Capacity for Trade in AfricaCapacity for Trade in Africa

A Traders View from AfricaA Traders View from Africa

John MagnayJohn Magnay

CEO, Uganda Grain Traders LtdCEO, Uganda Grain Traders Ltd

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BiographyBiography

Agricultural Economist from Wye College, Agricultural Economist from Wye College, University of London, ‘74-’77University of London, ‘74-’77

Lived and Worked in Uganda since ’77Lived and Worked in Uganda since ’77

Supplied inputs and agro processing equipment Supplied inputs and agro processing equipment since ‘79since ‘79

Supported Emergency, Relief, Development Supported Emergency, Relief, Development programmes in Great Lakes Region since ‘83programmes in Great Lakes Region since ‘83

Developed trade in food and seedDeveloped trade in food and seed

Established Uganda Grain Traders Ltd. in 2001Established Uganda Grain Traders Ltd. in 2001

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Africa TodayAfrica Today

830m people and rising830m people and rising80% of population involved in Agriculture 80% of population involved in Agriculture YETYETFood Import Bill $ 19 billion Food Aid / Food Import Bill $ 19 billion Food Aid / Commercial Imports per annumCommercial Imports per annumFood Insecurity increasingFood Insecurity increasingFood Aid IncreasingFood Aid IncreasingMost of Continent on less than $ 1 per dayMost of Continent on less than $ 1 per day

Who needs a Farm Bill?Who needs a Farm Bill?

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UgandaUganda

Land-locked, East Africa on Lake VictoriaLand-locked, East Africa on Lake Victoria

70% Land / 70% above Semi-Arid70% Land / 70% above Semi-Arid

Equatorial with majority of land 3-4000 feet Equatorial with majority of land 3-4000 feet above sea levelabove sea level

25 million people – 80% smallholder farmers25 million people – 80% smallholder farmers

2 crops per year in most areas2 crops per year in most areas

Non-maize dependantNon-maize dependant

The Pearl of Africa & Source of the NileThe Pearl of Africa & Source of the Nile

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Exports / Balance of PaymentsExports / Balance of Payments Product mtonnes

$ million Value

Comment

Coffee 140,000 160 Tonnage dropping / Value increasing

Fish 25,000 75 Resource decreasing

Cut Flowers / cuttings

30 20-30% growth per year

Maize / Beans formal

140,000 30 Relief food to Great Lakes

Tea 25,000 25 Tonnage increasing / price dropping

Maize / Beans informal

100,000 25 Border trade to region

Tobacco 15,000 20 Tonnage down from 2004 peak of

35,000mt

Cotton 16,000 16 Down from 40,000mt in 2004/5

Others   100 Gold / Minerals / Electricity

Exports 476  

Personal Remittances 424  

Donors 900  

Balance of Payments 1,800  

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UgandaUgandaGrainGrainTradersTradersLtdLtd

Formed in Sept 2001 by 16 grain trading companiesFormed in Sept 2001 by 16 grain trading companiesExported 31,000mt surplus Maize to Zambia Dec 2001 Exported 31,000mt surplus Maize to Zambia Dec 2001 to May 2002to May 2002Member companies responsible for producing export-Member companies responsible for producing export-qualityqualityUGT responsible for finance, storage, marketingUGT responsible for finance, storage, marketing

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FacilitiesFacilities

30-35,000 mt of bag storage capacity30-35,000 mt of bag storage capacityRail-siding for 22 wagons / 880mtRail-siding for 22 wagons / 880mtWeighbridges and parking areaWeighbridges and parking areaCapable of receiving and dispatching 1,000mt per dayCapable of receiving and dispatching 1,000mt per dayBuilt in 90 days !!!Built in 90 days !!!Room for expansionRoom for expansion100mt per day Cleaning & Drying Plant from June 2004 to 100mt per day Cleaning & Drying Plant from June 2004 to receive crops direct from farmers / tradersreceive crops direct from farmers / traders

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Food AidFood AidOne of the largest recipients of Food Aid in One of the largest recipients of Food Aid in Great Lakes region with up to 3 million IDP Great Lakes region with up to 3 million IDP and vulnerable recipientsand vulnerable recipients

One of the largest supplier of local One of the largest supplier of local purchased Food Aid in the Great Lakes purchased Food Aid in the Great Lakes region – now up to 160,000mt of food per region – now up to 160,000mt of food per yearyear

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Food for Peace 2003Food for Peace 2003

Commodity Tonnage $ Value Cost per mt ex-

USA

Maize Meal 18,800 19,969,676 1,062.22

CSB 16,100 9,484,910 589.12

Pulses, Green whole 3,000 2,362,012 787.34

Maize, Bulk 56,360 25,223,290 447.54

Veg.Oil (6/4 L) 1,530 1,933,684 1,263.85

Peas, Green Split 500 n/a  

  94,260 57,039,888  

What did this do to help production / markets in Uganda / Africa?

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Food for Peace 2003 - CSBFood for Peace 2003 - CSB

Commodity Tonnage $ Value Cost per mt ex-USA

CSB 16,100 9,484,910 589.12

IF PURCHASED IN UGANDA/EAST AFRICAUNIMIX 16,100 6,440,000 400

ORUNIMIX 23,710 9,484,910 400

ANDIt would have provided a market for another +/-

30,000mt of Maize / Soya

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Opportunity for TradeOpportunity for Trade

Target Import SubstitutionTarget Import Substitution

Target the Regional marketsTarget the Regional markets

Identify Niche markets outside AfricaIdentify Niche markets outside Africa

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Hit the ImportsHit the ImportsCropCrop ValueValue

$ million$ million

Target Export Potential ***Target Export Potential ***

RiceRice $ 20$ 20 Development of the Upland varieties has Development of the Upland varieties has developed developed ******

SugarSugar $ 12$ 12 In next 5 years Uganda will move from 20% In next 5 years Uganda will move from 20% import to surplus exporter import to surplus exporter ******

Veg OilVeg Oil $ 75$ 75 Both Palm Oil and Sunflower being developed to Both Palm Oil and Sunflower being developed to replace $ 100m-worth of imports replace $ 100m-worth of imports ******

PetroleumPetroleum $ 300$ 300 Uganda struck Oil in Lake Albert valley in Dec Uganda struck Oil in Lake Albert valley in Dec 2005 and again in Mar 2006 2005 and again in Mar 2006 ******

Barley / Barley / AdjunctsAdjuncts

$ 5-10$ 5-10 A UGTL / Uganda Breweries initiative is targeting A UGTL / Uganda Breweries initiative is targeting substitution of 70% raw material imports for substitution of 70% raw material imports for Breweries Breweries ******

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Field to BottleField to Bottle

Only buy Export Quality Only buy Export Quality product!product!– Maize & Beans for Maize & Beans for

Export & Relief salesExport & Relief sales– Barley under contract for Barley under contract for

BrewingBrewing– Soya Bean for ExportSoya Bean for Export– RiceRice

More than 50% from More than 50% from Farmers / Small Farmers / Small TradersTraders

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The Regional MarketThe Regional Market

Up to the early 80’s national grain boards held Up to the early 80’s national grain boards held responsibility for food securityresponsibility for food securitySince early 90’s most markets have been Since early 90’s most markets have been seasonally / annually shortseasonally / annually shortUganda is year-on-year surplus in grains and Uganda is year-on-year surplus in grains and pulsespulses

ButButIn absence of regional market and financing In absence of regional market and financing mechanisms, regional food security will be mechanisms, regional food security will be dependant on Food Aid and non-regional dependant on Food Aid and non-regional importsimports

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Kenya Maize BalancesKenya Maize BalancesKenya Maize balance 1980 - 2004 (mt)

-1,400,000

-1,200,000

-1,000,000

-800,000

-600,000

-400,000

-200,000

0

200,000

400,000

600,000

800,000

80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04

Sour ce : UGT/ FEWSNET

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4 Grain Crashes in Uganda in 20 years4 Grain Crashes in Uganda in 20 years

1987-8 – Govt sponsored increase in production – the 1987-8 – Govt sponsored increase in production – the Grow more Food CampaignGrow more Food Campaign

1995 – dramatic increase in demand for Relief food in 1995 – dramatic increase in demand for Relief food in 1994 for Rwanda followed by no demand in 1995.1994 for Rwanda followed by no demand in 1995.

2001 – loss of Kenya informal trade market, due a 2001 – loss of Kenya informal trade market, due a seasonal surplus (despite an annual deficit).seasonal surplus (despite an annual deficit).

2005 – wet harvest / large surplus / unsympathetic 2005 – wet harvest / large surplus / unsympathetic purchase by WFP / short term surplus in Kenya – short purchase by WFP / short term surplus in Kenya – short term problems with impact on 2006 Food Securityterm problems with impact on 2006 Food Security

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The Ideal ScenarioThe Ideal ScenarioTo reduce Food Aid requirements:-To reduce Food Aid requirements:-

Regional Market with Spot and Futures MarketsRegional Market with Spot and Futures MarketsCommercial Finance mechanismCommercial Finance mechanismCommercial cleaning & drying as close to Commercial cleaning & drying as close to production areas to avoid the quality issuesproduction areas to avoid the quality issuesStrategic commercial storage facilities to access Strategic commercial storage facilities to access the regional marketsthe regional markets

Ethiopia – Kenya – Tanzania – Uganda – Ethiopia – Kenya – Tanzania – Uganda – Rwanda – Burundi – Eastern Congo – SudanRwanda – Burundi – Eastern Congo – Sudan

ALSO ALSO Balancing with the Southern African MarketsBalancing with the Southern African Markets

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The RoadThe Road

Political Will for regional markets from Political Will for regional markets from Govt & DonorsGovt & Donors

Regional infrastructure / reduction of Regional infrastructure / reduction of transaction costtransaction cost

Financial mechanisms to remove Price Financial mechanisms to remove Price Risk for food commoditiesRisk for food commodities