On the Campaign Trail in 2016, Uganda’s President Yoweri Museveni who was campaigning for a 7th term, stopped in Bundibugyo District, Western Uganda. Bundibugyo... Tracking the Missing Link: Why Uganda is missing out on the Cocoa windfall

On the Campaign Trail in 2016, Uganda’s President Yoweri Museveni who was campaigning for a 7th term, stopped in Bundibugyo District, Western Uganda. Bundibugyo District is Uganda’s leading Cocoa producer. The president promised the cocoa farmers Government support in the development of the Cocoa value chain from production to marketing. Instead what he has delivered is 1 million seedlings and left the Marketing to private sector middlemen. Why the detached interest? 

President Yoweri Museveni

By Collins Hinamundi 

In the Rwenzori Mountain Ranges, about 350 Kilometres West of Kampala, Jockus Matte and over 2000 other farmers grow Cocoa in Bundibugyo district. It is a crop that was popularised in Bundibugyo in the year 2000 by Olam Uganda Limited a cocoa and coffee exporter. Matte, 56, grows Cocoa on 5 acres of land in Bubukwanga Sub-county. He lost more than 4 acres of cocoa when Machete-wielding attackers raided his farm in the 2014 ethnic violence that rocked Bundibugyo district. Like many other cocoa farmers in the district, he started growing Cocoa in the early 2000s.

‘’Before that, I was growing beans, cassava, Maize and other food crops but they were not bringing in enough money, then the men from Olam started teaching us about Cocoa’’ He says.

“Cocoa fetches more money without necessarily working hard; you harvest every after two weeks’’ Matte adds, revealing for the first time, the windfall that comes with growing Cocoa during a price surge.

Swiss Contact, an organisation promoting Cocoa growth in Uganda, says that Cocoa used to be at 500 shillings per kilogramme in 1997, but now costs upwards of 8000 shillings a kilogramme.

 

Origins

Cocoa has its Origins in South America but It was a Swedish botanist, Carl Linnaeus, who classified cocoa and renamed it Theobroma Latin to mean food for the gods. Cocoa entered a phase of Mass consumption in 1876 with the creation of Chocolate Milk; the first Cocoa Plant in Uganda was planted at the government-owned Entebbe  Botanical Gardens in 1901 by a British Colonial Officer and when it thrived, it was taken to other parts of the country.

According to Joseph Kimera, a Project Officer at the Cocoa Development Project, “Commercial exports started in 1917 but the growing of cocoa was abandoned in 1924 due to a drastic drop in international prices.  Pests and diseases also attacked the crop. However, it was reintroduced in 1954 in order to diversify export earnings.”.

By 1965, 462 Hectares of cocoa had been planted in Mukono, Bundibugyo, and Hoima. In 1972, the Cocoa Development Project was formed in the Ministry of Agriculture with the aim of increasing the amount of cocoa grown in the country.  This led to an increase in the Cocoa acreage and as General Idi Amin’s government collapsed around him in 1979,  the figures from that year show the acreage on which the plant was grown, had increased by 2700 percent to 13,000 Hectares.

 

Swiss Contact estimates that there are currently over 13,000 farmers growing cocoa in Uganda on about  25,000 Hectares of land. These farmers, according to the Uganda Bureau of Statistics’ Statistical Abstract for the year 2016, earned the country more than $56m (Ushs180bn)  in foreign exchange.  This is money that can finance the annual budget of Uganda’s Ministry of Information and ICT, and the Ministry of Science and Innovation.

Cocoa is one of the top foreign exchange earners in the Agriculture sector. The crop ranks higher than cotton. According to the latest export statistics, Cotton exported in 2015/16 was valued at $20m and is still considered a strategically important crop.  The cotton sector is regulated by the Cotton Development Organization to oversee the production, marketing and export of coffee whereas Cocoa, which was introduced around the same time as cotton and earns more for the country, has largely been left in the hands of the private sector.  The Government’s intervention has largely been limited to supply of seedlings via the Cocoa Development Project and the Ugandan Army’s Operation wealth creation.

David Kyeyune, the project manager at Swiss contact, told this reporter on the sidelines of the  Cocoa Producers Association launch that for a while now, the cocoa value chain has been disorganised and marginalised despite fetching quite a significant chunk of foreign exchange.

“With difficulty, we have been trying to drive and push for the recognition of the cocoa value chain but nobody could listen because the sector was disjointed and lacked a voice from the players,” he said.

John Musisi who works with the Cocoa Development Project blames the sidelining of the Cocoa value chain on the lack of information.

“Not many Ugandans know that cocoa is grown in the country. The school’s curriculum mentions that cocoa is grown in Ghana and Nigeria and not in Uganda,” he says.

Musisi also goes to argue that land fragmentation by Ugandan farmers has made it impossible for Cocoa to grow on a large scale.

‘’Much of the arable land has been divided into small plots as families expand and smaller units are handed down, often leading to ownership disputes,’’ he says.

However, John Bosco Ochira a Cocoa exporter accuses the government of not being interested in the development of cocoa.

‘’The Uganda Government has been left out of the global Cocoa marketing procedures, international cocoa control bodies such as the International Cocoa Organisation (ICCO), do not recognize Uganda on the charts of the  world cocoa trading terminal in  the EU and USA countries, because Uganda as a country of cocoa origin has never bothered to become a member of ICCO by registration, increase Cocoa production, control prices and quality’’ He says.

He adds that Uganda at present production volumes, cannot even meet the supply demands of only one Buyer in Europe, giving the example of ICAM Uganda Limited that is supposed to supply 5000 tonnes of Cocoa beans to ICAM Italy Ltd but can only make 2000 tonnes.

Missed Opportunities

According to the International Cocoa Organisation (ICCO), the annual turnover of Cocoa is $83bn, with the leading producers being Côte d’Ivoire, Liberia and Ghana. These supply about 70 percent of the world’s cocoa. The rest comes from Indonesia, and South America countries like Brazil, the largest markets for the Cocoa is Europe and North America,

However, with the demand for chocolate products surging worldwide, particularly in developing countries, the demand for Cocoa has also increased. Last year, the world consumed more than 4.3 million tonnes of cocoa beans, a 32 percent increase in a decade.

Chocolate Sales in Asia are forecast to grow by 23 percent over the next five years, and by almost 31 percent in Latin America, according to London-based research firm Euromonitor International. That compares with growth of 8.3 percent in North America and 4.7 percent in Western Europe over the same period.

Those projections offer opportunities for new suppliers to corner the market, unfortunately, Uganda is not ready.

“Uganda’s cocoa production is still too low to attract credible investors into value addition. If we are to sell intermediate products like cocoa butter or cocoa powder we would earn three times more than what we earn when we export raw cocoa beans. According to the potential investors, our production levels are still low because their heavy machinery can’t run all year round on just 25,000 metric tonnes,” Musisi says.

Adding “A comparison in the export competitiveness of different commodities in Uganda indicates that At 4 percent contribution to exports, cocoa compares very well with electricity, Arabica coffee and yet these are the commodities considered to be of higher export value in Uganda, we need to change that.”

 

Philip Betts, the managing director at Esco Uganda Ltd, an exporter of organic cocoa and vanilla, says although cocoa production is growing, it is at a rate slower than the growth in global demand. “Cocoa production is increasing. but the demand is growing much faster, resulting in high prices,”.

The High farm gate prices would be good for Matte and other Cocoa farmers in the Rwenzori sub-region, but is it not sustainable because while Uganda is growing less cocoa, another farmer in another country is trying to meet the demand and prices will fall at some point as supply increases.

 

Hope rises anew

However, all is not lost, there is a concerted effort to increase Uganda’s cocoa exports, The Cocoa Development Project plans to double production levels from the current 25,000 metric tonnes to 50,000 by 2019.

“We plan to expand the cocoa growing hectares and also provide farmers with the required resources and technological knowledge in order to boost production levels from the current 25,000 metric tonnes to our target of 50,000 metric tonnes by 2018,” Musisi explains

This is being done through mass distribution of Cocoa seedlings to farmers and according to Musisi, more than 1 million seedlings have so far been distributed by the Cocoa Development Project, through the Army’s Operation Wealth Creation, but in 2 years when some of those 1 million seedlings start bearing fruit, most farmers will learn the harvest and processing process the hard way, they will also have to haggle with middlemen for prices far below the market value of their Cocoa beans. Because the government didn’t do its part and left everything to Farmers and the private sector.

Steven Sembuya

A 30-year-old Entrepreneur, says he would like to change all that. Stephen Sembuya wants to turn the $59m Uganda earned from cocoa into 1 billion dollars and to do that, he is setting up a chocolate making factory, is offering to help farmers become artisanal chocolate makers so they can supply his factory, and is promising an above market price for their beans.

Pink Food’s Uganda chocolate brand.

When I ask Jockus Matte the Cocoa farmer in Bubukwanga village, who is also a member of Bundibugyo Cocoa Farmers Association what he thinks of Sembuya’s offer, he sighs, and betrays the age-old suspicion Older men have of young men and their ambitions, ‘’ we were told about his plans at the co-operative, but I hope he can keep his promises’’.

 

 

 

The Main Cocoa Buyers in Uganda

The major companies involved in the cocoa trade are Esco Uganda Ltd, Olam Uganda Ltd, Bricam, ICAM Chocolate, UgaDen, Bakwanye Company Ltd.

This story was supported by a grant from the African Centre for Media Excellence.

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Collins Hinamundi