Reducing poverty among smallholder farmers through enhanced trade regimes and value chains for coffee in Uganda

Alice Turinawe, Makerere University, Uganda; Rosemary Emegu Isoto, Makerere University, Uganda; Irene Nakamatte, Makerere University, Uganda; John Sumelius, University of Helsinki, Finland; Qiuzhen Chen, University of Helsinki, Finland | 20 June 2024

Coffee is Uganda’s traditional and largest export commodity contributing about 15 percent to the country’s total annual export earnings. In 2023, the country’s coffee exports amounted to as high as 743,517 60-kilo bags, worth US$ 121.64 million. Robusta and Arabica are the main coffee varieties in Uganda, with Robusta dominating production and export. From the 2022 statistics, Robusta made 92.7% of the total shipments, at a growth rate of 50.9% with an increase in value of 84.8%. Exports for the higher-value Arabica increased by 20.3% although its value fell 6.6% compared to 2023. Robusta coffee is grown across the low altitude areas of Central, Eastern, Western and Southeastern Uganda up to 1,200 meters above sea level, whereas arabica coffee is grown in the highland areas on the slopes of Mount Elgon in the East, Mt. Rwenzori and Mt. Muhabura in the Southwestern Region (1500-2,300 m above sea level). Over the years, coffee production in the EAC has been increasing with Uganda being the leading producer followed by Tanzania and Kenya. A substantial amount of coffee produced in Uganda is exported with only about three percent consumed domestically (citation needed here). Europe is the main destination for Ugandan coffee, accounting for over 60% of its total shipments leveraging on her historical ties to European markets from colonialism to date.

To examine the country’s ability to reduce smallholder farmers’ poverty through enhanced coffee trade regimes and its value chains, our case study employed a mixed methods approach. Qualitative data were collected from value chain actors through in-depth and focused group discussions in Wakiso district, central region. A total of 16 key informant interviews were conducted with government bodies in charge of research initiatives, extension, policy making and implementation as well as the private sector involved in the input supply, farming, aggregation, processing and trading of coffee. Two (2) focused group discussions of mixed gender were conducted with coffee smallholders at district level, from the sub counties of Namayumba and Kakiri. Data were used to examine domestic governance measures as well as international standard regimes and practices; assess adoption of fair trade and consideration of human rights perspective for attaining SDGs 1, 2, 3, 5 and 13; and examine the extent and role of actor transparency and digitalization on poverty reduction among smallholder farmers and along the coffee value chain in Uganda. Quantitative data from the Uganda National Panel Surveys (UNPS) 2010/11, 2015/16 and 2019/20 were used to assess profitability of coffee value chain and its effects on the incomes of smallholder farmers and on poverty reduction in Uganda.

Overall, the coffee sub sector holds enormous potential to substantially increase government earnings and alleviate poverty among value chain actors. In-depth discussions with stakeholders indicated that liberalization of the coffee sub sector has continuously attracted private sector efforts from advocating for a favourable policy environment to supporting trade expansion, value addition and processing. In line with the National Coffee Act (2021), the Uganda government, through its ministries including Ministry of Agriculture, Animal Industry and Fisheries (MAAIF), Ministry of Trade Industry and Cooperatives (MTIC) and agencies such as the Uganda Coffee Development Authority (UCDA) and National Coffee Resources Research Institute (NACORI) remains fundamental at supporting the increase in production, productivity and quality as well as negotiating and developing markets for Uganda’s coffee within the country and beyond. However, the growth of Uganda’s coffee export business continues to be obstructed by its insufficient and bureaucratic quality control processes but also the delays in adoption of emerging coffee export grades for the increasingly expanding specialty coffee markets. These inefficiencies tend to reduce smallholder farmers’ share of economic benefits from the coffee sub sector. At international level, the EU stringent non-tariff measures in respect to sanitary and phytosanitary (SPS) measures and Technical Barriers to Trade (TBT) have become Non-tariff Barriers (NTBs) for coffee farmers since Europe is still the main destination of Uganda’s Coffee. These measures continue to distort trade of value-added coffee with the EU while promoting export of green coffee through the Multinational Corporations (MNCs). Besides, misinterpretation of the National Coffee Act (2021) clauses to the public especially smallholder farmers and the absence of regulations to implement the Act derails the smoothness of country compliance to both domestic and international standards. This does not only deprive actors the opportunity to participate in competitive international coffee markets but also the advantage of earning fair values through trade to the upstream value chain actors. In Uganda, smallholders dominate coffee production with opportunity to participate and benefit from the downstream value chain activities. Women are more involved at the downstream value chain nodes while men dominate upstream nodes of the coffee value chain.  Individual farmers with as low as 100 kg of dried coffee cherries are able to hull their produce to Fair Average Quality (FAQ) coffee for better earnings from value addition. However, farmer participation at the successive levels of the coffee value chain remains very low, and this is partly explained by the limitations in transparency of information amidst slow digitization and weak institutional governance measures. Majority of the small holder farmers therefore, individually sell low coffee volumes within informal spot market arrangements that are typical of low farmer bargaining ability, use of unstandardized scales and the influence to sell standing crops. While downstream work environments are healthy and safe, driven by minimum operating standards required by law, occupational health and safety remains deprived mainly due to the lack of knowledge about potential hazards and impact of particular labour activities. Besides, Uganda’s coffee production techniques are augmented with adaptation and sustainability measures such as coffee shading, mulching, manure application and irrigation practices. The interplay of these aspects, together with long certification process of fair trade limit the associated benefits to the very few value chain actors who have linkages with MNCs.

Using secondary data sources, the results from the profitability analysis showed that small scale farmers obtain higher returns compared to medium scale producers who tend to face labour deficits to undertake good management practices. More so, coffee producers are better off with comparably higher returns compared to non-coffee producers.

The study therefore recommends that more government efforts should orient towards promoting domestic and international trade of value-added coffee along its agro-industrialization agenda. Such enabling environment can be achieved through increased efficiency of the national quality control and assurance process, adoption of emerging coffee export grades and harmonization of the tax levies imposed on Uganda’s coffee value-added exports to enable increased participation of domestic players into downstream activities of coffee value chain. The upgrade, together with increasing public awareness and sensitization about compliance benefits to the National Coffee Act (2021),  is likely to expedite adoption of fair trade, consideration of human rights and other relevant principles as value chain actors attach economic value to increased access of fair paying market trade. There is need for concerted efforts to rebuild trust among smallholder farmers for collective action, not only focused on production but on also value addition development and marketing activities. To benefit from the UCDA’s immense efforts of improving the coffee sub sector, involvement of the private sector for technological development and circulation to enhance information transparency and digitization remains a priority. This is fundamental at increasing transmission of information from input access, production to investment, pricing as well as access to productive resources especially finance and markets. As a result, leveraging the current developments in coffee research and government efforts to increase production, and access to higher value coffee markets is bound to fetch more commodity earnings for not only the government but also the different value chain actors, even at the upstream end.