A policy analysis by Jane Nalunga, Executive Director of the Southern and Eastern Africa Trade Information and Negotiations Institute (SEATINI) Uganda, and Jonathan Lubega, a Program Officer at SEATINI Uganda, highlights the need for Uganda to reassess its agricultural subsidies to address inefficiencies and promote sustainability.
Agricultural subsidies are a critical tool for enhancing food security and supporting farmers. However, they remain controversial, with critics arguing that they often exacerbate trade imbalances and disproportionately benefit large corporations over small-scale farmers.
According to the Organisation for Economic Co-operation and Development (OECD), over USD 600 billion is spent annually on agricultural production subsidies globally, much of which funds environmentally harmful activities.
Uganda’s Agricultural Landscape
Agriculture employs 66% of Uganda’s population and contributes 24.5% of its GDP, making it vital for food security and economic growth. However, the sector faces numerous challenges, including reliance on rain-fed farming, rudimentary tools, and limited access to inputs.
Despite its importance, Uganda allocates less than the 10% of public expenditure recommended under the Malabo Declaration.
The analysis categorizes Uganda’s subsidies into input support and general services for the agricultural sector. Programs such as the National Agricultural Advisory Services (NAADS) and Operation Wealth Creation have improved access to inputs, distributing items like Hass avocado seedlings and providing financial support to farmers through World Bank-backed initiatives like the Agriculture Cluster Development Project.
However, these programs are often hampered by poor implementation, low-quality inputs, and late deliveries.
Mixed Success of Subsidy Programs
The Agriculture Insurance Subsidy program has seen growing adoption, with nearly 688,000 farmers insured as of March 2023, up from just 45,704 six years earlier. It subsidizes 50% of insurance premiums for smallholder farmers to mitigate risks from natural disasters.
However, the majority of beneficiaries are medium- and large-scale farmers, leaving smallholders underserved.
Tax incentives, such as a 10-year income tax waiver for agricultural processors and exemptions on machinery and tools, have supported value addition in the sector. Yet, these measures largely benefit larger investors due to high eligibility thresholds.
Despite increased coffee production and exports—Uganda exported 837,915 60-kg bags of coffee worth USD 221.63 million in August 2024—subsidies have failed to address key issues like limited value addition, inadequate extension services, and insufficient marketing support for crops such as Hass avocados.
Environmental and Sustainability Concerns
The analysis highlights the environmental impact of subsidies promoting agrochemicals, monoculture, and hybrid seeds.
These practices contribute to greenhouse gas emissions and undermine traditional farming systems. Hybrid seeds, for example, require farmers to purchase new seeds each season, adding financial strain to smallholders.
Need for a bottom-up approach
Nalunga and Lubega emphasize the need for a bottom-up approach to designing agricultural subsidies, involving small-scale farmers, government agencies, the private sector, and civil society. They advocate for subsidies that support the entire value chain, from inputs to markets, and call for better funding, timely delivery, and monitoring to ensure effectiveness.
“Uganda must redesign its agricultural subsidies to ensure they benefit small-scale farmers, enhance sustainability, and address the sector’s pressing challenges,” they said.
By addressing these issues, Uganda can unlock the potential of its agricultural sector, improve livelihoods, and achieve long-term sustainability.
