deal exclusively in onions, retailers sell other products such as other types of vegetables a factor that contributed to resilience of onion retailers especially during “off-seasons” .

52 Means of procuring Onions by Retailers in East Africa

Mode of procurement for onion by retailers (percentage of respondents) KENYA 100 80 60 40 20 UGANDA 0 RWANDA

TANZANIA Procurement from farm gate Middlemen deliver to traders Wholesalers deliver to traders

Source:17

Potential suppliers to retailers in the EAC would have to incalculate the cost of delivering the onions to retailers in whichever market they choose to supply because retailers require onions to be delivered at their premises.

 Due to the small-scale nature of onion retail businesses in the EAC, it is not surprising that they just receive onions at their premises from suppliers- wholesalers or middlemen.  In was observed in Kenya and Uganda that In some instances, wholesalers park trucks containing onions at market premises where retailers at such a market just go to procure the volumes they want.

53 54 BUSINESS ENVIRONMENT & SWOT ANALYSIS OF MARKETS FOR RED BULB ONIONS IN THE EAC

Wholesalers in Kenya pay the highest cost of compliance with formal and informal business regulations at an average of USD 504 per year

55 What Rules and Regulations that govern Onions Businesses in the EAC?

Kenya Rwanda Tanzania Uganda

Wholesalers Retailers Wholesalers Retailers Wholesalers Retailers Wholesalers Retailers

Market fees 25 10 6 6 3 3 3 (Per month) Market fees 300 120 72 72 36 36 36 (Per Year) Business license (Per 60 7 5 71 7 year) Local Taxes 0.5 0.6 2.5 1 (Market days) Local Taxes 144 173 720 288 (per Year) Total Costs 504 130 251 78 725 36 395 43 (Per Year)

Onion wholesalers in Kenya pay the highest costs-USD 504 per year for compliance with formal and informal business regulations.

 Onion trade in the EAC is highly informal. However, some of the costs that traders-mostly wholesalers-incur in compliance of some trade requirements are such as local (at the areas of operations) taxes, business licenses and market fees. Onions traders in Kenya incur the highest costs of compliance. Conspicuously so, costs of compliance are relatively lower in Rwanda despite the country having the highest level registered onion businesses in the EAC.  Be that as it may, onions traders in the country of study complained that the costs they pay are too high. In addition, some onion wholesalers in Uganda reported paying import duties of as high as USD 128. On the flip side, high level of informality of the onion business in the EAC is a catalyst to entry into the business.

56 SWOT of Onions Markets in the EAC

Strengths Opportunities 1) Ability of traders to self-finance to procure 1) Growing population translating to increased volumes of onions that they want at any one demand for onions. point wherever they are. 2) In some countries such as Kenya, there is 2) Consistent demand since onions are an increasing demand for red bulb onion consumed daily in households and institutions from the previously preffered cheaper spring where food is prepared. onions. 3) Onions are grown around many agro-ecologies 3) Expansion of the hospitality industry thus in each country. increase in onion demand. 4) Markets for onions in the region are 4) Increasing integration of the thereby making differentiated only to a limited extent meaning trade in onions nearly “borderless”. that traders sell all onions they procure. 5) Increasing demand for onions in importing 5) Low barriers to trade. countries outside the region eg in Europe 6) Traders have established networks with and Middle East. farmers and/or traders in production hubs Tanzania where other EAC countries import onions from. 7) Limited infestation f onions with pest and diseases Weaknesses Threats 1) Poor Post-harvest handling techniques 1) Increasing tariff and non-tariff barriers to contributing to losses at farm level especially trade in Tanzania-specifically for onions during wet seasons, during transportation and traders who would freely move in and out of at points of sale. Tanzania now have to pay some fees to enter 2) Harvesting of pre-mature onions that are the country. sold cheaply ultimately dampening prices for 2) Increasing competition for onions in onions that are mature. Tanzania from traders coming from 3) Limited storage facilities. importing countries who have established relationship with farmers in major onion 4) Existence of cartels which interfere with production hubs. dynamics of markets such as prices. 3) Competing uses for land for other food crops 5) Limited value addition thus limited product and commercial purposes in major onion differentiation growing areas. 6) Unstandardized weighing systems and 4) Poor road infrastructure in production areas packaging. that hinders seamless transportation of onions to different markets.

57 58 PROSPECTS FOR REGIONAL TRADE IN RED BULB ONIONS AND CONTRACT FARMING

a. 67% and 33% of wholesalers in Kenya and Uganda are willing to source for onions mainly from Tanzania at 570MT/month for the former and 1,000MT/month for the latter. b. 61% and 33% of wholesalers in Rwanda and Tanzania are interested in contract farming.

59 Prospects for and reasons for not sourcing onions from Regional markets by wholesalers

Prospects for Regional Sourcing of Onions by wholesalers, preferred Importing Countries and desired Volumes Country of % of Traders Preferred Desired Reasons for Destination Willing To Source Country Volumes preference Source From (MT/ of Country of EAC Countries month/ Source for Onions trader) Uganda 33% Kenya 17 Close proximity and low prices

Tanzania 571 Onions are long lasting, required volumes always available, and low price, Rwanda 24% Tanzania 270 Good quality Uganda 240 Good quality and enough volumes Tanzania 28% Kenya 80 Close proximity Uganda 10 Close proximity Kenya 67% Tanzania 1015 Onions are long lasting and close proximity

67% and 33% of onion wholesalers in Kenya and Uganda respectively expressed desire to procure onions from Tanzania citing consistent supply and long shelf life.

60 Prospects for and reasons for not sourcing onions from Regional markets

 Sufficiency of local sourcing and high costs (majorly transactional) of sourcing across borders for many traders is a deterrent to regional procurement of onions,  Indeed, although onions from Tanzania were praised by traders for their superior quality, traders noted that they only source for onions from the country when they cannot get sufficient suppliers nationally. This is to say that should the productive capacities of importing countries in the EAC improve, Tanzania will loose her comparative edge. Therefore improvement of competitiveness of onions production and efficiency in trading in Tanzania will be paramount.  Kenya is a structurally onion deficit country and as such, 67% of onion wholesalers in the country would want to source for the commodity from other EAC countries.  Surprisingly, although Uganda is the biggest producer of onions in the EAC, 33% of onion wholesalers in that country expressed desire to source onions mostly from Tanzania. They cited reasons such as consistent availability of better quality of onions compared to those locally produced.

Reasons by wholesalers for not sourcing Regionally

Bureaucracy High costs Satisfied with local sourcing

KENYA 60 50 40 30 20 10 UGANDA 0 RWANDA

Source:17 TANZANIA

61 Current Status of, Prospects and Conditions for Contracting Farmers by Onions Wholesalers in the EAC

Current Status of and willingness of Wholesalers to engage in contract farming

25 ofrespondents % 0 KENYA RWANDA TANZANIA UGANDA

% of wholesalers Contracting farmers % of wholesalers willing to get into contract farming Source:17 Conditions for contracting farmers Uganda Tanzania Kenya Rwanda

Aggregates required volumes 50 40 30 Willing to agree to be 20 Located close to paid later after delivery 10 wholesales' premises 0

17 Farmers deliver to Farmers deliver required Source: trader's premises quality

61% and 33% of wholesalers in Rwanda and Tanzania respectively are interested in contracting onion farmers.

62 Current Status of, Prospects and Conditions for Contracting Farmers by Onions Wholesalers in the EAC

 Contract arrangements between traders and farmers are not a common occurrence in East Africa with at most 12% of wholesalers in Rwanda reporting that they are currently involved in the practice. It is also in Rwanda that the biggest number of wholesalers, at 61% expressed their willingness to engage in contract farming followed by those in Tanzania at 53%. However, despite onion deficit status in Kenya, onions wholesalers in the country do not consider contract farming as a avenue to ensure constant supplies of the vital commodity.

 While the Rwandan case can be explained by the need to ensure stable supply of onions due the countries deficit status, wholesalers in Tanzania would be interested in contract farming to alleviate the problem of high competition from Kenyan traders who have direct contact with farmers in Tanzania.

 Ability to aggregate required volumes and in the right quality are important pre-conditions for contract farming by wholesalers who want to contract farmers. Quality characteristics of onions that are important to them are: a. Medium sized onions that that do not have off -shoots b. Well dried onions-with a thin dry covering and without shoots

63 64 Challenges and Recomendations

65 66 Conclusions

Red bulb onions are a “seller” in themselves as they are an important constituent of daily meals and other food preparations at households, processing companies and in some institutions such as schools, hospitals and prisons, not just in the East Africa region but in other parts of the world. Although as a block, the region produces onions in surplus, there are pockets of deficits that drive trade between them and surplus areas.

67 Bibliography

1. FAO STAT, 2017, Production and food supply data 2. ITC 2016, Trade Map 3. USAID 2013, The fresh fruit and vegetable markets of East Africa: An assessment of regional value chain actors, activities and constraints in kenya, tanzania and Uganda 4. Kilimo Trust 2017, REACTS fields work experience 5. WFP (2016) Comprehensive Food Security and Vulnerability Analysis (CFSVA) 6. Farm Concern International (FCI) 2016, Tanzania Market Outlook: A focus on onion trade in Arusha and Kilimanjaro region 7. Farm Concern International (FCI) 2016,Informal Wholesale Markets Summary in Coastal Kenya 8. VECO East Africa 2016, Adding value to the Ugandan horticultural sector 9. Tegemeo Institute Of Agricultural Policy And Development (2004) Improving kenya’s domestic horticultural production and marketing system: current competitiveness, forces of change, and challenges for the future 10. Farm Concern International (FCI), VEMAC Value Chain Analysis, 2015 11. UBOS 2013, Informal cross border trade 12. Tanzania Daily News (2016), East Africa: Arusha Onion Growers Start Exports to Juba 13. The East African(2014), Tanzania bulb onion traders lose as Kenyans start growing the crop 14. USAID 2016, Commercialization Bulletin: Onions 15. USAID 2013, Horticultural VC in Kenya 16. Global Supply Online, 2017. Exporters of Onions from Uganda. http:// www.globalsuppliersonline.com/Uganda/Onion 17. Kilimo Trust, 2017. Study on characteristics of Markets for Onions in the East Africa. 18. FAOSTAT 2017. Annual Population statistics. http://www.fao.org/faostat/ en/#data/OA

68 Bibliography

19. Soft Kenya, 2017. Onion Farming in Kenya. https://softkenya.com/kenya/ onion-farming-in-kenya/ 20. Cordaid, 2015. New Onion Seed Increases Young Farmers’ Profit. https:// www.cordaid.org/en/news/new-onion-seed-increases-young-farmers- profit/ 21. Farm Solutions Africa, 2016. Onion Red Creole Rules Ugandan Market. http://farmsolutionsafrica.com/2016/11/03/onion-red-creole-rules- ugandan-market/ 22. E-Hinga, 2017. Onion Varieties. http://www.ehinga.org/eng/articles/onions/ varieties 23. Balton Rwanda, 2017. Seed. http://balton.co.rw/farming 24. The Times of India, 2017. “After Price Crash”, Maharashtra Onions see record exports. 25. East Africa Online Transport Agency, 2017. Average Transport Rates - Road.

69 70 APPENDICES

71 UGANDA: Inventory of wholesalers, their volumes (Actual and desired)

PROCURED DESIRED NAME OF THE CONTACT COUNTRY LOCATION PHONE VOLUMES IN VOLUMES BUSINESS PERSON MT/YEAR PER YEAR Kisoro, Nkwasibwe - UGANDA (+256)783301410 504 864 Kanaba Warren Ntungamo, Akampurira - UGANDA (+256)755410779 216 216 Rwahi Moses Ntungamo, Tumwijukye - UGANDA (+256)74033670 196 200 Rwahi Samuel

Ntungamo, Barungira - UGANDA (+256)782513250 120 150 Kayonza Gordon Kampala, Musinguzi - UGANDA Owino (+256)755359158 117 117 Joseph market Anthony Wo- Anthony UGANDA Gulu (+256)783372820 112 130 kowu Wokowu Ntungamo, - UGANDA Kiza Fred (+256)782088050 108 120 Rwahi Kisembo Namanya UGANDA Kampala (+256)755397670 77 100 imelda modden MUYONGA MUYONGA UGANDA GULU (+256)779960929 70 80 BEN BEN Ntungamo, Magambo - UGANDA (+256)784403230 70 80 Rwahi Bernard Lily Fresh Kampala, UGANDA Yawe Lydia (+256)751252207 66 72 suppliers Owino Kisoro, Gashillingi - UGANDA (+256)773922577 58 68 Mukaranga George Kampala, Abdu Nulu - UGANDA (+256)772961046 52.8 58 Owino Karuhanga Kumi road Mudebo UGANDA Market (+256)774772992 50 55 Kamaadi mbale Nabudo UGANDA Mbale (+256)785350804 48 60 Aziz Jinja cen- Namulondo None UGANDA (+256)781330816 48 50 tral market Annet

72 RWANDA: Inventory of wholesalers, their volumes (Actual and desired)

PROCURED DESIRED LOCATION CONTACT PERSON PHONE VOLUMES IN VOLUMES PER MT/YEAR YEAR Nyarugenge Olive (+250)784376081 100 180 Nyarugenge Bamaso Naphtha (+250)788398555 50 65 Rubavu Nzayisenga Jackson (+250)785014240 24 30 Nyarugenge Nzamulamboho Aprien (+250)788777383 11 20 Rubaku Ntinengamya (+250)788557899 10 30 Rubavu Habakurema (+250)782499137 10 18 Rubavu Kafe (+250)783223746 10 10 Rubavu Bigango Patrick (+250)785612182 0 10 Rubavu Ndabomuye (+250)788764504 10 15 Rubavu Kafevuba (+250)785581414 8.5 3.5 Rubavu Habiyaremye (+250)783132630 8 10 Rubavu Munyabonimza (+250)789903320 8 5 Rubavu Ntamuhanga (+250)782039135 8 15

73 TANZANIA: Inventory of wholesalers, their volumes (Actual and desired)

PROCURED DESIRED NAME OF THE CONTACT LOCATION PHONE VOLUMES IN VOLUMES PER BUSISNESS PERSON MT/YEAR YEAR

MISUNA onion Paul Mbogo (+255)767364345 705 1050 international market Arusha- Adam business Kilombero Adam Giriki (+255)754998682 520 50 mrkt MISUNA onion Saidi Ibrahim (+255)754620450 270 0 international Saidi market Ramadhani Ilala (+255)765002421 265 290 hamisi

Shabby m. Shimon Kariakoo (+255)788714372 240 400 Hatibu

Leodegard Whole sale busi- Arusha- Valerian (+255)762969643 210 210 ness Kilombero mrk Masawe

MANGU SINGIDA (+255)758388279 123.6 0 TANDU

Ilala Hamis Muha (+255)75852435 110 100

Mama Mve Ilala (+255)785113155 105 70 vanesa

Luanda Vija Ubungo (+255)683949521 103 100 kiwenge

Arusha- Simon’s business Simon Noel (+255)769631735 100 160 Kilombero

Moshi- Limo Business Shaba Limo (+255)784666351 90 130 Mbuyuni mkt

Charles Kinondoni (+255)715792166 75 60 Michael

S150 Ubungo Shirima (+255)754833737 75 100

Arusha- Mama Abdul Kilombero Mama Abdul (+255)755985455 70 50 Business market

74 TANZANIA: Inventory of wholesalers, their volumes (Actual and desired)

NAME OF THE LOCATION CONTACT PHONE PROCURED DESIRED BUSISNESS PERSON VOLUMES VOLUMES IN MT/ PER YEAR YEAR

Arusha-Kilombero William Juma Business (+255)754041110 70 50 market Wambula

Ilala Rajab Abdalah (+255)788554649 70 60

Ak Ilala, ilala Ally karim (+255)785113155 70 50

Godfrey Godfrey business Arusha-Kilombero (+255)756648063 70 50 Massawe

Msangi Business Arusha-Kilombero Haruni Msangi (+255)755349904 70 50

Shimoni Ilala Jummanne juma (+255)784502483 66 50

Arusha-Kilombero Emmanuel Emmanuel Business (+255)755572634 62 30 mrkt Miagiye

Arusha-Kilombero Mamba business Mr. Maumba (+255)757895288 60 50 mrkt

Mbise Business Arusha-Kilombero Elias Mbise (+255)766806381 60 30

Husein Husein’s business Arusha-Kilombero (+255)718997937 55 45 Mohammed

Jafety Arusha Jafety (+255)754730823 55 10

75 KENYA: Inventory of wholesalers, their volumes (Actual and desired)

NAME OF THE LOCATION CONTACT PHONE PROCURED DESIRED BUSINESS PERSON VOLUMES IN VOLUMES MT/YEAR IN MT PER YEAR

Kimana onions Machakos John (+254)724018175 126 150

Sammy Mkulima Kitunguu Machakos (+254)706477051 85 70 Ndumbu

Mbeneka Onions Machakos Ben Mbithi (+254)711255383 70 74

Makueni/Emali Tabitha (+254)713892264 63 80

NK traders Emali Nicholas Kyalo (+254)796031212 57 70

Juhudi Groceries Machakos Richard Musau (+254)75426852 52 70

Eastside stores Machakos Ann muange (+254)714265826 43 60 Branson Stage shop Emali (+254)79548623 38 50 maundu Nakuru /nakuru Nderitu Simon Nderitu Simon (+254)722635140 27 36.5 /Wakulima mkt Nakuru / Irene Mueni Naivasha /old Irene Mueni (+254)710338015 27 31 market Nakuru /nakuru Luka kagiri Luka kagiri (+254)721423468 23 31 /Wakulima mkt

Loitoktok/ Francisca Farmers court (+254)786542586 6.5 29.5 Kimana market Mueni Nakuru / Wanjiru Wanjiru wamuyu Nakuru / (+254)706415547 20 24.5 Wamuyu wakulima mkt Nakuru / James Njoroge nakuru/ James njoroge (+254)725875384 20 24 wakulima mkt Nakuru /nakuru Rahab nyam- Rahab nyambura (+254)722161872 20 23.5 /wakulima mkt bura Nakuru / Patricia Kiara Nakuru / Patricia kiara (+254)711310278 19 23.5 Wakulima mkt

COUNTRY OFFICES Headquaters Plot 42, Princess Anne Drive, Bugolobi P.O.Box 71782, Kampala - Uganda Tel: +256 392 264 980/1, +256 200 926 498, Email: [email protected] Kilimo Trust Tanzania Plot 455, Avocado Street, Kawe P.O.BOX 106217, Dar-es-Salaam, Tanzania Tel: +255 22 278 1299, Email: [email protected] Website: www.kilimotrust.org