Improved Food Security by Empowering Farmers

Agroways warehouse

Better storage facilities and packaging have lead to higher prices and more negotiating leverage 
for maize growers in Uganda. Farmers in Uganda used to be so desperate to sell their produce before it spoiled that they would seize the first buyer as if it were their last opportunity to make money. Back then, the middlemen would drive a hard bargain and dismiss farmers’ price quotations with a take-it-or-leave-it arrogance. Today, the balance of power is now shifting into the hands of the farmers.

In 2006, Agroways Uganda, a medium-sized company founded in 1995 in Jinja, about 80km east of Kampala, was buying grain, cleaning it, storing it and selling it as a packaged product. The firm dried the grain under the sun, a method that cost it about 6tn of spoilt grain every season. “Considering the small profit on every kilo of maize, this was too much spoilage,” remembers Herbert Kyeyamwa, an Agroways director and one of
its founders.

Farmers find their voice

The Ugandan government passed the Warehouse Receipt System Act of 2006, which allows private companies to store food on behalf of third parties. Soon after, the Uganda Commodity Exchange (UCE), a private-sector body formed under the Act, began licensing companies that wanted to engage in public grain warehousing.

Agroways applied in 2007, and Kyeyamwa says it spent much of the year organising the company to meet UCE requirements, such as creating proper storage structures, insuring the produce and hiring the staff to fumigate.

In 2008, Agroways became the first company in Uganda to obtain a warehouse receipt licence.

The company went looking for grain right away. “We undertook a deliberate effort to call on farmers to form groups and bring their ­produce for storage. We carried out training to sensitise them about the need for storage,” Kyeyamwa says.

Agroways moved from processing 500tn of maize per season to handling between 2,000 and 3,000tn. Today, the company handles 7,000tn per season. In April, it will commission new silos with capacity to process another 1,400tn. The silos will be automated and need only three workers per shift, compared with the current 11.

At the core of Agroways’ message to farmers is the ability to get a higher price when the produce is well-packaged. There is now a shift in power when it comes to bargaining. Many farmers are no longer timid; they make their voice heard when they feel cheated, says Kyeyamwa.

The number of farmers’ groups that work with the company has increased to 120 from about 80 three years ago, says Richard Ibengo, a manager at Agroways. Each group has about 60 members.

Unto the breach

The World Food Programme (WFP), the biggest purchaser of stored grain in Uganda, has confirmed the evolving influence of farmers. In 2010, according to Kyeyamwa, the WFP started the procedure to purchase more than 1,000tn of grain, but got nothing because the farmers sold their maize to other buyers after delays in the WFP payment process. That sounds like breach of contract, but to Kyeyamwa, the WFP left them no choice.

“When you have farmers who are receiving a better price, and they can see their produce is in the store, what do you expect us to do when they all come here demanding money?” he asks. Kyeyamwa says he does not think Agroways has played a huge role in improving Uganda’s food security. Nevertheless, he says the farmers sell produce worth US$2bn ($855,000) a month, and that this money filters through the economy.

With their produce at the warehouse, farmers can now access loans using their receipts as security. Housing Finance Bank was the first to lend to farmers who presented their warehouse receipts as collateral. Stanbic, Centenary Bank and Equity Bank have also joined in.