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Why Coffee Sector Needs More Funding Not Budget Cuts

Coffee is Uganda’s leading cash crop and a top foreign exchange earner/courtesy photo

In a letter dated March 25th 2020, the Ministry of Finance Planning and Economic Development announced Shs490bn budget cuts from agencies and ministries which will be channeled to local governments to implement the agriculture Parish Model.  The model aims at turning subsistence farmers into commercial ones.

One of the agencies affected by this decision is Uganda Coffee Development Authority (UCDA) where Shs58bn has been cut off its planned budget for 2021/22. The funds were meant to pay nursery operators who supplied coffee seedlings to government as well as procure more seedlings for farmers.

The Ministry of Finance had earlier removed Shs16bn from UCDA’s budget.

The ministry’s move followed the March 15th 2021 cabinet decision that also authorized budget cuts worth Shs56bn from National Agricultural and Advisory Services (NAADs) meant for the purchase of agriculture supplies.

This decision leaves many unanswered questions at a time when government is planning to merge its agencies with ministries in order to reduce public expenditure.

One wonders whether local governments are best placed to implement the ‘Parish Model’ than NAADS, UCDA, Operation Wealth Creation (OWC) and Ministry of Agriculture.

Is government acknowledging failure of OWC and NAADS?

Government has not yet given out details about the ‘Parish Model’ especially the crops being targeted.

It is disheartening for government to consistently underestimate the role of agriculture sector [and coffee sub-sector in particular] in Uganda’s economic transformation agenda.

Government officials in decision making positions should know that coffee is the world’s most traded crop/item after oil. And that means it is important, and should be among the top priorities of government funding.

During COVID-19 lockdown, the coffee sector remained resilient, supporting Uganda’s economy as other key sectors like tourism suffered huge losses.

No doubt, coffee is Uganda’s green gold.

UCDA figures indicate that exports for the calendar year (January 2020 to December 2020) totalled to 5,492,525 60kg bags worth US$515.94million (approximately Shs1.902tn), compared to 4,519,563 60kg bags worth US$436.54 million equivalent to (Shs1.610tn) the previous year. This represents 22% and 18% increase in quantity and value respectively.

There’s more to the above interesting figures.

The country registered an increase in monthly coffee exports in the months of July, August and September surpassing the 500,000 bags mark. The increase is the highest since 1991 when Uganda’s coffee industry was liberalized.

A total of 543,251 60 kg bags of coffee valued at US$49.78 million were exported in July 2020. In August, Uganda exported a total of 519,683 60 kg bags of coffee valued at US$ 46.06 million. A total of 506,470 60 kg bags of coffee valued at US$ 44.64 million were exported in September 2020.

The increase in export volumes and the resultant earnings is a direct result of deliberate efforts undertaken by UCDA to increase coffee production in the country.  

This has been achieved with limited funding where UCDA takes years to pay nursery operators who supply coffee seedlings to government on credit.

It’s definitely not the authority’s fault but people at the ministry of finance and cabinet who are probably yet to appreciate how coffee can turnaround Uganda’s fortune.

Some nursery operators have since abandoned business and others drowned in debts over delayed payment by UCDA.

I have interacted with many UCDA staff who are passionate about promoting Uganda’s coffee but quite often they are limited by meagre funding.

Emmanuel Iyamulemye Niyibigira, the Managing Director at UCDA and team are generally doing their best to promote Uganda’s coffee sector, but with the meagre resource envelope, they can only do so much.

Let government fund the sector and task the implementing agencies like UCDA to account for the money given to them.

Coffee farmers across the country need sensitization on Good Agricultural Practices (GAPs) and post-harvest handling. Extension workers are still few.  

It’s not surprising to find three districts being served by one UCDA extension officer. A case in point is the greater Kibaale (Kakumiro, Kibaale and Kagadi districts) are served by one person.

However much he’s passionate about his work, he can’t efficiently and effectively serve all farmers in three districts.

Whereas some districts have agricultural officers, not all of them are knowledgeable about coffee farming. They literally need refresher courses on coffee production and management.

This is why more funding to UCDA and the coffee sector at large makes sense. There are so many misconceptions about coffee drinking that must be demystified by UCDA through massive sensitization. But how will they do it without enough resources?

UCDA will also have to take a leading role in sensitizing coffee stakeholders about the National Coffee Bill, 2018 that will soon become law after being assented to by the President.

Huge opportunity

Uganda has an opportunity to become the world’s 3rd coffee producer after Brazil and Vietnam if it achieves its target of producing 20 million 60kg bags by 2025.  Colombia, with over 13.5 million bags is currently the world’s 3rd largest coffee producer.

Currently, Uganda is world’s 8th largest coffee producer. Coffee supports 12 million Ugandans and the country’s leading cash crop is now produced in 126 districts out of 146. This means that if efforts are undertaken to increase production and improve quality, many families will easily be transformed economically.  

Recent statistics indicate that the demand for coffee globally is increasing at a rate of about 2.0 percent per annum, implying that by the year 2030, global demand for coffee may have a deficit of about 30 million bags (60 kg bags each) if no production increase is made.

The above statistic is good for Uganda that is pushing to increase coffee production. Uganda’s coffee is also preferred by many consumers due to its unique natural taste.

Late last year, Uganda was ranked the 3rd country with best coffee globally. The ranking was based on coffees from around the world that were harvested from 2010 to 2018 and graded by 1,229 professional tasters certified by the Coffee Quality Institute.

The ball is now in the hands of government especially officials who make key decisions on how the national budget is shared. Let’s feed the cow that gives us milk in good and bad times!

The author is a business journalist, coffee nursery operator and farmer.

Taddewo William Senyonyi
William is a seasoned business and finance journalist. He is also an agripreneur and a coffee enthusiast.

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