Escalating prices of vegetable oil, soap

Support Small Holder Farmers to grow oil seeds such as sesame, soya bean, and sunflower to increase production of the same

COMMENT | WALTER AKENA | As the country grapples with rising prices of essential commodities, in particular prices of cooking oil, and laundry soaps, several factors have been advanced by our economists to explain the current situation. Key among these issues are; the ongoing Ukraine-Russia conflict, the global inflation and the after-effect of COVID-19 that disrupted production at the peak of the pandemic.

The impression that one gets from these explanations is that the disruptions are caused by external shocks in the international supply chains. This has been particularly so because Uganda is a net importer of intermediate raw materials used in the production of some of these essential commodities.

Statistics from the Ministry of Finance, Planning and Economic Development (MoFPED) show that Uganda imported 84 per cent of crude palm oil from Indonesia and Malaysia in 2021. Over the last two years, the prices of crude palm oil have doubled because of; the growing importation by China and India which are the largest buyers, and the export restriction introduced by Malaysia and Indonesia.

The escalating prices have been exacerbated by a decrease in global sunflower and soya bean oil exports from Brazil and Peru which are close substitutes for palm oils, effectively increasing the demand for palm oils and subsequently propping up its prices.

According to the Uganda Investment Authority, the annual aggregate demand for edible oil in Uganda is 120,000 metric tonnes against a production capacity of 40,000 metric tonnes. This leaves a deficit of 80,000 metric tonnes which is a great investment opportunity in the edible oil sector.

Although Uganda’s land is arable and suitable for growing edible oil seeds such as sesame, soya bean, and sunflower, production of the same has remained low.

The variance between the aggregate demands and production of raw materials for edible oil, as well as, the escalating price of cooking oil and laundry soap brings to bear the urgent need to scale up the production of oil crops.

To achieve this, the Government needs to build the capacities of farmers to open larger farmlands to expand the acreage of oil crop production. This is aligned to the development strategy under the National Development Plan III that is hinged on the need for increased industrialisation based on increased productivity and production in agriculture.

In 2009, the Bank of Uganda and World Bank initiated the Agricultural Credit Facility to provide medium and long term financing to projects engaged in Agriculture and Agro-processing.

This, however, targets majorly the large scale commercial farmers. Yet, according to the Uganda Bureau of Statistics (UBOS), Uganda is dominated by small scale-farmers with an average household land opening capacity of 2 acres for cultivation. To harness the full impact of this Credit Facility, its access should be opened up to small-scale farmers to catapult them to large scale production.

Under the Parish Development Model (PDM) pillar one focuses on Agricultural Value Chain Development. This provides an opportunity for scaling up production of oil crops and the attendant value addition infrastructure especially for the North and Mid-Western Regions that have comparative advantage in the production of sunflowers, sesame and soya bean.

Furthermore, Public-Private Partnership could be essential in scaling up production of oil crops. Government should provide a conducive environment for private sector investment in production and value addition of oil crops. Improvement on road infrastructure and ensuring access to reliable and affordable electricity for farmers in production areas could help to encourage private sector investment in oil-crops production and value addition. Incentives such as tax holidays and access to land are steps in the right direction.

The Government may consider partnering with private sector players such as Ngetta Tropical Holdings in Lira District which has become a compelling testimony of the private sector’s contribution in edible oil sector.

The company set up an oil milling plant seven years ago, now boasts of a network of 24, 000 contract farmers in Lango and Acholi Sub region. This has since increased sunflower production in Lango Sub region from 2,968 to 103,547 metric tonnes in 2015 and 2021 respectively.

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The writer is a Project Officer under the Local Government Councils Scorecard Initiative (LGCSCI)  at ACODE and can be reached on walter.akena@acode-u.org