An Action Plan for Developing Agricultural Input Markets An in Uganda International Center for Soil Fertility and Agricultural Development An Action Plan for Developing Agricultural Input Markets in Uganda Prepared by IFDC—An International Center for Soil Fertility and Agricultural Development Sasakawa-Global 2000 (SG 2000) and Investment in Developing Export Agriculture (IDEA) Project Sponsored by Ministry of Agriculture, Animal Industry, and Fisheries (MAAIF) Funded by United States Agency for International Development (USAID) i IFDC—An International Center for Soil Fertility and Agricultural Development P.O. Box 2040 Muscle Shoals, AL 35662 (U.S.A.) Telephone: +1 (256) 381-6600 Telefax: +1 (256) 381-7408 E-Mail: [email protected] Web Site: www.ifdc.org IFDC publications are listed in IFDC Publications, General Publication IFDC–G-1; the publications catalog is free of charge. Photo Credit: Outside Front Cover – Johnny H. Allgood ii Preface The Ugandan economy is a predominantly agricultural economy, but the low land and labor productivity in the agricultural sector has resulted in a high incidence of poverty in rural areas. To reduce poverty and hunger, agricultural productivity must be increased. This cannot be achieved without appropriate use of modern tech- nologies based on improved seed, mineral fertilizer, and crop protection products (CPPs). Adequate and timely supply of these inputs is needed at the farm level. However, input supply systems in Uganda remain underde- veloped, and farmers have difficulty in accessing inputs. This study focuses on the functioning of the input markets, constraints affecting their performance, and measures needed to make them more effective and efficient. This assessment and associated action plan is one of several country-specific efforts undertaken by IFDC to promote the development of agricultural input markets (AIMs) in Africa. During 1998/99 at the request of the USAID/Africa Bureau and in collaboration with other organizations, IFDC prepared a strategic framework for promoting sustainable input supply systems in Africa. The framework was validated at a regional workshop in Addis Ababa in 1999. Because the framework was generic in nature, the workshop delegates recommended that a few country-specific studies be undertaken to test the framework at national levels. Subsequently, IFDC and various collaborators have prepared action plans for developing AIMs for Malawi, Nigeria, and Ghana. Several donors including USAID, Directoraat Generaal voor Internationale Samenwerking (DGIS), Depart- ment for International Development (DFID), European Union (EU), The World Bank, and SG 2000 have con- tributed to the preparation of these action plans. This assessment and action plan development was undertaken by IFDC in collaboration with SG 2000 and the IDEA Project. It was sponsored by MAAIF and funded by the USAID/Africa Bureau. The assessment team included the following members: 1. B. L. Bumb, Policy Economist and Team Leader, IFDC 2. J. H. Allgood, Marketing Specialist, IFDC 3. G. Dimithe, Agricultural Economist, IFDC 4. R. Gahakwa, Crop Protection Product (CPP) Specialist, MAAIF 5. G. Gardner, Agricultural Economist, USAID/Washington 6. S. Kabito, Seed Specialist (Consultant) 7. L. Mwebesa, Input Specialist, SG 2000 8. F. Muhhuku, Seed Specialist, IDEA Project 9. M. Othieno, Planning Specialist, Plan for Modernization of Agriculture (PMA) Secretariat The assessment team visited Uganda during March 2002 and consulted with various stakeholders including policymakers, donors, National Agricultural Research Organizations (NAROs), nongovernmental organiza- tions (NGOs), bankers, farmers, and input dealers. To encourage focused discussions of various issues and to ensure wide coverage, the team was divided into two groups (fertilizer group and seed and CPP group) and traveled extensively in the country. The first group traveled to Mbale, Kapchorwa, Iganga, Bugiri, Tororo, and Mukono and the second group visited Mpigi, Masaka, Hoima, Masindi, Lira, and Luwero. The preliminary impressions of the team were shared at debriefings at MAAIF and the Donors Group. Comments and suggestions from these meetings were reflected in the draft Action Plan, which was validated at a stakeholders’ workshop in Uganda in October 2002. The IDEA Project provided partial funding support for the workshop. Comments and suggestions received at the workshop are reflected in the report. The Action Plan recommends a holistic approach and private-public partnerships for strengthening the functioning of input markets in Uganda.1 Logistic and administrative support provided by SG 2000 and MAAIF is gratefully acknowledged. 1. The views and interpretations expressed in this document are those of the Study Team and should not be attributed to the funding or sponsoring agencies. iii Contents Preface ....................................................................................................................................................... iii Executive Summary ................................................................................................................................... ix I. Introduction .......................................................................................................................................... 1 Recent Developments and New Initiatives ........................................................................................ 4 Role of Agricultural Input Markets in Modernizing Agriculture....................................................... 5 Goal, Scope, and Objectives of the Action Plan ................................................................................ 5 II. The Agricultural Input Markets in Uganda: An Assessment................................................................ 7 The Policy Environment .................................................................................................................... 7 The Fertilizer Market: Structure, Functioning, and Constraints ........................................................ 7 The Seed Market: Structure, Functioning, and Constraints............................................................. 13 The CPP Market: Structure, Functioning, and Constraints ............................................................. 23 Potential of the Private Sector in Marketing Inputs......................................................................... 31 III. An Action Plan for Developing AIMs in Uganda .............................................................................. 32 Rationale for the Action Plan........................................................................................................... 32 Creating a Supportive Policy Environment ..................................................................................... 33 Development of Human Capital-Dealer Networks.......................................................................... 34 Improving Access to Finance........................................................................................................... 34 Market Transparency Through the Creation and Operation of MIS ................................................ 35 Strengthening the Regulatory System .............................................................................................. 36 Technology Transfer Activities ........................................................................................................ 39 Development of Output Markets ..................................................................................................... 39 Regional Integration of Markets ...................................................................................................... 41 Other Technical Issues ..................................................................................................................... 41 Expected Benefits ............................................................................................................................ 42 IV. Institutional Arrangements for Implementing the Action Plan .......................................................... 44 Holistic Approach and Sequencing of Activities ............................................................................. 44 Public-Private Partnership ............................................................................................................... 45 Implementation Arrangements......................................................................................................... 45 Resource Requirements ................................................................................................................... 46 Government Commitment and Policy Consistency ......................................................................... 46 Donor Support ................................................................................................................................. 46 V. Linkages With Donor and National Programs ................................................................................... 48 USAID/Uganda’s Strategic Objectives and the Action Plan ........................................................... 48 PMA and the Action Plan ................................................................................................................ 48 References ................................................................................................................................................ 51 v Matrices