|Uganda Table of Contents
Uganda's main food crops have been plantains, cassava, sweet potatoes, millet, sorghum, corn, beans, and groundnuts. Major cash crops have been coffee, cotton, tea, and tobacco, although in the 1980s many farmers sold food crops to meet short-term expenses. The production of cotton, tea, and tobacco virtually collapsed during the late 1970s and early 1980s. In the late 1980s, the government was attempting to encourage diversification in commercial agriculture that would lead to a variety of nontraditional exports. The Uganda Development Bank and several other institutions supplied credit to local farmers, although small farmers also received credit directly from the government through agricultural cooperatives. For most small farmers, the main source of short-term credit was the policy of allowing farmers to delay payments for seeds and other agricultural inputs provided by cooperatives.
Cooperatives also handled most marketing activity, although marketing boards and private companies sometimes dealt directly with producers. Many farmers complained that cooperatives did not pay for produce until long after it had been sold. The generally low producer prices set by the government and the problem of delayed payments for produce prompted many farmers to sell produce at higher prices on illegal markets in neighboring countries. During most of the 1980s, the government steadily raised producer prices for export crops in order to maintain some incentive for farmers to deal with government purchasing agents, but these incentives failed to prevent widespread smuggling.
Coffee continued to be Uganda's most important cash crop throughout the 1980s. The government estimated that farmers planted approximately 191,700 hectares of robusta coffee, most of this in southeastern Uganda, and about 33,000 hectares of arabica coffee in high-altitude areas of southeastern and southwestern Uganda. These figures remained almost constant throughout the decade, although a substantial portion of the nation's coffee output was smuggled into neighboring countries to sell at higher prices. Between 1984 and 1986, the European Economic Community (EEC) financed a coffee rehabilitation program that gave improved coffee production a high priority. This program also supported research, extension work, and training programs to upgrade coffee farmers' skills and understanding of their role in the economy. Some funds were also used to rehabilitate coffee factories.
When the NRM seized power in 1986, Museveni set high priorities on improving coffee production, reducing the amount of coffee smuggled into neighboring countries, and diversifying export crops to reduce Uganda's dependence on world coffee prices. To accomplish these goals, in keeping with the second phase of the coffee rehabilitation program, the government raised coffee prices paid to producers in May 1986 and February 1987, claiming that the new prices more accurately reflected world market prices and local factors, such as inflation. The 1987 increase came after the Coffee Marketing Board launched an aggressive program to increase export volumes. Parchment (dried but unhulled) robusta producer prices rose from USh24 to USh29 per kilogram. Clean (hulled) robusta prices rose from USh44.40 to USh53.70 per kilogram. Prices for parchment arabica, grown primarily in the Bugisu district of southeastern Uganda, were USh62.50 a kilogram, up from USh50. Then in July 1988, the government again raised coffee prices from USh50 per kilogram to USh111 per kilogram for robusta, and from USh62 to USh125 per kilogram for arabica.
By December 1988, the Coffee Marketing Board was unable to pay farmers for new deliveries of coffee or to repay loans for previous purchases. The board owed USh1,000 million to its suppliers and USh2,500 million to the commercial banks, and although the government agreed to provide the funds to meet these obligations, some of them remained unpaid for another year.
Uganda was a member of the International Coffee Organization (ICO), a consortium of coffee-producing nations that set international production quotas and prices. The ICO set Uganda's annual export quota at only 4 percent of worldwide coffee exports. During December 1988, a wave of coffee buying pushed the ICO price up and triggered two increases of 1 million (60- kilogram) bags each in worldwide coffee production limits. The rising demand and rising price resulted in a 1989 global quota increase to 58 million bags. Uganda's export quota rose only by about 3,013 bags, however, bringing it to just over 2.3 million bags. Moreover, Uganda's entire quota increase was allocated to arabica coffee, which was grown primarily in the small southeastern region of Bugisu. In revenue terms, Uganda's overall benefit from the world price increase was small, as prices for robusta coffee--the major export--remained depressed.
In 1989 Uganda's coffee production capacity exceeded its quota of 2.3 million bags, but export volumes were still diminished by economic and security problems, and large amounts of coffee were still being smuggled out of Uganda for sale in neighboring countries. Then in July 1989, the ICO agreement collapsed, as its members failed to agree on production quotas and prices, and they decided to allow market conditions to determine world coffee prices for two years. Coffee prices plummeted, and Uganda was unable to make up the lost revenues by increasing export volumes. In October 1989, the government devalued the shilling, making Uganda's coffee exports more competitive worldwide, but Ugandan officials still viewed the collapse of the ICO agreement as a devastating blow to the local economy. Fears that 1989 earnings for coffee exports would be substantially less than the US$264 million earned the previous year proved unfounded. Production in 1990, however, declined more than 20 percent to an estimated 133,000 tons valued at US$142 million because of drought, management problems, low prices, and a shift from coffee production to crops for local consumption.
Some coffee farmers cultivated cacao plants on land already producing robusta coffee. Cocoa production declined in the 1970s and 1980s, however, and market conditions discouraged international investors from viewing it as a potential counterweight to Uganda's reliance on coffee exports. Locally produced cocoa was of high quality, however, and the government continued to seek ways to rehabilitate the industry. Production remained low during the late 1980s, rising from 1,000 tons in 1986 to only 5,000 tons in 1989.
In the 1950s, cotton was the second most important traditional cash crop in Uganda, contributing 25 percent of total agricultural exports. By the late 1970s, this figure had dropped to 3 percent, and government officials were pessimistic about reviving this industry in the near future. Farmers had turned to other crops in part because of the labor-intensive nature of cotton cultivation, inadequate crop-finance programs, and a generally poor marketing system. The industry began to recover in the 1980s. The government rehabilitated ginneries and increased producer prices. In 1985, 199,000 hectares were planted in cotton, and production had risen from 4,000 tons to 16,300 tons in five years. Cotton exports earned US$13.4 million in 1985. Earnings fell to US$5 million in 1986, representing about 4,400 tons of cotton. Production continued to decline after that, as violence plagued the major cotton-producing areas of the north, but showed some improvement in 1989.
Cotton provided the raw materials for several local industries, such as textile mills, oil and soap factories, and animal feed factories. And in the late 1980s, it provided another means of diversifying the economy. The government accordingly initiated an emergency cotton production program, which provided extension services, tractors, and other inputs for cotton farmers. At the same time, the government raised cotton prices from USh32 to USh80 for a kilogram of grade A cotton and from USh18 to USh42 for Grade B cotton in 1989. However, prospects for the cotton industry in the 1990s were still uncertain.
Favorable climate and soil conditions enabled Uganda to develop some of the world's best quality tea. Production almost ceased in the 1970s, however, when the government expelled many owners of tea estates--mostly Asians. Many tea farmers also reduced production as a result of warfare and economic upheaval. Successive governments after Amin encouraged owners of tea estates to intensify their cultivation of existing hectarage. Mitchell Cotts (British) returned to Uganda in the early 1980s and formed the Toro and Mityana Tea Company (Tamteco) in a joint venture with the government. Tea production subsequently increased from 1,700 tons of tea produced in 1981 to 5,600 tons in 1985. These yields did not approach the high of 22,000 tons that had been produced in the peak year of 1974, however, and they declined slightly after 1985.
The government doubled producer prices in 1988, to USh20 per kilogram, as part of an effort to expand tea production and reduce the nation's traditional dependence on coffee exports, but tea production remained well under capacity. Only about one-tenth of the 21,000 hectares under tea cultivation were fully productive, producing about 4,600 tons of tea in 1989. Uganda exported about 90 percent of tea produced nationwide. In 1988 and 1989, the government used slightly more than 10 percent of the total to meet Uganda's commitments in barter exchanges with other countries. In 1990 the tea harvest rose to 6,900 tons, of which 4,700 were exported for earnings of US$3.6 million. The government hoped to produce 10,000 tons in 1991 to meet rising market demand.
Two companies, Tamteco and the Uganda Tea Corporation (a joint venture between the government and the Mehta family), managed most tea production. In 1989 Tamteco owned three large plantations, with a total of 2,300 hectares of land, but only about one-half of Tamteco's land was fully productive. The Uganda Tea Corporation had about 900 hectares in production and was expanding its landholdings in 1989. The state-owned Agricultural Enterprises Limited managed about 3,000 hectares of tea, and an additional 9,000 hectares were farmed by about 11,000 smallholder farmers, who marketed their produce through the parastatal Uganda Tea Growers' Corporation (UTGC). Several thousand hectares of tea estates remained in a "disputed" category because their owners had been forced to abandon them. In 1990 many of these estates were being sold to private individuals by the departed Asians' Property Custodian Board as part of an effort to rehabilitate the industry and improve local management practices.
Both Tamteco and the Uganda Tea Corporation used most of their earnings to cover operational expenses and service corporate debts, so the expansion of Uganda's tea-producing capacity was still just beginning in 1990. The EEC and the World Bank provided assistance to resuscitate the smallholder segment of the industry, and the UTGC rehabilitated seven tea factories with assistance from the Netherlands. Both Tamteco and the Uganda Tea Corporation were also known among tea growers in Africa for their leading role in mechanization efforts. Both companies purchased tea harvesters from Australian manufacturers, financed in part by the Uganda Development Bank, but mechanized harvesting and processing of tea was still slowed by shortages of operating capital.
For several years after independence, tobacco was one of Uganda's major foreign exchange earners, ranking fourth after coffee, cotton, and tea. Like all other traditional cash crops, tobacco production also suffered from Uganda's political insecurity and economic mismanagement. Most tobacco grew in the northwestern corner of the country, where violence became especially severe in the late 1970s, and rehabilitation of this industry was slow. In 1981, for example, farmers produced only sixty-three tons of tobacco. There was some increase in production after 1981, largely because of the efforts of the British American Tobacco Company, which repossessed its former properties in 1984. Although the National Tobacco Corporation processed and marketed only 900 tons of tobacco in 1986, output had more than quadrupled by 1989.
Uganda's once substantial sugar industry, which had produced 152,000 tons in 1968, almost collapsed by the early 1980s. By 1989 Uganda imported large amounts of sugar, despite local industrial capacity that could easily satisfy domestic demand. Achieving local self-sufficiency by the year 1995 was the major government aim in rehabilitating this industry.
The two largest sugar processors were Kakira and Lugazi estates, which by the late 1980s were joint government ventures with the Mehta and Madhvani families. The government commissioned the rehabilitation of these two estates in 1981, but the spreading civil war delayed the projects. By mid-1986 ,work on the two estates resumed, and Lugazi resumed production in 1988. The government, together with a number of African and Arab donors, also commissioned the rehabilitation of the Kinyala Sugar Works, and this Masindi estate resumed production in 1989. Rehabilitation of the Kakira estate, delayed by ownership problems, was completed in 1990 at a cost of about US$70 million, giving Uganda a refining capacity of at least 140,000 tons per year.
More about the Economy of Uganda.
Source: U.S. Library of Congress