Final Report Political Economy Analysis of the Agriculture and Agribusiness Sectors in Northern Uganda DFID

Final Report Political Economy Analysis of the Agriculture and Agribusiness sectors in Northern Uganda DFID

James Joughin, Gerald Owachi, Thelma Akongo and Mateo Cabello

May 2014 Political Economy Analysis of the Agriculture and Agribusiness sectors in Northern Uganda

Executive Summary

Oxford Policy Management (OPM) and Coffey have been contracted by the Department for International Development (DFID) to appraise proposed options for intervention in agribusiness sector in Northern Uganda, and to inform project design, from a political economy perspective. This report presents the key elements of this analysis, much of it based on field work carried out since January 2014.

The Political Economy Analysis (PEA) carried out identifies specific bottlenecks and opportunities that affect the agribusiness sector. Chapter 2 introduces the current economic and social situation in Northern Uganda and explores the links between this reality and the effects of the armed conflict that beset the region until recently. The main features of the agriculture sector in Uganda as well as the specific issues in commercial agriculture in Northern Uganda are explored in this section. Chapter 3 presents the main political economy factors analysed during the work, making a crucial distinction between overarching factors at national level and factors specific to Northern Uganda. Among the former, the study identifies clientelism, a political system based on inflationary patronage and the prominence of corruption as the distinguishing features of the existing political culture in the country. Among the latter, the lack of social capital and trust as a result of the armed conflict creates a vicious cycle which is heavily reinforced by a myriad of other factors, of which issues regarding land tenure and land use are significant.

The individual analyses of the different market systems (agricultural inputs, transportation, storage, processing and agricultural finance) carried out in Chapter 4 shows that the most pressing bottlenecks in each of them can be construed as technical – that is, related to the nature of the agribusiness activity, rather than to the political decisions taken around it. The most important political economy issues affecting the market systems are, at macro level, the patchwork of incomplete regulations governing them; at meso level, public actors’ inability to enforce rules because of a combination of low enforcement capacity (including lack of sanctions), lack of checks and counterbalances and poor motivation; at micro level, the weak bonds existing in most value chains which result in huge asymmetries of bargaining power among the stakeholders involved in these chains. Issues like the lack of capacity of the NSCS to put a brake on the counterfeiting of seeds or the negative influence of politically driven agriculture finance initiatives are discussed in the report. Most market systems are dominated by one or two actors with strong political connections and a capacity/ability to navigate through the flawed regulatory, commercial and economic environment.

While Chapter 4 demonstrates that the main factors behind the low level of development of each market system are mainly technical, Chapter 5 introduces new evidence that helps to expand on these findings. By exploring the linkages between overarching and specific political economy factors and their influence on the factors affecting the market systems, it is possible to conclude that the technical elements highlighted in Chapter 4 are neither the only ones constraining the development of the agribusiness sector in Northern Uganda nor the most influential; rather it is a combination of these technical issues with the negative path dependency created by the concentration of political economy factors at supra, macro, meso and micro levels that impacts the development of the sector so deleteriously. The concept of negative

© Oxford Policy Management and Coffey i Political Economy Analysis of the Agriculture and Agribusiness sectors in Northern Uganda path dependency – the way a set of decisions for any given circumstance is limited by the decisions one has made in the past - is explored further in the text.

This conclusion has important implications for the design of DFID’s interventions. The most important one is that sustainable progress cannot be achieved in agribusiness in Northern Uganda unless a long-term process of restoration of social capital is put in place, to run in parallel with reforms in the markets. Issues like increased levels of transparency and accountability, as well as local participation, are critical to improving the chances of any intervention overcoming the deeply entrenched incentives perpetuating negative path dependency. This underlines the importance of finding a balance between the need to obtain quick-wins, so as to create trust and confidence in the reform process, and the necessity for these interventions to be as inclusive as possible, even if that means working with those other than the most qualified stakeholders. In fact, between these two alternatives, the second one is the most pressing: strategy exclusively focused on quick-wins and the creation of rapid demonstrative effects will mostly rely on the existing winners in the markets, which in turn may create deeper divisions in the fragile social fabric of the region.

Table of Contents

Executive Summary i Table of Contents iii List of Abbreviations v 1 Introduction 1 2 The Northern Uganda context 2 2.1 General background 2 2.2 Poverty and vulnerability in Northern Uganda 3 2.3 The historical legacy 6 2.3.1 Ethnicity and conflict in Northern Uganda 6 2.3.2 Peace, recovery and development 9 2.3.3 The changing role of Northern Uganda 10 2.4 Agriculture and agribusiness in Northern Uganda 11 2.4.1 The sector in the national context 11 2.4.2 Specific issues in commercial agriculture in Northern Uganda 13 3 The political economy context in Uganda and the North 15 3.1 Our understanding of the assignment 15 3.2 Overarching PE factors affecting the national landscape 16 3.3 Overarching PE factors specific to Northern Uganda 20 3.3.1 Population demographics 20 3.3.2 Inter-generational tensions 21 3.3.3 Perceptions of marginalization 21 3.3.4 Sharing the “peace dividend” 22 3.3.5 Issues of outsiders 22 3.3.6 Trust and mistrust 22 3.4 The lack of availability of productive land 24 3.4.1 Availability of land 24 3.4.2 Land and the social fabric 24 3.4.3 Conflicting land tenure systems 26 3.4.4 Land and economic development 27 3.4.5 Land as a renewed source of conflict 28 4 The agricultural market systems 30 4.1 Agricultural inputs 30 4.2 Transport 45 4.3 Storage 49 4.4 Processing 52 4.5 Agricultural Finance 56 4.6 Summary 59 5 Bringing together the political economy factors 61 References 64 Terms of Reference 72 Stakeholder meetings during fieldwork 82 A short history of some of the land acquisition issues 83

Land transactions and commercial agriculture 85 Registered seed companies 87 The main agrochemical importers in Uganda 88

Figures

Figure 1: Geographical and administrative division of Uganda 3 Figure 2: Seed value chain 32 Figure 3: Organisational structure of the seed sector 33 Figure 4: Annual Fertilizer Imports, Uganda, 1994-2012 (mt) 39 Figure 5: Fertilizer Distribution Structure 41 Figure 6 Lending to Agriculture 58 Figure 7: The political economy connections in agribusiness sector 62

List of Abbreviations

ACF Agricultural Credit Facility AGRA Alliance for a Green Revolution in Africa ALGC Agricultural Loan Guarantee Company ATAAS Agricultural Technology and Agribusiness Advisory Services AfDB African Development Bank APEP Agricultural Productivity Enhancement Project BFP Budget Framework Paper CAADP Comprehensive Africa Agriculture Development Programme COMESA Common Market for East and Southern Africa DANIDA Danish International Development Agency DDA Dairy Development Authority DFID Department for International Development (UK) DLB District Land Board DLO District Land Office DRC Democratic Republic of Congo DSIP Development Strategy and Investment Plan EAC East African Community EAAPP East African Agricultural Productivity Project ECA Eastern and Central Africa EPRC Economic Policy Research Centre EPS-PEAKS Economics and Private - Sector Professional Evidence and Applied Knowledge Services Framework EU European Union FAO Food and Agriculture Organization FICA Farm Inputs Care Centre (FICA) Ltd GoU Government of Uganda IDP internally displaced person IFAD International Fund for Agricultural Development IFPRI International Food Policy Research Institute ISSD Integrated Seed Sector Development Programme LRA Lord’s Resistance Army MAAIF Ministry of Agriculture, Animal Industry, and Fisheries NAADS National Agricultural Advisory Services NARO National Agricultural Research Organization NRM National Resistance Movement

NDP National Development Plan NSCS National Seed Certification Service NGO Non-governmental organization OECD Organisation for Economic Co-operation and Development OPM Oxford Policy Management PMA Plan for the Modernization of Agriculture PFA Prosperity for All (NRM strategy) PRDP Peace Recovery and Development Plan RCs Resistance Councils ToR Terms of Reference UBOS Uganda Bureau of Statistics UGX Ugandan Shilling ULA Uganda Land Alliance UNADA Uganda National Agro-inputs Dealers’ Association UNDP United Nations Development Programme UNFFE Uganda National Farmers Federation UNHS Uganda National Household Survey UNLA Uganda National Liberation Army UPDF Uganda People’s Defence Force USAID United States Agency for International Development USTA Uganda Seed Trade Association

1 Introduction

Within the Economics and Private Sector Professional Evidence and Applied Knowledge Services Framework (EPS-PEAKS) Oxford Policy Management (OPM) and Coffey, have been contracted by the Department for International Development (DFID) to appraise proposed options for intervention in Agriculture and Agribusiness sector in Northern Uganda, and to inform project design, from a Political Economy (PE) perspective. The Terms of Reference (ToR) for the assignment are at Annex A.

Work on the assignment began early in January 2014 with a conference call with representatives from DFID in Uganda to discuss the scope of the work considering the existing time framework. It continued with a review of relevant literature and data sources. Preliminary findings were summarised in the Inception Report, which was submitted on 6 February, receiving useful feedback and suggestions. During the field visit between 10-22 February, meetings were held in Kampala, Lira, Gulu and Arua, bringing together stakeholders involved in the agribusiness sector in Northern Uganda (Annex B contains a list of stakeholder meetings). In the fieldwork, the main hypotheses obtained during the Inception Phase were tested. On 22 February, the team had a wrap-up session with DFID to discuss the findings.

Following DFID’s request, the main purpose of this document is to explore the main political economy factors affecting the agribusiness sector in Northern Uganda and the potential implications they may have for DFID’s intervention options in the sector.

Chapter 2 of this report provides background data about Northern Uganda, including information about poverty and vulnerability, ethnicity, the root of the conflict and its main effects, as well as the agriculture sector in the region. Chapter 3 describes some of the main PE factors that will be taken into account during the assignment, including a description of the approach used to analyse them. A key distinction is made between overarching factors at national level and Northern Ugandan-specific factors. Chapter 4 explores the main market systems included in the assignment: input supply, transport, storage, financing, and processing. A brief description of the main PE factors affecting each of them, on an individual basis, is included in this section. Chapter 5 brings together all the PE elements described in the document, exploring not only the links between them but also the cumulative effect that these links produce. Finally, Chapter 6 provides basic information about DFID’s intervention options in the region as well as describing the PE factors most likely to impact on them.1

1 The exchange rate between USD and UGX used in this document is 1 USD = 2,532 UGX

2 The Northern Uganda context

2.1 General background

Uganda is a landlocked country in East Africa bordering South Sudan to the north, Kenya to the east, Rwanda and Tanzania to the south and the Democratic Republic of Congo (DRC) to the west. The total population of the country is some 36.4 million inhabitants (World Bank, World Development Indicators) half of which are under the age of 15. The population growth rate is some 3.2 percent per annum (Ministry of Agriculture, Animal Industry, and Fisheries, 2010), meaning Uganda has the third highest rate of population increase in the world. The population that was 6 million in 1969 is now six times that. Life expectancy is just over 50 years.

The country is divided into four main regions: Central, Western, Eastern, and Northern. In turn, they are divided into 112 districts. Northern Uganda occupies half of the country and is divided into three sub-regions: West Nile (15,783 km2), Mid Northern (41,880 km2) and North East (45,213 km2). These sub-regions were divided into some 40 administrative districts (see map below). The North East is the driest of the three sub- regions, with an average annual rainfall of 400-1,500mm, compared to 750-1,500mm and 1000-1,540mm in West Nile and Mid Northern respectively.

GoU’s decentralization strategy, adopted in 1993, is predicated on bringing ‘services closer to the people’ and, if making more districts is the answer to this, progress is certainly being made. In 2002, there were 56 districts, by 2008 this had risen to 80 and the number now stands approximately 112. The consequences, however, especially in the already weaker north, seem to have been increased administrative confusion, the weakening of the authorities in the affected districts, increased public administration expenditure and a reduced quality of services.

Figure 1: Geographical and administrative division of Uganda2

2.2 Poverty and vulnerability in Northern Uganda

Northern Uganda’s GDP per capita is USD240; globally, only Somalia has a lower national figure (Oxford Economics, 2014). The prevalence of poverty levels in Northern Uganda is almost twice the Uganda average: 46.2 percent compared to the national average of 24.5 percent (although this represents a major improvement from a rate of 60 percent in 2006). Northern Uganda’s population is set to double by 2040, outpacing the national projected population growth rate and presenting a massive poverty reduction challenge. The Northern Uganda economy will need to grow at 10 percent a year for 30 years just to close the income gap with the rest of Uganda, assuming the current rate of growth. (Oxford Economics, 2014).

As for nutrition and food security, “northerners are far more likely to be lacking in food energy than Ugandans elsewhere in the country: some 54% are food energy deficient compared with an average of 48% nationally” (World Food Programme 2013, p22)3. “They are more likely to have poor food consumption” (defined in the WFP report as ‘an extremely unbalanced diet, that is devoid of protein and chiefly comprised of starchy maize or matooke flavoured with some vegetables’ that is 6.2% vs 4.6% national average. “And some 12% of northern households are surviving on one meal a day compared with 6.3% at the national level.” Households in the north “spend a higher share of their overall expenditure on food than other regions (56% vs. 51% average). In fact some 45% spend more than 65% of their overall income on food: nationally,

2 The map is for illustration purposes only. The small map in the top-right corner shows the regions of West Nile, Mid Northern and North East, which form Northern Uganda. Teso sub-region is normally considered part of the East with regional headquarters in Mbale. 3 The rest of this section follows World Food Programme (2013), Comprehensive Food Security And Vulnerability Analysis. The data for the analysis is from the Uganda National Panel Survey (UNPS) 2009/2010. This is the first round of the survey which ran from September 2009 through August 2010 and the sample used for this analysis consisted of 2,563 households. The UNPS is representative at the national, urban/rural and regional levels (north, east, west and central regions).

30% of households spend more than this portion of their income on food (World Food Programme 2013).

In the Uganda National Panel Survey households were asked whether they had faced a situation when they did not have enough food to feed the household members in the year before the survey (September 2008-2009). “Nationally some 44% of households responded that they had – rising to 74% in northern Uganda.”

Northern Uganda has the highest rate of acute childhood malnutrition (wasting) at 7%, some two percentage points higher than the national average, and the highest rate of underweight children at 18%, three percentage points higher than the national rate.

Many of the factors underlying food insecurity and malnutrition are most severe in northern Uganda. Firstly 43.5% of the population is poor – much higher than the national average of 26%. These people cannot access enough nutritious food to live a healthy and active life and are continually forced to skip meals and cut portion sizes. Housing is much more rudimentary in the north with more than half living in huts with thatched roofs and earth floors. 13% have more than five people sharing a room, almost double the national average. Sanitation is much poorer than elsewhere in the country with almost a quarter of households devoid of toilet facilities and forced to defecate in the bush. Of course both factors are an indicator of poverty but poor quality housing and sanitation can also lead to disease, a leading cause of malnutrition. With the exception of acute respiratory infection, child illness rates (diarrhoea, bloody diarrhoea and fever) are the highest in the country. Furthermore, vaccination rates for children (for Tuberculosis, Diphtheria, whooping cough (Pertuasis), Tetanus, Hepatitis B, Haemophilus Influenza, Polio and Measles) are the lowest in the country. A fifth of communities have experienced epidemic outbreaks since 2008, the highest in the country.

The dependency ratio is the highest (1.7 vs 1.4 national average) and more than a third of households (34%) are headed by women, against a 29% national average (World Food Programme 2013 p24). Almost 9% of household heads have a physical/mental impairment which is considerably higher than the national average of 6%. Northern households tend to have a lower percentage of working age men, though higher proportion of dependent boys and higher percentage of elderly men and women. Only a quarter of women can read and write which is well below the average for other regions.

Despite its proximity to major export markets in the region, the North only accounts for 4.5 percent of Uganda’s exports (Oxford Economics, 2014). Infrastructure, government services and skills are all weaker in the North, and the conflict (and post-conflict response) has created a generation that has largely missed out on commercial experience. The Oxford Economics report characterizes typical businesses in the North as follows: “Most businesses are small, informal, insular, lack growth ambitions, do not export and are dependent on internal funds ... Creating more businesses, growing existing businesses, attracting larger firms and reversing the insular nature of businesses is a key challenge…..most sales are just within the same district the business is operating, which means growth is limited by local demand.”

The imbalances and inequities described are familiar to the people of the north and contribute to the feeling of resentment and mistrust that they feel towards the central

© Oxford Policy Management and Coffey 4 Political Economy Analysis of the Agriculture and Agribusiness sectors in Northern Uganda government, none of it helped by a contested history and perceptions of repressive behaviour by the state (see Section 2.3).

The most significant economic event in recent years is the discovery of crude oil reserves along the Albertine Rift Valley and Uganda is now set to establish itself as an oil producer in the coming decade. Total oil reserves are believed to be 2.5 billion barrels4. Depending on the exact production levels, the extraction period, the future oil price, and revenue sharing agreements with oil producers, the Ugandan government is set to earn revenue equal to 10-15 percent of GDP at peak production and this has the potential, subject to careful management of oil revenues, to provide significant stimulus to the Ugandan economy.

Wiebelt et al. (2010) suggest the oil industry will present an unparalleled opportunity for the agricultural sector and for poverty reduction in particular. On the one hand, domestic demand for food, such as cereals, root crops, pulses and matooke, but especially higher valued products, such as horticulture and livestock products, will increase as incomes rise. Moreover, higher urban income and urban consumer preferences will lead to increasing demand for processed foods and foods with greater domestic value-added, such as meat, fish, etc. Provided Uganda’s tradable food sectors can remain competitive, this provides an opportunity for both farming and the food processing manufacturing sector. On the other hand, there is, because of the risk of Dutch Disease, the danger of losing market shares in agricultural exports, which might be extremely hard to regain after the oil boom. As Wiebelt et al. show, the outcomes for agriculture depend very much on whether government revenues are used to alleviate chronic under-investment in the public goods that are constraining agricultural growth in Uganda (or not). This may be one of the single most important issues for agricultural development in the next ten years but the early signs are, so far, not particularly good. A high level of corruption in the management of mineral resources, limited information available to the public and likely inequitable distribution of these resources are some of the factors that have already arisen and have the potential to promote instability in the north .

Despite this rather bleak reality, private sector investment is increasing in the entire region and there is much interest in increasing investment in resource exploitation, particularly in products such as aloe vera, tamarind, gum arabic, gold, limestone and marble (Vaughan and Stewart, 2011). Gum arabic and aloe vera from Uganda have both recently been certified as meeting international standards in Europe. Investments in oil seed processing in Lira have promoted considerable changes in the prosperity of the area (see Box below).

4 Oxford Policy Management 2011

Lira Town

Lira is a bustling town now, a hub of activity, with several agricultural (notably oilseed) processing operations within the town boundaries and it seems to contrast markedly with other town centres in the north. The consensus opinion among those spoken with was that Lira had:

 Less disruption during the war (caught up in the conflict later)  Less trauma from the war  More time to recover  People more willing to contribute to new initiatives  A concentration of oilseed production right back to the 1990s  Less contentious issues as regards to land  A more ‘constructive’ local government  More stable power line, direct from Jinja  Roads radiating out to several key towns and districts (Soroti, Kitgum, Karamoja, Gulu)  Better proximity to Kenya

2.3 The historical legacy

2.3.1 Ethnicity and conflict in Northern Uganda

The roots of the current situation can be traced back to the colonial era. Misrepresentations of ethnicity were part of the very formation of Uganda by the British (Atkinson 2010). At the centre of the new state was the kingdom of Buganda (Nzita and Niwampa 1993), which comprised what is now all of Uganda's Central Region, including the capital Kampala. Buganda was the largest, wealthiest and most powerful state in nineteenth century East Africa and the one recognized by the Europeans as most similar to their own. Buganda became the commercial and administrative centre of the colony and the people, particularly the dominant elites, garnered a highly disproportionate share of the limited opportunities available for advancement in the colony. It was in this context that the Buganda and British elites elaborated, emphasized and exaggerated ethnic distinctions, viewing the people to the north as marginal and inferior (Atkinson 2010).

British colonial rulers, without much basis in history or culture, stereotyped northerners in general, and Acholi in particular, the dominant group in the region, as militaristic and therefore suited to be soldiers. At the same time, colonial policy favoured the development of the Southern regions of the protectorate and the neglect of the North, leading to an economic imbalance that further helped push Acholi and other northerners into the military (and police). Thus a colonial stereotype merged with colonial policy to produce a pervasive real-life pattern (Atkinson 2010).

Arguably, this continued until well into the modern era: "Since independence in 1962, Uganda has been plagued by ethnically driven, politically-manipulated violence, referred to by some as a history of cycles of revenge and mistrust. Deep-rooted divisions and polarization remain between different ethnic groups and these have been greatly exacerbated by the way in which the country’s leadership has developed since independence.” (Latigo 2006).

For the purposes of this paper, the major ethnic groups in the North and North-West can be said (Nzita and Niwampa 1993) to be:

(i) The Acholi, the dominant ethnic group in the study area, with 1.1 million counted in the last Uganda census (UBOS 2002), that is 4.8 percent of the Uganda population (Minority Rights Group, 2014). The Acholi is a Luo Nilotic ethnic group from an area commonly referred to as Acholiland, including the districts of Agago, Amuru, Gulu, Kitgum, Nwoya, Lamwo, and Pader (as well as Magwe County in South Sudan). The Acholi language is mutually intelligible with Lango, Alur and other Luo languages across western Kenya, Eastern Uganda, West Nile and South Sudan. The Acholi had small chiefdoms of one or more villages, each with several patrilineal clans. Chiefs are chosen from one lineage. The Acholi keep sheep and cattle but are not as committed to pastoralism as some other Nilotic peoples. Millet is the staple food of the Acholi. Maize, sorghum, beans, squash, groundnuts are also grown. Stream and swamp fishing are important. The land tenure system in Acholi sub-region is mostly traditional. (ii) The Langi who inhabit the marshy lowlands northeast of Lakes Kwania and Kyoga and have a population of about 1.5 million or 6.1 percent of the Uganda population (UBOS 2002). They speak an Eastern Sudanic language of the Nilo- Saharan language family. They cultivate millet for food and for making beer and also vegetables. Cassava and beans have become the staple food in Lango sub- region and this in part explains why a starch factory was built in Lira at one point. Men and women share the agricultural work, but men have sole custody of cattle. There was no hereditary aristocracy and the population was traditionally divided into a number of patrilineal clans. The Lango sub-region now covers the districts of Amolatar, Alebtong, Apac, Dokolo, Kole, Lira, Oyam, and Otuke. Traditional land tenure is still widely used in rural areas but is less than the case in Acholi sub-region. (iii) The Lugbara, 1 million (4.3 percent), who are mainly in the West Nile region of Uganda and in the adjoining area of the DRC. In the early days, the Lugbara were a mainly chiefdom-based community. Traditionally they grow millet, sorghum, legumes, pigeon peas and a variety of root crops. Cassava was introduced to counter the effects of famine when millet and sorghum failed in drought in the 1960s and is now one of the main staples. Tobacco is an important cash crop, though phasing out somewhat now. Chicken, goats and, at higher elevations, cattle are important as sources of animal protein, as are guinea-fowl. (iv) The Ma'di people (80,000, 0.4 percent of the total population) who are found in Adjumani and Moyo districts. Sesame, groundnuts, cassava, sweet potatoes, maize, millet and sorghum are the main food crops and cotton is also grown. Some of those who live close to the Nile fish for commercial purposes. (v) The Alur, 475,000 (2 percent), who come from Nebbi, Zombo, and Arua districts (but also north-eastern DRC). They are part of the larger Luo group with a language closely related to Acholi.

When independence came in 1962, Buganda had far the greatest proportion of infrastructural development and capital investment in the new country (Atkinson 2010). The first Prime Minister, Milton Obote, was, however, a Northerner (a Lango) and he set about addressing this imbalance, even though many Northerners were more inclined to support the opposition Democratic Party. In 1971, Obote was, however, overthrown in a coup by Idi Amin (from West Nile), and, from then on, the Acholi’s special access to the military became something of a liability, their ethnic identity alternatively offering opportunity and danger, as later regimes gave way, amidst growing political violence.

Until the current president, Yoweri Museveni took control in January 1986, the colonial pattern of a northern-dominated army with considerable access to state resources was replicated. Museveni’s seizure of power completely turned the tables. The struggle he led against the Obote II regime, as it was known, was based in an area of central Uganda known as the “Luwero triangle,” located fewer than forty miles north of Kampala. Luwero was an ethnically and occupationally heterogeneous area of immigrant herders and local peasant farmers. The former were mainly Banyankole, from Western Uganda, the latter mostly Baganda. With many Baganda hostile to Obote, following his abolition of their kingdom in 1966, Luwero was fertile ground for an insurgency, not least also because, like the immigrant herders among whom they sought refuge, Museveni’s army, and especially its leadership, was dominated by Banyankole.

Museveni and the NRM used two basic strategies to gain local popular support, one that “de-ethnicised” local politics and another that stoked ethnic and regional differences (Atkinson 2010). First, they formulated and effectively implemented a hierarchy of Resistance Councils (RCs) in areas under NRM control. These local-level RCs were made up of all adults in their respective areas (Baganda, Banyankole, and others), and were thus democratic and non- or multi-ethnic.

Secondly, at the same time, the NRM leadership emphasized, both implicitly and explicitly, a common “Bantu” identity among those from Western and Central Uganda. This played down Baganda and Banyankole ethnic or “tribal” identities within the NRM and the areas that they controlled. At the same time, the enemy against whom the NRM was fighting was sharply differentiated as ‘not Bantu’ (Atkinson 2010). This was facilitated by the way that the NRM identified its military opponents. They were not typically called by its official name – for example the Uganda National Liberation Army (UNLA) or even Obote’s army. Instead, in a practice also adopted by the general population in the Luwero war zone, enemy soldiers were usually referred to as northerners in general, and as “Nilotes” (Lango and Acholi), or as “Bacholi” or “Abacholi” (the Bantuized forms of Acholi) specifically. This naming process was often applied to the government as well, thus interchanging and conflating regional, linguistic, and specifically ethnic labels. This had the effect that those to whom such labels were applied were generalized as alien and dangerous ‘others’, accused of abuse and misrule in both the past and the present (Atkinson 2010).

As the war went on and Museveni forces became stronger, the predominantly, but not solely, Northern UNLA army committed gross human rights violations in the Luwero area, killing tens of thousands of civilians which increased the negative characterizations applied, in the south, to northerners and to Acholi in particular. In 1986, the NRM took Kampala but while this may have been the end of ‘the bush war’ it was not an end to war in Uganda. Instead, the battle zone simply shifted location, from Central Uganda toward the north and the country’s peripheries, with the most protracted, vicious, and debilitating conflict still to come over the long years ahead.

Twenty years later, after several phases of the war, amid what Jan Egeland, then UN Under-Secretary General for Humanitarian Affairs, was describing as “the biggest neglected humanitarian emergency in the world”, the fighting eventually stopped. At this point, nearly 2 million Northern Ugandans lived in camps, more than half of whom had been forced there by NRM government policy. And not only was this displacement forced, it also left most of the encamped people with little or no protection from the

Northern insurgents, essentially defeated elements of UNLA, transmuted over time and one or two iterations, into the Lord’s Resistance Army (LRA). The camps were no longer even euphemistically called “protected villages,” as they once had been, and in addition, despite promises to the contrary, government provision of basic services— water, sanitation, health care, education—had broken down, often woefully so. Violence and abuse by government forces, the Uganda People’s Defence Force (UPDF) were rampant, and repression common. Forced encampment in these conditions meant forced dependency, forced vulnerability, forced humiliation, forced congestion within camps, and forced isolation from outside (Atkinson 2010).

The physical, psychological, economic, social, and cultural damage caused by the camps was huge. One 2005 study showed that, of all adults surveyed in camps in Gulu and Kitgum districts (the third Acholi district, Pader, was omitted because security concerns made research there too dangerous), over 50 percent had been abducted at some point during the war; nearly 40 percent had had their own child abducted; over two-thirds had witnessed a child being abducted; nearly half had witnessed a family member being killed; over half had been threatened with death; and nearly 20 percent had been physically mutilated, maimed, or injured.5

The structural violence of camp life has not however entered the dominant narrative in this way. Rather, the official line concentrates on two partial themes (Atkinson 2010). The first of these, still very prominent now, is the brutal violence perpetrated by the LRA; second is the notion that the group (and its leader, Joseph Kony) is guided by an incomprehensible and essentially primitive world view that excludes any meaningful political agenda.

Domestically, President Museveni, has used this narrative to sow fear in the Ugandan population and to cultivate political support from areas outside the north. Internationally, he has used the war, and the official discourse of it, to help obtain diplomatic and budgetary support from the World Bank, the US, and other donors, both in general and for the military in particular. The war, and camp life, continued until 2006-8, exacerbating the old colonial pattern of inequality between the north and south. During this time, Uganda became, as Atkinson (2010) notes, essentially two separate countries: one includes the peaceful and relatively prosperous western, southern, and central parts of Uganda, with a growing economy that has won Museveni much praise from the World Bank, IMF, and other donors (especially the US); the other is the war- torn, impoverished, isolated North. As we will see later, this dichotomy has profound implications for the perceptions around, and acceptance of, any new plans for investments in commercial agriculture in the north.

2.3.2 Peace, recovery and development

With the end of the fighting in 2006 came a wave of humanitarian assistance, at first mostly to people still residing in the camps. This “emergency phase” was followed by attempts to re-build institutions and economic infrastructure. As this second phase progressed, assistance came to be more focused on traditional poverty reduction, rural development, and economic growth. Against this background, the GoU introduced the Peace, Recovery and Development Program (PRDP) in 2007. This was a

5 Forgotten Voices: A Population-Based Survey on Attitudes about Peace and Justice in Northern Uganda (Berkeley, CA: July 2005), available at www.ictj.org .)

© Oxford Policy Management and Coffey 9 Political Economy Analysis of the Agriculture and Agribusiness sectors in Northern Uganda comprehensive programme to tackle the lack of development and improve the livelihoods of people in a total of 55 districts, all essentially in the North, although interpreted rather loosely and politically to imply the northern half of Uganda. PRDP’s objectives were to consolidate state authority, to rebuild and empower communities to revitalise the economy and to undertake peace building and reconciliation, moving towards improved development and regional balance and equity. The effort to kick start the economy was to include revitalization of the productive sectors and marketing systems; revitalization of energy and transport infrastructure; and improved public services and environmental management (including on land issues) with due considerations to human rights, stability and peace.

A Mid-Term Review of the PRDP was carried out in June 2011, concluding that progress was being made. The positive developments included a decline in the poverty rate in Northern Uganda, down from 63 percent in 2002/03 to 46 percent in 2009/10. While this was indeed a significant decline, the national poverty rate was still much lower, some 25 percent in 2009/10; and also, due to the high population growth rate, the absolute number of poor people in the North had actually increased.

Based on this progress, a second phase - PRDP 2 (2012-15) - was launched, with the express intention to address some of the challenges from the first phase, continuing the gradual move from emergency assistance towards traditional development support to the region. It was conceived as an elaborated framework with a log-frame, M&E system and procedures for coordination and dialogue between all the multiple development partners supporting the program and GoU. Donor support from a number of sources – Denmark, Sweden and Ireland - was expected to go to specific budget lines of the PRDP 2 in the form of budget grant support to the Office of the Prime Minister (OPM) as the implementing agency, all regulated by a Joint Financing Agreement. The support was also expected to continue into a transitional phase after the end of PRDP 2, that is from 2015 onwards. In preparation, the OPM received significant capacity building support from a range of DPs, such as DFID, GIZ and Danida.

However, just months into the new phase, a GoU report uncovered serious fraud within the OPM through unauthorised payments and transfers of PRDP money (ACCS NU Conflict Analysis 2013). The audit revealed that of the €22.9 million received on two PRDP budget support accounts between 2009 and 2011, €12.6 million had been misappropriated (Auditor General, 2013). Most DPs have now discontinued direct support to OPM and the situation has put the entire PRDP II implementation into jeopardy. Many citizens of northern Uganda apparently take this as further evidence of their political marginalization (ACCS 2013). Some have said they see it as part of a long history of neglect, an almost institutionalised lack of political will to bring northern Uganda up to the levels of the rest of the country.

2.3.3 The changing role of Northern Uganda

It is important to note the changing position that Northern Uganda has held within the broader national political and economic consciousness: as described below, perceptions of it as a drain on the national economy in the 1980s and 1990s have shifted to a new more optimistic view of the region.

 Northern Uganda (1986-2005), a drain on government resources: Through this time, government expenditure in the North, mainly military expenditure, was said to average about 1.6 percent of GDP although it was hard to tell from Uganda’s planning and budgeting process that a full scale war was going on in one half of the country.  Northern Uganda, the “kingmaker” in national electoral politics: In the lead up to the 2006 election, the opposition Forum for Democratic Change (FDC) mounted what seemed like a credible challenge to the candidature of President Museveni. However, when the opposition put the return to peace in the north at the top of its agenda, the President trumped this promise, agreeing to peace talks with the LRA and reaping many votes in the north. As the country heads for another election in 2016, it looks like this electoral calculus may persist. Recent NRM caucus meetings, one proposing Museveni for the presidential candidate, the other proposing Prime Minister Mbababzi, were both catalysed by northern representatives with northern agendas.  Northern Uganda, the new frontier for economic growth6: Although starting from a low, conflict-affected base, and facing a number of structural weaknesses, the economic potential of the North is genuinely significant. Its key factor endowments (land for production, water for irrigation, energy and minerals, tourism) give the region some real comparative advantage. If fully exploited this potential could transform the North from a lagging region to an economically dynamic one. This may be a factor as to why, with the growth potential in the rest of the economy perhaps, dwindling, top local companies (in telecoms, Simba, and in agro processing, Madhvani and Mukwano) are making attempts to get (more) established there.  Northern Uganda the stepping stone into the South Sudan market: The region is well positioned to be a key factor in both the Sudan and DRC emerging markets. It is the key transit point for most cargo and also a key source of food imported into those countries.

2.4 Agriculture and agribusiness in Northern Uganda

2.4.1 The sector in the national context

For the nation as a whole, agriculture is, and will still be for some time, the bedrock of the economy. Currently it contributes over 22 percent of gross domestic product and accounts for more than 40 percent of exports by value (UBOS statistical abstract 2013, p38). Furthermore, the sector is the key to poverty reduction. Benin (2009) demonstrated that if the 2.7 percent rate of agriculture growth achieved in 2005/06 was maintained, then by 2015, there would be a reduction in poverty to just below the Millennium Development Goal target of 27 percent. However, if a 6 percent annual growth could be achieved, the poverty level would fall much farther, to about 19 percent, with the absolute number of poor people declining from 8.45 million to 7.25 million.

6 DFID/OPM Uganda/ Oxford Economics: December 2013; Northern Uganda Economic Recovery Analysis Phase II. DRAFT REPORT.

The above situation notwithstanding, over the last ten years, Uganda’s agriculture sector has performed below average, even for Sub-Saharan Africa (MAAIF, 2010) although there have been pockets of good performance in some key areas (Zorya 2012). These latter were reflected in booming agricultural exports, and improvements in yields for some crops, notably maize and beans (UBOS, 2007)7.

Small farms account for at least 58 percent of farms across the country, while medium- size farms comprise 38 percent (UBOS, 2007). Both types of farms must have performed relatively well because the agricultural growth that has occurred could not have been driven only by the 4 percent of production coming from relatively large farms, i.e. above 5 hectares (Zorya 2013). The sector would presumably perform better, however, if poor rural infrastructure, under capitalization of farmers, and the high cost of inputs had not left the bulk of farmers out of reach of modern technologies and inputs.

The agricultural growth that has taken place is in spite of the chronic under provision of public services to the sector. During 2001-08, agricultural sector expenditure was only 4-5 percent of total expenditure (MAAIF 2010), and most spending on infrastructure, especially roads and electricity, by-passed rural areas. Maintenance of many rural roads has been inadequate, keeping costs of inputs high and farm prices low. Because high input prices require significant cash advances, they are, under the prevailing conditions of volatile weather and unpredictable output prices, too risky for many smallholders and even for large farms. The outcome is that the use of modern technology remains very modest, even if new technologies are profitable on paper. These problems were supposed to be addressed by the MAAIF’s Development Strategy and Investment Plan (DSIP), which was launched in 2010 but implementation of the plan has foundered on disagreements about priorities.

Ugandan farmers’ yields are not even 40 percent of those attained at the country’s research stations (Zorya 2012). Although overall field yields are unlikely to reach these research levels, they can certainly increase as the result of improved technologies. Demonstration results under pilot programs promoted by the National Agricultural Advisory Services (NAADS) and others, in particular USAID/APEP and Danida, confirm the possibility of closing the gap (Danida, U-Growth 2013).

Over the past two decades, Uganda has adopted various initiatives to promote the commercialisation8 of smallholder farmers but results have been mixed (Zorya 2012). Export commodities fetching relatively high values (i.e., US$1,000 per ton and higher) and with the ability to compensate for the high transaction costs in Uganda have recorded some success. Flower export volumes have multiplied more than 450 percent, while tobacco, fish, and tea exports are almost 250 percent higher than they were 10 years ago. The performance of lower value food staples, accounting for the bulk of

7 Uganda’s major food crops are maize, bananas, beans, soybeans, groundnuts, sesame, sunflower, sorghum, finger millet, upland and lowland rice, sweet potatoes, solanum potatoes, cassava, and horticultural crops. All are commercial crops, and some, such as maize, beans, sesame, and sorghum, are exported to regional markets. Rice and wheat are imported but much greater domestic production is possible. The traditional export crops are coffee, cotton, tea, , and tobacco. Cocoa is considered to be a non-traditional export crop. Sugar cane is not exported 8 Agricultural commercialisation is far more than selling agricultural products. Zorya (2010) defines commercialisation as the state after which household product choice and input use decisions are made based on the principles of profit maximization. Commercialization is not restricted only to cash crops because, in Uganda, ‘traditional’ foods crops are also marketed to a considerable extent.

© Oxford Policy Management and Coffey 12 Political Economy Analysis of the Agriculture and Agribusiness sectors in Northern Uganda farms, has been less striking, except when farmers accessed nearby regional markets like South Sudan, Kenya and the Democratic Republic of Congo9.

Most farmers in Uganda are at the lower end of output and input commercialisation. In 2005/06, out of all households engaged in agriculture, the most commercialised quintile of households sold no more than 50 percent of their output, while the same quintile purchased even fewer inputs - equivalent to no more than 23 percent of their total production value (Zorya 2013; UBOS, 2007). The rest of the farmers sold insignificant amounts or did not sell at all, and they did not buy any inputs. Larger farms are more market oriented because they sell a larger share of their outputs and buy more inputs, but farm size has mattered only to a certain extent: commercialisation does increase as the scale of farm grows but stabilizes after reaching the maximum of about 10 acres for output and 15 acres for inputs.

The bulk of Uganda’s agriculture is weather dependent and is therefore naturally susceptible to climatic change. Unfortunately, there are virtually no water management schemes (like irrigation) or weather-indexed insurance schemes available to farmers to help them manage these risks. Soil degradation is a major issue and a country that was once known for high levels of soil fertility is facing top soil losses of as much as 5 tonnes per hectare in some areas (MAAIF 2010).

However, despite all the challenges, the prospects for national level agricultural development in 2014 are better than they have been for some time. This follows: (i) improving markets as a result of a growing population and accelerating urbanization; (ii) increased demand for food and agricultural commodities in the wider region; (iii) the end of the price decline on international markets for agricultural commodities; (iv) some increase in budget allocations to roads and infrastructure and hence better market access for farmers; (v) the continuing reintegration of Northern Uganda where there is potential for large agricultural surpluses; (vi) opportunities arising from new agricultural and other technologies, and; (vii) a renewed international interest, including among the donors, in the catalytic power of the agriculture sector.

2.4.2 Specific issues in commercial agriculture in Northern Uganda

The leading region in agricultural income generation is the West, where farming households select the most profitable crops and achieve good yields (Zorya 2012). In the East and Central regions, average yields are lower than in the West, but farmers there obtain higher output prices. In the North, considered to have the highest yield potential, the key issues are specific and different:

 The years of conflict have held farmers back and they still mostly produce low-value food crops and achieve the lowest yields, causing food prices to be among the highest in the country.  Many households in Acholi sub region spent up to 20 years in camps and many of them, especially the youth, lost their knowledge of good agricultural practices. This is very hard to recover.  Production is, apart from a few commercial enterprises, mostly subsistence-based farming and households typically cultivate 1-2 acres with only a small surplus for

9 See http://star-www.giz.de/fetch/4Q0p84X0001H0g23th/giz2013-0643en-uganda-agricultural-finance- yearbook-2012.pdf

sale. Cultivation is by hoe, and the use of certified seeds and fertilizer is at a bare minimum. This is a difficult situation from which to commercialise.  Before the conflict there was a tradition of ox-ploughing (the only area in Uganda where this was the case). Projects like Danida’s RALNUC have promoted the use of oxen and community based ox-trainers and it seems to have worked well. When fully utilized, ox-ploughing generates a good income that can sustain and develop the animal traction business as an alternative to the more expensive, much harder to promote and organise, tractor industry (although, for many animal traction areas, the war led to a huge reduction in herds, which has badly impacted crop production in those areas. The herds are still not fully re-established .  According to WFP, food and nutrition indicators are worse in the north than elsewhere (see section 2.3). Some 45 percent spend more than 65 percent of their overall income on food (compared to 30 percent nationally). A further problem for these people is that between 2009-13 the growing market for food in South Sudan substantially drove up food prices in the north.  The supporting infrastructure for commercial agriculture (market places, stores, equipment for post-harvest handling) is in short supply and the state of rural access roads is poor. In West-Nile and Acholi most roads are gravel or earth and the community access roads are often impassable in the rainy season.  The capacity of local government in the 40 northern districts is very weak and made worse by the NRM’s policy of creating more and more new districts, ostensibly to bring ‘services closer to the people’ (see section 2.1) but actually as part of its patronage-based approach to governing10.

The intention now is to look deeper at the above issues by means of an examination of the structures, or long-term contextual factors, relevant to both the agriculture sector and to Northern Uganda. These include economic, social and political structures, including the structures of ownership and organisation in the key agricultural market systems. We will also endeavour to examine the role that formal institutions and informal social, political and cultural norms play in shaping political and economic competition (at the national, regional and local levels) as well as political behaviour and public policy for the sector.

10 In 2007, in a populist gesture while election-campaigning, the President abolished the Graduated Tax. This has severely reduced district revenue and, with it, the capacity to deliver services. GoU may say it is trying to bring services closer to the people, but, as Booth (2010) writes, it is ‘real policy that counts, not nominal policy. Policy is what policy does’. A major problem is that, in this environment, initiatives to empower constituents at the district level, are often swimming against the tide, not with it.

3 The political economy context in Uganda and the North

3.1 Our understanding of the assignment

Political economy analysis (PEA) is an important tool to better grasp on-going processes of change. It improves our understanding of how incentives, institutions and ideas shape political action, business initiatives and development outcomes. It can also be used to identify obstacles and constraints to opportunities for leveraging policy change (DFID 2009). In this study, PEA will be used to explore the relationships between the various agribusiness-specific factors constraining investment in the industry in Northern Uganda (the ‘whats’ and ‘hows’ of the problem), and the overarching political, economic and cultural factors (the deeper ‘whys’).

Much of the project literature concentrates on listing the different constraints to change. To understand better whether agribusiness development is possible in Northern Uganda, we develop an analytical framework that analyses the prospects for change within the agribusiness sector as a part of a broader political, economic and institutional framework – rather than analysing them within the context of agribusiness only. We argue that agribusiness development in Northern Uganda is not only about sector- specific issues but is affected by broader factors shaping the PE factors in the country and even the region. In this regard, a critical methodological distinction is that between specific and non-specific agribusiness PE factors. The latter can be also defined as overarching or contextual PE elements and they include issues like historical, cultural, contextual or organizational factors that are not strictly related to the agribusiness sector.

The specific factors are clearly linked to market systems. That is they are a function of the nature of the activity in question, and of the associated business model, and can be expected to be amenable to changes in the incentive structure. It is important to note that while non-specific factors are beyond the scope of a time-limited donor project, however large, specific factors can be receptive to interventions and will be more amenable if the project has been designed on the basis of a PE approach.

The analysis of specific PE factors is done using a multi-level framework which includes:

 Macro level: the law, regulations, and policy that result from the interaction between stakeholders and the existing institutional framework, in this case within the agribusiness sector. Such interactions frame decisions about policy and strategy.  Meso level: sometimes described as an ‘enabling’ level, this is a transitional space between the macro and micro levels. It is where the main structural factors (the scaffolding of the economic processes operating in the agribusiness sector) occur, those factors which can deliver implementation of policy changes and decisions. Essentially also, the institutions and rules that govern the system at the macro level become visible as processes and structures at the meso level.  Micro level: the linkages between producers and other stakeholders in the market system. The existence (or not) of social contracts (and incentives) between these

stakeholders determines their behaviour towards existing opportunities. At this level we discuss issues such as trust and the lack of legitimacy of institutions.

An example of Macro, Meso and Micro levels in Uganda

Experience shows that understanding well the role and importance of Meso Level is not always easy, even for those who are quite familiar with PEA. For that reason, the best way to illustrate its importance is by using one of the five market systems included in the study – financial services, as an example.

From a financial service perspective, the Macro Level is formed by the set of regulations that govern financial activity. That includes, for example, the Financial Institutions Act (FIA) 2004, which governs the regulation and supervision of financial institutions (banks and credit institutions). Acts and Regulations issued by the Bank of Uganda also are part of this Macro Level. Norms and regulations at Macro level govern the way actors behave at Micro level. For example, the Microfinance Deposit-Taking Institutions Act (MDI) 2003, which regulates the activity of microfinance institutions (MFIs), creates the framework where MFIs and their clients interact. Thus, a bank lending money to an association of corn producers is an act taking place at Micro level, following rules established at Macro Level.

So, where is the Meso level in financial services? Uganda´s Credit Reference Bureau would be a good example of Meso level actor. A Credit Reference Bureau is a risk management system which makes it easier for financial institutions to make informed and responsible lending decisions in a timelier manner. In other words, by providing information about a client´s payment records, it improves lenders’ ability to predict default.

The Credit Reference Bureau is not a Micro level actor – people have no access to or interact with it. It is situated in a level immediately above the relationships between financial institutions and their clients. But it is also a level below the Macro level because the functioning of the Credit Bureau is sanctioned by a public law - Financial Institutions (Credit Reference Bureaus) Regulations No. 59 of 2005.

The essential objective of this assignment is to get a good systemic understanding of the agribusiness sector in Northern Uganda. That is, to grasp how factors (both specific and non-specific) interact with each other and to understand the best ways to make the most of opportunities to introduce changes that may contribute to transform the system. Good examples of the interactions between specific and non-specific agribusiness factors are the incomplete demarcation of land and the weak capacity of national and local authorities to enforce laws and regulations. Another example is the low capacity of GoU to enforce laws and regulations at the meso level and the way this impacts on the seed market. At the micro level, the lack of trust between people in Northern Uganda and national authorities is reflected in the way business relationships develop (most pertinently, in this case, around different reactions to the widespread counterfeiting and adulteration of seed and other inputs).

3.2 Overarching PE factors affecting the national landscape

The considerable literature on the PE of Uganda is summarised comprehensively in Hickey (2012) although this has less specifically on Northern Uganda than it does on the other key issues. Hickey is confident that the process of structural transformation in Uganda can accelerate and “begin to transform the general character of the political settlement from one based on predominantly clientelist relations and principles to one

© Oxford Policy Management and Coffey 16 Political Economy Analysis of the Agriculture and Agribusiness sectors in Northern Uganda that is predominantly capitalist in character” although, for this process to be accelerated, would require the ruling coalition to act against its own interests in the short/medium-term. This is a significant conclusion especially in the Northern Uganda context. If, as Hickey (2012) suggests, “the main aim is to stay in power”, investing in capitalist enterprise or broader economic development may not be the best strategy (for the regime) because this has uncertain pay-offs that may take time to materialize (Geddes, 1994; Tripp, 2010) and also because such a strategy can threaten the stability of the ruling coalition (Kjaer and Katusiimeh 2012: 8). This suggests that “a clientelist type of political settlement that undermines the prospects for sustained development looks set to remain in place in Uganda for the foreseeable future” (Hickey 2012).

It is on this basis that Uganda is defined as a patrimonial society, with strong relationships between senior public officials and private actors obscuring authority structures and accountability mechanisms. Resources are often directed to prominent groups based on their regional affiliation, ethnicity or loyalty to the President (Transparency International, 2009). Although there are exceptions, policies and organisations pursue objectives that generate resources to permit these relationships to flourish. The President has increasingly centralised power over the last twenty five years, through a personalised form of leadership.

The National Resistance Movement (NRM) is the core of what Kjær et al (2012c) call “the ruling elite.” NRM members have all the key positions of power (Kjær et al 2012c). They are dominated by the President, who is also party chairman and Commander-in- Chief of the armed forces. The NRM is strongly represented in Parliament with 263 of 364 elected seats. They have been in power for 27 years. Winning elections with a clear majority is increasingly important in order to stay in power, and expenses for election campaigns have increasingly burdened the national budget (Kjær and Therkildsen 2013).

Kjaer uses another term, “the ruling coalition,” to describe the individuals and factions who help the ruling elite gain and remain in power. Other sources, met during the fieldwork, used, in the context of the agribusiness sector, the term the ‘private sector/military/political elite nexus’, essentially the same thing as Kjaer is writing about, that is a set of factions which determine decision-making in the country.

As Kjaer has it, the factions in the ruling coalition can best be defined regionally. The most important come from the southwest, the NRM’s geographical base. Most of the top (and most influential) positions in government and the army are occupied by members of a south-western subgroup, the Bahiima.

The President appoints key government officials in the districts, notably the Resident District Commissioners (RDC) who play an active role in political mobilization through local government and who are also chairmen of the local security committees (Ssemogerere 2011). RDCs are powerful and have become more so with the introduction of Movement primaries and decentralization. Favouritism and nepotism have grown: some of Museveni’s family members hold important government and military positions and also own big businesses (Kjær et al. 2012c). At least half of the most important NRM party leaders also hold posts as cabinet ministers or other important government jobs they can use to channel funds into the NRM. One way to keep the ruling coalition in power is to nurture support from important individuals and factions by turning a blind eye to their profiting from government jobs (Barkan 2011).

Funding for the ruling coalition comes to a great extent from state resources. Most observers would argue that development aid has helped Museveni fund patronage to hold the ruling coalition together (Mwenda and Tangri 2005; Tripp 2010; Barkan 2011). The NRM also receives funding from businessmen, many of them Asian Ugandans, some of whom also have posts within the party (Kjær and Katusiimeh 2011)11.

The multiparty system has had some impact on the political culture with the latest parliamentary intake having a more vocal approach to oversight. For example, Parliament voted to prevent new petroleum deals being concluded until new legislation was in place - although this was ignored ‘on a technicality’.

Civil Society Organizations (CSO) are also vocal but lack capacity - being short of staff, funding, and sector knowledge - and have little real influence in policymaking circles. This partly reflects the limited transparency of government and the lack of coordination between different CSOs. CSOs are probably also learning to be more cautious: the 2006 NGO Amendment Act granted extensive powers to the NGO Board and gave it the mandate to de-register CSOs/NGOs, a power that has been used to curtail dissenting and opposition voices in CSOs. The media is in part independent and also quite vocal on governance and corruption issues, but there have been cases of press restrictions in recent years (de Vibe, 2012).

11 This is a huge and sensitive (but largely unexplored) subject. Key events in the story include the expulsion of 28,000 Ugandan Asians by President Idi Amin in the autumn of 1972 (Alibhai-Brown, 2012), most of them settling in Britain, and the repatriation of 2,000-3,000 descendants after the Museveni regime invited them back in 1997.

The narrative begins in the 1890s when 32,000 labourers from British India were brought to East Africa under indentured labour contracts to work on the construction of the Uganda Railway. While many returned home on the completion of the railway, some 7,000 remained in East Africa (Miller 1971). Anti-Asian feeling pre-dated the Amin era, with a system of work permits and trade licenses for Asians being introduced in the 1960s. Some of this was connected to the racial hierarchy of the time with the whites at the top, the ‘Asians’ in the middle, the buffer between the whites and the blacks, who were at the bottom (Alibhai- Brown, 2012). On repatriation, Asians ‘kept their heads down and amassed money’ (Alibhai-Brown, 2012) and some of them did this very effectively.

Mostly the associated stories are only sketchily told but some give a flavour of the underlying political currents. For example, Uganda’s rich list would be incomplete without Alykhan Karmali and Amirali Karmali, popularly known as the Mukwanos, the most successful father and son business partnership in Uganda today and prominent in the narratives in this report. They own the Mukwano Group of Companies, one of the biggest conglomerates in Uganda. It comprises (http://ugandansatheart.org) : Mukwano Enterprises Ltd, A.K. Transporters Ltd, A.K. Oils & Fats (U) Ltd, A.K. Plastics (U) Ltd, A.K. Detergent (U) Ltd, Mukwano Sweets & Confectioneries (U) Ltd, Rwenzori Commodities Ltd and Mukwano Forex Bureau Ltd. ‘Like many tycoons, the Karmalis neither like to talk about their wealth, careers nor their family history but …. legend has it that Mr Ali Mohamed Karmali came to Uganda in 1904’ and built a roaring trade in cotton and coffee… Karmali isn’t willing to discuss this sad chapter in the history of Ugandan Asians. However, other sources claim that he never went into exile. That he was hidden by good Samaritans for a number of years. While many Asian businesses were looted and taken over in the late 1970s, Mukwano was able to rebuild his business and in the early 80s established Mukwano Enterprises Ltd., which later expanded to include Mukwano Industries (U) Ltd.’ Another name prominent in this study and one of the best-known business names in Uganda is the Madhvani Group which had built a huge commercial empire in Uganda and East Africa as early as the 1960s.When the Asians were expelled, the Madhvanis fled to Britain and did not return until the mid-1980s. At this time, there was no sugarcane, their factory was looted, there were no roads and few people. ‘But we took up the challenge because we thought this country had great potential in agriculture. We were encouraged by President Museveni’s government, the World Bank and other agencies which helped us raise the $53 million loan needed for the rehabilitation of the sugar plant’ (http://ugandansatheart.org). At the Kakira estate, the Madhvani Group now supports, together with the outgrowers and their families, around 40,000 local people. The group’s core businesses are based on agriculture and tourism but include edible oils, confectionery and soap, as well as steel manufacturing, metal products, glassware, packaging, tea, flour, brewing, floriculture, insurance and a TV station.

As for explicit ‘corruption’, there have been cases of large-scale misappropriation of funds (see Section 2.3.2) as well as petty corruption involving public officials at all levels. The political patronage networks reach deep into the private sector (Anti- Corruption Business Portal, 2012, and see comments from field work in Section 4). The World Bank has previously estimated that the GoU budget loses around USD 300 million each year due to corruption and procurement malpractice (de Vibe, 2012).

Despite having contributed large amounts of budget support, donors have found it difficult to engage with most of these issues, let alone leverage governance reforms.

South Sudan

South Sudan is the major staple food importer in the region, accounting for 57 percent of the region's total (Market Analysis Sub-group of the Food Security and Nutrition Working Group. January 2014. East Africa Cross-border Trade Bulletin). The main markets for staple food commodities produced in Uganda are: sorghum (South Sudan); maize and cassava (South Sudan and Kenya; beans (South Sudan and Kenya); maize meal (South Sudan). There was a one and a half times increase in Uganda's maize trade with South Sudan between 2012 and 2013, and this trend was continuing at the time hostilities broke-out on 14th December, 2013.

Over the following weeks an ostensibly political tussle for power descended into violence, leaving over a thousand people dead and around 200,000 displaced. This has already had a major impact on markets for northern Uganda producers as well as, possibly, a serious destabilizing influence on the political settlement in the North on producers throughout the country, not only those based in the north.

The challenging governance situation clearly has major implications for development (and agricultural) planning, not least given Barkan (2011)’s description of how the regime can only stay in power on the basis of a system of “inflationary patronage”, that is ‘contributions’ have to keep rising to generate the same result. A good example is described by Kjær (2012a, 2012b, 2012c) on the politics of the dairy and fisheries industries. She argues that the dairy industry succeeded in the 1990s and beyond because the ruling elite had an interest in it, while the fisheries industry did not because the benefits were much harder for the elite to capture. She argues that the ruling elite supported the fishing industry at first, because of industry pressure, but failed to enforce standards when the political costs rose. The dairy sector, on the other hand, was initially supported because it was located in the heart of the regime’s geographical base, where it wished to strengthen its core support. A degree of regulation was achieved in this sector because the biggest processor pressured the ruling elite to do so and because the implementing agency was able to bargain with producers who were well-organised.

This raises the issue of the Ministry of Agriculture, Animal Industry, and Fisheries (MAAIF)’s puzzlingly poor ‘performance’ over many years. Its long record of obstruction has been noted many times: against the PMA (Oxford Policy Management 2005), against the NAADS (Rwamigisa et al. 2013; and see the Box over), and against its own reform (World Bank 2010). Joughin (2014) explains how the “projectification” of the Ministry budget creates islands of authority in the sector, which over time accrue funds, power, influence, and control. This has reduced the authority of the formal structure

© Oxford Policy Management and Coffey 19 Political Economy Analysis of the Agriculture and Agribusiness sectors in Northern Uganda and left a parallel structure whose rationale is largely to protect itself12. At the heart of the problem is the repeated failure of leadership. This is especially a problem in the agriculture sector, where everyone has an opinion about agricultural development and how best to do it, including the president, with both his hobbyist’s interest in the subject (although, as several sources were keen to add, he is a cattle and not a crops man) and his two dedicated agricultural advisers orbiting far outside even the limited discipline of the MAAIF and the civil service.

The NAADS Project

The long, tortuous history of the ground-breaking NAADS project, its mutation into the Agricultural Technology And Agribusiness Advisory Services Programme (ATAAS) and its collapse into a situation where the President thinks the solution lies in replacing senior staff with soldiers (Daily Monitor, 30 Jan 2014) casts a long shadow on all deliberations in the agriculture sector (Rwamigisa et al. 2013; Kjaer and Joughin 2012).

The NAADS project (2001-2010) was an innovative public-private initiative designed to target the development and use of farmer institutions and empower them to procure advisory services, manage links with marketing partners, and monitor the services and their impacts. It was managed by a semi-autonomous Board under the MAAIF budget but with services contracted out and sustainability sought through cost recovery and cost sharing. Two independent evaluations (ITAD 2008; Benin 2009) gave very positive assessments but, just as the programme was beginning to deliver results, in late 2007, it was suspended, the President being quoted as saying that “there was nothing to show for it” (Daily Monitor February 15, 2008). Thereafter, the project and the institution of NAADS itself, stumbled from one crisis to another, losing its momentum and all its reputation. In place of the ambition and promise of the original NAADS came ATAAS and the “new NAADS,” an entirely opaque process which uses about 80 percent of its considerable budget for input hand-outs. Arguably, the ruling elite saw no great electoral gain from NAADS. It needed a much quicker payback. Handing out seeds, livestock and even tractors was more effective than the systematic work of planning, implementing, and evaluating that was necessary under the NAADS project.

3.3 Overarching PE factors specific to Northern Uganda

While the above overarching PE factors apply to the whole country, there are also overarching PE factors specific to Northern Uganda, mostly because of the particular historical legacy already described.

3.3.1 Population demographics

The population demographics of the North present perhaps its most serious underlying driver of conflict. Currently growing faster than even the startling national average, the population of the north is forecast to double in size by 2040. Almost half of the North’s population is aged 15 or under today (Oxford Economics 2014), making it one of the

12 Understanding how this works may lead to ways around the problem. In particular, why are the patrons of these projects not interested in achieving success? Why were they (and the donors who were paying) content, in 2008, to sit on donor-financed development disbursements that were 58 percent below the budget allocation, compared with a shortfall of 20 percent for government-financed undertakings? (See World Bank 2009 and Uganda and EPRC 2009 for many more examples of the poor performance of MAAIF projects.) There are many anecdotes of management exhorting staff to perform better, but in a relatively cash-strapped environment, projects provide vehicles, per diems, travel budgets, study tours, and other benefits, and some donors are less strict about policing the appropriateness of such largesse than others. Three Public Expenditure Reviews in the agriculture sector sought to address why “projectification” has perverse effects. The third volume proved contentious, took more than a year to complete, and was never finalized (EPRC 2009).

© Oxford Policy Management and Coffey 20 Political Economy Analysis of the Agriculture and Agribusiness sectors in Northern Uganda youngest populations anywhere in the world. As the young of today enter the labour force over the next 10-20 years, there will be a large rise in the population of working age and thereby the supply of labour. At the same time a bigger population will bring pressure on existing public services, land and infrastructure.

It is important to recall that most of this population was born and raised in IDP camps, witnessed the trauma of war and missed out not only on education opportunities but also on the chance to be raised through what can be termed a normal up-bringing. It should also be noted that a good portion of the youth in the North have some military experience. While a huge, youthful population could potentially translate into both a large labour force and a considerable market, its current characteristics may present as much risk as opportunity.

3.3.2 Inter-generational tensions

Across the region, the traditional clan leaders played a key role in promoting and keeping social cohesion and resolving conflict. They were also, often, repositories of key information regarding various aspects of the lives and livelihoods of the community. The long period of displacement and the conflict led to a mutation of these roles. There are now emerging tensions especially between the elders and the youth. This is not to say that these institutions are no longer broadly relevant: they are, for instance, credited with resolving most of the community-level land disputes.

However, while sometimes constructive, there are signs that these emerging tensions could be problematic. They mainly manifest in the form of the youth disregarding the views of the “elders” and vice versa. To give an example of the former, it is said that the plans presented by the Amuru Sugar Corporation for land acquisition and development (see Box later), were blessed by the elders in Amuru district but rejected by the youth (the assumption being that the latter had neither the experience, nor the wisdom nor the legitimate authority to do this and that it would not have happened in the past). This view certainly seems to be shared by the proprietors of Amuru Sugar. These tensions could rise to further erode inter-generational relations and, eventually, the functionality of community-based dispute-resolution mechanisms which have played an important role in community level stability to date.

3.3.3 Perceptions of marginalization

Much has been said in regard to perceptions of the South marginalizing the North. This was for long presented as one of the key drivers of the conflict. In the absence of hard evidence to back this claim, many have made the point that the long conflict rendered communities in the North dysfunctional and unable to take advantage of opportunities to prosper and grow like the rest of the country. Having, due to the conflict, been unable to access education, health and nutrition services, many people in the north claim to see themselves as a “taker of deals and not an equal partner at the deal-making table”, as one source put it. The confused state of the youth is also presented as a vivid example of the region’s marginalization (but that is an argument put elsewhere many times before).

None of this is to suggest that the North will suddenly erupt into violent conflict (although the underlying conditions certainly present situations that, if not addressed, will continue to “bubble under” and heighten the risk profile and consequently the cost of

© Oxford Policy Management and Coffey 21 Political Economy Analysis of the Agriculture and Agribusiness sectors in Northern Uganda doing business in the region). Neither is it to rule out outbreaks of localized, sporadic violence: there seems to be a host of triggers which could be set off by these underlying conditions.

3.3.4 Sharing the “peace dividend”

The effects of the post conflict rebound which followed the cessation of fighting may be running out of steam. In the immediate post conflict period, a huge number of people left the IDP camps for their original homes and started to rebuild their lives. This led to a drop in the poverty figures. However the consolidation of the peace dividend is going to require more: not only the coming on-stream of a host of investments to spur economic activity beyond the household level but also the fair sharing of the returns to that investment. Given the host of structural constraints, the latter will not be easy. To start with, and for the investments to flourish, broader long-term community input and interests will need to be vested in them.

3.3.5 Issues of outsiders

As things stand, investments coming, or likely to come, to the North are being seen as “foreign”. The biggest “investors” at the moment are said to be either “Indian, white or from parts of the country other than the North”, as one source put it during the fieldwork. This perception is, in part, due to the fact that most Northern businesses are insular and lack the capital to invest in their own undertakings. If Northerners want to be other than just ‘takers of deals’, then they need to become more active. This applies also to proposed incoming investments like Amuru Sugar. The community needs to understand the issues better and to develop a clear position. Anything short of this will delay new investments and the spreading of the peace dividend. If northerners cannot move to this position13, it may be that the dominant narrative will broaden, going beyond one where “outsiders” are deemed to dominate the economic opportunities to one where a passive north is being “exploited” by outsiders. The emergence of such a narrative could present a further risk to the stability of the region or seen to be addressed or included.

However, the issue of outsiders also has a different and more interesting dimension: in many cases, they are not just “true” outsiders but simply the economic elite which is, by definition, closely linked with the regime. If one of the key drivers of the conflict was perceptions of marginalisation of the north and domination by “non-Northerners”, this sentiment persists. Clearly, fundamental obstacles, like those relating to land and oil development, are unlikely to be overcome until these perceptions are addressed and northern interests more deeply considered and included.

3.3.6 Trust and mistrust

There is much in the Northern Uganda literature about ‘a lack of trust’. This was confirmed during the interviews in the field, several accounts being given about the problems of contracting for land, labour, finance, produce etc. between parties who were unable to trust each other.

13 One source suggested that ‘the north’ is in fact making progress on moving to this position but not as a unit. Lango sub-region, it was said, is ahead on this as compared to Acholi sub-region. The north, in this analysis, has sub-regional variations in behaviour and practices and it is important to be aware of this.

In the literature, Kjaer (2009) writes about extractive capacity and the ability of the state to raise revenues through personal income tax. Both generalised inter-personal trust and institutional trust are argued to be important: generalised trust because there is a need to be confident that you are not the only ‘sucker’ who pays while the rest free- rides, institutional trust because there is a need to be confident that the tax money is put to good use. The point is that in a society like that in Acholi, without much accountability and with a strong suspicion of free-riding, generalised trust is missing on the ground.

On the basis of the fieldwork, it appears mistrust manifests at different levels:

 Inter and intra-community mistrust. This appears at different levels (small farmers vs. the elite and then again small farmers vs. diaspora elite), arguably because of the traumas of displacement and encampment. It is played out mainly around issues of land, especially in the tensions between customary and freehold land tenure (see Section 3.4) below). There have been numerous cases of both the local and diaspora elite attempting to title their land as this is often a prerequisite to demonstrate the proof of ownership required to enter production arrangements with potential investors. The titling of land is done through the local land registration boards which small farmers perceive as working in the interest of the elite. Small farmers tend to have more faith in customary ownership which they believe is a better guarantor of community ownership but these “community arrangements” are not set in law. One business met with was caught in such a situation.  Mistrust of the government. Mistrust of central government is deeply rooted in the colonial and post-colonial legacy (see Section 2) and plays out in a generalised suspicion of government intentions.  Mistrust due to the lack of reconciliation after the war. The community has on numerous occasions questioned the government’s account of the conduct of the war in the north. They have especially questioned the constant denial by government of the human rights excesses committed by the NRA (and later UPDF). This has been repeatedly raised by various community leaders and the recent apology granted to northerners by the President gave credence to the earlier claims. This may be such a big issue that it can only be addressed by mechanisms set up to offer closure for the human rights atrocities.  Mistrust due the implementation of post conflict recovery. The recovery program has been fraught with cases of corruption, the most recent one described in Section 2.2. Alongside this is the issue of reparations. Government has recognized claims by leaders from the north that, during the war, soldiers looted herds of cattle from the region. The attempt to compensate for the looted herds has been a long running issue. A process is now underway to restock the region. However, when it emerged that the cost of a cow under the government programme is about 1.5 times that under a similar World Bank programme, claims were made that the government is using the cattle restocking program as a Trojan horse to siphon funds. This view presents the north as a small pawn in a much bigger game of primitive accumulation of resources by government functionaries. The mistrust at this level is also exacerbated by the fact that key government agencies, like the district land boards and courts, have not recovered enough to provide a good service to the community. These agencies are seen as being out of reach and serving the interest of the rich and well-connected and a good portion of their staff tend to be government officials.

 Mistrust of “some outsiders”. “Outsiders” have been mentioned already: they are perceived as often very keen to get approval from the President before they start up in the north. Sometimes, when such “outsiders” work the system to get the glowing testimonials they believe they need from the President, they merely end up annoying the community, especially if it is suspected the testimonial may be regarded as a substitute for community benefits.

A particular point to note here, in relation to the specifics of the agribusiness sector, is that this prevailing lack of trust means making contracts is problematic. Often they are not entered into at all, or are broken, leading to a breakdown in economic transactions and considerable efficiency losses. Every market becomes a spot market.

3.4 The lack of availability of productive land

The key to agricultural growth in Uganda is improving productivity but most observers suggest this will be difficult without a radical change both in the attitude to land and in land policy. However, as all the literature suggests, and the interviews done for this study back up, the availability of productive land for agricultural investment is a very complex issue. It is probably the key over-arching factor in the immediate development of Northern Uganda (and, for that reason, has its own section). The ‘land problem’ is, of course, multifaceted. Presented below are some of the different angles from which this problem can be approached.

3.4.1 Availability of land

Arguments about the limited availability of land apply to the whole of Uganda but are different in the North where there is apparently plenty of land. The issue is that some 93 percent of land in the sub-region is held under customary tenure (McKibben 2010) and that ‘land without owners, land not subject to customary tenure, land that can be easily bought up in the form of valid freehold title; this sort of land is scarce’ (see Annexes C and D). Furthermore, a lot of land in the north is not being ‘well’ used in the sense that agriculture could be much more productive in the sub-region. There are very clear reasons for this. In 2009, when McKibben surveyed 116 producers in the Acholi sub-region, 99 percent said they intended to improve their agricultural production. Asked about how they intended to do this, 79 percent stated that they needed access to financial services (see Section 4.5). However, not one of those surveyed recalled applying for, or receiving, finance in the form of an institutional bank loan. On this basis, it can be said that, land is not so much scarce, rather it is poorly, even scarcely, used.

3.4.2 Land and the social fabric

The whole discussion on land cannot be had without appreciating that Northerners, and perhaps Acholis in particular, have a profound relationship with the land. Land is the driver of economic behaviour in Acholiland, and an indivisible part of the social fabric (McKibben 2010). Land is essential for housing (most people reside in self-made mud- huts on their land) and it is the means of subsistence, food security, and primary production for 85 percent of people in the sub-region. Spiritually, Acholi culture emphasizes the importance of being buried on ancestral land. Otherwise the deceased’s spirit will remain earthbound in an indeterminate state, unable to reach the afterlife, and forever haunting the deceased’s family.

Perhaps, therefore, it is a clash between traditional Acholi culture and the emerging commercial reality that is behind the land conflicts in Northern Uganda: these are ‘endemic, embedded in social, economic and historical contexts of extraordinary complexity’ (Whyte 2011). To understand requires ‘a variety of explanatory frameworks: legal pluralism (overlapping customary and state laws), inter-gender and intergenerational relations, wealth differentials, livelihood and economic policy, social identity and identification, population growth, and the perceived failure of modern and ‘traditional’ governance institutions’.

Land conflicts in Acholi (i) As of February 2012, the majority of all civil and criminal cases filed with the police in Lamwo district were said to be land-related, while the majority of conflicts between clans over the past two years are also land-related. In Pader district, there are about 20 cases of land disputes in each sub-county. (Participant, Pader District Local Government, oral presentation, 16 February 2012, Gulu). In Amuru districts there are violent land conflicts involving Lakang and Apac local communities on one hand and the company Madhvani, the Uganda Wildlife Authority, Amuru district and Adjumani district local governments on the other (ACCS, 2013).

In the context of this study, where we are looking at the potential to use land for agriculture and agribusiness, it is instructive a look at some of passion generated by recent competing demands for land (and the language used to describe it). The Uganda Land Alliance (ULA), which is a lobby group for national, regional and international CSOs advocating for land rights for the poor and disadvantaged groups, has investigated a number of transfers of land to investors and writes as follows (Obaikol 2013): ‘the food and financial crises have triggered a new global scramble for land’ and ‘since March 2008, high level officials’ from land deficit countries ‘have been on a treasure hunt for land in such countries like Uganda…. The investors are basically Ugandan citizens that are not indigenous or Ugandan local elites who have entered into agreement with the Uganda Government and the production is mainly for export purposes.’ ULA suggests land is taken away from indigenous people and transferred to what it describes as private entities in four main ways:

 Transmigration, as the state resettles people into areas of indigenous people to gain control over the lands. For example, ‘the Balaalo of unknown origin who have hundreds of cattle were, in 2008, sponsored (sic) to forcefully settle on land in Queen Elizabeth National Park. All these Balaalo takeovers have been accompanied by ugly incidents of violence…...’.  Certification, as the state awards legal rights of ownership over land to persons who had illegally settled on land in the chaotic 1970s. This mostly affected mailo14 land in Buganda thereby rendering the mailo interest worthless.  Concessions, as the state awards user rights and permits to exploration companies for mining, logging, plantations etc. Currently, this applies mainly in the Albertine region due to petroleum developments.  Spatial reconstruction as the state takes over indigenous people’s land for designated national parks and projects like airports, roads, government structures etc.

14 Under the so-called ‘1900 agreement’, the British colonial authorities established the first tranche of private land, the “mailo” system, whereby big landowners in Buganda were enabled to own some of their land.

The ULA report cites examples of GoU facilitating large scale land transfers to investors. These are stories that have appeared in the press15 Examples of this include (Obaikol 2013):

 The Uganda Land Commission entered into an arrangement with Neumann Kaffee Grouppe for the establishment of a coffee plantation in Mubende district. Using the army, the government managed to evict people that were occupying the land and it is alleged that a total number of 2,041 people belonging to 392 families were evicted16.  In 2006, President Museveni provided Chinese investors 10,000 acres which is now being farmed by 400 Chinese farmers, using imported Chinese seeds to grow corn and rice. This project is overseen by a former Chinese government official, now head of the China-Africa Business Council.  The Uganda Government leased 840,000 ha (drawn from various parts of the country) to Egyptian interests to grow organic beef and rice for export to Egypt (Daily Monitor June 9th, 2009).  In April 2008, during the World Islamic Economic Forum, the government of Kuwait launched a new USD100 million fund called “Dignity Living” to be invested in food production and agri-development in Uganda.  There was a proposal to give away part of the Mabira forest to the Sugar Corporation of Uganda Limited (Scoul), a sugar company owned by the Mehta Group. The plan sparked off mass demonstrations in which three people died and GoU abandoned the idea. For the moment.

3.4.3 Conflicting land tenure systems

As already explained, there are two main forms of land tenure in Uganda: registered land and land under what is legally known as “customary tenure”. Most of the land ownership in northern and eastern Uganda is under the customary tenure system.

Customary ownership simply recognizes pre-colonial land ownership systems. The 1995 Constitution gave recognition to both forms of ownership and consequently full legal force to locally accepted systems for administering land, or land disputes mechanisms.

Across most parts of the North, the clan has always been the basic unit of land governance. The clan’s role combines administrative and judicial functions, and includes a responsibility to protect land, a role that is historically critical for community livelihoods: this covers adjudicating land disputes; ensuring that those considered vulnerable are not left landless, and; vetting and giving consent to land sales.

15 Some of these stories may seem extraordinary but, in the present political environment, it is not safe to assume they have no basis in reality, that there is smoke but no fire. The purpose of this section was to look ‘at some of passion generated by recent competing demands for land (and the language used to describe it)’: some of the comments made in early drafts on the quotes from ULA indicates that the passion remains undiminished. 16 From Neumann Gruppe website: “As early as 2001, Neumann Gruppe GmbH set up Kaweri Coffee Plantation Ltd. in Uganda. Ever since its initiation, this project has been repeatedly subjected to unjustified accusations. Those accusations focus on a misrepresentation of the relocation of a small group of individuals before the land of the farm was legally taken over by NG.” http://www.nkg.net/newsroom/nkginuganda.

As a result of the trauma of war and the long period in the camps, the complexion of customary tenure changed. In the immediate post conflict period, it was discovered that many elders (regarded as the clan’s custodians of information on land ownership and boundaries) had died during displacement17. At the same time, household heads begun to see themselves as “owners” not just “trustees” of rights in land and this to some extent shifted authority of tenure away from the clans (World Bank 2009). Land sales were undertaken after consultations with clans but final approvals were, in many instances, not left with the clan. The clan was merely informed and was no longer the sanctioning authority. Under this new order, common land resources, like grazing areas, hunting areas and areas for hewing firewood, were sometimes spirited away from communities, generally by individuals.

Land conflicts in Acholi (ii) “I’ve seen young men from the camps and the villages and the towns shouting and abusing these big businessmen as they walk by. Some of them try and steal from these people too. They’re frustrated and angry because they don’t have any money, and they see these big men go by in their expensive, shiny cars. I can understand why they do it.” – Anonymous civil servant in Gulu District from McKibben 2010.

To compound this situation, formal land administration structures, like the District Land Board (DLB) and the District Land Office (DLO) have lost much of their credible authority. Where they even exist, they are constrained by poor staffing and shortage of funding. They certainly lack the credibility to deal with issues regarding customary tenure even though they do have a mandate under the National Policy on Internal Displacement18.

3.4.4 Land and economic development

Deininger and Ali (2007) make interesting points about how varieties of land tenure constrain investment. They show, inter alia, that:

 Overlapping rights (arising out of conflicting land tenure systems) significantly reduce tenants’ incentives to invest in trees, soil conservation structures and manure application, and that the effects are large by any measure. A conservative estimate suggests that investment disincentives from overlapping property rights alone can reduce productivity by up to 25 percent depending on the type of crop planted Deininger and Ali (2007).  Legal provisions aiming to give de facto ownership rights to tenants on lands held only under usufruct help to reduce insecurity of property rights ….but fail to fully eliminate under-investment. These conclusions build on work in Lango and Acholi regions in 2007 (World Bank 2009) which showed that:

17 USAID March 2010: Stability, Peace and Recovery in Northern Ugandan (SPRING) Conflict and Recovery Briefing Report No. 6. 18 GoU. 2004, Uganda National Policy for the Internally Displaced Persons

 About 85 percent of the respondents had experienced threats to tenure security and 59 percent felt these threats were significant.  There were widespread misgivings about Central Government’s intentions towards land. Up to 23 percent of the respondents felt that the government, the army and rich people had taken too much interest in their land without clearly declaring their motives or intentions, and they felt this as a threat. This perception was higher in Acholi region at 48 percent of their respondents than in Lango where it was at 44 percent.  90 percent of the survey respondents had no knowledge of the 1998 Land Act.  Disputes mainly occurred on land abandoned upon displacement, which on return had a dispute prevalence rate of 65 percent.  Both the statutory and traditional dispute resolution institutions in northern Uganda lack capacity for resolution of disputes and conflicts occurring on the return of IDPs.  Given the high uncertainty in the study areas over GoU’s intentions on land, there were misgivings over official tenure reform proposals such as systematic demarcation, land registration and titling. There was general agreement that titling needs to be pursued in a manner complementary to customary tenure and not in a manner aimed at immediately replacing it, because customary tenure is at times better equipped to manage communal or collective land rights.  Female-headed households, child-headed households, widows, orphans and children, generally classified as “Extremely Vulnerable Individuals” (EVIs) were inadequately served in the return process and needed specially tailored interventions. Many of these groups lacked the financial and human capacity to rebuild their shelters and livelihoods in their places of origin.

3.4.5 Land as a renewed source of conflict

A recent study by Burke and Egaru (2011) showed that conflict associated with land was increasing ‘substantially’ following the return of peace to the Acholi Region, the re- settling of internally displaced people and increases in the value of land. . The key questions are : with so much at stake, how can the land issues be addressed to ease the tensions and to try to improve the potential for investment and can a donor project do anything to assist?

This conflict plays out mainly at three levels. The first is within families and takes the form of disputes over ownership and disagreements over the division of land. The second is at the community level and takes the form of disputes over ownership and boundaries. The third level involves disagreements over decisions by land owners and local or central government agencies to provide land to private investors. While the first and second levels are more prevalent, resolution over disagreements is often sought and got from those traditional and clan leaders who can continue to command some community respect. Where clan authorities have been disregarded, such situations have sometimes escalated into violence.

These first two stages account for up to 90 percent of the reported cases of land conflicts in the Lango and Acholi sub region19. Though fewer, ‘level three’ conflicts

19 International Alert 2012; Monitoring the Impact of the Peace Recovery and Development Plan on Peace and Conflict in Acholi and Lango.

© Oxford Policy Management and Coffey 28 Political Economy Analysis of the Agriculture and Agribusiness sectors in Northern Uganda have tended to galvanize the community mainly against governmental agencies and potential private investors. The case of the Amuru Sugar Scheme (see Section 4.4) is its most vivid example. While the mandate to resolve this type of conflict rests mainly with the local and central government agencies, the mechanisms that would bring resolution to such situations no longer enjoy the trust and confidence of the community. They are perceived to be out of reach, cumbersome, expensive and are yet to shed the perception that they work in the interest of the rich and powerful. Given the huge galvanizing effect, this level of conflict presents, it is perhaps the biggest risk and uncertainty to the stability required for agribusiness investment.

In fact, arguably, there is now, a degree of suspicion around even the most well- meaning attempts to form productive relationships between those with capital and landowners in the north. Perceptions that legal and administrative systems favour the elite and the titleholders were cemented early on and it can be anticipated that initiatives seeking to title land will create political debates, tension and, in some cases, violence.

Ultimately, the problem is that the state, faced with these challenges, rather than mediating and solving conflicts, will follow its clientelist instincts (which have been reduced now just to staying in power) and do nothing. The problems can therefore be said to be manifest, and then aggravated, by intergenerational issues at the micro level; by a lack of social fabric at the meso level; and by the nature of the state at macro level.

4 The agricultural market systems

The previous section discussed how the specific and non-specific issues covered there could be examined by means of a look at the structures, or long-term contextual factors, relevant to both the agriculture sector and to Northern Uganda and, in particular, how these are manifest in the key agricultural market systems of Northern Uganda

In this section, we will explore the major market systems operating in the agriculture sector, five in all; agricultural inputs, transport, storage, processing and financial services. The process of exploring these systems is complicated by the many important agricultural commodities there are in Northern Uganda, each with their own peculiarities, different production structures and marketing models. Although there is not one dominant crop in the region, and several are discussed here, maize (as perhaps now the key food crop) is used as the main exemplar20. Maize seed accounts for some 60 percent by volume of all seed sold. Furthermore, maize, as a small holder crop (although with increasing numbers of commercial farmers involved) with atomized, scattered production and basic marketing, is a useful illustration of the many challenges existing. The coverage will look, as far as possible, at the key stakeholders in the market systems and how they influence the sector. It will examine the interests and incentives facing them and how these guide policy and investment patterns in the sector.

4.1 Agricultural inputs

There are three main inputs necessary for commercial agricultural production. To be most effective, they operate in tandem but the starting point is improved seed. Quality seed is the foundation stone of agricultural growth.

4.1.1 Seeds

(i) The Problem

With Uganda’s population expected to almost double, to 56 million, in less than 30 years, with land shortages over much of the country (World Bank 2006), with continued reliance on extensification of agriculture said to be “environmentally disastrous” (World Bank 2006), there has to be a rapid improvement in land and labour productivity, most urgently in yields.

Ugandan farmers’ yields are between 10 and 40 percent of those attained at the country’s research stations (Zorya 2013). Although farmers’ yields are unlikely to reach research levels, they can certainly increase as the result of improved technologies. A major factor is the lack of good quality, higher yielding, more vigorous, drought resistant and disease-free seeds and planting material: use of quality seed in Uganda is very low. Ferris and Ojok (2006) estimate that 90 percent of Uganda’s crops are still produced using home-saved seed. Later reports (AGRA, 2011) repeat this figure.

20 Which is not to say that cassava, sorghum and millet are not very important crops in the area, for income, nutrition and food security (MAAIF 2012)

And yet the country’s seed companies find it difficult to turn a profit, operating as they do in a dysfunctional regulatory environment where institutional inertia is the order of the day. As several studies have reported, this has been apparent for some time but the issues are complex and stakeholders may have been reluctant to face the facts.

(ii) The Market

Thorough, and succinct summaries of the seed sector and its history are given in (Okot 2011; MAAIF 2012a; Ferris and Ojok 2006; Joughin 2014). Essentially there are three components of the seed industry:

 The informal seed system accounts for an estimated 87 percent of planted seed (MAAIF 2012a). It consists of three elements: (i) farmers saving seed for own use (no trade involved); (ii) farmers exchanging seed with neighbours; and (iii) farmers and farmers’ groups growing seed (improved or otherwise) for sale through informal channels, including local markets, nongovernmental organizations (NGOs), seed fairs, and development projects.  There are a number of reasons (Louwaars and de Boef 2012) farmers still use farm- saved seed, including (i) inadequate access to appropriate seed markets; (ii) limited access to financial resources or credit to buy or produce seed; (iii) lack of interest or capacity in the research system to develop genotypes that are adapted to the small farmer production environment. However, enterprising farmers in the informal sector can “graduate” into the formal system by expanding production, establishing a brand name, and marketing seed.  The formal seed industry derives from the initiation of the public seed industry in 1968 under the Ministry for Agriculture and Cooperatives and its subsequent liberalization undertaken in the early 1990s. However, it was not until around 2000 that private companies began to prosper and, at that time, three came to dominate the market—Harvest Farm Seeds, Farm Inputs Care Centre (FICA), and Nalweyo Seed Company (NASECO). Since then, more companies have appeared (Victoria Seeds, East African Seed Company, Mt. Elgon Seed Company, Equator and others). Multinationals also began to show an interest (Pioneer, Cargill, Monsanto, Pannar).21  Relief seed: During the war, the 1.5 million people in the camps became the target for huge amounts of institutionally procured seed, purchased and distributed to the camps by the government, NGOs, and relief programs. The situation proved lucrative for entrepreneurs who could deliver seed quickly; the pressure was always on speed rather than quality, with several long-term negative impacts. In hindsight, it is clear how the situation distorted farmers’ seed procurement strategies, undermined local seed and grain market functioning, and compromised the development of more commercial seed supply systems. The relief business had the excuse that the situation demanded urgency and did not allow time for quality assurance of any given seed, but the result was that a market-driven seed industry struggled to find its feet. By the end of 2010, all the camps had been decommissioned and GoU’s strategy in the north had reverted to a recovery and development model, although the impact of the emergency model still echoes in attitudes to seed as an input, as well as to its regulation. And, indeed, NGOs (and

21 In fact, probably because of the small market and the uncertain regulatory environment, the multinationals have so far proved reluctant to make any substantial investment.

GoU) are engaged in the same behaviour albeit the primary geographical focus has shifted to Karamoja.

Industry insiders estimate that potential demand for commercial seed could be about 35,000 tonnes. Total sales, however, i.e. not including seed saved for own use and seed exchanged with neighbours, are estimated at just over 12,000 tonnes (MAAIF 2012a), of which maize seed accounts for some 60 percent by volume. A simple seed value chain is shown in Figure 2 and an industry structure in Figure 3.

By 2012, 23 seed companies were licensed and operating (See Annex E).Of these, 5 or 6 are serious players with production and storage facilities, another 4 or 5 are “emerging,” and the rest mostly operate ad hoc, with variable product quality (and no supervision). During peak demand, the established companies may produce about 30– 35 percent of the seeds that farmers demand. When there are real shortages, the incentives for quick movers to do a one-off sale increase substantially. This is not a good basis for sustainable market relationships as there are clear incentives for unscrupulous behaviour, supply of substandard seeds (or just grain), and counterfeiting/faking.

Figure 2: Seed value chain

Pre-basic seed Commercial seed Development and production and production and Seed marketing identification of variety processing and distribution new varieties maintenance

Seed companies are supplied by hundreds of contract seed growers scattered around the country (making inspection difficult and expensive). Through training and capital and operating loans, these contract growers have become an important part of the industry and there are some growers’ associations.

By and large, the private companies concentrate their investments where there is profitability: in producing and marketing seeds for hybrids of maize and sunflower; in producing open-pollinated varieties (OPVs) of maize, beans, soybean, and sorghum; and in importing seeds (for hybrid maize and exotic vegetables), fertilizer, and other farm inputs. They also export seeds produced locally and re-export some of the imported vegetable seeds, crop protection products, and farm tools. Most of the improved varieties accessed by Uganda’s seed companies come from breeding by the National Agricultural Research Organization (NARO), and this appears to be an unnecessarily slow and cumbersome process (MAAIF 2012, Non-ATAAS Analytical Report).

Figure 3: Organisational structure of the seed sector

Ministry of Agriculture, Animal Industry and Fisheries (MAAIF)

National Seed Board National Agricutlure Research (NSB) Organization (NARO)

National Seed Certification Variety Release Private companies Service (NSCS) Committee (VRC)

Private companies Importers

Production & Processing

Government NGOs & Relief Distributors Stockists and Donors Agencies

Farmers

Informal Seed System

Counterfeiting or “fake seed”22 is much reported, with stories of counterfeit labels and bags, interceptions and adulteration of shipments, and the quick filling of sudden “stock-outs.” Several in the industry suggest that this is well organized and that some in the trade must be aware of the source, even that the counterfeits may be coming from some of the more respectable companies. There are virtually no data. However, a research project by Svensson, Yanagizawa-Drott, and Bold (2013) will cast new light on counterfeiting. The authors have conducted a trial, planting purported high- yielding variety (HYV) hybrid maize seeds bought in the market and comparing them with authentic HYV maize bought from Naseco. About 30 percent of the purchased samples were deemed counterfeit. Despite the small sample, the data provide strong evidence suggestive of widespread counterfeiting. Why no data have been collected on counterfeiting before and why the regulatory authorities are so relaxed about it are questions that underlie much of the enquiry of this report. If numerous stakeholders are complicit in this, as some allege, it would seem virtually impossible to trust anyone in the industry.

The key institutions in the seed sector are:

22 “Fake seed” is maize grain that has been coloured to look like treated hybrid seed.

 Uganda Seed Trade Association (USTA), a membership lobby association formed “to coordinate and oversee the development of the seed industry”. USTA’s capacity to participate fluctuates, usually according to the level of engagement of its donor of the moment, currently AGRA, USAID, the Eastern Africa Agricultural Productivity Project (EAAPP), and probably the Dutch Integrated Seed Sector Development Program (ISSD).  The Crop Protection Department in MAAIF. CPD is in charge of all matters related to plant health. It is underfunded and chronically weak. It claims that staff need training in all areas of their responsibility, even though most have attended numerous (donor-funded) training courses already.  The National Seed Certification Service under CPD, is mandated to play the key role in seed quality assurance including licensing seed dealers, field crop inspection, sampling and laboratory testing, official certification, and the sealing of seed bags.

(iii) The Technical/economic factors

The technical and economic challenges are described in Joughin (2014). The most important is the uncertain profitability of the use of improved seed at all levels of the value chain. This is because (i) rainfed agriculture under smallholder conditions is highly risky; (ii) returns to the use of improved seed varieties are less than they might be because complementary inputs are not applied at the optimal levels; (iii) the formal ‘market’ remains distorted because of its genesis in relief seed industry; (iv) the seed companies, operating with two seasons a year, still struggle to nurture businesses which can operate on the basis of producing and selling seed commercially in a small (still nascent) market with very variable demand. (v) the desired quantities and qualities are often not delivered to farmers on time because the cost of delivery to widely dispersed small customers is more than the customers are willing to pay. (vi) revenue from sale of produce by individual farmers fluctuates because marketing costs are high and prices offered for small quantities of poor quality produce are low; (vii) there are no institutions to bulk the orders and deliver seed or market the produce more efficiently for farmers; (viii) counterfeiting undermines all the players in the value chain; (ix) the institutions mandated to protect against counterfeiting fail to undertake their responsibilities.

There are other more specifically technical agronomic challenges: the rate of cultivar introduction in Uganda is too low: 2.6 per year for maize (MAAIF 2012) as compared to 9 per year in Tanzania, 12 in Zambia, 15 in Kenya, and 45 in South Africa; the failure to maintain a national germplasm bank; the inadequate supply of pre-basic and basic seed from NARO; poor phytosanitary controls on imported seeds; and the absence of reliable seed data (NSCS, as the regulator, has the primary responsibility to set up such a database but has never done so).

(iv) The Underlying PE issues

For at least fifteen years, donors have tried to address the problems described above, seeking to realise the potential from a better functioning seed industry. Major support

© Oxford Policy Management and Coffey 34 Political Economy Analysis of the Agriculture and Agribusiness sectors in Northern Uganda has been provided by USAID, Danida, AGRA, the Netherlands Embassy, FAO and the EAC Secretariat among others. Much of it has used for similar processes, essentially seeking to address the technical challenges. By the end of 2008 (Joughin 2014), the early donors at least had tired of the process but now a new generation of supporters has emerged, undeterred by the disappointments of the past23. The suggestion here is that there are a series of underlying PE issues which set the context for the technical challenges, and that if these are not addressed little progress will be made. These PE challenges include:

Dysfunctional regulatory environment

The key regulatory body is the NSCS which develops rules and regulations for the seed industry and is supposed to monitor and ensure compliance. The NSCS has received years of support but has never managed to undertake its mandate. The questions remain: Why does NSCS license companies who don’t have the capacity to produce decent seed? Why doesn’t it then inspect them? Why does it look the other way when it knows companies are not following best practices, when it knows companies are handling low quality product, when it knows fakes are present in the market? And does this have a bearing on how easy or otherwise it is for new companies to set up and grow, i.e. barriers to entry?

Various hypotheses are put forward as to the driver of the NSCS’ foot-dragging. Joughin (2014) mentions various possible sources of rent (import licenses, payments for lax inspection or not inspecting at all, refusal to inspect without “facilitation” by the client, seed companies paying for certification) but there is nothing obviously on the record. Privately, sources suggest that this is exactly the kind of institutional inertia that follows when the nexus between the private sector, the military and the political elite is so close and opaque (see Section 3.2).

As for barriers to entry for new companies, it certainly seems to be the case that, of the 4-5 existing successful operations, most of them seem to be well connected but there is no specific evidence on this. A related issue is that, with the rates of cultivar introduction ‘too low’ and MAAIF (2012) suggesting there needs to be a minimum 4-7 new varieties per year for each crop, it is significant which companies get the new variety seeds. Looking only at new varieties released during 2000-11, of the 95 approved varieties, 63 have come from NARO and 32 from private companies (MAAIF, 2012). The situation would be helped if the companies could source more varieties from other countries and also start their own breeding programmes so they can control their own seed supply but NSCS regulations currently forbid this.

The guiding legislation for the seed industry has evolved over the years, much like that of the rest of the agricultural sector, into a bewildering patchwork of imperfect and incomplete acts, strategies, bills, and policies, some of it containing elements of the dirigiste past: the Seeds and Plant Act 2006; the Seed Board (which has never met); the National Agricultural Seed Policy (which has not been approved)24; the Draft Seeds

23 In particular, MAAIF has formulated a new project for World Bank, USAID and other donor assistance (derived from the Framework Implementation Plan for Seeds and Planting Materials, drawn up under the non-ATAAS exercise). 24 In May 2013, an advertisement appeared in New Vision for a consultant to help prepare a national seed policy. The work was to be funded under the EAAPP, financed by the World Bank. Neither the SWG nor the SSCG knew anything about it, and nothing more was heard until some stakeholders received an invitation from the EAAPP to a workshop in August “for the National Seed Policy.” In August,

© Oxford Policy Management and Coffey 35 Political Economy Analysis of the Agriculture and Agribusiness sectors in Northern Uganda and Plant Act Regulations 2011 (not passed by Cabinet); the Plant Protection and Health Bill 2010 (tabled in 2004 and still with Parliament); the Plant Variety Protection Bill 2011 (in draft for several years and still with Parliament); the Biotechnology and Biosafety Bill 2010 (still before Parliament); the Guidelines on Importation and Exportation of Seeds (according to MAAIF itself (2012a), going ‘beyond what is necessary to protect Uganda …. interfering with what are normal business activities for seed companies around the world’).

A common argument in favour of public sector regulation, and one used by the NSCS, is that governments have a responsibility to ensure that inputs sold to farmers are appropriate for local conditions and meet certain standards for germination and yield performance. This is all very well, especially, in the context of a certain mistrust of the seed-testing and seed-certifying capacity of neighbouring countries. Yet, the long term non-performance of NSCS, the evidence that farmers are regularly swindled by seed counterfeiters, and the proposition that government regulators might be better employed using their scarce resources to attend to this problem, through routine market surveillance for example, seems to carry little weight.

For at least 10 years, there have been regular calls to make the NSCS autonomous (Ferris and Ojok 2006). This is part of a wider long running argument but does follow the precedents for the cotton, coffee, and dairy regulatory bodies, and even the NAADS. All parties say they support an autonomous NSCS, i.e. giving it industry-based revenue-raising powers, and MAAIF’s DSIP commits the ministry to it. However, in reality the authorities do not want to relinquish budgets and control (see Box below). No sooner was the NAADS up and running than the NRM started to destroy it. The reality is that NSCS staff know that if the institution was granted autonomy, their own working days would be numbered.

As a lesser measure, NSCS could be pushed to delegate some tasks to local government or to accredit USTA or some private companies to inspect seed fields and test seed. The NSCS is clearly reluctant to make such changes. It will not willingly cede its powers.

neither the NSCS nor NARO nor the World Bank thought to inform the recruited consultant (or any of the respondents that he spoke to) about it. To add to the puzzle, the “National Seed Policy” document that was presented does not address the outstanding issues raised in the most recent relevant government document, the Framework Implementation Plan for Seeds and Planting Materials.

Autonomy from government - not favoured by GoU

The prospects for pursuing at least semi-autonomy for NSCS and UCE are discussed in the text. The efforts of the Dairy Development Authority to tread this same path are therefore instructive.

DDA’s mandate is to regulate and develop the dairy sector. The regulation aspect has been quite successful and the DDA has had a degree of managerial autonomy. It was however supported largely by donor funding and some ad hoc subventions from the MAAIF budget. Detailed plans were made in 2005 for the DDA to become semi-autonomous and to raise revenue through various fees, notably a cess on the processing industry. This had been proposed in MAAIF’s Dairy Master Plan of 10 years before, was supported by all sections of the industry and by the Board and would have given the DDA self-financing status and a degree of independent power. However, at the very last moment, the cess was resisted strongly, without much clear argument, by one of the main processors, Jesa, himself a major beneficiary of donor largesse and a close ally of the President. The plan fell at the final hurdle with MAAIF refusing “to let DDA go” even though it seemed to be beneficial for all parties.

Dairy material derived from Kjaer et al (2012c).

Fragile institutional context

The broader context for NSCS inertia is MAAIF’s long record of obstruction (see Section 3.2) and the repeated failure of leadership. Authoritarian structures suck initiative out, reduce space for management, and discourage ideas.

Erratic policy processes

There is a still broader context to the issues above: essentially the confused policy environment and the sudden policy pronouncements and unconnected and overlapping initiatives of the last few years. For example:

 Prosperity For All: This initiative followed from the NRM’s 2006 Manifesto and established the focus on production and wealth creation at the expense of poverty reduction. After the 2006 elections, a structure for the PFA program was established under the President’s Office, running in parallel with the secretariats of the NAADS and the PMA. The intention of the PFA was to assist “agricultural households to engage in activities that raise their incomes from the current low levels towards a target of UGX 20 million per household per year” (MAAIF 2008). Officers from MAAIF were directed to undertake PFA work although not much of this was very visible. There were no PFA documents of substance. The fact that the parallel structure operated, however, meant that the rules, procedures, and ethos of public spirit built up in the civil service were confused and undermined.  The Presidential Investors Roundtable: an advisory body of 24 national and international corporate leaders launched in 2004. It seems to have few links to the mainstream civil service but one of its priority areas is agribusiness and, following representations from the industry, it has involved itself with reforms in the seed sector: without much impact it appears.  Government plans to set aside UGX 57 billion ($23 million) for seeds and livestock activities (Daily Monitor October 1, 2013): “The President … tasked the ministry of

Agriculture to look into the launching of government established gardens for seed production…. Mr Museveni also urged farmers to encourage the youth to embrace modern commercial agricultural practices, pledging a donation of UGX 20 million to boost Kisoro boda-boda-run Sacco.” This is a typical announcement: absurd sums of money, assumptions that the government will be best placed to spend the cash, and a deft back-hander intended to keep various interests happy.  And most topically, recent reports on several new Presidential Initiatives (Daily Monitor. 18-19 Feb 2014): In one, the Presidential Initiative on Banana Industrial Development, police detained an adviser over ‘mismanaging’ UGX 40 billion; in another, the President launched an UGX 750 billion beef project; in yet another the President commissioned a tomato and fruit processing factory, the ‘brainchild’ of his brother, Salim Saleh, in Nakaseke district, and received a donation of a UGX 45 million generator from the Luwero Minister. Not surprisingly, none of these considerable investments appear in the MAAIF DSIP, nor in the budget.

Weak parliamentary process

In a 2009 study, Tsekpo and Hudson (2009) describe how recent parliaments managed to pass important bills even if “the legacy of one or no-party rule and the continuing dominance of the NRM, the Executive and President Museveni continue to shape the functioning and performance.” So what is happening with the agriculture bills and specifically the seed bills (see section 2.6)? In the 8th Parliament, which ran until 2011, 23 bills were tabled for which there was no time for debate, and they all lapsed following the dissolution and expiry of that parliament. Among these bills were the seed sector bills.

Uncertain donor response

Till now donors have struggled to know how best to address this complex set of challenges and have persisted over recent years with various types of essentially technical project. As this report was being finalized, several donors were making a new effort to build a new round of support. Late last year, the Seed Sector Commodity Group (SSCG) held its second meeting to improve information sharing and better target resources. Representatives were present from USAID, the World Bank, the FAO, the ISSD, and Danida and the attendees accepted that there were potential overlaps and synergies in the activities under way and insufficient coordination with the government and the MAAIF. However, they still struggled to maintain a consistent line and position, especially on most of the key PE issues.

4.1.2 The fertilizer distribution system

(i) The Problem

The need for productivity improvements in agriculture is discussed in the section on seeds and applies equally to fertiliser usage. However, despite widespread recognition of the importance of inorganic fertilizer use in achieving productivity improvements, fertiliser application rates in Uganda remain very low. 2012 imports of 40,000 mt of fertilizer correspond to fertilizer application rates on all cultivated land of 4 kg/ha, or around 1.8 kg/ha of nutrient per year (Benson and Lubega 2013). Average application rates on smallholder fields are significantly lower than this, given the substantial

© Oxford Policy Management and Coffey 38 Political Economy Analysis of the Agriculture and Agribusiness sectors in Northern Uganda proportion of fertilizer imported by large-scale commercial agricultural producers, and they compare very badly with the situation in Kenya where average application rates were 35 kg/ha, as well as Malawi (22 kg/ha) and Tanzania (13 kg/ha) see Bayite- Kasule (2009). Data from the 2008/09 Uganda Census of Agriculture shows that only about 8 percent of smallholder farmers nationally use inorganic fertilizer on any of their crops (Okoboi & Barungi 2012). With slightly less cultivated land than Uganda, in 2010 Kenya imported an estimated 480,000 mt of fertilizer, which is 12 times the amount brought into Uganda.

(ii) The Market

Imports have grown rapidly and now stand at levels of around 40,000 to 50,000 mt (Benson et al, 2013)25.

Prior to the mid-1990s, very little if any fertilizer was marketed to smallholder farmers. The stocks brought into the country were primarily for cash crop production in large- scale or contract farming, notably on tea, sugar-cane, and tobacco estates, and these have continued to be the most significant consumers of fertilizers to date. Benson (2013) attributes increases in fertilizer consumption among smallholders to the reforms in agricultural markets since the 1990s. Anecdotally, maize, coffee, and vegetable farmers, seem to be increasingly recognizing that profitable use of fertilizer is possible on these crops and are using it more and more.

Figure 4: Annual Fertilizer Imports, Uganda, 1994-2012 (mt)

60000

50000 NPK Blends Pottasium Products 40000 Phosphorous including DAP Nitrogen Products 30000

20000

10000

1996 1994 1995 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2010 2011 2012

Source: (IFPRI, 2013). Note: DAP- diammonium phosphate; NPK, nitrogen phosphorus, calcium.

A diagrammatic representation of the key players in the fertilizer value chain is shown in Figure 5. These include, based on Benson (2013):

25 All fertilisers sold in Uganda are imported. However, in late 2012, a memorandum was signed between India’s Gujarat State Fertilizers and Chemicals Limited and Nilefos Minerals (a Madhvani Group company) to develop the Sukulu rock phosphate deposit along the border with Kenya. However, the commercial prospects are unclear not least because the agronomic response of the principal crops grown in Uganda to the application of phosphate is apparently unknown while tests using the Sukulu deposit have apparently so far proved disappointing.

 Overseas suppliers: These are mainly from South Africa, the Middle East, Mauritius and Europe. However, direct importation is limited for small scale importers26. Recently, due to high transaction costs, Ugandan importers have increasingly procured supplies from Kenyan importers like YARA (formerly Norsk Hydro), SKL and MEA, either via Mombasa, or directly from Nairobi, Nakuru or Eldoret. Although business linkages with importers from Kenya have helped local importers achieve 20 percent-30 percent lower import procurement prices, fertilizer prices still remain very high.  Commercial importers: This category is composed of about 8-10 importers (although there is some unlicensed (illegal) importing. They are mostly based in Kampala and Mbale. ETG is the biggest and reckoned to account for perhaps 50 percent of imports on the basis of a very passive strategy, supplying to the estates. Yara and MEA seem to go more for the smallholder market. Importers also function primarily as brokers who bring in fertilizers only after tendering for a contract by the commercial crop growers. Most fertilizer brought into Uganda is bagged in 50-kg bags. Smaller quantities of fertilizer are sold to individual customers, but these are generally packaged at the point of sale in poorly labelled plastic bags, a practice which is illegal.  Wholesalers: There are approximately 20 in number shipping on from importers, selling to retailers and a small number of large farmers. There is a significant parallel market of informal importer/wholesalers that bring small truck loads directly from Kenya, bypassing customs and avoiding the 6 percent withholding tax that is borne by the licensed importers. They rarely register their imports and hence the volume of fertilizer they represent is unknown. However they are the primary source of fertilizers for the smallest commercial farmers and retailers especially in Eastern Uganda.  Retailers: A 2008 census of agro-input dealers enumerated 1,992 dealers across Uganda (AT-Uganda 2009, reported in Benson 2013). Of these, 966 reported that they sold fertilizer. The median annual sale of fertilizer per trader was 200 bags or 10 mt of fertilizer. A single supplier was used by 54 percent of the traders in the sample but traders tended to obtain several small orders from their suppliers over a season, rather than single large orders. The majority of traders sold fertilizer to customers in small quantities: sales of less than 50 kg accounted for an estimated 61 percent of the fertilizer sales of traders. Most ‘break’ 50-kg bags and either repack the fertilizer themselves into smaller standard-weight packets or simply sell it loose by weight. The most common packet size into which retailers repack fertilizer is 1 kg.  NGOs: These can and have built capacity for input supply among wholesalers and retailers to create demand by smallholder farmers. Examples of these NGOs include SG2000, APEP project funded by USAID, and AT Uganda Ltd. They have trained individuals in business management, financial management and in fertilizer product knowledge. Besides capacity building, they have also played a role in linking value-chain players, and sensitizing farmers on the proper use of fertilizers and other inputs. One challenge is that not all individuals who get the training remain active fertilizers retailers.

26 Overseas suppliers require consignments to be at least 300mt. Such consignments cost cash amounts well beyond a typical Ugandan importer.

 Large scale farms: These are mainly commercial tea, sugar, palm oil, tobacco, flower and rice growers and typically procure fertilizers directly, either from Europe or South Africa where they have established trading houses, or from large suppliers in Kenya. Occasionally, they put out tenders for supply by domestic firms.

Figure 5: Fertilizer Distribution Structure

Overseas supplier South Africa, Middle East , Kenyan supplier Mauritius and Europe Yara, Mea

Commercial importers and wholesalers Syngenta East Africa, ETG, Balton, Uganda Crop Care , General Allied, Bukoba Chemicals etc.

NGOs Farmers Retailers SG2000, AT, Associations Twiga chemicals USAID SMILAW seeds Uganda Crop Care Keith Associated Small scale farmers

Large scale farmers Plantation Crops- coffee, palm, sugar, tea, rice etc.

The Agricultural Chemicals Board (ACB) under the Crop Protection Department in MAAIF is the Government agency responsible for ensuring that fertilisers are registered and are efficacious, safe, and of good quality. Its mandate is provided by the Agricultural Chemicals Control Act 2006 but, as with NSCS, it lacks both human and financial resources and a great deal of motivation. The major issue with the Agricultural Chemicals (Control) Act 2006 is that it treats all agricultural chemicals (fertilizers and pesticides) the same, without distinction as to their relative risks to public health and/or farming systems. To address this, in 2011, a new draft set of regulations was developed that focused on fertilizer alone, with different regulations drafted for pesticides separately. Unfortunately, much of the text from the new pesticides regulations was used in the fertilizer draft and this is inappropriate, being much more restrictive (though no doubt in line with the instincts of MAAIF) than is necessary. MAAIF’s attempts to rectify this are still inconclusive nearly three years later.

(iii) The Technical/economic factors

Key constraints to increasing fertilizer use by smallholder farmers include:

 Fertiliser is costly, being a bulky commodity produced overseas and shipped inland from Mombasa, principally by expensive road transport;  Information for farmers as to how they can make most efficient and profitable use of fertilizer is limited (Benson et al 2013);  Inadequate or costly credit markets and significant household cash constraints present added barriers to fertilizer use by smallholder farmers.  Fertilizer use has substantial risks, related to those already discussed in the seed section. Farmers may not obtain the revenues from crop sales necessary to pay for the fertilizer used. Rain-fed agriculture is inherently risky. Pest and disease pressures are high in Uganda. Uncertain crop prices make it difficult for farmers to be confident that they will obtain a sufficient return from the sale of any additional harvest from the use of fertilizer.  Opening new land (especially in the north) is often less costly for Ugandan farmers than investing in fertilizer for use on existing cultivated land.  Fertilizer importers emphasize delays at the entry points as a key challenge (Benson et al 2013). Procedures for clearing and entry of fertilizer are not as clear as would be expected, probably a function of both poor regulation and lack of capacity. The importers use clearing agents for quick and easy goods clearance and these are quite expensive and often claim they have taxes to pay over and above the professional fees.  Barriers to entry are assumed to be no greater than might be expected for companies working in a high volume, low margin, but fairly opaque, business where most participants appear to be well connected.

(iv) The Underlying PE issues

The PE Challenges for the fertiliser industry are the same or similar to those of the seed industry. Additional points to be made include:

Dysfunctional regulatory environment. The regulatory system for fertilizer in Uganda is excessive, both in terms of the direct and indirect costs associated with following the regulations and in terms of the benefits for public health, safety, and welfare for which the regulations have been put in place. However, as with seeds, MAAIF knows policy reform is needed to reduce the regulatory burden faced by importers and dealers of fertilizer but does little to address the problem.

A major barrier to entry is that import permits have to be acquired from MAAIF. This is at no direct cost but considerable indirect costs are associated with following the regulations. The benefits in terms of public health and safety from imposing these costs on the sale of a standardized global product like high-analysis inorganic fertilizers are small and the process could be streamlined, possibly doing away with it altogether.

Institutional context and policy process: MAAIF’s inertia on this issue is much the same as for the seeds industry. MAAIF sources will often say the reason nothing happens is

“insufficient resources.” However, this is ultimately an allocation issue. MAAIF does not allocate funds to priority areas. It has some authority to do this and certainly to argue for intra-sector reallocations. But it does not.

4.1.3 Agro-chemicals

(i) The Problem

As with fertilisers and seeds, the agricultural chemicals industry struggles with low usage and low demand. This is partly due to the interdependent way in which all agricultural inputs are applied (although it does seem small farmers are more inclined to use agrochemicals – out of urgency and necessity, perhaps – than they are to apply fertiliser, the use of which has to be planned ahead). Low usage is also partly due to the nature of the dominant rain-fed semi-smallholder mode of production and partly due to the lack of finance.

(ii) The Market

Agricultural Chemicals are a small but growing market, estimated by one source in the industry as worth USD 25m/year, tiny compared to Kenya. Products are largely imported from China and India but also from Israel, Kenya, South Africa, and Singapore. Of the total market, herbicide imports are estimated to account for 41 percent of the total by value, insecticides 22 percent, fungicides 25 percent (with fertilizers included for comparison at only 12 percent).

The main crops on which chemicals are used are coffee, tea, rice, cotton, sunflower, tobacco, and export flowers. Food crops on which chemicals are known to be used include bananas, potatoes, maize, rice, beans, groundnuts, millet, sorghum, rice. The main agrochemical importers are shown in Annex F.

As with fertilisers, the ACB at MAAIF is responsible for ensuring that chemicals are registered and safe. Enforcement is, as ever, inadequate and there are widespread substandard, expired, illegal, adulterated and counterfeit pesticides within the supply chain.

(iii) The Technical/economic factors

Several factors constrain demand:

 The same rainfed semi-commercial smallholder agricultural sector challenges as already discussed  Imported inputs are expensive due to high transport costs and formal/informal tariffs. Small wholesale orders and ineffective distribution channels drive up input costs, and large packaging is expensive for farmers  Small wholesale orders and ineffective distribution channels further drive up costs.  Most chemicals are sold without accompanying advisory services and farmers are unsure exactly what to do.  Agrochemical supply chain actors, particularly stockists, lack business, financial and inventory management skills, as well as marketing, promotion,

and social marketing skills, and have not been exposed to profitable business models to emulate.  As with fertilisers, barriers to entry are assumed to be no greater than might be expected for companies working in a high volume, low margin, but fairly opaque, business where most participants appear to be well connected.

(iv) The Underlying PE issues

Again, the PE Challenges for the ACP industry are much the same or similar to those of the seed and fertiliser industries. Additional points to be included/emphasised are:

 Informal relationships and lack of trust among supply chain actors drives opportunistic merchant behaviour and discourages investment, perpetuating a short-term, high-margin, low-volume perspective rather than a low-margin, high-volume model that might offer better opportunities for expansion, sustainability and profit. The low-volume approach creates an incentive to sell fake products to raise margins. Customer service issues seem barely to register as an issue.  The Agro Chemicals Control Board (ACCB) lacks human and financial resources to enforce regulations, and sanctions are inadequate to deter adulteration of inputs.  As with fertiliser, the need for import permits is a major barrier to entry. There are direct costs such as potential importers having to travel to Entebbe and wait while their applications are approved. There are also considerable indirect costs through having to follow the regulations. The benefits in terms of public health and safety from imposing these costs on the sale of a standardized global product like inorganic fertilizers and other agricultural chemicals are small and the process could be streamlined.

Summary issues: Agricultural Inputs

 Low yields require application of improved technologies but usage of seed and ACPs remains very low.  The input companies find it difficult to turn a profit selling seeds Market failures and ACPs.  The regulatory environment is dysfunctional, inertia being the order of the day.  Counterfeiting and adulteration of product undermines the market.  Returns to the use of improved seed varieties are less than they might be because complementary inputs are not applied at the optimal levels.  Most ACPs are sold without accompanying advisory services Main “technical” and farmers are unsure exactly what to do.  Inadequate credit markets and significant household cash issues constraints present added barriers to use by small farmers  The desired quantities are often not delivered to farmers on time because the cost of delivery to widely dispersed small customers is more than the customers are willing to pay.  Few adequate institutions for farmers to bulk the orders and deliver inputs, or market the produce.

 Few incentives to change: lack of political benefits to be reaped by the political elite and risk of financial losses for the potentially more proactive large farmers and seed producers. Together these impede the development of a more competitive market.  Large numbers of atomised farmers, without any basic level of organisation or bargaining power, either in the market place or as regards decision-making processes.  Decision-making processes controlled by dominant elites: low or non-existent level of participation by those at the end of Main PE issues value chain.  Companies and market associations have achieved their position through donor largesse and/or support from within the ruling elite and have little pressure to offer a (better) service or any value for money.  Weak regulatory bodies with no incentive to change. Consequently, a lack of capacity to set the rules, inspect and supervise the system.  Widespread opportunistic merchant behaviour which perpetuates a short-term, high-margin, low-volume perspective  Lack of trust, rooted in the historical legacy and the war, and exacerbated now by widespread counterfeiting as well as abuse of power and rent-seeking by regulatory bodies’ staff.

4.2 Transport

(i) The Problem

Given its land-locked position, Uganda, and in particular its agricultural sector depends on its transport infrastructure.

The country suffers from the high costs of transport, to access markets (outside Africa and within the region), to import inputs and to collect and market produce domestically. Freight rates are, as might be expected, high, compared with those in many other countries (World Bank, 2012a). Some have argued (Zorya 2012) that Ugandan products remain competitive, nationally and internationally, only because of the favourable natural conditions for agriculture and lower wages. To accelerate the commercialisation of Ugandan agriculture, it will certainly help if there can be a substantial reduction in transport costs and prices27.

(ii) The Market

Uganda has about 78,000 km of roads, only 3,000 of which are paved (Laker-Ojok 2012). Most roads radiate from Kampala. The country has a 321 km rail network, most of which is not in use.

The transport system operates differently in different value chains but generalizable insights can be acquired from studies of the maize and beans industries (World Bank, DTIS 2012; UNDP 2012).

In the maize value chain, rural agents buy and assemble maize from numerous scattered farmers, often located in inaccessible rural areas. Despite various initiatives to establish aggregation points over the years, it seems problems with the organising, and fundamental economics, of collective marketing endeavours, agents still travel to the farmers, often using bicycles to transport the maize to their collection points, then seek markets (often urban traders and processors) when they have accumulated sufficient quantities. Sometimes urban traders and processors will arrange the transport from the farms, either directly in which case they pay cash, or from the collection points of the agents. Since the agents live in their catchment areas, they are a reliable link between the farmers and the urban traders and millers.

Larger traders, with trucks of 25 to 30 tons capacity, compete for maize from the rural collection points and bulking stations (and sometimes manage bulking stations themselves) and then deliver this to large buyers/processors in Kampala, such as Aponye, Premier and Sunrise, who process and pack for large national and regional buyers. Pelrine (2009) suggests this business is broadly competitive and seems efficient although, in his interviews, large buyers did complain that truck traders often delivered low quality maize that required serious cleaning and drying.

The beans transport system is very similar (UNDP 2012)28. Village assembly is done by people on bicycles and motorcycles collecting beans from the producers. The village assemblers are small traders who either buy beans and sell them to larger traders (maybe with 5 ton trucks) or transport the beans themselves to major towns where bigger traders are concentrated. Village assemblers can also act as agents, working

27 The cost of transportation from the wholesaler to the last village retailer is often as much as 6 to 10 percent of the value of the goods transported (Laker-Ojok 2012). The cost of transporting a container from Uganda to Mombasa can be equivalent to the cost of getting that same container to the US east coast from Kenya (Fowler pers comm). 28 Beans (Phaseolus Vulgaris) is a significant crop in Uganda, providing 25 percent of the total dietary calorie intake and 45 percent of the protein

© Oxford Policy Management and Coffey 46 Political Economy Analysis of the Agriculture and Agribusiness sectors in Northern Uganda on behalf of bigger traders for a commission. They collect and bulk beans from different farmers especially during the off season and receive a commission. Almost inevitably, inefficiencies and high losses are prevalent at every stage and contribute to the problems with international competiveness. Transport for smallholder crops contrast with an enterprise like sugar where the processors mostly operate their own trucks and so reduce the various value chain challenges29.

The way the informal sector dominates transport and distribution channels is clearly a problem for the rapidly expanding urban supermarket sector which is increasingly seeking to stock a wider range of middle to up-market items for the discriminating urban consumer (Laker-Ojok 2012). The supermarkets are trying to link up with small scale entrepreneurs who, in turn, are trying to add value to local produce for domestic consumption, both parties struggling to connect in an environment characterised by high costs, low quality, low profitability and related opportunistic behaviour patterns30. The problem is that, in the disconnect that exists, better organized foreign supermarket chains with a longer term view and a capacity for loss-leading, are taking increasing market share on the basis of imported goods from Kenya and South Africa (Laker Ojok, 201).

Perhaps the key challenge for distributors is how, given that, for the vast majority of rural Ugandan consumers, household needs remain fairly basic and purchasing power is low, key items can most effectively be marketed. “Luxury items” such as soft drinks and cigarettes are routinely made available in remote areas via supply chains that make their way to the farthest reaches of the country: can lessons be learned from this and used, in the marketing of perishable, low value agricultural items like maize meal or milk?

(iii) The Technical/economic factors

The question remains: why hasn’t the market responded to reduce margins and make efficiencies? The reality for small agricultural producers is that there are very many of them, they have been historically hard to organise collectively, their product is of poor quality and costs are high at every link in the value chain. If this was not enough, all of the above make farmers vulnerable to the opportunistic behaviour of those who own the transport.

(iv) The Underlying PE issues

29 Some of the biggest road users on the main routes are companies that are not Ugandan owned and are poorly placed to influence government (e.g. Transami, Manson’s and KenFreight). Some of the largest Uganda-based operators of large truck fleets are industrial or service firms for which transport is a subsidiary activity (e.g. Mukwano Enterprises). “Most of the other potential beneficiaries are poor, badly informed and non-influential, and they have no means of engaging in collective action” (Booth and Golooba-Mutebi 2009). 30 Both village retailers and commercial distributors hold almost no inventory, typically less than two weeks of stock, and resupply themselves frequently. They generally use public transportation to collect their inventory (Laker-Ojok 2012). Village retailers use their judgement to set a wide range of margins: 8 percent for beer, 20 percent for hand lotion, 37 percent for laundry soap, and 39 percent for salt (Durgavitch 2008). These margins allow them to cover costs plus profit and to provide the goods at prices acceptable to the customers.

The way in which the ‘private sector/military/political elite nexus’ operates in relation to the transport industry is not well understood although there are many dark narratives circulating. Some insight might perhaps be suggested by sections of Booth and Golooba-Mutebi (2009): ‘All of the evidence indicates that, under the pre-2008 arrangements, the roads divisions of the Ministry of Works operated as a well-oiled machine for generating corrupt earnings from kickbacks. The arrangements in place appear to have permitted the personal enrichment of the Minister, Engineer Nasasira, and of a good many of his senior civil servants, as evidenced by the otherwise inexplicable wealth of named individuals. They also , and more significantly, seem to have provided reliable means of accumulating funds to be made available to State House or other top government offices for political uses (patronage, campaigns and other ‘political work’). In this sense, they constituted a ‘system’, held together by mutual interest. The Minister and his staff were protected from unwelcome enquiries into corruption or inefficiency thanks to the Ministry’s place in the political funding system. Meanwhile, the likelihood of serious challenges to that system was reduced by the substantial personal stake that individuals acquired in its operations.’

In that kind of environment, it may be clearer why small producers are vulnerable and why those who own their own transport (and need to engage less with the predators around them), will have few incentives to try to improve the system and indeed may wish to keep their heads down (especially if there are ethnic issues involved such as that many of the big distributors and commodity processors are owned by Ugandans of Asian extraction). They may, however, have incentives to see that better roads are built and, perhaps, that a competitive transport system works to bring down costs and, in that sense, may prove to be a useful future entry point. To compound the problems of the smaller producers, even when they do try to organise, their umbrella groups, especially if they develop any authority, say like the Uganda Farmers’ Federation (UNFFE), quickly become dominated by party loyalists whose first task seems to be to hobble the mission of the body in question. Small farmers can therefore be said to lack political voice, despite years of donors like Danida and USAID trying to build representative organisations on their behalf.

Summary issues: Transport

 Freight rates are high, compared with those in many other Market failures countries  Large numbers of atomised producers from and to whom product needs to be collected/distributed

Main “technical”  Hard to organise farmers collectively issues  Produce is of poor quality and costs are high at every link in the value chain

 Farmers lack bargaining power and are vulnerable to the abuse and opportunistic behaviour of those who own the trucks.  Supermarkets and producers struggling to connect with farmers, in a relationship characterised mostly by mistrust Main PE issues  Trucking companies hustling business in a market with lax regulations and little (although sometimes arbitrary) enforcement.  Weak regulatory bodies with no incentive to change.  Infrastructure provision distorted by corruption and political calculations.  Lack of trust, widespread in every market system. .

4.3 Storage

(i) The Problem

For the most part, crop storage in Uganda is unsatisfactory. Even though in-house storage has now largely replaced the use of mud-thatched granaries at the household level, post-harvest losses caused by insects, rodents and fungi remain high. Rates are estimated at 12 to 40 percent across the whole value chain, depending on the crop, according to one study (Nahdy & Agona, 2001) and 30 percent according to World Bank (DTIS 2012). All of these estimates need to be treated with caution.

(ii) The Market

Storage promotion has been a theme in agricultural support programmes throughout the modern era but the impact on the level of post-harvest losses appears to be minimal. Lately, donors in Uganda supported the establishment of several large warehouses, with a total storage capacity of some 30,000mt, and several other small and medium sized stores (USAID COMPETE, 2012). However, most of these warehouses are operating well below capacity because of the prevailing volume and quality problems described above.31

The exception is Agroways in Jinja which, in 2008, became the first warehouse to receive a license from the Uganda Commodity Exchange and appears to be operating at near full capacity and at a profit. The Nyakatonzi and Masindi Seed and Grain Growers Limited warehouses were also launched in that year but have had a patchier record. For several of the warehouses, revenue may exceed running costs but probably does not cover depreciation on the new equipment they have been granted (or indeed on the buildings).

The regulatory authority for warehousing is vested in the Uganda Commodity Exchange (UCE) which is a public body with a conflicted mandate. It was set up in 2006 to run a trading floor which it has never really managed to do (European Commission, 2011),

31 In 2011, WFP began a programme of constructing modern warehouses in the rural areas (http://www.wfp.org/node/3608/3501/185170: 22 February 2012). One was opened in Gulu at the end of that year (but has never functioned commercially) and in February 2012 another one, with a capacity of 2,000 mt, was opened in Kapchorwa at a cost of US$1.4 million. This is run by the Kapchorwa Commercial Farmers’ Association (KACOFA) and is apparently functioning well, on ‘a 50 percent cost-recovery basis’, to handle maize, wheat, barley and sorghum. On top of those mentioned, there are another four licensed warehouses: two in Kasese (El Shadai), one in Tororo (Export Trading) and one in Soroti (Soroti Grain Millers). According to the WFP, these ‘investments are the result of a joint agreement signed with MAAIF and the National Planning Authority and are designed to support structured trading through a warehouse receipt system implemented by the Ministry of Trade, Industry and Cooperatives.

© Oxford Policy Management and Coffey 49 Political Economy Analysis of the Agriculture and Agribusiness sectors in Northern Uganda to promote warehousing generally and, at the same time, to regulate the warehouse industry. The former are commercial functions while the latter is a public service.

A roadmap towards self-financing autonomy for UCE was instigated under and EU project, 2007-10, based on managerial independence, trading on the exchange floor, increased licensing, and increased volumes stored and traded. Unfortunately, till now, only minimal progress has been made towards these goals (European Commission, 2011). The issue is similar to that faced by NSCS (see Section 4.1.1): that is, GoU is reluctant to let UCE go.

(iii) The Technical/economic factors

The critical technical issues largely relate back to production, most notably, the lack of volume from many small producers and the low quality of product available for purchase. A value chain study in Busoga sub region (PMA, 2009) showed 58 percent of processors expressing disappointment with the quality, in this case, of maize received. This is because scattered subsistence farmers, who make up the majority of Uganda’s maize producers, are without organisation or power in the market and cannot resist the temptation to sell to traders at the farm-gate, even at a low price and before their grain is properly dried. With little or no liquidity, investments in storage and processing/drying technology that might improve the grain are difficult and not a high priority for them. And so the trade in small volumes of poor quality, wet, unclean maize continues, each delivery being consolidated into larger volumes of worsening quality.

A key challenge in the maize industry is the bimodal nature of production. Most of Uganda produces maize over two annual seasons: from December/January to June/July and then from July/August to December/January. This means that grain put in store in July has to be cleared from the warehouse, at a profit, by December when the next crop comes in. Additionally, because in Uganda, maize is only one of many staples, there is less of a fluctuation between the top and the bottom of the market, that variation in price which pays for the storage. Making a business out of storage is thus genuinely testing in Uganda.

If the economics of warehousing is not always understood by all stakeholders, they do know, however, that the only way to viability is to increase throughput. The problem is, at the moment, there is probably insufficient adequate-quality volume available to fill these large stores. Perhaps the key point is that bulking operations are expensive and require long term capital investments that cannot be justified without regular, assured, high volume throughput.

Another driver of the problem is that no premiums are paid for cleanliness, quality or low moisture content at the village level. This means there are no incentives in the market system to prioritise quality products. This is because most market destinations are either local or in South Sudan or DRC where quality is not a significant issue. It only becomes so in the export markets, most obviously in the advanced economies, and these are not an immediate target for many businesses.

(iv) The Underlying PE issues

The fundamental factors prevailing in the storage sub-sector are essentially “technical”, that is, closely linked to the nature of the economic activity and the business model involved. However, it is striking how few “winners” there are: maybe only Agroways and perhaps another warehouse in Kapchorwa. Like so much else in this narrative, they are, of course, creatures of the donors, only really sustainable when they get the delicate technical (and financial) issues right. Arguably, also, they only exist because they reflect the prevailing vested military and political elite interests, a manifestation of the status quo and the stream of benefits that currently accrues to it/them.

Insufficient is understood about this industry to pronounce on the level of barriers to entry. It would be reasonable to assume, as elsewhere, high levels of clientelist behaviour, which stops new entrants coming into markets and driving quality or price improvements, but no details are currently known.

Summary issues: Storage

 Post harvest losses are estimated at 12 to 40 percent across Market failures the whole value chain, depending on the crop  With little or no liquidity, investments in storage technology that might improve the grain are difficult for farmers and not a high priority for them

 The lack of volume from many small producers and the low quality of product available for purchase constrains profits from storage.  Subsistence farmers, without any organization, cannot resist the Main “technical” temptation (sometimes the need) to sell to traders at the farm- issues gate, even at a low price and before their grain is properly dried.  Most of Uganda produces maize over two seasons each year. This means that grain put in store in July has to be cleared from the warehouse, at a profit, by December when the next crop comes in.  There are no premiums for cleanliness, quality or low moisture content at the village level. This means there are no incentives in the market system to prioritise quality products.

 Inability to organize on the supply side, which affects the volume and quality of products.  Poorly functioning stores and warehouses that only became established because of donor largesse and have limited prospects for sustainability.  Weak regulatory body (UCE) with no incentive to change. Main PE issues Consequently, a lack of capacity to take any kind of lead.  Widespread opportunistic behaviour (such as selling, low quality, wet grain) which undermines long term opportunities for expansion, sustainability and profit.  Lack of trust, rooted in the historical legacy and the war and exacerbated now by abuse of power and rent-seeking by regulatory bodies. .

4.4 Processing

(i) The Problem

The proportion of Uganda’s agricultural commodities which is processed is believed to be no more than 5 percent (MAAIF, 2010). For some time GoU has proclaimed its intention to raise this although its strategy for doing it has changed over time and is not always consistent (PMA, PFA, NAADS, ATAAS, DSIP etc.).

(ii) The Market

The issues around crop processing are varied and differ according to crop and by scale of operation. This can be demonstrated by means of a short review of three of the key commercial crops grown in the North. These crops are intended to be illustrative. The piece is not meant to be comprehensive as all crops cannot be covered.

Maize

Maize milling produces maize flour or posho, the domestic market for which is estimated at some 400,000 mt (World Bank, DTIS, 2012). In this industry, processors/millers can be grouped into four categories:

 The majority fall under the small-scale category and they are scattered in various rural trading centres (villages) in the districts, carrying out customised, at-a-fee, milling with hammer mills with a capacity of less than 10 tonnes per day. Local millers interviewed by Pelrine (2009) seemed to be reasonably profitable though earning differing levels of revenue depending on their throughput and the level of competition they faced.  Medium-scale processors are taken to be those operating mills with capacities of up to 50 tons per day. These are based mainly in the district capitals and offer both contract and trade-based milling services to institutions and urban traders.  Large-scale processors were once only found in Kampala. They buy their maize from urban traders and from larger traders from the regions. Mukwano, however, is now milling in Lira and Masindi.

 There are regional-based milling operations but, for the most part, they import their maize from first-world exporters or more sophisticated developing countries. These companies have operations in several countries within the region though their strategies for procurement, milling and sales differ. Unga, for example, moves both raw and milled maize between Uganda and Kenya. Pemba has operations in Uganda and Rwanda but they do not trade with each other. This appears to be a reasonably competitive business although some sources estimated that urban millers were operating at only 50 percent of normal milling capacity, a major cause of high costs. This information was confirmed during the fieldwork interviews.

Oilseeds

 Sunflower processing was once only a small scale investment but now includes large scale producers. Mukwano’s operations in Lira began some ten years ago with the establishment of a factory for crushing sunflower and soya to extract edible oil and for processing animal feed cake. This is now a large, sprawling complex on the outskirts of Lira town, expanded recently by the addition of a USD 20 million solvent extraction plant. The company works with over 60,000 smallholder growers, organized into around 2,000 producer groups. They operate 200 parish level extension personnel and 12 district level extension co-ordinators to ensure that farmers learn the appropriate knowledge and skills. Mukwano’s annual expenditure on direct procurement of sunflower, soya (and maize) from farmers in the Lira region stands at around UGX 60 billion.

 The first solvent extraction plant in Lira was actually introduced by Mt Meru Millers in 2009. They now have a fully integrated edible oil complex there with a crushing capacity of 100,000 mt per annum. The company also buys sunflower and soya directly from the farmers and is promoting contract farming of soybean.

 In 2003, oil palm plantations were established on the Ssese islands (Kalangala and Buvuma Districts). This is a central estate run by BIDCO Oil Refineries Ltd, with surrounding smallholder out growers. The smallholders are supported by a public-private partnership as part of the IFAD-funded Vegetable Oil Development Project (VODP).

 There is known to be at least one medium small scale processor undertaking sesame oil extraction although most sesame in Uganda is consumed whole or ground into paste in local dishes.

 There are also a few small-scale shea butter processors but the production of shea nuts in northern Uganda is primarily for local consumption. Guru Nanak Oil Millers is the only miller processing shea for the international market.

Sugar

There are three sugar plantations in Uganda, none of them in the north: at Kakira Sugar Works, Kinyara Sugar Works, and Sugar Corporation of Uganda Ltd (SCOUL). There have been moves to look for areas of expansion but these have been limited by land availability and the mixed reputation of the sugar industry. This has, in turn, led to serious political controversies around the President’s ‘lobbying’ role: firstly over his efforts to speed up the process of converting part of the Mabira forest in Eastern Uganda to sugar production; and, secondly, and quite significantly for this study, over his intervention on behalf of the Madhvani group’s attempt to secure 40,000 ha for a new sugar cane plantation in Amuru district in the North (see Box). Both of these interventions seem to have back-fired with both developments now stalled.

Land conflicts in Acholi (iii)

In 2007, the Madhvani group started discussions with the people of Acholi sub region and government to secure land on which they could expand their existing sugar business in the region. The group wanted 20,000 hectares to establish a sugar processing plant in Amuru District.

There are conflicting accounts of how the consultation process proceeded but it certainly went on for a long time and involved many visits. Eventually, despite the public support of leaders from seven districts, the President himself (apparently), religious leaders, cultural leaders, RDCs, the Acholi Parliamentary Group objected to the plans, seeming to imply that ‘government’ wants to grab the land. Others of the Acholi leaders, including Prof Ogenga Latigo, formerly MP for Agago County in Pader District and Leader of the Opposition, have been vocal in their support of the undertaking, believing it will bring jobs, skill training and other benefits to the community (schools, a hospital, road network etc.). He implies that a lot of the argument is more about local leaders jockeying for authority and failing to take their responsibilities seriously. Interestingly, Prof Latigo told the press that ‘I was given land in Amuru but I refused because I know how our people behave.’ (Independent 10/5/13).

As it now stands , the High Court decided in favour of Madhvani’s plans but the decision has now gone to appeal. The matter can run and run but the lack of transparency and the mistrust which runs through much of the land narrative is a perfect environment for fomenting further mischief. UPC President, Olara Otonu, alleged only recently (Acholi Times 6 January 2014,) that the whole exercise was a cover for the President’s brother, Salim Saleh, to add yet more hectarage to his already considerable holdings in the north. Describing the plans as ‘a provocation to the Acholi people’, Otunu said ‘both Museveni and his brother are trying to grab land in the area because they know it is not only fertile but rich in mineral resources.’

(iii) The Technical/economic factors

For many commodities, low quality raw material is the default situation (maize, milk even sometimes coffee). But it doesn’t always have to be the case. Elements of the cotton, tobacco and coffee industries manage to attract high quality produce.

Frequently the processing units are operating under capacity. This is a function of management and planning but it leads to high unit costs, a lack of competitiveness and ultimately unsustainability. Nucleus estates are usually designed to keep the factory operating at full capacity.

Sometimes processing industries are planned to absorb ‘surplus’ fresh produce (viz perennial GoU plans for an orange juice plant in Teso). This is rarely the basis for success. A successful orange juicing operation needs exactly the appropriate variety of orange with optimum moisture content and sweetness. It cannot be planned on the basis of the occasional abundant harvest in a nearby orchard. The same applies to the perennial promise of a mango processing plant.

(iv) The Underlying PE issues

In relation to the processing industry generally, some PE findings from the fieldwork might be noted here:

 A widespread dislike of middlemen prevails (even from the likes of medium sized processors who are using the very people they criticise);  There is a generalised suspicion of large processors (for no startlingly obvious reason and some of the anecdotes told seem rooted more in prejudice - including against Asians – than in reality);  There is a sense of resentment that many of the more successful businesses (if not all) got established either through the support of donors or through connections which are widely believed to at least deliver concessional funding and tax breaks (a widely reported allegation against BIDCO).  Acceptance that, to get ahead, strong political connections within the ruling party, even direct lines of communication to the President, are necessary. Some of the companies met are believed to fund the activities of the ruling establishment and to front business deals for them. The lack of such connections is assumed to be fairly costly. One of the owners of a company having serious issues in the north noted that “we are going to call the President and should have this sorted out by the next presidential elections. Our main problem is that opposition politicians have turned the community against us”. Another source, who believed he had been sold dormant seed, wrote a complaint to MAAIF but had received no response after 12 months. “I picked up the phone, called the minister and a few minutes later the owner of this seed company (one of the biggest around) had called me back to ask why I had reported him. Are you trying to destroy my business? he asked”.  There is also the phenomenon of operating “under the radar”. An owner of a company without political connections related the reaction of the President who had been invited by the district authorities to launch his new processing unit: “the President was very puzzled that I was doing all this without his knowledge. He pulled me in a corner and spoke to me for 22 minutes. During this time he repeatedly asked how come he didn’t know me and had never met me”. This curious remark – part joke, part threat – has not yet yielded results, the operation is still ‘limping’ and needs more machinery, but the owner was still hopeful that the meeting with the President will “yield something, especially just before the elections”. With these kinds of stories, one is left asking whether one can make progress at all without connections.  Insufficient is understood about the processing to pronounce on the level of barriers to entry. It would be reasonable to assume, as elsewhere, high levels

of clientelist behaviour, which stops new entrants coming into markets and driving quality or price improvements, but no details are currently known.

Summary issues: Processing

 Low levels of value addition Market failures  Shortages of suitable high quality raw material  Inadequate management and planning

Main “technical”  Low quality of raw material issues  Under capacity of processing units  High unit costs

 Producers, without organisation or much power, struggle when set against the processing companies  Instinctive dislike/distrust of middlemen.  Dislike/distrust of large processors, with hints of resentment against ‘outsiders’. Main PE issues  Extent of the political and donor connections of established businesses, which creates quasi-monopoly situations.  Resentment of businesses (the majority) who got established either through support of donors or through political connections  Inability of public actors to design and implement strategies that may fill the gap between supply and demand at processing level

4.5 Agricultural Finance

(i) The problem

Productivity-enhancing technology exists, land for purchase or rent exists (up to a point) and labour is available. What is really lacking is appropriate investment. Farmers’ retained earnings are insufficient to address their funding needs so improving access to financial services will be the key to this. Currently, farmers have restricted access to finance, both from agricultural finance and chain liquidity perspectives. This, in turn affects farmers’ levels of productivity. Among the reasons for this failure of the market, are:

 The financial risks associated with agricultural activity are perceived by financial institutions as being very high. Obviously, agricultural lending is a risky activity but this perception is amplified by the fact that most financial institutions operating in the country32 have a limited knowledge of the agribusiness sector.

32 Uganda has some 30 regulated financial institutions (BoU 2012). Of these 24 are commercial banks, 3 credit institutions and 4 microfinance deposit-taking institutions. However, only 9 percent of the total lending of these institutions was for agriculture (BoU 2012).

 Linked to the lack of knowledge of Ugandan financial institutions, there is also a lack of capacity, skills and motivation which further constrain the supply of financial products.  The fact that the cost of finance is very high (around 28 percent pa) helps to explain why commercial banks are risk averse when it comes to lending money to the agribusiness sector (and why demand from smallholder farmers is so low).  Lending for primary production is mainly short (less than 1 year) and medium term (1-3 years). Only a small part of total lending, even for agricultural processing, is in excess of three years (BoU 2012). This is a function of the high cost of finance. The lack of long-term investment is one of the most important factors constraining the sector: it impedes improvements in each of the different elements that form each production chain.

(ii) The Market

Agricultural lending is dominated by MFIs and Tier 2 institutions: commercial banks may account for 95 percent of total lending volume but MFIs and Tier 2 institutions provide by far the largest number of loans to smallholder farming. Agricultural lending significantly declined in 2009 but has since recovered (see Figure 6). This can be attributed to a number of factors including: (i) the expansion of the warehouse receipt product in the coffee sector (different from the situation with maize, discussed earlier); (ii) licensing of eight new financial institutions since 2007; (iii) borrowing for speculation in food prices; and (iv) the UGX 30 billion Agricultural Credit Facility (ACF) supported by GoU. Loan guarantees and lines of credit provided by the Agricultural Loan Guarantee Company (ALGC) have also made a contribution. (Danida, 2012a).

In addition to the regulated institutions, there are several hundred semi-formal institutions, member-based Savings and Credit Cooperatives (SACCOs) and non- member-based microfinance institutions (MFIs – without permission to receive deposits) as well as thousands of informal institutions such as the Village Savings and Loan Associations (VSLAs).

In 2012, the majority of farmer-borrowers obtained their agricultural loans from family and friends (27 percent) and others who include traders, processing enterprises and agro-dealers (33 percent). Banks and other regulated institutions (e.g. MDIs) were the port of call for 30 percent of borrowers while unregulated MFIs and SACCOS served the remaining 10 percent (Danida, 2012a). The major uses of the loans given were to buy seeds (35 percent) with pesticides at 13 percent, hiring of labour (11 percent), and fertilizer (10 percent). The use of credit for investments was not that common, that is, purchase of agricultural land (11 percent) and buying livestock (5 percent). Of course, a major issue is that most agricultural finance goes to traders and processors, using finance for working capital to buy harvests. It is much less common for it to go to farmers.

Figure 6 Lending to Agriculture

Source: Bank of Uganda, Supervision Function Note: Figures reflect new advances during the year, and not the outstanding portfolio

The SACCOs that exist are largely a function of the 2006 Rural Financial Services Strategy “Achieving Prosperity for All through SACCOs” where the government set targets of establishing at least one SACCO per sub-county. It was a politicised strategy – like PFA (see Section 3.2) and the poor results were predictable. Today, many of the RFS-created SACCOs are politicised and mismanaged and consequently dormant or non-viable (IFAD, 2011). The outcome is that, despite their potential, the relative weight of SACCOs in financial services provision remains modest.

(iii) The Technical/economic factors

From the point of view of commercial banks, finance for agriculture is limited because banks shy away from funding agriculture and agribusiness. This is for well-known reasons: (i) banks’ perceive agriculture as highly risky; (ii) banks do not understand the complexities of the rural economy (and the risks alarm them); (iii) banks have few incentives to change their existing business models which prosper quite adequately on the basis of providing minimum initiative, tried and tested services to government and the urban middle-classes.

(iv) The Underlying PE issues

Undeterred by the failure of the Rural Financial Services Strategy and the confusion it caused for the SACCO sector, in 2010 GoU instigated another top down initiative, this time specifically to try to increase medium/long-term finance for investment in agribusiness. The Agricultural Credit Facility (ACF) was an attempt to harness the regulated financial institutions into a scheme to extend loans to farmers and agro- processors on more favourable terms than were available through normal market channels. Government subsidised the scheme through the provision of interest-free

© Oxford Policy Management and Coffey 58 Political Economy Analysis of the Agriculture and Agribusiness sectors in Northern Uganda loans and by covering some of the credit risk. Under the scheme, participating institutions were supposed to provide loans to agribusinesses at an annual interest rate of 10 percent (subsequently increased to 12 percent) but, at these rates, funds quickly dried up (Danida. 2012a) and borrowing terms reverted to commercial levels – well over 25 percent. From past experience, it can be assumed with some certainty, that there was a degree of ‘elite capture’ in relation to who got the subsidised loans.

The cornerstone of good value chain finance is developing trust between actors built on good flows of information and communication. However, as we have seen, trust, information and good communications are scarce assets in the agribusiness sector in general and in Northern Uganda in particular. Politically motivated schemes, like those of ACF, hardly help of course.

Summary issues: Agricultural Finance

 Insufficient agriculture finance provided by financial institutions.  Insufficient value chain finance, which involves financial Market failures services established and anchored in the cooperation between agents along value chains as well as between them and a financial institution.  Insufficient chain liquidity, which involves financial transactions between chain actors  Perceived high risk of agricultural lending  Insufficient knowledge of agricultural sector by banks mainly because of lack of skills and evaluation capacity Main “technical”  Large numbers of scattered producers makes the collection of information about them difficult, which in turn issues increases the risk of individual lending.  Banks prefer to pursue other, less risky, less costly lines of activity  Banks lack motivation and capacity for innovation

 Distortions created by politicised strategies to expand Main PE issues financial services (e.g. the RFS and the ACF). These are open to elite capture and destroy the repayment culture.  Political interference with SACCOs which further distorts credit markets.

4.6 Summary

Summing up, it seems all the market systems (five in all) are affected, to varying degrees, by many of the same PE factors: deficient regulatory framework at the macro level; dis-organized small farmers, ill-conceived political initiatives, and inadequate licencing and inspection systems at the meso level and; lack of trust and corruption in the relationships between stakeholders at micro level.

However, while these PE factors obviously exert an important influence in the development of each market system, the proposition here is that most of the factors contributing to the under-performance of the agribusiness sector in northern Uganda remain “technical”. That is, they are not directly related to political decisions. Among these technical constraints, the most serious are, to summarise Section 2:

 Rain fed agriculture under smallholder conditions is difficult and risky  Ugandan farmers’ yields are low, probably well below 40 percent of those attained at the country’s research stations.  Cultivation in the north is still largely by hoe. Without mechanisation (or at least ox-ploughs), land clearance and cultivation for commercial production will be very difficult.  Returns to the use of improved seed and complementary inputs (fertilizer, water, and pest control products) are less than they might be because the various inputs are rarely applied at optimal levels.  The quality of seed and other inputs is variable and poor. This is exacerbated by widespread counterfeiting of seed and adulteration of fertilizer and other chemicals, practices which further deter farmers from trying to improve their productivity.  There are barely any institutions able to bulk sales for inputs and/or market produce efficiently for farmers. Farmers’ groups/co-operatives have a poor record and, by and large, farmers lack confidence in them.  Agribusiness companies (selling seed and other inputs, storage and processing services etc.) struggle to nurture businesses in a small (still nascent) market with very variable demand and an erratic/hostile regulatory environment (i.e. a far from level playing field).

5 Bringing together the political economy factors

Chapter 4 explored the most important market systems in Northern Uganda as well as the political economy factors constraining them. As a result of this analysis it was concluded that the main reasons behind the low level of development in the agribusiness sector were mostly technical rather than political. Following this conclusion, the next step should naturally be to propose a set of technical solutions to deal with those barriers identified. However, that would be a strategic misstep

In this section we will take a step back and, rather than exploring the factors affecting market systems on an individual basis, we will take a look to the wider picture. That is, political economy factors will be portrayed as part of a complex structure of interconnected layers of barriers and constraints that stretch far beyond the agribusiness sector. The main purpose of this systemic approach is to understand better the linkages between the PE factors, most of which are organic and have grown up over decades. An enhanced understanding of how these factors reinforce each other is the most effective way to provide DFID with an informed perspective in the light of which it can assess the pertinence of its proposals for intervention in the sector.

To do so, we have produced Figure 7. The aim is not to include every single political economy factor affecting the sector but to illustrate how constraints and bottlenecks at different levels reinforce each other, creating a strong current of negative path- dependence.

The starting point for this analysis is the overarching political economy factors dominating Ugandan decision-making, as described in Chapter 3. Clientelism, political patronage, corruption and patrimonial society are some of the terms provided to explain the close relations between power, political culture and economic decisions. In fact, so tightly bonded are they that it is hardly possible to describe them as separate items any more. However, important as this relationship is in determining the course of the economic path followed by Northern Uganda, it is not the most determinant element in the equation of agribusiness activity in the region. In fact, the same combination of clientelism, corruption and a patrimonial society can be found in many other African countries. What makes Northern Uganda different is the uniqueness of its past – what in Figure 7 is called “the historical legacy”: this includes, but is not limited to, the armed conflict in the area. This is the main factor behind disputes around land tenure or the generalized lack of trust in the area, which in turn helps to underpin many other bottlenecks for economic development33.

Fukuyama (2002) argues that social capital is a basic precondition for successful development and that a strong rule of law and basic political institutions are necessary to build social capital. In a nutshell, it could be said that the overall Ugandan political economy factors have been central to the evolution of the clearly dysfunctional business environment in the country. The specific Northern Ugandan political economy factors, in turn, are essential to explain the lack of social capital in the region. Both sets of elements are mutually-reinforcing: once combined, they create a “perfect storm”. The

33 One source put it like this: ‘in understanding historical legacy, it is important to observe that having lost livestock, property, infrastructure and social services, and even cultural heritage/dignity, the only resource that the people in the north, especially Acholi sub-region, felt they had left after armed conflict was the land. This is why land is such a political and highly sensitive issue across the region at all levels.’

© Oxford Policy Management and Coffey 61 Political Economy Analysis of the Agriculture and Agribusiness sectors in Northern Uganda lack of social capital can therefore be said to be the main constraint to developing institutions that may contribute to foster economic development: in turn, the political culture and the institutional framework act as major deterrents to increasing the levels of social capital in the region.

Figure 7: The political economy connections in agribusiness sector

Supra Level - Uganda Supra Level - Northern Uganda

Historical Legacy Cultural Legacy

INFLATIONARY Land Use Problem CLIENTELISM PATRONAGE

Unsolved Economic aspects of role of PATRIMONIAL outsiders CORRUPTION the conflict SOCIETY

Lack of Trust

Lack of Social Capital Intergenerational Dysfunctional business environment conflicts

Macro Level

Patchwork of incomplete regulation in all market systems

Politically driven agricultural finance initiatives Meso Level Institutional w eakness Lack of enabling scaffolding for agribusiness key actors MAAIF, UCE, UNADA, UNFFE

"Self-preservation" Low planning Low inspection Absence of checks dysfunctions at capacity public capacity NSCS and counterbalances ministerial level actors Micro Level Farmers: low bargaining pow er Weak structures in existing value chains

No incentives for reform transport system

Access to Agricultural Inputs Transport Storage Processing Finance

Opportunistic behavior commonplace among all levels

Distortions created by Infrastructure provision Distortions created by Distortions created by Distortions created by quick-delivery systems distorted by corruption short-termism donor priviledge access and politized strategies to during conflict and political calculations largesse interference expand financial services

Source: OPM-Coffey.

The combination of inadequate business environment and lack of social capital then produces a cascade of negative effects over macro, meso and micro levels of agribusiness activity. As explained in Section 4, most of the regulatory frameworks governing market systems are inadequate, incomplete, contradictory or obsolete to some degree or other. At meso level, public actors in charge of overseeing the system usually lack the capacity and the incentives to do so. The lack of planning capacity

(certainly the failure to utilise what is there) and the “self-preservation” mentality at ministerial level (based on the idea that an effective way to retain power is to do little and ‘keep your head down’), only contribute to the increasing paralysis of public actors. At micro level, actors negatively affected by the existing status quo are too scattered and lack the bargaining power to produce any real change.

In contrast with the situation where the majority consists of small players, most market systems are dominated by a few key actors, sometimes even enjoying a near monopolistic situation. The status of these dominant players is perpetuated because (a) they not only possess some kind of technical advantage but also the know-how and contacts to navigate in the turbulent political waters surrounding the agribusiness sector in Northern Uganda; (b) the lack of capacity for collective action means their privileged position remain uncontested. To a certain extent it is fair to say that these players are the least interested in changing the current order of things.

The opportunistic behaviour of other actors is also clearly linked to the combination of the inadequate business environment and the lack of social capital; as well as the effects at macro, meso and micro levels. The weakness or absence of checks and balances, particularly at meso level in different market systems, creates opportunities for fraud and misbehaviour, as in the case of the counterfeiting of fake seeds. This, in turn, reinforces the vicious circle of lack of trust and social capital. At the bottom of Figure 7, we can also see how market systems are affected by different distortions, most of them linked to the overarching PE situation in Uganda.

One of the most interesting things about the systemic approach illustrated by Figure 7 is that the relative weight of political economy factors becomes much more visible than when they are explored on an individual basis. As explained before, political economy factors, even those with deeper agribusiness implications, are not created in a vacuum. The reality is that, not only are they heavily dependent on the context, but they are also massively reinforced by other political/economic factors along the chain. In fact, the total weight of the system containing all the political factors is much heavier than the sum of the individual items. This is what we could define as “the cumulative effect of interrelated PE factors?”.

This is often the problem with PE issues. Explored in isolation they may give the impression of being relatively manageable. It is only when a systemic approach like this one is developed that the full extent of their ramifications is revealed. As a result, it can be argued that the main conclusion of Chapter 4, that the main constraints affecting market systems seem to be mainly technical, is only partially true. The technical factors highlighted are not the ones really constraining the development of the agribusiness sector in Northern Uganda; rather it is the combination of these technical issues with the negative path dependence created by the concentration of political economy factors at supra, macro, meso and micro levels.

Or in other words, the problems behind the various market systems are much bigger than the systems themselves. This situation has important implications for the design of DFID’s interventions, as will be explained in Annex F.

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Terms of Reference

Political Economy Analysis of the Agriculture and Agribusiness sectors in Northern Uganda

1. Objectives

The key objective of this analysis is to appraise proposed options for intervention in Agriculture and Agribusiness sector (“Agriculture sector”) in Northern Uganda, and to inform project design, from a Political Economy perspective. Northern Uganda, as defined for this analysis consists of mid North regions of Acholi and Langi, and West Nile.

The task requires:

A. Political Economy appraisal of intervention options: Identify specific bottlenecks and opportunities stemming from the political economy of the sector. Appraise up to 3 options for intervention from a political economy perspective.

a. The draft components that will be combined into the three appraisal options are described in the Annex, Para 1 and comprise market oriented interventions such as:

i. Market Facilitation programme focused around 3-5 market systems34 ii. Supporting a lead firm for integrated agriculture development and investing long term capital for growing agribusiness iii. Value Chain focused agribusiness development through capacity building and financial support to farmers and agribusinesses. iv. Strengthening informal land rights and awareness. v. A demand lead policy fund to complement the above components.

B. Provide an overview of political economy issues within a generic agricultural market system within Northern Uganda, organising the analysis through a framework of key market systems such as input supplies, processing, financing and transport/logistics.

2. Recipient of the report

 The DFID Growth and Resilience team will be the main recipient of the report.

3. Scope of Work

3.1. The scope of work consists of points A and B below:

34 Including market systems for: input supply; transport, storage and logistics; financing; and processing.

A. Options Appraisal:

a) Appraise up to 5 different intervention components which will form up to 3 options for intervention from a political economy perspective. A preliminary draft of intervention components is present in Annex para 1. o Comment on the feasibility of the proposed options given political economy factors which may enhance or restrict their potential for meeting the programme objectives as outlined in section 9.

b) Analyse the conflict sensitivity and conflict impact of the proposed options, as well as the impact of conflict dynamics on the identified options. In particular: o Assess the importance of land conflict and land tenure insecurity o A brief assessment of Karamojo in terms of its differences with the rest of Northern Uganda and its suitability as the object of an agri-business project.

c) Identify any political economy bottlenecks that might hold back the proposed interventions from achieving their full potential.

B. Assessment of the political economy of the northern Uganda agricultural market system, organising the analysis in terms of relevant sub-market systems. This should focus on:

1. Structures: Long-term contextual factors relevant to the Agriculture sector, both national ones and those specific to Northern Uganda, such as economic, social and political structures, and including the structures of ownership and firm organisation in key agricultural market systems.

2. The role that formal institutions (e.g. rule of law, elections) and informal social, political and cultural norms play in shaping human interaction and political and economic competition at the national, regional and local levels; the impact of values and ideas, including political ideologies, religion and cultural beliefs, on political behaviour and public policy for the sector.

3. The key stakeholders in the Agriculture market systems (See Annex, Para 2) and how they influence the sector, the interests and incentives facing them and how they influence policy and investment patterns in the sector. Consider using the Politics of Development framework for political decision making for this analysis (see Annex, para 3). Identify key allies with aligned economic/financial or political interests who could form coalitions around specific issues and have the collective power to create institutional change.

3.2. The report should provide clear Recommendations on:

a) Political economy factors to take into account to ensure success of the proposed interventions in Northern Uganda

b) Which of the proposed options is most suitable from a political economy perspective? a. What features can we incorporate into these options to enhance their likelihood of success?

c) Which interventions are likely to be most conflict-sensitive? a. What features can we incorporate into these options to make them conflict sensitive?

d) Interventions that would help influence the political economy of agriculture in Northern Uganda towards being more supportive of investment and market transformation, and lead to more pro-poor and stabilising outcomes: a. what levers can we press to create institutional change? b. What allies can we work with to create the change needed?

3.3. External factors: The below external factors should be taken into account when analysing the options for intervention:

a) Regional economic and political arrangements (e.g. East Africa Community, Africa Union); b) Relations and/or conflict with neighbouring countries, militias located in border areas (Kenya, DRC, South Sudan); c) Licit and illicit trade in agricultural commodities d) The role of donors and donor programmes

3.4. The analysis should go beyond a static description and take into account the changing context, both of the country’s economic situation especially with the discovery and commercial development of oil resources and the donor policy framework. It should consider new risks and opportunities for working in the agriculture sector.

3.5. A list of questions that might be useful in the analysis is annexed (Annex, para 4).

4. Methodology

The analysis will utilise a combination of desk based research and field work.

4.1. Desk based research to review available literature related to the political economy of agriculture sector in Uganda. The analysis should build on existing work- some references are included in the Annex Para 5.

4.2. Meet with a range of actors, including but not limited to:  Central and Local Government and Govt. agencies  Private-sector including agri-businesses. Leading businesses in each of the key market systems should be identified and, where, possible, interviewed  Civil society and NGOs  Producers and farmers

 Donors, development partners and implementing agencies of donor programs

in both Kampala and relevant regions of Northern Uganda.

5. Outputs

5.1. Output 1: An inception report summarising preliminary observations (maximum 10 pages) and detailed methodology, focusing on item A.

5.2. Output 2: A complete Political Economy analysis including items A and B:

5.3. Output 3: A presentation to DFID Uganda Staff.

6. Required skills and experience

6.1. Essential  At least a Master’s degree in international relations, development, political science or economics  Experience completing political economy analyses of market systems in developing country contexts  Experience working on agriculture/ agri-business, investment climate reform or private sector development  Proven ability to work as part of a team  Knowledge of and experience working in Uganda

6.2. Ideally  Knowledge of DFID or other development agency political economy analysis tools.  Luganda/ other Ugandan languages

7. Timeframe

The work should commence as soon as possible and all deliverables to be completed within 3 months of commencement:  Output 1: 1 month from commencement (max. 10 pages)  Output 2: Draft report to be submitted 2 months from commencement (max 35 pages)  Output 3: Final report and Presentation to DFID Uganda: Within 3 months of commencement.

8. Reporting and coordination

The consultants will report to Richard Sandall, Private Sector Adviser, and Maureen Katende, Procurement Manager, DFID Uganda. The consultants will coordinate with DFID scoping and analytical work on-going in the sector.

9. Background

DFID Uganda is commissioning this work to help inform HMG strategy, choose aid modalities and partners, design programmes, as well as informing dialogue and engagement with partners. Using political economy analysis to affect change is an important tool to enhance the impact of UK’s programming.

The objectives of the programme are to increase employment improving agricultural productivity to raise rural incomes, improve conditions for women and youth and build resilience to climate change and financial shocks, transform agricultural market systems to function better for poor people, leading to a strengthened economy of Northern Uganda.

Northern Uganda is a region with huge economic potential. Subsistence agriculture is the primary source of income and livelihoods for 78 percent of the population. The vast majority of farms in the mid-Northern and Karamoja Drylands agro-ecological zones are small (up to 1 ha). These are also the zones with the lowest value added per acre of cultivated land in Uganda: UGX 12,937 per acre in Karamoja and UGX 53,333 in mid- northern compared to UGX 165,363 as the national average.

Poverty levels in northern Uganda are almost twice the national average: 46.2 percent compared to the national average of 24.5 percent. Raising agricultural productivity, while less effective at stimulating national growth, generates broad- based welfare improvements. Thus, even after accounting for migration and agglomeration gains from urban-led development, improving agricultural productivity remains crucial for significantly reducing poverty and promoting regional equity in Uganda.

But Ugandan agriculture is a sector well known for being challenged by its political economy. A former multi-donor agricultural extension programme is considered to have failed because it did not address political economy factors adequately, which left the program susceptible to diversion of resources towards political motives, pre- election. This may imply that traction will be highest with policies that provide material resources in exchange for political loyalty and those that have tangible benefit to citizens country-wide. This needs to be reconciled with our objective of building a sustainable, resilient and functioning agricultural sector in Uganda.

Uganda has multiple land-tenure systems, which has led to tenure insecurity and drives down farmer incentives and productivity. The discovery of oil in parts of northern Uganda has exacerbated tensions over land. As a result, politicians frequently use land as a battle ground to escalate tensions between communities and sub-regions. Land insecurity is both the greatest concern and the primary cause of conflict for the people of the north. Local institutions for dispute resolutions within the region are weak. Continued land conflicts in the region risk discouraging investments, undermining property rights and jeopardising sustained peace.

The political and economic climate crowds out and constrains the growth of sustainable and well-functioning agricultural markets. Consequently in much of the

© Oxford Policy Management and Coffey 76 Political Economy Analysis of the Agriculture and Agribusiness sectors in Northern Uganda sector there is a lack of commercial activity. There is a predominance of subsistence agriculture and small scale pastoralist livestock rearing, with limited scope for productivity increase and growth. A handful of very large business conglomerates and finance institutions dominate the limited agri-processing and export sector.

In order to engage effectively in the sector, the UK requires a detailed political economy analysis of the agriculture and agri-business sector. Such analysis will help the UK better understand how to work with the various stakeholders in the sector across a number of policy objectives.

The proposed intervention seeks to improve the situation of poor farmers in Northern Uganda, but without a better understanding of the political economy, the intervention could fail to improve the position of those targeted. Furthermore, the intervention seeks to have a transformational impact on the agricultural market systems to achieve long-term sustainable change. This requires us to go beyond ensuring that the program is sensitive to political economy considerations, and adopting an approach that seeks to influence policies, institutions and relationships to create a better political and economic environment for agriculture in Northern Uganda.

Components for intervention options The intervention options are likely to comprise of some or all of the below components

i. Market System Development: Apply a Markets for Poor (M4P) approach to agriculture development, focusing on long term functioning and sustainability of the market system. Maintain a flexible approach, using tools such as market facilitation, creating linkages, Business development services and Smart subsidies to enable a better functioning market for Agriculture and Agribusiness.

The approach is likely to focus on 3 to 5 commodity value chains and/or cross cutting agricultural services such as input supplies or warehousing. Focus areas will be further refined by the time of commencement of the contract and may include a) Improve agronomy, access to credit for inputs, agricultural input supply chains, animal health services, aggregation of tillage, availability of implements and machines b) Conservation agriculture techniques to conserve soil and water, including watershed development c) stronger bulking and marketing of produce, access to information and standard setting d) Construction of rural roads for market access

ii. Integrated agriculture development by a lead firm and investing patient capital in agribusinesses to create commercially viable agribusiness investment opportunities to the point where they can attract private investment. a) Acting as principal, a lead firm would deploy a hub and out- grower farm production and processing model, typically along a transport corridor, making agricultural inputs available on commercial terms and providing a market. b) It would also develop and invest patient capital as debt and equity in businesses across value chains c) It would fund the development of supporting infrastructure such as farm-level irrigation, feeder roads and bulk storage

iii. Fund a Ugandan institution to develop selected agricultural value chains in Northern Uganda via capacity building, matched grants and expanding access to credit a) improving the performance of selected value chains b) targets critical weaknesses along entire value chains from input supply, production, processing to consumption, such as Quality management and phyto-sanitary standards, business development, technical advisory services, brokerage between value chain intermediaries

c) Provides matching grants to agri-businesses and farmer groups and enables better access to credit by supporting commercial financial institutions to extend agricultural credit.

iv. Policy Fund: A demand driven fund to provide technical assistance to Government, legal and regulatory bodies for specific pieces of work that come to light as a result of the programmes other components.

v. Strengthening Informal land rights and awareness a) Awareness creation through outreach, radio talk shows, distribution of fact sheets etc b) Legal aid for Alternative dispute resolution and court representation c) Advocacy against land grabbing, district dialogue for degazzetment of usable agricultural land d) Improving women’s land rights and awareness

2. Illustrative Stakeholder map:

3. The Politics of Development Framework: thinking systematically about how political decisions are made. The framework highlights four elements of a political decision making process:

a) the wider historical, socio-economic and cultural environment, including the legitimacy of a given political process;

b) the immediate pressures coming from groups and interests who influence, but do not make political decisions; c) the processes, both formal and informal, through which decisions are actually made; and the continuing politics of implementation that determine the implications, if any, of political decisions.

4. Questions that should be explored in the analysis:

This section elaborates on specific questions that the Consultants should explore in the analysis (this is not an additional section of the Scope)

a) Ownership Structure and Financing: What is the balance between public and private ownership? Are relevant value chains (tbc, but likely to include, for example, livestock ownership and dairy in Northern Uganda) dominated by individuals, large firms, SMEs, micro-businesses? How is the sector financed (e.g. private capital, taxes, donor support)? Who are the individuals most invested in agricultural businesses, and what are their other interests?

b) Political linkages: What are the linkages between Business and the Political party in power, the National Resistance Movement and families related to it?

c) Power Relations and decision making: How are power and wealth distributed within the agriculture sector? Who is party to these decision-making processes? To what extent is power vested in the hands of specific individuals/groups? How do different interest groups seek to influence policy? Which policies, industries and actors are prioritised in the sector?

d) Institutions, Ideologies and Values: What are the main institutions, norms, relationships, values and ideas that shape policy and development outcomes? To what extent may these serve to foster or constrain change?

e) Historical legacies: What is the past history of the sector, including previous reform initiatives? What is the history of the agricultural cooperatives? How does this influence current stakeholder perception?

f) Corruption and rent-seeking: Is there significant corruption and rent-seeking in the sector? Where is this most prevalent (e.g. at point of delivery; procurement; licensing)? Who benefits most from this? How is patronage being used?

g) Service Delivery: Who are the primary beneficiaries of service-delivery? Are particular social, regional or ethnic groups included/ excluded? Are subsidies provided, and which groups benefit most from these?

h) Implementation Issues: Once made, are decisions implemented? Where are the key bottlenecks in the system? Is failure to implement due to political-economy reasons?

i) Potential for Reform: Who are likely to be the “winners” and “losers” from particular reforms? Are there any reform champions within the sector? Who is likely to resist reforms and why? Are there “second best” reforms which might overcome this opposition?

j) Opportunities: Identify opportunities to influence agriculture sector’s political economy for the better, including through planned programmes.

k) UK Policy and programming: Help inform UK policy and programming by identifying relevant political economy factors, including which reforms will likely be blocked, which may get political traction and which could be achieved through appropriate phasing. Include ‘second-best’ reforms where important changes are likely to be blocked. Help inform risk management and scenario planning by identifying political economy risks and factors affecting them.

5. Selected Political economy analyses on Agriculture sector in Uganda: o Kjaer and Joughin: The reversal of agricultural reform in Uganda: Ownership and values o Kjaer, Muhumuza and Mwebaze: Coalition-driven incentives in the Ugandan dairy sector: Elites, conflict, and bargaining o The political economy of the fisheries sector in Uganda: ruling elites, implementation costs and industry interests o Rwamigisa: The Political and Institutional Dimension of Agricultural Extension Reform in Uganda: Experiences of the National Agriculture Advisory Service.

Stakeholder meetings during fieldwork

[Redacted in public version of report]

A short history of some of the land acquisition issues

Land has been central to politics in Uganda since the so-called 1900 agreement under which the British colonial authorities established the first tranche of private land, the “mailo” system, whereby big landowners in Buganda were enabled to own some of their land35. In pre-colonial Uganda, the land tenure system was predominantly customary, comprising of various systems ranging from communal or tribal tenure, clan tenure and nomadic tenure.

Under the 1900 agreement, Buganda was also granted a large part of the neighbouring Bunyoro kingdom, the so-called “lost counties” (the present districts of Mubende and Kibaale). Over the years, these issues chafed with the key parties and were crucial to the establishment of the first political settlement, at independence in 1962, when the head of the protestant based Uganda People’s Congress (UPC) party, Milton Obote, entered into a delicate and unlikely alliance with the Kabaka Yekka (KY) movement of the Buganda king and his supporters. The problem for Obote was land (Kjaer x) . The Banyoro were claiming back the lost counties, and sympathetic to the claim, Obote raised a parliamentary majority to pass legislation to enable a referendum on the matter. He wanted to support the tenants living on the land of the large landowners and to transform the Mailo system into a leasehold system in which land could be government-owned and then leased to whoever was willing to put it to productive use (Bazaara, 2000).

Obote persuaded many opposition Democratic Party and also some KY members to support the UPC and, by 1964, he achieved a majority in a referendum (Kjær and Katusiimeh, 2012). The KY and the Kabaka himself, however, felt threatened, and tried to infiltrate UPC, which increasingly divided between a southern Bantu wing and a northern wing, the split exacerbated when the southern wing formed a majority in parliament through an alliance with other non-UPC members and demanded an independent investigation of corruption claims related to Obote and his close allies in the military, (including Idi Amin). Obote’s response was to burn down the Kabaka’s palace and force him into exile, leaving a political settlement that was much more narrowly based, without the crucial support of the Baganda and especially the landowning elites.

The rise of Idi Amin should be seen in this light. When he got to power through a coup in 1971, he had initial support from the Baganda although this did not last long, since Amin never returned to constitutional rule or gave the Baganda the influence they had hoped for. Amin ruled primarily through repression and relied heavily on the army. His 1975 Land Act, in which all land was converted to state land, was a way to appropriate assets (especially those belonging to the expelled Asians) and, it was assumed, to increase revenues. Military personnel, bureaucrats and the politically powerful did appropriate large chunks of especially customary land (Bazaara, 2000) but, due to the increasing vulnerability of the regime and the fragmentation of the state bureaucracy, the act was never fully implemented (Hansen, 1977; 2013).

35 It is in this context, that some have warned that DFID should be sensitive to perceptions of British sponsorship of any new initiatives in the land sector.

This was still the situation when the National Resistance Movement marched into Kampala in 1986, to establish a government with a strong bias in favour of the southwest, with northerners feeling themselves marginalized in the subsequent political settlement. This bias has been exacerbated over the 30 years of NRM rule, because many of the factions that initially supported the NRM ruling elite have broken away, after one falling out or another, thus forcing the elite to rely more on in its core constituencies.

As under Obote and Amin, the initial alliance between Buganda and the government frayed, with land again being the issue. At the outset, the ideological conviction of Museveni and his peers was in favour of giving customary tenants and non-landowners a right to their land even though they knew a law favouring the tenants, many of whom were from the southwest, could be seen as favouring Museveni’s people (Bazaara, 2000).

The first proposed land bill, in the early 1990s, tried to introduce private property rights by converting leasehold into freehold. However, this was widely criticized as being a law favouring the privileged because it hurt landless Ugandans, especially the ones tilling land belonging to someone else. By the time the bill became law in 1998, it had been weakened and now recognized several types of ownership. At the same time, ownership and control were separated, such that, while Baganda landowners may have owned land they could not always control its use, because of the tenants occupying it. At the same time, tenants were often in control of land they did not own (Bazaara, 2000).

Tensions around the Land Act also affected relations with northern politicians who were concerned with the new legislation and its enforcement.36 One contemporary report showed that “historical tensions between the Northern and Southern Uganda mean that land rights are characterized by misinformation and distrust. The Northern Ugandans have little trust in Southern Ugandan interpretations of land rights.” (Hetz, Myers and Giovarelli, 2007:2). Similarly, a survey done for the World Bank in 2008 found “a high level of distrust toward government intentions” in both Acholi, Langi and Teso, and that “it is felt that Government, the army and rich people have taken an interest in the land without clearly elaborating their motives or intentions” (Rugadya, Nsamba-Gayiiya; and Kamusiime, 2008). Ironically, this comment omits to mention that these northern perceptions are quite similar to the Baganda attitudes to the Land Act: both groups fear that it will used as an excuse for government to grab land, either to reward important political supporters or to give it to ‘investors’.

While some observers may concede that the motivation for giving land to investors could be to promote economic development, others evidently perceive it that the ‘investor’ is being rewarded for providing funding for the ruling party. That is, some say, privileging key political supporters’ access to land becomes the basis for maintaining the ruling elite coalition and a stable political settlement.

36 Kjaer: pers comm, following interviews with local council politicians and the woman MP for Gulu, 2008.

Land transactions and commercial agriculture

Nwoya & Amuru Districts: Constructed partly on the basis of confidential interviews

A key issue underlying the whole discussion here is just how difficult it is to establish a commercial agricultural operation. There are many challenges but the first, and perhaps most daunting, is land.

There may be plenty of land in Nwoya and Amuru but there is actually very little with a title and virtually none that is available for sale or long term lease (although this is not always the story brokers give out). In one of the few recent transactions, the demarcation was wrong (title map and GPS co-ordinates did not match up) leading eventually to a court process and costs.

Of the transactions that have gone through, one source spoken with first fell foul of relations with the local community, then had problems with the sheer difficulty of land clearance by tractor, then was hit by drought and some concern that the land was not the best for agriculture. When better land was acquired, apparently perfectly legally, it was invaded four times by squatters and more than a year of production lost. Then, perhaps partly because of this, came a falling out between the partners. All the technical dominos were lined up in the right place (equity funding, good relationship with a seed company, plans for plant hire and crop aggregation etc) but timing was slightly awry: even though the partners were experienced in this type of enterprise, they perhaps underestimated the scale of the task.

Another investor spoken to found that although the title acquired was for some 1,500 ha, less than 20 percent was available to farm because of illegal squatters, some of whom appeared to be being assisted in their obduracy by local government officers. The process of having these people evicted was long, tortuous and lined with pitfalls and, as final eviction approached, incidents of larceny and violence increased. It seems several other local land owners have suffered this sort of experience when they have tried to move encroachers off, and also find the encroachers to be organised/supported by local politicians.

It seems that when owners are willing to lease their land out they usually want to do it for a medium term period, maybe 7 to 10 years. This might be acceptable to a commercial operator if the land was a fully developed farm with all the infrastructure in place, but for virgin bush it is not nearly long enough. The land owners have little concept of what it takes to develop a proper farm on a commercial basis, (and this is a key constraint in the whole discourse).

A second challenge is lack of trust. Some landowners are interested in partnerships, which is probably the quickest way for an outsider to get into farming in Northern Uganda but trust is thin on the ground (and not helped by the many negative stories that pass for currency in these parts). The problems the few investors have in making a return in the early years don’t help either.

Land and agricultural machinery agents suggest there are quite a few potential farmers coming from abroad looking for opportunities. They have heard that the farming potential is good and that the markets are there, but they do not realise they will have to spend 2-3 years getting access to the land. There are a few examples of people willing to start farming whilst waiting for the title to be processed, maybe because they are known at the community level and have spent time in that place, but few outside commercial investors are likely to risk this route. A recent article (Johansen 2013) elaborates on this and is well worth quoting at length: ‘The long war and the relative peace since the war ended has for many reasons made the Acholi suspicious of "investors" no matter where they come. Most investors who desire to invest in this region focus on farming and because ….. land is normally involved, controversy is not always far (away). ….Customary land is arguably the most complex and will in the foreseeable future block investment. Under customary land ownership, there are simply too many stakeholders to negotiate land agreements with.’ Even individually owned land is hard to negotiate. ‘ In Acholi any investment in land is not just q business deal. For the community. it is very important they know the investor well as the investor enters the ‘Acholi home’. Prospective investors might want to know that 95 percent of the investment is the relationship and acceptance by the community.’

Johansen then goes further: ‘Often investors do not have the humility and respect for the community. They also do not understand that land transactions in this region take an unusually longer time. Quick deals are the ones that fail most as such deals are not easily accepted in the community….. Investors must understand that it's not just about money and they must drop the superior attitude they often come along with. The investor’s personality, communication skills and mutual respect are the most important. In short, building a good relationship takes time and it must remain an on-going process even after securing land.’

Johansen’ advice as to how to proceed is eminently sensible. ‘Prospective investors should try as much as possible to involve the local district leaders, sub-counties and LCs in whichever transaction they wish to do in the region. Most districts are willing to help with such, and normally have marketing and production officers. When on the ground for a possible agreement, take time to find out who your neighbours are and find out what they have to say in regard to the land history and ownership.’

‘There have been many instances where investors have been conned because of their erroneous thinking that money is everything. So in short, all parties from official leaders to neighbours need to be consulted several times before entering into any agreement.’ As commercially minded, but otherwise well-intentioned prospective investors will attest, however, it is not always that easy. Building a ‘constant relationship with the community’ is normally outwith the normal business plan. However, as Johansen says: ‘Anyone wishing to invest in the Acholi sub-region should remember that, for the locals, land is the only wealth Ieft for them after the war and they do not want to lose it. They do not reject investors per se, but want assurance that the investor will be a good neighbour’.

Land and agricultural machinery agents spoken with for this study suggest few of the enquiries they get will, perhaps for the reasons described above, end up as commercial projects. It is also suggested that the fracas over the Madhvani sugar plans in Amuru has worsened the local attitude and that it is now very difficult to get the Amuru land board to do anything.

Registered seed companies

Name and location of seed Source of Description Main seed crops handled company varieties NASECO Seeds (1996), Kibaale Local, seed Maize OPV, maize hybrids, upland Public research producer rice, cowpeas, beans Farm Inputs Care Centre (FICA) Ltd, Local, seed Maize OPV, maize hybrids, upland Public research Kampala producer rice, sorghum, beans, cotton, ground nuts Victoria Seeds Ltd, Kampala Local, seed Maize OPV, maize hybrids, upland Public research, producer rice, sorghum, beans, soybean, Imports groundnuts, vegetables, pasture seed Otis Garden seeds Ltd, Lira Local, seed Maize OPV, maize hybrids, upland Public research producer rice, beans, sorghum, sunflower, soybean, finger millet Rial Seeds, Ltd, Kampala Maize OPV Public research El-Shaddai, Ltd, Mbale Distributor Maize OPVs and hybrids, upland rice, Imports beans, sorghum, sunflower, soybeans A.K. Oils and Fats, Ltd Kampala Distributor Hybrid sunflower Imports General & Allied Ltd, Kampala Local Vegetable seeds Importer East Africa Seeds, Ltd, Kampala Regional Maize OPVs and hybrids, upland rice, Public research, sorghum, vegetables Importer Mt Elgon Seeds Ltd, Kampala Regional Maize hybrids, pastures, vegetables Importer Safari Seeds Ltd, Kampala Vegetable seeds Importer Grow More Seeds & Chemicals, Local Maize OPVs, upland rice, sorghum Public research, Kampala beans, vegetable seeds Importer AMLA Seeds Enterprises, Kampala Maize OPV Public research CAII Seed Company, Iganga Local Maize OPV and hybrid, upland rice Public research Kazinga Channel Seed Company, Local Maize OPV Kasese Agro-Genetic Technologies Ltd, Local Tissue culture–derived plantlets for Public research Kampala bananas, coffee, pineapples, and others Supa Seeds Africa Ltd, Kampala Local Maize OPVs Public research Masindi Seeds Ltd, Masindi Local Maize OPVs, upland rice Public research Pearl Seeds Ltd, Kampala Local Maize OPVs, upland rice, beans, Public research groundnuts, millet, soybeans CEDO Seeds, Rakai Local Beans Public research and CGIAR BRAC Enterprises Ltd, Kampala Local Maize OPVs, beans, upland rice Public research Green Nile Agro-Tech Ltd Maize OPV Public research Equator Seeds Ltd, Gulu Maize OPV, upland rice, beans Public research Monsanto International Maize and sunflower hybrids; testing Own research Bt. cotton; source of WEMA biotechnology Note: OPV = open-pollinated variety. CGIAR = Consultative Group on International Agricultural Research. Bt. = Bacillus thuringiensis. WEMA = Water-Efficient Maize for Africa.

Source: MAAIF 2012a.

The main agrochemical importers in Uganda

Agrochemical Key Products Company 1. Balton U LTD Chloropyrifos, Mancozeb + Metalaxyl, Cypermethrin + Profenofos, Glyphosate, Deltamethrin + Chloropyrifos, Diuron, Ametryn, 2,4-D, Satunil, Imidacloprid , Metribuzin, 2. Bukoola Chemical Mancozeb, Cypermethrin, alpha-Cypermethrin, Industries (U) Ltd 2 4 D, Glyphosate, Paraquat, Dimethoate, Fenitrothion, Malathion, Metalaxyl+ Mancozeb, Benomyl, Carbendazim, (With local repackaging Dichlorvous, Chloropyrifos, Profenofos + Cypermethrin, plant) Butalachlor + Propanil 3. Nsanja & Lyala Bbisi Dimethoate,Dichlorvous, Mancozeb, Glyphosate, Group of Companies Cypermethrin, Chloropyrifos, Ametryn, Mancozeb + Metalaxyl, 2,4-D, Copper Oxychloride 4. Greenhouse Chemicals Floriculture product range from Bayer, Syngenta + generics 5. General and Allied Mancozeb, Cypermethrin, 2 4 D, Glyphosate, Dimethoate, Malathion, Metalaxyl+ Mancozeb, Carbofuran, Chloropyrifos, Propanil + Thiobencarb 6. Lipsun /Alga Mancozeb, Aluminium Phosphide, Cypermethrin, Glyphosate, Carbendazim 7. Hangzhou Agrochemicals Glyphosate, 2,4-D, Mancozeb +Metalaxyl, Cypermethin + Chlopyrifos, Ametryn, Diuron, Organic Foliar fertilizers 8. Keith Associates Cypermethrin, Glyphosate, Dimethoate, Ridomil, Primagram, Mancozeb 9. Evergreen Mancozeb, Glyphosate, Dimethoate 10. Sekalala Ent (Monsanto Roundup Rep 11. Trust Chem (Bayer Agent) Antracol, Decis, Milraz, Confidor, Sencor 12. Twiga Chemical Industries Syngenta-Polytrin, Ridomil, Gramoxone, Actellic, Touchdown, Pegasus, etc; TCI- Agral 90, Kocide, 2 4-D, Marshal Suscon, Tedion, Galben, Rhizolex, etc. Rotam, SFCOLTD- Sicorin, DuPont -Equation Pro, Avaunt, Vydate; Agrochem-Dimethoate; Volcano-Diuron; Helm- Glyphosate; Excel-Celphos; Bayer-Actril, Sencor

13 Coopers (U) Ltd Glyphosate, Mancozeb, Lambdacyhalothrin, Mancozeb + Dimethomorph, Imidacloprid, Dimethoate 14. Others, Tea, Sugarcane Glyphosate, 2 4-D, Ametryn and Coffee Estates