THE IMPACT OF GOVERNMENTFUNDING ON COFFEE PRODUCTION IN UGANDA
ABSTRACT
Coffee is the biggest foreign exchange earner for Uganda, a position it has attained for a number of years. A study has been conducted in the sub-counties of Nabweru and Nansana in Wakiso district to assess the impact of government funding on coffee production with specific objectives, to establish the relationship between fertilizer application, provision of improved coffee seedlings, availability of extension services, access to infrastructure, and access to market information with coffee production.
Primary data was collected among coffee farmers. Data was cleaned and then analyzed with the help of Statistical Package for Social Scientists (SPSS) at univariate, bivariate and multivariate level.
Study findings confirmed that there was fertilizer application, modern coffee seedlings, provision of extension services and availability of good infrastructure, methods of coffee spacing, pruning, coffee picking, and drying and nursery bed preparation. Coffee farmers had access to modern seedlings and farmers had benefited through increased output seedlings that are resistant to wilt and quick maturity.
In conclusion the researcher recommends involvement of all further trainings on improved coffee production as well as government supply of materials and improved coffee seeds to ensure that coffee production are boosted in Uganda.
Key: Words: Foreign exchange, Infrastructure, fertilizers.
SECTION ONE:INTRODUCTION
This study is to assess the impact of government funding on coffee production in Uganda. This chapter will present the background to the study, the statement of the problem, the general objectives, the objectives of the study, the research questions, the hypotheses, the scope of the study and the study significance.
Historically, it is well documented that agricultural sector assumes a dominant role in Uganda’s economy in terms of numbers employed. More importantly, agriculture has the potential to act as a base for the improvement of the livelihoods of both rural and urban populations. In rural areas such improvement would be achieved by enhancing productivity at the primary, i.e. production level. In rural towns and urban areas agricultural products constitute the base for the creation and expansion of value adding processing industries catering to domestic and regional markets, and for packaging/marketing operations, both for domestic and export markets (Oxford Policy Management,2002).
Although most of this agriculture is engaged in at the micro subsistence level, its ability to transform this sector is greatly constrained by a myriad of factors, among them limited access to formal financing (Robinson, 2006). The bigger and medium term financial institutions view the smallholder agriculture operators as too risky and too costly to service while the smaller financial institutions the majority of them being rural based and thus in a better position to cost effectively serve the agribusinesses with their proximity lack the financial and technical capacities to do so. There have however been modest attempts made by a number of rural based financial institutions working at the micro level to finance agriculture and agribusiness, though their attempts still remain “pockets of progress”.
New global forces - the economic downturn, a food crisis and climate change are driving renewed interest in ways to improve the productivity of smallholder farmers in developing and emerging economies. Small holder farms can be efficient producers on a per hectare basis, however, limited capital for investment, exposure to risks such as weather, unreliable markets and market price fluctuations as well as imperfect knowledge of sustainable approaches and technologies mean most smallholder farmers are not optimizing potential returns.
At the production level, financial services for agriculture can enable farmers to introduce external or purchased inputs such as: irrigation or other productivity-enhancing technologies; finance input and marketing costs; co-finance extension and information services; bridge the pre-harvest income gap; prevent forced sales of produce immediately following harvest at low prices; smooth seasonal income flows through deposit facilities, facilitate access to remittances, and bank overdraft lines; and eventually to insure against price or yield fluctuations. If agribusinesses cannot access financial services, their capacity to finance and supply farmers, and to buy and process farm produce, is restricted (PMA, 2008).
Coffee is one of the world's largest traded commodities with over 90% of coffee production taking place in developing countries, while consumption takes place mainly in the developed economies. Worldwide, it is estimated that over 25 million smallholder producers rely on coffee for a living.
The world coffee exporting and importing countries are organized under an intergovernmental body, the International Coffee Organization (ICO). Ethiopia remains the Africa’s leading coffee producer with production totaling followed Uganda.
The international coffee market net growth trend continues to reflect supply tightness that will prevail over the next several years. The global consumption as of 2010stands at 134 million bags compared to the world supply of 131.3 million bags. The buoyant global coffee consumption growth of about 2.4% per year is mainly attributed to expanded, emerging markets and the domestic consumption campaigns and programmes by the coffee producing countries. There is also marked growth in demand for specialty coffee in niche markets especially in Europe and United States of America. Therefore, the coffee producing countries will continue to strategically position themselves in order to benefit from the growth in the market.
Global stocks are also at their lowest in both exporting and importing countries. Opening stocks in producing countries for coffee year 2010/11 were estimated at 18 million bags and 18 million in importing countries as of June 2011. Dwindling stock levels and a buoyant consumption growth have supported global prices in the short term.
Uganda is a member of the International Coffee Organization (ICO) which is the main intergovernmental organization for coffee, bringing together exporting and importing Governments to tackle the challenges facing the world coffee sector through international cooperation.
Uganda is fully committed to the ICO’s mission to strengthen the global coffee sector and promote its sustainable expansion in a market-based environment for the betterment of all participants in the coffee sector.
Uganda is also a member of Inter-African Coffee Organization (IACO) which is an intergovernmental organization composed of 25 African coffee producing countries.Uganda associates herself with IACO’s objective of taking up the challenges associated with coffee of African origin through regional and international cooperation.
Recalling the fact that the government of Uganda introduced the Entandikwa credit scheme in 1995 and later modified it to a new Prosperity for All programme known as “bonna baggagawale”, these schemes have channelled huge amounts of money to agriculture especially among coffee farmers.
While there has been an increase in funding to the coffee production in Uganda over the last six years, growth in production is still low in comparison to the neighbouring countries.In 2008/09, the sector received UShs 223 billion, amounting to 3.8 per cent of government spendingwas used to boost coffee production(MoFPED, 2010). According to MAAIF and UBOS (2011), coffee exports in FY2010/11 were 2.6 million 60-kilogram bags valuedat US$338 million representing a 3.7% decline in volume andvalue compared to a target of 2.7 million bags.Very few studies have been conducted to ascertain the impact of government funding on agriculture.To that end therefore,it is imperative to establish theeffect of government funding on coffee production in Uganda.
The main objective of this study was to establishthe effect of government funding on coffee production in Uganda. But the entire research aimed fulfilling specificobjectiveslike; to find out the relationship between fertilizer application and growth in coffee production, to find out the relationship between improved coffee seedling provision and growth in coffee production, To find out the relationship between agriculture extension services and growth in coffee production, To determine whether availability and access to infrastructure has an effect on coffee production, To establish whether access to market information has an effect on coffee production
Conceptual Framework
Figure 1.0: A conceptual framework showing the impact of Government funding on coffee production in Uganda.
This above framework explains the impact of government financing on the coffee production in Uganda with the production of coffee being dependant on government funding.
The findings of the study will provide useful information to the concerned policy makers such as government, donors, farmers associations and all the stakeholders in the agricultural sector. The findings of the study will provide an insight to how government finance can benefit the key production sectors in the country like coffee production.
The study will act as a reference for future researchers and scholars who may want to use it as a secondary source thereby adding on the existing literature.
Uganda as a country is one of the leading coffee exporters in Africa. Considering that Uganda as agriculture sector has been experiencing increase in the funding, we would expect a good allocation of the funds to coffee production hence need to find out whether there is an impact of government funding on the production of coffee.
The study was conducted among coffee farmers, NAADS extension workers, nursery bed operators and coffee processors in Wakiso district within the selected sub-counties of Nansana and Nabweru. Nansana is located on the main high way between Kampala and Hoima approximately 12 kilometres by road, North West of Kampala city. In 2011, the Uganda Bureau of Statistics estimated the population of Nansana at 89,900 people. On the other hand, Nabweru sub-county is also found in Wakiso district and it borders with Kawempe division of Kampala city.
The study covered a period of 10 years starting with 1997 when the Entandikwa Credit scheme was introduced by the Government of Uganda to support farmers up to 2007 after the inception of NAADS.
The impact of Government funding as measured by GDP contribution of Coffee was the dependent variable while individual farmer characteristics, agriculture extension services, fertilizer application, improved coffee seedlings provision, availability and accessibility to infrastructure as well as access to market information were the independent variables.The study also covered coffee production reports from major statistical centres such as UBOS, UCDA and MoFPED.
Coffee productionrefersto quantity and quality of coffee produced as a result of various inputs such as fertilizer and mechanisation.
Coffee seedlings provision looks at the seedlings which have been provided or recommended to farmers for usage.
Agriculture extension services refer to services rendered to farmers through workshops, trainings to provide them with necessary information regarding production and modernisation of agriculture.
SECTION TWO:RESEARCH METHODOLOGY
This chapter discusses the research designs, sampling designs, data sources, data collection instruments, sample size, data presentation and analysis methods that were used in the study.
Research design adopted both qualitative and quantitative approaches whencollecting andprocessing data to establish the impact of Government funding on coffee production in Uganda.The qualitative approach was adopted because it was the best way to bring out respondents’ opinions and perceptions on the effects of government funding on coffee production in Uganda. Further, the approach was preferred because it was suitable for answering “what, why and how” social as well as institutional phenomena occur.
The quantitative approach was adopted to measure the magnitude of the various constructs and variables that were conceptualized in the study. Most importantly, quantitative studies wouldlead to the establishment of the effect of Government funding on coffee production in Uganda through testing the hypotheses. Also, quantitative studies wouldlead to the understanding of the strength of each construct in their contribution to the main independent variable and its relationship with the dependent variable. A combination of both qualitative and quantitative approaches thusserved as a strong basis for drawing compelling conclusions and recommendations during the study (Sekaran, 2000).
The sample size of study consisted of 60 respondents comprising of 50 coffee farmers and 10 stakeholders who include NAADSextension workers (5), nursery bed operators (3) as well as coffee processors (2).
The Sampling design and Sample size of the study adopted purposive sampling technique where 60respondents were selected for the study. Purposive sampling is a technique used where the researcher chooses the sample based on who they thinkwould beappropriate for the study. The technique was very useful in reaching a targeted sample quickly and where sampling for proportionality was not the main concern (Babbie, 2001).Stratified sampling was also used in order to have respondents of similar characteristics grouped together during the interviews.
The study had a Sample size of 60 respondents was selectedin Nabweru and Nansana sub-counties of Wakiso district and their number was determined using the statistical inference formula;
………………………………………...... (1)
Where,
Is the total sample size that was selected
Z is the area under the normal curve corresponding to the desired confidence level
is the level of significance
is the expected frequency value or true proportion of factor in the population.
is the maximum difference betweenthe samplemean andthe population mean.
=(1-) is the probability of failure.
The variables were measured by operationally defining concepts for instance the questionnaire was designed to ask responses about the effect of Government funding on coffee production in Uganda. These werechannelled into observable and measurable elements to enable development of an index of the concept.
The researcher used both primary and secondary sources.Primary data was obtained from the respondents using questionnaires and key informant interviewsto examine the effect of Government funding on coffee production in Uganda.
Secondary data was obtained from already existing information that included NAADS reports,Uganda Coffee Development annual reports, Ministry of Agriculture reports, and Uganda Bureau of Statistics on agricultural production.
Data collection methods are an integral part of research design which involves selection of both qualitative and quantitative data in form of primary and secondary data (Amin, 2005). Primary data was collected by the researcher from Coffee farmers in Nabweru sub county while secondary data was obtained from already existing information. Generally, the researcher collected primary data using quantitative methodsand secondary data using qualitative methods (Forshaw, 2000).
The questionnaire was used on the basis that the variables under study could not be observed for instance the views, opinions, perceptions and feelings of the respondents.It was also usedbecause the information was collected from a large sample in a short period of time yet the respondents could easily read and write (Sekaran, 2003).
In this research, questionnaires with both structured questions and closed ended questions were administered to a group of 50 farmers. The researcher interviewed the respondents in Luganda which is the local language spoken in the sub-counties of Nabweru and Nansana of Wakiso district.
With this method, the researcher interviewed NAADS extension workers, Nursery bed operators and coffee processors following questions on an interview guide. The researcher also summarized the responses in a note book reflecting what was being replied by the respondents.
Secondary datawascollected by reviewing existing published and unpublished information relating to the effect of Government funding on coffee production in Uganda. Relevant documents such as the internal project quarterly reports, midterm evaluation reports, project documents, newspapers, journals and magazines were also reviewed and vital information recorded. This information was used to supplement other methods of data collection in understanding the core areas and variables of the study.
The field questionnaires were first cleaned to remove errors, and then entered into Statistical Package for Social Scientists (SPSS)for analysis. Most errors were detected using descriptive statistics, scatter plots and histograms. These errors were checked by revisiting the questionnaires and coding missing data as “999”. The blank and not applicable data was coded “0” and there was also rectifying of the typing errors.
SPSS programme version 17 was used for univariate, bivariate and multivariate analysis.This version is an improved one unlike the lower versions. It is user-friendly and can accommodate a big number of variables as well as simultaneous tabulation of variables.
This type of analysisinvolved the description of a single variable and its attributes. The basic way univariate data waspresented included creation of frequency distribution of the individual cases. This was done in a table format, bar graphs and pie charts.
Keeping the dependent variable fixed, the researcher analyzed the impact of government funding to each of the independent variables. Bar graphswere alsoused toexplain the bivariate data as well as testing of simple hypotheses of association between the dependent and independent variables. Bivariate analysis was also usedin predicting a value of the dependent variable using the independent variables. The study results were presented in form of percentage distribution tables, pie charts, bar graphs, correlation coefficient as well as the logistic regression model.
At multivariate analysis, a logistic regression model was fitted to determine the impact of government funding on coffee production in Uganda. A dependent variable with two outcomes; (1-Increase in coffee production yields, 0-No increase in coffee production yields) was considered during the study. Independent variables included;NAADS extension services, fertilizer application, improved coffee seedling provision, availability and accessibility to infrastructure as well as access to market information.