Policy issues in Uganda have not been smooth. The country continues to suffer from poor policy choices. On March 9, Daily Monitor published a story, “Parliament seeks inquiry into sale of 130 public companies”. This inquiry seeks to investigate the privatisation policy. Allow me to zero down on the agricultural trade liberalisation policy.
Whether this policy increased opportunity for farmer’s choice, capability to make choices and improve their social and economic security will be analysed in a future article.
The coffee industry board was established in 1930 to handle issues of quality control. Sixteen years later, the department of crops was created with an objective of encouraging the expansion of robusta coffee. By 1953, the function of coffee industry board was extended to incorporate price setting responsibilities and in 1959, it acquired a new name: Coffee Marketing Board (CMB) with even an additional role of buying coffee.
After independence, the coffee board assumed full control of robusta industry. This board even assumed more power under Obote’s government, with new legislations giving the board monopoly function in exporting coffee. These roles subjected coffee farmers to control, exploitation and oppression. This arrangement remained until 1990 when the coffee sector went through a broader policy reforms.
However, the first wave of policy reforms had begun in mid 1980s, during the implementation of an International Development Assistance agricultural rehabilitation project. The main goal of the $70 million of which $22 million went to coffee sector, was to rehabilitate processing facilities, improve marketing efficiency and enable the government formulate development strategies.
However, restructuring the coffee marketing chain and reducing the coffee board’s responsibilities were not part of the project. This was because of the important part coffee played in bringing foreign exchange earnings to Uganda’s economy.
In the late 1980s, the sector went through agricultural trade liberalisation process after Uganda committed herself to the trinity of International Monetary Fund (IMF), World Bank and World Trade Organisation (WTO) conditionality. As a result, Uganda devalued the Uganda shillings by 77 per cent and also agreed to de-regulate her coffee trade (Belshaw, Lawrence, and Hubbard 1999:673-690).
This trade liberalisation further penetrated and influenced the kind of policy framework that Uganda was to pursue. In line with the commitment that Uganda made towards the WTO protocols, today Uganda’s broad policy objectives have continued to focus on the need to stabilise the economy.
This is partly through restoring the fiscal and monetary discipline, the liberalisation of consumer and producer prices in order to align prices in favour of export-oriented production and import substitution, progressive movement towards a realistic, market oriented exchange rate within a system of restrictions; the removal of trade restrictions, the privatisation of and rationalisation of State enterprises.
More wide-ranging policy reforms continued in 1990 as part of Structural Adjustment Programme where the coffee board was split into two; the Coffee Marketing Board Ltd charged with trading and processing roles of the former board, and the Uganda Coffee Development Authority, which assumed responsibility for monitoring and regulating the industry and advising the government on policy issues. Additional reforms followed in 1992 that added unification of exchange rate regime.
This led to the board gradually liquidating all its assets and withdrawing from the coffee industry and marking the end of Uganda government’s involvement in trading and marketing of coffee. Interestingly, liberalisation had one major positive effect, the monetary policy framework that in many ways was the vehicle for the positive impacts of coffee trade liberalisation in Uganda.
The liberalisation of agricultural commodity prices and the abolition of various marketing boards had a short-term effect of increasing revenue to farmers as well as lowering marketing costs, thus significantly raising the profitability of agricultural production, including coffee. This was a positive development.
Today, the coffee sector is still a significant export contributor to the economy. However, one needs to be little bit cautious here because these revenue flows are for the well-off farmers not the peasant out growers. As such, this policy reform exposed some coffee farmers to systemic risks and uncertainty by affecting their ability to cope and recover from adverse price shocks and environmental hazards, forcing some farmers to lose their source of livelihood. Hence, the policy reform falls short of the security test principle because it did not improve the security and work prospects of the list secure farmers in Uganda.
Furthermore, the policy reform exposed coffee farmers to coercion and removed their ability to make choices. This meant farmers were disposed of their collective voice representation. Yet before liberalisation, the CMB traded in coffee with foreign coffee buyers on behalf of the government. The CMB operated in a way that guaranteed coffee prices to the farmers based on the assured quotas that CMB negotiated on the world market on behalf of the Uganda government.
Even though the cost of the CMB staff and infrastructure as well as the coffee tax reduced the farmer’s net pay, the farmers were assured of a particular price when they decided to produce coffee.
After liberalisation and abolishment of the CMB, the farmers have become more vulnerable to price change shocks in the world market.
The trade liberalisation stripped farmers of their right to voice representation and collective bargaining. The policy reform only improved the situation of the most secure, technologically literate farmers. So, the sale or policy reform constrained the freedom of the disadvantaged farmers. And thus it is not socially just because it did not improve the security of the least secure.
Currently, the return from sale of coffee produce by farmers cannot even meet the cost incurred in production.
In this case, the agricultural policy reform denies coffee farmers a sense of occupation in a dignified way and imposes control on local farmers and local buyers who have no license from gaining external sales.
Amazingly, the proponents of the privatisation policy assumed free human capital movement of factors of production. This assumption did not materialise because of unskilled farmers’ labour that affected labour mobility.
