Marketing and distribution of Agricultural Chemicals and Farm Tools in Uganda

Abstract

In this study an attempt is made to investigate the marketing systems for agricultural chemicals and farm tools in Uganda, for the years 1984 to 1986. The study focuses its attention mainly on two

aspects of the trade. First, it attempts to analyze the structure of the agro-chemicals and farm tools marketing systems. Second, the conduct of the market is investigated in an endeavour to reveal the patterns of the market behaviour. The study is based ,on primary data obtained by interviewing firms, Ln s t i t u t i o n s and farm supply shops involved in either procurement or in-country distribution of the inputs. The study covers parts of eastern, central and western regions of the

country. The survey was carried out during

months of February 1987 to April 1987.

the

Questionnaires were used to obtain data. Secondary data have been used whenever they have been available and found to be relevant. Analysis of data has been done by cross-tabulation. The results show, first. that the public sector

has assumed a greater and growing role in the

procurement

of agricultural chemicals than both

the

private and

cooperative sectors. The percentage

value of agro-chemicals handled by the public sector

w a 5 25. 48 and 71 for 1984, 1985 and 1986

xi i

respectively. The corresponding figures for the private sector were 57,15 and 14 while the figures for the cooperative sector were 18, 37 and 15 for the three years respectively. On the other hand, the private sector's role in the procurement of farm tools has been growing while that of the cooperative and public sectors has been declining. The results show the private sector to have grown by 169 percent over the three years while the public sector fel I by 27 percent and the cooperative sector by 28 percent. Second, the procurement systems are characterised by a high degree of concentration and inequality, indicating lack of competitiveness in the trade. Despite this, no firms or institutions have consistently monopolised the procurement of both categories of inputs, over the three years under study. Third, there is no uniform pricing system for the inputs and actual pricing is based on speCUlation emenating from the scarcity of these inputs. Fourth, the study reveals lack of credit facil ities, poor transport infrastructure, haphazard procedures of

foreign exchange al location, negative real

interest

rates, limited working capital and

poor

market

information network as the main constraints in the procurement and in-country distribution of agricul.tural chemicals and farm tools.

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Re-organisation of the marketing systems through establishment of a national agricultural inputs coordination unit may help to improve the efficiency of the marketing and distribution systems. The average margin (appendix 11) earned by licenced farm supply shops is 37 per cent, while that for the open market is 82 per cent. Thus establishment of the inputs cordination unit may reduce the prominence of middlemen and the growing role of the open market in this trade thereby reducing prices paid by farmers for these inputs and creating incentives for adoption of modern farming practices. It is suggested that the government adopt a foreign exchange allocation policy which reflects the sectoral-contributions to both gross domestic product (GDP) and foreign exchange earnings of the country. In addition, the government should consider adopting a system of direct and regular allocation of foreign exchange for

critical agro-industrial inputs producers.

This

may

alleviate

the

existing inputs scarcity as

we 11 as

reducing

the

high prices farmers have to pay for

these inputs.