The Observer (Kampala)

27 February 2013

Uganda: Ssemujju Nganda - Why Not Replicate Palm Oil Incentives?

opinion

It was a visit by the parliamentary committee on the National Economy, of which I am a member. The committee, which scrutinizes loan requests by government, was in Kalangala to check on the progress of the palm oil project.

The government borrowed about $19m to extend loans to the people of Kalangala willing to participate in the project by growing palm oil on their land.

This is how this project works. The government gave Bidco about 6,000 acres of land, I think, valued at about Shs 3bn. It supplemented this by another 4,000 acres that is privately owned. Private farmers get seedlings from government, grow oil palm trees. Then, through an organization, almost run by government, farmers sell their produce to Bidco.

There is an implementation unit at the ministry of Agriculture. What you need to know is that there are all sorts of incentives for the oil palm farmers in Kalangala. If you like, they will give you a loan to purchase land; a loan to clear it, especially if it is forested, and a loan to maintain (cultivate) it, etc. When you begin harvesting, government recovers its money by retaining about 30% of your payments. Harvest begins after four years and goes on for another 21.

The spokesperson for this project claims nine years are enough to service the loans which literally every family has acquired. I am told Kalangala is made up of 24 islands but palm trees are grown on Bugala, the main one, which also hosts the district headquarters and several beaches. There are lessons and lots of questions here. From a purely theoretical point of view, this appears to be the most successful agriculture project in the country.

I use the word 'theoretical' because this project was almost derailed by controversies at the start. Environmentalists argued against it, saying it would have an effect on Lake Victoria. Obviously, lots of natural forest trees have been cut down, therefore depleting the forest cover to give way to palm trees. There were also issues of land grabbing. In fact some of us opposed this project even before setting foot on the island.

I will dwell on the government push for the project and lack of similar initiatives in other areas. For example, what would be the justification for giving the palm growers all sorts of loans and the same is not extended to say, coffee, banana, tea, cotton or cocoa farmers?

Coffee remains our biggest foreign exchange earner, bringing in about $461m annually. Coffee production by 1964 was 3.2 million 60kg bags. We are still producing the same number of bags. Vietnam which produced half a million bags in the 70s now produces 26 million bags and rakes in $3.8bn. And like I said before, Uganda's budget is about $3.8bn, which means Vietnam could finance Uganda's budget by only selling coffee.

The question to ask is: why don't we extend similar loans to coffee, tea and other farmers? I am told agriculture takes just below 4% of our budget, yet some 80% of our population depends on it. Just a few billions have revolutionised farming in Kalangala; suppose we duplicated it throughout the country?

My own feeling is that because there was resistance against oil palm in Kalangala at the beginning, incentives in terms of loans had to be found. It was some form of bribery ? shower all these villagers with money and they will grow palms for you. I don't think it was done in good faith, but it seems to be working.

The people of Amuru and elsewhere in northern Uganda are making similar demands. Don't take away our land - let us grow the sugarcane and sell it to whoever is setting up a processing plant. And I think it can be done on a similar arrangement. Finally, I also learnt during the Kalangala visit that Uganda, which is supposed to be an agricultural country, has no factory for fertilizers. The one we had in Tororo was destroyed during the Amin era and has never been rebuilt.

This factory, I was told, has been handed to Madhvani, but he needs Shs 240bn to rebuild it. The other impediment is that people have occupied the land belonging to the factory and we need another Shs 40bn to compensate them. This government that is known for dishing out money doesn't have Shs 40bn to free the fertilizer factory land. We are now importing fertilizers, mainly from Malaysia, at a huge cost, largely because of transportation costs.

In a future article I will argue for the restructuring of Naads, Naro and other agriculture related institutions. In truth, I have my reservations about the palm oil project but it is something that is working. For me, I would rather that Kalangala is turned into a tourism zone, just like the Bahamas.

The author is Kyadondo East MP.

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