Uganda: Tororo Fertiliser Makers Bank On NEC, Low Prices to Sway Market

17 September 2019

According to a report titled, "Fertiliser Quality Assessment in Markets of Uganda," by the International Fertiliser Development Centre released last year in April, soils in Uganda are depleted at an average of 80Kg of nutrients per hectare annually yet farmers use less than 1 kg of inorganic fertilisers per year.

The report added that: "Less than 8 per cent of households use fertilisers and at low application rates. A major constraint is poor knowledge at the farm level on the benefits of fertiliser and agronomic practices required to achieve high productivity. This has led to low adoption rates."

Besides ignorance, the prohibitive prices of fertiliser products on the market have been cited as another restraint for usage of fertilisers in Uganda.

What are the odds that local fertiliser production can reset this state of affairs? The answer depends on whoever is doing the analysis.

Guangzhou Dongsong Energy Uganda Ltd, the Chinese company developing the Sukulu comprehensive industrial complex, says they have done a market analysis on fertliser demand and usage, and their mathematics checks vis-à-vis prevailing circumstances.

To gain an upper hand in the unfamiliar market territory, the company's chief Jane Guo told Prosper in an interview that one of their unique selling propositions is price.

"We are cheaper than the ones on the market," Ms Guo said at the company's offices in Kololo.

"As long as we build our reputation with time and with continuous interaction with the market -- farmers and communities -- I think we stand chance," Ms Guo said.

How can a company do so in such a murky environment? Ms Guo without offering much detail said Dongsong signed an offtake agreement with Uganda People's Defence Force (UPDF's) business arm, National Enterprise Corporation (NEC), to spearhead the product's distribution channels and network.

Offtake agreement

An offtake agreement is an arrangement between a producer and buyer to purchase or sell portions of the producer's upcoming goods/products.

Asked about the rationale, Ms Guo responded: "Only government can reach farther than we can reach. Only government has the authority over scale farmers everywhere."

"We partnered government because they only can reach the various corners of the country."

She, however, revealed only the company will be in charge of production and price determination.

Trial production

The fertiliser plant, which was commissioned by President Yoweri Museveni last October, commenced a one year trial production this March. Initially, trial production was expected to commence in December but Ms Guo attributed the delay to the deferrals to acquire requisite certifications from the standards body -- Uganda National Bureau of Standards.

"We know the market is out there, and for that matter we are hopeful," Ms Guo said, adding that so far, they have sold 5,000 tonnes of fertilisers of all types.

NEC officials were not readily available to discuss the matter.

The fertiliser plant, which is part of the Sukulu comprehensive development project, according to Dongsong has production capacity of 300,000 tonnes. Uganda's average consumption is less than 100,000 tonnes.

Dongsong says they have undertaken several "studies on the suitability" of seven types of bio-organic fertilisers for among other crops maize, tea, and tobacco around the country.

The agriculture sector, which according to the last national head count employs 70 per cent of the population, different assessments have showed is declining in productivity due to among other factors, nutrient export through harvested biomass and failure to embrace modern farming methods including usage of fertilisers.

Low consumption

According to the International Fertiliser Development Centre report, fertiliser has not played a significant role in boosting agricultural production in Uganda due to very low adoption and consumption rates compared to neighbouring countries.

"To increase the growth rate of Uganda's agricultural sector from 2.6 per cent to the desirable 4 per cent per year, research is needed to determine how best to increase the use of productivity-enhancing inputs, such as inorganic fertilisers," the report added.

The government has undertaken some policy interventions, such as formulating the National Fertiliser Policy to among others improve the fertiliser market structure, and ensure the availability of high quality, low-priced fertilisers.

Exports

Dongsong says after establishing a distribution line in Uganda, they are eying exports to Kenya which has an annual consumption capacity of up to 800,000 tonnes, and subsequently to South Sudan, and Tanzania.

The fertiliser plant is expected to run back to back with a brick baking plant, a steel and glass manufacturing plant: throw in the maintenance centre, which will supply spare parts for all plant machinery and is also expected to produce tools such as agricultural tools like hoes and rakes from residue of the steel plant.

The steel plant which was expected to be up and running by July this year, Ms Guo revealed, was setback as a result of delayed loan approvals by their funders -- Industrial and Commercial Bank of China (ICBC)--but the hiccup has "since been sorted."

"We have just finished financial closures, and we are now on track with the steel plant," Ms Guo added.

"We expect the plant to be up and running by May next year."

The raw materials for the products are the 75 million tonnes of phosphorite from which fertilisers are made, 213 million tonnes of iron ore, 429 tonnes of niobium, and 1 million tonnes of rare earth lying beneath Tororo's Sukulu hills.

Products

The company is producing four fertiliser products; organic, work which works over time to create a healthy growing environment, and suitable for crops like vegetables: inorganic fertilisers (NPK): organic-inorganic: and rock phosphate, suitable for perennial crops such as sugarcanes.

"From our tests, the organic fertiliser is doing well. We have been selling it to local farmers in Tororo and it is works well," Ms Guo said.

The inorganic fertiliser is currently being sold to farmers who make specific requests, the inorganic-organic is available for maintenance, while the rock phosphate has been found suitable by customers like Kakira and Kinyara--both large-scale sugarcane growers.

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