In Focus: the Agro-Processing Sector
Uganda has a predominantly agricultural economy, thanks to its fertile soils and year-round sunny climate
ACCORDING to the World Bank, the agricultural sector accounts for 54 percent of the country’s export earnings. Meanwhile, agro-processing (the treatment and processing of agricultural materials into saleable commodities) comprises around 60 percent of the manufacturing sector’s output.
Between 2012 to 2017, the food processing subsector increased at an average annual rate of eight percent, with the strongest growth registered in the processing of meat, fish and dairy, as well as edible oils and bakery processing. A growing middle class in the country is leading to a change in diet, with more people looking to buy high quality, processed products.
The agro-processing sector is important to Uganda for several key reasons. The first is that developing small- and medium- scale agro-industrial firms will lead to an expansion in job opportunities. The second is that agro-processing will help Uganda move away from exporting low-value raw commodities and diversify its export offering, both of which will facilitate economic growth within the country.
The Ugandan government’s development agenda prioritises agro-led industrialisation as an important pillar of economic prosperity. It will take an area-based commodity approach – in other words, it will focus on developing and processing the commodities grown in defined agro-industrial zones. A key feature of the plan involves “nucleus farms” – spaces which aggregate high volumes of raw material provided by surrounding smallholders – which has had proven success, Uganda’s Kalangala Oil Palm scheme being one example.
However, according to a report by the International Growth Centre, there is a potential problem.
“There appears to be a high degree of confusion and mis-co-ordination among government institutions over the crop, fish and livestock value chains on which the new agro-industrialisation strategy is to be based, having the potential to severely hamper a co-ordinated agroindustrialisation push,” the report reads.
In short, different government agencies and institutions are prioritising different value chains, with little information available on why different commodities have been selected. It states that there is an urgent need for improved agricultural statistics, allowing public and private stakeholders to improve policies and interventions in the agro-processing sector.