Uganda's Tea Sub-Sector

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Uganda's Tea Sub-Sector RESEARCH SERIES No. 119 UGANDA’S TEA SUB-SECTOR: A COMPARATIVE REVIEW OF TRENDS, CHALLENGES AND COORDINATION FAILURES MUNYAMBONERA F. EZRA CORTI PAUL LAKUMA MADINA GULOBA SEPTEMBER 2014 RESEARCH SERIES No. 119 UGANDA’S TEA SUB-SECTOR: A COMPARATIVE REVIEW OF TRENDS, CHALLENGES AND COORDINATION FAILURES MUNYAMBONERA F. EZRA CORTI PAUL LAKUMA MADINA GULOBA SEPTEMBER 2014 Copyright © Economic Policy Research Centre (EPRC) The Economic Policy Research Centre (EPRC) is an autonomous not-for-profit organization established in 1993 with a mission to foster sustainable growth and development in Uganda through advancement of research – based knowledge and policy analysis. Since its inception, the EPRC has made significant contributions to national and regional policy formulation and implementation in the Republic of Uganda and throughout East Africa. The Centre has also contributed to national and international development processes through intellectual policy discourse and capacity strengthening for policy analysis, design and management. The EPRC envisions itself as a Centre of excellence that is capable of maintaining a competitive edge in providing national leadership in intellectual economic policy discourse, through timely research-based contribution to policy processes. Disclaimer: The views expressed in this publication are those of the authors and do not necessarily represent the views of the Economic Policy Research Centre (EPRC) or its management. Any enquiries can be addressed in writing to the Executive Director on the following address: Economic Policy Research Centre Plot 51, Pool Road, Makerere University Campus P.O. Box 7841, Kampala, Uganda Tel: +256-414-541023/4 Fax: +256-414-541022 Email: [email protected] Web: www.eprc.or.ug Uganda’s Tea Sub-sector: A comparative Review of Trends, Challenges and Coordination Failures ABSTRACT This study critically reviews Uganda’s tea sub-sector performance in relation to the institu- tional framework. The tea sector has performed far below its potential largely owing to poor coordination of activities in the sector. Uganda has about 200,000 hectares suitable for tea production, but only 14 percent (28,000 hectares) is utilised both by small holder and estate owners. Exports have stagnated at around 50,000 metric tonnes in the last 5 years. On the other hand, Kenya has succeeded in transforming its tea sub-sector is largely due to effective coordination of policies and institutions. We argue that the challenges faced by Uganda’s tea sector are as a result of coordination failures in policy, institutions and programmes across the various Ministries, Departments and Agencies. Lessons learnt from Kenya points to the need of Uganda having a comprehensive tea policy and effective institutional framework to coordinate the various interventions and programmes in the sub-sector. ECONOMIC POLICY RESEARCH CENTRE - EPRC i Uganda’s Tea Sub-sector: A comparative Review of Trends, Challenges and Coordination Failures TABLE OF CONTENTS ABSTRACT I 1. INTRODUCTION 1 2. PERFORMANCE OF THE TEA INDUSTRY: A COMPARISON BETWEEN UGANDA AND KENYA 2 2.1 Tea production, acreage and productivity 2 2.2 Organisation and distribution of tea stakeholders 5 2.3 Tea research and extension services 8 2.4 Tea export performance 8 2.5 Pricing 9 2.6 Processing 11 3. INSTITUTIONAL REFORMS WITHIN UGANDA’S TEA SECTOR 12 4. WHAT COORDINATION FAILURES EXIST IN THE TEA SECTOR? 13 5. CHALLENGES 14 6. CONCLUSION AND POLICY RECOMMENDATIONS 15 REFERENCES 16 APPENDIX I: THE KEY TO UN-LOCK THE UGANDAN TEA SECTOR 19 END NOTES 21 EPRC RESEARCH SERIES 22 ii ECONOMIC POLICY RESEARCH CENTRE - EPRC Uganda’s Tea Sub-sector: A comparative Review of Trends, Challenges and Coordination Failures 1. INTRODUCTION Despite tea’s significant potential both Tea is traditionally Uganda’s third largest as a source of income and employment, agricultural export commodity by value. As the institution governing the sector are such, the Agricultural Sector Development uncoordinated as they are delivered by Strategy and Investment Plan (DSIP) 2010/11 several autonomous agencies in distinct includes tea in its strategic export plan owing Ministries, Departments and Agencies to its ability to earn export revenues. The (MDAs) 1 and Programmes.2 In this regard, DSIP plans to address production related MAAIF (2013) defines coordination failure as challenges in the tea sector by reviving tea the existence of multiple policy frameworks research and enhancing tea processing and interventions spread out in various capacity by building new tea factories in institutions, but none of the intervention Bushenyi and Kabale. Evidence shows that or institutions systematically addresses on average, 93 percent of tea products issues of the tea sector exclusively. Put are exported while 7 percent is consumed simply, coordination failure is the inability domestically (MAAIF, 2012). More recent to coordinate the various institutions statistics from MoFPED (2013) indicate and interventions in a sector to pursue a that Uganda earned US$ 72 Million from common goal. exporting 63,456 tonnes of tea, cultivated on 35,194 Ha, in 2012/13. This represented We argue that the slow growth and limited 2.8 percent of Uganda’s total exports, 1.26 improvements in the performance of percent of global tea exports and 0.36 the tea sector are largely attributed to percent of Uganda’s Gross Domestic Product uncoordinated institutions that govern (GDP). the sector leading to uncertainty in future outcomes for the old and new stakeholders. Tea growing is envisaged as a tool to fight Thus, there is limited linkage of performance poverty through its ability as a source of of tea policy in Uganda. More specifically, we employment to households, especially in compare trends in production, productivity, rural areas. In 2009/2010, the tea sector acreage, export, pricing and processing employed more than 60,000 persons and between Kenya and Uganda. In addition, we was an indirect source of livelihood to analyse the institutional reforms governing close to 500,000 Ugandans (BoU, 2011). tea in Uganda from the 1950’s to-date and Moreover, the limited initial investment also review coordination failures in the required combined with the relatively low sector (1997 – to-date). We also discuss the risk of crop failure, the auxiliary services challenges facing the tea sector. created around the factories, the steady all year income, and the market linkage in retail While Uganda and Kenya-a major tea grower trade, transportation and consumption have and exporter- have comparable agro climatic all made tea growing an attractive activity conditions suitable for tea production, the to smallholder farmers (Oxfam, 2002). performance in Uganda’s tea industry is However, tea’s lengthy gestation period comparatively weak given the opportunities (3 years) and land ownership have slowed available.3 Findings reveal that the flaws in down smallholder’s reinvestment on tea. the coordination of interventions, and the ECONOMIC POLICY RESEARCH CENTRE - EPRC 1 Uganda’s Tea Sub-sector: A comparative Review of Trends, Challenges and Coordination Failures mal- functioning institutional frameworks 2.1 Tea production, acreage and that govern tea largely explain the slow productivity growth and performance of the tea sector a) Production in Uganda. In addition, due to limited awareness of opportunities associated with Ugandan tea is commonly grown on the tea growing, the sector has continued to slopes of Mount Rwenzori and along the attract almost no new investments by small crescent of Lake Victoria areas of Bushenyi, holders and estates. Simply put, the role of Hoima, Kabarole, Kanungu, Kibaale, Kisoro, government in coordinating tea activities is Mbarara, Mukono, Mityana, Rukungiri and largely missing. Thus, we recommend for a Wakiso. These areas are consistent with stand-alone tea policy and an institutional tea growing requirements of a temperate framework, comparable to the Tea Board climate with an average precipitation of of Kenya, to harmonize public and private between 1000mm and 1500mm for not less intervention, to coordinate collection of than 150 days per annum. In the above areas, regular and reliable tea statistics, to regulate temperatures average from 200C-250C, an competition and standards, to license inputs altitude of over 1500m above sea level and to ensure consumer protection in the with rich well drained fertile soils and soil tea sector in Uganda. alkalinity levels of not more than PH6. The rest of the paper is structured as follows: Tea production in Uganda has fluctuated Section 2 provides a comparative analysis of over time. From Figure 1, in 1962-when differing trends in the tea sector for Uganda Uganda gained independence, 6,319 and Kenya. Section 3 discusses the various Metric Tonnes (MT) of tea were produced institutional reforms in the tea sector and with slight improvements recorded over section 4 reviews the policy framework the next 8 years. But from 1972 to late and coordination failure. Section 5 details 1980s, Uganda recorded severe decline in the challenges facing the tea sector while production-approximately 80 percent drop section 6 provides the conclusion and policy over that period. The poor performance recommendations. in tea production was attributed to the political instability of 1970’s and 1980’s that 2. PERFORMANCE OF led to destruction of infrastructure and to THE TEA INDUSTRY: A disinvestment due to the abandoning of tea estates by Asians, who were the majority COMPARISON BETWEEN
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