JoIN T D ISC U SSIoN pA peR T H e Wo R l D B A N k , U N I v e R S I T y o f G U e l p H , A N D M A k e R e R e U N I v e R S I T y 71630 NoT yeT Up To STANDARD: The legacy of Two Decades of private, Governmental, and Donor efforts to promote Ugandan Horticultural exports Luz Diaz Rios, steven Jaffee, spenceR Henson anD JoHnny MugisHa JUly 2009 A F R I C A N S M A L L H O L D E R S FA R M E R S A N D PA R T I C I PAT I O N I N H I G H E R - VA L U E S U P P LY C H A I N S Joint Organizational Discussion Paper- Issue 1 T H E WO R L D B A N K , U N I V E R S I T Y O F G U E L P H , AND THE UNIVERSITY OF MAKERERE NOT YET UP TO STANDARD: The Legacy of Two Decades of Private, Governmental, and Donor Efforts to Promote Ugandan Horticultural Exports Luz Diaz Rios Steven Jaffee Spencer Henson Johnny Mugisha Uganda_Horticulture_FM.indd i 8/19/09 2:32:43 PM © 2009 The International Bank for Reconstruction and Development / The World Bank 1818 H Street, NW Washington, DC 20433 Telephone 202-473-1000 Internet www.worldbank.org/rural E-mail ard@worldbank.org All rights reserved. This work was undertaken under the Research Program “African Smallholder Farmers and Participation in Higher-Value Supply Chains� cofunded by the Government of the Netherlands and the International Research Centre, Ottawa, Canada. This volume is a product of the staff of the International Bank for Reconstruction and Development/ The World Bank, University of Guelph and the University of Makerere. The �ndings, interpretations, and conclusions expressed in this paper do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The International Bank for Reconstruction and Development/ The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, USA, telephone 978-750-8400, fax 978-750-4470, http://www.copyright.com/. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Of�ce of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA, fax 202-522-2422, e-mail pubrights@worldbank.org. Authors Luz Diaz Rios, Consultant, Agriculture and Rural Development Department, The World Bank. Steven Jaffee, Lead Economist, Agriculture and Rural Development Department, The World Bank. Spencer Henson, Professor, University of Guelph in Canada, and Visiting Fellow, Institute of Development Studies, University of Sussex in United Kingdom. Johnny Mugisha, Senior lecturer, Department of Agricultural Economics and Agribusiness, Makerere University in Uganda. Uganda_Horticulture_FM.indd ii 7/27/09 4:07:45 PM CONTENTS LIST OF FIGURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv LIST OF TABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v LIST OF BOXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi ABBREVIATIONS AND ACRONYMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii LIST OF STANDARD UNITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . x ACKNOWLEDGMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xii INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 CHAPTER 1 A Role for Fruit and Vegetable Exports in Uganda’s Growth and Poverty Reduction Strategy? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1.1 Conceptualizing the Challenges of Ugandan NTAE Development . . . . . . . . . . . . . 5 1.2 The Early Challenges of Horticultural Export Development in Uganda. . . . . . . . . . . 8 1.3 Identifying Suitable Entry Points: Toward Public and Private Capacity Building . . . . . . 11 1.4 Achievements and Frustrations from the mid-1990s to 2000s . . . . . . . . . . . . . . 14 CHAPTER 2 Emerging Standards and the Commercial Responses by Ugandan Horticultural Exporters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 2.1 Recent Structure of Ugandan Fresh Produce Exports to Europe . . . . . . . . . . . . . 26 2.2 Strategic Responses to an Evolving Market: Comply, Redirect Focus, or Exit? . . . . . . 29 2.3 Adjusting Procurement Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 2.4 Standards Compliance as an Overstated Element of the Industry’s Competitiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 CHAPTER 3 Development Community and GoU Response to Compliance Challenges . . . . . . . . . . 43 3.1 Overview of Recent Interventions in the Fruit and Vegetable Sector in Uganda . . . . . 43 3.2 Strengthening Industry Capacities to Comply with Quality, Safety, and Traceability Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 3.3 Initiatives Supporting Market Differentiation: Organic and Value Addition through Processing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 CONCLUSIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 REFERENCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 ANNEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_FM.indd iii 7/20/09 4:19:14 PM LIST OF FIGURES FIGURE 1 Overall set of factors determining an effective supply response to NTAE market opportunities . . . . . . . . . . . . . . . . . . . . . . 7 FIGURE 2 Interventions supporting export horticulture development in Uganda during the 1990s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 FIGURE 3 Spectrum of commercial and regulatory requirements and associated conformity assessment systems in fruit and vegetable markets . . . . . . . . . . 24 FIGURE 4 Product share of EU fresh fruit and vegetable imports from Uganda, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 FIGURE 5 EU imports of fruit and vegetables from Uganda by main destination, 2000 to 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 FIGURE 6 EU imports of fruit and vegetables from Uganda by product, 1999 to 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 FIGURE 7 Ugandan exports of chilies/hot peppers, 2003 to 2007 . . . . . . . . . . . . . . . 29 FIGURE 8 Strategic options implemented by Ugandan exporters in response to compliance issues and competitiveness forces . . . . . . . . . . . . . . . . . 30 FIGURE 9 Framework of recent interventions in the Uganda horticulture sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 FIGURE 10 Perceived bene�ts of interventions improving traceability and food safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 FIGURE 11 SWOT analysis of the Uganda horticulture sector I . . . . . . . . . . . . . . . . . 80 FIGURE 12 SWOT analysis of the Uganda horticulture sector II . . . . . . . . . . . . . . . . 81 TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_FM.indd iv 7/20/09 4:19:14 PM LIST OF TABLES TABLE 1 USAID support to agro-enterprise development in Uganda . . . . . . . . . . . . . 6 TABLE 2 Examples of internal and external capacities critical for NTAE development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 TABLE 3 Summary of key interventions undertaken in horticulture by the IDEA project through 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . 11 TABLE 4 Entry point of the main initiatives supporting horticulture development in Uganda during the period 1988–2002 . . . . . . . . . . . . . . . . 12 TABLE 5 Estimated value of Uganda’s high-value exports, 1988–2002 (US$ million FOB). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 TABLE 6 Share of largest export �rms in total fruit and vegetables exports to the European Union (%). . . . . . . . . . . . . . . . . . . . . . . . . . 27 TABLE 7 Product share of total fruit and vegetable exports of some leading exporting companies 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . 29 TABLE 8 Ugandan company perceptions of the main factors affecting their participation in the EU market . . . . . . . . . . . . . . . . . . . . . . . . . 42 TABLE 9 Aspects of compliance promoted by different interventions directed at compliance with market/buyer requirements . . . . . . . . . . . . . . 44 TABLE 10 Main entry points and instruments used by support programs promoting compliance with market/buyer requirements . . . . . . . . . . . . . . . 46 TABLE 11 Typology of cost elements covered or shared by interventions . . . . . . . . . . . 47 TABLE 12 Broad themes of assistance provided by PIP program . . . . . . . . . . . . . . . . 52 TABLE 13 Respondent perceptions of where awareness and implementation had been achieved . . . . . . . . . . . . . . . . . . . . . . . . . 59 TABLE 14 Firm commercial strategies in absence of donor support . . . . . . . . . . . . . . 62 T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_FM.indd v 7/20/09 4:19:14 PM LIST OF BOXES BOX 1 Supporting agro-enterprise development: USAID interventions in Uganda. . . . . . . 6 BOX 2 Initial gains on NTAE development from existing capacity . . . . . . . . . . . . . . . 9 BOX 3 The intermediary role of the donor to overcome public and private institutional capacities: the Agribusiness Development Center . . . . . . . . . . . . 13 BOX 4 Developing a supply of products with low agronomic potential and few competitive advantages: the case of temperate vegetables. . . . . . . . . . . . 17 BOX 5 Coordinated supply chain response to a poorly identi�ed market opportunity: the case of dried oyster mushrooms . . . . . . . . . . . . . . . . . . . 18 BOX 6 Segmentation of buyer demands for fruit and vegetables in non-GlobalGAP certi�ed markets in the United Kingdom. . . . . . . . . . . . . . . . 25 BOX 7 Partnering with “lead �rms� to boost horticulture exports: the case of Mairye Estates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 BOX 8 Changing product FOCI: the case of Uganda’s pioneer company in organic produce exports to Europe. . . . . . . . . . . . . . . . . . . . . . . . . . 34 BOX 9 Supplying less demanding markets, while achieving organic and GlobalGAP certi�cations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 BOX 10 Produce or procure from smallholders? The case of a leading exporting �rm . . . . . 37 BOX 11 Changing geographic scope to reduce domestic competition and ensure a continuous supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 BOX 12 Achieving GlobalGAP and organic certi�cation to open opportunities in higher segments of the EU market: the key role of the lead �rm . . . . . . . . . . 40 BOX 13 Addressing basic bottlenecks in passion fruit production. . . . . . . . . . . . . . . . 41 BOX 14 A produce-oriented approach to improve industry competitiveness and improve quality and consistency: the Strategic Export Program (SEP) . . . . . . . . . 49 BOX 15 Export Production Village Program: Channeling support through coordinated supply chains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 BOX 16 “Big leaps� along the spectrum of buyer requirements have a high risk of failure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 BOX 17 Nurturing associations to ensure sustained participation in international markets: the case of a cooperative in the Kasese region . . . . . . . . . . . . . . . . 56 BOX 18 Export Promotion of Organic Products from Africa (EPOPA) Program . . . . . . . . . 64 BOX 19 EPOPA approach to certi�cation of farmer groups . . . . . . . . . . . . . . . . . . . 65 BOX 20 Aggregating volumes and improving overall quality: Natural Pride of Uganda . . . . . 68 BOX 21 Promoting fruit production to satisfy local and regional demands . . . . . . . . . . . 71 TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_FM.indd vi 7/20/09 4:19:14 PM ABBREVIATIONS AND ACRONYMS A2N Africa 2000 Network ACP African, Caribbean, and Paci�c countries ADC Agribusiness Development Center ADF African Development Foundation AFPEC Association of Fresh Produce Exporting Companies ANEPP Agriculture Non-Traditional Export Promotion Project APEP Agriculture Productivity Enhancement Project ASPS Agriculture Sector Programme Support project BMFL Bukonzo Mixed Farmers Limited BSDP Business Service Development Project BUDS-EDS Business Uganda Development Scheme, Enterprise Development Support CAAS Cooperative Agriculture and Agribusiness Support Project CBI Centre for the Promotion of Imports from Developing Countries CEDE The Centre for Development and Enterprise COLEACP Liaison Committee Europe-Africa-Caribbean-Paci�c DANIDA Danish International Development Agency DDT Dichlorodiphenyltrichloroethane DED German Development Service DFID Department for International Development EPADU Export Policy Analysis and Development Unit EPOPA Export Promotion of Organic Products from Africa EPV Export Promotion Village EU European Union FAO Food and Agriculture Organization of the United Nations FOB Free on Board FPPC Food Processing Pilot Center GAP Good Agricultural Practice GDP Gross Domestic Product GMP Good Manufacturing Practice GoU Government of Uganda T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_FM.indd vii 7/20/09 4:19:14 PM viii ABBREVIATIONS AND ACRONYMS HACCP Hazard Analysis and Critical Control Point HIVOS Humanistisch Instituut voor Ontwikkelingssamenwerking (Dutch: Humanist Institute for Development Cooperation HORTEXA Horticultural Export Association HPOU Horticulture Promotion Organization of Uganda ICRAF International Center for Agro-Forestry ICS Internal Control System IDEA Investment in Developing Export Agriculture project ILO International Labor Organization IKN International Knowledge Network for Sustainable Development IPM Integrated Pest Management KSIIP Kasese Smallholder Income and Investment Program MAAIF Ministry of Agriculture, Animal Industries, and Agriculture MFEP Ministry of Finance and Economic Planning MKIS Market Knowledge Information System MoU Memorandum of Understanding MRLs maximum residue levels NaCRRI National Crops Resources Research Institute NAPU Natural Pride of Uganda NARO National Agriculture Research Institute NAADS National Agriculture Advisory Services NEMA National Environmental National Authority NES Uganda National Export Strategy NGO non-governmental organization NOGAMU National Organic Agriculture Movement of Uganda NTAE Non-Traditional Agricultural Exports ODA Overseas Development Agency PIP Pesticide Initiative Programme PMA Plan for Modernization of Agriculture PMO primary marketing organization PSFU Private Sector Foundation Uganda PSOM Programme for Cooperation with Emerging Markets TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_FM.indd viii 7/20/09 4:19:14 PM A B B RE VIAT IONS AND ACRONYMS ix RATES Regional Agriculture Trade Expansion Support RPE Rehabilitating Productive Enterprise program RUCID Rural Community in Development SCOPE Strengthening the Competitiveness of Private Enterprise SEP Strategic Export Programme SHF smallholder farmer Sida Swedish International Development Cooperation Agency SMEs small- and medium-sized enterprises SSA Sub-Saharan Africa SWOT strengths, weaknesses, opportunities, and threats UAWMPE Association of Women Mushroom Producers and Exporters UBOS Uganda Bureau of Statistics UEPB Uganda Export Promotion Board UEPC Uganda Export Promotion Council UgoCert Uganda Organic Certi�cation Ltd. UIA Ugandan Investment Authority UNBS Uganda National Bureau of Standards UNCTAD United Nations Conference on Trade & Development UNIDO United Nations Industrial Development Organization USAID US Agency for International Development VAT value-added tax VECO VredesEilanden Country Of�ces WSSD World Summit on Sustainable Development T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_FM.indd ix 7/20/09 4:19:14 PM LIST OF STANDARD UNITS MT metric tons kg kilogram km kilometer US$ international dollar Ha hectare euro £ British pound TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_FM.indd x 7/20/09 4:19:14 PM ACKNOWLEDGMENTS The authors would like to express their sincere gratitude to the industry leaders and exporters in Uganda for sharing their experiences and insights on the enormous challenge of achieving sus- tained participation in international horticultural markets. Special appreciation is given to the donor agencies and Government authorities that contributed to this work, by kindly and openly sharing their experiences and reflections on the challenge of providing effective support to export horti- culture and for facilitating key documentation. Appreciation is also extended to the independent consultants, service providers, and other stakeholders for their invaluable contributions to the preparation of this report. T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_FM.indd xi 7/20/09 4:19:14 PM EXECUTIVE SUMMARY During Uganda’s post-conflict period, several development assistance efforts sought to revive and diversify the country’s agriculture exports as a means of accelerating growth, reducing poverty, and lowering the �scal vulnerability associated with the country’s extreme level of dependence on a single export commodity—coffee. Particular attention was given to the development of higher-value agro-food exports, including fruits and vegetables. Uganda appeared to be blessed with a favorable climate, ample natural resources, and a plentiful and inexpensive labor force, thus providing the bases for horticultural comparative advantage. Beginning in the late 1980s and early 1990s, a few Ugandan �rms made tentative steps to enter the European Union (EU) market for fresh fruit and vegetables. Early support was provided under several donor-led initiatives, which involved much experimentation with new crops and/or varieties and attempts to augment nascent private and public sector capacities. A signi�cant part of the assistance was directed at individual companies. Other, more limited support measures were taken by the Government of Uganda (GoU). Two models of development were envisioned, both involving so-called “lead �rms.� First, companies were to emerge with their own farms and some out-growers, and compete with established Kenyan exporters in the market for temperate vegetables. Firms were expected to invest in farms, modern packinghouses, and other supply chain facilities. Second, entrepreneurs who were already working with a broad array of smallholder out-growers were to establish or expand export of various products directed at “ethnic� or immigrant community markets in European countries. Overall, knowledge would be generated and spread through research trials, demonstration plots, and other outreach programs. In spite of these efforts, Ugandan horticulture attracted few investors with relevant experience and managerial capacity, or with ample access to �nancial resources. It was a new industry facing numerous “teething problems�—agronomic, logistical, institutional, and so forth. Very few of the early experiments or demonstration plots translated into commercial activity. The sector experienced little sustained investment, with most Ugandan entrepreneurs �nding better and/or less risky returns in other endeavors. The few well-capitalized companies that did enter the sector struggled to make a pro�t. The activity of newly created industry associations was limited and donor dependent. Hence, by the early 2000s, and after a decade of development assistance and government support, the Uganda horticultural export trade remained very small and seemingly fragile, with weaknesses at all levels in the supply chain, limited capacity for collective action, and relatively few individual success stories at the commodity or �rm level. Stakeholders drew variant lessons TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_FM.indd xii 7/20/09 4:19:14 PM E X ECUT IVE SUMMARY xiii from this early experience. Some contended that Uganda still possessed important assets to underpin a competitive horticultural industry, that useful learning had taken place, and that continued GoU and donor support could still enable the sector to gain a critical mass and become well positioned in external markets. Others argued that Uganda’s natural assets and lower labor costs had not and were not likely to overcome signi�cant disadvantages (e.g., Uganda’s land- locked position) and that Uganda’s industry lacked any clear competitive advantage over the incumbent players in the international trade of temperate vegetables and most “ethnic� fruits and vegetables. Most of the early attempts to grow and export temperate vegetables—in competition with Kenya and others—were unsuccessful. Thus, the bulk of Uganda’s small horticultural trade in the early 2000s consisted of various types of peppers and other vegetables directed to distribution channels in the United Kingdom and some other parts of Europe serving various ethnic minority/ immigrant communities. Traditionally, importers and wholesalers of these products sought suppliers who could consistently meet consumer preferences for quality and variety, do so at competitive prices, and be reliable in delivering agreed volumes of produce. The increasingly intense focus—from the early/mid-90s onward—on food safetpy matters (and especially pesticide residue) in the overall EU market for fresh produce �ltered only slowly into the distribution channels for (and regulatory oversight) of more “exotic� or “ethnic� fruits and vegetables. Hence, while African suppliers of temperate vegetables were being put under increasing pressure from their buyers to upgrade food safety and other standards, these pressures were largely missing— at least through the early 2000s in the ethnic food trade. Nevertheless, these latter markets are certainly not stagnant. Increasingly, many of the so- called “ethnic� foods have been �nding their way into mainstream consumer markets, not least of which through the catering trade and the proliferation of restaurants featuring an international cuisine. Some European importers servicing these emerging market segments stepped up pres- sure on their Ugandan suppliers to undertake and demonstrate improved production, hygiene, and quality management. Other importers still servicing the more traditional wholesale/retail channels also began asking questions about production and packing practices. Thus, by the mid-2000s, Ugandan exporters understood that they could no longer apply “business as usual,� with disjointed supply chains and outdated production and packing practices if they were to maintain, let alone enhance, their position in the European market. Among Uganda’s several dozen horticultural export companies, various strategies have been employed to respond to the evolving regulatory and commercial environment within Europe. Some �rms have focused their attention on upgrading out-grower production practices, packinghouse operations, and associated documentation in order to comply with and be certi�ed T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_FM.indd xiii 7/20/09 4:19:14 PM xiv EXECUTIVE SUMMARY under GlobalGAP and other protocols. Others have sought to reposition themselves in the market by focusing on the procurement and sale of organic fruits and vegetables. Still others have shifted their businesses to focus on the production and sale of processed products, especially dried fruit. The remainder are just treading water—making minimum changes and continuing to trade on a periodic basis. The attempts by Ugandan �rms to adjust to, cope with, or even take advantage of emerging requirements and consumer preferences have been supported by various GoU, international donor, and NGO initiatives. From the early 2000s, both the donor community and the GoU embraced compliance with private standards such as GlobalGAP as a central focus of their sup- port to the sector. The rationale was seemingly that standards compliance was both necessary to maintain Uganda’s limited toehold in the European market and an opportunity for exporters to differentiate themselves in parts of that market. A broad range of interventions sought to raise awareness of standards and to facilitate their adoption via training, technical assistance, and �nancial assistance, especially to cover certi�cation costs (and, in some cases, purchases of equipment). This assistance was predominantly channeled through “lead �rms.� These �rms, in turn, were supposed to provide the proper signals, incentives, and support to smallholder farmers to adopt good agricultural practice (GAP) and otherwise be compliant with buyer and/or regulatory requirements. Some efforts were made to customize interventions to accommodate the preexisting capacities of �rms and other basic structural conditions. The available evidence suggests that most �rms had very limited capacity to absorb this assis- tance and, more importantly, to translate it into more competitive and sustainable operations. With limited exceptions, increased awareness and knowledge has not been translated into improved practices along the value chain, predominantly because Ugandan exporters lack the �nancial resources to invest in improved physical facilities or in sustained upgrading to operating systems and ongoing training of staff. Uganda’s horticulture export trade remains fragile, with weaknesses at all levels in the supply chain. One or two small �rms have been able to achieve GlobalGAP certi�cation, yet will probably require donor �nancing to cover at least partially the costs of recerti- �cation. Likewise, some interesting initiatives have emerged in the organic sector, but most have ongoing donor assistance. The incentives for other exporters to invest in substantive upgrades to their production and/or procurement systems are limited, unless much of the cost is defrayed through sustained technical and/or �nancial assistance. In many cases, weak market signals and lack of specialization in production for exports provide insuf�cient motivation for exporters and producers to do things differently in a consistent and sustained manner. Further, export-oriented horticulture is not suf�ciently attractive to invite signi�cant new investment, either from domestic or international sources. Evidently, donor and/or TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_FM.indd xiv 7/20/09 4:19:14 PM E X ECUT IVE SUMMARY xv government support will remain essential if Uganda is to maintain its limited foothold in European markets, yet at the same time we must be realistic about what this support is likely to achieve in the short and medium terms. Clearly, the challenge of standards compliance is just one among a set of challenges faced by this industry. In recent years, the dedicated attention by donors and the government to standards compliance may have overlooked many of the more fundamental matters of management, applied research, technology transfer, and access to �nance, which are required to ensure sustainable participation in international markets. Support to maintain and consolidate limited gains in some export sectors and to address underlying industry constraints is needed, but with a focus on approaches that integrate compliance issues within the wider set of production and marketing factors. Given the industry’s small size ($4.7 million, the value of exports to the EU in 2007), low pro�t- ability, and fragile competitive position in European markets, it is dif�cult to see how horticultural exports will yield signi�cant gains in terms of rural income and employment. A few thousand smallholders are irregularly involved in supplying this trade. Some recent gains have been made in exports, notably hot peppers, yet overall the industry is probably falling farther behind its main com- petition from within and outside of Africa. Donor and/or government support to the participation of a few lead �rms in international markets is unlikely to present opportunities for enhanced livelihood to many producers. Indeed, it is probable that the greatest scope for absorbing large numbers of smallholders is with promotion of horticultural production for local and/or regional markets. For the international development community, several broad lessons can be drawn from this industry case study. First, dedicated programs focusing simply on standards compliance (or, more narrowly, certi�cation) are not likely to be successful in the context of emergent (immature) industries. Put another way, “compliance� is likely to be no more than a fleeting mirage where fundamental supply chain weaknesses persist. Efforts to promote GAP and associated systems of record keeping and traceability are more likely to be successful where farmers have reliable market outlets, the basic agronomic challenges for the focal crop(s) have been well addressed, and other factors provide strong incentives for farmers to adjust practices and make investments as per the recommendations or urgings of buyers. Thus, development assistance interventions focused on standards compliance and related upgrading are likely to have greater and more sus- tainable impact when applied in contexts where many other technical and supply chain problems have been resolved and where there are clear market signals that compliance is demanded. In circumstances where more fundamental constraints are still unsolved, efforts to build awareness and capacity for standards management need to go hand in hand with complementary measures. In the Ugandan context, it is not evident that this has been the case. T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_FM.indd xv 7/20/09 4:19:14 PM xvi EXECUTIVE SUMMARY Second, in supporting standards compliance, efforts involving “great leaps forward� are unlikely to have high success rates. In many instances, donor assistance sought to defray the costs of certain upgrades by both lead �rms and producers, including the steps toward achieving GlobalGAP certi�cation. However, most exporters have found themselves having to make huge leaps in capacity in order to achieve prevailing benchmarks in more exacting markets, essentially transforming their entire businesses, when there are few tangible assurances that the pertinent investments will result in new or more remunerative trading opportunities. Programmatic subsi- dies can help to offset some of the initial upgrading costs, yet the �rms are left with the recurrent costs of running a more complex business and supply chain operation. For most of the incumbent players in Uganda’s horticultural industry, this “new� latter business model may be inappropriate and unsustainable, except with sustained donor and/or governmental support. A more graduated, incremental process of management system and commercial practice upgrades may prove to be more sustainable in circumstances where the core industry players are primarily smaller companies. TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_FM.indd xvi 7/20/09 4:19:14 PM INTRODUCTION The relative prosperity enjoyed by Uganda during the 1960s, based largely on the traditional exports of coffee, tea, cotton, and tobacco, was eroded by a devastating civil war over the period 1971 to 1985. The war disrupted agricultural production and marketing, and weakened public and private infrastructure. By 1988, the only major export was coffee, representing 95 percent of total merchandise exports. During the post-conflict period, several development assistance efforts sought to revive and diversify Uganda’s agriculture exports as a means of accelerating growth, reducing poverty, and lowering the �scal vulnerability associated with such high export depen- dence on a single commodity. Particular attention was given to the development of higher-value agro-food exports, including fruits and vegetables. Although producing a wide range of fruits and vegetables and having one horticultural crop (plantain) as a core staple food, Uganda was a relative newcomer to the �eld of horticultural exports. Local stakeholders and development assistance agencies sought to emulate the success of neighboring Kenya and/or other examples of emerging successful horticultural trade from sub-Saharan Africa (SSA). Uganda appeared to be blessed with a favorable climate, ample natural resources, and a plentiful and inexpensive labor force, thus providing the bases for horticultural comparative advantage. Yet, could these assets be translated into a successful horticultural export trade? Could horticultural production and trade make an important contribution to the recovery and growth of the Ugandan economy? And, could export-oriented horticultural production boost incomes for large numbers of Ugandan smallholder farmers? During the immediate post-conflict period, development assistance efforts focused on promot- ing macroeconomic stabilization, rehabilitating physical infrastructure, strengthening basic public services, and creating a better enabling environment for private investment. By the late 1980s, selected donor interventions began to target the development of nontraditional agricultural ex- ports (NTAE). Over the subsequent decade, these efforts involved the exploration of potentially remunerative products and markets and the creation or augmentation of underlying capacities in the private and public sectors. Entirely new supply chains were formed, with emphasis put on introducing and expanding the production of nontraditional crops and introducing Ugandan entre- preneurs to pertinent market players. More recently, and at least since 2002, a major thrust of NTAE-related development assistance has centered on helping Ugandan stakeholders to comply with emerging regulatory and private stan- dards, including those for food safety and environmental management. Whether needed to retain market (segment) access or providing a basis for brand/company/product differentiation, compli- ance with emerging standards has been perceived as increasingly critical for the competitiveness T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_Chapter.indd 1 7/20/09 4:21:00 PM 2 NOT YET UP TO STANDARD of Ugandan NTAE.1 While this has been marketing, and �nancial constraints have led especially evident for Uganda’s important some industry players to exit from this trade. �sh exporting industry, which was temporar- Although other export �rms remain active, ily banned from the EU market during the only modest amounts of private investment late-1990s due to food safety product and have taken place and institutions for collective institutional concerns, an increasing aware- action remain weak, while the overall indus- ness of the role and importance of standards try lacks a suf�cient critical mass to achieve compliance has also taken place in Ugandan economies of scale or scope or to differenti- horticulture. ate itself in targeted international markets. External development assistance has recently Since the early to mid-1990s, the develop- been scaled back, with some traditional ment of Uganda’s NTAE has been quite donors to the sector phasing out their sup- uneven, although the composition of the port entirely. Thus, after nearly two decades country’s food and agricultural export basket of development assistance, Uganda’s horti- is certainly now much more diversi�ed. Con- cultural export sector is still struggling and its siderable success has been achieved in the impact on Uganda’s overall economy arguably development of �sh exports (which exceeded remains marginal. Increased attention to and $124 million in 2007) while, until recently, some success in the adoption of improved Uganda’s floricultural exports underwent sus- food safety, environmental, and other stan- tained growth. Other NTAE, however, have dards have not counterbalanced underlying either remained very small or experienced competitive and structural weaknesses in the wide year-to-year fluctuations. At the same sector. time, Uganda has developed a sizable trade in staple food commodities (plantain, maize, This paper retraces this experience of un- beans, etc.), supplying regional markets as ful�lled promise, highlighting the interplay well as humanitarian relief programs. among industry, government, and develop- ment assistance initiatives and the factors Despite strong government interest and that have prevented the sector from realizing a broad range of development assistance its expected growth and maturation. From interventions, Uganda’s horticultural exports these experiences, selected lessons are have remained very modest. Fruit and veg- drawn that can inform the design of future etable exports, largely geared toward the interventions in this �eld, whether in Uganda EU, totaled less than $5 million in 2007, with or elsewhere in sub-Saharan Africa. The paper the level of trade showing uneven patterns is based upon interviews with selected re- from year to year. Persistent production, spondents, including government authorities, exporting companies, donors, and practitio- 1 See the background paper on Ugandan trade and ner organizations, carried out in 2007 and standards prepared for the Diagnostic Trade Integra- tion Study (Jaffee et al., 2006). 2008. It also draws upon past project reports, TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_Chapter.indd 2 7/20/09 4:21:00 PM I N T RODUCT ION 3 country- and industry-specify case studies, 2000s in response to past performance and and international statistics. in the face of evolving regulatory and market requirements, especially in the European The paper is divided into four sections. Union. Section 3 examines the rationale for, Section 1 provides a brief historical perspec- means of support of, and apparent ef�cacy tive on the emergence of the Ugandan fruit of a range of recent programs seeking to and vegetable export industry and examines improve or sustain the competitiveness of the role played by different government Uganda’s fruit and vegetable exports via and donor initiatives in the initial shaping of improved compliance with regulatory or pri- the sector, between the late 1980s and late vate standards. Lessons are drawn from this 1990s. Section 2 highlights the strategic experience. Section 4 provides a brief set of commercial approaches adopted by Ugandan general conclusions. exporting companies and farmers during the T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_Chapter.indd 3 7/20/09 4:21:00 PM Uganda_Horticulture_Chapter.indd 4 7/20/09 4:21:00 PM CHAPTER 1 A Role for Fruit and Vegetable Exports in Uganda’s Growth and Poverty Reduction Strategy? In Uganda, one of the most destructive economic effects of the civil war was the flight of private capital. Opportunities for reversing the negative effects of the loss of private capital largely depended upon policy choices, which Uganda has been proactively exercising since 1987. At the beginning of 1986, GDP was 20 percent lower than in the 1970s and inflation was raging at around 240 percent per year (World Bank, 2000). The Government, with the support of the World Bank2 and other donors, embarked on a stabilization and structural adjustment program in 1987, followed by economic liberalization reforms, with gradual results that have been frequently ac- knowledged (World Bank, 2000; IDA, 2006; DTIS, 2006).3 Complementing these broader reform and stabilization measures, other initiatives were under- taken that speci�cally sought to strengthen Ugandan agro-enterprises as a means of generating sustained growth and reducing poverty. The US Agency for International Development (USAID) was the most active development assistance partner in this endeavor (Box 1). Over the period 1988 to 2002, USAID spent nearly US$76.5 million on programs for which the primary focus was NTAE development and associated farmer–agribusiness linkages. Support for horticultural exports formed a subset of these NTAE development initiatives. 1.1 Conceptualizing the Challenges of Ugandan NTAE Development Programming interventions to promote NTAE development in Uganda has required a careful and continuous assessment of available market opportunities, a clear de�nition of needed supply and coordination capabilities, and the design of suitable interventions to facilitate the emergence, strengthening, and sustainability of such capabilities. The critical challenge is to translate a country’s/industry’s/company’s basic sources of comparative advantage into a sustained competi- tive response. To do so, it is necessary to benchmark the target entity’s “starting point� in terms of the presence of basic and advanced productive assets and its apparent capacity to innovate. In horticulture, as with various other categories of NTAE, basic productive factors include land and water resources, agro-climatic conditions, geography and topography, and demographic and labor conditions. More advanced productive assets include logistics infrastructure, science and technol- ogy systems, and entrepreneurial skills, among others. 2 During 1987–1997, the World Bank’s portfolio for reconstruction and rehabilitation of the Uganda economy reached nearly US$2 billion. 3 During the 1990s, Uganda attained one of the highest per capita real GDP growth rates in the world, albeit from a low base, of 3.4 percent per annum, double that of the 1.7 percent per annum for all developing countries (IF, 2006). T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_Chapter.indd 5 7/20/09 4:26:19 PM 6 NOT YET UP TO STANDARD Box 1 SUPPORTING AGRO-ENTERPRISE DEVELOPMENT: USAID INTERVENTIONS IN UGANDA For nearly a quarter century, USAID has been providing support to agro-enterprise development in Uganda. As Table 1 illustrates, the areas of relative emphasis have evolved under this program. Initially, under the 1984–1988 Rehabilitating Productive Enterprise (RPE) Program, the focus of attention was on the post-conflict rehabilitation and recapitalization of enterprises. By the late 1980s, the center of attention shifted to NTAE development, especially under the Agricultural Non-Traditional Export Promotion (ANEPP) and Investment in Developing Export Agriculture (IDEA) projects. More recently, greater attention has been given to matters of farmer and en- terprise productivity and commercialization and in servicing domestic and regional markets. The most recently completed Agricultural Productivity Enhancement Project (APEP) emphasized pro- poor growth, as reflected in the selection of economic subsectors that are potentially relevant to large numbers of poor or marginalized producers. Other recent projects, including the Strengthen- ing the Competitiveness of Private Enterprise (SCOPE) and Regional Agriculture Trade Expansion Support (RATES) projects, have supported the development of industry competitiveness strategies, a branding strategy for Uganda (i.e., “gifted by nature�), the harmonization of regional standards, and other nonenterprise-speci�c means of promoting Ugandan exports. TABLE 1. USAID support to agro-enterprise development in Uganda 1984–1988 1988–1990 1990–2004 2003–2007 Agro-enterprise Cooperative Emphasis on NTAE Emphasis on productivity, rehabilitation development and development commercialization, and EMPHASIS policy reforms for competitiveness NTAE Rehabilitating Cooperative Cooperative Agricultural Productivity Productive Agriculture and Agriculture and Enhancement Project Enterprise Agribusiness Support Agribusiness Support (APEP) Strengthening Program (RPE) Project (CAAS) Project (CAAS) the Competitiveness Agricultural Non- Agricultural Non- of Private Enterprise PROJECTS Traditional Export Traditional Export project (SCOPE) Promotion (ANEPP) Promotion (ANEPP) Regional Agriculture Investment in Trade Expansion Developing Export Support Program Agriculture (IDEA) (RATES) In considering available capacities, it is impor- dedicated to a particular commodity or supply tant to distinguish between those capacities chain. The latter we refer to as external capaci- that are directly associated with the focal ties. As will be illustrated below, interventions farmer and the industry players, so-called to support Ugandan NTAE (and speci�cally internal capacities, and those that are pres- horticultural exports) have combined attention ent in supportive institutional structures and to strengthening both internal and external general physical infrastructure that is not capacities, with mixed success. Figure 1 TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_Chapter.indd 6 7/20/09 4:21:00 PM FIGURE 1. Overall set of factors determining an effective supply response to NTAE market opportunities Uganda_Horticulture_Chapter.indd 7 Assessment of market opportunity Desirable position in the target market: Which product? Which segment? - Quality - Consistency Assessment of possibilities to Requirements for market - Packing supply the market Relative position participation - Safety and others with regard to competitors Efficiency and cost relation - Payment conditions - Volume Species and Production Harvest/Post-harvest/ Distribution Export varieties technologies Processing • Availability of seeds of • Agronomic knowledge • Labor requirements • Conditions and • Reliability and desirable varieties and • Sophistication of • Level of specialization specifications of availability of species production technologies required transporting transport/storage • Sophistication of • Seed adaptability to infrastructure at port • Investment required required harvesting and local conditions post-harvest • Roads conditions • Control procedures • Availability of inputs • Seed costs infrastructure • Storage facilities • Cost of air/sea freight • Availability of human capital • Investment required • Labor requirements • Expertise required • Susceptibility to • Availability of pests and diseases infrastructure locally • Expected yields • Specification of packing materials and other T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E • Asset specificity inputs Basic + advance production factors + capacities to improve and innovate Possibilities to develop Basic + advance production factors competitive Basic production factors advantages Policy Institutions Infrastructure CHAPTER 1 A ROLE FOR FRUIT AND VEGETABLE EXPORTS IN UGANDA’S GROWTH AND POVERTY REDUCTION STRATEGY? 7 7/20/09 4:21:00 PM 8 NOT YET UP TO STANDARD TABLE 2. Examples of internal and external capacities critical for NTAE development Internal External Category On-Farm Off-Farm Category Public Sector Private Sector Human capital Entrepreneurship Product-handling skills Infrastructure Roads Telecommunications Production skills Marketing skills Seaports Testing capacity Managerial skills Managerial skills Airports Certi�cation capacity Physical capital Equipment Post-harvest Institutions Regulations Standards Buildings facilities Standards Codes of conduct Chilled distribution Social capital Farmer groups Agribusiness Technological Research & Research & Clustering organizations conditions Development Development Supply chain relations Clustering Supply chain relations Natural capital Access to land Access to water Land quality Access to water Financial capital Access to �nance Access to �nance Own �nancial Own �nancial Resources Resources Source: Henson and Jaffee (forthcoming). A Framework to Understand Smallholder Participation in Higher-Value Markets. illustrates the complexity of factors involved in crops, accounting for some 95 percent of the matching market opportunities with emergent volume of Ugandan fruit and vegetable produc- supply capacities. Table 2 provides an illus- tion through the late 1980s. trative listing of certain internal and external capacities necessary for NTAE development. Initial trial and error activities under ANEPP/CAAS Efforts to promote horticultural export devel- 1.2 The Early Challenges of opment started in 1988 through the Agricul- Horticultural Export ture Non-Traditional Export Promotion Project Development in Uganda (ANEPP), funded by USAID. Under ANEPP, Unlike neighboring Kenya, whose extra-regional the possible scope for many types of NTAE horticultural exports were initiated in the 1950s, was explored through market and technical Uganda was a newcomer to horticultural studies, �eld trials, enterprise and farmer exports. Although Ugandan farmers have long training, and other interventions. The early produced a range of fruits and vegetables, this experience was opportunistic and involved production was for household consumption or much trial and error. Results were very mixed, local/urban domestic sale. Bananas and plan- although the project did catalyze a consider- tains have long been the dominant horticultural able amount of experimentation (Box 2). TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_Chapter.indd 8 7/20/09 4:21:01 PM CHAPTER 1 A ROLE FOR FRUIT AND VEGETABLE EXPORTS IN UGANDA’S GROWTH AND POVERTY REDUCTION STRATEGY? 9 apex grower/exporter association, the Horti- Box 2 cultural Export Association (HORTEXA), and INITIAL GAINS ON NTAE DEVELOPMENT FROM EXISTING CAPACITY the construction of a cold storage facility at the Entebbe airport that, notably, remained Although Uganda’s NTAE increased sub- stantially from 1988 to 1991, most of the unused until 2000. expansion was based on increased utilization of existing capacity, stimulated by a liberal- Uganda’s initial foray into the EU market for ized market environment and trade reforms, fresh fruit and vegetables centered on a few rather than by diversi�cation into new comparatively low-value products. For example, product lines. In 1991, Uganda’s NTAE were of the country’s exports of 530 MT in 1992,4 dominated by a few product lines, including nearly two-thirds was accounted for by cooking sesame (38%), maize (14%), beans (13%), �sh products (17%), and hides/skins (14%). banana (matooke), with most of the remainder With the exception of �sh exports, all other being chilies, okra, and other so-called “Asian NTAE trade was highly erratic, with short- vegetables,� servicing UK immigrant communi- term booms followed by sudden crashes. ties. Subsequent efforts, implemented under For example, the remarkable success achieved in sesame exports during the early the ANEPP and Cooperative Agriculture and 1990s ended with the decline of internation- Agribusiness Support (CAAS) projects, sought al prices in 1993, when the leading player, to explore the feasibility of Ugandan participa- Sudan, returned to the international market. tion in selected higher-value EU market seg- Following a series of market opportunity stud- ies, a decision was reached that ANEPP sup- ments. For example, support was provided to port to NTAE would be extended from 9 to undertake �eld trials for snow peas and aspara- 17 sectors, with new attention to be given to gus (see below). such commodities as peppers, vanilla, fruits, groundnuts, bananas, flowers (mainly roses), By the mid-1990s, the most established NTAE cocoa beans, and ginger. sectors in the high-value spectrum were vanilla Source: World Bank (1996); Sherper (1993) and flowers. High-end horticulture exports were still in a trial-and-error phase. Yet, some promising initiatives identi�ed during the early With speci�c regard to horticulture, most 1990s would subsequently be further pursued support efforts under ANEPP were directed under the Investment in Developing Export at individual private initiatives, seeking to Agriculture (IDEA) project. overcome particular technical and marketing constraints to export development (Eriksson Broadening the base through capacity et al., 1994). Field trials of new crops were building and strengthening end-market cost-shared, thus representing a sharing of linkages risk of new crop development between the The leading role of USAID in supporting hor- project and the private players. Some initia- ticulture development in Uganda through the tives were also aimed at the broader industry level, with support provided to an emergent 4 EPADU (1993) T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_Chapter.indd 9 7/20/09 4:21:01 PM 10 NOT YET UP TO STANDARD ANEPP and CAAS projects continued with the sectors was expected to be through employ- implementation of the IDEA project in 1995. ment generation, on farms, in packinghouses, The project was implemented through a then and in other downstream activities. new approach to private sector development, Initiatives undertaken by the IDEA project focusing on vertically integrated commod- to support horticulture in the latter half of ity support systems. Multiple interventions, the 1990s included (1) the establishment of including research, training, �nancial inter- research agreements with entrepreneurs to mediation, association development, and assess productivity and/or varietal selection farmer and enterprise-level support, would be for different crops; (2) technical assistance undertaken in selected commodity chains. At to individual �rms on technical and business the same time, some measures were taken management matters and to HORTEXA; to strengthen the capacities of certain public (3) market contact visits involving Ugandan and private service providers. A grant element exporters and overseas market importers; and was designed to provide operational support (4) the creation of a Market Knowledge Infor- to selected research and extension activities. mation System unit (MKIS) that disseminated At the time of the IDEA project design, the market information and technical/commercial- link between higher-value NTAE and poverty ization bulletins for asparagus, baby banana, reduction was being questioned. Both the hot peppers, okra, and other crops (Table 3). 1994 CAAS program evaluation (Roof et al., Much of the support to individual companies 1994) and an agribusiness assessment report came through a program of cost-sharing (Eriksson et al., 1994) drew attention to the grants. Simultaneously, another donor, the much higher numbers of Ugandan smallhold- Dutch Centre for the Promotion of Imports ers producing basic food commodities that from Developing Countries (CBI), provided had yet to gain a foothold in supply chains for support to the emerging sector by supporting higher-value NTAE. Consequently, the IDEA overseas trade missions and overall business project involved a dual strategy. Support would training and market information. be provided for both low- and high-value com- With the understanding that the consolida- modities. The former, including maize, beans, tion of emergent NTAE would require long and other food staples, were perceived to lead times, the IDEA project was conceived have large potential for regional exports and to with an initial time horizon of �ve years, with involve relatively large numbers of smallholder the possibility of a second phase. Indeed, the farmers. For higher-value commodities, includ- original 1995 to 1999 project was extended for ing flowers, horticultural crops, and spices, the a second phase covering 2000 to 2004.5 By expectation was that exports to international the end of that period, USAID (and selected markets could be increased, yet the numbers of participating farmers would be far lower. 5 During the second phase, support to �rms with spe- The prime developmental impact from such ci�c links to high-value markets was emphasized. TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_Chapter.indd 10 7/20/09 4:21:01 PM CHAPTER 1 A ROLE FOR FRUIT AND VEGETABLE EXPORTS IN UGANDA’S GROWTH AND POVERTY REDUCTION STRATEGY? 11 TABLE 3. Summary of key interventions undertaken in horticulture by the IDEA project through 1999 Clients/Firms Grant Value Technical Assistance ADC’s Expected Activity Reached (US$) (Days) Impact Research 6 152,000 215 Low to high Feasibility studies 1 0 5 High Training and marketing 11 170,000 480 Low to high Institutional 1 72,000 200 Medium strengthening Irrigation 1 12,000 20 Medium Strengthening 2 16,000 45 Low to medium farm infrastructure Source: Kiiza and Ngabirano (1999). “Low� means no tangible exports directly resulting from IDEA assistance; “Medium� means less than US$50,000 FOB in exports resulting from IDEA assistance; “High� refers to more than US$50,000 of exports. other donor) interventions in export horticul- Hence, the earliest focus of donor support ture would have extended over a decade and to NTAE development targeted policy advice a half. Some of the evident shifts in strategies and support for public institutions to undergo and approaches are highlighted below. the necessary reforms to provide an enabling environment for private investments.6 1.3 Identifying Suitable Entry Points: At the institutional level, USAID support Toward Public and Private led to the establishment of the Export Capacity Building Policy Analysis and Development Unit A signi�cant challenge faced by cooperating (EPADU) placed at the Ministry of Finance agencies is to de�ne the entry point and the and Economic Planning (MFEP), and the right actors to partner with. In Uganda, the Ugandan Investment Authority (UIA) in process of facilitating horticulture exports fea- 1991 (USAID/ODA).7 In 1996, the need for tured shifts in such entry points and assistance an institution providing support services to bene�ciaries over time. As illustrated in. the emerging export sector was addressed Table 4, USAID assistance shifted from an through the creation of the UEPB, replacing early emphasis on building public capacities the dysfunctional Uganda Export Promotion to a subsequent focus in the mid-1990s on Council (UEPC) set up by the Government of private sector capacity building. The public Uganda (GoU) in 1969. sector institutions that were supported were not commodity-speci�c but were pertinent to 6 Thus, about 80 percent of the initial ANEPP budget, NTAE as a whole. Initiatives led by CBI focused about US$51.5 million, was designated to pro- mote trade policy reforms, and only 20 percent for on industry actors, with some support also technical assistance and public institutional capacity building. going to the Uganda Export Promotion Board 7 Overseas Development Agency (UK), known today as (UEPB) (see below) to provide industry training. Department for International Development (DFID). T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_Chapter.indd 11 7/20/09 4:21:01 PM 12 NOT YET UP TO STANDARD TABLE 4. Entry point of the main initiatives supporting horticulture development in Uganda during the period 1988–2002 IDEA IDEA ANEPP ANEPP (Phase I)* (Phase II)** 1988–1990 1991–1994 1995–1999 2000–2004 Government Industry actors Industry actors, through Industry actors, through the Agribusiness the Agribusiness Development Center Development Center (ADC) (ADC) Focus on direct support Although the support Institution building Less emphasis on to Government. Some to EPADU and UIA efforts focused on trade associations indirect assistance to continued during this private sector trade institutional building the industry through period, there was a associations and more emphasis ENTRY POINT/ generalize training and shift in institution on individual companies TARGET OF seminars building efforts from through direct ASSISTANCE the GoU agencies to assistance private sector trade associations. Moving toward direct Emphasis on direct as- assistance to agribusi- sistance to agribusiness ness (including integrated packages to address technical/marketing and �nancial needs) * The last two years of the project were practically a transition to the project’s successor, the APEP project. ** CBI support to export development has extended until today. Likewise, in an effort to rebuild the agriculture little research on those crops considered to research infrastructure weakened during the have the best export potential, the importance civil war, several donors supported the creation of building NARO’s capacities to perform its of the National Agriculture Research Institution role and to respond to the needs of the NTAE (NARO) in 1992. NARO was born as a semi- sector, including horticulture, was apparent. autonomous agricultural research agency with The assumption of initial capacity-building ef- a mandate covering crops, livestock, forestry, forts was that there was a need to strengthen and �sheries.8 Most of the research under- the set of public institutional capacities as taken since independence had been heavily a �rst step toward subsequent support to focused on cotton, tea, and coffee. Thus, with private industry. Public sector institutional capacity building was assumed to be criti- 8 NARO was born as a semiautonomous agricultural research agency with a mandate covering crops, live- cal to the promotion of private investment in stock, forestry, and �sheries. The institution inherited the six existing research institutes from the Minis- emergent industries. Yet, the uptake of new tries of Agriculture, Animal Industry and Fisheries, functions by NARO, UEPB, and other public and Cooperation, which focused on crops, livestock, �sheries, and forestry research (ASTI, 2002). institutions proved to be slow. Additionally, in TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_Chapter.indd 12 7/20/09 4:21:01 PM CHAPTER 1 A ROLE FOR FRUIT AND VEGETABLE EXPORTS IN UGANDA’S GROWTH AND POVERTY REDUCTION STRATEGY? 13 the promotion of NTAE, and particularly those adequate support to horticulture and other sectors with an expected high participation emergent sectors had to be found. Thus, the of smallholders (such as horticulture), strong project established an Agribusiness Develop- and quali�ed technical assistance was a must. ment Center (ADC) as a way to consolidate in However, public capacities to provide technical a single unit foreign and local expertise, and assistance and extension services to support to provide services to NTAE sectors, including diversi�ed horticulture production were miss- horticulture (Box 3). ing. Although efforts undertaken by ANEPP and CAAS, through general training and work- shops, created awareness on relevant issues, Box 3 they proved to be too general and lacking THE INTERMEDIARY ROLE OF THE DONOR TO OVERCOME PUBLIC AND PRIVATE focus (Eriksson et al., 1994). Thus, the baseline INSTITUTIONAL CAPACITIES: THE or starting point for public institutional capacity AGRIBUSINESS DEVELOPMENT CENTER building was low, and the gap to be narrowed In the implementation of the IDEA project, too broad to achieve sustainable results within the implementer assumed a critical role the timeframe of a single project/intervention. not only in the coordination and provision of direct technical assistance and training Recognizing the likely long lead time and but also in provision of marketing informa- tion and �nancial linkages to enterprises, �nancial resources needed to strengthen through the creation of the Agribusiness pertinent public sector capacities, a shift in Development Center (ADC). ADC’s role in the orientation in NTAE development assistance provision of services to NTAE sectors was began to emerge by the early 1990s. Thus, in seen as transitional. The ADC was supposed to facilitate a “critical mass� of NTAE activ- 1992 the focus of the ANEPP project moved ity. It was expected that the strengthened from policy analysis and reforms to more direct industry/commodity associations would assistance targeting the needs of individual predominantly assume the ADC’s functions companies through short-term technical as- at the close of the IDEA project (USAID, sistance, direct grants for feasibility studies, 1997). It is not evident that any of the at- tendant industry/commodity organizations market development, and �nancial support. have achieved suf�cient capacity to take on these functions. Additionally, support pro- The focus on direct assistance to private sec- vided to Makerere University was designed tor actors, initiated by ANEPP, was further to enable this entity to play a longer-term advanced through the implementation of the role in generating innovations and providing sources of expertise required for the emerg- IDEA project. In the IDEA project, an impor- ing industries. Furthermore, policy and regu- tant component of institutional capacity build- latory efforts would be enhanced through ing efforts was the strengthening of emerging the dialogue between ADC and the public industry associations, which required and private actors, and by the exchange signi�cant time and resources. Meanwhile, of information on identi�ed constraints to export development. transitional and innovative ways of providing T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_Chapter.indd 13 7/20/09 4:21:01 PM 14 NOT YET UP TO STANDARD FIGURE 2. Interventions supporting export horticulture development in Uganda during the 1990s Initiatives enhancing industry’s internal resources Collective Identifying potential market level Strengthening associations (IDEA) opportunities (ANEPP/IDEA) Facilitating access to market information (IDEA) Achieving agronomic success Improving post-harvest Promoting end-market and/or improving quality infrastructure linkages Firm/farm ANEPP, IDEA, GoU IDEA, GoU IDEA, CBI level Species and Production Harvest/Post-harvest/ Transportation/ Export varieties technologies processing storage Initiatives enhancing industry’s external resources Policy: macroeconomic recovery, stabilization, and liberalization World Bank USAID (ANEPP and IDEA) Infrastructure: building basic infrastructure roads DFID, DANIDA, and other Institutions: creation/strengthening public institutional infrastructure donors Figure 2 summarizes the division of attention undoubtedly the efforts on this front were between internal and external capacity build- mainly led by USAID, through the ANNEP and ing in relation to Ugandan horticulture during IDEA projects. the 1990s. During the 1990s, the emergent horticulture sector bene�ted, directly and 1.4 Achievements and Frustrations indirectly, from several interventions aimed from the mid-1990s to 2000s at creating and/or strengthening external and The initiatives undertaken by �rms and donors internal industry capacities for export devel- to promote horticultural development during opment. Initiatives aimed at augmenting the the early to mid-1990s began to yield notice- set of external industry capacities to support able positive results. By 1997, a set of small export development covered, among others, companies was accessing international mar- efforts to provide an enabling environment kets, export-oriented production had spread for private investments, which started in the to a few districts, and there was evidence of mid-1980s. At the level of institutional capac- regularized linkages between producers and ity building, donors’ efforts initially centered exporters. Consequently, the mid-term evalua- on strengthening public sector capacities, tion of the IDEA project recommended a more but shifted in the mid-1990s toward a focus rigorous drive to promote fresh produce trade on private sector capacity building. Although by undertaking and completing research to other donors, such as CBI, supported initia- extend diversi�cation opportunities by identi- tives aimed at strengthening/creating internal fying more markets and improving the delivery industry capacities by providing direct produc- of market information, as well as �nding effec- tion and marketing support to industry actors, tive ways to involve out-growers (Kiiza, 1997) TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_Chapter.indd 14 7/20/09 4:21:01 PM CHAPTER 1 A ROLE FOR FRUIT AND VEGETABLE EXPORTS IN UGANDA’S GROWTH AND POVERTY REDUCTION STRATEGY? 15 More and more companies entered the sec- Some Ugandan companies were entering into tor. By 1998, there were some 81 registered supply agreements with these buyers. Thus, horticultural exporters, although only a dozen a considerable amount of support under IDEA or so companies accounted for the bulk of the Phase II was geared toward enabling compa- trade, with most of the others operating on a nies with established end-market linkages to part-time and mostly speculative basis. By the participate in higher-value segments of the EU end of IDEA Phase I in 1999, fresh fruit and market. This included considerable support for vegetable exports were still relatively modest, �eld trial and technology transfer programs, with an estimated FOB value of $3.3 million, as well as for strengthening nascent out- yet there were perceived to be good pros- grower schemes. pects for future growth. Indeed, a target �gure The implementation of these interventions in of $10 million was set for IDEA Phase II. Fur- the sector as a whole was mixed, while the ther, it was believed that Uganda’s horticultural overall results fell well below expectations. exports could reach some $50 million within Uganda’s fresh produce exports failed to take a decade if signi�cant private investment off, nudging up slightly in value from year to were to occur. With such a trajectory, export- year and reaching some 3,500 MT by 2002, oriented horticulture could provide a remune- valued at $3.5 million (Sergeant & De Vette, rative source of income for relatively large 2004).10 The trend in fresh produce exports numbers of Ugandan smallholders.9 lagged considerably behind parallel gains Although Uganda’s horticultural trade was observed for exports of flowers, spices, cocoa, then still based primarily on the sale of com- �sh, and various lower-value food commodities paratively lower value commodities chan- (Table 5 ). Despite considerable research and neled to the UK ethnic food market, there development to assess agronomic feasibility, were expectations that both product and alongside other efforts, little success had been market diversi�cation could occur. Indeed, by made in diversifying Uganda’s fresh produce 1999 representatives from most of the major export basket, particularly directed at EU mar- UK supermarket chains and a number of im- kets. Much of the research effort was even- portant European continental distributors had tually discontinued or resulted in only small visited Uganda. adoption of new crops. An important excep- tion, however, was the introduction and spread of scotch bonnet peppers, which gained an 9 The end evaluation of IDEA Phase I, carried out in increasingly important role in Uganda’s fresh 1999, highlighted the importance of horticulture ex- ports as a vehicle to generate growth. Products such produce export trade (see below). as chilies, hot peppers, passion fruit, peppers, okra, and baby vegetables could be produced competitively in Uganda, while the potential of asparagus should be further explored, they concluded. The evaluation team also recommended strengthening the work 10 According to IDEA data, and reported by Sergeant and on critical products, from a food security perspec- De Vette (2004), the total value of horticulture exports tive, and with regional markets potential, such as reached US$4.4 million in 2002, of which US$0.9 mil- matooke. (USAID, 1999) lion were regional exports (about 2,539 MT). T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_Chapter.indd 15 7/20/09 4:21:02 PM 16 NOT YET UP TO STANDARD TABLE 5. Estimated value of Uganda’s high-value exports, 1988–2002 (US$ million FOB) Product 1988 1993 LOP Target 1995 2000 2002 Roses/plant cuttings 0.0 0.2 25.0 2.3 13.6 21.1 Fresh produce 0.6 0.7 10.0 0.6 3.2 4.4 Vanilla 0.0 0.4 2.0 0.24 2.0 9.4 Cocoa 0.0 0.7 3.0 0.6 2.0 5.0 Other high-value products11 — — 1.0 — 0.5 0.2 Fish12 0.3 9.0 — 17.5 30.8 87.4 Source: IDEA (2003) , World Bank (1996) 11 12 Diversi�cation dead ends Especially frustrating, given the level of From the mid-1990s, an array of donor- effort devoted and the expectations for supported initiatives was implemented, relatively rapid trade growth, were efforts to seeking to diversify Uganda’s horticultural promote exports of temperate vegetables export product basket. Most of these (Box 4). Another dead end occurred in initiatives involved market and/or agronomic relation to dried mushroom exports; these testing. Few were successful and even had previously been deemed to have high fewer led to sustainable and signi�cant potential for linking large numbers of women 13 trade volumes. Although much was learned farmers to international markets (Box 5). from these experiences, it was becoming Modest yet uneven progress in institutional increasingly evident that Uganda would not capacity building be able to replicate the scale and scope of The limited progress of horticulture export neighboring Kenya’s success in this �eld. expansion and diversi�cation was matched by mixed or unsatisfactory results in various 11 Other high-value products include dried pineapple and initiatives aimed at strengthening broader banana, bird’s eye chili, and various spices. 12 Fish was not one of the sectors supported by the institutional capacities. Here, we briefly IDEA project but was the focus of several other highlight major developments related to donors. The source for the data on �sh exports is the UBOS (Uganda Bureau of Standards), as reported by horticultural research, industry association Keizire (2004) development, and the provision of technical 13 A range of constraining factors was experienced. For example, various types of peas and green beans did support services. not prosper under Uganda agro-climatic conditions. A mushroom support program encountered market access and cost competitiveness problems. Some The efforts to assess varieties and expand introduced crops that required intensive cultivation production of horticulture products during practices and gained little acceptability among small- holder farmers (USAID, 2004) the 1990s were undertaken through a TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_Chapter.indd 16 7/20/09 4:21:02 PM CHAPTER 1 A ROLE FOR FRUIT AND VEGETABLE EXPORTS IN UGANDA’S GROWTH AND POVERTY REDUCTION STRATEGY? 17 Box 4 DEVELOPING A SUPPLY OF PRODUCTS WITH LOW AGRONOMIC POTENTIAL AND FEW COMPETITIVE ADVANTAGES: THE CASE OF TEMPERATE VEGETABLES Kenya’s success in exports of temperate vegetables and growing EU consumer demand created interest among Ugandan investors and donors in the possibility of developing a similar trade. Under the ANEPP/CAAS projects, �eld trials for snow peas were established in the Kabale region, involving 50 farmers, while trials for asparagus were set up in Mukono District. Poor agro- nomic results led to the end of these trials, yet under the IDEA project new varietal trial and other work relating to green beans was implemented in conjunction with several private companies. A grant was provided to a company called Fruit Pack to develop trials and out-grower schemes in the Kabale and Kasese districts. The preliminary results of the trials indicated that good-quality product could be produced in the Kabale region, although the availability of land with proper soil conditions seemed to be a limiting factor. In contrast, the Kasese region presented advantages associated with less fragmented land, availability of irrigation, and a higher degree of organization among farmers. Yet, due to the location, about 400 km from Kampala, transportation acted as a limiting factor. In contrast, the partnership established with Mairye Estates produced more-positive results. The company bene�ted from substantial technical and �nancial support for the establishment of trials and the commercial production of the variety of bobby beans initially identi�ed as having agro- nomic and market potential. The company had established contacts with major European buyers and was supplying product to the main UK supermarkets. Increased exports were expected to be the result of expanded production through an out-grower scheme established by the company in the Kabale district. However, basic infrastructure, including roads, electricity hookups, and water availability, proved to be a binding constraint, and the initiative was short-lived. Over time, it became increasingly apparent that the varieties of green beans that grew well in Uganda did not have much market potential in the European Union. Similarly, there was a realization that the climate was a limiting factor to achieving export quality products. The climate around Lake Victoria is too warm for the temperate crops demanded in Europe, and in many of the cooler areas, the level of rainfall tends to compromise quality. Consequently, both agronomic and logistical factors acted to limit the feasibility of Uganda be- coming a strong competitor to well-established Kenyan exporters. After nearly a decade of con- tinuous donor support and �rm efforts, there was a realization that Uganda could not compete effectively in the EU market for temperate fresh vegetables. Source: Kiiza and Ngabirano (1999); IF (2006). combination of research, training, and dem- passion fruit and banana. The IDEA project, onstration plots, predominantly carried out speci�cally, was implemented with a clear by ADC in partnership with the private sec- focus on private sector–contracted on-farm tor and with contributions from NARO for research. As in the case of the provision of T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_Chapter.indd 17 7/20/09 4:21:02 PM 18 NOT YET UP TO STANDARD Box 5 COORDINATED SUPPLY CHAIN RESPONSE TO A POORLY IDENTIFIED MARKET OPPORTUNITY: THE CASE OF DRIED OYSTER MUSHROOMS USAID initiatives promoting mushroom production in Uganda started under the ANEPP project in the Kabale district. Mushroom production was considered to be a potential winner from a pov- erty reduction perspective, given the low capital and land requirements. USAID supported the initiative of a private �rm that was, at the time, distributing planting materials to producers and buying the product for export to Europe. The initial assistance focused on quality improvements through technical assistance, training, and support for improved infrastructure, for example, stoves to reduce fuel costs. The need to increase production was evident, as the company was supplying only half of its buyers’ demands, estimated at about 80 kg per week. In 1996, the horticulture sector had generated exports valued at US$20,000, in a planted area of about a hectare, and created around 300 jobs. The donor provided a US$40,000 grant to an Association of Women Mushroom Producers and Exporters (UAWMPE) to support production, training, and the achievement of organic certi�cation. The exporter, on the other hand, was supported by specialized technical assistance, visits to the United Kingdom and Holland to strengthen end-market linkages, and assistance in accessing credit through a local �nancial institution. Expectations of growth potential led to the development of a proposal for an ambitious “Ugandan Mushroom Project,� yet an IDEA-hired consultant found little evidence for unmet market potential and discouraged continued USAID support. The consultant’s report noted: Currently, Ugandan export volume is about 50 kilograms of dehydrated product per month; an amount which can barely be absorbed by the current market. If and until new markets can be identi�ed for dehydrated oyster mushrooms, ADC/IDEA recommends no further expansion of production by existing Ugandan producers and no new investments by those currently not in the sector. USAID 2001a, pg. 2. Several years later, a new attempt to develop a supply of dried oyster mushrooms was undertaken, with donor support, in several districts near Kampala. During 2003–2004, the Business Service Development Project (BSDP), implemented by the International Labor Organization (ILO) with funding from DFID, supported the implementation of a pilot initiative to take advantage of what seemed to be a market opportunity identi�ed by a small exporting company. The goal was to estab- lish a monthly supply of 250 kg of dried mushrooms to satisfy the demand of a UK buyer. The donor provided technical assistance in terms of expertise, planning of the activities, and oversight of the operation. The stakeholders, on the other hand, were responsible for most of the invest- ments required to undertake production and processing activities. Several factors contributed to the failure of the project, including poor technical capacities of the actors, lack of trust and transpar- ency, and weak commitment on the part of the exporter, as highlighted by the evaluation report: . . . the lack of follow-through with the partners on agreed activities created the impression that his interest was elsewhere, or worse, that the market was actually non-existent. Kairumba and Nyabuntu (2005), pg. 16. Only 11 kg of dried mushrooms were produced, a quantity that, according to the �rm involved, was too small to be exported. Source: USAID (1994); USAID (2000); USAID (2001a); Kairumba and Nyabuntu (2005). TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_Chapter.indd 18 7/20/09 4:21:02 PM CHAPTER 1 A ROLE FOR FRUIT AND VEGETABLE EXPORTS IN UGANDA’S GROWTH AND POVERTY REDUCTION STRATEGY? 19 technical assistance and support services, A substantial proportion of assistance to there was an assumption that the research Uganda’s horticultural industry in the mid to capabilities of the private sector were in late-1990s was directed at individual com- place or could be easily augmented with the panies. Two models were envisioned, both support and assistance of the ADC team. involving so-called “lead �rms�: Yet, according to IDEA reports, the experi- • Companies were to emerge with their own ence fell short of expectations. Several trials farms and some out-growers, aimed at undertaken via agreements with the private competing with established Kenyans export- sector had to be rehabilitated, repeated, or ers in the temperate vegetable market. As in abandoned due to poor maintenance and Uganda’s emerging floriculture industry, �rms reporting by the �rms, including those for entering this space were expected to invest asparagus, apple banana, hot pepper, and in farms, modern packinghouses, and other bird’s eye chili. Many of the contracted private supply chain facilities.15 companies lacked the experience and orga- nizational capability to effectively manage • Engage with entrepreneurs that were already �eld research activity and to report results for working with a broad array of smallholder out- broader dissemination. Although some of the growers, aimed at establishing and/or expand- horticultural research programs that involved ing exports of various fruits and vegetables, a planning and monitoring role by NARO predominantly directed at ethnic markets in performed somewhat better, NARO’s ability European countries. Knowledge was gener- to provide �eld-level supervision was often ated and spread through ongoing research constrained. The shortcomings of the re- trials, demonstration plots, and other outreach search program made it dif�cult to anticipate programs. and prevent pest and disease problems and Yet, Ugandan horticulture attracted few to identify other constraints to productivity investors with the pertinent experience and enhancement. Thus, the technical and agro- managerial capacity, and who could access nomic base for the fledgling new industry the required �nancial resources. It was a new remained shallow.14 industry facing many “teething problems� 14 The mid-term and �nal evaluation of IDEA Phase I and had no obvious source of competitive highlighted that the focus of research activities on advantage over well-established players in private actors did not suf�ciently leverage technical and management capacity of public institutions to the market, notably established exporters in support �eld activities. Adjustments in the approach to research and technology transfer activities dur- neighboring Kenya. Reflecting this, the sector ing the second phase of IDEA included efforts to attracted little substantial investment, with bring together public and private actors. Research agreements on green beans, hot peppers, and other most Ugandan entrepreneurs experiencing commodities were also established with private �rms, with NARO playing a direct role in planning, monitoring, and supervising research activities, while 15 An assessment of the critical factors determining demonstration programs in banana, matooke, and the success of the floriculture industry in Uganda is cocoa were directly implemented by NARO. presented by Sergeant and de Vette ( 2004). T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_Chapter.indd 19 7/20/09 4:21:02 PM 20 NOT YET UP TO STANDARD better and/or less risky returns in other sec- expected roles.16 Although some support tors, including some other NTAE. The few for HORTEXA continued during the second well-capitalized companies that did enter the phase of the IDEA project, institutional capac- sector struggled to make a pro�t. ity building through association development was deemphasized. Thus, the project activi- Although experiences with individual nascent ties centered on selected “lead �rm� clients export �rms were below expectations, there in an effort to boost crop diversi�cation and also proved to be limited basis for collective horticulture exports.17 action via industry “apex� associations. HORTEXA was created in 1990 under ANEPP Over nearly a decade, Uganda’s horticultural and subsequently was supported by IDEA sector bene�ted from the services provided and other donor programs. Through grants by ADC (see Box 3), including direct technical and various cost-sharing programs, HOR- assistance and training, provision of market- TEXA received upward of $160,000 from ing information, and �nancial linkages be- IDEA over the period 1995 to 2000. This tween banks and individual enterprises. With support included participation in horticultural the end of the IDEA project, efforts were research programs, training of members, and made to train industry organizations, such as cost-sharing grants directed at 10 members HORTEXA, to take on some of ADC’s func- for investments in supplementary irrigation tions. For example, training was provided in and �eld packing facilities. However, as with the preparation and dissemination of techni- several other apex associations formed to cal and commercialization bulletins. However, support NTAE development in Uganda, immediately upon donor support ending, HORTEXA developed only modest institu- such activities ceased. Similarly, attempts tional capacity and was unable to mobilize resources from among its membership to 16 Based upon the experiences of the IDEA project, the following preconditions for viable associations include sustain the activities initiated with donor the provision of valuable services to members, ac- support. tive membership, and a commodity with signi�cant export value. The positive growth of associations is dependent upon natural, mutual needs among the HORTEXA members included small and/or members to come together to increase strength. These preconditions were not present in the case of young companies that faced enormous tech- HORTEXA, which was comprised of small companies going through a gestation period, and consequently nical, marketing, and �nancial challenges. It is facing enormous technical, marketing, and �nancial dif�cult to determine whether HORTEXA, and challenges. Thus, a lack of membership commitment, and the absence of an agreed-upon vision, trust, and other associations in emerging NTAE sectors, member cohesion, were critical factors limiting the success of HORTEXA. evolved in response to the needs of the 17 A bottom-up approach to association development nascent export sector or as a means to ac- and involvement was recommended in the �nal evaluation of IDEA Phase I in 1999, on the assump- cess development assistance. What is clear, tion that local/district associations would be more however, is that multiple factors have limited likely to render meaningful member-focused services and be more easily targeted for technical assistance, the capabilities of HORTEXA to perform the training, and other outreach programs. TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_Chapter.indd 20 7/20/09 4:21:02 PM CHAPTER 1 A ROLE FOR FRUIT AND VEGETABLE EXPORTS IN UGANDA’S GROWTH AND POVERTY REDUCTION STRATEGY? 21 were made to transfer export promotion, Yet, after a decade of development assis- business training, and market information tance and government support, the Uganda functions to the UEPB.18 However, resource horticultural export trade remained fragile, constraints severely limited the ability of the with weaknesses at all levels in the supply UEPB to undertake these functions; the chain, limited capacity for collective action, UEPB was supposed to be funded from and relatively few individual success stories import taxes, although these did not material- at the commodity or �rm level. Ugandan ize, while donor interest in the promotion of scotch bonnet peppers were beginning to horticultural exports from Uganda has tended be recognized by overseas markets, yet few to wane.19 Ugandan companies had gained recognition as consistent and reliable suppliers. A consid- Thus, by the early 2000s Uganda had estab- erable amount of experimentation had been lished a modest export trade in fresh fruit done with different crops and products, yet and vegetables, largely consisting of lower- little of this effort bore fruit, either due to value crops targeting the ethnic/immigrant implementation problems or the realization market and wholesale vendors in the United of agronomic and/or logistical constraints. Kingdom. It is evident that development as- Although the GoU was to initiate a Strategic sistance efforts had contributed substantially Export Program in 2001 that would include to the formation of this trade via technical some support to horticulture, by that time and business management support as well as there were growing doubts about the sec- facilitating linkages to end markets. Without tor’s growth potential: these development assistance efforts, it is unlikely that the majority of the most active Uganda cannot be competitive in exports players would have entered and/or remained of some of the major traded commodities, in this sector.20 such as French beans, banana, pineapple, mango, and avocado. In the case of temper- 18 The IDEA project had provided technical support to ate vegetables, the climatic conditions are not the government during the design and planning of favorable; in the case of tropical fruits, due the UEPB and also assisted in the elaboration of its strategy and action plan, although over time direct to their weight, they are generally shipped by �nancial and technical support was deemphasized. sea and air freight costs are prohibitive. As a 19 With regard to �rm-level technical assistance, other do- nor initiatives undertaken in the early 2000s did enable landlocked country, Uganda cannot develop the emergence of alternative private support structures, �lling some of the gaps remaining after the closure of competitive advantage. Products, which are the ADC. These will be discussed in Section 3. currently exported, and which have growth 20 An assessment of the impacts of the IDEA project carried out in 1999 (Carvalho & Mulnax, 1999) indicated potential include fresh chili and hot pepper, that, in the stakeholders’ view, about 50–75 percent passion fruit, okra, baby vegetables, and sun- of the export growth in this sector was a result of the IDEA contribution. Yet, other factors cited were a dried tropical fruit.21 positive government export policy and increased air cargo space. There was clearly a perception among bene�ciaries of a signi�cant contribution by IDEA for commodities such as hot peppers and passion fruit. 21 Reported by Gabre-Madhin and de Vette (2004), page 9. T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_Chapter.indd 21 7/20/09 4:21:02 PM 22 NOT YET UP TO STANDARD As the IDEA project wound down and a new given reasonable expectations for growth in USAID-supported agricultural supply chain this sector. Thus, in the follow-up APEP pro- project was designed, a decision was made gram, the only horticultural commodity receiv- not to continue support for export-oriented ing USAID support was banana, with a focus horticulture given the myriad of constraining on productivity enhancement and domestic factors and the assessment that large num- marketing matters. bers of livelihoods could not be enhanced TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_Chapter.indd 22 7/20/09 4:21:02 PM CHAPTER 2 Emerging Standards and the Commercial Responses by Ugandan Horticultural Exporters Over the past decade or so, the challenge of international competitiveness in the horticultural export sector has increasingly been linked to the development of capacity to manage food safety and plant health risks. In the European Union, the main destination market for Uganda’s horticul- ture exports, existing public food safety standards have become more stringent, while new stan- dards are being applied to address previously unknown or unregulated hazards and other related consumer concerns. These of�cial requirements cover a broad set of issues including grades, packing materials, hygiene, microbiological and chemical contaminants, phytosanitary risks, safe and effective use of pesticides, and traceability.22 In parallel, private operators have been increasingly tightening their requirements to address food safety risks, as well as the quality, environmental, and social concerns of consumers and civil society organizations. In higher-end EU markets, private individual or collective initiatives have led to a number of private standards, which in some cases are more prescriptive and stringent than of�cial regulations (Humphrey, 2008). Importers in these segments of the EU market are increasingly demanding their suppliers to demonstrate compliance with these private standards. While public and private food safety, quality, and other standards are evolving in the European Union, the level of supply chain oversight by importers and emphasis on good practice implemen- tation varies across segments of the market, giving rise to a broad spectrum of buyer require- ments and associated means to verify compliance (Figure 3). These requirements start with preferred varieties, grades, and packing materials, and progressively incorporate a wider range of compliance parameters related to food safety practices, record keeping, and traceability along the supply chain and risk and quality management structures. Compliance is assessed through �rst- and second-party inspection in the less demanding segments of the EU market and through third-party conformity assessment and precerti�cation in higher-end segments. The targeted seg- ment and the speci�c product and/or process23 de�ne the challenges associated with compliance, while the starting point of the �rm or farmer de�nes the degree of effort and investment required in order to achieve compliance in the targeted market. 22 A detailed description of of�cial EU requirements for imports of fresh fruit and vegetables is presented by Graffham (2006). 23 The actual risk is determined by how the product is consumed (e.g., whether the product is consumed cooked, semi- cooked, or raw), characteristics of the product (e.g., level of perishability), and practices during production, harvest, and post-harvest (e.g., rate of pesticide use during production, use of chemicals post-harvest; use of free water during post-harvest operations; degree of handling, etc.). T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_Chapter.indd 23 7/20/09 4:21:02 PM 24 NOT YET UP TO STANDARD FIGURE 3. Spectrum of commercial and regulatory requirements and associated conformity assessment systems in fruit and vegetable markets +specifications for more + specifications advanced/quite for more specific process + specifications advanced and standards, yet Upgrading steps for selected, often quite implemented in basic standards, specific process the context of + internal basic GAP, good standards with highly quality hygiene, and associated integrated characteristics approaches to greater detail in supply chains + quality of products safe pesticide record keeping and where the grades and +basic use/storage and supplier has a + visual varietals requirements associated relatively characteristics preferences on pesticide use record-keeping sophisticated + consistent systems management quality and structure for quantities quality control and risk management 1st and 2nd + 2nd and 3rd + 2nd and 3rd party + 2nd and 3rd party party + visual + visual inspections/ party conformity conformity conformity inspections inspection testing assessment assessment assessment Level 1 Level 2 Level 3 Level 4 Level 5 Level 6 Stringency of official and buyers requirements Level of sophistication of the conformity assessment systems Informal Sector - Domestic High-End Horticulture Horticulture Exports to High-End Int’l Outlets Domestic - Ethnic Produce Exports Low Risk Products High Risk - Exports to Wholesale Markets Products/Sophisticate (Fresh and Dried Products) Postharvest Operations Source: World Bank-University of Guelph. On-going.“Conceptual Framework of the Ongoing Project Facilitating the Access of Small-Scale Producers to High-Value Markets�. In the United Kingdom, the market destina- a signi�cant market where there is little or no tion for over 60 percent of Ugandan horti- demand for GlobalGAP or other pre-harvest culture exports in 2007, most of the largest private food safety standards. Within this lat- retailers are demanding that their suppliers ter market, however, it is still possible to dis- source products that are produced on farms cern segments that differ in their food safety 24 that are certi�ed to GlobalGAP or their own and quality requirements across products and propriety standard (for example Tesco’s distribution channels (Box 6). Nature’s Choice). At the same time, there is Given that Ugandan horticultural exports are predominantly targeted at ethnic and 24 GlobalGAP, formerly EurepGAP, is a private sector body that sets voluntary standards for the certi�ca- wholesale markets in the United Kingdom, tion of agricultural products around the globe. The at the current time the core compliance scope of the standard applied to horticulture can be found at http://www.globalgap.org. challenges lie to the left of the spectrum in TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_Chapter.indd 24 7/20/09 4:21:02 PM C H A P T E R 2 E ME RGING ST ANDARDS A ND TH E COMMERC IA L RES PONS ES B Y UGA ND A N H ORTICULTUR A L EX POR TER S 25 Box 6 SEGMENTATION OF BUYER DEMANDS FOR FRUIT AND VEGETABLES IN NON-GLOBALGAP CERTIFIED MARKETS IN THE UNITED KINGDOM Although the major supermarket chains dominate in markets for fresh fruit and vegetables in the United Kingdom, accounting for 80 to 85 percent of retail sales, there remains a sizeable market for produce from farms that are not certi�ed to GlobalGAP or other pre-farm-gate private food safety standards (e.g., Tesco’s Nature’s Choice); what is termed the “noncerti�ed market� for brevity below. It is estimated that this subsector was valued at £1.71 billion in 2007, consisting of distribution through independent retail stores (£1.34 billion) and sales to the food service industry (£0.37 billion). All produce supplied to the noncerti�ed fruit and vegetable subsector must satisfy legal require- ments, for example, with respect to phytosanitary certi�cates and not exceeding regulatory limits on pesticide residues. Further, any actor in the horticultural supply chain must be able to identify where all produce in which they trade has been purchased. There are, however, signi�cant dif- ferences in the requirements of importers beyond regulatory requirements, such that the non- certi�ed market for fruit and vegetables in the United Kingdom is positioned variously along the spectrum in Figure 3. Much of the flow of imported fruit and vegetables to independent retail stores is through the major wholesale markets. Here, importers sell on to retail customers and/or traders. Smaller importers and their customers typically make purchases on the basis of price and physical appearance, with little or no attention given to food safety parameters beyond general cleanliness, degree of deterioration, and such. Larger importers, however, are beginning to ask questions about where and how the fruit and vegetables they purchase has been produced. Further, some of these com- panies are beginning to elaborate their own standards as part of their “due diligence� for their customers. For example, they are tending to purchase only from suppliers that can trace back the produce they supply to the farmer, and where records are kept on, for example, use of pesti- cides. While this is far from meeting the requirements of GlobalGAP, it does indicate that food safety issues are on the “radar screen� of some of the more important importers and suppliers to wholesale markets. Food service companies, as a general rule, are more discerning than independent retailers with respect to food safety and quality. Thus, a number of medium and even small food service companies are auditing their wholesale suppliers in order to ensure that they are sourcing from reputable producers. While traceability is the key requirement of these buyers, they also tend to buy preferentially from importers that can demonstrate that producers have followed basic good agricultural practice (GAP), maintain records, and so forth. While GlobalGAP is far from being a strict requirement, the more discerning buyers in this value chain are aware of the attendant issues and can conceivably see certi�cation becoming a reality in the future. Source: Accord Associates (2007). Figure 3, with a predominant focus on achiev- cost ef�ciencies. Exporters that are more to ing consistency in quality and supply, while the center of Figure 3 and/or are attempting maintaining price competiveness through to shift toward the right, need to implement T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_Chapter.indd 25 7/20/09 4:21:02 PM 26 NOT YET UP TO STANDARD proactive approaches toward the gradual exporters had increased to around 80 percent adoption of improved production practices, by 2006 (Table 6). mainly associated with pesticide use and as- Among the top �ve exporting �rms, four sociated record keeping. Any attempt to shift were established in the mid-1990s and have market focus across the spectrum of buyer achieved a regularized position in selected requirements toward higher-end segments of overseas wholesale markets and/or ethnic the market, however, likely require substan- food distribution channels. The two largest tial investments in compliance capacities, exporters accounted for around 50 percent of improved managerial skills, and changes in exports in 2006, with the single largest �rm procurement strategies. In this section, we representing 36 percent.26 Most of the other highlight the range of strategies pursued by export �rms, which predominantly entered Uganda’s horticultural exporters in response the sector during the 1990s, have remained to the challenges and opportunities associ- small. It is interesting to note that the three ated with the evolving market and regula- leading recipients of IDEA project support tory picture for food safety and quality in the have either experienced a recent contraction European Union. in their fruit and vegetable exports or have 2.1 Recent Structure of Ugandan exited the trade entirely. Fresh Produce Exports to Europe Although the basket of horticultural exports In 2006, Ugandan fruit and vegetable exports from Uganda to the European Union is quite to Europe were around 4,700 MT, valued at broad, consisting of nearly 50 products, US$4.7 million.25 Over the period 2004 to most individual products are exported in 2006, some 122 �rms participated in this very small quantities. Further, just three trade, although only 28 of these were regu- products—banana (matooke and apple lar traders, while around half of these �rms banana), pineapple, and capsicum27— exported no more than 1 MT per week on average. Indeed, many of these �rms are not real exporters but rather act as supply agents 26 This company reported substantial increases in exports in the three years from 2004 to 2006, and that source and export on commission for volumes and values that are signi�cantly higher overseas companies, with many of the more than those reported by UEPB statistics. This sug- gests an ever higher share of this company in total active players being involved on a speculative exports. and periodic basis. At the same time, how- 27 In this segment, the country faces international com- petition from consolidated players such as Morocco, ever, there are signs of consolidation in the Turkey, Israel, and Jordan. Former competitors, such as the Dominican Republic and Egypt, have been sector. While the 10 largest exporters only losing market share. Within the sub-Saharan Africa accounted for 40 percent of exports by region, Ghana is the leading supplier of hot peppers and chilies to the EU market; EU imports from Ghana value in 2004, the share of the 10 largest rose from over 500 MT in 2003 to 2,970 MT in 2007. Uganda is the second largest supplier followed by Kenya. In 2007, EU imports from these countries were 25 According to COMTRADE data. estimated at 1592 Mt and 1137 Mt, respectively. TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_Chapter.indd 26 7/20/09 4:21:02 PM C H A P T E R 2 E ME RGING STANDARDS A ND TH E C OMMERC IA L R ES PONS ES BY UGA ND A N H ORTIC ULTUR A L EX PORTER S 27 TABLE 6. Share of largest export �rms in total fruit and vegetables exports to the European Union (%) Companies 2004 2005 2006 Quantity Value Quantity Value Quantity Value Top 10 42.8 36.8 52.3 45.1 70.8 79.1 Top 5 28.0 23.0 33.2 28.0 51.6 67.1 Top 2 20.7 12.8 21.3 14.7 31.2 46.4 Source: Calculations based on UEPB statistics and information provided by companies. accounted for over 80 percent of the value of somewhat better margins and account for exports in 2007 (Figure 4). The main export half or more of the trade for most of the market is the United Kingdom (Figure 5), leading exporters (see Table 7). Product which is also the market exhibiting the most share of total fruit and vegetable exports of appreciable growth through the 2000s. some leading exporting companies 2007). At the same time, exports of hot peppers/ On the basis of EUROSTAT import data, chilies are rather erratic (Figure 7).29 Exports exports of bananas, capsicum, and pineapple of scotch bonnet peppers have exhibited would appear to have increased over the a volatile pattern as a result of production period 1999 to 2007, while imports of fresh problems due to pests and diseases. Trade vegetables (including green beans and some in other types of hot peppers, however, other fresh vegetables) increased to 2005 but has apparently experienced more steady have since diminished signi�cantly (Figure 6). growth in recent years. Around two-thirds It should be noted, however, that contradic- of Uganda’s hot peppers/chilies trade is with tory trade statistics from different sources— the United Kingdom. Government of Uganda, EUROSTAT, and COMTRADE—make it dif�cult to elaborate in Uganda’s main market for matooke and apple a reliable way on trends in the volume and/or bananas is the United Kingdom, which ac- 28 value of exports over time. counted for 80 percent of exports in 2007. The small trade in pineapple is directed mainly to- Most of Uganda’s horticultural exports con- ward Germany and Belgium. Uganda’s current sist of relatively low-value and low-margin trade in green beans and other somewhat products sold through wholesale distribution higher-value temperate vegetables is now channels. Hot peppers/chilies have provided very tiny. 28 For example, according to EUROSTART data, exports of capsicum are experiencing an increasing trend, 29 The composition of Uganda’s capsicum trade has yet very different �gures are reported by national and been changing in recent years, but the speci�c international statistics. The same is seen with data for components cannot be discerned from trade bananas. statistics. T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_Chapter.indd 27 7/27/09 4:11:10 PM 28 NOT YET UP TO STANDARD FIGURE 4. Product share of EU fresh fruit and vegetable imports from Uganda, 2007 Pineapple (dried/fresh) Green beans Bananas, including plantains Fresh capsicum Fresh vegetables Source: Calculations based on EUROSTAT data FIGURE 5. EU imports of fruit and vegetables from Uganda by main destination, 2000 to 2007 6,000 5,000 4,000 ( ’000) 3,000 2,000 1,000 0 2000 2001 2002 2003 2004 2005 2006 2007 Belgium Netherlands United Kingdom Germany Source: Calculations based on EUROSTAT data FIGURE 6. EU imports of fruit and vegetables from Uganda by product, 1999 to 2007 4,500 4,000 3,500 3,000 ( ’000) 2,500 2,000 1,500 1,000 500 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 Bananas, including plantains Fresh vegetables Fresh capsicum Pineapple (dried fresh) Source: Calculations based on EUROSTAT data TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_Chapter.indd 28 7/20/09 4:21:02 PM C H A P T E R 2 E ME RGING ST ANDARDS A ND TH E COMMERC IA L RES PONS ES B Y UGA ND A N H ORTICULTUR A L EX POR TER S 29 FIGURE 7. Ugandan exports of chilies/hot peppers, 2003 to 2007 900 800 700 600 500 400 300 200 100 0 2003 2004 2005 2006 2007 Tones US$’000 Source: Data from UEPB export statistics TABLE 7. Product share of total fruit and vegetable exports of some leading exporting companies 2007 Exporting company Product % Product % Product % Product % Hot peppers 50 Matooke 20 Sweet potatoes 15 Fresh avocados/ 15 1 Others 2 Hot peppers 40 Sweet peppers 30 Avocados 10 Others 20 3 Hot peppers 34 Matooke 28 Green chilies 14 Okra 10 4 Hot peppers 70 Matooke 10 Apple bananas 10 Avocados 10 5 Hot peppers 60 Sweet potatoes 18 Okra 12 Matooke 10 6 Hot peppers 30 Matooke 25 Okra 25 Sugarcane 10 7 Matooke 50 Hot peppers 30 Sweet potatoes 9 Apple bananas 5.8 8 Hot peppers 90 Matooke 5 Okra 5 Source: UEPB data. Note that the numbers in the left-hand column do not represent rankings. 2.2 Strategic Responses to an have penetrated mainstream supermarkets. Evolving Market: Comply, Traditionally, these distribution channels have Redirect Focus, or Exit? been primarily concerned with product quality We have seen how Uganda’s fruit and vegeta- and cost considerations, with substantially less ble export sector is populated by a small num- focus on food safety, environmental, and social ber of larger emergent �rms and numerous concerns. Yet, these markets are not static and smaller companies, many of which export inter- there are signs that broader attention is being mittently. The predominant focus of the export given to consumer concerns and the evolu- trade is distribution channels directed at ethnic/ tion of regulatory systems affecting the fresh immigrant markets, while very few exporters produce wholesale business in export markets. T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_Chapter.indd 29 7/20/09 4:21:02 PM 30 NOT YET UP TO STANDARD Thus, the overseas buyers/distributors of indeed have sought external assistance to Ugandan fresh produce have begun to look for support: (1) attempts to comply with emerging more assurances about product safety and/ standards; (2) product diversi�cation toward or related production/packinghouse practices. less risky products; (3) shifting market focus to At a minimum, Ugandan exporters have come achieve differentiation; (4) targeting less strict to perceive that “business as usual,� with dis- regional markets; and (5) exiting the horticul- jointed supply chains and outdated practices, is tural business (Figure 8). not sustainable if they are to maintain and even Given the nature of the main EU market enhance their position in the European market. served by Ugandan fruit and vegetable export- Although most of the industry is operating ers, wholesale markets directed at ethnic food from a position of relative weakness and low retailers, few �rms have experienced strict pro�tability, each exporter has had to take demands from their buyers in terms of good proactive measures to adjust to an evolving practice implementation and guarantees of regulatory and market environment. Based on compliance. Not surprisingly, Mairye Estates interviews with 24 of the main export �rms Ltd. was the �rst �rm in Uganda to pursue it is possible to discern a number of distinct GlobalGAP certi�cation for its fresh vegetable “strategies� that �rms have employed, and production, and certi�cation for its packing FIGURE 8. Strategic options implemented by Ugandan exporters in response to compliance issues and competitiveness forces Firm strategic Level 1 Level 2 Level 3 Level 4 Level 5 Level 6 option Increase competitive Ensured compliance with position in existing quality/grades/consistency market segment in fresh wholesale markets Targeting the same Shift product mix or market segments with category (e.g., from fresh less risky products to dried fruits or vegetables) Use assured Shift in market segment compliance to gain competitive advantage Organic GlobalGAP Exit export market to supply domestic/regional markets Exit the business TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_Chapter.indd 30 7/20/09 4:21:03 PM C H A P T E R 2 E ME RGING ST ANDARDS A ND TH E COMMERC IA L RES PONS ES B Y UGA ND A N H ORTICULTUR A L EX POR TER S 31 operation against the BRC Global Standard who specialize in sourcing exotics for super- for Food Safety (Box 7). An attempt to get markets. In one case, the EU buyer directly out-grower suppliers of chili certi�ed under requested compliance with the GlobalGAP GlobalGAP Option 2 was initiated by the com- standard, while in a second case the buyer pany in 2005, with the support of the Pesti- requested an exporting company to comply cides Initiatives Programme (PIP) (see below). with EU residue levels after detecting pes- However, following the company’s decision to ticide residues in some of the company’s focus on flowers as a more pro�table export shipments. Both exporters sought to obtain business and to cease horticultural exports, GlobalGAP certi�cation to signal their com- this initiative did not materialize. pliance, yet neither was successful. Around six other exporters initiated the process For some Ugandan companies, the pres- of GlobalGAP certi�cation for their own or sure to upgrade operations has come from out-grower farms, not at the behest of their their main buyer, typically European traders buyers but due to a desire eventually to Box 7 PARTNERING WITH “LEAD FIRMS� TO BOOST HORTICULTURE EXPORTS: THE CASE OF MAIRYE ESTATES Mairye Estates is a family-owned business. The farm was originally established in the 1950s on a 600-acre piece of land, growing coffee and sugar cane. During the post-conflict period, the family returned to Uganda and repossessed their property to resume the farming business. Low coffee prices motivated investments in vegetables and flowers for the export market. In 1994, with the support of ANEPP, the company initiated pilot trials on French beans, asparagus, zucchini, chili, li- monium, and roses. The �rm’s efforts to diversify and expand exports continued with the support of the IDEA project for nearly a decade, concentrating on floriculture and selected horticultural products. The company has achieved notable results in floriculture exports, taking a leading position, with nearly 4 million roses per month exported to Europe. In spite of the company’s continuous efforts, and considerable levels of donor support, the results in fruit and vegetable exports have been less positive. Taking advantage of promising export markets Most of the research on green beans throughout the life of the IDEA project was undertaken through agreements with this company. The �rm also bene�ted from the project’s support in the areas of end market linkages and �nancial facilitation. In 1996, the positive outcomes of the trials undertaken for green beans resulted in a contract to supply UK supermarkets, with an estimated value of US$360,000 per year and an expected potential of more than US$2 mil- lion. By the late 1990s, the company had managed to consolidate an export market for green beans and Asian vegetables to the United Kingdom and faced growing demands for a varied set of horticultural products. IDEA supported the company in its attempts to expand and to diversify production through the establishment of commercial trials on promising varieties of chili, okra, baby vegetables, passion fruit, and papaya, and continuation of the trials on green Continued T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_Chapter.indd 31 7/20/09 4:21:03 PM 32 NOT YET UP TO STANDARD beans. Most of the company’s initial gains in horticultural exports came from production on its own farm, but expansion of export volumes to supply growing demands in the United Kingdom required a complementary strategy to distribute production risks, increase production capacity and achieve consistency in supply. The establishment of links with out-growers seemed the way forward. Attempts to develop out-grower schemes By 1999, with the support of IDEA, the company had undertaken a series of trials on French and runner beans in the Kabale region, about 350 km southwest of Kampala. Results of the trials indi- cated that yields and quality were far superior in Kabale than at Mairye Estates, which is located in Wakiso district. Motivated by these results and by the encouraging market developments, the company established an out-grower scheme to build up a reliable supply of high-quality beans. To support the company’s efforts, the World Bank provided a matching grant, while the IDEA proj- ect funded the establishment of a temporary on-site cold store and supported technical expertise from Kenya. Growers invested in refrigerated trucks to transport the crop directly to Entebbe airport, while the company provided inputs and other variable costs and ensured a market for the product. Yet, poor agronomic results and transportation and other logistical problems limited the development of a reliable and effective supply to satisfy growing demands. A second attempt to develop an out-grower scheme was undertaken by the company in 2004, with a market opportunity to supply chilies. The scheme involved a joint venture, including around 320 small farmers, through the creation of a company called Farm Fresh with initial ownership by Mairye Estates but with projections of 40 percent being owned by the farmers. Farmers were organized by the company into eight groups and registered as community-based organizations. Contracts between Farm Fresh and the small farmers were established, which included the pro- vision of inputs and technical assistance, transportation, and purchasing of the production. Train- ing to farmers was delivered by a local service provider with funding from the Catholic charitable foundation CordAid, through a matching grant. CordAid also supported the company’s efforts to get GlobalGAP certi�cation for out-growers through a loan, and provided grants for the develop- ment of physical infrastructure in the production area including collection sheds, spray equip- ment, and so on. The Dutch government, through the PSOM-Program, supported investment in a new packinghouse to increase the production capacity of the company. Leaving the vegetable export business: reputation risks and low margins Numerous factors constrained the scope for Farm Fresh to consolidate a reliable supply of prod- uct and to expand vegetable exports. High air freight costs and seasonality of out-grower pro- duction played a critical role. Additionally, the price of land mitigated farmer pro�tability; the land surrounding the company’s farm was owned by large landowners, thus most of the company’s out-growers were not landowners, but rather rented land for production. Other factors included the high costs of agricultural inputs and problems associated with poor product quality control. According to company staff, the nature of the vegetable export business in Uganda was too risky in comparison with the efforts and investments required. The company had already built a reputation as a reliable supplier of flowers to supermarkets in Europe. To avoid risking its reputa- tion with European buyers the company withdrew from the vegetable export business in 2006 to concentrate in this more pro�table sector. Source: Ribbink et al. (2005); Fintrac (2001); Personal interview with the company CEO in 2007. TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_Chapter.indd 32 7/20/09 4:21:03 PM C H A P T E R 2 E ME RGING ST ANDARDS A ND TH E COMMERC IA L RES PONS ES B Y UGA ND A N H ORTICULTUR A L EX POR TER S 33 reposition them self in the EU market. In As in the case of GlobalGAP certi�cation, the some cases, these �rms had the mistaken movement toward organic and/or fair trade impression, enhanced by donor and/or gov- certi�cation has generally been facilitated ernment agencies, that GlobalGAP certi�ca- by signi�cant donor support. Although, it is tion would be a (legal) requirement to access dif�cult to determine precisely the volume the EU market, with speci�c deadlines for of organic and fair traded certi�ed products its implementation. Although several com- exported by Uganda, UEPB statistics indicate panies have received donor support to attain that the two leading companies exported GlobalGAP certi�cation, to date only two have 300MT in 2006. Figures from the National successfully completed the process. Organic Agriculture Movement of Uganda (NOGAMU) suggest a signi�cant increase Although GlobalGAP certi�cation is perceived in exports of dried and fresh organic fruit in (and, in some cases, actually is) a requirement recent years, from 820 MT in 2005–2006 to for servicing various mainstream European su- 2,252 MT in 2007 (Forss et at 2008). permarkets, other standards may be vehicles for Ugandan suppliers to differentiate them- According to UEPB data, of the 28 companies selves in selected overseas markets. Hence, a that can be considered regular fresh produce growing number of companies have sought to exporters, very few are pursuing opportunities position themselves in the dynamic European outside of EU markets, with longer-term ambi- market for organic and/or fair trade products, tions to supply the more demanding supermar- both for fresh and dried fruits and vegetables. ket supply chains. There are, however, some This has included several companies that have notable exceptions. The Middle East accounts been active exporters for many years, as well for nearly 30 percent of sales for one of the as new entrants (see Box 8 and Box 9). leading exporters of organic products (see, e.g., Box 8). Another exporter has exited the The shift toward orgnic and/or fair trade certi�- EU market and now focuses its business on cation has been facilitated by the relatively the South African market. Two other companies small upgrades required to become certi�ed, have begun to develop trade within East Africa. due to the fact that many small-scale produc- ers do not use pesticides.30 During the 1990s, Several companies have recently stopped there was only one company exporting or- exporting fruit and vegetables. Predominantly, ganic fresh produce from Uganda. By the end these �rms have been driven out of the market of 2005, there were seven companies holding by general �nancial problems that have ren- organic certi�cation, with a further two in the dered horticultural exports unpro�table. It is not process of conversion, targeting either fresh evident that overseas market and/or regulatory and/or dried fruit export markets (Gibbon, 2006). conditions have played any signi�cant role.31 30 The major exception to this is producers of chilies/hot 31 These insights on commercial strategies are based peppers. on a survey of companies carried out in early 2008. T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_Chapter.indd 33 7/20/09 4:21:03 PM 34 NOT YET UP TO STANDARD Box 8 CHANGING PRODUCT FOCI: THE CASE OF UGANDA’S PIONEER COMPANY IN ORGANIC PRODUCE EXPORTS TO EUROPE The largest exporter of organic fresh and dried fruit and vegetables in Uganda was established by a Swiss consultant in 1994. The entrepreneur recognized that demand for organic products was grow- ing appreciably in Europe, while relatively few upgrades were required to achieve organic certi�ca- tion for fresh fruit and vegetables in Uganda. In 1998, the entrepreneur entered into a partnership and the company was registered. The new owners decided also to explore opportunities in dried fruit processing as an alternative use for fresh produce that did not meet export quality standards. In 2001, the company became 100 percent organic, with exports of fresh and dried organic products to the European Union reaching nearly 300 MT, of which scotch bonnet formed a large share. In 2003, a buyer of scotch bonnet pepper in the United Kingdom demanded GlobalGAP certi�ca- tion, providing a period of six months to prove that compliance had been achieved. By that time, scotch bonnet exports represented 50 percent of the company’s turnover, thus losing this market would have had signi�cant �nancial consequences. With the support of PIP, the company started a two-year program to achieve compliance. However, realizing that compliance of the company’s out-growers could not be achieved in such a short period of time, the company had to make a critical strategic decision: either to lose the market or to change its strategic orientation. According to the company’s manager, although certain upgrades had already been made, the neces- sary investments in infrastructure, including water facilities, collection centers and harvesting con- tainers, were too high for the company to bear alone. The donor support it had received was in the form of training and technical assistance and did not fund capital expenditure. Keeping the buyer did not represent a suf�cient incentive to compensate for the risks and investments that were needed to achieve compliance with EurepGAP/GlobalGAP. Thus, the company decided to shift its orientation toward exports of organic and fair trade processed and fresh products to less demanding markets. Although the transition has not been easy, the company has recovered from this market shock through gradual consolidation of opportunities in new markets in the European Union, as well as by diversifying into the United States and Middle East. In 2007, the company’s exports were three times higher than in 2001. Donor and institutional support has been crucial in sharing the risks associated with incursion into new markets and the expansion of current operations. This support has included assistance with assessing the feasibility of exporting frozen products from local research institutions and from the Export Promotion of Organic Products from Africa (EPOPA) project (see below) in maintaining and expanding organic certi�cation. Further, through the BUDS Technology Acquisition Fund, the company as able to improve its drying technology. The company faces ongoing challenges in complying with market requirements, including main- tenance of organic certi�cation and the implementation of GMP and HACCP-based systems in its processing plant. However, compliance is just one of a set of challenges in meeting the demands of existing and potential high-value markets. Other critical factors include the need to expand its processing capacities to deal with seasonal price fluctuations, increasing local and regional demand for raw materials, high costs of packing materials, and the consolidation of end-market linkages. Source: Interview with company manager. TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_Chapter.indd 34 7/20/09 4:21:03 PM C H A P T E R 2 E ME RGING ST ANDARDS A ND TH E COMMERC IA L RES PONS ES B Y UGA ND A N H ORTICULTUR A L EX POR TER S 35 Box 9 SUPPLYING LESS DEMANDING MARKETS, WHILE ACHIEVING ORGANIC AND GLOBALGAP CERTIFICATIONS One exporting company that was established in 2001, started working with out-growers in the districts of Mpigi and Luwero in 2003. The company began supplying small quantities of hot peppers to a wholesale buyer in Germany and a supplier of small corner shops in the United Kingdom. After ongoing payment problems with its UK customer, the company made a strate- gic decision in 2004 to withdraw from the EU market and invest time and effort in upgrading its operations and achieving relevant certi�cations, with a view to eventual market reentry. The company’s decision was motivated by the desire to establish links with more “professional� and reliable buyers serving higher-end market segments. Achieving GlobalGAP certi�cation proved to be a dif�cult task In 2004, the company started to work toward GlobalGAP certi�cation Option II for a group of 25 farmers producing hot peppers, avocado, and passion fruit in the Mpigi district. The PIP (see below) supported 52 percent of the total costs, including the provision of technical assistance, training to farmers, and implementation of a traceability program. The company was responsible for implementing the recommended upgrades and covering the certi�cation costs. The imple- mentation program started in September 2004 and extended until May 2007. A pre-audit was held in July 2007 to certify an initial group of 10 producers. In spite of these efforts, in March 2009 the group had not yet achieved GlobalGAP certi�cation. Working toward organic certi�cation: a more successful effort Under the agreement with PIP, and motivated by previous enquiries from potential EU buyers of organic products, in June 2005 the company started to pursue a program of organic certi�cation for two groups of out-growers located in the Luwero district. By 2006, these groups had obtained organic certi�cation through UgoCert, the local certi�cation body. According to the company, a survey undertaken in Luwero indicated that farmers were using traditional production methods, with no use of chemical sprays, and so forth, which made it easier and quicker to achieve cer- ti�cation. The company laid down some minimum requirements for prospective growers, who needed to sign an agreement that they would produce according to the organic standard. Facing so many challenges at once! The company buys 10 percent of the pineapple produced in Luwero and 40 to 60 percent of the production in Mpigi district. Yet, as of August 2007, most of the organic product was still marketed as conventional in Middle Eastern markets. Most recently, the company has entered into a partnership with a newly established exporting company, with existing links to a EU buyer. It is expected that this partnership will open up new opportunities for organic-certi�ed production. Most recently, the company has had to explore drying technology as a way in which to establish a reliable supply to satisfy European demands. Toward this end, the company has joined Natural Pride Uganda Limited (NAPU), an initiative supported by United Nations Industrial Development Orga- nization (UNIDO) aimed at consolidating export volumes, improving processing technologies and Continued T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_Chapter.indd 35 7/20/09 4:21:03 PM 36 NOT YET UP TO STANDARD overall quality and safety. The company has also joined FARMEX a recently established consortium of four companies within HORTEXA that has been able to send a few consignments of dried fruit to Europe. Yet, according to of�cial statistics, the company’s exports reached only 150 MT in 2006, 98 percent of which was destined for the Middle East. The company also sells to a local supermar- ket and to NOGAMU’s organic produce shop. Clearly, the company has simultaneously been pursuing several strategic options and tactics to gain market participation and diversify risks. It has employed a graduated approach, consolidating opportunities in less demanding markets while gradually upgrading operations to pursue more differentiated and demanding markets. In so doing, the company’s efforts and resources have been widely dispersed, although the attendant risks have been offset somewhat through donor support. As with many other exporters in Uganda, this company has received considerable government and donor support since its establishment. Yet, it has been proved that �nding market opportu- nities and developing a strong supply response in a sector dominated by small players is very challenging. After �ve years of donor and �rm efforts, the company has been able to generate employment for only around 20 people. Further, it has relations with only 100 out-growers, from whom it buys less than 100 percent of their production. Source: Wiegratz et al. (2007a); Personal interview with the company CEO. 2.3 Adjusting Procurement Strategies and vegetables to exporters, whether regu- lar or irregular, to the export trade. In 2001, In Uganda, smallholder farmers account for the IDEA project estimated that some 3,000 the bulk of supplies to horticultural exporters. smallholders were involved (USAID, 2001b). Although most of the larger, regular exporters The 23 export �rms interviewed by Kleih et al. now own or lease their own farms, most still (2007) reported having 2,145 out-growers in source heavily from smallholder out-growers, 2005, but a lower number in 2006. Estimates directly and/or through intermediaries. Efforts from PIP indicate that around 1,659 small- by some exporters to integrate vertically the holders are suppliers to the export companies bulk of their operations have not proven suc- that the project has supported (PIP, 2008). cessful (Box 10). Based on a survey of the Sergeant and De Vette (2004) estimated the leading export companies in early 2008, we number at about 2,900. While there may be a estimate that smallholder farmers account for considerable amount of double-counting, with upward of 75 percent of exported produce, farmers selling to multiple exporters, an esti- with the balance coming from exporter-run mate of 3,000 smallholder farmers is prob- farms and a limited number of other medium ably realistic taking into account sourcing for or larger-scale farms. both the fresh produce trade and the recently There is a lack of reliable data on the number emerging trade in dried fruit. Most of these of smallholders who are suppliers of fruit farmers are very small; a 2008 survey of 18 TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_Chapter.indd 36 7/20/09 4:21:03 PM C H A P T E R 2 E ME RGING ST ANDARDS A ND TH E COMMERC IA L RES PONS ES B Y UGA ND A N H ORTICULTUR A L EX POR TER S 37 Box 10 PRODUCE OR PROCURE FROM SMALLHOLDERS? THE CASE OF A LEADING EXPORTING FIRM The leading exporter of fresh produce from Uganda is also a major provider of cargo services, especially for the �sh export business. The company entered the fresh produce trade in 2000, largely as a consolidator of product from various other exporters and using spare cargo space. Although it has become an exporter of fresh produce itself, the company still sells cargo space to other export �rms. Growing demands in European markets and the dif�culties of consolidating a consistent sup- ply from smallholders have motivated the company to integrate vertically. In 2002, the company leased a farm and started production on a number of horticulture products. Technical expertise was brought in from South Africa and signi�cant investments made by the company in machin- ery and other equipment and overseas travelling to gain knowledge and experience in horticul- tural production. However, lack of technical expertise and certain agronomic and other missteps resulted in a failed venture. The company decided that a better tactic would be to procure product from out-growers that were able to supply on a reliable basis. Seeds and other agricultural inputs were provided to some out-growers. The results were again disappointing; intense competition from other buyers led to a signi�cant level of side selling. Early in 2007, the company decided that a combination of own production and sourcing from out-growers would be required to realize the market opportunities envisaged. This time, it was clear that the company needed to improve its overall relations with out-growers. It acquired new land, hired staff, and embarked on an ambitious project to grow around 100 hectares of horticul- tural products. The company began cooperating with the PIP program in 2004, with the objective of getting its own farms GlobalGAP certi�ed. Until now, however, this has not been achieved. Although, given the markets served, the company has not been under great pressure to upgrade its operations. With respect to procurement, the company has been undertaking efforts to orga- nize two groups of out-growers, which are provided with seeds and other inputs. Some support was provided for training of out-growers by the PIP program. The overall performance of the company in the last few years has been quite positive, yet it is apparent that the growth in exports of horticultural products that have been achieved are not the result of its efforts to upgrade its own production and/or to establish coordinated relations with out-growers. Rather, key has been its capacity to ensure cargo space and the cross-subsidization between its own exports of �sh and fresh produce on the one hand, and its own exports and the cargo space sold to other exporters on the other. Source: Personal interviews with company staff. horticultural exporters that have received 89 percent have less than �ve hectares.32 support from PIP suggests that 69 percent Very few of these farmers have specialized in of the smallholders from which they source have less than one hectare of land, while 32 Personal communications with PIP staff. T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_Chapter.indd 37 7/20/09 4:21:03 PM 38 NOT YET UP TO STANDARD export-oriented horticulture, but rather use been to obtain certi�cation for their own or part of their land to supply exporters and/or for out-grower farms. In turn, lead �rms have processors during part of the year. clearly played a key role in driving processes of producer upgrading (see Box 11). In the Traditionally, the links between Ugandan case of out-growers, some of the core activi- exporters and farmers have been loose, with ties performed by the lead �rm have included few companies having technical support promoting the formation of groups with a le- teams or being able and/or willing to provide gal structure, developing closer relations with seed and other inputs on credit (Wiegratz suppliers to increase oversight of production, et al, 2007a); Sourcing supplies from loca- and/or harvesting activities, centralizing proce- tions nearby to Kampala has involved inten- dures, performing initial internal inspections, sive competition, such that companies have and maintaining required documentation. In generally not been able to win farmer loyalty some cases, the lead �rm has also provided and thereby control “side selling.� Some quality seeds and other agricultural inputs, exporters have made additional attempts to and undertaken pesticide storage and coordi- secure farmer loyalty and/or promote produc- nation of application. Changes in production tion in more distant locations where buyer practices and product speci�cations are com- competition is less rampant. This presents municated to farmers through group training, the key question and challenge for Uganda’s usually with the support of external agents fresh produce export sector: In a commercial such as donors, government of�cials, and environment characterized by lack of trust, consultants. poor transparency, and overall “loose� rela- tions between out-growers and buyers, what In the development of effective links with are the best options in order to take advan- out-growers, the traditional role of the “lead� tage of market opportunities and to leverage farmer acquires signi�cant importance. Thus, the production capabilities of out-growers and where more successful examples of out- institutional support? Some examples of the grower schemes are observed in Uganda, a strategies are highlighted in Boxes 11, 12 and “lead� farmer assumes important functions 13. Clearly, the overall low pro�tability of the in the supply chain, for example, serving as business, a lack of specialization in export- an aggregation point for the consolidation of oriented production, variable export demands export volumes and acting as a channel for in terms of quantities, and increasing compe- coordination of production activities between tition among local buyers, represent tre- individual out-growers and the exporter. mendous challenges to the development of Usually, the export company’s staff and/or sustained out-grower schemes. “lead� farmers undertake supervision to As we highlight previously, one of the tacti- ensure that prescribed practices are followed cal options implemented by export �rms has and records maintained. TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_Chapter.indd 38 7/20/09 4:21:03 PM C H A P T E R 2 E ME RGING ST ANDARDS A ND TH E COMMERC IA L RES PONS ES B Y UGA ND A N H ORTICULTUR A L EX POR TER S 39 Box 11 CHANGING GEOGRAPHIC SCOPE TO REDUCE DOMESTIC COMPETITION AND ENSURE A CONTINUOUS SUPPLY Although some of the most established exporting companies in Uganda have been pursuing GlobalGAP certi�cation, the second largest export company has been concentrating its efforts on dealing with the more basic constraints that limit market participation, namely consolidating export volumes and ensuring availability of air cargo space. The company entered the horticulture export business in the mid-1990s and quickly established a leading position in the sector. Initially, the export portfolio of the company comprised only mangoes and chilies, but today the company exports a wide variety of products, with hot peppers, okra, and plantains accounting for over 80 percent of its trade in 2007. As in the case of other �rms, there is some degree of specializa- tion in the procurement of particular products. For example, the company’s own farm production focuses on okra, while larger and small out-growers provide the other crops. Relations with out- growers tend to be loose. In order to deal with increased competition among exporters in procuring fresh fruit and veg- etables and to address the concerns of one of its buyers with respect to pesticide residues, the company has recently been trying to develop an out-grower scheme. This has involved the intro- duction of hot pepper into a new region that is distant from Kampala where competition between exporters to secure supplies is less �erce and farmers have been motivated to switch away from hot pepper production due to negative past experiences. In this new area, the company has supported former tobacco producers to transition to hot pepper, including provision of �nancial incentives, seeds and other inputs, and training. Members of company �eld staff supervise out- grower production and oversee pesticide application. Company staff and out-grower farmers have received training with support from PIP. Source: Personal interviews with company staff. 2.4 Standards Compliance as an has shown that such production factors are Overstated Element of the not suf�cient to succeed in horticultural ex- Industry’s Competitiveness ports. Seasonality is a major issue, particularly After almost two decades of horticultural ex- in vegetable production, affecting both overall port development in Uganda, the sector still quality and production volumes. Fragmenta- relies on basic production factors, favorable tion of production, due to the geographically agronomic conditions, ample land, and rela- scattered and poorly coordinated participa- tively cheap labor as its main source of com- tion of small farmers, enhances risk and the petitive advantage.33 However, experience attendant costs. Additionally, uneven product quality and signi�cant post-harvest losses, 33 This is illustrated by the two SWOT analyses presented due to poor harvesting practices, packing, and in the Annex. Although, these analyses highlight different weaknesses, opportunities, and threats, there logistics, bring about considerable inef�cien- is broad agreement on the perceived strengths of the sector, driven by basic production factors. cies in procurement (see Box). T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_Chapter.indd 39 7/20/09 4:21:03 PM 40 NOT YET UP TO STANDARD Box 12 ACHIEVING GLOBALGAP AND ORGANIC CERTIFICATION TO OPEN OPPORTUNITIES IN HIGHER SEGMENTS OF THE EU MARKET: THE KEY ROLE OF THE LEAD FIRM The challenges faced by smaller �rms in developing a coordinated response to market oppor- tunities for horticultural exports are well exempli�ed by the case of a relatively well-organized company with an established market trajectory. The company started its export business in 1996. Initial experiences with exports to the European Union were marked by some �nancial losses due to “untrustworthy� buyers. However, believing in the opportunities provided by horticulture exports, the �rm persisted. Currently, about 90 percent of the company’s exports consist of hot peppers. The company has consolidated linkages with two European buyers, supplying hot pep- pers in speci�c time “windows� when volumes from other competitors are low, covering around �ve months each year. In the late 1990s, with �nancial intermediation by the IDEA project, the �rm approached �nancial institutions for a loan to expand production and upgrade infrastructure, but with no success. This has served to limits the scope for expansion. Although the company has not faced acute pressure from its buyers to upgrade operations, the �rm embarked on a program to certify a group of 20 out-growers under GlobalGAP option 2, and another 10 farmers for organic production. Both initiatives received the support of the PIP program over the period 2004 to 2007. In 2005, the company established its own farm near to its out-grower. The �rm has coordinated the organization and registration of farmer groups and provides seeds and cash advances. With regards to GlobalGAP certi�cation, the company established a basic structure that acts as a packinghouse and gathering place for farmer training sessions. Some innovations and cost- effective ways to ful�ll GAP requirements, in terms of sanitation, water containers and disposal of pesticide containers, were also introduced. The lead farmer controls the storage of pesticides and authorizes applications. A pre-audit was undertaken in June 2006. Final certi�cation to GlobalGAP Option 2 was granted in September 2008. In pursuit of organic certi�cation, farmer training was undertaken and an Internal Control System (ICS) was established. It became evident, however, that the costs of achieving certi�- cation were signi�cant, in part reflecting the long transition period; in contrast to many other horticultural crops in Uganda the use of pesticides is a common practice. Agronomic problems were also experienced in the control of pests and diseases in the absence of non-chemical technological options. Thus, the decision was taken to pursue certi�cation to GlobalGAP as an alternative. An on-going problem for the exporter is the lack of incentives for out-growers to follow recom- mended practices on a regular basis. At times, the exporter does not purchase the product and they are forced to �nd alternative markets that have no requirement for GlobalGAP. Further, there are questions over whether the exporter will be able to achieve the economies of scale needed to cover the recurrent costs of certi�cation without continuous donor support. More broadly, will this certi�cation facilitate access to more discerning markets, while other supply chain weaknesses persist? TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_Chapter.indd 40 7/20/09 4:21:03 PM C H A P T E R 2 E ME RGING ST ANDARDS A ND TH E COMMERC IA L RES PONS ES B Y UGA ND A N H ORTICULTUR A L EX POR TER S 41 Although many exporters see increasingly competition from other countries are highlight- stringent standards in export markets as a ed as the main constraining factors. Similarly, threat, the sustainability of the sector lies in among the set of risks faced by Ugandan �nding sources of real competitive advantages exporters, the reliability of cargo, including and solving the primary bottlenecks to im- flight cancellations, delays, and late arrivals and proved competitiveness. Table 8 illustrates airlines taking less than agreed-upon volumes, the perceptions of a group of exporters regard- is at the top of the list. Wiegratz et al. (2007b) ing the main factors affecting their participa- noted that “a number of exporters have ac- tion in EU markets. Lack of reliable and com- cordingly fallen out of the market because of petitive export logistics and increased price the �nancial implications of such incidences.� Box 13 ADDRESSING BASIC BOTTLENECKS IN PASSION FRUIT PRODUCTION Passion fruit was cultivated on a relatively signi�cant scale in Central Uganda during the 1990s as part of export diversi�cation initiatives, and most recently in the Eastern and Western Highlands. Yet, yields have remained very low, production has never exceeded a few hundred tons, and exports have generally consisted of very small annual quantities. Biotic and management-related factors have contributed. Disease problems are particularly critical, predominantly because pro- duction has been dominated by a single variety (Kawanda Hybrid) that is susceptible to prevalent disease and pests. Low soil fertility, unpredictable rainfall, and poor agronomic and post-harvest practices are also factors contributing to low levels of productivity. Several initiatives aimed at reducing disease problems have been undertaken since the mid- 1990s, mainly by NARO and the IDEA project, through the introduction of improved germ plasma, screening of local passion fruit types for disease tolerance, dissemination of clean planting material to farmers, etc. The impact of these efforts, particularly with respect to the control of viruses, has been minimal, predominantly due to the lack of epidemiological data to formulate appropriate management strategies and poor identi�cation of casual agents and sources of tolerance. Most recently, a research program has been initiated at Makerere University, in collaboration with other national and regional research institutions, to map viral disease incidence and sever- ity, identify and characterize viral pathogens and characterize and screen local passion fruit germ plasma for sources of host tolerance. This program has been supported by the Rock- efeller Foundation, World Bank, International Foundation for Science, SIDA and NORAD. It is expected that the results of this program will provide clear insights of strategic management options to produce and expand passion fruit production and exports. Passion fruit is one of the crops prioritized under current research program of the East Africa IPM/CRSP initiative funded by USAID. Source: Karungi (2007); IPM CRSP (2005). T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_Chapter.indd 41 7/20/09 4:21:03 PM 42 NOT YET UP TO STANDARD TABLE 8. Ugandan company perceptions of the main factors affecting their participation in the EU market Low/Very Low Medium High/Very High Importance Importance Importance Factor % (%) (%) Price competition from other countries 27 0 73 Higher quality product from other countries 64 0 36 Dif�culties in meeting the requirements in terms of varieties and grades 55 18 27 Dif�culties in meeting the requirements set in terms of pesticide 50 10 30 residues, traceability and food safety Lack reliable and cost competitive export logistics 0 10 90 Limited own capacity to sustain a reliable supply 56 9 36 Weak domestic production base 18 55 27 Lack of market information, and business contacts 36 28 36 Lack of GLOBALGAP certi�cation 27 9 64 Lack of HACCP certi�cation 27 18 55 No organized body/cooperative to assist farmers/exporters 55 18 27 Source: Author survey of Ugandan exporters. The lack of GlobalGAP and Hazard Analysis coordination and performance in international and Critical Control Point (HACCP) certi�ca- markets, progress has been uneven. Overall, tion were also highlighted in the survey as the industry has been unable to overcome the key constraining factors. This seems to reflect key competitive disadvantages that it faces. poor understanding of the importance of these The low pro�tability of the business has been standards in the context of Uganda’s fresh a serious constraint to investments and inno- produce exports and the market segments vation, although it should be recognized that served, on the part of a number of exporters. many companies have made attendant adjust- At the same time, some exporters evidently ments in recent years. Indeed, the industry perceive opportunities to increase margins has not had to act alone in these efforts. and escape from speculative markets through In recent years, a set of donor and GoU initia- serving higher segments of the EU market. tives has supported the industry in overcom- ing the challenges of compliance and compet- Although recent efforts have been made by itiveness. The contribution of these initiatives some Ugandan �rms to improve supply chain will be analyzed in the next section. TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_Chapter.indd 42 7/20/09 4:21:03 PM CHAPTER 3 Development Community and GoU Response to Compliance Challenges 3.1 Overview of Recent Interventions in the Fruit and Vegetable Sector in Uganda An array of government/donor initiatives targeting identi�ed constraints to Uganda’s sustained participation in international horticulture trade has emerged in recent years. Although it is not easy to draw a �ne line between recent initiatives targeting overall aspects of industry competitiveness and those speci�cally promoting compliance with market requirements, on which we focus here, an attempt to do so is made in Figure 9. The GoU, with the support of major donors, has led initiatives targeting overall aspects of com- petitiveness, including improved infrastructure and institutional capacity building in the public and private sectors to provide �nance, technical advice, and other services to commercial and export sectors. As an example, the Plan for Modernization of Agriculture (PMA) is making investments in district roads and rural electri�cation and the provision of agriculture extension services through FIGURE 9. Framework of recent interventions in the Uganda horticulture sector Compliance with standards Level 1 Level 2 Level 3 Level 4 Level 5 NAADS/VEDCO IDEA NAADS PIP EPOPA EPOPA PIP PIP MAAIF CordAid UNIDO FAO-UNCTAD Technological improvements for Improving market linkages in added value: dried fruit and exporting markets processing for local and exports markets CBI/UEPB in specific segments and improved Baseline for market participation NAADS/UNIDO/EU-BUDs Strengthening exporters’ organizations PIP/IDEA/FAO/DANIDA/Others competitiveness - Formation of farmers’ groups - Production methods - Expansion of production areas NAADS/VEDCO - Distribution of seeds IDEA/MAAIF/NARO/UEPB Infrastructure: electricity, roads, etc. WORLD BANK, UNIDO, etc. T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_Chapter.indd 43 7/20/09 4:21:03 PM 44 NOT YET UP TO STANDARD the creation of the National Agriculture the Danish International Development Agency Advisory Services (NAADS). (DANIDA), IDEA) and improving end-market link- ages (e.g., CBI, UEPB, IDEA Phase II, UNIDO). Other recent interventions are more directly targeted at aspects of sectoral competitive- Another set of recent initiatives speci�cally ness. For example, promoting expansion of targets aspects of compliance, in domestic, production and commodity diversi�cation (e.g., regional, and/or international markets, and for IDEA Phase II), distribution of clean seeds and fresh and/or dried horticultural products. The planting materials (e.g., UEPB, IDEA Phase II), aspects of compliance addressed by these undertaking research for controlling pest and initiatives include the promotion of basic disease problems (e.g., NARO/University of quality improvements, facilitating the adop- Illinois), promoting farmer organizations as tion of good agricultural and/or manufacturing the foundation for smallholder participation in practices (GAP/GMP), and facilitating farm domestic and/or export markets (e.g., NAADS, and/or enterprise certi�cation with respect to VredesEilanden Country Of�ces VECO), organic and/or fair trade. Table 9 summarizes promoting cohesion among industry actors by the aspects of compliance promoted by these strengthening industry associations (e.g., PIP, different interventions. TABLE 9. Aspects of compliance promoted by different interventions directed at compliance with market/buyer requirements Intervention/ Quality/ Assured Compliance/ Program Consistency Safety Record Keeping Traceability Certi�cation PIP ✓ ✓ ✓ ✓ EPOPA ✓ ✓ SEP (2001–2003) ✓ SEP (2004+) ✓ ✓ ✓ ✓ UNIDO ✓ NAADS ✓ IDEA Phase II ✓ ✓ FAO ✓ ✓ DANIDA ✓ BUDS ✓ TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_Chapter.indd 44 7/20/09 4:21:03 PM C H A P T E R 3 DE VE L OP ME NT COMMUNITY A ND GOU RES PONS E TO COMPLIA NCE CH A LLENGES 45 There have been dual motivations for these sector (e.g., PIP, EPOPA, FAO), promotion of interventions related to standards compliance. quality and/or safety through industry-level On the one hand, there has been a general training and/or the establishment of codes perception that even the limited (yet fragile) of practice and integrated crop production gains from earlier initiatives in the sector could protocols (e.g., PIP, IDEA), and promoting in- be at risk with emerging market and regulatory novative processing technologies to enhance standards serving to block Ugandan company/ overall quality (e.g., UNIDO, DANIDA). farmer continued participation in external The main entry point of other interventions has markets. On the other hand, there is conten- been through lead �rms. Support has involved tion that the application of certain voluntary direct technical assistance and training of the standards, including organic and fair trade, company’s staff and/or out-growers, in some provides a window of opportunity for Ugan- cases with �nancial support for investments dan horticultural exports to be differentiated in equipment and improved infrastructure and in overseas markets and thus escape from certi�cation costs. In recent years, interven- their low pro�t and vulnerable competitive tions at the company level have generally position. Regardless of the motivating objec- targeted niche EU markets, especially for tive, it is recognized that achieving the needed organics and dried fruits.34 Donors/programs upgrades in systems and practices is likely to supporting upgrades in these areas include prove challenging given the shallow technical DANIDA, UNIDO, BUDS,35 and EPOPA. and institutional foundations of the industry. Table 11 illustrates the typology of cost ele- The interventions made and supported by ments defrayed by the interventions. It should donors and the GoU have sought to enhance be noted that not every company targeted by a both external and internal industry capacities particular intervention necessarily received the (Table 10) and to defray many of the adjust- same level and type of support; programs such ment costs incurred by Ugandan �rms and as PIP and IDEA provided customized support farmers (Table 11). There have been a signi�- to lead �rms on the basis of a de�ned needs cant number of interventions, yet seemingly assessment and action plan. The target of as- only modest coordination among them. As sistance, objectives, and approaches of some will be illustrated below, the overall combined of these initiatives is discussed in detail below. impact from these interventions can also be characterized as modest. 34 Under the Uganda National Export Strategy (NES) 2008–2012, the fruit and vegetable sector was priori- Efforts to augment the set of internal indus- tized, and speci�cally those activities involving value addition. try resources have been undertaken both at 35 The Business Uganda Development Scheme, Enter- the collective and individual �rm level. At the prise Development Support (BUDS-EDS) program was a cost-share grant project that was funded by collective level, initiatives have focused on the European Union and implemented and managed strengthening industry apex organizations and by the Private Sector Foundation Uganda (PSFU). The support was not sector-speci�c, but targeted to the interface between the public and private individual SMEs. T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_Chapter.indd 45 7/20/09 4:21:03 PM 46 NOT YET UP TO STANDARD TABLE 10. Main entry points and instruments used by support programs promoting compliance with market/buyer requirements Internal Capacities of the Industry External Capacities Individual Level (Public/Private Intervention Sectors) Collective Level Firm Farmer Strengthening Training Training Training regulatory/institutional framework PIP (Pesticides) Crop protocols/ Technical Laboratory capabilities Assistance Task force District seed Training Training SEP (2000–2003) nurseries Training SEP (2004+) Provision of quality seeds Strengthening Code of practice Training Training regulatory framework Strengthening apex Infrastructure Improved (Pesticides) organizations IDEA–Phase II infrastructure Technical Assistance Infrastructure Innovation Training and NAADS technology provision of root stocks Supporting Innovation Training collective technology UNIDO marketing Training initiatives FAO Task force Training Strengthening apex Innovation DANIDA organizations technology Technology BUDS acquisition Strengthening Strengthening apex Support for Training capacities of organizations internal control certi�cation bodies/ systems EPOPA Regional standardization process TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_Chapter.indd 46 7/20/09 4:21:03 PM TABLE 11. Typology of cost elements covered or shared by interventions Main Aspects of Compliance Addressed Uganda_Horticulture_Chapter.indd 47 Safety Pesticides/ Quality and Safety and Environmental Demonstrate Consistency Traceability Concerns Quality and Safety Compliance Shell Cost Item SEP EPV PIP EPOPA UNIDO DANIDA Foundation Several Others Human capital capacity building Materials and aids ✓ Training of group leaders/trainers ✓ ✓ ✓ Training of farmers ✓ ✓ ✓ Training of �rms ✓ ✓ Monitoring/supervisory Testing/analysis Water Soil Pesticide residue ✓ Certi�cation Pre-audit Audit ✓ ✓ Initial certi�cation ✓ ✓ ✓ ✓ ✓ Renewal of certi�cation ✓ ✓ ✓ Infrastructure/physical upgrading T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Building ✓ ✓ Equipment ✓ Machinery ✓ ✓ ✓ C H A P T E R 3 DE VE L OP ME NT COMMUNITY A ND GOU RES PONS E TO COMPLIA NCE CH A LLENGES Management QMS/HACCP development ✓ ✓ ✓ Documentation/traceability/record keeping ✓ ✓ ✓ Information updates ✓ Coordination/linkage with buyers ✓ Internal control system (ICS) ✓ ✓ 47 7/20/09 4:21:03 PM 48 NOT YET UP TO STANDARD 3.2 Strengthening Industry Capacities generally (Box 14). A mid-term evaluation of to Comply with Quality, Safety, the program in 2004, however, pointed to the and Traceability Requirements limited effectiveness of the interventions that The broad themes of interventions directed had been made, with support for too many at the fresh produce export sector in Uganda commodities and a range of disconnected ini- have included training in integrated pest tiatives (GoU, 2004). At the same time, there management (IPM) systems, safe use of was a concern that these interventions did pesticides, hygiene in production and harvest- not address emerging food safety and other ing, traceability systems, and certi�cation of requirements that were posing increasing production practices. Indirect objectives of the challenges to the sector. The evaluation also support have included the establishment and/ noted a disconnection between the program’s or strengthening of farmer groups and devel- support for individual companies and its inter- oping and enhancing vertical linkages between ventions at the farmer and community levels. lead �rms and producers. The project summa- In 2004, the broader SEP was restructured. In rized above can be characterized in terms of relation to horticulture, the new focus was to speci�c blends of these interventions. become compliant with GlobalGAP via sup- port under an Export Production Villages (EPV) Initiatives targeting internal company program (Box 15). The aim of the EPV was to and out-grower capacities to comply improve the skills and capacities of organized Several isolated initiatives have sought to fa- farmers to supply export markets. From 2004 cilitate improved farmer and/or company com- to 2006, a total of 23 export villages (cover- pliance with emerging standards. In relation to ing 1,314 farmers) were trained on different the fresh produce sector, the initiatives led by aspects of compliance with the GlobalGAP the GoU through the Strategic Export Program protocol, and on the importance of group (SEP) and the Export Production Villages (EPV) cohesion. Training was delivered by multidisci- program, and by the COLEACP through the plinary teams from different public institutions, PIP have been the most prominent in terms of including the Ministry of Agriculture, Animal the scope and magnitude of their efforts. Both Industries and Fisheries (MAAIF); Ministry of initiatives have used exporting companies as Tourism, Trade and Industry; National Envi- the entry point to promote industry compli- ronmental Management Authority (NEMA), ance. NARO, Uganda National Bureau of Standards In recent years, the GoU has supported (UNBS) and Ministry of Labor, and the private horticultural exports through several initia- sector. In so doing, the EPV brought together tives. Starting in 2001, general support for the capacities of the different public institu- quality enhancement, sectoral coordination, tions supporting the sector and promoting and infrastructure investment was provided to cohesion and common targets. Typically, the the sector under the Strategy Export Program training was conducted over a three-day period (SEP), an ambitious plan to boost NTAE more and held on a lead farmer’s premises. TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_Chapter.indd 48 7/20/09 4:21:03 PM C H A P T E R 3 DE VE L OP ME NT COMMUNITY A ND GOU RES PONS E TO COMPLIA NCE CH A LLENGES 49 Box 14 A PRODUCE-ORIENTED APPROACH TO IMPROVE INDUSTRY COMPETITIVENESS AND IMPROVE QUALITY AND CONSISTENCY: THE STRATEGIC EXPORT PROGRAM (SEP) At the end of the 1990s, the GoU developed the Program for the Modernization of Agriculture (PMA) and the Strategic Export Program (SEP) as the key policy programs to enhance productivity and rural incomes. Whereas the PMA was expected to boost agriculture productivity across sec- tors, the SEP was addressed the speci�c concerns of the export sector, including horticulture. By March 2003, about US$660,000 had been delivered to support program activities. Direct support of an estimated US$165,000 was provided to 18 horticultural export companies and to HORTEXA, which was mainly used for the construction of basic post-harvest infrastructure and the acquisi- tion of equipment (packing sheds and collection centers, charcoal coolers, solar driers), organic certi�cation of a group of 26 out-growers, and the rehabilitation of the Mubuku Irrigation Scheme. Initiatives led by NARO for improving the quality of planting materials included training 315 farm- ers in nursery management, raising 35,000 stock seedlings, and establishing four mother gar- dens for passion fruit, avocado, and mango. The project was implemented under the concept of production villages or production clusters in an effort to support farmer’s cohesion and facilitate their links to exporters by reducing transaction costs. Source: GoU (2004). Activities implemented at the �eld level perch in the late 1990s. This interpretation were part of a wider framework through of the challenges facing horticultural exports which the government planned to play a role from Uganda, however, failed to recognize in assuring compliance of Ugandan horticul- that the �sh sector had been deemed to be tural exports with GlobalGAP and of�cial EU in violation of EU regulatory requirements, requirements by aligning national regulations while GlobalGAP is a private standard being and overseeing their enforcement through applied by European retailers to whom very continued training and follow-up needed little of Uganda’s fresh produce trade is until the export villages would be ready to be directed. Nevertheless, this alleged threat certi�ed.36 The Department of Crop Protec- of market exclusion acted to motivate in- tion of MAAIF emphasized the urgency of creased attention and resources to improve broad GlobalGAP certi�cation, claiming that production practices in horticulture. the failure to do so could well result in the The EPV envisaged establishing an inspection type of trade restrictions imposed by the program and traceability system, and work- European Union on Ugandan exports of Nile ing toward GlobalGAP certi�cation for each export village. Resource constraints, however, 36 In addition to providing farmer training, a second component of the program was the development of soon served to limit the scope of the EPV a traceability system, with all exporters being issued registration numbers and with them, in turn, develop- such that none of these aspirations were ma- ing farmer codes for their suppliers. Under this sys- terialized (see below) and even farmer training tem, problematic consignments could be better traced by both exporters and Ugandan government of�cials. had to be curtailed toward the end of 2006. T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_Chapter.indd 49 7/20/09 4:21:03 PM 50 NOT YET UP TO STANDARD Box 15 EXPORT PRODUCTION VILLAGE PROGRAM: CHANNELING SUPPORT THROUGH COORDINATED SUPPLY CHAINS The overall goal of the Export Village Program (EPV) was to improve marketing linkages and access to farmers for organized groups of farmers targeting the EU market. A key focus, there- fore, was compliance with EU regulatory and commercial requirements, although in practice this was generally interpreted as GlobalGAP certi�cation. The EPV was focused on the concept of an “export village,� consisting of a group of 5 to 100 small-scale farmers that marketed collectively through a “lead �rm.� This was seen as an effec- tive way to achieve economies of scale, reduce product quality losses, improve market coor- dination, and reduce transaction costs. The lead �rm, usually a well-established farmer or an exporter, coordinated producers within a radius of 5 to 20 km and provided planting materials, some extension knowledge, and advice on market requirements with respect to food safety and quality. In certain cases, the lead �rm also provided packinghouse facilities and refrigerated trucks for transporting produce, and employed workers to handle fresh produce at various levels of the food chain. The primary contribution of the EPV was to provide farmer training and to support the establishment of a broader system of traceability within the horticultural export sector. The performance of the export villages that were established was highly variable. The evaluation of the EVP undertaken in 2007 observed that • Groups that were led by serious exporters continued to run. A serious exporter is one who lays strategies to export all year round by having farmers in different parts of the country who provide a continuous supply. • Lack of transparency in payments made by exporters was the cause of signi�cant numbers of farmers pulling out of the export village scheme. • Frequent meetings with the exporter and clarity in the deductions that it made, as well as honesty between farmer group members were key in keeping groups together. It is also criti- cal that support to groups be of equal bene�t to all members. • Farmer groups should not be forced to form but rather support should be given for groups to form of their own volition. These �ndings highlighted the importance of a reliable market for the produce from export vil- lages and trust and transparency in relations with exporters as critical factors. Source: Personal communications with MAAIF staff. The PIP, a program of support to the horticul- with EU regulations relating to pesticides, the ture sector that is funded by the European PIP program has also supported many compa- Commission, has been active in a number of nies in their attempts to comply with private African, Caribbean, and Paci�c (ACP) countries. standards, especially in relation to food safety. While substantially focused on ensuring the The PIP program began working in Uganda in compliance of exporters and their suppliers 2003, initially to address a set of problematic TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_Chapter.indd 50 7/20/09 4:21:03 PM C H A P T E R 3 DE VE L OP ME NT COMMUNITY A ND GOU RES PONS E TO COMPLIA NCE CH A LLENGES 51 areas related to the regulation and use of pesti- agreement established, the components cides that had been identi�ed in a UEPB needs supported by the program covered the cost assessment (PIP, 2006). of training and technical assistance, trace- ability software, laboratory analysis, and the Although the PIP program in Uganda has also establishment of demonstration plots for supported some broader capacity-building and IPM. A company’s �nancial commitment sectoral coordination efforts (see below), the mainly included the costs associated with the core of the program has fallen under its Good logistics of training and the implementation Company Practice component. Work in this of recommended practices. The PIP program area began in 2004. This is a demand-driven generally does not support investments in process by which export companies request infrastructure and logistics associated with assistance and subsequently a need assess- internal company training events or for their ment is carried out and a �rm-speci�c action out-growers. plan is developed. In Uganda, needs assess- ments and the preparation of action plans In Uganda, PIP has worked with 23 compa- were initially done by international consultants, nies with links to approximately 1,659 produc- but later through local consultants trained by ers. By 2007, 16 Memoranda of Understand- the program. ing (MoU) were still active, of which only around 10 could be considered completed Although the action plans were customized in April 2008, when the �rst phase of the to each recipient �rm, the activities usually program was concluded (PIP, 2008). Table 12 covered different levels of training and techni- summarizes the broader themes of assis- cal assistance in areas related to food hy- tance that was provided. The project sup- giene, traceability, and IPM systems. In some ported companies in their attempts to shift cases, support was provided for certi�cation market orientation and/or comply with market to GlobalGAP and/or organic certi�cation. The requirements by achieving certi�cation with program worked through matching grants, respect to GlobalGAP Option 1 (2 companies), with the bene�ciary company assuming GlobalGAP Option 2 (7 companies), organic about 40 percent of the �nancial costs of (1 company), and fair trade (1 company). A implementing the plan.37 Depending on the further 12 companies receiving support from PIP were directed at markets for noncerti�ed 37 According to the �nal evaluation of the PIP program: products in the European Union. The companies working with small producers were a priority target of the program. Thus, all of the actions in favor of the small producers ben- Aggregate PIP support to Ugandan compa- e�ted from more favorable cost-sharing rules for nies totaled about €776,000, suggesting an the companies, their minimum contribution was, in this case, brought down from 40–50 percent to average of €35,000 per company.38 A key 20 percent. Gergely et al (2008) Pages 34–35. Yet, during the interviews, it was not clear whether the PIP program applied this rule among the 38 This �gure is a rough average, as not all companies companies in Uganda working with out-growers. were subject to the same level of support. T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_Chapter.indd 51 7/20/09 4:21:03 PM 52 NOT YET UP TO STANDARD TABLE 12. Broad themes of assistance management system upgrades. This improved provided by PIP program awareness would appear to have occurred Number of much more widely at the level of exporting Activity Companies companies than among farmers, which remem- Diagnostic 21 ber are predominantly small-scale. HACCP 16 General technical support 16 Based upon interviews with company and Pesticide analysis 10 government representatives and available docu- Microbiological analysis 10 mentation, it is possible to discern a number Soil analysis 1 of broad �ndings and lessons from attempts to Pre-audit 8 enhance capacity for assured compliance in the Pre-audit: GlobalGAP Option 1 2 Ugandan horticultural export sector. We detail Pre-audit: GlobalGAP Option 2 7 each of these in turn below. Pre-audit: Organic 1 • Misapplication of the Export Village characteristics of the program was its cost- Concept: Most interlocutors believe that sharing basis; progress in the implementation the export village concept has some utility in of action plans was highly dependent on the Uganda and could be a suitable framework capacities of the companies to undertake the for training, infrastructure development, and investments required. For example, a training other support activity. However, as applied, session could not be delivered if the company the training program did not yield tangible or did not provide transport and food to the out- sustained results. Rather than a one-off growers that were attending. This is a major and short training program in each village, factor explaining the quite signi�cant variation the scheme should have involved a system of in the progress of action plans across the more frequent and better focused modules 23 companies that received support. dealing with a range of very speci�c topics. The training might have been accompanied Ef�cacy of compliance-related interventions by complementary investments, such as The aggregate impact of the various interven- investments in low-cost storage facilities tions geared directly toward enhancing the (i.e., charcoal-based cooling sheds). food safety and other management capaci- ties of Ugandan exporters and farmers can be • “Train the Trainers� Approach Proved characterized as both mixed and below initial Ineffective: The initial implementation ap- expectations. The qualitative evidence points to proach of the PIP was to provide collective enhanced awareness of the need for improved training to company staff on the assumption food safety and hygiene and understanding that these staff would then act as “trainers� of pertinent approaches to production and at the company level and for the company’s sourcing, yet only preliminary progress in the out-growers. A PIP consultant would accom- implementation of needed investments and pany the company staff in the initial training TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_Chapter.indd 52 7/20/09 4:21:03 PM C H A P T E R 3 DE VE L OP ME NT COMMUNITY A ND GOU RES PONS E TO COMPLIA NCE CH A LLENGES 53 sessions they provided, but it was assumed core ingredients have been missing. For that the company would then develop a many companies, there has been a lack of comprehensive plan to train other company clear incentives to undertake the pertinent staff, �eld operators, and out-growers. Yet this investments. These companies have not approach proved to have limited application been pressured by their existing buyers to in the Ugandan context, reflecting in part the undertake upgrades, while the prospects prevailing administrative and managerial struc- for them to supply more discerning buyers ture of most of the companies involved in appears remote given ongoing struggles in horticultural exports: staff shortages and lack their existing business. Even where there has of staff specialization in supply chain func- been some push for upgrades, at the extreme tions. Thus, although 103 participants from including requests for certi�cation against 21 companies took part in the collective training GlobalGAP, many companies have simply provided by PIP, and over 200 company staff lacked the �nancial resources and breadth of took part in sessions aimed at “training the managerial capability to make the needed in- trainers,� most of the training to farmers and vestments and to translate these investments company staff continued to be provided by into enhanced business performance. external consultants. Companies were unable • Efforts Involving a “Great Leap Forward� to provide follow-up/reinforcement training to Will Have High Failure Rates: In many farmers, both because they lacked the staff instances, donor assistance sought to defray and because of the typically high turnover the costs of certain upgrades by both lead among company out-growers. �rms and producers, including the steps to- • Closing the “Knowledge Gap� Proved to ward achieving GlobalGAP certi�cation. How- Be Necessary, But Not Sufficient: A criti- ever, most exporters have found themselves cal assumption in the PIP program was that, having to make huge leaps in capacity in order if technical assistance and training could be to achieve prevailing benchmarks in more provided to exporting companies in order to exacting markets, essentially transforming �ll critical informational and technical gaps, their entire businesses, when there are few then these companies would be able to apply tangible assurances that the pertinent invest- this enhanced knowledge and implement up- ments will result in new or more remunerative grades in their management systems, physi- trading opportunities. Programmatic subsidies cal infrastructure, and supply chain relation- can help to offset some of the initial upgrad- ships, resulting in increased compliance and ing costs, yet the �rm is left with the recurrent broader competitiveness. Although there is costs of running a more complex business and certainly evidence that important “knowledge supply chain operation. For most of the incum- gaps� have been bridged, it is not evident bent players in Uganda’s horticultural industry, that this has been translated into appreciable this “new� latter business model may be investment and system modernization. Other inappropriate and unsustainable, except with T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_Chapter.indd 53 7/20/09 4:21:04 PM 54 NOT YET UP TO STANDARD sustained donor and/or governmental support are still unsolved, or where only weak or fragile (Box 16). The “Great Leap Forward� approach supply chain relationships exist, efforts to build is even less likely to be successful at the awareness and capacity for standards manage- farmer level. Few Ugandan smallholders have ment must go hand in hand with complemen- had any extended experience growing fruit tary measures. In the Ugandan context, it is and vegetables in a dedicated way for exports. not evident that this has been the case. Even smaller numbers have bene�tted from Evidence of industry learning and reported sustained interaction with individual exporters bene�ts from interventions and programs to enhance productivity and/or In January 2008, a survey was undertaken of product quality, and to implement new agricul- Ugandan horticultural exporters that solicited tural practices. Incremental advances can be information on their objectives in sourcing achieved over time. Yet, the notion of rapid and technical assistance toward assured compli- transformational movement toward GlobalGAP ance, the extent to which they had actu- certi�cation is misplaced. Compliance can be ally gained awareness and implemented achieved with sustained assistance (Box 17), recommended upgrade programs, and the but even in these instances of “success,� perceived bene�ts associated with the steps achievements are typically a “hard slog.� that they had taken in this regard. With respect to objectives in seeking donor sup- • “Compliance� is a “Fleeting Mirage� Where port, all companies emphasized their interest Fundamental Supply Chain Weaknesses in increasing company and staff awareness Persist: Efforts to promote GAP and associated about food safety and traceability. Around systems of record keeping and traceability are 90 percent indicated that an objective had more likely to be successful where farmers been to improve hygiene in post-harvest and have reliable market outlets, where the basic transport operations (including implementa- agronomic challenges for the focal crop(s) have tion of HACCP), improved traceability and been well addressed and where other factors record-keeping systems, and reduced quality provide strong incentives for farmers to adjust problems during production. Further, around practices and make investments as per the 78 percent referred to the need to strengthen recommendations or urgings of buyers and/ awareness of safe use of pesticides and IPM. or government of�cials. Thus, development Only 43 percent indicated that their objective assistance interventions focused on standards had been to achieve GlobalGAP certi�cation compliance and related upgrading are likely on their own farm and/or by their out-growers. to have greater and more sustainable impact Over two-thirds saw such improvements as when applied in contexts where many other part of their strategy to obtain new buyers in technical and supply chain problems have been overseas markets. resolved and where there are clear market sig- nals that compliance is demanded. In circum- The survey has an element of bias in the infor- stances where more fundamental constraints mation it provides on impacts of donor support TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_Chapter.indd 54 7/20/09 4:21:04 PM C H A P T E R 3 DE VE L OP ME NT COMMUNITY A ND GOU RES PONS E TO COMPLIA NCE CH A LLENGES 55 Box 16 “BIG LEAPS� ALONG THE SPECTRUM OF BUYER REQUIREMENTS HAVE A HIGH RISK OF FAILURE The request to comply with EU MRLs As a result of a pesticide residue detected by one company’s main EU buyer in 2005, the com- pany agreed to take corrective actions, including keeping paper-based records and increasing the company’s oversight of production. The company decided, however, to move even farther toward EurepGAP/GlobalGAP Option 2 certi�cation. The program of upgrades was expected to increase buyer con�dence in the exporter, translating into higher prices and a greater market share. With support from PIP, the company embarked on this initiative in August 2006. The company’s starting point The company had been established in 2003. Around 30 percent of its exports were produced on a nonirrigated farm, with the remainder procured from four middle-size farmers and about 25 small- holders, who also sold to other exporters. Hot peppers accounted for 90 percent of its sales. The company’s staff consisted of 5 full-time workers and 10 temporary �eld workers. It did not have a packinghouse, sourcing from farmers through commissioned agents that delivered produce and kept basic records. At times, quality losses could reach 20 percent of procured produce. Challenges of compliance The assessment of gaps in the company’s traceability and food safety system with regard to compliance with of�cial and GlobalGAP standards indicated that there was a need for (1) a trace- ability system along the company’s procurement system; (2) company policies regarding �eld hygiene, water environment and soil analysis, risk assessment, health and safety, and harvest- ing and post-harvest handling procedures for its own farm and its out-growers; (3) infrastructure upgrades; and (4) registration of the out-grower farmer group as a legal entity with a constituted executive. Addressing the challenges The company received support from PIP to defray the costs associated with training of company staff and/or farmers, technical assistance on establishing a traceability system and provision of traceability software, technical assistance for the establishment of a HACCP-based food safety system, and pesticide analysis. Speci�c responsibilities of the company included allocation of staff to attend training, coordination and �nancial support for training logistics, and implementa- tion of recommended practices (including building a packinghouse, store rooms for chemicals, washing facilities, and �eld toilets). Investments in infrastructure were estimated at about US$17,000 and would take 20 months. Progress and challenges As of August of 2007, a weeklong training event and a needs assessment of the company’s food safety system had been undertaken. Steps had not been taken to implement the traceability system or to improve infrastructure at the �rm or farm level. The weak �nancial and managerial capabilities of the company and its poor backward integration in the supply chains certainly have limited its ability to overcome so many challenges at once. At the same time, the necessary investments could impede its cash flow and jeopardize pro�tability. Source: Personal communications with company CEO. T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_Chapter.indd 55 7/20/09 4:21:04 PM 56 NOT YET UP TO STANDARD Box 17 NURTURING ASSOCIATIONS TO ENSURE SUSTAINED PARTICIPATION IN INTERNATIONAL MARKETS: THE CASE OF A COOPERATIVE IN THE KASESE REGION Consolidating a supply of hot pepper to European markets The cooperative is located in Kasese District of Western Uganda, about 420 km from Kampala. Speci�cally, it is situated in the Mobuku Irrigation Settlement Scheme, which was established by the government in the 1960s. The cooperative started in the 1970s when farmers that settled in the area decided to organize themselves. The IDEA project started to become involved with the cooperative in the mid-1990s, introducing high-value crops with export potential. Numerous crop trials were undertaken including aspara- gus, French beans, and various Asian vegetables. Hot peppers were found to be suitable for the export market and the IDEA project and other donors supported investments in post-harvest infrastructure and training in aspects of production and IPM. The IDEA project also facilitated a link with a Dutch buyer, which has been maintained. By 2003, the cooperative had consolidated its position as a leading hot pepper exporter, with exports of nearly 200 MT. Filling the gap in the provision of services to the group In 2004, with the end of the IDEA project, the European buyer linked the farmers to CordAid, who facilitated funds to expand high-value crop production, mainly hot peppers, passion fruit, and vanilla for export, and most recently moringa seeds for regional markets. To channel this support, a collaborative initiative was put in place under the Kasese Smallholder Income and Investment Program (KSIIP), involving two specialist horticultural consulting �rms, the EU buyer and seven smallholder grower associations, six of which specialized in vanilla and one in hot peppers and passion fruit. The �ve-year project was expected to generate $6.7 million in extra high-value exports. Under the program, the local consulting �rm was not only involved in the provision of technical advice and training to farmers but also assumed crucial processing and marketing functions. An interesting characteristic of the program is its business model, under which the project must generate suf�cient funds to pay for the technical assistance and other services provided by the consulting �rm. Thus, it was expected that the grant and loan provided by the donor, nearly €0.25 million, would support initial project activities, including the costs of technical assistance, but that in the medium-term, 80 percent of technical assistance costs would be funded through income-generating activities. Through the program an array of assistance has been provided to hot pepper farmers, including the �nancing of a tractor and of a revolving fund for farmer inputs, repairing the association’s cold truck to reduce post-harvest losses, and providing training to farmers. In 2004, the association exported about 211 MT of hot pepper, an increase of 10 percent over the previous year. In 2005, with the support of the PIP program the association embarked on GlobalGAP certi�ca- tion. However, several problems delayed its achievement, in particular an outbreak of bacterial wilt in 2006 and 2007, which practically eradicated production. Farmers had received training in IPM systems through the IDEA project, but these principles and practices had been poorly applied. A Continued TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_Chapter.indd 56 7/20/09 4:21:04 PM C H A P T E R 3 DE VE L OP ME NT COMMUNITY A ND GOU RES PONS E TO COMPLIA NCE CH A LLENGES 57 contingency plan was developed with assistance from one of the consulting �rms to grow on new land and to undertake trials for possible strategies to control the disease. Other problems at this time were high post-harvest losses and dif�culties ensuring availability of cargo space. Early in 2008, about 32 farmers belonging to the association achieved GlobalGAP Option 2 certi�- cation on new land that entered production in November 2007. Although exports have started to recover, they have not yet returned to 2005 levels. Ongoing challenges The cooperative faces signi�cant ongoing technical and �nancial challenges, including starting the repayment of loan obligations, the maintenance of GlobalGAP certi�cation, and ensuring the sustainability of the services provided by the consulting �rm once the KSIIP program �nishes in 2009. To date, 131 hot pepper producers have bene�ted from continuous institutional support over more than a decade. Yet only a subgroup of 32 of these farmers has obtained GlobalGAP certi�cation. This raises questions not only about the cost effectiveness of these interventions, but also about how GlobalGAP certi�cation is to be extended to more members of the coopera- tive without a further tranche of donor support. Source: KSIIP Quartely Bulletins(July-September 2007 to April-June 2008); ) AMA and Fintrac (2004); Personal communication with AMA director. on awareness and achievement of capacity implementation of record keeping was consid- enhancement because the respondent �rms ered to have been limited. self-assessed their achievements. Neverthe- There is a general perception among the less, the responses do provide some interesting exporters surveyed that the costs of upgrad- observations in terms of overall patterns across ing infrastructure and equipment and imple- �rms (Table 14). Management and application menting traceability systems are prohibitive. of pesticides, record keeping, and HACCP Yet, there is no apparent distinction between principles were some of the areas where higher investments necessary for achieving com- levels of awareness creation with the export pliance with regulatory and/or commercial �rms themselves were reported. With respect requirements in higher-end export markets to out-growers, higher levels of awareness and the very basic needs (e.g., basic packing were reported in the areas of general food facilities and computers) in order to partici- safety, hygiene, and pesticide use. Lesser gains pate in less exacting but highly competitive were reported with respect to record keeping. international markets in a sustained manner. With respect to implementation of recom- As the horticultural export sector in Uganda mended practices, the greatest gains were in has suffered a chronic lack of investment the areas of pesticide use and management, over long periods, the industry has been ill- and overall safety. Advances with respect to equipped to undertake additional challenges, infrastructural investments, for example, in in particular, those related with “big leaps� packinghouses, collection centers, �eld toilets, along the spectrum of buyer requirements, and pesticide stores, were reported to have such as achievement of GlobalGAP been less signi�cant. Among out-growers, certi�cation. T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_Chapter.indd 57 7/27/09 4:11:10 PM 58 NOT YET UP TO STANDARD All respondents to the survey agreed that sup- scope of the current study. However, from port programs had contributed to improving the information we are able to glean from the their understanding of the scope and limitations survey responses, paired with the fact that of working with out-growers to supply stricter half of the protocols supported by PIP were markets. Other perceived bene�ts extend from not �nalized, it is reasonable to conclude that, understanding of the company’s potential and while a signi�cant level of awareness has limitations, to participating in high-end market, been created within the export �rms, impacts to the need for improved relations with out- on actual practices, and especially where growers, and so on (Figure 10). Relatively few these are reliant on substantive �nancial of the exporters that responded to the survey, investments, have been quite limited. At the however, perceived that the support they had same time, we can regard interventions such received had contributed to enhanced exports, as EPV and PIP to have been necessary �rst higher and/or more stable prices, and such. steps on the industry’s steep learning curve. Apparently, considerably more support would The respondents were asked about their be needed if further steps are to be made. future strategies if company-speci�c support, notably by donors, were to be reduced or Initiatives strengthening industry capacities withdrawn. Although most �rms expected to at the collective level remain focused on supplying the wholesale Initiatives aimed at supporting industry market for ethnic foods in Europe under this compliance through augmentation of capaci- eventuality, at the same time almost all indi- ties at the collective level have included the cated that they would maintain the objective strengthening of industry associations and of reaching the “elusive state� of GlobalGAP platforms for public-private sector dialogue certi�cation (Table 14). For whatever rea- and collaboration. There has been little focus sons, this certi�cation has come to symbolize on promoting collective action among farm- for many Ugandan exporters a fundamental ers, this having been considered the role of benchmark for improving their standing in a exporters as lead �rms in a very “top down� competitive international market. Whether model of value chain upgrading. Overall, rela- such certi�cation would be truly bene�cial tively little success has been achieved at this to their near term business prospects and level, although some recent initiatives may whether the costs of investment and certi- still hold promise. �cation processes would exceed near and longer-term bene�ts is not very evident. In relation to industry associations, HORTEXA A comprehensive assessment of the level continued to function through the mid-2000s of adoption of the recommended practices following the end of the IDEA project, ob- for food safety management in the surveyed taining support from various donors to run a export �rms and their out-growers and trace- small secretariat of�ce and to participate in ability along their supply chains is beyond the pertinent policy discussions. Yet, HORTEXA TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_Chapter.indd 58 7/27/09 4:11:10 PM C H A P T E R 3 DE VE L OP ME NT COMMUNITY A ND GOU RES PONS E TO COMPLIA NCE CH A LLENGES 59 TABLE 13. Respondent perceptions of where awareness and implementation had been achieved Awareness Implementation Firm Staff Farmers Firm Farmers Greater Lesser Greater Lesser Greater Greater Gains Gains Gains Gains Gains Lesser Gains Gains Lesser Gains Achieved Achieved Achieved Achieved Achieved Achieved Achieved Achieved Risks Risk Importance Proper Establishment Proper Establishment associated associated of keeping application of sanitary application of sanitary with proper with poor records of pesticides facilities in the and use of facilities in use, han- hygiene �eld pesticides the �eld dling, and practices storage of pesticides Risks Set of good Proper Storage of Proper Keeping associated practices to disposal of pesticides methods for records of with proper be applied pesticide the control activities in use, han- to improve containers of pest and the �eld dling, and product diseases storage of safety pesticides Importance Proper Proper han- Proper Proper use of keeping methods dling prac- handling of collection records of for control tices during practices points production of pest and harvesting/ practices and diseases post-harvest harvested Improved Proper soil product packing in- management frastructure practices Importance Keeping Establish- Proper of HACCP records of ment of a agronomic principles activities in system to practices the �eld monitor pesticide residue Source: Survey of horticultural exporters. has not been effective in resolving on-going Exporting Companies (AFPEC). However, industry constraints or coordinating industry this was unable to raise operating funds from relations and activities with government its members or donors and was short lived. and/or donors. Reflecting frustrations at More recently, government and donor efforts HORTEXA’s functionality among some export- led to the creation of an umbrella organiza- ers, an alternative entity was established tion, the Horticulture Promotion Organization in 2003, the Association of Fresh Produce of Uganda (HPOU), which has sought to T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_Chapter.indd 59 7/20/09 4:21:04 PM 60 NOT YET UP TO STANDARD FIGURE 10. Perceived bene�ts of interventions improving traceability and food safety Increased selling prices/more stable prices Increased export volumes Improved confidence encouraged company to increase orders from existing out-growers Improved confidence encouraged company to increase number of out-growers Improved confidence led company to wider product range Reduction of product rejections due to quality problems Identification of previously unknown hygiene problems in your supply chain/formed relations with new or additional buyers/increased reputation of company among buyers Identification of previously unknown pesticide-related problems in your supply chain Improved company supply base due to better relations with out-growers/improved loyalty of out-growers supplying the company Improved understanding of the company’s potential and limitation for supplying the EU market segments Improving understanding of scope and limitations of sourcing from smallholders to service strict export markets/avoided potential loss of market access 0 20 40 60 80 100 Source: Survey of horticultural exporters. coordinate certain industry initiatives (see HORTEXA as yet another competitor in the 39 below). The creation HPOU is seen by provision of services to the sector. While HORTEXA and AFPEC unsuccessfully 39 The National Export Strategy 2008–2012 has placed sought to coordinate efforts within the private HPOU as the leading institution to coordinate a program to provide services to the sector, as well sector, parallel efforts have been made to as in the preparation of business plans for value ad- foster improved public-private sector dialogue dition and �nancial facilitation. The HPOU was also responsible for the implementation of the project under the rubric of a National Task Force. This Action Research on the International Competitive- ness of Ugandan Fruits and Vegetables, funded by task force has been supported by PIP and was the Dutch government though the WSSD Partner- initially coordinated by MAAIF. Thus, the so- ship Market Access Program in Uganda. This proj- ect ended in 2007. More recently, the HPOU has called EurepGAP Task Force was born in 2003, been implementing the Horticulture Development Project in collaboration with NARO. This project is with the objective of coordinating Uganda’s also funded by WSSD, with an investment of over response to the challenge of emerging food US$500,000, with 75 percent coming from the Dutch government. safety and traceability requirements in the TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_Chapter.indd 60 7/20/09 4:21:04 PM C H A P T E R 3 DE VE L OP ME NT COMMUNITY A ND GOU RES PONS E TO COMPLIA NCE CH A LLENGES 61 EU market.40 Yet, the task force evolved less of development of the UgaGAP program. as a vehicle for public-private interaction and The process is expected to include an impor- more as a means for government to communi- tant component of stakeholder sensitization cate speci�c initiatives it was planning in order regarding the importance of GAP, followed to enforce GlobalGAP adoption through man- by the process of UgaGAP development, and datory requirements and product inspection. the development of commensurate standards through consultation.41 The task force was never really operational as a coordinating body and its activities were In June 2008, two committees were estab- marked by complaints by the private sector lished at the center of the task force, and a on the control wielded by government and on working plan was agreed upon for the imple- the perceived unjusti�ed measures proposed mentation of a national training program on by MAAIF. In 2006, PIP and other donors GAP. The training program would be imple- supported the reorganization of the task force mented by FAO in coordination with NOG- under the coordination of the recently estab- AMU and different service providers. It is lished HPOU. This time the establishment of expected that the lessons learned from IDEA, guidelines for GAP was seen as the mecha- PIP, and EPV would contribute to re�ning the nism to set up a quality control system for training approaches to produce better results. the industry. Clearly, the emphasis of the work should move beyond a compliance focus based on Along these lines, FAO and UNCTAD prescribed recommendations to instead use supported an expert consultation and some di- training programs as a vehicle to solve current alogue among stakeholders on the ways that and latent production problems that ultimately the creation of a national program on GAP, translate into quality, safety, and environ- the so-called UgaGAP, could contribute to mental improvements. Thus, GAP programs addressing growing concerns about food qual- that are not supported by applied research ity and safety and to cope with the resulting and that do not have a demonstration effect regulatory requirements and private standards would likely have limited success. in importing countries. Recommendations of the consultation included the establishment of Initiatives supporting technical service a National Steering Committee with represen- capacities to facilitate compliance tation of all stakeholders to lead the process Among recent programs, the PIP program has probably had the most impact in strengthen- 40 This is well established by the following quotation ing broader service capacities to support the from MAAIF: “The EU came up with a regulation that food must be traced from the farm of production horticultural sector. PIP support has sought to the folk. Also commercial standards like Eurep- to strengthen the capacities of regulatory GAP were coming in to influence sourcing of fresh produce for import into the EU. There were deadlines authorities and a private laboratory, and to that by January 1, 2005, buyers would only source from producers whose farms were compliant with the EU regulations� (MAAIF, 2008). 41 See Muwanga (2007) and Muwanga (2008) T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_Chapter.indd 61 7/20/09 4:21:04 PM 62 NOT YET UP TO STANDARD TABLE 14. Firm commercial strategies in absence of donor support Redirecting Keep Trade by Focusing Supplying Supplying on Moving Wholesale Less Strict Domestic toward and International Focusing Focusing Fruit/Veg- Exporting EurepGAP/ Ethnic and/or on on etable to Alternative GlobalGAP Markets Regional Alternative Organic Product Neighboring Business Company Certi�cation in EU Markets Products Production Markets Countries Activities 1 X X X X 2 X X X X X 3 X X 4 X X 5 X 6 X X X 7 X X 8 X X 9 X X X 10 X X X 11 X X X Source: Survey of horticultural exporters. train and engage a cadre of local profession- indeed emerged, but the bulk of its work als to take on training and advisory services. remains dependent upon �nancing from donor PIP has sponsored training courses for Ugan- and government programs. Fees charged dan service provides in such �elds as IPM, under donor-supported contracts are typically safe use of pesticides, food hygiene, food double or more those applied when there is a safety management, and HACCP and quality purely commercial fee-for-service relationship. management (ISO 9000, 2000). In the area of conformity assessment, the According to the PIP �nal evaluation, the pro- PIP program supported a private laboratory, gram trained 29 Ugandan consultants, with Chemiphar, in the accreditation of analyses 23 of these still active in supporting the horti- for organophosphates and organochlorids. cultural sector. Eleven were regularly used by The PIP assistance in this front, basically the PIP for providing support to companies. through training, was effective mainly due Several consultants have now developed a to the fact that the library acquired adequate regional or broader international clientele. Yet, equipment, with support from other donors, anecdotal evidence suggests that few Ugandan notably UNIDO (Gergely et al., 2008). exporting companies make use of these local service providers through their own resources. Within the framework of the PIP program, a That is, a private sector service industry has component was to strengthen the capacities TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_Chapter.indd 62 7/20/09 4:21:04 PM C H A P T E R 3 DE VE L OP ME NT COMMUNITY A ND GOU RES PONS E TO COMPLIA NCE CH A LLENGES 63 of the public sector with respect to the rati�- this area. Once a company is certi�ed, fur- cation, registration, and control of pesticides. ther �nancial support from donors helps the In Uganda, around 12 inspectors of the company to maintain the certi�cation and/or to Department of Crop Protection of MAAIF were expand operations by increasing the number trained. Yet, according to the �nal evaluation of farmers that are certi�ed. For example, the of the program, the results have been mixed. �rst company in the Ugandan horticulture sec- As of June 2008, no database of approved tor to achieve certi�cation, in the mid-1990s, pesticides had been created. Budgetary con- has received support to maintain and expand straints on the part of MAAIF have limited the operations from PIP, SEP, and, most recently, implementation of other initiatives. However, Box 18 describes the characteristics of the in spite of the poor results achieved, this is a EPOPA Program. public good that would bring bene�ts for the Much of EPOPA’s support is directed through industry as a whole, improving Uganda’s repu- individual companies that have a demon- tation and credibility in international markets strated ability to export. In horticulture, most and therefore arguably deserving further atten- of the projects have been relatively small tion from the donor community. and centered principally on the certi�cation of pineapple production for export. Compa- 3.3 Initiatives Supporting Market nies such as BioUganda, BioFresh, Amfri, Differentiation: Organic and Value Addition through Processing Sulma Foods, and RECO have bene�ted from EPOPA’s support for staff training, develop- Supporting the achievement of organic ment and revision of internal control systems, certi�cation participation in organic trade shows, provision As we detail above, a group of companies of market information, support for organiza- have been shifting their market orientation as tion of out-growers, costs of certi�cation, a way of escaping from unpro�table markets establishment of infrastructure for processing and/or exploring potential opportunities in products, and value addition (EPOPA, 2007) differentiated “niche� segments of the EU market through organic certi�cation. Donor Key to the EPOPA project is linking small and government support in this area has come farmers to the lead exporters with which it mainly in the form of training, technical as- works. The approach it uses is described in sistance for the establishment and revision Box 19. EPOPA partners with �rms that are of company internal control systems, and willing to accept the requirements of the pro- �nancial support to defray the costs of certi�- gram in terms of transparency, cost sharing, cation. Several donors have been supporting and responsibility; the exporter undertakes to individual companies in this effort, including purchase the crop under contract with farmers PIP, Shell Foundation, DANIDA, SEP, EPOPA, and is also responsible for �eld organization re- and the German Development Service (DED). lated to the internal control system and more A number of NGOs have also been active in broadly to provide support to the farmers. T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_Chapter.indd 63 7/20/09 4:21:04 PM 64 NOT YET UP TO STANDARD Box 18 EXPORT PROMOTION OF ORGANIC PRODUCTS FROM AFRICA (EPOPA) PROGRAM The Export Promotion of Organic Products from Africa (EPOPA) program funded by Swedish International Development Cooperation Agency (Sida) aims to increase the volume and value of organic agricultural products exports, thereby increasing the income for rural communities and exposing the country’s agriculture sector to sustainable farming techniques. It works in a number of countries in sub-Saharan Africa. The project started operations in Uganda in 1995. In the �rst phase, the project supported export �rms in setting up procurement systems for certi�ed organic cotton, sesame, and coffee. In the second phase, while EPOPA continued to work extensively with established lead �rms but across a wider range of agricultural products, support was extended to cover institution-building activities, including overall industry training, regional standardization processes, establishing a lo- cal certi�cation body, and consolidation of industry networks (Forss and Lundström, 2004) In the capacity-building component, EPOPA has supported the development of the National Organic Movement of Uganda (NOGAMU), established in 2001 through the initiative of a small number of lead �rms. Most of the support for NOGAMU’s activities has come from donors, in particular HIVOS. Membership dues support only six percent of NOGAMU’s current budget (Forss et al., 2008). In the area of certi�cation, EPOPA supported the development of UgoCert and has also supported the development of regional organic standards. It is expected that UgoCert will re- duce the current costs of certi�cation within Uganda. At the current time, however, much of the business that UgoCert attracts is donor funded. It is evident that the national certi�cation body is far from being commercially viable in the absence of donors. Although private and donor efforts to establish a platform for advocacy and provision of services to the organic sector have been quite successful, these efforts demonstrate that long-term donor investments are needed before independent institutions can become sustainable.42 By 2007, the organic sector in Uganda was estimated to have output valued at US$15 million and involve over 100,000 certi�ed farmers (Forss et al., 2008). Yet donors need to consider what size the sector must reached before NOGAMU is likely to become self-sustainable, along with re�ning expecta- tions of the role of the institution should the sector consolidate, as is expected. 42 The value of the organic export sector was estimated at US$15 million in 2007, involving over 100,000 certi�ed farmers and about 40 companies (Forss et al., 2008). In most cases, EPOPA defrays the costs and mobilization/transportation to undertake associated with training of company staff farmer registration and annual auditing visits. and farmers, the establishment/revision of Rarely, the �rm also pays for the costs of the ICS, and the initial costs of certi�ca- certi�cation, notably where it cannot tion. Most of the investments each lead secure support to renew the certi�cation �rm incurs are related to additional staff of farmer groups. TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_Chapter.indd 64 7/20/09 4:21:04 PM C H A P T E R 3 DE VE L OP ME NT COMMUNITY A ND GOU RES PONS E TO COMPLIA NCE CH A LLENGES 65 Box 19 EPOPA APPROACH TO CERTIFICATION OF FARMER GROUPS The EPOPA project supports export �rms that have export experience, have worked or are willing to work with smallholders, and are willing to shift to producing and/or marketing organic prod- ucts. The approach implemented by the program includes the following steps: An initial process of group farmer sensitization about the organic certi�cation processes, market- ing requirements, and quality issues. • The registration of farmers, undertaken by the company’s �eld of�cers. During this time, the �eld of�cer is required to make a personal visit to each farm so that an assessment of the production systems, previous farming practices and risks that may compromise the integrity of the organic project can be identi�ed. These conditions are evaluated by the �eld staff together with the farmer. The information collected is compiled in a farmer registration form. • Contracting the farmer following registration. A contract is drawn up between the farmer and the lead �rm, primarily to de�ne responsibilities and to maintain integrity within the or- ganic system. Once the farmer has been contracted, there is no need to renew a contract, unless it is stated in the contract that it is for a certain time period. • Training of out-growers. Training involves principles of organic farming, production, Internal Organic Standards, and other related topics. Further, quality issues and social responsibil- ity to guard the integrity of the organic project are always key aspects for which farmers receive training. Source: Nagawa et al (2007) In the development of a Primary Marketing This is a major factor explaining why efforts to Organization (PMO) for GlobalGAP Option 2 promote organic certi�cation have been con- certi�cation, the lead �rm must have a close siderably more successful than efforts toward relationship with its out-growers, assuming a GlobalGAP certi�cation. crucial role in group formation and legalization, A widespread procurement strategy of export- centralization and coordination of production ers is to establish a base of organically certi- and marketing activities, and achievement and �ed suppliers that is more than suf�cient to maintenance of certi�cation. In contrast, with meet the current demands of their European organic certi�cation, the �rm’s functions are buyers, in order to overcome problems with much less onerous, mainly being focused on seasonality and growing competition from monitoring and record keeping. Rather, the local/regional markets and to reduce depen- key driver of the lead �rm’s relations with its dency on individual producers. At the same out-growers is the need to ensure a reliable time, many exporters expect export market supply with consistent quality and quantity.43 demand to rise in the future. This strategy has 43 In pineapple, for example, the results of a study on the supply chain of Biofresh suggested that farmers higher costs in order to comply with the quality and growing under organic schemes have undertaken im- production speci�cations required by the company portant investments to upgrade operations, assuming (Bolwing & Odeke, 2007). T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_Chapter.indd 65 7/20/09 4:21:04 PM 66 NOT YET UP TO STANDARD been facilitated by the fact that donors defray changes to their production practices on the costs of certi�cation, while exporters an- becoming organically certi�ed, given that ticipate that recerti�cation costs will fall in the they were already making little or no use of future due to the establishment of a local cer- agro-chemicals. There is very little evidence ti�cation body. Taking a longer-term perspec- of the adoption of improved organic farming tive, however, such an approach to sourcing techniques that can boost yields and improve does not provide a good basis for the ongoing quality. Indeed, organic certi�cation is widely consolidation and upgrading of production seen as a “free ride,� providing a premium for practices and supply chain improvements. what Ugandan farmers “do anyway,� rather With pineapple, for example, production than establishing a rewards system that volumes typically surpass export demand dur- delivers environmental outcomes in a man- ing the main season, driving down prices and ner that enhances ef�ciency and promotes forcing producers to sell on noncerti�ed local commercially sustainable methods. A shift in markets; yet during the dry season, export- “culture� is certainly needed in this regard, ers are unable to source the product volumes although this will require the emergent sector required. As a result, there are instances to consolidate opportunities in international of producers abandoning organic pineapple markets and for commensurate institutional production for more lucrative crops, causing responses, for example, in terms of research turnover in the supply base of exporters. and development. Perhaps the biggest challenge facing exports Supporting upgrades and market of organic fruit and vegetables, however, is compliance in the dried fruit industry to ensure that shifts in market orientation Although Uganda has been supplying dried are accompanied by improvements in farm- fruit to EU markets since the early 1990s, the ing methods and the achievement of longer- sector remains small, with just two compa- term productivity gains. Most of the growth nies accounting for the bulk of exports.44 Yet, in organic pineapple production has come in an attempt to overcome Uganda’s limited from expanded areas; there is little evidence competitive advantages in agro-processing,45 of appreciable gains in yields, reductions in recent company strategies have centered the incidence of pests and diseases, and/ on exporting organic dried fruits, particularly or improvements in quality. Thus, Bolwing pineapple and banana. Similarly, a set of donor and Odeke (2007) report that pineapple out-growers have higher revenues from 44 Although exports of dried fruit have increased, the growth of the sector has not been dramatic; we pineapple sales than conventional producers, estimate that exports are currently around 300 MT, which compares to 90 MT in 2002 (Agona, 2002). The mainly due to expanded production capac- export trade is erratic, with very few companies trad- ity. Similar observations have been made for ing product on a continuous basis. 45 Uganda faces various competitive disadvantages in producers of other crops that are linked to the international markets for processed fruit and vegeta- exporter RECO (Forss et al., 2008). In many bles, including high freight rates, lack of economies of scale, and high input costs, notably for raw fruits and cases, farmers implement few appreciable vegetables and packaging materials. TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_Chapter.indd 66 7/20/09 4:21:04 PM C H A P T E R 3 DE VE L OP ME NT COMMUNITY A ND GOU RES PONS E TO COMPLIA NCE CH A LLENGES 67 initiatives has been promoting processing tunnel drier designed in Denmark, yet they as an alternative to supplying domestic and too are experiencing problems with product regional markets, as well as a way to reduce quality. UNIDO has introduced a hybrid drier, post-harvest losses and improve food security. which was initially developed and tested in Burkina Faso and later modi�ed to conditions The major challenge in this sector has been in Uganda. The technology was initially tested the optimization of drying technologies to im- in two companies (Masaka Organic Producers prove product quality and achieve operational and Tropical Ecological Foods), what UNIDO and scale ef�ciencies. Thus, initiatives led by terms Food Processing Pilot Centers,48 with UNIDO and DANIDA have focused on promot- very promising results (UNIDO, 2007) ing technological innovations. Most recently, UNIDO has also been providing support to UNIDO’s support to the dried fruit sector has companies in their marketing efforts via con- not only targeted the technological gap but solidating supplies under an export consortium. also other constraints to export development. Notably, the agency has been supporting the In Uganda, drying technologies to supply export establishment of an export consortium of 10 markets were initiated in the early 1990s by a small companies that is pursuing niche EU pioneer company, Fruits of the Nile, through the markets for high-quality value-added dried design of an affordable and easy-to-construct products that are to be marketed through solar drier that was distributed to company the Natural Pride of Uganda (NAPU) label suppliers.46 In developing this technology, the (Box 20). There are, however, concerns company received support from NRI and IDEA. about the sustainability of this initiative. The However, high raw material losses and uneven high cost of the technology that is employed product quality remain persistent problems, with would certainly be unaffordable for the appreciable product rejections serving as a disin- companies without donor support.49 Simi- centive for farmers to supply the company.47 larly, these �rms would struggle to �nd the In contrast to the procurement strategy developed by Fruits of the Nile, a group of 48 For the dissemination of improved processing tech- nologies, UNIDO has developed the Food Processing small companies have centralized the dry- Pilot Center (FPPC) approach which consists of food ing process in their own facilities. They have processing facilities (that include trading companies, export consortia, etc.) managed by quali�ed person- deployed different technologies, including a nel linked to a certain number of farmers and market outlets. Each pilot center is expected to act as a dem- onstration and training facility for processors and to as- 46 Currently the company does not process any fruit on sist farmers in training and advice on the supply of raw its own, but procures all its supply from “lead� farm- material that conforms to the speci�cations required ers that the company supports by providing inputs for by the end market. As of March 2007, UNIDO had es- the construction of solar dryers and through training. tablished 12 FPPCs, involving 7 companies drying fruit The company deducts the costs of the solar drier for domestic and export markets, 3 in domestic fruit from future payments for product supplied. Apart juice processing, and 2 in processing of staple crops. from exporting dried fruits, Fruits of the Nile is cur- 49 The cost is around £25,000 per drier, including the rently also involved in the importation and distribution equipment and installation. However, improvements of solar drying equipment. to the original hybrid drier model have reduced the 47 Personal communications with General Director of operating costs to US$0.2/Kg (Personnel communica- the Company. tion with NAPU staff). T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_Chapter.indd 67 7/20/09 4:21:04 PM 68 NOT YET UP TO STANDARD Box 20 AGGREGATING VOLUMES AND IMPROVING OVERALL QUALITY: NATURAL PRIDE OF UGANDA Natural Pride of Uganda (NAPU) was borne out of the companies that were supported under the pilot phase of the Food Component of UNIDO’s Uganda Integrated Program. This program started in March 1999 and provided support to small-scale producers and processors in the areas of technology adoption, raw material supply, marketing, quality control, and so on. Support was provided both to individual enterprises and to public and private sector institutions, for example to establish local product standards. UNIDO’s support for NAPU started as a partnership. There were four original founding companies; Envalert, Rural Community in Development (RUCID), IKN, and Masaka Organic Producers. These four members encouraged others companies to join the consortium. Today, NAPU has 10 mem- bers, 4 of which are NGOs that are managing fruit-drying projects with the support of donors. The objectives of NAPU are to: • Add value to farmer products and harmonize quality for companies under NAPU as a strategy to get a premium price on the market. • Access new markets and enhance marketing opportunities for the member companies by jointly raising market required volumes. • Support member companies to achieve organic certi�cation. • Build capacity of farmers in organic production, quality control and record keeping, and linking them to processing plants. • Establish a control system that ensures high quality production and quality assurance. • Increase household incomes of farmers through market support and giving them employ- ment opportunities. • Establish small to medium scale fruit drying centers. • Support in the sharing of knowledge, skills and expertise in fruit processing. On-going challenges Only three of the members of NAPU had some experience in exports, and only two had ex- perience in supplying organically certi�ed products. Most of the companies are implementing processing at a very small scale. According to NAPU, the largest volume exported by any of the NAPU members in 2007 was about 5 MT. Each company is responsible for developing relationships with their out-growers by providing training and implementing a basic record-keeping system and an ICS. To date, over 700 farmers have been registered by these companies. The companies should also be in position to �nance the acquisition of the drying technology and the overall operation costs, including those related to pro- cessing, oversight of out-growers, and procurement of raw material. Exports activities are currently performed by the individual companies, but it is expected that this function will be through NAPU in the future. UNIDO has provided support in a number of areas: • Facilitating access to proper technologies by providing seven hybrid dryers to companies as pilots on a cost-sharing basis • Providing technical support for installation, management, and maintenance of hybrid dryers TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_Chapter.indd 68 7/20/09 4:21:04 PM C H A P T E R 3 DE VE L OP ME NT COMMUNITY A ND GOU RES PONS E TO COMPLIA NCE CH A LLENGES 69 • Providing training to the companies on a Code of Practice for Fruit Processing, GMP, and HACCP • Advising in the areas of food safety and quality standards • Providing �nancial support for the costs of running the NAPU secretariat • Support in the construction of a central packinghouse • Promoting end-market linkages Other donors have provided assistance to this initiative. For example, the Agricultural Sector Programme Support (ASPS) project of DANIDA has supported training, loan guarantees, micro- leasing, and the development of bankable business plans. The Centre for Development and Enterprise (CEDE)/ProInvest has provided farmer and enterprise training. The African Develop- ment Foundation (ADF) has funded organic certi�cation of farmers, training and the purchase of equipment for one company. NAADS provides ongoing training of farmers. Some gains, but enormous challenges remain As an increasing number of companies “try their luck� at exports of dried fruit, the sector is becoming increasingly fragmented. This risks jeopardizing Uganda’s reputation at the very time it is establishing a market position. NAPU’s aim is to bring together the substantive actors and promote overall quality and safety improvements. It has evidently made some progress in this regard, but faces ongoing challenges. According to NAPU staff some of the achievements of the consortium include improved cohesion among members, opening of some EU markets, develop- ment of minimum standards to be followed by NAPU members, recruitment of new members into the consortium, intercompany skills development and initial steps toward organic certi�cation by registering farmers and establishing ICSs. However, enormous challenges remain, related to • The costs associated with obtaining organic certi�cation • Development of a comprehensive marketing system • Lack of �nance within the companies for the acquisition of raw material from farmers • Limited processing capacity in relation to the available supply of raw materials • High initial investment capital required for the fruit drying technology and working capital • Expensive packing materials • Underdevelopment of local markets • Lack of funds to facilitate NAPU activities and operational costs Source: Personal communication with NAPU staff. resources necessary to achieve initial organic and marketing activities, yet even with the 50 certi�cation, let alone recerti�cation. UNIDO best commitment of the companies and the has already invested around US$500,000 donors, this is an enterprise that will need in this initiative, while NGOs are playing a considerably more support into the future. further supporting role by providing train- In parallel to UNIDO’s support to the dried fruit ing to farmers and coordinating processing sector, has looked to value addition for pine- 50 At the same time, the lack of managerial skills in this apples, apple bananas, and mangoes by intro- industry is a dif�cult bottleneck to overcome; indeed, ducing solar-drying technologies through lead two of the pilot centers initially established by UNIDO have faced considerable management problems. farmers, both to satisfy local and niche export T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_Chapter.indd 69 7/20/09 4:21:04 PM 70 NOT YET UP TO STANDARD markets (NAADS, 2004).51 Other donors are coordination among donors, government, and also supporting initiatives on this front.52 the private sector on the approach that would best ensure sustained participation in interna- Other initiatives have focused on the produc- tional markets. The recently launched Uganda tion of juice and other forms of fruit process- National Export Strategy (NES), which will be ing for local and export markets. For example, implemented over the period 2008 to 2012, NAADS is supporting initiatives in Kabale to represents an attempt to move in this direc- promote temperate fruits to substitute imports tion. Indeed, the NES has prioritized fruit pro- from South Africa. It has also established a cessing as one of the sectors to be support- partnership with Jakana Fresh Foods and ed, given its perceived potential to generate Bella International that aims to expand fruit employment and the number of stakeholders production to supply processing plants that are currently involved in fruit production.53 The expected to be built in Soroti and Jinja Districts. strategy includes the development of capaci- NARO and the International Center for Agro- ties to sustain a supply of processed fruits Forestry (ICRAF) are working on improved to export markets by forming and widening adaptable varieties to support developments production clusters, implementing a produc- in the processing sector. The Government of er–processor linkage program, scaling up Netherlands, through the Programme for drying technologies, and establishing process- Cooperation with Emerging Markets (PSOM), has ing incubation pilot centers in fruit-producing supported a partnership between a European areas (GOU, 2007) company and Nabutele Farmers Center Logis- tics to implement a fruit-processing project in Scope for value-addition and differentiation the Jinja District, with total project investments The strategic orientation toward organic estimated at £830,000. As with dried fruit, the production, fruit drying, and other forms of key driving force behind the evolution of fruit processing certainly presents potentially processing is the GoU and donors (see Box 21). lucrative opportunities to Ugandan exporters, yet the challenges ahead are signi�cant. As in Clearly, emergent sectors such as fruit dry- the case of the fresh produce sector, a better ing would greatly bene�t from cohesion and understanding of long-term industry and �rm strategies and commensurate investments 51 For example, a lead farmer for 4,000 pineapple farm- ers was provided with two solar pineapple driers; it is needed in order to �nd the most effective was expected that the farmers would learn and also utilize post-harvest handling facilities at this farm to way in which to secure a sustainable position dry their fruit and pack it for sale to local supermar- in niche European markets. kets and exporting companies 52 An ecological fruit-drying factory, the �rst in Uganda, funded by Australian Development Cooperation Both the organic and fruit-drying sectors and estimated to involve an investment of some lack well-capitalized companies, which is £250,000, was recently opened. The plant’s capacity is 1,000 MT per month. The plant will be operated by likely to limit their ability to reach suf�cient Horizont 3000 an af�liate organization of the Austra- lian donor, while the NGO Africa 2000 Network (A2N) will operate the factory on behalf of the farmers 53 Sergeant estimates that 600–700 full-time jobs were (Africa 2000 Network–Uganda, 2008). generated by the industry by 2005. TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_Chapter.indd 70 7/20/09 4:21:04 PM C H A P T E R 3 DE VE L OP ME NT COMMUNITY A ND GOU RES PONS E TO COMPLIA NCE CH A LLENGES 71 scale/scope to attract mainstream buyers. critical mass of business and certi�cation ser- As a consequence, they are likely to remain vices and to establishing a growing production dependent on donor support to ensure their base. Further, a small number of companies sustainability. The most notable export suc- seem to be playing an innovative role that has cesses in these sectors, for example organic sector-wide consequences. Yet, without more fruit exports to Germany, relied upon buyers deep-pocketed investors, the sector will rely in European markets that were committed to highly on donor support to ensure its sustain- support development projects. These buyers ability. In the context, a promising role for are the exception rather than the rule, and donors and government is to combine market- most exporters will have to target markets oriented approaches to support compliance where their buyers are looking for increas- with production approaches that ensure pro- ingly exacting safety and quality standards at ducers are equipped with the knowledge and competitive prices, with little regard for sourc- capacities for productive organic production. ing from one country rather than another. Although one or two companies have man- In the organic sector, horticulture has bene�ted aged to consolidate a small supply channel for from the momentum created in other sectors, dried fruit to European markets, the volume notably cotton, sesame, and coffee. Donor growth of their exports has been modest. support has contributed to the generation of a Given the lack of serious investors in this Box 21 PROMOTING FRUIT PRODUCTION TO SATISFY LOCAL AND REGIONAL DEMANDS With the objective of rising incomes, generating on-farm and off-farm employment and expand- ing industries in the Kasese district, the local government developed a �ve-year plan to promote fruit production in 2006. The project focused on expansion of pineapple, mango, and citrus orchards, and was implemented in collaboration with NARO and NAADS. The project involved Bukonzo Mixed Farmers Limited (BMFL), a small �rm that served as a nucleus farm around which a network of farms was to be organized and supported. Approximately US$270,000 has been invested in the project since its inception, 72 percent coming from local government. Some of the achievements of the project include the establishment of about 40 Ha of pineapple, 240 Ha of mango and 58 Ha of citrus, bene�ting over 900 producers. Around 66 percent of seedling materials were provided by BMFL through an agreement with NARO. It was expected that the lead �rm would play a key role in marketing smallholder production. Yet, �nding market channels for exist- ing and future production is a challenge. Expectations rely on the possible expansion of the RECO fruit-processing factory located in the district, due to an expected future contract with a UK buyer of fruit juice concentrate, and on the possibility of future foreign investments in fruit-processing facilities. The expansion of production areas also brings signi�cant institutional challenges. There is a signi�cant demand for technical support to farmers, especially to prevent and control potential disease and pest problems and to apply management practices that are appropriate to output that is expected to be used as a raw material for processing. Source: Personal communication with local government staff. T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_Chapter.indd 71 7/20/09 4:21:04 PM 72 NOT YET UP TO STANDARD sector, it has been necessary for donors and through NAADS, has been most directly in- the government to move from a facilitator role volved in support in this area, although some to making direct investments in infrastructure donor-supported activities have targeted and processing technology, while NGOs are upgrades in domestic banana marketing, with playing a key intermediary role in coordinating some of that product also entering into cross- production and marketing functions. It is not border trade. Regional horticultural exports clear, however, whether the export models predominantly consist of dried/fresh legumes that have evolved are truly business-oriented and various types of fruit, including bananas, and have scope to be sustainably in the ab- pineapple, and watermelon, mainly directed sence of ongoing donor support. at Kenya. Regional fruit exports reached 7,000 MT in 2006, up from only 1,700 MT in The risk for these emerging sectors is that the 2004, with both of these �gures likely to be diverse set of donor initiatives will contribute signi�cant underestimates. Compare this with to fragmentation rather than cohesion. Given Uganda’s fresh fruit and vegetable exports the government’s emphasis on the promo- to Europe, which have been in the region of tion of value addition in horticulture, the UEPB 5,000 MT in recent years. While regional trade may serve as a venue to bring donors and key is highly seasonal and exhibits sharp changes industry actors together to discuss approaches, from year-to-year, and suffers from signi�cant promote cohesion, and reduce the vulner- bottlenecks due to transportation problems, abilities associated with reputational risks. In it quite possibly presents greater potential for an industry lacking a vibrant private sector, trade expansion than the European Union. pilot projects that consolidate initiatives into Therefore, interventions addressing quality guides on best practice are a virtual prereq- and productivity gaps, targeting aggregation uisite, before focusing on lead �rms that are of supply, improving transportation ef�ciency, most capable of commercial success to dem- and enhancing availability of marketing in- onstrate the real potential to the sector as a formation are important areas where donor/ whole. It would appear that NAPU provides government support may contribute to pro- a useful “model� for the piloting of initiatives duction and market ef�ciencies and generate and the coordination of donor efforts. bene�ts for small-scale farmers taking part, or Finally, while exports to high-value markets expected to take part, in regional and domes- such as the EU remain alluring, and certainly tic markets. However, a clear assessment of could provide useful opportunities for Ugan- bottlenecks and market opportunities in the dan exporters, both in terms of the direct context of regional and domestic markets economic returns and as a fulcrum for pro- should be undertaken in order to gain a better cesses of upgrading, recently the potential for understanding of the scope for interventions regional exports of horticultural products has and the full potential of the sector to support gained some attention. The GOU, especially growth and poverty-reduction objectives. TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_Chapter.indd 72 7/20/09 4:21:04 PM CONCLUSIONS Sustained participation in international markets is highly dependent upon the capacities of the industry to overcome competitive and compliance challenges. Moving along the spectrum of buyer/ market requirements, higher degrees of internal and external capacities are required. Development efforts to support the creation of those capacities have been made for nearly two decades in the Ugandan horticultural sector, but with very mixed results. During the 1990s, most development assistance was targeted at agronomic �eld trials, the identi�cation of export market opportunities, matchmaking of exporters and overseas buyers, and putting in place basic support capacities within government and the private sector. There was much trial and error, with many products being found to be unsuitable from an agronomic and/or market perspective. A great deal was learned, but the emergent fresh produce trade lagged, in size and scope, behind expectations. By the early 2000s, Uganda had developed a small fresh produce trade, consisting primarily of lower-value products targeting the ethnic/immigrant market and wholesale vendors in the United Kingdom. Within the wider program of nontraditional export development, this industry was a relative laggard, notably compared with the �shery and floricultural sectors. The fresh produce industry entered the 2000s with a rather weak foundation and with few cases of overt success. Yet, changes were afoot in international markets, and especially in the core targeted market of Europe where regulatory changes, consumer concerns, and private sector responses were creating an environment in which compliance with food safety and other standards was becoming increasingly critical to market access and competitiveness. The winds of this change were not being fully felt by the Ugandan fresh produce industry, given its predominant focus on the ethnic/wholesale trade and its limited involvement in value chains to major supermarket chains. Thus, Ugandan exporters were experiencing little pressure from their buyers to fundamentally change their practices and/or that of their farmer suppliers. Yet, from the early 2000s both the donor community and the GoU embraced compliance with private standards such as GlobalGAP as a central focus of their support to the sector. The rationale was seemingly that standards compliance was both necessary to maintain Uganda’s limited toe- hold in the European market and an opportunity for exporters to differentiate themselves in parts of that market, including through the sale of organic, fair-trade, or other certi�ed products. A broad range of interventions sought to raise awareness of standards and to facilitate their adoption via training, and technical and �nancial assistance, especially to cover certi�cation costs. This assistance was predominantly channeled through “lead �rms.� These �rms, in turn, were supposed to provide the proper signals, incentives, and support to smallholder farmers to adopt GAP and otherwise be compliant with buyer and/or regulatory requirements. T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_Chapter.indd 73 7/20/09 4:21:04 PM 74 CONCLUSIONS Some efforts were made to customize interventions to accommodate the preexisting capacities of �rms and other basic structural conditions. The available evidence suggests that most �rms had very limited capacity to absorb this assistance and, more importantly, to translate it into more competitive and sustainable operations. With limited exceptions, increased awareness and knowledge has not been translated into improved practices along the value chain, predominantly because Ugandan exporters lack the �nancial resources to invest in improved physical facilities or in sustained upgrading to operating systems and ongoing training of staff. The Ugandan exports sector remains outside of mainstream European fresh produce markets. Uganda’s horticulture export trade remains fragile, with weaknesses at all levels in the supply chain. One or two small �rms have been able to achieve GlobalGAP certi�cation yet will probably require donor �nancing to at least partially cover the costs of recerti�cation. Likewise, some interesting initiatives have emerged in the organic sector, but most have ongoing donor assistance. The incentives for other exporters to invest in substantive upgrades to their production and/or procurement systems are limited, unless much of the cost is defrayed through sustained technical and/or �nancial assistance. In many cases, weak market signals and lack of specialization in production for exports provide insuf�cient motivation for exporters and producers to do things differently in a consistent and sustained manner. Further, export-oriented horticulture is not suf�ciently attractive to invite signi�cant new investment, either from domestic or international sources. Evidently, donor and/or government support will remain essential if Uganda is to maintain and/or enhance its foothold in European markets; yet, at the same time we must be realistic about what this support is likely to achieve in the short and medium terms. Given the industry’s size, pro�tability, and competitive position in European markets, it is dif�cult to see how horticultural exports will yield signi�cant gains in terms of rural income and employment. A few thousand smallholders are irregularly involved in supplying this trade. Some recent gains have been made in exports, notably hot peppers, yet overall the industry is probably falling farther behind its main competition from within and outside of Africa. Clearly, the challenge of compliance is just one among a set of challenges faced by this industry. In recent years, the dedicated attention by donors and the government to standards compliance may have overlooked many of the more fundamental matters of management, applied research, technology transfer, and access to �nance, which are required to ensure sustainable participation in international markets. Support to maintain and consolidate limited gains in some export sectors and to address underlying industry constraints is needed, but with a focus on approaches that integrate compliance issues within the wider set of production and marketing factors.54 54 It is apparent that the recently approved Horticulture Development Project, implemented by NaCRRI-NARO and funded by the Government of the Netherlands, is attempting to apply some of the lessons learned from previous experiences by, for example, prioritizing the sectors to be supported and addressing issues related to supply chain coordination and quality improvements through a strong research component. TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_Chapter.indd 74 7/20/09 4:21:04 PM C O NCL USIONS 75 A �nal question regarding support for development of the horticulture sector in Uganda relates to the scope for appreciable contributions to rural development and/or poverty alleviation goals. Donor and/or government support to the participation of a few lead �rms in international markets is unlikely to present opportunities for enhanced livelihood to many producers. Indeed, it is probable that the greatest scope for absorbing large numbers of smallholders is with promotion of horticultural production for local and/or regional markets. At the same time, being toward the left of the spectrum in Figure 3, the requirements in terms of assured compliance do not imply signi�cant upgrading of production and/or procurement systems. 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March 1996. “Uganda: The Challenge of Growth and Poverty Reduction.� USAID. 2001a. “ADC Commercialization Washington, DC. Bulletin No. 12: Mushrooms. Agribusiness Development Center Uganda’s Investing in World Bank. 2000. “Uganda: Post-Conflict Developing Export Agriculture (IDEA) Project.� Reconstruction.� Country Case Study Series. US Agency for International Development, The Operations Evaluation Department (OED). Kampala, Uganda. Washington, DC. T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_Chapter.indd 79 7/20/09 4:21:05 PM ANNEX FIGURE 11. SWOT analysis of the Uganda horticulture sector I Strengths Weaknesses Relative political and economic stability The subtropical temperatures prevent pro�table produc- A distinct subtropical climate tion of many products, e.g., temperate vegetables—which very signi�cantly reduces market opportunities Good quality of hot peppers Lack of fruit and vegetables that can be exported competi- Considerable support from the donor community tively has inhibited the buildup of horticultural critical mass Good cooperation between exporters Some of the incentives due to exporters are not promptly FHL and the airport cold store have helped maintain the recognized by some GoU departments (e.g., value-added cold chain tax [VAT] refunds) FHL has negotiated sensible airfreight rates and guaran- Registration of agro-chemicals can be slow—some inputs teed suf�cient cargo capacity used by competition cannot be used in Uganda Cheap labor Relatively small base of commercial farmers Technical support and inputs available from Kenya Increasing requirement for traceability by the European Cheap and plentiful land supermarkets makes it even more dif�cult for small farm- ers to participate in horticulture exports Erratic electricity supply Opportunities Threats Not speci�cally de�ned for horticulture Not speci�cally de�ned for horticulture Source: Sergeant (2005). TH E WORLD BA NK, UNIVER S ITY OF GUELPH , A ND TH E UNIVER S ITY OF M A K ER ER E Uganda_Horticulture_Chapter.indd 80 7/20/09 4:21:05 PM A N NE X 81 FIGURE 12. SWOT analysis of the Uganda horticulture sector II Strengths Weaknesses Organized sector associations Overall lack of business skills on the side of small-scale Existence of airport cold store farmers. Cheap labor Dominance of subsistence farmers compared to competi- tors like India with more agricultural commercialization Cheap and plentiful land Poor codes of practice and their enforcement High-quality fruits and vegetables Opportunistic trade between Smallholder Farmers (SHFs), traders and exporters Poor post-harvest handling practices (sorting, packing, and loading) Lack of value addition, save for a few companies, which, however, largely depend on imported pulp and concentrates Absence of adequate research to support value addition in the sector. Opportunities Threats Expanding and growing market opportunities as produc- Potential use of DDT will affect organic exports and ac- tion increasingly moves away from Europe to developing ceptability of conventional products into the EU market countries Continued power irregularities A growing international organic market for fruits and Increasing requirement for traceability by the European vegetables supermarkets makes it dif�cult for SHFs to participate in A distinct tropical climate with excellent soils and climate horticulture exports Competition especially from emerging economies of Asia for EU market. T H E WORL D BANK, UNIVE RSIT Y OF GUELPH , A ND TH E UNIV ER S ITY OF MA KER ER E Uganda_Horticulture_Chapter.indd 81 7/20/09 4:21:05 PM The World Bank Agriculture and Rural Development (ARD) 1818 H Street, NW Washington, D.C. 20433 USA Telephone: 202-477-1000 Internet: www.worldbank.org/ard This is a joint publication with: