By Robert Mukiza, International Finance and Investment Expert
The negative impact of the COVID-19 pandemic on our economy and the risk that between 1-2 million Ugandans could slip back into poverty should cause us to seriously consider President Museveni’s advice of bringing more Ugandans into the money or market economy.
The President’s message is re-echoing the Government’s stated objective of transforming the agricultural sector from a subsistence into a commercial one, in order to increase household incomes.
The era of our small holder farmers remaining content with being food sufficient should be brought to an end. All efforts ought to be made to support them to sell some food in the local markets, in order to earn some income. In this way, millions of shillings could be put into the hands of rural people, thereby expanding demand for goods and services in rural economies. Moreover, this increased demand for goods and services will lead to a rapid growth of non-farm jobs and incomes.
Although the benefits of moving more farmers away from subsistence into commercial agriculture are clear, a number of obstacles persist.
First, many small holder farmers are concerned about their own food security. This concern has been identified by researchers to be more pronounced in the second season of the year. If farmers are worried about their own food security, they will be less willing to sell any produce to the market. If these concerns about food security are not adequately addressed, then, small holder farmers will always be hesitant to become active participants in the market.
The second impediment to the participation of small holder farmers in the market is the issue of a complicated land tenure system, characterized by land fragmentation and land wrangles. If farmers are not sure of the ownership of the land on which they cultivate, then they will be less willing to engage in more commercial activities.
Similarly, farmers with very small parcels of land will tend to prioritize growing food for consumption. The lack of access to good feeder roads has also been shown to be an impediment to farmers’ participation in the market economy.
The farther a farmer is from a good feeder road, the less likely they will be to participate in the market. Poor roads impose very high transaction costs on farmers and discourage them from participating in markets.
Climate change and unexpected weather occurrences, such as drought also exacerbate the food security fears of farmers and make it less likely that they will participate in the market economy.
To combat the above challenges, the Government through the National Development Plan III and the Budget Framework Paper for the Financial Year 2021/22, has laid out ambitious interventions. For example, to address the food security concerns of farmers, the Government has prioritized boosting production and productivity in the agricultural sector.
Indeed, over the last five years, as a result of the implementation of the Operation Wealth Creation (OWC), the growth of the agricultural sector has averaged 3.4% per annum. Specifically, food crops grew at 3.7% p.a, cash crops grew at 6.4% p.a, while the livestock sector lagged at 2.1% p.a.
To build on these successes, the Government through the agro-Industrialization programme, intends to increase the commercialization and competitiveness of the agricultural sector. Specifically, the government seeks to create more jobs in agro-industry and improve the food security of small holder farmers. Government is also investing in rural feeder roads and markets.
Under the 2nd Phase of the Markets and Agricultural Trade Improvement Programme (MATIP-2) the Government has constructed 11 new and modern markets in: Busia, Tororo, Soroti, Arua, Kasese, Mbarara, Kitgum, Masaka, Moroto, Lugazi and Entebbe.
Finally, the Government is encouraging Ugandans to desist from land fragmentation and archaic land inheritance practices that discourage agricultural commercialization.
Robert Mukiza, International Finance and Investment Expert
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