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What does oil mean for Ugandan farmers?

Image: Hoima farmer with pineapples

Paul Kasaija sells just a small fraction of his pineapple crop to the oil camps, but expects demand to increase as the camps grow. (Photo: C. Sirisena)

Supplying fresh produce to oil workers has been widely touted as one of the potential benefits of oil exploration for rural people in oil-bearing districts. Yet local communities and activists claim that the catering companies serving the oil camps source most of their produce from outside the oil areas, even from abroad.

Catering contractors to the oil industry dispute these claims, insisting that they do buy produce from locals in Hoima, Buliisa and Masindi.

“We had a local supply chain which we developed over six years. We got involved with Traidlinks who would ensure that the Hoima guys supply great stuff,” says Peter Bowser, co-owner of Equator catering services, which had a contract to supply Tullow camps in Buliisa and Kaiso-Tonya from 2006 to 2013.

Mr. Bowser, a British citizen, describes his company as “Ugandan by registration.” He adds that “I have been here since 1964, about 95 of my 100 employees are Ugandan. My company is local and I promote local content.”

Asked about claims that Ugandan farm produce is not good enough for the oil camps, Bowser says that “The issue of quality is there, but it is something we can work on. Like meat: I used to buy it from a man who brought it in a polythene bag on a bicycle, but now the same man brings it in a refrigerated vehicle. We have been very patient with him and supportive and we have helped him improve his quality of supply.”

Locals in Kaiso village, on the shores of Lake Albert, report that caterers from Tullow’s nearby oil camp buy fish and sodas from the village market.

Mr. Bowser admits, however, that Equator went to Kampala or even international markets for some produce, such as salad ingredients.  These, he says, were either not available locally, or of inadequate quality.

This year, Equator lost its Tullow catering contract in a re-bidding exercise. The contract has now gone to the Supreme Group, a USA and UK based company that specializes in providing services to military forces and extractive industries.

Supreme were not available for comment on whether they would maintain Equator’s local supply chains.

The bigger picture

Dr. Charles Kajura, Hoima District Production Officer, has a less positive view of the catering companies.

“They buy Hoima’s products on a small scale, very small, less than 20 percent of the total supply going into these caterers,” he says. “Most of it is bought from Kampala and outside. They always use the poor quality excuse.”

Dr. Kajura reports that, partly thanks to the efforts of groups such as Traidlinks, the number of famers in the district involved in horticulture has recently grown by more than 20 percent. Many local farmers, he says, are now growing good quality fruits, tomatoes, cabbages, carrots and green peppers.

This, he suggests, is because of significant increase in local demand.

Oil exploration may have triggered that demand, but the main factor is now the rapid population growth that oil has brought to Hoima town. According to Town Clerk, Emmanuel Banya, Hoima hosts an estimated 200,000 people, up from just 45,000 five years ago.  Masindi town is also growing fast, and some smaller centres, including relatively undeveloped Buliisa town, are likely to follow suit.

This is a much bigger market for local produce than the oil camps, the largest of which generally house around 200 employees.

Over the next few years, as the oil refinery and other infrastructure is built, there will be a further influx of workers from elsewhere into the oil-producing areas. These new mouths to feed will add to local demand for food.

By the time oil comes on-stream, the Albertine region will be transformed.  Towns and trading centres will have larger, settled populations.  Better roads (and, perhaps, rail) will link them with each other and with the rest of the country.

The big question for the region’s farmers is whether they can benefit from this transformation.

Transforming agriculture

Bigger urban populations mean bigger markets for farm products. Experience around the world also shows that, as people move to towns and become more ‘middle class,’ they eat more meat and vegetables.

Encouraging farmers to move away from subsistence agriculture and to grow more cash crops has long been a cornerstone of government agricultural policy. But local farmers will not necessarily be the first to benefit from urban markets developing in the oil regions.

Locals will have to compete with produce coming in from other parts of the country—and improved infrastructure may intensify this competition by reducing transport costs.

Already, according to Professor Augustine Nuwagaba, a political economist and presidential adviser, “There is a likelihood that the food is coming from other parts of the country into Hoima.”

Yet, according to Lawrence Bategeka, a policy analyst at Makerere University’s Economic Policy Research Centre, “There is a lot needed to enhance agriculture in Hoima, but little is being done to support farmers because most of them are not big scale farmers.”

Minister of Agriculture, Tress Bucanayandi, confirmed that central government has no plans to offer special support for oil-region farmers.  “We are putting in place programs to grow the entire sector, not what suits a specific area,”he told Oil in Uganda.

This is in line with the free-market principles that have guided Ugandan policy under President Museveni, and that international donors and financial institutions encourage.

Yet lack of preferential treatment may disappoint some locals, who feel they are suffering the disruption of oil but see few immediate benefits.

Which farmers can benefit?

The shift from subsistence to more commercial, market-oriented farming requires capital and technical skills that are in short supply among the peasant families who still make up the great majority of the population in the oil regions.

New opportunities may therefore be dominated by better-off and larger-scale farmers, leaving the majority behind.

According to Fredrick Kawooya, a livelihoods expert with ActionAid-Uganda, the once-vibrant Savings and Credit Cooperatives (SACCOs) are no longer well placed to spread opportunities more evenly to smallholders.

“These cooperatives are not strong enough anymore, and their weaknesses are beyond the strength of the locals,” he says. “This should be the role of government, to establish the markets, and study the demands of this market so that farmers know how to address these demands.”

Small farmers, he points out, need storage facilities for perishables, and this also requires government support. He adds that few Ugandan farmers are “professionals.” They need more training in the field.

Kawooya warns, however, that progress for small farmers will be hard to achieve without improvements to the policy on SACCOs.

“The enforcement is wrong; they are formed with the wrong motive. Government should provide funding to the institution responsible for reviving SACCOs, the Uganda Co-operatives and Savings Union and the Uganda Cooperatives Alliance, then withdraw and let cooperatives take charge and grow unsupported.”

‘Dutch disease’

In the longer term, many economists fear that the notorious ‘Dutch disease’ may cast a shadow over Uganda’s agricultural sector.

When natural resource revenues come on-stream, a country’s currency tends to increase in value.  This is the ‘Dutch disease’ syndrome.  It has the effect of making imports cheaper, and exports less competitive.

This could create further difficulties for small farmers, who may find themselves even less able to compete in local markets with relatively cheap products coming in through improved, regional transport routes.

In addition, Lawrence Bategeka warns that “What should worry us is that the sector is likely to suffer when oil starts flowing because people will move away into the service sector which cannot employ everyone. People are going to run out of agriculture, and therefore productivity will be low.”

He adds that “Agriculture programs like NAADs (National Agricultural Advisory Services) are not doing enough.”

Most experts therefore agree that the prospect of oil revenues should make the government pay more, not less, attention to agriculture.

Report by Flavia Nalubega

editor@oilinuganda.org