By Jacky Achan
Six years ago, farmers in the Southwest of Uganda struggled to produce milk from their farms for the dairy market. Production declined each time the dry season set in, Ian Walker, a farming shareholder says.
There would be no feeds and the cows were dying. Concerned for the farmers and the diary sector, the government came in and skilled farmers on pasture improvement.
It started with modernising cattle feeding through farm mechanization. The Ministry of Agriculture, Animal Industry and Fisheries (MAAIF) through the National Agriculture Advisory Services (NAADS) availed 40 tractors and implements to the farmers.
The machinery would be used to open land for improved pastures. Over 600 dairy farmers in the region accessed the 40 tractors through a cluster arrangement.
The goal was to increase milk production to meet the increasing demand of milk and milk products locally and internationally.
With the tractors to use in feed production, the farmers were all able to increase the volume of feeds for their cattle.
The target was raising farm productivity ten times from producing five litres per day per cow to 20 litres per day, by revolutionizing cattle feeding through farm mechanization.
Farmers were skilled by SNV, a Netherlands Development Organisation working in agriculture and financed with equipment’s for milking and supported with artificial insemination
As a result of farm mechanization, milk production in the Southwestern region Uganda has hugely increased.
Six years on, the farmers are still using the tractors, and have increased their acreages for planting maize and grass to make silage and hay to feed their cows and milk. Production and profitability has also increased.
Milk production in the country increased from 2.5 billion litres in 2018 to 2.8 billion litres in 2020. Whereas revenue from export of dairy products rose from $131.5m (sh480bn) in 2018 to $205m (sh750bn) in 2020 according to records from the Dairy Development Authority (DDA).
Central and Southwestern Uganda milk sheds together contribute 50% of the total national production
But the switch to agricultural mechanization as seen for dairy farmers in Southwest Uganda has not happened for most smallholder farmers in Uganda who are the majority and cultivating on less than one hectare of land.
The Uganda Bureau of Statistics (UBOS) data, indicates about 70% of Uganda’s working population is employed in agriculture, but most of the farming is done on fragmented pieces of land and on a small scale.
The farmers Produce a wide variety of agricultural products including coffee, tea, maize, rice, bananas, beans, cassava, sweet potatoes, millet, sorghum, and groundnuts on their small pieces of land, and agriculture contributes 23% of the Gross Domestic Product (GDP) which is the total value of the goods and services produced in the country annually.
In the financial year 2021/2022, agriculture accounted for about 24.1% of GDP, and 33% of export earnings, according to government figures.
But according to Financial Sector Deepening (FSD) Uganda, which is the country’s leading ‘think and do tank’ on financial inclusion and inclusive financial market development, small scale farming gives limited opportunities for increased productivity, innovation and value addition, as well as commercialization.
It says the sector continues to face challenges with most primary production happening at a small economic scale and for subsistence.
Furthermore, today due to lack of Agricultural mechanization, most young people do not want to work in farms, and eventually replace the older farmers. “They have lost interest in using hand hoes, and they are moving away from the farm. Getting labour is becoming a challenge,” Walker says.
“Unless the industry changes and mechanizes, there is going to be a labour shortage. Even the output and Income from farming will not increase. Agricultural mechanization is the solution, there are many opportunities in it,” he elucidated.
Agriculture mechanization is said to increase the level of cultivated land, promote industrialisation and strengthen the market for rural economic growth. Ultimately the goal is improving the livelihoods of farmers.
“It is about taking the hard work out of farming and making it easier, as well as more efficient, and expanding production. That one acre of land that a farmer can till manually for a month can be done in a day, Agriculture mechanization is an opportunity to increase production, and income,” walker states.
Both the United Nations Food and Agriculture Organization (FAO) and the United Nations Industrial Development Organization (UNIDO) evidence that agricultural mechanization reduces labour and increase productivity.
Uganda’s fertile agricultural land has the potential to feed 200 million people, according to FAO. But there is still a low number of smallholder farmers who are the majority responding to mechanization.
Much as agricultural mechanization is suitable for large scale farmers with bigger farms, even the small-scale farmers can mechanize, walker advised.
He says the misconception that exists is that agriculture mechanization is for large scale farmers but mechanization is possible even for small scale farmers.
“The machines are the same it’s only the size that differs,” Walker who is the Managing Director Engineering Solutions (ENGSOL) Uganda suppliers of tractors and farm implements says.
A mechanized farm needs machinery such as tractors, and implements including among other bush cutters, combine harvesters, cultivators (Plows), harrows, fertilizer spreaders, farm wagons, seeders, sprayers, and trans-planters.
The small-scale farmer will need smaller tractors and implements such as seeders and harvesters while large scale farmers will use big tractors and big implements, Walker explains.
Studies have proved that agriculture mechanisation has a major impact on demand and supply of farm labor, labor efficiency, productivity and profitability.
In a country like India the agriculture sector is still dominated by small scale farmers, 80% of farms are less than two acres in size and 95% are less than five acres in terms of owned holdings.
But agriculture mechanization is widespread. It has boosted agricultural production in India by reducing bottlenecks in agricultural operations, and enhancing land-use intensification.
Walker says the advantage for small farmers is that mechanization helps in coping with the shortage of labour and improving farm efficiency.
But in Uganda growth, success and profitability of farming is being hindered by the farmers’ lack of agricultural mechanization, which has impacted on output and profitability.
According to available data, Uganda has about 4,000 tractors which is not enough for the farming sector but majority of the 70% of Ugandans employed in the agriculture sector cannot afford agricultural machinery.
On the global scale, there is an average of 200 tractors per 100 square kilometres (km2) of arable land whereas in Sub-Sahara Africa the figure is as low as 27. Studies show that 50% of Africa’s yield gap is due to lack of equipment.
Its reported lack of mechanization has dire consequences for farmers making it difficult to plant on time, hence leaving land under-cultivated and resulting in loss of potential incomes. So how can farmers in Uganda afford agricultural mechanization and profit out of farming?
Loans
Farmers can utilize the Agricultural Credit Facility (ACF) set up by government in partnership with Commercial Banks, Uganda Development Bank Ltd (UDBL), Micro Deposit Taking Institutions (MDIs) and Credit Institutions in 2009, Prossy Namala Head of Disbursement Agriculture Credit Facility at Bank of Uganda says.
It provides medium- and long-term financing to people engaged in agriculture and agro-processing, focusing mainly on commercialization and value addition.
The loans under the ACF are disbursed to farmers and agro-processors through the commercial Banks, UDBL, MDIs and Credit Institutions at favourable terms than are usually available under conventional loans.
“We do support the entire value chain, all the way from the farm to production,” Namala says.
The maximum loan amount to a single borrower is up to sh.2.1billion. However, it can be increased up to sh.5billion on a case-by-case basis for eligible projects that add significant value to the agriculture sector and the economy as a whole.
They include acquisition of agricultural machinery, post-harvest handling equipment, storage facilities, agro-processing, mechanization and any other related agricultural and agro-processing machinery and equipment.
There is no designated minimum loan amount to the final beneficiary who is the farmer or agro-processor however Bank of Uganda can only reimburse a minimum of sh. 10million to the lending institutions.
Walker says the bank financing is available for farmers to buy tractors and other farm implements. With a deposit of approximately 20% a farmer can get a loan which is payable over three to four years.
The interest rate for the funds is a maximum of 12% that makes acquisition of machinery affordable.
Primary security for the credit facilities is the machinery and equipment financed, where applicable, and any other marketable securities provided by the borrower.
He says when it comes to affordability, in the last two years, agricultural machinery prices have reduced with ACF funding from government. “In the past farmer would want to buy machines but there was no funding. But now it is available,” Walker says.
He says the price of a tractor depends on the size the smaller the lower the price the bigger the higher the price when picking a tractor consider your acreage the window of operation and then price
Direct purchases
Walker explains tractor financing or agriculture financing is over a long period. “With agricultural machineries we pay for them in advance to the manufacturer, import and then sell.
“The ability to in-house finance is limited. There are a lot of people who don’t want to use banks, unfortunately we the suppliers don’t have the capacity to do the financing at the moment.”
“But if a farmer wants to deposit the money that could be arranged however we need banks, we use the banks to help farmers mechanise,” he says.
“Our core business is equipment supply, support and training, we use banks to do their core business which is financing customers. They know how to do the due diligence on the financing side better than us.”
“We do due diligence for banks on whether the farming mechanization project is viable or whether the land is useful and the equipment we work hand in hand it’s a three-way partnership the farmer, the machine supplier and then bank we all need to be successful,” Walker explains.
He says the banks need to make money and keep loaning more, the farmer needs to increase yields and profits and they need to succeed to continue giving machinery support.
However, when it comes to after sale maintenance of agriculture machinery it is difficult, but with right spare parts and technical support its manageable.
“Those in the business of supplying agricultural implements offer after sales services, and have ensured there are spare parts and distributors through a regional network of partners around the country,” he reveals.
“They are within agriculture they know the farms and are there to also increase technical and financial skills of the farmers.”
“There is sustainable after sale support to farmers so they don’t have to incur costs. We minimise costs on support, we have a technical team that goes around the country to support farmers. Training is done continuously with a network partners and it keeps tractors operating,” walker disclosed.
Get machines as a group
Famer groups or cooperatives can also come together and hire machinery and share its usage, Walker said. “The tractor operator will come and plough, plant or harvest for each farmer in turns as is scheduled.”
He says getting machinery in groups is key and will reduce costs. He says that currently, the Ministry of Trade, Industry and Cooperatives is again promoting cooperatives in agricultural enterprise. “With equipment for smaller holder farmers, contract services need to be increased.”
He says “Farm equipment’s will ease work on the farms and also increase productivity given the machines will do much more work than farm-hands.
Pay-as-you-go program
Across Africa including Uganda, farmers are using Hello Tractors, a pay-as-you-go program which is an online tractor sharing and management platform.
The platform is enabling inclusive and sustainable financing to entrepreneurs across Africa to increase critical access to farming mechanisation, Walker says.
Through the app private equipment owners, track and manage their fleet remotely, and also trace rental equipment and book new clients via the platform.
The smallholder farmers on the other hand hire these tractors and other equipment when they need it most, via booking agents and the mobile app.
The agricultural technology company Hello Tractor and others are relying on location intelligence, to link farmers to tractors, to increase production and save resources.
Since its launch in 2014, with presence in 15 countries including Uganda and 3,000 tractors on its marketplace, in addition to working with more than 500,000 farmers to date, the application has made strides in connecting smallholder farmers to existing tractor owners and operators.
The program has accelerated financial inclusion via technology and automation. “Farmers can also use the Hello Tractors platform; it has been proven to work.” Walker said
“We hope with that kind of digital technology and other applications, a farmer can see the prices to rent machinery, access the suppliers and use the machinery to improve their farming.”
Challenges
Smallholder farmers often don’t have access to information and skills to manage their agricultural tools, and they may even lack spare parts when their tools breakdown, in turn affecting their output, Walker disclosed,
“The farmer will incur high costs of repair, will not get crops planted or harvested on time, all of which when combined leads to losses.”
Walker states when it comes to agricultural mechanisation the machine operator is a key person. “If the person does not know what they are doing, the farmer will not get the efficiency and output desired.” But there are solutions.
“Suppliers internally have got a lot of expert resources. When we supply equipment we provide training. We go out and do service repairs and more trainings, even commercial trainings when professional training is needed,” Walker enthused.
“When we supply the tractor, we do all the servicing, it covers oils, labour, and transport all the farmer has to worry about is fuel and any repairs that may happen after, so the affordability is determined by return of investment.”
“We work closely with government organisations such as NAADS, the National Agricultural Research Organization (NARO), and Uganda prisons doing trainings with them. NAADS is a success, it has contributed majorly to the growth of agriculture in the country.”
“They supply the tractors to the farmers and give them support in trainings. Their effort is exemplary, if more entities worked like that agriculture production and profitability will grow,” he said.
Walker says the interest to mechanise is there “we had hundreds of inquires during the Harvest Money Expo.”
“The availability of tractors for small holder farmer’s and improvement of technology in agriculture is going to improve on mechanisation because there are machines including tractors that a small holder farmer can use to improve production.”
“When a farmer buys a tractor and maximises efficiency of the machine, farm production is increased. The farmer gets higher yields, more income, and is able to pay off the loan and get profits, that’s where the affordability comes in. Increase in production means increase in income.”
He however says, in agriculture mechanisation is just one piece of the jigsaw, knowledge and financing is all needed, and should work together for better output and profitability. /END
