“Oil money should fund agriculture”
Prof. Zerubabel Nyiira Mijumbi is the outgoing State Minister for Agriculture who has just been appointed Junior Fisheries Minister. He spoke to Oil in Uganda about how the extractives sector can facilitate the growth of agriculture and avoid the so-called Dutch Disease.
Oil in Uganda: Can extractives and agriculture really co-exist?
Prof. Mijumbi: Extractives are basically good for the economy. Selling oil and gas brings in money that supports the economy at international level. At the same time the oil and gas industry brings opportunities to individuals to make money because they provide services to the oil industry.
The opportunities along that line also extend to farmers because the farmers find where to sell their produce. So in a way, the oil industry promotes agriculture: indirectly by providing money to the economy which money government feeds into the development of agriculture and also supports agriculture and farmers to sell their products to institutions and people in the oil industry.
For instance, the industry will automatically steer fertilizer production for the agriculture sector. When you extract oil, you get ammonium which comes from methane gas. Ammonium nitrate is used to manufacture fertilizers for agriculture. By supporting the agriculture industry, you are actually supporting agro based industries and there is value addition on the crops in agriculture and it is from that angle that you begin looking at agriculture and extractives opportunities.
What is government doing to maximise those opportunities for Ugandans?
Government creates conditions and an environment which allows the people to exploit the opportunities. For instance, the government has built a road to the oil fields and that alone attracts the population to utilise the opportunities and facilities that shall be along that line but also to easily access the oil area.
In Hoima there is a new market. That new market has been constructed not because the people in Hoima require a bigger market but because the oil activities are likely to attract more people there. There is likely to be an airport and electricity has been taken to those places. All these are taking place as a result of the oil industry. When you say has government prepared itself, you will never find a paper written that government has prepared like this, all these are part and parcel of the plan. A simplistic person will think government should start building for the people-No. In fact, government facilitates the process, like what you are doing yourselves now is part of government.
Because you are educating the people. It is a responsibility of the Non-Government Organizations and government to merely facilitate the process.
How does government plan to fully utilise all the bi-products from the oil refinery?
Naturally, there are plans of putting up industries. The government does not put up industries, that is one thing that must be clear. Government has created conditions that are suitable for investors to establish themselves and that is why there is peace, security and political stability which are factors that attract investors. So the issue is how we plan because in studying the oil industry, we studied all these possibilities. The Energy Ministry has all these plans laid out, how the products of oil are going to be used, how they are going to deal with the by-products, how they are going to deal with the environment and so on. So when the government gets this report it becomes part and parcel of the work investors are going to do to invest in that potential.
So even the fertilizer plant will be constructed by investors?
Yes, government is not an investor, it just creates conditions.
But it is going to invest in the refinery?
It is not an investment per say. We used to have a cooperation that was a joint venture in which government had interests. So if you take it like that then government has interests in almost all sector industries because it is government that has an interest to bring investors into the country.
In the past before we had a Structural Adjustment Plan which was proposed and implemented by the World Bank that tampered with government engagement in direct investment, government had investments. It had hotels through the Uganda Hotelier Association. But the Structural Adjustment Plan recommended that government should keep away from direct investment and leave it to the private sector.
You talked about farmers directly benefiting from the oil sector but in Masindi and Hoima small scale farmers are having difficulty supplying produce to the oil companies. Some of the food consumed in the camps is imported.
I don’t agree with you, I know of small farmers in Masindi who are producing mangoes and these mangoes are being sold to workers in the Albertine Region. I know the farmers and I can take you there. I have farmers in Teso who are producing oranges and they bring them to be sold to oil companies.
Which people are buying these products, is it the casual labourers or the oil companies?
Now that is where I wanted you to bring this out because most people do not understand provision of goods and services, they do not understand how they will benefit from the oil industry. They think that the investor will move to them and ask for pineapples.
When they talk about international standards, food is food. The food that is going to be feeding those people working there is not international. You will have sweepers, you will have moppers, even dogs will be eating food so you cannot say they will import food from Russia to be feeding dogs. Who will say that this meat should be international?
But I also agree with you that some food stuffs are imported for instance, apples, they will get them from South Africa and they will actually have the guts to say that your apples are so small we shall not buy them. That is trade and industry, that is what I have been telling people here. When we go international we go into commerce and trade and we go global. Every country looks for opportunities to sell their products.
So while these people are bringing their apples and pineapples, we are also taking ours to Somalia. In the meantime, we are also selling our maize to South Sudan and Rwanda and the Rwandese are selling theirs to Botswana.
Have you made any efforts to link these village farmers to the oil companies because to them, the oil companies are ‘unreachable’
The environment that is provided is to make it easy for the farmers and traders to sell their produce, so if the government ensures that there is infrastructure in place like roads, to ensure that there is security and peace so that people move freely, there is no body who stops the people from selling. People are free to come together and form cooperatives.
The government does not provide markets, it does not take you to India and get you market there, it provides the environment so that you can move and go get market in India. When you get this market in India, the government now provides the environment so that when you are taking your produce to India you are not constrained.
When you look at mineral-rich areas, there is competition for land for either mining or agriculture. For gold mining for example, the miners use mercury which is hazardous for the environment. How is your Ministry addressing these issues?
Mining has got to be done so that we get money for the national economy but how it should be done, ensuring safety and quality of land, is a different issue. It is a regulatory issue. But if I were to ask, What does not destroy land? Even burying people spoils land, in fact we are not supposed to do agriculture where people have been burried. Look at how much land is being taken up by real estate, literally wherever there was agricultural land here in Kampala in a radius of 20 miles from the city centre has been taken up by real estate. Development is changing land use.
So what Government has to do and is doing is to start rationalising land use so that we get to understand how best to use land, and that is going into the agrarian reform, a study of understanding the partitions pertaining to people’s needs and balance them with agriculture so that good land can be protected for agriculture. We can then do real estate in certain places, but good land must be protected to be able to meet the demand for agricultural produce in future.
Do Ugandan farmers have the capacity to supply the produce that shall be needed when development of the oil and gas sector finally kicks off?
It depends on demand and the market. Yes, our farmers have the capacity but they need to be organised to meet the demand. They must be educated, that is why we need to do extension services, that is why we need NAADS because you can use it to produce more and more so that we go and look for those markets out there.
Are you worried that some farmers may abandon agriculture and look for casual employment in a possibly better paying oil and gas sector?
As a country grows and develops, it offers more opportunities for people to choose what to do. When there is not much to do in villages, people eventually get caught up in agriculture, but when you have opportunities coming up, people move from rural to urban areas to go and get work there. So what you are asking is if people are moving away from agriculture to other sectors, yes they are because they are looking for better opportunities. Naturally people will move away from agriculture to other areas and go to where it pays better when the opportunity presents itself.
Don’t you think that is going to lead to the so-called Dutch Disease?
No we should not fear, for example in USA, the entire population there is fed by 5 percent of the farmers. So the capacity to produce is not numbers, it is how prepared people are to produce so when people run away from the agricultural sector to go work elsewhere, it stimulates those who are remaining to work harder, to employ modern mechanical methods because the labour intensive methods are becoming less productive. So they must use advanced methods of production so that they use their money to increase production.
And commercial agriculture does not mean you need a big piece of land, it means you engage yourself in agriculture as a business. When you do this, because of the demand involved, you will be forced into opening up other pieces of land or using the land you have with good technology so that you are able to obtain more from the land.
I believe the oil and gas industry is going to be useful for the development of the agricultural sector but for this to happen, it has to be planned very well so that the proceeds from oil are used well to boost agriculture so that we avoid the oil curse.
People should not think that the money is going to move from oil and gas into their pockets but they should utilise the opportunities that have come with the oil discovery to benefit from the sector. They should produce things the people in the oil industry are going to buy.
Questions put by Flavia Nalubega