Wednesday 26 June 2013

Will Oil be a Deal or No Deal for farmers in Uganda?

Danie Lukwago
Morrison Rwakakamba



Uganda is on the verge of exploiting oil and gas resources in the Lake Albert Rift Basin. Oil wells are being sunk and a refinery is slated for construction, despite some occasional brushing of shoulders between government and oil companies. 

A windfall of revenues from oil and gas is expected any time from the year 2015 onwards for the next twenty or thirty years. Uganda government, the private sector and other stakeholders hold that non-oil industries will sprout up and jobs will be created. The structure of the economy will change, with oil becoming the major contributor to Gross Domestic Product (GDP). Consequently, there is a possibility that agriculture may suffer from neglect just like in many African oil producing countries. 

The foregoing expectations have already inspired development of policy and legal documents aimed at ensuring that the oil and gas resources and revenues are openly and transparently managed.
Over years, the share of agriculture in Uganda’s GDP has declined, while those of industry and service sectors have relatively increased. This would not be considered bad per se, if growth in service and industrial sectors create more jobs in these sectors while releasing unproductive labour from the agriculture sector. However, looking at Uganda Bureau of statistics (UBOS) 2012 statistical abstract, 66% of the labour force is still stuck in agriculture. This means that qualitative structural transformation of Uganda’s economy is happening at a slow pace. Trends in Uganda’s budget allocation already indicate that the agricultural sector is getting less attention from planners at technocratic and policy levels, since the sector receives less than 4% of the entire national budget.

The fortunes of Ugandan farmers under the new ‘oil economy’ are not very clear. The oil industry may hurt the agricultural sector further and prove to be an anathema to farmers who are the majority of Uganda’s population. In a new paper, http://www.agencyft.org/wp-content/uploads/2013/06/Publication-Farmers-in-Ugandas-oil-Economy-Deal-or-no-Deal.pdf, we argue that, if not prudently managed, the oil revenues can lead to a ‘natural resource curse’, as is the case with many African oil producing countries. For example, oil revenues can exert a negative impact on growth through having deleterious impact on institutional quality through rent-seeking and corruption; exposing the country to volatility, particularly in commodity prices; and making the country susceptible to Dutch Disease (the tendency for the real exchange rate to become overly appreciated in response to positive shocks), which leads to the contraction of the tradable sector. In addition, oil resources can considerably increase the chances of civil conflict in a country by affecting institutional quality (Sala-i-Martin and Subramanian, 2003). There are also worries about oil spills or contamination, which could displace populations and wildlife and damage water sources.

Like in other African oil producing nations, if unchecked, speculative tendencies by a few corrupt elite with access to illicit oil money may lead to huge countryside land purchases and in effect drive poor and small holder farmers out of their lands. Optimistically, if prudently managed, oil has the potential and vitality to spur Uganda’s economy and push the country to higher levels of development which countries like Norway have reached. However, this will only happen if there is strategic investment in non-oil sectors such as agriculture – which remains a dominant sector. Investment in agricultural modernisation, energy, education (skills development), transport infrastructure, tourism (agro-tourism), health, and environmental conservation is key. Through these strategic investments, farmers will be able to produce more and sell more, and consequently increase household incomestherefore increasing aggregate demand, which is key in stimulating the economy.

To counteract currency appreciation, Uganda will have to increase domestic production (especially of foodstuffs) and demand. Uganda will also have to leverage the Eastern Africa Community to set the common external tariff (CET) regime for sensitive agricultural commodities like maize, rice, fruits and other oil seeds to protect local farmers from cheaper food imports from Pakistan, India and other countries. For example, the CET of 75% for rice needs to be maintained in Uganda and in the region. Should Kenya, which is now the largest importer and supplier of rice in the region, continue to stay application then it may be prudent for Uganda to charge rice from Kenya at 75%, which corresponds to the EAC CET rate. This is likely to benefit farmers, close the competitiveness gap of Ugandan farmers, and increase people’s welfare and wellbeing. However, this measure will have to be implemented within a given time frame agreed upon with other EAC partner states. Overall, for farmers to benefit in Uganda’s oil economy, government through relevant institutions will have to do the following;




A: Leverage the Eastern Africa Community to set a common external tariff regime for sensitive agricultural commodities like maize, rice and other oil seeds to protect local farmers from cheaper food imports. This will be a strategic deterrent against expected currency appreciation driven by substantial amount of oil revenues.
B: Uganda joins Extractive Industries Transparency Initiative (EITI) a globally developed initiative for revenue transparency; accountability throughout the oil value chain. This will reduce the risk of corruption and speculative tendencies that have potential to drive farmers out of their lands.
C: Manage the potential effects of displacement of farmers, unfair compensations, and land evictions.
D: Manage environmental hazards such as flaring and venting; oil spills; land, air and water contamination; acid rain; health risks; and climate change.
E: Use oil revenues to capitalise the Uganda Development Bank and other local banks to push down interest rates for small holder farmers and small scale and medium enterprises to easily access agricultural credit.
F: Regulate local content to ensure that small holder farmers can benefit from oil companies and their auxiliaries through marketing of agricultural products and other value addition added agricultural products in Uganda.
G: Ensure that government fulfills the Maputo Declaration of allocating 10% of the national budget to agriculture with a broader objective of achieving and sustaining a 6% growth target.

Morrison Rwakakamba, CEO, Agency for Transformation

Daniel Lukwago, CEO, Nonner Consult

Thursday 20 June 2013

GEN. SEJUSA IS A BESIGYE COPYCAT WHO SHOULD BE IGNORED

I have been quietly following Gen. Sejusa aka Tinyefuza conundrum keenly – through newspapers and statements through his lawyers. I needed to listen to him speak. He has now spoken- far away from home – in the comfort of London- at the BBC.  His interview at the BBC lacked creativity and he could be classified as a Dr. Besigye copycat both in the issues he raised and the tone he used. And when I recalled the 2004 Andrew Mwenda live KFM discussions that pitted Gen. Tinyefuza and Col. Besigye I wondered whether Tinyefuza would be willing to listen to himself! In that interview, Col. Besigye was talking about evoking Article 3 of the constitution which requires all citizens to do all in their power to defend the constitution of the republic of Uganda.  In response, Gen. Tinyefuza argued that all democratic avenues are available in Uganda to contest for power and articulate alternative views. He in effect, invited Col. Besigye to come back from self-imposed exile and participate in Uganda’s political process. Well, Besigye returned and it is Gen. Sejusa himself who commandeered his arrest- the rest is history! Now, Sejusa is seeking to play Besigye. What a conundrum? Isn’t Tinyefuza a revisionist?  How I wish a sharp and clever journalist can dig up the records of KFM Andrew Mwenda live interview and juxtapose it with the BBC interview. Ugandans would then have an opportunity to judge the character of Gen. Sejusa and measure his authenticity as an aspiring leader of Uganda. I was also disappointed that General Sejusa did not give Ugandans details of strong claims he made is his popular letter. He for instance claimed that there is a plan to extra judiciary assassinate some top officials in government. As a top member of Uganda’s secret society – I expected him to divulge more details. He instead veered off from the content of his letter. Why? Was the letter a prank and only part of the strategy to launch his political campaign for change?
Gen. Sejusa, says to be “A four star General without ambition, you must be in a wrong place”. What did Sejusa mean? Is he suggesting that to be President of Uganda, one must have four star General credentials as a mandatory criterion? Now, the foregoing defines clearly the ideological position of General Sejusa. An ideology that seeks to perpetuate a psychological belief that to be a President in Uganda, one must be, or rather must have been a soldier! What a wrong ideology that seeks to trap Uganda in the past- yet this country has changed.  Gen. Sejusa must stretch and realize that Uganda is under civilian authority and the military submits to civilian authority. Ugandans are looking for contests that are based on ideas –period. General Sejusa disagreement with President Museveni stems from his misunderstanding of this particular milestone, and his misplaced sense of entitlement as one of those who sacrificed to liberate Uganda. The liberation was a sacrifice – and a sacrifice not for individual gratification and power but for setting Uganda to a democratic and transformational path.   That is why President Museveni subjected himself to democratic elections and by doing so handed power to civilian authority. I therefore, tend to think that Sejusa did not appreciate that and feels power should be shared in turns by those that participated in the liberation war. Even then, the military is an institution where any citizen can chose to pursue a professional career like any other institution of state. It is not intended to be a sure pathway to presidency. Anybody with ambition, whether a four star general, two star general or any citizen with required academic qualifications and age can aspire and subject himself or herself to the people of Uganda for any position including that of President. Therefore, Gen. Sejusa should state clearly his agenda. For example what does he want to change? What is his program of action? What new things and value does he want to add? What and which policies does he want to address?
Gen Sujusa also said, “ … once you are in the military and you think you have the capacity to be anything else, you are never released from the military. So we have a situation where you have everybody going in and nobody goes out”. Really? Again this is a falsehood. Many retired soldiers are active in business and politics. For example, there are many senior leaders both in opposition and government who are retired soldiers. We also know for sure that many constituencies in this country are represented in Parliament by for military officials. So why is Gen. Sejusa insinuating that his former colleagues who are retired and active in politics have no capacity to be anything else? Is for example being a President of the biggest opposition party –the Forum for Democratic Change (FDC) a demonstration of no capacity to be anything else? For starters, the President of FDC is Gen. Mugisha Muntu, a liberation war hero and former Army Commander of the UPDF. So why is Gen. Sejusa using the BBC platform to mislead the world? Why can’t he show respect for his former colleagues in the struggle? Perhaps Gen. Sejusa may need to clarify what he meant by no capacity to do something else. It’s also a falsehood that people who go in the army have no route to get out. What is true, is that there are clear procedures of entry and exit. The UPDF is not Kabetemere nko rutokye rwomushazi, a Banyankole proverb literally translated to mean a madman’s banana plantation where people go and harvest matooke and get out at will while the madman is looking on. Indeed former Supreme Court Justice George Kanyeihamba recently explained why he ruled against Gen. Sejusa by making a similar argument. Kanyeihamba argued that the principle of not allowing soldiers’ to retire as and when they feel like is a good thing. The retired judge further asks an intriguing and poignant question; Do you want soldiers’ to run away from UPDF under the guise of retiring? Your guess is as good as mine.
Morrison Rwakakamba
Coffee farmer – Rukungiri District
mrwakakamba@gmail.com

Wednesday 5 June 2013

2013/2014 Budget: Bigger pie of Agriculture sector budget should focus on DSIP and Local Governments

Although the agriculture sector has a Development Strategy and Investment Plan (DSIP), its implementation has been hampered by inadequate funding and poor linkage between Ministry of Agriculture Animal Industry and Fisheries (MAAIF) headquarters and Local Governments (LGs). For instance, in Financial Year 2012/13 the sector received Shs 379.04 billion compared to Shs 559.6 billion projected in the DSIP, thus leading to a funding gap of Shs 180.6 billion.
The agriculture sector remains among the lowest ranked sectors in the national budget. Agriculture sector has not received more than 5 percent share of the national budget since 2009/10. The total budget allocation for the agriculture sector for FY 2012/13 was Shs 379.04 billion which is 3.5% of the total national budget. The 2013/2014 projection is 3.2% - even if we stretch to the total direct and indirect allocation to the sector, the total allocation will not exceed 5% of the total national budget. Either way, the allocation to the sector is way below the Maputo / Comprehensive Africa Agriculture Development Program (CAADP)   declaration (target) of at least 10% of the national budget- that Uganda committed to implement.
Due to low funding, the agriculture sector is facing challenges, among them are: lack of implementation of the Shs 1.4 trillion national action plan on poverty reduction and enterprise selection; recruitment of staff at district Local governments; lack of non-wage budget to implement the MAAIF structure at headquarters; failure to provide water for agriculture production facilities; lack of continuous funding for technology development; and inability to fund 100 farmers per parish under NAADS and evident struggle to manage devastating wilts like banana bacterial wilt and coffee wilt.
Sadly, looking at inter-sectoral analysis of the agriculture budget over the last three years, one notes that 60 percent of the sector budget is allocated to central government agencies and the headquarters. Despite the fact that Local governments implement majority of the sector DSIP activities, only 40% of the sector budget is allocated to Local Government’s  programmes under advisory services and production services. Apart from NAADS, there is virtually no other government funding for agriculture at Local Government levels. 
Districts continue to face serious problems in raising local revenues to support the agriculture and other sectors. For example, Amuru collects only 0.7 percent of its total budget, Luwero at 1.2 percent of its entire budget and Nebbi at 3.3 percent! Can these districts marshal capacity to deliver local specific services especially those in the agriculture sector? The answer is no. Indeed most local governments depend on Central Government (CG) transfers. For 2012/2013 Financial Year, average CG grants constituted over 70 percent, 90 percent and 92 percent of Amuru, Luwero and Nebbi DLG budgets respectively for the last four years. The CG transfers are biased towards national budget priorities and are largely conditional in nature. This means local governments lack the discretionary powers to allocate resources and ensure that peculiar needs of the communities in areas such as agriculture and livelihoods are executed.
District Agriculture Budget Allocations also show that agriculture is not among the key priorities of the District Local Government (DLG) budgets. The share of the production sector (which constitutes agriculture) to the total DLG budget is less than 10 percent, averaging 6.7 percent, 7.3 percent and 8.4 percent in Amuru, Luwero and Nebbi DLGs respectively over the last four FYs (i.e. 2009/10 – 2012/13). Apart from NAADS, there is no other visible government agriculture development program at LG levels. Yet NAADS program mainly focuses on advisory services, and provision of inputs; other agriculture value chains such as pests and diseases control, post-harvest handling and marketing are largely underfunded. 
Generally sub-counties allocate more funds in their budgets towards agriculture compared to the central and DLGs. Over half of the entire sub-county budget is spent on agriculture related programmes. The higher share of agriculture in the sub-county budget is more encouraging especially given the fact that the sub-county is the front-line service delivery organ of government. The biggest challenge is that the actual amounts are too meager to create meaningful impact on the agricultural development in the county. 
Government should exploit the possibility of establishing an Agricultural Bank that will explicitly focus on farmers credit needs, hedge against risks like crop failures and price volatilities of agro-products. MAAIF needs to enhance its linkages with LGs through recruiting more staff and empowering the District Production offices. MAAIF needs to ensure that the DSIP is effectively implements by harmonizing its budget estimates with the Medium term Framework (MTEF) and annual budgets. Government needs to recruit more extension staff at the sub county level in a bid to address the inadequate staffing. Government needs to develop client’s charters between the service providers and communities/ beneficiaries.   Local Governments both district and sub-counties need to improve on their planning and budgeting process through involving the key stakeholders such as farmers.  Finally, LGs need to increase access to budget information through display of budget information on public notices boards, or announcements on radios and other local media where possible. The foregoing will tame corruption in the sector and increase service delivery efficiency.
Morrison Rwakakamba
Chief Executive Officer
Agency for Transformation