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Coalition-Driven Initiatives in the Ugandan Dairy Sector: Elites, Conflict, and Bargaining Anne Mette Kjær, Fred Muhumuza and Tom Mwebaze

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Coalition-Driven Initiatives in the Ugandan Dairy Sector: Elites, Conflict, and Bargaining Anne Mette Kjær, Fred Muhumuza and Tom Mwebaze DIIS WORKINGDIIS WORKING PAPER 20PAPER12:02 Coalition-driven initiatives in the Ugandan dairy sector: Elites, conflict, and bargaining Anne Mette Kjær, Fred Muhumuza and Tom Mwebaze DIIS Working Paper 2012:02 WORKING PAPER WORKING 1 DIIS WORKING PAPER 2012:02 ANNE METTE KJÆR Associate professor Department of Political Science, Aarhus University FRED MUHUMUZA Lecturer College of Business and management sciences Makerere University TOM MWEBAZE Senior Lecturer College of Business and Management Sciences Makerere University ACKNOWLEDGEMENTS The authors wish to thank James Joughin and Warwick Thompson for valuable and insightful comments; we are also grateful to Mesharch Katusiimeh for his taking part in interviews and reading of drafts. The usual disclaimers apply. DIIS Working Papers make available DIIS researchers’ and DIIS project partners’ work in progress towards proper publishing. They may include important documentation which is not necessarily published elsewhere. DIIS Working Papers are published under the responsibility of the author alone. DIIS Working Papers should not be quoted without the express DIIS WORKING PAPER 2012:02 © The authors and DIIS, Copenhagen 2012 Danish Institute for International Studies, DIIS Strandgade 56, DK-1401 Copenhagen, Denmark Ph: +45 32 69 87 87 Fax: +45 32 69 87 00 E-mail: [email protected] Web: www.diis.dk Cover Design: Carsten Schiøler Layout: Allan Lind Jørgensen Printed in Denmark by Vesterkopi AS ISBN: 978-87-7605-485-4 Price: DKK 25.00 (VAT included) DIIS publications can be downloaded free of charge from www.diis.dk 2 DIIS WORKING PAPER 2012:02 DIIS WORKING PAPER SUB-SERIES ON ELITES, PRODUCTION AND POVERTY This working paper sub-series includes papers generated in relation to the research programme ‘Elites, Production and Poverty’. This collaborative research programme, launched in 2008, brings together research institutions and universities in Bangladesh, Denmark, Ghana, Mozam- bique, Tanzania and Uganda and is funded by the Danish Consultative Research Committee for Development Research. The Elites programme is coordinated by the Danish Institute for International Studies, Copenhagen, and runs until the end of 2011. Earlier papers in this subseries: Rweyemamu, Dennis: “Strategies for Growth and Poverty Reduction: Has Tanzania’s Second PRSP Influenced implementation?” DIIS Working Paper 2009:13. Kjaer, Anne Mette, and Fred Muhumuza: “The New Poverty Agenda in Uganda” DIIS Work- ing Paper 2009:14. Whitfield, Lindsay: “The new ‘New Powerty Agenda’ in Ghana: what impact?” DIIS Working Paper 2009:15. Webster, Neil, Zarina Rahman Khan, Abu Hossain Muhammad Ahsan, Akhter Hussain and Mahbubur Rahman: “State Elites and the New Poverty Agenda in Bangladesh”. DIIS Work- ing Paper 2009:22. Buur, Lars, with Obede Suarte Baloi: “The Mozambican PRSP Initiative: Moorings, usage and future” . DIIS Working Paper 2009:35. Whitfield, Lindsay: “Developing Technological Capabilities in Agro-Industry: Ghana’s ex- perience with fresh pineapple exports in comparative perspective”. DIIS Working Paper 2010:28. Whitfield, Lindsay: “How countries become rich and reduce poverty: A review of heterodox explanations of economic development”. DIIS Working Paper 2011:13. Whitfield, Lindsay and Ole Therkildsen: “What Drives States to Support the Development of Productive Sectors?”, DIIS Working Paper 2011:15. Buur, Lars and Lindsay Whitfield: “Engaging in productive sector development: Comparisons between Mozambique and Ghana,” DIIS Working Paper 2011:22. Lindsay Whitfield: “Competitive Clientelism, Easy Financing and Weak Capitalists: The Con- temporary Political Settlement in Ghana”, DIIS Working Paper 2011:27. Lindsay Whitfield: “Growth without Economic Transformation: Economic Impacts of Gha- na’s Political Settlement”, DIIS Working Paper 2011:28. Lindsay Whitfield: “Political Challenges to Developing Non-Traditional Exports in Ghana: The Case of Horticulture Exports”, DIIS Working Paper 2011:29. Lars Buur with Obede Baloi and Carlota Mondlane Tembe: “Mozambique Synthesis Analysis: Between Pockets of Efficiency and Elite Capture,” DIIS Working Paper 2012:01. More information about the research and access to publications can be found on the website www.diis.dk/EPP or via the Q2 barcode 3 DIIS WORKING PAPER 2012:02 ABBREVIATIONS ADB African Development Bank DC Dairy Corporation DDA Dairy Development Authority EU European Union FAO Food and Agricultural Organization IFI International Financial Institutions IMF International Monetary Fund MAAIF Ministry of Agriculture, Animal Industry, and Fisheries. MOFPED Minsistry of Finance, Planning, and Economic Development. MP Member of Parliament NAADS National Agricultural Advisory Services NRA National Resistance Army NRM National Resistance Movement PEAP Poverty Eradication Action Plan PIRs Policies, Implementation arrangements, and Results RDE Royal Danish Embassy SALL Sameer Agriculture and Livestock Ltd. UCCCU Uganda Crane Creameries Cooperatives Union UFPEA Uganda Fish Processors and Exporters Association UCB Uganda Commercial Bank UNBS Uganda National Bureau of Standards UNDATA Uganda National Dairy Traders Association UNDP United Nations Development Program 4 DIIS WORKING PAPER 2012:02 CONTENTS Abstract 6 1. Introduction 7 2. Overview of the dairy sector 8 3. The ruling coalition in post-colonial Uganda 12 4. Historical background and early initiatives in dairy farming 14 5. Liberalization and privatization: drivers and consequences 17 6. Regulation in the dairy sector: drivers and consequences 22 7. Conclusion 26 References 28 5 DIIS WORKING PAPER 2012:02 ABSTRACT The dairy sector is one of the only agricultural sectors in Uganda that has enjoyed sustained high growth since the late 1980s. Milk and the cold dairy chain developed especially in the south-western part of the country. This paper explains why this is so by the sector’s relation to the ruling coalition. We argue that the dairy sector was relatively successful because the south-western based ruling elite wanted to build a support base in its home area. In addition, the elite had a special interest in dairy since key elite members owned dairy cattle them- selves. As milk production grew, the ruling elite wanted to regulate the sector as this would help the big processor, the state owned and later privatized Dairy Corporation. Regulation was relatively successful and a pocket of bureaucratic efficiency was established in an agency called the Dairy Development Author- ity. The reason why regulation was enforced to a considerable extent was the organization of dairy farmers and traders and the bargaining and compromise with the Dairy Development Authority this organization of industry actors enabled. 6 DIIS WORKING PAPER 2012:02 1. INTRODUCTION This paper explores why and how the ruling elite have supported the dairy sector in Ugan- Uganda’s dairy sector has been bucking a da. Its main purpose is to analyze and explain trend in the agricultural sector in which pro- Policies, Implementation arrangements and duction has been growing very slowly since Results (PIRs) in the sector. It argues first the late 1990s and was less than one percent that milk production in Uganda grew because in 2010/11. However, milk production has of a mixture of targeted government initia- grown quite rapidly at about 7 percent an- tives towards south-western dairy production nually, and the number of livestock has also and a general liberalization of the sector that grown. Whereas in the early 1990s Uganda allowed milk to be traded. The targeted initia- was dependent upon imported milk powder, tives were part of an effort to build up the it is now largely self-sufficient in fresh milk. ruling coalition with core support from Presi- Though still rudimentary, technology in the dent Museveni’s home region. Secondly, the dairy sector has been upgraded and milk paper argues that initial pressure to privatize quality has improved. There has also been an the state-owned Dairy Corporation (DC) increase in the volume of pasteurized milk. came from donors. The reason why its imple- The former state-owned dairy corporation mentation took over ten years was that there has been privatized, and it buys milk, mainly was pressure from the south-western dairy from the south-western cooperatives, which farmers, who are well-organized, to buy it. it then processes. There are a rising number However, the government wanted the factory of small-scale pasteurizers offering competi- to be sold to a private investor for investment tion to the big privatized unit, called SALL and technology purposes as well as probably (Sameer Agriculture and Livestock Ltd). for the more hidden purpose of providing Milk production has increased most mark- funding for the ruling coalition. Thirdly, we edly in Uganda’s south-western region, where argue that the sector has been regulated and most of the country’s ruling elite come from. upgraded technologically because of the es- The ruling National Resistance Movement tablishment of a relatively successful regula- (NRM) party is regionally based and is pri- tory agency, the Dairy Development Author- marily based on the Banyankore people from ity (DDA), whose director has been able to south-west Uganda, or, for the very impor- negotiate with well-organized stakeholders tant positions close to the president or in among farmers and particularly dairy trad- the army, from the president’s sub-tribe, the ers. The DDA has had some autonomy to do Bahiima. This group makes up the core base this, but there has been pressure from ruling of support
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