Foreign investors sow seeds of change for Uganda’s farmers

For seven years Daniel Moi cowered in a refugee camp as the brainwashed child soldiers of Joseph Kony’s Lord’s Resistance Army rampaged through his homeland in Nwoya district, northern Uganda, abducting and killing anyone who opposed them.

The cult was eventually chased into neighbouring countries in 2006, but with little education or help to cultivate his 15-acre smallholding, Mr Moi faced a bleak future.

But thanks to what he describes as a fresh “invasion”, the subsistence farmer’s fortunes have changed.

​Instead of thugs brandishing automatic rifles, the new forces are those of European listed companies, international private equity and global venture capital, which are investing tens of millions of dollars in one of Africa’s most fertile areas. Their aim is to transform the region, which lies 350km north of the capital Kampala, into the granary not just of Uganda but of sub-Saharan Africa.

“We believe it has the potential to be a very significant investment,” says Carl Bruhn, chief executive of Amatheon Agri, a German listed company that started by cultivating 400 hectares in Nwoya in 2013, increased that to 2,700 by the second of 2015’s two growing seasons and expects to plant 3,300 hectares, mainly of rice and maize, by the end of this year.

“We’ve had a good experience in the first two years. Now we want to integrate value additions into the operations. Cropping, adding higher value crops, integrating everything into the value chains.”

Other investors have preferred to develop agribusinesses, working with local farmers to improve their yields and then buying their crops.

Mr Moi is working with Afgri, a South African grain handling company that has set up a facility some 8km from his farm. Afgri lends farmers money for seeds, fertiliser and machinery, and provides advice. It also offers a transparent market for farmers’ crops — mostly maize and rice — which it then processes and sells on to national and global markets.

“They have the land, we help them learn and improve,” says Martin Maugustini, head of Afgri’s Uganda operations. “We strike collaborative agreements for five to 10 years. We share costs and profit 50-50.”

Mr Moi says he is already reaping the benefits. “Last season I used their machinery and it made a huge difference,” he says. “This season we’re going to change to Afgri seeds after I saw how much better they were on farms that used them last year.”

With a glint in his eye Mr Moi estimates that within four years, if all goes well, he should be able to increase his yields by 300 per cent.

The potential returns are demonstrated by the success of the Gulu Agricultural Development Company. Set up by South African Bruce Robertson in 2009 with a $15,000 investment, the company first reopened a cotton ginnery in Gulu, one of the region’s larger towns, and began working with 1,000 farmers.

It has expanded into sesame oil, sunflower oil, chilli and maize, now works with more than 80,000 farmers and had a turnover last year of $10m, says Mr Robertson.

But investing in the region is not for the faint-hearted or anyone looking for big returns overnight.

“You can make it work in the north but you have to have a 10-20 year investment horizon,” says Chris Isaac, investment director for Agdevco, a venture capital company that invests in early-stage businesses. “There’s no quick win.”

The challenges are many and various. Lack of infrastructure, low-quality seeds and fertiliser, poorly educated locals, an undeveloped marketing network and a corrupt bureaucracy are some of the day-to-day issues to be overcome.

But the biggest constraint on investors is securing land, either to lease or buy. Much is owned by families or communities and it is not always clear who has the right to sell. As a result of the LRA uprising, during which tens of thousands of people were killed in northern Uganda alone, whole families were wiped out and there are competing claims to plots as people seek to take advantage of the ownership vacuum.

“The economics of commercial farming can look beautiful on a spreadsheet,” Mr Isaac says. “But reality in remote parts of Africa has a nasty habit of biting back.”

Uganda’s government has expressed support for the foreign investors. President Yoweri Museveni, recently re-elected for a fifth term in a disputed election, opened the Afgri centre in Nwoya last year and visited Amatheon’s farm. “I believe [this area] will soon overtake places like Kampala in terms of modernisation because of commercialised farming,” he said.

The region is also benefiting from heavy government investment nationwide in roads and power generation, as well as tax breaks.

But dealing with local government officials is best avoided, most investors say. “They just try and fleece you by asking for random taxes,” one foreign farmer says. “I haven’t seen them do anything at all to encourage local farming.”

The investors’ and farmers’ success is creating new challenges, however. “Some do a lot of merrymaking when they get their money,” says Charles Oboth, GADC operations manager. “The next phase is financial management. We also need to promote women’s participation, because they’re more responsible.”

Financial Times


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