39243 Sustainable Development 272 March 2007 Findings reports on ongoing operational, economic, and sector work carried out by the World Bank and its member governments in the Africa Region. It is published periodically by the Operations Results and Learning Unit on behalf of the Region. The views expressed in Findings are those of the author/s and should not be attributed to the World Bank Group. Restructuring Uganda's Coffee Industry: Why Going Back to the Basics Matters Uganda's coffee industry lowest level since the reforms, consists of low input-intensity even lower than the 1974-92 aver- smallholders with an average farm age of 2.35 million bags. Although size of 0.2 hectares and is the coffee contributed as much as $400 main source of income for an million to total merchandise ex- estimated 500,000 households. ports during the mid-1990s, it cur- Following its introduction earlier rently contributes less than $150 in the 20th century, the industry million (equivalent to one quarter expanded considerably during the of merchandise exports and 2 per- 1950s and 1960s. However, the cent of GDP). Understandably, the sector experienced a huge setback sector's poor performance raised due to the civil strife of the 1970s, concerns amongst policy makers. when output halved within a 5- year period (1972-77). During the Most reports identify declining late 1980s, the sector went coffee quality and Uganda's poor through a liberalization process, market position as the industry's which, coupled with high world key problems. The evidence prices, led to considerable supply presented here, however, response, with exports exceeding overwhelmingly showed that the 4 million bags in two consecutive quality of coffee has not years (1995 and 1996), the only deteriorated. With respect to time in the sector's history. By all marketing and regulation, the accounts, the reforms have been findings of the present paper largely successful. Producers' share of echo those of an earlier report export prices doubled and growers which argued that Uganda's coffee receive payments promptly. industry supply chain is Entrepreneurial activity has competitive and efficient while increased enormously. Most there is not much to be done to important, there has been a well- reduce marketing and processing documented poverty reduction costs. On the other hand, there are impact on households of the coffee- no policy, regulatory, or growing regions. There has been institutional constraints within no backtracking of reforms. the marketing chain. As one coffee Findings exporter put it, "Uganda must be The post-1997 coffee price de- doing something right for all these cline has had a negative effect on traders from neighboring production. However, production countries to want to trade their kept declining even when prices coffee through our marketing sys- recovered after 2002. It is cur- tem." Further, the coffee rently estimated that for the 2005/ monitoring body, UCDA (Uganda 06 season, Uganda's coffee output Coffee Development Authority) is will be about 2.3 million bags, the playing a useful role in terms of regulation, inspection, collecting the coffee replanting program that material and soil. and disseminating statistics, being was designed to replace the aging one of the few commodity tree population with newer high The wilt disease, which was organizations in Sub-Saharan yielding varieties, have received first confirmed in Uganda in 1993, Africa that publishes an Annual much less attention, especially has been monitored through field Report with a very useful statistics, considering their poverty reports and numerous scientific analysis of current issues, and, implications to Uganda's rural surveys. The disease was the most importantly, an audited households. Not surprisingly, the subject of a workshop (hosted by account of its finances. The 1 per- issues have not been placed high the Government of Uganda in July cent fee charged on all exports to enough in the policy-making 1997), attended by 60 participants support its budget is also not high, agenda. from most East and Central Africa especially at current volumes and coffee producing countries. The prices. However, at least two of the The Coffee Wilt Disease workshop's resolutions were: (i) UCDA's activities must be immediate action should be taken reexamined, namely its The coffee wilt disease (CWD), to contain the disease; (ii) a project involvement in coffee promotion scientifically known as proposal should be presented to the activities and its capacity to run Tracheomycosis, is caused by a International Coffee Organization the replanting program. fungus that blocks water and and the European Union for nutrients from traveling to other funding; and (iii) Uganda and DRC Strategies to increase parts of the coffee plant from the should take the lead in the specialty coffee have been proposed roots, in turn causing wilting and investigations. In terms of re- very often. During the past nine eventually death. The disease, search, however, it appears that years only 0.21 percent of Ugandan which affects only robusta no immediate progress was made. coffee output was marketed as varieties, was first reported in the A few years later, for example, it specialty coffee, very low compared Central Africa Republic in 1927. was noted that "Research work will to the world average of 6-8 percent. Between 1944 and 1950 it spread be intensified to develop a This should not be surprising since to Côte d'Ivoire, Liberia, and resistant coffee cultivar. Uganda already receives a pre- Cameroon. It last recurred in Epidemiological study results on mium for its robusta. On the other Eastern Congo (DRC) between 1988 the disease will also be made hand, efforts to increase domestic and the early 1990s from where it available to farmers." consumption to enhance rural is believed to have spread to incomes are unlikely to bear any Uganda. Belgian researchers who The latest UCDA survey fruit. Similarly, efforts to expand worked on the disease in DRC confirmed that all robusta- activities such as roasting and recommended eradication through producing districts have been instant coffee may add some the destruction of affected coffee affected by the disease. In some income (mainly through trees. Subsequently, a regional cases entire coffee fields have employment generation) but they working group was established and been destroyed. Although precise are unlikely to have any effect on outlined an action plan but the estimates on the impact of the prices received by growers. The parastatals in charge of coffee disease are not available, one can cost effectiveness of promotional marketing in the region did not gauge the effects of the disease activities designed to increase act. based on the 2003 review study consumption of Uganda's coffee in which estimated that of the total emerging markets such as China The disease affects coffee of 240,000 hectares in all 21 ro- and Middle Eastern countries is plants of any age and spreads by busta-growing (traditional) questionable. Finally, the wind, water, movement of infected districts, 122,400 hectares have recommendation to introduce a soil, movement of material from been infected (equivalent to about coffee auction is also based on infected fields (for example 136 million robusta trees), assumptions not consistent with firewood), and use of contaminated representing a 51 percent the realities of the global coffee tools. These findings are consis- cumulative infection rate. There market. tent with the way the disease is considerable variation among spread during the earlier districts with infection rates Yet, two important issues, outbreaks in DRC and West Africa. ranging from a low of 12 percent namely the coffee wilt disease that Control measures currently in use (Rakai) to a high of 67.2 percent may have caused an estimated aim at reducing the disease spread (Mukono, the district accounting export revenue loss between $40 through burning infected coffee for 22 percent of Uganda's robusta and $50 million per annum (almost trees on site, delaying replanting area). one-third of recent coffee export at least by one to two seasons, and revenues) and the effectiveness of restricting movement of infected The impact of the coffee The Coffee Replanting Program by the wilt disease. disease is enormous. UCDA estimated a loss equivalent to The replanting program was The 2005 Monitoring and 61,200 tons (1.02 million bags) of introduced in 1992/93 with the Evaluation Report argued that poor coffee, which is around 40 percent objective of enhancing the seedling production at the of the output in recent years. This productivity of the sector by nurseries may have contributed to corresponds to $42.8 million in ex- replacing old robusta coffee trees the incidence of the wilt disease. port revenue loss per annum at with newer, high-yielding varieties It also argued that only coffee 2003/04 prices (Ush 1,090/kg). (free of charge) at the rate of 5 per- specific programs such as the for- Under different assumptions cent per annum, and to expand the mer Farming System Support regarding production (88,240 tons) area under arabica. The program Programme and Coffee and prices (Ush 1,200/kg), the has been administered by UCDA, Rehabilitation Programme should Uganda Coffee Trade Federation which contracted out the be encouraged to solve the (UCTF) put the annual losses at $51 production and delivery of seedlings problems of the coffee industry million. Note that the wilt disease to about 900 private nurseries. since it is difficult for other current had been identified as the key pro- During the last 12 years, a total of programs such as the Area Based blem of Uganda's coffee industry by 135 million trees have been Agricultural Modernization Ponte (2002, p. 260): "Uganda's distributed--101 million robusta Programme and National falling production and changing and 34 million arabica. The pro- Agricultural Advisory Services roaster's blends may marginalize gram peaked during the 2002/03 (NAADS) to address coffee problems it in the future vis-à-vis cheaper season when almost 30 million due to their divergent objectives. origins, unless coffee wilt disease trees were distributed. Interestingly, most of NAADS is tackled." activities appeared to be While there have been ineffective according to the earlier Obviously, the only long-term numerous reports from the public evaluation, because they only solution is the development of wilt and private sectors assessing the consisted of giving seminars, disease-resistant coffee varieties. progress of the program, there has something that coffee growers did Although some progress has been been no thorough independent not really need. made towards that end, details are evaluation of the program, despite still unclear. For example, UCDA the resources that have been spent reports that: "Steady progress has on it. These reports have been made in the development of questioned the effectiveness of the This article was written by John robusta coffee lines resistant to the program, with the most important Baffes, Senior Economist, disease. (A) sustained screening problem being the low survival rate Development Prospects Group, the program has to date identified 593 of new plantlets, believed to have World Bank. It is an extract from a coffee wilt resistant robusta coffee been in the order of 50 to 60 per- full publication, "Restructuring clones. These were identified cent. The main reasons for the low Uganda's coffee industry: Why going among seedlings of germplasm col- survival rate include poor growing back to the basics matters", lection at Coffee Research Insti- conditions at the nurseries (hence Development Policy Review, vol. 24, tute and have been planted in mot- the low quality of plantlets) and dist- pp. 413-36. Also published as World her gardens. 143 out of the 593 ribution during the wrong season. Bank Policy Paper 4020, October have been planted out in-station In turn, this could be attributed to 2006. For more information, e-mail in a CWD infected garden for field delays in reimbursing nursery jbaffes@worldbank.org evaluation." It is not clear, operators; on some occasions however, how many of these nurseries have not been paid at all varieties will withstand the and have abandoned their opera- disease in infected areas. tions. The most recent estimate is Furthermore, even under the that UCDA owes nurseries some assumption of complete success, Ush 5-7 billion (equivalent to US producing plantlets in large $2.7-3.8 million). Further, it quantities and finding effective appears that the new trees are ways to distribute them to coffee affected by the wilt disease at the growers will be a monumental same rate as the old trees, which task, especially in view of the may explain why despite the fact limitations of the existing replan- that 101 million of robusta trees ting program. have been distributed under the program, an estimated 136 million robusta trees have been destroyed Findings Findings can be accessed via the World Bank Group's website at http://www.worldbank.org/ Click on Publications, then Periodicals. Or, Findings would also be of in- click on Countries and Regions, then Africa. terest to: Name: Institution Letters, comments, and requests for publications not Address available at the World Bank Bookstore should be addressed to: Editor, Findings Operational Quality and Knowledge Services Africa Region, The World Bank 1818 H Street NW, Mailstop J-8-811 Washington, D.C. 20433 e-mail: pmohan@worldbank.org