1.0 Macro trend (Pestle) analysis of agriculture trading in Uganda

1.1 Political environment

1.1.1 The EAC free regional agriculture trade

The East African Community has launched a three-year project in order to increase staple food production and reduce reliability on imports from nonmember states. The Regional East African Community Trade in Staples (REACTS) is aimed at helping at least 300,000 small hold farmers across the three countries (Uganda, Kenya and Rwanda), through guaranteeing them market and formalizing agriculture business in the EAC states.[3] According to the report, Uganda has suitable agro ecologies for production of maize and beans but is faced with several challenges. However, through utilizing the synergies the country will be able to sell to the ready market of these products in countries like Kenya, Rwanda, DRC and South Sudan thus an opportunity for Ugandan agricultural traders to enjoy the fruits of trading both on the national and regional level.

1.1.2 Uganda picked as a hub for the World Food Program

The WFP picking Uganda as a food hub is a growth opportunity for Ugandan farmers and agriculture traders. The World Food Program has picked Uganda as a global procurement hub creating an opportunity for over 1,000 Ugandan farmers to benefit from their produce. The NGO has set up collection stores across the country for post-harvest management in order to ensure that high standards are maintained.[4] According to the report, WFP has already bought more than 300,000 metric tons locally contributing more than $100million into the local economy. The ever-increasing demand for maize by the NGO is an opportunity for agriculture traders and farmers in Uganda to grow, increase their revenue and profits.

1.1.3 Inefficient government services

However, much Uganda has made improvements in the BOU doing business rankings moving its rating position to 115 in 191 countries, market challenges still remain on a big scale when it comes to trading. Uganda is ranked 136 in trading, exports take an average of 71 hours for border compliance and 64 for documentary compliance while imports take an average of 154 hours to border compliance and 138 to documentary compliance.[5]

This is a major issue that has made it hard for agriculture traders to export their products.

When it comes to starting a business, Uganda is rated 165where by it requires at least 64 procedures in comparison to sub-Saharan countries which has seen the country on a low scale when it comes to agriculture trading...

1.2 Economic environment

1.2.1 Lack of affordable financing

Lack of affordable financing is a big threat to the growth of the Ugandan agriculture trading sector. However much the Bank Of Uganda reduces interest rates, financing still remains a big challenge for small to medium businesses in Uganda. This is mainly due to the fact that the commercial lending rate for low risk customers is currently at the average of 25% which is too high for a person in need of starting or investing in a business. The high cost of credit has become a disincentive to private sector credit uptake making it hard for agriculture traders to get loans to start or even invest in their businesses thus a threat to agriculture trading in Uganda.[6]

1.3 Social environment

1.3.1 Millennials poor attitude towards agriculture

Uganda is an agriculture country with the biggest population relying on the sector but the youth find the field unattractive. Unfortunately, the older generation which has been the backbone of agriculture is aging very fast yet with no youth ready to replace them in the field.[7] This is a threat to the agriculture sector as it will affect the production levels since the elderly are already weak and not as productive and strong as the younger generation can be.

1.3.2 Urbanization

It is estimated that two thirds of the world’s population will live in town by 2050 which means a decline in the rural population. According to the world food program USA this will mean need to produce more food in order to meet the growing demand in cities yet with less labour force. Uganda’s urbanization rate is at 5% annually and its estimated that at least 30% of the country’s population will be living in urban areas in comparison to 20% today.[8]  This is a threat to the agriculture sector since most of the younger generation is moving to towns leaving the agricultural activities to the old and weak demographics.

1.3.3 Lack of specialized skills

Uganda is rated 163 out of 188 countries on human development index with the adult literacy at 73%, 75% primary drop outs, 27% enrolled in secondary schools and only 4% in tertiary schools.[9] This has resulted in failure to efficiently manage the value chain from agriculture research to farm in puts, farm management and connection of end products to the market. This has also made it hard for Ugandan agriculture traders to to get into contractual agreements with big supermarkets and later alone among high consumer economies in Western and Asia countries.[10]

1.3.4 The growing population

Africa has the fastest growing population in the world and is forecast to grow by about 50% in the next 18 years. This is a great opportunity for agriculture traders to grow because of the growing food demand which is forecast to grow by more than 60% by 2050.[11]

However, even with 65% of arable land most African countries still depend on imports worth $50 billion a year. This is a growth opportunity for agriculture traders in Uganda to grow by taking advantage of the low competition in the field and the growing food demand.

1.4 Technological environment

1.4.1 Agritech

While agritech is big business in many developed countries, many African countries including Uganda still lack access to agricultural technology. Agriculture has often been viewed as a low technology industry despite its importance to many economies in the world. While many advanced nations have embraced Agritech or the use of technology in agriculture, many farmers in Uganda, like in other African countries, still view the sector as a peasant profession and still rely on antiquated basic tools such as hoes or wheelbarrows to ply their trade.

However, there are signs this is changing. Since 2016, the Agritech sector in Africa has for instance grown by 110%, at the back of continued investment. For instance, Aspiring Panda, a London based Agritech launched Awega CDMS and Awega Marketplace in Uganda in 2018. The CDMS uses community data to offer optimized workflows for efficient farming of food products such as avocado, tea and coffee, enabling supply chain traceability of all farmed produce from seed to table. Farmers then use the Awega marketplace to gain access to both domestic and international markets, cutting out middlemen and gaining higher profits.

While such use of technology is still in its infancy in Uganda and many African markets, its growing and with agriculture still the main employer of labour on the continent, opportunities abound in Agritech that can drive efficiencies, productivity and ultimately help in reducing poverty. Below, we look at some of the Agritech that’s making waves in agriculture and its application.

1.4.1.1 Use of sensors

Sensors are also making their way into the agriculture sector where by they can be used to monitor moisture levels, wind speed, sunlight among other factors (Paine 2018). The future of the agriculture sector just like any other industry will heavily rely on connected farms and sensors are the first step in achieving that.

1.4.1.2 AI and machine learning

Technology is currently being used to process huge amounts of data that no human being could ever process. In the agriculture field, this could enable farmers to forecast diseases, poor harvests and out breaks and help them make improvements in their overall operations. Making decisions based on technology is one of the most accurate and best practices and will help improve the agriculture sector and thus growth of agriculture trading companies in Uganda.

1.4.1.3 Modelling and simulations

By using a combination of collected data, this technology will be able to run advanced simulations that will give agriculture companies a picture of what is likely to happen under a variety of different conditions. This will enable agriculture companies to test out different approaches in virtual environment and get ideas of how its likely to work out if the try them out. It will also help them to pick t best course of action while deciding to invest.

1.4.1.4 Robots

As technology becomes better, robots are also becoming better and less costly. They will become valuable options in different fields across the agriculture industry from meat production to harvesting among others. This is a great growth opportunity as they tend to be cheaper than manual labour while during more uniform and accurate work. Robots will improve the agriculture industry, eliminate lots of costs, mistakes and will become a top priority in improving the industry all the way from the farm to trading.

Technology has the potential to disrupt the whole sector and with the growing demand, spotting this opportunity will help improve Uganda’s agriculture sector and productivity putting it on the level of developed countries like China and USA.

1.5 Legal environment

1.5.1 The National Biosafety Act

On 4th October 2017, the Ugandan government passed the enactment of The National Biosafety Act, a law which is supposed to limit importation of Genetically Modified Products in the country. The act is also supposed to help Uganda experience maximum benefits of modern biotechnology while minimizing environmental and human health risks.[12]

However, GMO’s are a threat to Ugandan agriculture as some of the clauses in the act undermine small holder farmers. The bill restricts the distance where GMOs should be planted which limits small land owners from using GMOs yet GMOs are not meant for seed production. According to the report, Uganda is very likely to lose majority of its indigenous crops due to this law thus a threat to agriculture traders.  [13]

1.5.2 Complex land laws leading to frequent land disputes

Uganda is composed of four systems of land tenure which include free land, Mailo land among others. The Ugandan land act of 1998 restricts foreign investors to leasing land. Its only holders of free hold, lease hold and Mailo land who are allowed to lease land while customary and communal land owners who account for 90% are not allowed, this has resulted in frequent land disputes making in an issue in the development of agriculture.[14]

According to some analysts, social attachment as opposed to leasing it to potential investors, has resulted in land under-utilization, hurting the potential contribution of land as a natural resource in Uganda.

1.6 Environmental issues

Most Ugandan’s rely on natural resources for survival where by forests provide firewood and charcoal as well as arable soil for agriculture once cleared. According to WWF Global, at least 6000 hectares of forest are lost monthly which means that in case no action is taken the country’s per capita forest cover will be zero by 2050.[15] Most forest have been cleared for agriculture which has exposed soils to erosion thus infertility, with cattle also being grazed on the same lands the soil quality has been affected reducing agriculture productivity.

Uganda’s forest cover has been reduced to 8% from 24% in the 1990s due to human activities. This is likely to result in climate changes in form of drought, floods and landslides which will affect the Ugandan agriculture sector thus a threat to agriculture traders.[16] Climate change has in form of unreliable rains, new diseases and pests has made farming more expensive since farming practices have to be re oriented to the changing conditions.