Uganda Agriculture Sector Public Expenditure Review

Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
Republic of Uganda
Review
September 2019
Agriculture
Expenditure
Sector Public
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This Report is a product of the staff of the International Bank for Exchange rate effective as of May 11, 2018
Reconstruction and Development/ The World Bank. The findings,
interpretations, and conclusions expressed in this Interim Report Currency unit = Ugandan shilling (USh)
do not necessarily reflect the views of the Executive Directors of
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The World Bank or the governments they represent. The World
Bank does not guarantee the accuracy of the data included in
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Republic of Uganda: Agriculture Sector Public Expenditure Review
ACKNOWLEDGMENTS
This report was produced by a team from the World Bank Group, led by Ladisy Komba Chengula (Lead
Agriculture Economist) and comprising Holger A. Kray (Lead Agriculture Economist), Kevin John Crockford
(Sr. Rural Development Specialist), Joseph Oryokot (Sr. Agriculture Specialist), Irina Schuman (Sr. Agriculture
Economist), Friederike Mikulcak (Jr. Professional Officer), Barbara Kasura Magezi Ndamira (Senior Public
Sector Specialis), and Christopher Paul Jackson (Senior Public Sector Specialist). Agnes Yvonne Masaka (Team
Assistant), with Janet Christine Atiang and Srilatha Shankar (Program Assistants), provided administrative
and logistical support. A team of consultants led by Christian Derlagen and including Alban Mas Aparisi,
Leopold Ghins, Paul Cathala, and Lucile Hummel undertook the expenditure analysis from the BOOST
database. Other consultants included James Joughin (institutional analysis) and Charles Owuor (private
sector analysis). Diego Arias Carballo (Lead Agriculture Economist), Michael Morris (Lead Agriculture
Economist), Philip Schuler (Lead Economist), Elliot Mghenyi (Sr. Agriculture Economist), and Tihomir Stucka
(Sr. Economist) contributed useful insights as peer reviewers, while Antony Thompson (Country Manager)
provided additional guidance at various stages of the report’s preparation. Dina Umali-Deininger (Practice
Manager) provided oversight for the work.
The team would like to thank the leadership of the Ministry of Finance, Planning and Economic Development
(MoFPED) and the Ministry of Agriculture, Animal Industries and Fisheries (MAAIF) for excellent collaboration,
including organization of the various missions and meetings, and provision of the information and inputs
requested. Special thanks go to Mr. Pius Wakabi Kasajja (Permanent Secretary, MAAIF) for support and
oversight. Finally, the team would like to thank all the contacts in the various public ministries, departments,
agencies, non-governmental agencies, and donor organizations who have contributed to and otherwise
supported the development of this review.
I
ACRONYMS & ABBREVIATIONS
AgGDP Agricultural Gross Domestic Product

AgSER Agriculture Sector Expenditure Review
ARUD Agriculture, Rural, and Urban Development Program
ASSP Agriculture Sector Strategic Plan
AU African Union
AUGN African Union Guidance Note
BFP Budget Framework Paper
CAADP Comprehensive Africa Agriculture Development Programme
CBA Commodity-based approach
CDO Cotton Development Organization
COCTU Coordinating Office for the Control of Trypanosomiasis in Uganda
COFOG Classification of the Functions of Government
DDA Dairy Development Authority
DFID Department for International Development (United Kingdom)
DSIP [Agriculture Sector] Development Strategy and Investment Plan
EAC East African Community
GDP Gross domestic product
GoU Government of Uganda
ICT Information and communication technology
IFAD International Fund for Agricultural Development
IFMS Integrated Financial Management System
IMF International Monetary Fund
KSW Kakira Sugar Works
MAFAP Monitoring and Analyzing Food and Agricultural Policies
MAAIF Ministry of Agriculture, Animal Industry, and Fisheries
MoFPED Ministry of Finance, Planning, and Economic Development
MoLG Ministry of Local Government
MoLHUD Ministry of Lands, Housing, and Urban Development
II
MoPS Ministry of Public Services

MTEF Medium-Term Expenditure Frameworks
MWE Ministry of Water and Environment
NAADS National Agricultural Advisory Services
NAEP National Agricultural Extension Policy
NAGRC&DB National Animal Genetic Resource Centre and Data Bank
NAP National Agriculture Policy
NARO National Agricultural Research Organization
NBFP National Budget Framework Paper
NDP National Development Plan
NPA National Planning Authority
OPUL Oil Palm Uganda Limited
OWC Operation Wealth Creation
PE Public expenditure
PEAS Public expenditure in support of the agriculture sector
PMA Plan for Modernization of Agriculture
PPP Public-private partnership
R&D Research and development
SAGA Semi-autonomous government agency
SSA Sub-Saharan Africa
SWG Sector Working Group
TFP Total factor productivity
U-PACT Uganda Platform for Agricultural Coordination and Transformation
UCDA Uganda Coffee Development Authority
USAID United States Agency for International Development
VAT Value added tax
WHT Withholding tax
III
GLOSSARY OF KEY TERMS
Analysis that permits one to understand priorities and balance of

Allocative efficiency of
public expenditures. It consists of the analysis of economic and
public expenditures
functional compositions
Budget allocation approved by the Ugandan Parliament at the
Budget estimates
beginning of each fiscal year
Investments where the benefit continues over a long period rather
than being exhausted in a short period. Such expenditure is of
Capital expenditures
a non-recurring nature and results in acquisition of permanent
assets
Economic composition of Assessment of balance between wages, non-wage recurrent, and
public expenditures capital expenditures
Assessment of allocation of public expenditures by main functions and
Functional composition of
alignment of this composition with policies, strategies, growth
public expenditures
diagnostics, and other priorities
Non-wage recurrent Recurrent expenditures less expenditure on wages, salaries, and
expenditures supplements
Expenditure that does not result in the creation or acquisition of fixed
assets. It consists mainly of expenditure on wages, salaries and
Recurrent expenditures supplements, purchase of goods and services, operations and
maintenance of fixed assets, interest payments, subsidies, and
transfers
Revised budget allocation approved by the Ugandan Parliament during
Revised estimates
mid-term review
Wage expenditures Recurrent expenditure on wages, salaries, and supplements
IV
TABLE OF
CONTENTS
ACKNOWLEDGMENTS I
ACRONYMS AND ABBREVIATIONS II
GLOSSARY OF KEY TERMS IV
EXECUTIVE SUMMARY 1
1.0 UGANDAN AGRICULTURE AND THE OBJECTIVES OF THE PUBLIC EXPENDITURE REVIEW 11
1.1 Objectives of the Agriculture Public Expenditure Review 11
1.2 The Macroeconomic and Fiscal Environment 15
1.3 The Growth Potential for the Agriculture Sector in Uganda 15
2.0 SYNTHESIS OF PUBLIC SPENDING ON AGRICULTURE IN AFRICA

2.1 Rationale for Public Spending on Agriculture 20
2.2 Level and Trends of Public Spending on Agriculture in Africa 21
2.3 Improving the Quality of Public Spending to Maximize Returns 26
2.4 Improving Budget Management Processes 32
2.5 Conclusions 33
3.0 UGANDAN AGRICULTURAL PUBLIC EXPENDITURES: LEVEL, COMPOSITION AND EFFICIENCY 35

3.1 Data Sources and Methodology 36
3.2 Level of Public Expenditure in Agriculture 38
3.3 Efficiency of Public Expenditure in Agriculture 40
3.4 Conclusions 60
4.0 UGANDAN INSTITUTIONAL ENVIRONMENT AND BARRIERS TO IMPROVING AGRICULTURE 61

PUBLIC EXPENDITURE
4.1 The Policy and Institutional Framework for Agriculture 61
4.2 Institutional Barriers to Improving Public Expenditure in Agriculture 67
4.3 Conclusions 74
5.0 THE ROLE OF THE PRIVATE SECTOR IN PROVIDING AGRICULTURAL SERVICES 75

5.1 The Private Sector and Agricultural Services in Uganda: Background and Context 75
5.2 The Private Sector in Uganda 77
5.3 Private Sector Approaches to Providing Agricultural Services 78
5.4 Main Constraints Facing Agribusiness 79
5.5 Incentives for Attracting Private Investment in Agriculture 81
5.6 Models Used by the Private Sector to Provide Agricultural Services 82
5.7 Conclusions 88
6.0 CONCLUSIONS AND RECOMMENDATIONS 90

6.1 Public Expenditure on Agriculture: Level, Composition, and Efficiency 90
6.2 Institutional Environment and Barriers to Improving Public Expenditures on Agriculture in Uganda 92
6.3 Role of Private Sector in Providing Agricultural Services 94
REFERENCES 98
ANNEX 1: SUMMARY OF POLICY RECOMMENDATIONS 105
ANNEX 2: DATA SOURCES AND METHODOLOGY 107
ANNEX 3: LEVEL OF PUBLIC EXPENDITURE IN AGRICULTURE 115
TABLES
Table 2.1. Trends in public spending on agriculture in Africa 24
Table 2.2. Returns to agricultural research in sub-Saharan Africa 25
Table 2.3. Impacts of different types of public spending on agriculture in Africa 26
Table 2.4. Drivers of agricultural productivity in sub-Saharan Africa 29
Table 2.5. Factors affecting agricultural productivity 31
Table 3.1. Main PEAS indicators (nominal USh billions) 39
Table 3.2. Main PEAS indicators (constant 2013 USh) 39
Table 3.3. Percentage share of final PEAS in national budgets across countries of the East African 40
Community and developing regions
Table 3.4. Distribution of PEAS across various national ministries and agencies (% of total final 42
expenditure)
Table 3.5. Share of external financing in budgeted PEAS across votes 50
Table 3.6. Shares of recurrent and development spending within budgeted and final PEAS 51
Table 3.7. Budgeted and final PE and PEAS, recurrent (wage and non-wage) and development, 51
2013/14–2017/18 average (%)
Table 3.8. Target shares for commodity groups in the ASSP budget 52
Table 3.9. ASSP budget targets mapped to major agricultural subfunctions 55
Table 3.10. Final PEAS, disaggregated by agricultural subfunction (USh billion) 56
Table 5.1. Annual output and market share of sugar manufacturers in Uganda 85
ANNEX TABLES
Table A1.1. Policy coherence assessment for selected PEAS indicators 105
Table A2.1. Data gaps and implications for PEAS indicators 108
Table A2.2. Subfunction perimeter for this AgPER, based on selected categories from the MAFAP 109
methodology of FAO (covers COFOG categories 70421, 70422, 70423, 7084)
Table A2.3. AUGN enhanced COFOG functions included in the scope of this AgPER 111
Table A2.4. Administrative disaggregation of PEAS, final expenditure (USh billions) 114
Table A3.1. Reference budget allocations across agriculture sector agencies from the ASSP 115
2015/16–2019/20
Table A3.2. Disaggregation of final PEAS across commodities 116
FIGURES
Figure 3.1. Estimated budget allocations for agriculture sector agencies in the ASSP 2015/16– 41
2019/20 (USh billions) (in the table, left) and relative proportions (in the figure, right)
Figure 3.2. Gaps between observed (final) PEAS allocations and ASSP targets for selected 43
agriculture sector agencies (deviations from relative shares)
Figure 3.3. Disaggregation of decentralized PEAS (final) by region (left); per capita PEAS (final) by 45
region (USh) (right)
Figure 3.4. Distribution of budgeted external financing in support of the agriculture sector across 48
votes
Figure 3.5. Distribution of budgeted, national (non-donor) PEAS across votes 49
Figure 3.6. PEAS final expenditure, disaggregated by identified subsector 53
Figure 3.7. Gaps between observed (final) PEAS allocations and ASSP targets for commodity target 54
groups (deviations from relative shares)
Figure 3.8. Gaps between observed (final) PEAS allocations and ASSP targets for agricultural 59
subfunctions (deviations from relative shares)
Figure 3.9. Relative size of agricultural subfunctions that could be assumed by the private sector 59
within budgeted PEAS
Figure 4.1. Structure of the Ministry of Agriculture, Animal Industry and Fisheries 63
ANNEX FIGURES
Figure A2.1. Perimeters of functions and subfunctions for this AgPER 110
Figure A3.1. Administrative composition of PEAS 116
BOXES
Box 3.1. Geographic disaggregation of PEAS 46
Box 3.2. Operation Wealth Creation, the National Agricultural Advisory Services, and the Ministry 58
of Agriculture, Animal Industry, and Fisheries
Box 4.1. The budget preparation process 65
Box 4.2: Reform initiatives of the Ministry of Agriculture, Animal Industry, and Fisheries since 2000 71
1
KEY MESSAGES
Geographic distribution of Public Expenditure in support of Agricultural Services
(PEAS) shows high inefficiency in addressing inequality. The Northern and Eastern
Regions require targeted spending to address inequality, end extreme poverty, and
boost shared prosperity. The geographic disaggregation of PEAS shows that spending
favors the Northern Region. This region is emerging from conflict, has much lower levels
of human capital, is the least populous, and has poor infrastructure. Per capita PEAS is
also persistently higher in the Northern Region but is relatively the same in the Western,
Central, and Eastern Regions. In 2016, about 47 percent of the poor lived in the Northern
Region and another 37 percent in the Eastern Region.
National decentralization objectives are not fully matched by the allocation of

resources. Local governments receive a much lower share of final PEAS than agriculture-
related ministries. The allocations to local governments declined from 37 percent in
2013/14 to about 7 percent in 2017/18, falling slightly short of the Agriculture Sector
Strategic Plan (ASSP) target of 10 percent. Given that local governments provide frontline
agricultural services such as extension and advisory services, market information
services, and rural infrastructure, their budget allocations need to be increased. Further,
the balance and efficiency of central and local government spending must improve.
Institutional setup and budget architecture constrain efficient spending in the

agriculture sector. A comprehensive functional review of MAAIF and its SAGAs as well
as other agriculture-related ministries is required to clarify their mandates. Budget
allocations and spending should strictly follow the assigned functional mandates and
strategic objectives. The agriculture Sector Working Group (SWG) should be more
proactive in providing feedback on budget planning, execution, and monitoring and
evaluation of impacts. MAAIF must further improve technical efficiency by aligning donor
funding with ASSP targets, so that external resources finance the national priorities
necessary for achieving the ASSP objectives. "
2
The government’s outsized role in the agriculture sector leaves little room for
private sector participation. The government seems more enamored of transforming
subsistence farming into modern, commercially oriented farming with the free
distribution of inputs than with the exigencies of supporting policies that: (1) enhance
the capacity of MAAIF to efficiently and effectively deliver on its mandates; (2) increase
public investments in infrastructure (such as irrigation and rural roads); and (3) crowd in
private sector investment in agribusiness, such as firms that market inputs and outputs
and provide agricultural services (for instance, mechanization and financial services). For
agriculture to act as a key economic driver of Uganda’s Vision 2040 and the transition to
middle-income status, private sector investment must be leveraged.
The constraints to private investment in agriculture are well known, particularly

within those value chains in which small-scale producers can participate fully. For
the private sector, the motive is obviously to facilitate business development and to earn
a profit. Yet the large-scale agricultural services required for agribusiness development
are costly, and the associated risks are too high to be mitigated by individual firms.
To leverage private sector investment in agriculture, the government must implement
policies that will help to reduce the cost of doing business, and it must also co-finance
some of the services provided by agribusinesses to smallholders. To achieve this,
strengthening farmer organizations to integrate smallholders into agri-food value chains
is key. When producers are organized into associations or cooperative societies, they
can gain access to knowledge and technologies, aggregate produce to achieve scale
economies, and connect with agro-processors for value addition to further increase
farm incomes and reduce poverty.
Reforming the policy on public spending for agriculture in Uganda should be a

priority. The importance of agriculture for inclusive growth is reiterated in various
national development strategies but has not translated into public expenditures for the
sector. It should be a priority of the government to steer public investments in agriculture
toward the provision of public goods, such as R&D, extension and advisory services,
and rural infrastructure. Input and output marketing should be left in the hands of the
private sector. The government should focus on creating the enabling environment for
private sector participation (market and policy reforms) and on regulating input quality
and standards.
3
EXECUTIVE SUMMARY
01 The Government of Uganda (GoU) regards agriculture as a key economic sector to support
Uganda’s Vision 2040 and the transition to middle-income status. It recognizes that public
spending on agriculture has a pivotal role in equipping the sector to fulfil its potential to drive
economic growth, create employment for a rapidly growing and predominantly young population,
and ultimately reduce poverty.
02 To improve the quality and effectiveness of public expenditures in agriculture, Uganda has
conducted its second Agriculture Public Expenditure Review (AgPER) since 2010. This effort—
undertaken by the World Bank at the behest of the Ministry of Finance, Planning and Economic
Development (MoFPED)—has entailed analyses of financial data as well as institutional relationships
to understand the processes of budget formulation, execution, and management as they relate to
agriculture. It has also relied on analytical work showing how domestic policies influence incentives
to enhance productivity, resilience, and private sector engagement in Ugandan agriculture. The
results will help the Ministry of Agriculture, Animal Industries and Fisheries (MAAIF) and MoFPED to
improve the technical and allocative efficiency of agriculture-related spending in the future.
03 Overall, the performance in implementing policy recommendations from the 2010 AgPER has
been mixed. "Between 2013/14 and 2017/18, the development budget in the agriculture sector
declined from an average of 80 percent to 67 percent". Consequently, less was invested in the capital
expenditures that are necessary for spurring inclusive growth. The share of PEAS going to input
subsidies increased from about 19 percent in 2013/14 to about 25 percent in 2017/18 (with a high
of 33 percent in 2015/16). This increased spending on inputs largely occurred at the expense of
the extension and advisory services, which saw its share of PEAS decline from about 37 percent in
2013/14 to 10 percent in 2017/18. Other important functions such as inspection and quality control,
feeder roads, and storage had a combined share of only about 4 percent of total PEAS. Spending
on research was starting to increase, but it was cut from 17 percent of the total budget in 2013/14
to 11 percent in 2017/18. On a positive note, the share of spending on processing and marketing
continued to grow (to about 21 percent in 2017/18), and the irrigation budget more than doubled in
2017/18 to about 12 percent of the total. These public expenditures are critical for leveraging private
investments in the agriculture sector, as they contribute to improving access to markets, increasing
value addition, and enhancing resilience to climate change and variability.
04 The expenditure analysis explores four major thematic areas identified by MAAIF and MoFPED:
(1) gaps between policy formulation and implementation; (2) the political economy and institutional
landscape for agriculture; (3) institutional barriers at the national and local level that impede
improvements in public spending on agriculture; and (4) the role of the private sector in providing
public goods and services in the agriculture sector. These themes reflect the holistic perspective
adopted for this review, which extends beyond issues of budget allocation and distribution to
develop policy guidance and recommendations to increase the quality and effectiveness of public
spending on agriculture.
4
05 The analysis focuses on public expenditure in the agriculture sector (PEAS) of Uganda over
2013/14–2017/18. Spending on agriculture occurs under the purview of many central and local
government agencies. At the national level, MAAIF is the lead ministry responsible for the agricultural
expenditures, along with six semi-autonomous government agencies (SAGAs): (1) the National
Agricultural Research Organization (NARO), (2) the National Agricultural Advisory Services (NAADS)
Secretariat, (3) the Uganda Cotton Development Organization (UCDO), (4) the Uganda Coffee
Development Agency (UCDA), (5) the Dairy Development Authority (DDA), and (6) the National Animal
Genetic Resource Centre and Data Bank (NAGRC&DB). But agriculture-related expenditures also
occur under the Office of the Prime Minister (OPM); the Ministry of Local Government (MoLG); the
Ministry of Water and Environment (MWE); the Ministry of Lands, Housing and Urban Development;
the Ministry of Trade, Industry and Cooperatives; the National Forestry Authority (NFA); and the
Uganda Exports Promotion Board (UEPB). At the local level, the District Production Offices also
spend on agricultural activities.
06 This summary presents the key messages emerging from the review and recommends
policy and strategic actions for improving the efficiency and effectiveness of spending on
agriculture in Uganda. To provide some context for the results, a brief overview of the global
experience with public spending on agriculture initiates the discussion. The main part of the
analysis looks at administrative efficiency by examining the distribution of sector spending across
administrative units (central and local governments) and different geographic (regional) levels; it
looks at technical efficiency by considering the institutional capacity to plan, manage and execute
the budget; it explores economic efficiency by analyzing trends in recurrent (wage bill and non-wage
bill) and development spending (current and capital outlays); and it examines functional efficiency
by looking at the composition of spending across various functions (infrastructure, research and
development, extension and regulatory services).
Global Experience With Public Expenditure On Agriculture As A Benchmark For

Uganda
07 Global experience reveals important lessons on how public spending on agriculture can
enhance productivity growth and sector transformation. "Worldwide it is evident that public
expenditures matter a lot for agricultural growth", as they are needed to address inefficiencies caused
by market failures and inequalities in the distribution of public goods and services. An increase in
public spending on agriculture needs to be undertaken in a fiscally responsible manner, however, to
avoid macroeconomic distortions that could undermine growth. Analysis of 12 East and South Asian
countries during their periods of high agricultural growth—the Green Revolution—shows that, on
average, these countries devoted around 10 percent of total public spending to agriculture.
08 An important lesson from global experience is that the level of public spending matters less
for growth than whether that spending is efficient and effective. For example, in a number of
settings an increase in capital expenditures on irrigation, drainage, and rural/feeder roads (under
the development budget) has achieved higher impacts than focusing spending on wages and other
operational expenses (under the recurrent budget). Similarly, spending more on public goods is
more productive than spending on subsidies. In the recurrent budget, a good balance between
wage and non-wage expenditures is essential. Allocating adequate recurrent budget to non-wage
spending can enhance the sustainability of assets created through capital expenditures by providing
operational and maintenance budget.
5
09 Public spending in agricultural research and complementary services (irrigation, extension

and advisory services) has generated the highest rates of return around the world. Most high-
income countries spend around 1 percent of their agricultural gross domestic product (GDP) on
research, as does Brazil, a country widely regarded to have an effective research agency, Embrapa.
Over the last decade, spending on agricultural research constituted about 0.4 percent of agricultural
GDP in sub-Saharan Africa (SSA), compared with 1.3 percent in Latin America and the Caribbean,
0.6 percent in East Asia and the Pacific, and 0.9 percent in South Asia. Large countries in Africa have
earned higher returns to research and development (R&D) (43 percent) than small countries (17
percent), but even in small countries, returns were still high enough (higher than the discount rate of
10 percent) to justify the investments.
10 There is considerable scope for financing investments that have higher impact on reducing
poverty. Rural roads and irrigation infrastructure can be geographically targeted at areas where
poverty is concentrated. Research can be aimed at crops, livestock, and technologies that are likely
to be most useful to the poor rather than plantation export crops. Efforts to connect farmers to
markets can focus on smallholders. Analysis shows that such investments have a large payoff in both
economic growth and poverty reduction.
11 Globally, public spending must remain flexible to cope with future challenges, and for
agriculture, probably no challenge is more urgent than climate change. Climate change threatens
agriculture worldwide, but the lack of resilience of poor farmers makes it particularly serious in SSA.
Projections show yields falling by 5 percent in the near term and perhaps by 15–20 percent across
all crops and regions of SSA by the end of the century. Agriculture is also an important contributor
to greenhouse gas emissions, particularly from deforestation, and Africa is the only region where the
majority of production increases have come from expanding cultivated area, rather than increasing
productivity, at the expense of forests.
12 Evidence from the periods of high agricultural growth in South Asia shows that fertilizer
subsidies played little or no role in that growth. Studies in four Asian countries—Bangladesh,
India, Indonesia, and Pakistan—conclude that fertilizer subsidies were not significant in farmers’
adoption of technology. They instead identify R&D of new technologies, irrigation expansion, and
other investments, such as roads, as the main drivers. At the height of the Green Revolution, farmers
in three of the four countries (although not Bangladesh) were net-taxed for fertilizer (that is, domestic
prices for fertilizers were higher than the world market price), indicating that it was profitability and
not subsidies that drove technology adoption during this era. In India, the relative performance of
subsidies evolved over time, with higher returns occurring in the early years of the Green Revolution
and declining rapidly thereafter. Fertilizer, power, and irrigation subsidies were among the least
significant contributors to productivity growth over the four decades.
13 A key strategy to maximize impacts of public spending in agriculture is to ensure that the
budgetary process supports efficient implementation. Efficient allocation of resources for
greater impact begins with improvements in budget management. Reviews of public expenditure in
20 African countries highlight the importance of aligning agriculture sector policies and strategies
with the investment plans, Medium-Term Expenditure Frameworks (MTEFs), and annual budgets as
the first step to technical efficiency in spending. Budgeting needs to start from a stronger foundation
of sector strategies and national agricultural investment plans. The investment plans need to be
accompanied by a monitorable results framework. In many SSA countries, the rate of budget
6
execution is dismal. Improving budget execution rates is essential for demonstrating that the sector
can make good use of additional public resources, and for persuading ministries of finance that their
budgets must be increased.
14 Finally, public spending brings better results when combined with better policies and
institutions. Many parts of Asia have achieved impressive gains in agricultural productivity and
poverty reduction over the past half-century due to policy reforms. Recent research has quantified
the potential improvement in productivity from policy reforms and several kinds of spending on
agriculture. While comprehensive development of Africa’s agriculture sector requires investments
across multiple areas, a total factor productivity (TFP) decomposition shows that productivity
improvements in Africa have been led by investments in development of new technologies
(contributing 51 percent of TFP), policy reforms that improve terms of trade and provide economic
incentives to farmers (20 percent of TFP), and wider adoption of new technologies (proxied by farmer
education) (8 percent of TFP).
Allocative Efficiency Of Public Expenditure In The Agriculture Sector In Uganda
15 Analysis of the allocative efficiency of public expenditure provides an understanding of

spending priorities and the balance of spending. Although the final share of public spending on
agriculture (PEAS) more than doubled in real terms between 2013/14 and 2016/17, the share of
PEAS in total public expenditure (PE) remained low throughout the period, averaging 3.6 percent.
Uganda’s share is also low compared to that of its East African neighbors (Kenya, Tanzania, and
Rwanda) and the Maputo/Malabo Declaration target of 10 percent. "To justify an increase in budget
allocation to move toward the 10 percent target" (which is aspirational, as only a few African countries
have achieved or are close to achieving it), MAAIF first needs to improve the quality and effectiveness
of spending in the sector.
16 Allocative efficiency, which consists of the economic and functional decomposition of public
spending, needs to improve. An economic decomposition of public spending on agriculture
in Uganda depicts that development expenditures dominate both budgeted and final PEAS.
Development and recurrent expenditures represented about 66 and 34 percent of budgeted PEAS,
respectively. There were no significant differences between budgeted and final PEAS in terms of the
relative sizes of development (50 percent) and recurrent (25 percent) spending. Given that budget
execution rates are high (around 90 percent), this means that about 15 percent of the budgeted
PEAS was not disbursed by MoFPED to the agriculture-related ministries and SAGAs.
17 The economic efficiency is mixes because although development expenditures averaged 66

percent, they were heavily oriented to non-wage recurrent expenditure rather than to capital
expenditures. As a result, too little was invested in irrigation, rural access roads, wholesale and
livestock markets, and veterinary, sanitary, and phytosanitary laboratories and equipment, which
are critical for increasing agricultural productivity and building resilience to climate change risks.
The low level of capital expenditure is reflected in the poor condition of rural infrastructure and
has adversely affected farmers’ productivity and access to input and output markets. Similarly, the
underfunded regulatory functions (sanitary and phytosanitary services) has impacted regional and
international agricultural trade, and ultimately poverty reduction efforts. MAAIF therefore needs to
increase the share of capital expenditure in its development budget, which is essential for productive
investments.
7
18 The high share of development expenditures in PEAS could to some extent be due to
misclassification. Many items reported as development expenditures serve to fund recurrent
activities or are used to purchase goods and services that are redistributed to farmers. For example,
96 percent of the NAADS budget was classified as development spending, even though much of this
budget serves to buy inputs for free distribution to farmers. Making inputs accessible was integral to
raising agricultural productivity, but the approach used for distributing inputs is unlikely to achieve
this objective, since it is not fiscally sustainable. Where input subsidies continue to be used, they
should at least be reduced to a modest share of PEAS. Input procurement and distribution should
not distort the market for inputs and crowd out the private sector. Finally, subsidies for inputs
should be coupled with other services (irrigation, mechanization, and extension services), targeted
to farmers who can increase productivity and generate a marketable surplus, and have a clear exit
strategy.
19 National decentralization objectives are not fully matched by the allocation of resources.
Local governments receive a much lower share of final PEAS than agriculture-related ministries.
Collectively, MAAIF, NAADS, NARO, and other SAGAs capture the bulk of the allocations in the sector
(approximately 92 percent). The allocations to local governments declined from 37 percent in 2013/14
to about 7 percent in 2017/18, falling slightly short of the Agriculture Sector Strategic Plan (ASSP)
target of 10 percent. Given that local governments provide frontline agricultural services such as
extension and advisory services, market information services, and rural infrastructure, their budget
allocations need to be increased. MAAIF should find ways of reducing its headquarters operating
costs and retain a modest budget for its policy, strategy, and regulatory functions.
20 Geographic distribution of PEAS shows high efficiency in addressing inequality. Although the
ASSP does not provide precise spatial targets, the geographic disaggregation of PEAS shows that
spending favors the Northern Region. This region is emerging from conflict, has much lower levels of
human capital, is the least populous, and has poor infrastructure. Per capita PEAS is also persistently
higher in the Northern Region but is relatively the same in the Western, Central, and Eastern Regions.
In 2006, approximately 68 percent of the poor lived in the Northern and Eastern Regions. By 2013,
this proportion increased to 84 percent. In 2016, about 47 percent of the poor lived in the Northern
Region and another 37 percent in the Eastern Region. In the northeast, almost three in four residents
(74 percent) live below the national poverty line. The Northern and Eastern Regions require targeted
spending to address inequality, end extreme poverty, and boost shared prosperity.
21 The functional efficiency of public expenditure on agriculture in Uganda has improved. An

increasing share of PEAS was allocated to areas that can generate the highest returns on investment:
R&D, extension and advisory services, and irrigation. But other critical public goods remained
underfunded, undermining the potential impact of research, extension and advisory services, and
irrigation on productivity growth and resilience. The underfunded public goods included inspection
and quality control services and feeder roads and other infrastructure. Although the private sector
cannot invest in these core public goods, they are critical for crowding in private investment in
agricultural production and agribusiness.
22 Reforming the policy on public spending for agriculture in Uganda should be a priority.
The importance of agriculture for inclusive growth is reiterated in various national development
strategies but has not translated into public expenditures for the sector. It should be a priority of the
government to steer public investments in agriculture toward the provision of public goods, such as
8
R&D, extension and advisory services, and rural infrastructure. Input and output marketing should
be left in the hands of the private sector. The government should focus on creating the enabling
environment for private sector participation (market and policy reforms) and on regulating input
quality and standards. In addition, it should fully implement extension reforms by allowing public
goods and services for agriculture to be delivered by both public and non-state actors (including
agribusinesses), and it should crowd in the private sector by directly offsetting or defraying the costs
to agribusiness of delivering those services, through public-private partnership (PPP) arrangements.
Technical Efficiency Of Public Expenditure In The Agriculture Sector In Uganda
23 Technical efficiency (doing things well) in public spending involves making the best use of
inputs to provide outputs in the form of public services. Most donor funded projects in Uganda
are implemented inefficiently, for various reasons. But not all of the blame for technical inefficiency
rests with MAAIF. Delayed budget ratification by Parliament, untimely and insufficient release of
counterpart funds by MoFPED are beyond the purview of MAAIF, yet these constraints cause several
years to pass before a donor-funded project can be launched in Uganda. Other constraints, including
weak procurement and financial management capacity, improper appraisal and feasibility work, poor
coordination of project preparation and implementation between MAAIF and local governments,
and inadequate operating budgets for technical staff are within the mandates of the ministry itself.
These result in high cost overruns, low-quality work, and other kinds of wastage.
24 The institutional setup and budget architecture constrain efficient spending in the agriculture
sector. A comprehensive functional review of MAAIF and its SAGAs as well as other agriculture-related
ministries is required to clarify their mandates. Budget allocations and spending should strictly follow
the assigned functional mandates and strategic objectives. The respective roles of the MAAIF and
NAADS (along with Operation Wealth Creation—OWC) regarding the provision of public good and
services must be clarified. The agriculture Sector Working Group (SWG) should be more proactive
in providing feedback on budget planning, execution, and monitoring and evaluation of impacts.
MAAIF must further improve technical efficiency by aligning donor funding with ASSP targets, so
that external resources finance the national priorities necessary for achieving the ASSP objectives.
"Better coordination of the central and local governments in budget processes and management is
essential". MAAIF should also develop an effective framework for capturing off-budget spending by
donors, because the ministry needs to be able to track off-budget spending in the sector and assess
its impacts.
25 Technical inefficiencies pervade the delivery of subsidized inputs to farmers. Considerable

volumes of inputs have been procured by the NAADS and distributed by the OWC, ranging from
seed (maize, beans, soybeans, rice, sorghum, groundnuts, and Irish potatoes) to banana plantlets,
heifers, layers and broilers, and tilapia and catfish fingerlings. These inputs are not costed in the
National Budget Framework Paper, but they have averaged US$100 million equivalent per year. The
unit costs of some inputs procured were 20–50 percent higher than comparable market prices.
The inputs often were of poor quality, distributed late without communication or consultation with
districts, without extension services, and rarely with complementary inputs such as fertilizers and
pesticides. Results were not monitored. Wastage was unavoidable. Giving free inputs to farmers is
not sustainable and in the long run breeds dependency or entitlement. The government should
address these inherent technical inefficiencies.
9
The Policy And Institutional Landscape For Agricultural Expenditures In Uganda
26 The government’s outsized role in the agriculture sector leaves little room for private sector
participation. The government seems more enamored of transforming subsistence farming into
modern, commercially oriented farming with the free distribution of inputs than with the exigencies
of supporting policies that: (1) enhance the capacity of MAAIF to efficiently and effectively deliver on
its mandates; (2) increase public investments in infrastructure (such as irrigation and rural roads);
and (3) crowd in private sector investment in agribusiness, such as firms that market inputs and
outputs and provide agricultural services (for instance, mechanization and financial services).
27 A review of the agricultural policy and institutional environment clearly shows that MAAIF’s
role in developing policy for the agriculture sector has diminished over time. Some sector
policies have emanated from the National Planning Authority (an agency of MoFPED). The ASSP,
which currently provides strategic direction to sector development, is not adhered to strictly. The
links between the ASSP, the MTEF for agriculture, and the budget are not obvious. Although the
SWG provides a platform for stakeholders to participate in the budget process and for monitoring
budget execution, its effectiveness has been less than required. Finally, the roles and responsibilities
of various MAAIF agencies in budget planning and execution are unclear, let alone the interface
between MAAIF and local governments in the budget process.
28 Public expenditures on agriculture underperform because of structural deficiencies and

capacity constraints—but even so, MAAIF has ample scope to improve the technical and
economic allocation of public resources to spur growth in the sector. To achieve this improvement,
MAAIF must continue with radical institutional reforms to reflect its new roles, including its role in
delivering extension services (transferred from NAADS), and reinforce its role in policy and planning.
Champions are needed from within MAAIF, at the senior leadership level, to articulate the rationale,
significance, and outcomes of the reforms.
29 More specifically, to improve PEAS from an institutional point of view:
• MAAIF should identify, agree, and target the highest priorities to ensure that limited resources are
used as efficiently and effectively as possible.
• In line with the widely accepted principles of good governance, MAAIF should ensure transparency,
accountability, and participation in its service delivery to maximize the efficiency and effectiveness
of its expenditures.
• Public expenditures should address the roots, not the results, of market failures. Rather than
spending the bulk of PEAS on free distribution of inputs, develop incentives (an enabling
environment) for private sector participation in input markets, and strengthen the regulatory
functions of MAAIF to ensure the quality of inputs.
• The provision of free inputs is fiscally unsustainable, creates dependency, and constrains private
investment in input distribution. Targeted input subsidies should be directed to producers who
have the potential to transition from subsistence (producing for domestic consumption) to
commercial farming (producing surplus for the market).
• Integrate projects into the strategy for agricultural growth and development (ASSP and the
10
National Development Plan). A programmatic approach to sector development could reduce the
number of projects, and the establishment of a Single Project Implementing Unit should reduce
transaction costs and help MAAIF and local governments to deliver on their mandates.
• Strategic improvements in public spending on agriculture must begin by making much greater
use of the Budget Framework Paper (BFP) to provide feedback to MoFPED, and by enforcing the
technical assistance, oversight, and monitoring roles of the SWG.
• To develop a much more credible, robust planning process, MAAIF requires a Directorate of
Planning with capacity, authority, and influence. Planning should devote greater attention to the
criteria used for prioritization, expected outcomes, detailed expenditure estimates, and linking
investment plans closely to anticipated MTEF ceilings (and indicating how plans will change if
ceilings increase or decrease).
• Much better impact evaluation and expenditure tracking systems are required to place policy
makers and planners in a better position to guide budget allocations across subsectors and
address operational constraints in the portfolio.
30
The balance and efficiency of central and local government spending must improve. Local
governments should get a bigger share of PEAS than the current average of less than 10 percent.
District fragmentation, underfunding, and low capacity at the local government level have caused the
quality of services to fall across the board, even though the total number of people with ostensible
access to some services may have grown. Measures to reverse the negative trend in service delivery
under local governments include:
• Strengthen local government capacity for planning and budgeting, financial management, and
procurement to improve the efficiency and effectiveness of spending, and most important, to
increase the quality and impact of agricultural services.
• Develop a framework to engage citizens in planning, budgeting, and performance evaluation to

ensure transparency and accountability. Sustained improvements in service delivery depend, at
least to some degree, on the ability to hold local governments accountable.
• Where possible, shift procurement from the central to the district level to reduce transaction
costs, minimize wastage and leakage, improve the quality of supervision, and empower the people
of the district.
• Discontinue the fragmentation of districts (if possible, consolidate to reduce administrative costs),
and strengthen governance and service delivery capacity in existing districts.
• Explore other sources of local revenue for local governments to fill the gap left behind by the
abolished graduated tax.
• Address the vacuum in human resource capacity at the local government level to ensure
adequate staff numbers and skill sets for planning production interventions, implementing them,
and monitoring and evaluating their performance.
11
The Role Of The Private Sector In The Provision Of Public Goods And Services
31 For agriculture to act as a key economic driver of Uganda’s Vision 2040 and the transition to
middle-income status, private sector investment must be leveraged. Agriculture by nature is
a private sector activity, in which commercial firms are in the best position to understand market
potential and to engage within their specific value chains. "Moreover, the scarce public resources
should be focused on those core public goods and services for which private financing is unlikely".
A rigorous analysis will help to identify investments that generate largely public goods in which the
private sector cannot invest, and investments that yield private goods that will attract private sector
financing. Public-private partnerships could be promoted in the case of relatively large investments.
32 At the same time, the constraints to private investment in agriculture are well known,
particularly within those value chains in which small-scale producers can participate fully.
For the private sector, the motive is obviously to facilitate business development and to earn a
profit. Yet the large-scale agricultural services required for agribusiness development are costly,
and the associated risks are too high to be mitigated by individual firms. The financial markets are
equally hesitant to develop products for financing agriculture, which to a large extent has limited
the operations of even relatively larger agribusinesses. Consequently, they have restricted their
businesses to certain geographical areas and specific value chains. To further leverage private sector
investment in agriculture, the government must implement policies that will help to reduce the cost
of doing business, and it must also co-finance some of the services provided by agribusinesses to
smallholders. Specific steps include:
• Strengthening farmer organizations to integrate smallholders into agri-food value chains.

When producers are organized into associations or cooperative societies, they can gain access
to knowledge and technologies, aggregate produce to achieve scale economies, and connect
with agroprocessors for value addition to further increase farm incomes and reduce poverty.
Federated producer organizations (such as cooperative unions) can form productive alliances
to commercially produce and supply agreed quantities and quality of a specific commodity to a
specific market – taking advantage of growing population and urbanization in Uganda.
• Supporting vertical integration of farmer organizations with larger producers and

processors. It is necessary to foster the competitiveness of Uganda’s agri-food system and
the economic inclusion and market power of smallholders. Vertical integration is important
for smallholders to commercialize their production and access credit and markets. For larger
producers (nucleus estates and agroprocessors), vertical integration enables quantity and quality
assurance, and value addition.
• Increasing access to agricultural finance for all parts of agri-food systems. Savings and
credit cooperatives and warehouse receipt systems are promising vehicles for fostering financial
inclusion of smallholders and addressing the lack of collateralizable land titles for loans. Other
options for smallholder financial inclusion are value-chain financing and smartphone-based
financial technologies (FinTech).
• Strengthening the policy and regulatory framework. To foster private sector participation in
Uganda’s agri-food systems, a range of policy and institutional challenges must be addressed,
particularly in regard to input regulations and quality controls. The prevalence of low-quality
inputs in the market significantly reduces returns and adoption rates. MAAIF needs to beef up
12
its capacity to regulate the input market. A strong plant protection framework is also needed
to protect crops from pests and diseases and allow the government to regulate cross-border
agricultural trade more effectively. There is an urgent need for the government to clarify the
role of the private sector (agribusinesses) in providing agricultural services under public-private
partnership arrangements as well as contract farming.
• Addressing land tenure issues. Rising pressure on land reduces the productivity of smallholder
farming systems, dimming prospects for future generations to expand cultivated area, and
increasing the number of landless young people in rural areas. Secure property rights over land
are central for attracting private investment—by smallholders and large commercial operations
alike—in agricultural development and commercialization.
Conclusions
33 This review has identified the critical policy and institutional opportunities for Uganda to
transform its agriculture sector as envisioned. Reaping the full benefit of the opportunities
indicated by sectoral trends will require an enabling policy environment, efficient institutional
processes, and sector stakeholder coordination. In addition, public spending on agriculture must
be directed to the provision of “public goods” such as research, extension, and infrastructure rather
than to “private goods” like subsidized or free inputs. Growth in agricultural productivity cannot be
achieved without better access to and adoption of high-quality agricultural inputs by smallholder
farmers. Better access to technologies and more widespread technology adoption will require
stronger regulatory measures, more secure land tenure, enhanced input quality controls, and full
implementation of the ongoing extension reforms to sharpen the focus on knowledge transfer.
34 Given that climate variability and pest outbreaks are on the rise, Uganda’s agricultural
systems and rural livelihoods must become more resilient. Farmers should be equipped with
climate-smart land, water, and livestock management practices, irrigation infrastructure, and access
to information about climate and disaster risks. Producer arrangements and integration into agri-
food value chains should be supported to increase farmers’ access to finance and markets, and the
competitiveness of the sector more broadly. As diverse agribusinesses develop in a range of value
chains, they will link greater numbers of farmers to sources of inputs, markets, and finance and
improve rural livelihoods.
35 The growing budget deficit means it is unlikely that GoU will increase spending on agriculture
to reach the Malabo–CAADP target of 10 percent in the near future. It is, therefore, prudent that
MAAIF and other agriculture-related ministries and SAGAs as well as local governments improve the
allocative and technical efficiency to increase the effectiveness (results or impacts) of their current
budget allocations. At 3.6 percent of the public expenditure (PE), Uganda’s PEAS is still above the
SSA average of 2.0 percent. And although a real GDP growth rate of 6.0 percent or more is projected
over the next few years, the competition for scarce resources from other key sectors such as human
development (health and education) and infrastructure (energy, roads and water) is also growing.
13
01
UGANDAN AGRICULTURE AND THE OBJECTIVES OF
THE PUBLIC EXPENDITURE REVIEW
spur inclusive growth, increase food security,

1.1 Objectives of the Agriculture
and reduce poverty.
Public Expenditure Review
01 This Agriculture Public Expenditure

Review (AgPER) analyzes the efficiency
03 Additional justification for the AgPER
comes from the New Partnership for
Africa’s Development (NEPAD). Under
and effectiveness of public expenditures NEPAD, Africa’s Heads of State committed to
on the agriculture sector in Uganda. allocate 10 percent of their national budgets
The main objective was to identify practical to the agriculture sector each year. Ever
measures for improving the quality of public since, assisting countries to increase the
expenditures on agriculture. This effort quantity and quality of public agricultural
entailed analyses of financial data as well spending has been a major objective of the
as institutional relationships to understand NEPAD’s Comprehensive Africa Agriculture
the processes of budget formulation and Development Programme (CAADP). Under
execution as they relate to agriculture. The CAADP, each country is to undertake a
results will help the Ministry of Agriculture, public expenditure review that documents
Animal Industries and Fisheries (MAAIF) the level, composition, and quality of
and the Ministry of Finance, Planning expenditures in the agriculture sector. This
and Economic Development (MoFPED) information is also useful to development
to improve the technical and allocative partners supporting the sector in Uganda,
efficiency of agriculture-related spending. the private sector (agribusinesses), and the
Regional Strategic Analysis and Knowledge
02 The AgPER was undertaken in response to

the MoFPED’s request to the World Bank
to analyze the level and composition of
Support System (ReSAKSS) for Eastern and
Central Africa, which is mandated by the
Common Market for Eastern and Southern
expenditures in the agriculture sector; Africa (COMESA) to monitor government
a further objective was to assess the spending on agriculture in the region.
impact of that expenditure on overall
sector growth and transformation. The
review emanated as well from discussions
by the agriculture Sector Working Group
04 The last AgPER in Uganda was undertaken
in 2010. Since then very little analytical
information has been available to ensure
(SWG), especially during the budget that public expenditures are prioritized
process, which consistently raised concerns to support the objectives of transforming
about seemingly low budget allocations Ugandan agriculture. Such information is
to the sector, as well as the failure to align critical in an environment where the national
limited resources with sector policy and budget is increasingly stressed by limited
strategies. In addition to providing a better domestic revenue generation, declining aid
understanding of the level and composition inflows, and competing demands of priority
of expenditure, the AgPER aimed to identify sectors.
the types of expenditures that would
promote agricultural transformation in
Uganda. Such expenditures include those
that can (1) help smallholder farmers
produce for the market and add value, so
that they can transition from subsistence to
commercially oriented production, and (2)
leverage private investments in the sector to
15
sector budget in Uganda was still about twice

1.1.1 Findings of the Agriculture Public
as low as necessary to meet the Maputo and
Expenditure Review 2010 Malabo pledge to allocate 10 percent of the
national budget to agriculture.
05 The Uganda AgPER (2010) concluded

that between 2001/02 and 2008/09,
agriculture sector expenditures could be 07
According
Expenditure
to the
Framework
Medium-Term
(MTEF),
divided into two distinct phases. During agriculture sector expenditures were not
the first phase, from 2001/02 to 2003/04, projected to grow but to keep declining. In
the budget for agriculture fell sharply in 2012/13, the agriculture sector expenditures
both nominal and real terms. It began to were expected to be 3.2 percent of national
recover after 2004/05. In nominal terms, expenditures, compared to 3.8 percent in
cumulative growth in the sector budget 2008/09 and 4.6 percent in 2001/02. Given
was 46 percent higher in 2008/09 than in this outlook, it was more critical than ever
2001/02. Despite this seemingly spectacular to ensure that scarce budgetary resources
increase, in real terms the 2008/09 sector were used in a highly efficient and effective
budget was about the same as it was in way at the central level (MAAIF and its SAGAs,
2001/02. Real expenditures were 38 percent and agriculture-related ministries) and at
higher in 2008/09 than at their low point in the local government level.
2004/05. As a share of the national budget,
the agriculture sector budget had fallen to
3.8 percent in 2008/09 from 5.7 percent 08 Compared to spending on agriculture
in high- and middle-income countries,
spending on agriculture in Uganda
in 2001/02. In terms of share of gross
domestic product (GDP), the sector budget (adjusted by the size of the sector) was low,
remained stable, albeit low, at 1.6 percent. but comparable to spending in selected
These were data for the approved budget, countries of sub-Saharan African (SSA).
but the released budget was on average 10 The AgPER 2010 also concluded that three
percent lower, reducing the share of sector conditions needed to be met to maximize
expenditure in GDP to 1.2 percent. the impact of public spending on agriculture
in Uganda. First, public expenditures on
06 The agriculture sector budget was not

much larger when defined according
to the United Nations Classification
agriculture would need to be supported
through an enabling environment in which
agricultural prices were subject to few
of Functions of Government (COFOG). distortions. It would be counterproductive to
Under the COFOG classification, which raise the public expenditure on agriculture
is recommended by NEPAD/CAADP for when farm-gate prices were depressed.
comparing agricultural expenditures across Second, the mix of spending needed to be
African countries, the sector budget as a efficient (allocative efficiency). Spending that
percentage of the national budget was about does not contribute (or does not contribute
1 percent higher (for example, increasing as much) to growth and poverty reduction,
to 5.4 percent for the released budget in relative to alternative goals, is allocatively
2005/06). Donors accounted for substantial inefficient or unproductive. Third, technical
off-budget spending; although information efficiency needed to be high. Technical
on these expenditures was difficult to efficiency in the public sector involves making
obtain, it was estimated to account for 10–20 the best use of inputs to provide outputs
percent of the total sector budget. Overall, in the form of public services. Put simply,
even with off-budget funds, the agriculture technical efficiency is doing things well,
16
while allocative efficiency is doing the right

things. According to the AgPER 2010, when
those three conditions are met, even small
11 The second drawback identified through
the economic decomposition was that
agriculture sector expenditures were
budgets are well positioned to generate increasingly dominated by non-wage
growth and encourage more private recurrent expenditures, mainly subsidized
investment in the sector, and the scaling up farm inputs and other goods. Between
of agriculture sector expenditure in Uganda 2005/06 and 2008/09, non-wage recurrent
will bring the highest rates of return. In light spending, mainly for farm inputs, comprised
of these findings, the AgPER 2010 made 65 percent of MAAIF’s development budget
some key policy recommendations on the on average. The share of non-wage recurrent
allocative and technical efficiency of public spending in MAAIF’s total budget grew from
expenditure, as well as budget processes, 49 percent in 2005/06 to 80 percent in
which are summarized below. 2008/09. Making inputs accessible is integral
to raising agricultural productivity, but the
approach taken—distributing inputs—was
1.1.2 Policy recommendations unlikely to achieve this objective, because it
from the Agriculture Public favored the wealthiest farmers, who could
Expenditure Review 2010 already afford the inputs. This approach
did not strengthen private input suppliers,
09 Allocative efficiency. Allocative efficiency improve the targeting of subsidies (through

(economic and functional decomposition) the use of e-vouchers, for example), or
was found to be low, and the report called invest in rural infrastructure to ensure
for its improvement. that farmers could obtain inputs easily.
The report recommended that resources
should be shifted from spending on private
goods (subsidized inputs) to public goods
10 The first drawback identified through

the economic decomposition was the
small share of capital expenditure in the
(extension services, regulatory functions,
and rural infrastructure), which also have
potential for increasing productivity and
agriculture sector budget. Development reducing poverty.
expenditure was not synonymous with
capital expenditure, as usually assumed.
Although the development expenditure 12 The third problem identified through
the economic decomposition was the
larger share of wage and operational
made up about 80 percent of the agriculture
budget, it was heavily oriented to non-wage expenditures going to MAAIF
recurrent expenditures, at the expense of Headquarters relative to other MAAIF
capital expenditures. The share of capital departments. MAAIF Headquarters
outlays in the 2008/09 approved budget absorbed 35 percent of the recurrent
was 6 percent, down from an already low budget. The report recommended that the
level of 11 percent in 2005/06. The report headquarters operating costs should be
recommended that development budget reduced, and more operating funds shifted
should be directed to capital expenditures to other departments of MAAIF and local
(for example, to research and development, governments (districts and sub-counties),
and to rural infrastructure such as irrigation where recurrent expenditures are dominated
and feeder roads), which generate higher by wages, leaving little operational funding
returns to investment, rather than current for the technical staff to deliver on their
expenditures. mandates—public agricultural services.
17
13 At first glance, the functional composition

looked quite efficient, given that the
largest share of the budget was allocated
15 Price distortions. Uganda had successfully
addressed one important component of
the efficiency of public expenditure, which is
to advisory services and agricultural agricultural price distortions. Most farm-gate
research. Between 2005/06 and 2007/08, prices were at the level of reference border
these categories with the highest potential prices adjusted for marketing costs. In 2001–
for enhancing pro-poor growth absorbed 04, the rate of assistance to agriculture was
57 percent of the sector budget. Even so, estimated at 1 percent, with no taxation to
many other core public goods remained export commodities and about 13 percent
underfinanced, undermining the potential support to imports, such as rice. The non-
impact of research and advisory services. agricultural rate of assistance had also
The critically underinvested areas were notably decreased, reducing the prices of
irrigation, rural or feeder roads, livestock and farm inputs and stimulating resource flows
plant pest and disease control, regulatory to agriculture. The policy environment in
services, and institutional development. Uganda was described as quite conducive
These are the core public goods that the for public expenditure to have a lasting
private sector will not invest in providing, impact.
but they are essential for catalyzing private
investment in agricultural production and
agribusiness. 1.1.3 Agriculture Public Expenditure
Review 2019
14 Technical efficiency. Most of MAAIF’s
16
development projects had low technical The intervening years since the AgPER
efficiency for various reasons, some of which 2010 have reinforced the view that public
were within the purview of the ministry itself. spending on agriculture has a pivotal role
The report recommended that technical to play in Uganda. Efficient and effective
efficiency should be improved for MAAIF spending on agriculture would help the
to make a convincing case for substantially sector to achieve its potential to contribute to
scaling up funding for agriculture. Many inclusive growth, create employment for the
institutional factors prevented projects from country’s rapidly growing and predominantly
being implemented efficiently and generating young population, and ultimately to reduce
the intended results, including delayed poverty. Accordingly, this new AgPER aims
budget ratification by Parliament, untimely to identify how public spending can best
and insufficient release of government support agriculture to deliver growth
counterpart funds, weak procurement through increased productivity, stronger
and fiduciary capacity (at MAAIF and the resilience to climate change and other
local government level), and insecurity production risks, and more effective private
in northern Uganda. These constraints sector engagement in the provision of public
increased transaction costs and adversely goods in the sector.
affected the viability of projects. MAAIF was
17
advised to keep raising these important MoFPED has challenged line ministries
issues with MoFPED and to actively seek to produce value-for-money analyses
concerted remedies at the national and local of their expenditures to provide a basis
government levels. for considering increased budgetary
allocation. Line ministries, including MAAIF,
often complain to MoFPED about insufficient
budget allocations. Due to inadequate
18
expenditure information, the sector Budget

1.2 The Macroeconomic and
Framework Papers (BFPs) contain insufficient
information on expenditures in the previous
Fiscal Environment
year and on what they achieved. Without
this information, it is difficult to develop
and justify a more evidence-based budget 19 In Uganda, the fiscal deficit, including
arrears
4.8 
repayments, widened
percent of GDP in 2017/18 from
to
allocation for the coming year. Thus, except
for few cases, annual budgets and MTEF 3.8 percent the previous year.2 At an
ceilings represent only incremental changes, estimated 15 percent of GDP in 2017/18,
irrespective of strategic and emerging total revenue collections were weaker than
priorities. in the previous year. Overall, collected
revenues were below the level projected in
18 AgPER 2019 also places a strong

emphasis on the relationship between
public expenditure and policy. It builds
the government budget, which assumed that
total revenues would be around 16.6  percent
of GDP. In other words, tax revenues
on prior analytical work by the World Bank1 undershot government plans by 1.6 percent
that highlights the role of domestic policies of GDP, or roughly USh1.4 trillion. Due to the
in limiting the incentives for producers to wider fiscal deficit, the government increased
enhance productivity and resilience and its borrowing. External project financing,
in curbing private sector engagement in rather than budget support, continued to
Ugandan agriculture. That work also finds be the primary source of foreign borrowing.
growing deficiencies in budget formulation, This contributed to the rising external debt
allocations, and execution in MAAIF and interest and principal payments. In the
agriculture-related ministries. MAAIF domestic market, the government borrowed
is deeply concerned about inadequate to finance the emergency supplementary
resources and limited potential for realigning budget in the fourth quarter of 2017/18.
expenditures to high priority activities set Consequently, the total public debt stock
forth in its Agriculture Sector Strategic Plan accelerated and reached 41  percent of
(ASSP). Currently, the bulk of MAAIF’s budget GDP at end-2017/18, of which 28 percent
is allocated to specific activities, either for of GDP represented external public debt,
the core autonomous organizations—the while domestic public debt stabilized at
National Agricultural Research Organization 13 percent of GDP.
(NARO) and the National Agricultural
Advisory Services (NAADS)—or for activities
to which the Government of Uganda (GoU) 20 The expenditure mix deteriorated
further in 2017/18, with excessive current
spending and sizable under-execution in
has committed under various projects.
Therefore, MAAIF has strong interest in capital spending. Overall, national current
conducting a comprehensive AgPER to spending in 2017/18 exceeded the budgeted
tailor its future expenditures to its priorities amount by 32 percent (or by 3.6 percent of
identified under the ASSP to improve the GDP). This overshooting was due to higher
quality of public service delivery; and make purchases of goods and services, transfers to
a compelling case to appropriate levels of government agencies, and employee costs.
funding for agriculture. Excess current spending was offset by a fall in
1 “Closing the Potential-Performance Divide in Uganda Agriculture” (the AgGAP ASA) and a closely aligned study, “Uganda:
Governance and Public Expenditure Aspects of Agriculture for Shared Growth.”
2 World Bank (2018d).
19
capital spending to an estimated 4.4 percent

of GDP (or 0.6 percent of GDP). Compared
to its peers, Uganda’s capital spending is
23 "To capture the expanding markets
for its products in the future, Ugandan
agriculture must start to grow more
less than half the size of Rwanda’s capital rapidly". Agriculture has traditionally been
outlays at 10.3 percent of GDP, and only an important component in Uganda’s
60 percent of Kenya’s at 7 percent of GDP. economy and a major driver of growth. In
Reining in excessive current spending will the last couple of decades, it has provided
therefore be pivotal in keeping public debt about one-quarter of national GDP.
under control, while also allowing capital Agriculture’s share in the overall economy is
spending to be executed as planned (World slowly diminishing because the information
Bank 2018d). The decline in capital spending and communication services, as well as
is driven by lower externally financed capital construction, have been major sources of
outlays, which are associated with land economic dynamism in recent years. In real
acquisition issues and a lack of government terms, agriculture has been growing at 2.5
co-financing. percent annually since 1995, even as GDP
growth at 6.3 percent per year has made
Uganda one of the fastest-growing African
1.3 The Growth Potential for the economies.
Agriculture Sector in Uganda
24
The good news is that the agriculture
21 The agri-food system in Uganda stands sector has tremendous natural potential
to benefit from enormous opportunities for additional growth. Land and water
created by population growth and resources for agriculture in Uganda are
urbanization. Domestic and regional among the best in Africa, due to the rich
demand for agricultural commodities is volcanic soils and the occurrence of two
rising rapidly as increasing numbers of wet seasons across most of the country
urban dwellers demand more processed (CCAFS 2017). Uganda is also one of the 10
food and protein-rich diets. By 2050 about most biodiverse countries globally. It is host
102 million people will live in Uganda, more to 18,783 recorded species of fauna and
than double its current population. About flora, and farmers in its varied agroecologies
one-third of them will probably live in cities, cultivate crops as distinct in their growing
compared to only about 17 percent now. profiles as mountain tea and dryland millet.
There is immense potential as well for
22 Uganda already has a strong competitive developing the livestock value chains.
position in agri-food trade. The country is
a net exporter of agri-food products, and in
the last decade it has maintained a positive 25 The agri-food system also exhibits strong
prospects for value-addition. Because
Uganda has two wet seasons, it can produce
trade balance for most agri-food products.
Agri-food products account for more than food at a relatively lower cost and in more
half of national exports. Cash crops like stable volumes than neighboring countries.
coffee and tea are by far the dominant When food processing is considered
export commodities, generating around alongside primary production, the Ugandan
one-fifth of all export earnings. Other key agri-food sector has higher potential to create
products include maize, beans, bananas, jobs than the services or industrial sectors.
and some livestock and fish. The share of services in GDP increased to 57
percent in 2018, but the services sector has
less of a socioeconomic (poverty reduction)
20
impact than agriculture, which remains

largely informal, with relatively low labor
productivity. As diverse agribusinesses—
27 Improvements in productivity are critical
because food insecurity and malnutrition
are still important threats in Uganda.
particularly in the dairy, maize, and coffee Food insecurity in Uganda is classified as
value chains—have developed over recent “serious” by the 2018 Global Hunger Index.
years, they have linked greater numbers of The northern and eastern areas are the
farmers to sources of inputs, markets, and most vulnerable to food insecurity and
finance, and have improved rural livelihoods. malnutrition, and they are also receiving
large numbers of refugees from neighboring
26 Continued low growth in agricultural

productivity will significantly diminish
these prospects. Agricultural productivity
countries affected by conflict, including
the Democratic Republic of Congo and
South Sudan. Overall, and despite clear
growth is based on increased technical (or improvements in recent years, 13 percent
financial) efficiency of input use, combined of the population is stressed regarding food
with technological innovation (knowledge), security (IPC Phase 2), and 1 percent of the
which together allow farmers to produce population is experiencing a food security
more with less. Productivity enhancements crisis (IPC Phase 3).3
are measured by total factor productivity
(TFP), or the ratio of output produced to
the amount of all inputs used. For Uganda,
average TFP has been negative since around
28 The presence of food insecurity and
malnutrition reflects the high vulnerability
to climate change in Ugandan agriculture
2000 (World Bank 2018a), primarily because and among the rural poor. The effects
input use and technology adoption in of the 2016 La Niña (which resulted in
Uganda remain among the lowest in SSA. severe drought) as well as outbreaks of
For example, on average Ugandan farmers fall armyworm have worsened poverty
apply 1.2 kilograms per hectare of inorganic and food insecurity. Although the share of
fertilizer each year, compared to 45 kilograms people living below the national poverty line
in Ethiopia and 146 kilograms in Malawi more than halved between 2002 and 2013,
(Sheahan and Barrett 2014). Only about 4 falling from 40 percent to 19.7 percent, in
percent of Ugandan farmers use a package 2016/17 the national poverty rate had risen
of production-enhancing technologies, to about 27 percent. At the same time, the
defined as a combination of fertilizer, food-secure proportion of the population
improved seed, and supportive extension (IPC Phase 1) dropped to 69 percent, while
services (Bategeka, Kiiza, and Kasirye 2013). the stressed population (Phase 2) rose to 25
Consequently, yields for maize, millet, rice, percent and the population in crisis (Phase
and sorghum, for instance, are estimated to 3) rose to 6 percent.
be only 20–33 percent of the potential yields
for these crops under rainfed conditions,
and even less under irrigated conditions
(PARM 2015).
3 The Integrated Phase Classification (IPC), widely accepted by the international community, describes the severity of food
emergencies. Based on common standards and language, this five-phase scale helps governments and other humanitarian actors
to quickly understand a crisis (or potential crisis) and act. IPC Phase 2 households have minimally adequate food consumption but
cannot afford some essential non-food expenditures without engaging in stress-coping strategies. IPC Phase 3 households either
have food consumption gaps that are reflected by high or above-usual acute malnutrition, or they are marginally able to meet
minimum food needs, but only by depleting essential livelihood assets or through crisis-coping strategies.
21
29 "Uganda is among the countries that

are most vulnerable but least adapted
to climate change". It scores 155 of 188
the country’s labor force, it is critical for
household income growth and consumption.
The performance of agriculture has been
countries on the ND-GAIN index,4 meaning closely linked to household income growth
that while its exposure to agriculture-related and subsequent poverty reduction (Hill and
risks is high, the capacity of its producers Mejia 2016). Indeed, agricultural households
and agricultural systems to mitigate risks is accounted for 79 percent of the poverty
low. Crop and livestock pests and diseases, reduction that occurred between 2002 and
as well as drought spells, are among the 2013.
top six agricultural risks in Uganda (PARM
2015), and their occurrence is projected
to increase under climate change (CCAFS 32 Uganda’s agri-food system
play a significant role in enhancing
employment opportunities for the
can
2017). These circumstances indicate that

improved inputs alone will not sustainably country’s predominantly young and
enhance agricultural productivity if they rural population. The agriculture sector is
are not accompanied by knowledge and particularly important for young Ugandans,
technology for climate-smart agriculture, who are the majority of the population:
as well as sustainable land and water 80 percent of Ugandans are below the age
management practices, to build resilience to of 35 and, with a median age of 16 years,
climate change. Uganda has the youngest population of any
country in the world (Aga Khan University
30 Uganda’s agricultural systems are

also vulnerable because they depend
heavily on rainfall. Less than 1 percent
2016). More than three quarters of people
aged 15–24 engage in agriculture as their
first job, mostly in primary production
of smallholder producers use irrigation (Yeboah and Jayne 2018). An analysis of
(Bategeka, Kiiza, and Kasirye 2013). The six SSA countries shows that transforming
government is committed to increasing their food systems from a focus on primary
investments in irrigation and drainage production to market-oriented agri-food
systems to support smallholders who are value chains could create more jobs between
making the transition from subsistence 2010 and 2025 than the rest of the economy
agriculture to market-oriented commercial (Townsend et al. 2017). By 2010, the number
production. Since irrigation may be of jobs in agribusiness amounted to 10
unaffordable for subsistence farmers, percent of all jobs in agriculture in Eastern
the adoption of other measures, such as and Southern Africa (Tschirley et al. 2015).
rainwater harvesting, water pans, valley
tanks, and water conservation technologies,
should be encouraged (World Bank 2018a). 33 The Government of Uganda’s Vision
2040 and Second National Development
Plan (NDP II) give priority to agriculture
31 Productive and sustainable agriculture is

a proven pathway out of poverty and food
insecurity. Uganda is still a predominantly
because of its capacity to spur Uganda’s
socioeconomic transformation
a middle-income country by 2040. In
into
rural country, with over three-quarters of the response, the ASSP (2015/16–2019/20)
population residing in rural areas. Because prioritizes investments that: (1) increase
agriculture employs about 70 percent of on-farm productivity to at least 50 percent
4 The ND-GAIN Country Index “summarizes a country’s vulnerability to climate change and other global challenges in combination
with its readiness to improve resilience.” See https://gain.nd.edu/our-work/country-index/.
22
of the yields obtained on research stations;

(2) transform subsistence farmers into
enterprise farmers, and smallholder farmers
35 Finally, reaping the full benefit of the
growth opportunities indicated by
sectoral trends will require stronger
into commercial farmers; (3) increase food institutional processes and stakeholder
security and food availability in all parts of coordination, as well as public investments
the country; (4) increase agricultural exports; in agriculture that are directed to the
(5) increase the efficiency and effectiveness provision of public goods such as research,
of agricultural services; and (6) increase extension, and infrastructure rather than
the sector’s resilience to the impacts of private goods like free inputs through
climate change. To achieve the envisaged subsidies. Global experience shows that
agricultural transformation, the sector public expenditures matter for increasing
must address the underlying constraints, agricultural productivity growth. But not
which will lead to: (1) enhancing agricultural all public expenditures are productive—so
productivity and building resilience to sector- what matters most is the allocative efficiency
related risks; (2) increasing competitiveness (quality of spending) and technical efficiency
of key agricultural value chains and access (effectiveness of spending). Coupled with an
to markets by smallholder producers; and improved policy environment that crowds in
(3) strengthening institutional capacity and private sector actors, the impact of public
improving the regulatory environment. expenditures on agricultural productivity
growth in Uganda would be even greater.
34
To speed the transformation of
Uganda’s agri-food sector, critical policy
weaknesses must be addressed. Primary 36 The analysis that follows explores major
thematic areas identified by MAAIF and
production cannot become more productive MoFPED. These thematic areas reflect the
without better access to and adoption holistic perspective adopted for this review,
of high-quality agricultural inputs. Better which extends beyond analyses of trends in
access and adoption will require stronger budget allocation and distribution (Chapter
regulatory measures, more secure land 3) to focus on the policy environment. For
tenure, enhanced input quality controls, and that reason, the analysis entails a synthesis
full implementation of the ongoing extension of trends in public spending on agriculture in
reforms to sharpen the focus on knowledge Africa (Chapter 2), a review of gaps between
transfer. Given increasing climate variability policy formulation and implementation,
and pest outbreaks in Uganda, it is vital to along with an assessment of the institutional
increase the resilience of agricultural systems environment and barriers to improving
and rural livelihoods. To this end, farmers public spending in agriculture (Chapter
should be equipped with climate-smart land, 4), and an examination of the role of the
water and livestock management practices, private sector in providing public goods and
irrigation infrastructure, and access to services (Chapter 5). Based on that analysis,
climate and disaster-risk information. Chapter 6 provides conclusions and policy
Productive Alliances and the integration of recommendations for improving the quality
smallholder producers into agri-food value and effectiveness of public spending on
chains should be supported to increase agriculture in Uganda.
farmers’ access to finance and markets,
and the competitiveness of the sector more
broadly.
23
02
SYNTHESIS OF PUBLIC SPENDING ON
AGRICULTURE IN AFRICA
generating knowledge (often in the form

2.1 Rationale for Public Spending
of technology), disseminating knowledge
on Agriculture (technology), reducing transaction costs,
and attracting private capital. These types of
01 The rationale for public investments

derives from two fundamental sources—
economic inefficiencies caused by
spending tend to provide goods or services
that have public good characteristics and
that are crucial for fostering robust growth
market failures and inequalities in in agricultural productivity and poverty
the distribution of goods and services. reduction in rural contexts.
Agricultural production is essentially
a private enterprise, but production • Generating knowledge. Technology-
requires public goods and services that the advancing effects are associated with
private sector cannot provide efficiently. public spending on agricultural research
One characteristic of public goods and and development (R&D) to create basic
services is that they are non-excludable—if knowledge, which is both non-excludable
provided to one consumer, other potential and non-rivalrous. Sometimes the
beneficiaries cannot be prevented from knowledge can be embodied in a
enjoying them. A second is that they are commercial product (as with hybrid
non-rivalrous—meaning that consumption seeds and chemicals), with benefits that
by one does not reduce the consumption are excludable and rivalrous, but the
of another. Non-excludability implies that basic knowledge itself is not. Therefore,
potential beneficiaries cannot be charged investments in R&D are among the
for the goods or services, so the producer most important public goods and a
cannot capture their full social value. Non- critical component of public agricultural
rivalry implies that it is inefficient to charge spending.
anything for the goods or services, since the
cost of supplying an additional unit (letting • Disseminating knowledge and building
another consumer enjoy the benefits) is human capital. Effects that enhance
zero. These characteristics cause social and human capital can be associated with
private returns to diverge, leading private public spending on extension, training,
investments to remain below the social and information services that transfer
optimum (Goyal and Nash 2017). That is why knowledge and skills to those engaged
the public sector worldwide needs to play a in agricultural production. These
pivotal role in the provision of public goods investments create significant positive
and services. externalities through demonstration
effects and peer-to-peer learning of
benefits from adopting new productivity-
2.1.1 Correcting economic inefficiencies enhancing technology. As agricultural
caused by market failures production processes become
increasingly knowledge intensive, with
02 To guide decisions on areas appropriate higher demand for precise and timely
for government spending, it helps information, such investments become
to consider what kinds of goods and more important.
services are necessary to catalyze
• Reducing transaction costs. Similarly,
agricultural growth, and to what extent
effects that reduce transaction costs can
each is a “public good.” Public spending on
derive from public spending on soft and
agriculture is efficient if it is directed toward
25
hard infrastructure that might improve as progressive as those from several kinds
access to input and output markets. of social spending (safety net programs),
Transaction costs are an important and they are far superior to spending on
determinant of market integration, subsidies.
and investments that lower the costs
of searching for and exchanging
information—and of bargaining, decision 2.2 Level and Trends of Public Spending
making, and enforcing contracts— on Agriculture in Africa
tend to enhance market participation.
04
Investments in rural roads, market This section summarizes the key findings
information dissemination, and land of the agriculture public expenditure
market development, for example, are reviews done in the last decade in 20
important in reducing transaction costs. African countries.5 By using a common
methodology for compiling expenditure
• Attracting private capital. The crowding- data, consistent with the CAADP guidance,
in effects of public agricultural spending the studies aimed to establish trends
on private capital occurs when in spending and in the effectiveness of
public and private investments are implementation. Although most of the
complements in production. An example studies were basic diagnostic analyses, the
is public investment in large irrigation lessons have enriched technical discussions
infrastructure, such as dams and canals, among practitioners and are being
which then make it profitable for farmers adopted by policy makers in many African
to make small on-farm investments in governments.
water management and a wider range of
production technologies.
2.2.1 The Malabo Declaration
2.1.2 Reducing inequality and poverty
05 The Malabo Declaration (2014) on
Accelerated Agricultural Growth and
03 Public spending on agriculture is also

justified on equity grounds, especially
given the concentration of the poor in
Transformation for Shared Prosperity and
Improved Livelihoods reaffirms the central
commitment of the Maputo Declaration
rural areas, most of whom rely primarily (2003) to allocate 10 percent of public
on agriculture for their livelihoods. One resources to agriculture. As discussed,
argument for fertilizer subsidies is that in 2003 and again in 2014, African heads
they could potentially help poor farmers of state and government agreed that
break out of a low-productivity poverty trap. spending was far too low in agriculture. But
The equity justification for spending on in contrast to the Maputo Declaration, the
agriculture is stronger for programs that can Malabo Declaration contains many more
be targeted at the poor and for programs commitments in areas like infrastructure,
that demonstrate a high income-multiplier natural resources, land tenure, trade, and
effect. For instance, impacts of spending nutrition. It also specifies more clearly a
on extension and advisory services are just range of commitments in agriculture, such
5 Botswana, Burkina Faso, Cameroon, Chad, Côte d’Ivoire, Democratic Republic of Congo, Ghana, Guinea, Liberia, Madagascar,
Malawi, Mozambique, Nigeria, Rwanda, Senegal, Sierra Leone, South Africa, Togo, Uganda, and Zambia. These countries account for
about 70 percent of agricultural value added in SSA.
26
as (1) doubling productivity by increasing private investment in the sector. It was also
irrigation and mechanization or curtailing assumed that the 10 percent allocation
post-harvest losses, among others; (2) would take the form of public investment,
sustaining at least 6 percent annual growth but in practice most public agriculture
in agricultural GDP;6 (3) establishing and/ expenditure has continued to be in the form
or strengthening inclusive public-private of recurrent expenditure (on salaries, rent,
partnerships for at least five priority fuel, electricity, and telecommunications,
agricultural commodity value chains with for instance) and not investments (in post-
strong linkage to smallholder agriculture; harvest storage, feeder roads, and market
(4) creating job opportunities for at least and irrigation infrastructure, for example). To
30 percent of the youth in agricultural create conditions necessary for the private
value chains; (5) tripling intra-Africa trade in sector to invest in agriculture, the quality of
agricultural commodities; (6) reducing child public expenditure is of critical importance.
stunting to 10 percent; and (7) ensuring One metric that is telling is the large ratio
that by 2025, at least 30 percent of farm/ of recurrent to investment expenditure in
pastoral households are resilient to shocks. the agriculture budget. Therefore, instead
These areas are important to agriculture, of arguing for increased budget allocation
but they are not (or not completely) under to agriculture (most of the countries still
the mandate of the Ministry of Agriculture. are below 10 percent), countries should
first strive to increase the proportion of
06 While the Malabo-CAADP continues to

focus on the agriculture sector, it also
considers interventions in related sectors
investment expenditure in their sector
budgets.
that are necessary for agricultural

growth. More inter-sectoral cooperation
and coordination is seen as necessary
08 Given the objective of getting the
biggest increase in the national budget,
nothing is special about the 10 percent
and must be fostered through suitable CAADP target for the agriculture sector.
and effective coordination frameworks, in However, the optimal distribution of public
particular with the Ministries of Finance spending among sectors largely depends
and Economic Planning, National Planning on many country-specific factors, including
Commissions, and other agriculture-related the share of the sector in the national GDP
ministries (water, natural resources and and its multiplier effects. To the extent that
environment, rural development). The ministries of agriculture can demonstrate
National Agriculture Investment Plan (NAIP) that their programs are an efficient and
remains the key vehicle for achieving the high-impact use of public funds, they can
Malabo Declaration targets. The emphasis make a stronger case to ministries of finance
on implementation, delivery, results, and and planning for increasing their budgets. In
impact is increased. this case, enhancing the quality of spending
is the first order of business. Nonetheless,
07 Under the Maputo-CAADP, the 10

percent allocation would be core funds
in the NAIP, to be complemented
the quantity of spending is a meaningful
indicator of government commitment to
agriculture. Therefore, it is worth considering
by private investment. However, this how Africa compares to other regions, and
required the public expenditure to attract to the Maputo and Malabo targets.
6 In Uganda, agricultural output has grown at only 2 percent per annum over the last five years, which is well below the population
growth rate and below the 3-5 percent growth rates in other East African countries.
27
share of spending is its share of national

2.2.2 Public Spending on Agriculture
GDP. This index—the share of spending on
agriculture relative to agriculture’s share in
09 The fundamental question is how much

of the government budget should be
devoted to the agriculture sector. In
the economy—is calculated for several Latin
American countries over time to analyze
whether there has been a systematic under-
principle, to maximize welfare on a given allocation or “anti-agricultural bias” in public
budget, spending should be distributed spending, with the general conclusion that
such that the marginal dollar in each activity no such bias is present in Latin America.
yields the same increase in national welfare
11
(however “welfare” is defined). If this were An alternative approach is to examine
not true—if, for example, an additional the experiences of countries that have
dollar devoted to agriculture increased undergone successful agricultural
welfare more than the incremental dollar to transformation. Analysis of 12 East and
non-agriculture spending—overall welfare South Asian countries during their periods
could be increased by taking a dollar of high agricultural growth—the Green
from non-agriculture and spending it on Revolution—shows that, on average, these
agriculture. How much welfare is increased countries devoted around 10 percent of
by an incremental public dollar spent in total public spending to agriculture. The
agriculture depends on how much that dollar Maputo-CAADP target is like what the Asian
will increase agricultural production, as well countries were spending on agriculture in
as how much the additional production will that period. Likewise, the NEPAD’s target of
increase welfare. This optimal allocation spending 1 percent of agricultural GDP on
condition can be expressed in a ratio of research is quite like the level that Brazil
spending in each sector. The optimal ratio devoted to its successful research agency,
of public spending on agriculture versus Embrapa, as well as the level of spending on
non-agriculture is equal to the ratio of the research in some high-income countries.
welfare elasticity of each sector’s production
times the ratio of each sector’s elasticity
of production with respect to public
spending in the sector. The problem in
12 Countries differ greatly in the contribution
of the agriculture sector to national
GDP. A 1 percent increase in agricultural
operationalizing this allocation condition to production will therefore generally result
provide practical guidance to policy makers in a smaller percentage increase in overall
is that it would require empirical estimation GDP in a country in which agriculture is 10
of all these elasticities (in every sector) for a percent of the economy than in a country
given country. in which it is 30 percent. Thus, the elasticity
of agricultural production with respect
10 In the absence of a practical way to

rigorously answer the question of how
much public spending should be allocated
to spending in the sector will be higher in
countries with high agricultural potential
because of favorable natural endowments
to agriculture, there have been some and if the overall policy environment is
efforts to provide rules of thumb, which conducive to a positive supply response—
may seem intuitive and reasonable. and where the spending is “smarter.” In such
For example, De Ferranti et al. (2005) countries, agriculture’s share of spending
show that with some special (and quite should be higher.
restrictive) simplifying assumptions, the
optimal allocation is such that each sector’s
28
13 Overall, Africa’s level of spending on

agriculture is lagging other regions based
on several metrics. Agricultural spending
Botswana, which have relatively small shares
of agricultural GDP in the overall economy. An
alternative indicator of the public budgetary
as a share of overall public spending—the commitment to agriculture—the Agriculture
metric used in the Maputo Declaration—is Orientation Index (AOI)—accounts for
substantially lower in Africa than in other sector size to determine agriculture’s share
regions, particularly East Asia and the Pacific of public spending relative to its share in the
and South Asia. In 2014, only Burkina Faso, economy. An AOI value of 1 would indicate
Malawi, Mozambique, and Zimbabwe had that the government spends a share of its
barely met or surpassed the 10 percent budget on agriculture exactly proportional
target (Malawi and Mozambique consistently to agriculture’s contribution to GDP. Rarely
surpassed it). Three countries—Niger, would spending be allocated exactly in
Rwanda, and Zambia—were close behind at proportion to each sector’s contribution to
9 percent. Overall, the annual average share the economy. At the very least, however,
of agriculture in total spending in Africa is large deviations would suggest the need for
about 4.0 percent, and its annual growth rate a deeper inquiry by policy makers.
is 0.8 percent (Table 2.1). Public spending on
agriculture as a share of agricultural GDP in
Africa is about 5.18 percent, substantially 15 Analysis indicates that no country in
Africa has an AOI of 1, although some
come close. There is a strong tendency for
lower than in other regions. Spending per
capita was on average US$19, almost a third the countries with small agriculture sectors
lower than that in the next lowest region, to devote proportionately more of the
South Asia. budget to supporting it (higher AOIs). Most
African countries, however, spend much
Table 2.1. Trends in public spending on smaller proportions of the public budget
agriculture in Africa on agriculture than the sector’s share in
the economy. Of the 47 countries for which
Main trends in spending Estimate the AOI has been computed, it is less than
Total agriculture spending in constant 2005 0.3 in 31 countries. While the numerical
--
PPP$, 1980 -2012
goal of 10 percent is somewhat arbitrary
Annual average growth rate (%) 0.8
and failure to meet this target is arguably
Annual average share in total spending (%) 4.0
not so worrisome, the AOI also appears to
Annual average share in agriculture value added
(%)
4.7 demonstrate underspending in most African
Research spending in constant 2011 PPP$, 1981 countries. What is more worrying is that
--
- 2011 over the last three decades there has been
Annual average growth rate (%) -0.1 a persistent negative trend in spending on
Annual average share in agriculture value added
1.1 agriculture in SSA.
(%)
Source: Benin 2015.

Note: PPP = purchasing power parity; -- = not available. 16 Agricultural R&D activities have high
returns but are severely underfunded in
most African countries. Large countries in
14 While almost all African countries are

spending below the 10 percent target,
country conditions and spending contexts
Africa have earned higher returns to R&D (an
internal rate of return of 43 percent) than
small countries (an internal rate of return
differ widely across SSA. For instance, the of 17 percent), but even in small countries,
spending target is arguably less meaningful returns were still high enough (higher than
for such countries as South Africa and discount rate of 10 percent) to justify the
29
investments (Table 2.2). In 2006, the NEPAD agricultural research, with their collective
set an additional target to increase public share in developing country public spending
spending on agricultural R&D to at least 1 on agricultural R&D rising from one-third in
percent of agricultural GDP, a target that 1981 to almost half in 2000 (Alston et al. 2000;
few African countries have met. Most high- Pardey et al. 2007). In SSA as well, investments
income countries spend around 1 percent of in national and international agricultural
their agricultural GDP on research, as does research have been demonstrated to be
Brazil, a country widely regarded to have an among the most important determinants of
effective research agency, Embrapa. Over long-term productivity growth. For example,
the last decade, spending on agricultural the Consultative Group on International
research constituted about 0.4 percent of Agricultural Research (CGIAR) has played
agricultural GDP in SSA, compared with 1.3 an important role in raising agricultural
percent in Latin America and the Caribbean, productivity growth in SSA. Spending by the
0.6 percent in East Asia and the Pacific, and CGIAR in the region has generated US$6 in
0.9 percent in South Asia. Africa was the only benefits for every dollar spent on research
region where agricultural research spending in Africa. Returns to spending by national
fell on average over this period. agricultural R&D agencies have been
relatively lower but still significant, averaging
17 Spending on R&D has driven agricultural

transformation in the rest of the world.
For example, during periods of rapid growth,
about US$3 in benefits for every US$1 spent.
Brazil, China, and India invested heavily in
Table 2.2. Returns to agricultural research in sub-Saharan Africa
Returns to agricultural research

Countries Benefit-cost IRR (%) without
IRR (%)
ratio CGIAR
Large countries
4.4 43 36
Côte d’Ivoire, Ethiopia, Ghana, Kenya, Nigeria, Sudan
Midsize countries
2.6 29 23
Madagascar, Mali, Mozambique, Senegal, Uganda
Small countries
1.6 17 13
Botswana, Burundi, Gabon, The Gambia, Swaziland
Source: Fuglie and Rada 2013.

Note: The benefit-cost ratio discounts future benefits at a yearly rate of 10 percent. CGIAR = Consultative Group on International
Agricultural Research; IRR = internal rate of return.
18 Following the public expenditure

reviews, some countries have increased
public expenditures, at least in nominal
the investments. All along, the reviews have
emphasized the need to improve the quality
of spending (allocative efficiency) and impact
terms. Where the effort to increase (effectiveness) at any level of resource
public investment in agriculture has been allocation to the sector. The next section
successful, an emerging concern is whether discusses some of the recommended
current expenditure has grown in tandem to measures to improve the quality and impact
ensure that the operations and maintenance of public spending in agriculture.
of the assets created are adequate to sustain
30
2.3 Improving the Quality of Public 2.3.1 Investing In Land Governance

Spending to Maximize Returns
20 One key public good that is greatly
19 Not all public spending on agriculture undersupplied across Africa is the legal
is productive—that is, efficient and and institutional framework for land
effective. Public spending on agriculture governance. Only about 10 percent of
may be unproductive or even reduce rural land in Africa is registered. The rest
the productivity of other spending for is undocumented or held under informal
two basic reasons. First, governments arrangements that make it vulnerable to
sometimes spend on things that are not “land grabbing” or expropriation, a particular
public goods, such as subsidies. In such problem for women. It takes twice as long (65
cases, governments tend to be inefficient days) and costs twice as much (9.4 percent
suppliers of private goods, and when they of the property value) to transfer land in
enter these markets, there is a serious risk SSA than in Organization for Economic
of displacing the private sector. Second, Co-operation and Development (OECD)
even when there are clear market failures, countries (31 days; 4.4 percent). Ghana,
government spending will not necessarily Kenya, and Uganda, for example, all have
improve the situation. Empirically, public fewer than 10 land surveyors per million
spending on public goods has typically been people, compared with 197 in Malaysia
much more productive than public spending and 150 in Sri Lanka (Byamugisha 2013).
on private goods (López and Galinato These conditions undermine land market
2007). To maximize returns on agricultural development and secure tenure, weakening
investments, Africa should spend its incentives to make on-farm investments and
relatively meager resources efficiently and impeding rural credit market development.
effectively. Essentially, this means investing Because significant investments in land
in areas that generate higher impacts, such quality are needed to reverse soil degradation
as R&D, irrigation, and extension services and depletion, improving land security is
(Table 2.3). hugely important to create conditions for
sustainably boosting productivity. Many SSA
Table 2.3. Impacts of different types of public countries either have legislation in place or
spending on agriculture in Africa initiatives underway to address communal
land rights and gender equality, the basis for
Estimated sound land administration.
Estimated impacts of spending
impact
Total agriculture elasticity 0.1–0.3
National and CGIAR research, ROR (%) 22–55
2.3.2 Strengthening Extension Services
Irrigation, ROR (%) 11–22
21
Extension, ROR (%) 8–49
Another crucial element in making
Extension, benefit-cost ratio 6.8–14.2
spending decisions to encourage greater
Rural roads, benefit-cost ratio 7.2
adoption of modern technologies is to
Source: Benin 2015. improve the effectiveness of extension
Note: CGIAR = Consultative Group on International Agricultural services. Particularly where information
Research; ROR = rate of return.
constraints are a major bottleneck in the
uptake of modern inputs and production
techniques, public funding (although not
necessarily provision) of extension can be a
31
cost-effective use of public funds. Moreover, estimated at 6 percent for Africa, compared
higher returns to investments in agricultural with 37 percent for Asia and 14 percent for
extension are expected if the rate of Latin America. Food production in Africa
developing new technologies for SSA is remains almost entirely rainfed, despite
increasing, enabling farmers to adjust more highly variable and in many cases insufficient
quickly to changing circumstances. rainfall, together with an increasingly high
incidence of severe drought. The potential
22 Extension services are coming back

onto the development agenda, and
in a few countries, they now receive
for profitable irrigation development for
SSA remains large, given the existing water
resources, the high value of irrigated
substantial shares of the budget. The agriculture on the continent, and the large
rapid adoption of digital technologies in number of rural-poor, who could benefit
rural areas promises to revive some aspects from the productivity improvements that
of extension services and consequently to result from irrigation.
improve productivity. Innovative models are
being implemented in SSA, led by Kenya and
Nigeria. New tools and approaches have
helped overcome information problems
24
The returns to many irrigation projects
in the past were relatively low in Africa,
and the negative externalities were
that hinder market access for many small- high. But recent advances in planning
scale farmers, promote knowledge and skill and design techniques have provided the
development, and stimulate opportunities ability to minimize adverse environmental
for agricultural supply chain management and social consequences of large irrigation
(Deichmann, Goyal, and Mishra 2016). In infrastructure. Recent studies show that
funding the new generation of extension irrigated land can be expanded from 13
programs, lessons from the past need to million hectares to 24 million hectares
be considered to achieve a better balance in economically viable ways, with returns
in spending across subcategories (wages ranging from 17 percent for large-scale
and non-wage recurrent expenditure) and irrigation to 43 percent for small-scale
make extension more effective, particularly irrigation (You et al. 2011). Africa has
in reaping the benefits from irrigation and significant unexploited potential to develop
water harvesting technologies. both large- and small-scale irrigation, but
economic viability depends on keeping costs
down. Although there is significant potential
2.3.3 Increasing Infrastructure for rehabilitating existing irrigated areas in
For Irrigation, Post-Harvest SSA, the expertise, knowledge, and capacity
Management, And Marketing to manage irrigation investments are low
(Rosegrant, Ringler, and Zhu 2009).
23 To transform African agriculture, it

is critical to invest in irrigation, post-
harvest management, processing, rural
25 Spending on rural roads has significant
effects on poverty and agricultural
productivity overall. Reduction in
roads, and market infrastructure. A large
transport costs reduces both trade costs
literature on the impacts of investments
and interregional price gaps (Casaburi,
to improve market access for farmers has
Glennerster, and Suri 2013). The spillover
found that benefits are significant, come in
effects are that farmers pay less for their
different forms, and can be realized. Irrigated
inputs and get more for their outputs,
area as a share of total cultivated area is
increasing incomes (Chamberlin et al.
32
2007; Stifel and Minten 2008). This type of

2.3.5 Implementing Policy Reforms
infrastructure investment is particularly
critical in Africa, where less than half of the
Necessary For Agricultural
rural population lives close to an all-season Transformation
road. Trader surveys in Benin, Madagascar,
and Malawi find that transport costs account
for 50–60 percent of total marketing costs
(Dercon et al. 2008; World Bank 2008).
27 Agricultural transformation and poverty
reduction in Africa will also require policy
reforms. Many parts of Asia have achieved
Higher profitability from road access also impressive gains in agricultural productivity
increases the value of farmers’ land. Not and poverty reduction over the past half-
surprisingly, access to markets facilitates century due to policy reforms. By contrast,
economic diversification in rural areas and sustained productivity growth remains
creates incentives for smallholder farmers elusive in most African countries. Spending
to adopt modern production technologies. on productive investments related to the
development and diffusion of technological
improvements, greater connectivity in rural
2.3.4 Shifting Government Spending areas, and irrigation development has done
From Private To Public Goods the most to reduce poverty. In India, the
relative performance of subsidies evolved
26 Research from Latin America and the over time—returns were higher in the early
Caribbean finds that it is crucial to shift years of the Green Revolution and declined
public spending away from providing rapidly thereafter. Fertilizer, power, and
goods and services (to specific groups irrigation subsidies were among the least
of producers) and toward the increased significant contributors of poverty reduction
provision of public goods. A reallocation of over the four decades. These findings
10 percentage points of public expenditures provide potentially important implications
from subsidies to public goods would for enhancing agricultural growth and
increase per capita agricultural income by poverty reduction in Africa. There are strong
about 2.3 percent without increasing total reasons to believe that the policy reforms
spending (López and Galinato 2007; Valdes and investments that generated high payoffs
2008). These findings from cross-country in Asia can drive growth and reduce poverty
analysis for Latin America are consistent in Africa as well.
with the analysis for Asia, where spending
on rural infrastructure, agricultural research,
and dissemination had large poverty 28 Recent research has quantified the
potential improvement in productivity
from policy reforms and several kinds
alleviation effects. Governments in Africa
and other developing regions have invested of spending on agriculture. While
heavily in state-owned enterprises (SOEs), comprehensive development of Africa’s
or parastatals, to perform commercial agriculture sector requires investments
functions that the private sector generally across multiple areas, a TFP decomposition
performs more efficiently, which has (Table 2.4) shows that productivity
crowded out private investment and dragged improvements in Africa have been led
down overall sector performance. While this by investments in development of new
situation has improved over time, SOEs are technologies (contributing 51 percent of
still more involved than they should be in the TFP), policy reforms that improve terms
agriculture sector, particularly in marketing of trade and provide economic incentives
inputs and outputs. to farmers (20 percent of TFP), and wider
33
adoption of new technologies (proxied by poor farmers makes it particularly serious in

farmer education—8 percent of TFP). SSA. Projections show yield decreases in the
near term of 5 percent, potentially growing
Table 2.4. Drivers of agricultural productivity in to 15–20 percent across all crops in SSA by
sub-Saharan Africa the end of the century (World Bank 2014).
Agriculture is also an important contributor
Contribution to
Type of investment cumulative TFP
to greenhouse gas emissions, particularly
growth (%) from deforestation, and Africa is the only
Agricultural research and development 51 region where the majority of production
Improvement in agriculture’s terms increases have come from expanding
of trade with market and trade policy 20
cultivated area, generally at the expense of
reform
forests.
Reduction in conflict 18
31
Increase in farmer education 8
In Africa, as around the world, a more
HIV/AIDS therapy to adult population
infected
2 climate-resilient agriculture is needed
to achieve the triple win of enhancing
Source: Fuglie and Rada 2013. agricultural productivity, mitigating
Note: HIV/AIDS = human immunodeficiency virus/acquired
immune deficiency syndrome; TFP = total factor productivity emissions of greenhouse gases, and
helping farmers adapt to climate change.
Most investments to mitigate climate change
2.3.6 Targeting Spending To Reduce Poverty (promoting low-carbon growth) and adapt to
it (building resilience) will need to be made
29 There is considerable scope for financing by farmers and other private agents. Even
investments that have higher impact on so, proactive government policies, planning,
reducing poverty. Rural roads and irrigation and investments are required to provide
infrastructure can be geographically targeted information, incentives, and an enabling
at areas where there are concentrations of environment to encourage communities,
poverty. Research can be aimed at crops, households, and the private sector to
livestock, and technologies that are likely to change their behaviors and investment
be most useful to the poor rather than to choices. Many climate-resilient investments
plantation export crops. Efforts to connect will not be very different from productive
farmers to markets can be focused on investment choices.
smallholders. Analysis shows that such
investments have a large payoff in both
economic growth and poverty reduction.
32 For public spending priorities, climate-
smart agriculture entails
landscape-scale approaches to invest in
using
managing climate risks. Such approaches

2.3.7 Addressing Emerging Priorities could include developing drought or flood-
Arising From Climate Change resistant technologies, understanding and
planning for transitions to new adapted
cropping and livestock systems and livelihood
30 Public spending will need to remain

flexible to cope with future challenges,
and for agriculture, probably no
options, and reducing greenhouse gas
emissions from livestock practices and land
use changes that cause deforestation and
emerging challenge is more urgent than
losses of biomass and soil carbon. Increasing
climate change. It is a threat for agriculture
resilience, restoring degraded lands, and
across the world, but the lack of resilience of
managing ecosystem services better will play
34
key roles in all of these options. Efforts to conditions much closer to optimal than in
craft budgetary and policy choices to create most farmers’ fields, with better soil and
a more climate-smart agriculture will have to more plentiful water. In much of Africa,
cope with special challenges rooted in many however, water management is scarce, and
uncertainties, distributional issues, and the soil has been degraded, greatly reducing the
long-term nature of the problem. responsiveness of crops to higher chemical
fertilizer use (Christiaensen and Kaminski
2015). The policy discussions of low
2.3.8 Reducing The Current Excessive Focus productivity in Africa tend to overemphasize
On Unproductive Fertilizer Subsidies fertilizer use and underemphasize the poor
farming practices (agronomic) and rainfed
33 The resurgence of input subsidy conditions that limit African farmers’ ability
programs in Africa has arguably been to use fertilizer as profitably as in other
the region’s most important policy regions (Jayne et al. 2016). But analysis
development for public agricultural indicates that economic policy reforms
spending in recent years. For example, 10 (which can increase TFP by 4.7 percent) and
African governments7 spend roughly a total investments in R&D (which can increase TFP
of US$1.2 billion annually on input subsidies, by 3.4–4.1 percent) have the greatest impact
primarily on fertilizers. These programs were in raising agricultural TFP in SSA (Table 2.5).
almost phased out in the 1990s, during a
period of structural adjustment in Africa, but
they have made a strong comeback. Their 35 The evidence from the high agricultural
growth periods in South Asia shows that
fertilizer subsidies played little or no role in
return is partly due to residual support for
subsidies among African leaders, even while substantially boosting productivity (Fan,
pressured to phase them out, and partly to Gulati, and Thorat 2008; Gautam 2015).
the uncertainties about food supply during Studies in four Asian countries—Bangladesh,
the 2007–08 global food and fertilizer price India, Indonesia, and Pakistan—conclude
instability. Input subsidies continue to be that fertilizer subsidies were not significant
vastly popular among African politicians as a in farmers’ adoption of technology. They
way to support their constituents. instead identify R&D of new technologies,
irrigation expansion, and other investments,
34 The economic rationale for fertilizer such as roads, as the main drivers (Rashid et
subsidies comes mainly from the al. 2013; Smith and Urey 2002). At the height
motivation that, because of credit and of the Green Revolution, farmers in three of
information constraints, fertilizer use is the four countries (not in Bangladesh) were
suboptimal in most of Africa. The subsidies net-taxed for fertilizer (that is, domestic
could overcome these problems by reducing prices for fertilizers were higher than the
the costs that farmers incur and the barriers world market price), indicating that it was
of affordability, access, and learning. This profitability and not subsidies that drove
justification is often based on the fact that technology adoption during this era (Rashid
fertilizer is used much less intensively in et al. 2013).
Africa than in other regions, particularly
Asia, and that fertilizer use in demonstration
plots provides high returns. But on the
demonstration plots, crops are grown under
7 Burkina Faso, Ethiopia, Ghana, Kenya, Malawi, Mali, Nigeria, Senegal, Tanzania, and Zambia.
35
Table 2.5. Factors affecting agricultural

2.3.9 Deploying Alternative And
productivity
Complementary Investments To
Simulated Complement Policy Reforms
Type of investment increase in TFP
(%)
Doubling spending on international
research
Doubling spending on national research
4.1
3.4
37 In areas where fertilizer or other modern
production technologies are actually
underused, many alternative investments
Economic policy reforms 4.7 can be used to encourage greater uptake.
Doubling irrigation investments 2.9 Alternative policy options can be deployed
Improving labor force schooling 1.3 depending on the prevailing constraint. If
Stopping the spread of HIV/AIDS 2.1 the main bottleneck is that farmers have few
Stopping armed conflicts 0.5 choices of appropriate input technologies
for the main agroecological systems in
Source: Fuglie and Rada 2013.
a country, the best solution may be to
36 Several SSA countries have recently focus on regulatory reform to encourage

implemented changes (or input subsidy spillovers from abroad and investment
policy reforms) to improve the efficiency in domestic research. If the problem is a
and effectiveness of their input subsidy lack of information on the part of farmers,
programs. Countries have replaced public extension services may be the best policy
with private procurement and delivery lever. If one of the underlying causes for
mechanisms, and even put in place low fertilizer use is insufficient cash flow
electronic delivery systems for subsidies for farmers to buy inputs, then efficiently
(as in Nigeria). These appear to be steps in promoting the emergence and growth of
the right direction. But there is no rigorous rural credit markets would address this
empirical evidence to assess whether these constraint. Much can be done by using
changes have significantly improved the innovative ways of providing credit that take
performance of the programs. Even “smart” advantage of new applications of digital
input subsidies have seldom produced information technologies.
benefits commensurate with their fiscal
costs, but they remain politically attractive.
Where subsidies continue to be used, they
38 In terms of complementary investments,
creating demand for fertilizers in Africa
will require lowering the farm gate prices,
should at least be reduced to a modest
where they are higher relative to other
amount in national agriculture budgets, with
regions. This has clear implications for
a clear exit strategy. In the longer term, no
government spending priorities: spending
program will sustainably raise fertilizer use
needs to be aimed at streamlining logistics
until it becomes profitable for farmers to
and reducing costs and risks in fertilizer
buy fertilizer on commercial markets after
supply chains (Jayne et al. 2013). Much of
they graduate from the subsidy program.
this investment is most appropriate for the
private sector, but governments can support
the effort by improving the infrastructure for
fertilizer distribution, reducing regulatory
barriers, and improving profitability through
reduced transport costs.
36
39 Other steps required to stimulate demand

for fertilizer are to enhance research and
extension, and to invest in soil analysis
2.4.1 Improving Budget Planning
And Management
and mapping (to improve soil fertility
management to raise fertilizer response
rates). Input promotion during the high 42 Budgeting needs to start from a stronger
foundation of sector strategies and
national agricultural investment plans,
agricultural productivity periods in Asia and
South America, for example, addressed few of which currently provide much
systemic constraints to productivity through guidance on budget preparation. The
integrated investments in new technologies, investment plans need to give more
extension support, irrigation, and market detailed and quantitative guidance on
linkages. Countries in SSA could get a bigger translating recommendations into spending
impact within the existing expenditure priorities, and adjustments from the most
envelope by moving away from a heavy focus recent implementation period need to
on fertilizer subsidies toward a package of be accompanied by a monitorable results
complementary investments. Reforming the framework. In many countries, the rate
design and implementation of these subsidy of budget execution is dismal. Improving
programs while rebalancing government budget execution rates is essential for
spending in favor of high-return core public demonstrating that the sector can make
goods (Table 2.3) and policies (Table 2.4) good use of additional public resources,
could produce massive dividends. and for persuading ministries of finance
that their budgets must be increased. For
40 Efficient allocation of
for greater impact begins with the
improvement of budget management
resources resources to be used effectively, the focus
must to be on improving the implementation
of development expenditures, the
processes. The reviews of public expenditure predictability of releases from ministries
in the 20 African countries highlighted the of finance, the procurement planning and
importance of aligning agriculture sector implementation system, and the budget
policies and strategies with the investment information management systems to inform
plans, MTEFs and annual budgets as the within-year budget implementation.
first step to technical efficiency in spending.
The next section summarizes the key
recommendations on improving budget 2.4.2 Strengthening Budget
management processes in African countries. Monitoring And Evaluation
2.4 Improving Budget

Management Processes
43 Countries need to strengthen monitoring
and evaluation (M&E) capacity as part
of accountability systems that shift
resources toward effective spending.
41 Another dimension of a strategy to

maximize impacts of public spending
in agriculture is ensuring that the
Ministries of agriculture need more
resources and staff doing M&E, and in
exchange they need to be held accountable
budgetary process supports efficient for demonstrating that budgets are
implementation. There is considerable efficiently and effectively spent. Ministries
variance in budget preparation and of agriculture need to increase recurrent
execution capacity among countries, but spending for this purpose. Budget analysis
there is undoubtedly scope for improvement. capacity has to be established in the sector
37
ministries for expenditure monitoring and of decentralization, of expenditure planning

adjustment within the budget year. Budget capacity as well. Where the momentum of
information systems appear to be improving decentralization and deconcentration is
with the expanded rollout of computerized accelerating, budget information systems
systems by ministries of finance and and information sharing need to be
accountant general offices. developed across all levels of government,
to enable budget planning that leverages
potential synergies and avoids duplication in
2.4.3 Capturing Off-Budget Financing sector spending.
44 Ministries of finance need to put in place

budget information systems that, in
some form, capture off-budget external
2.4.5 Rationalizing Recurrent Spending
partner financing of projects that deliver

public goods and services, which in
some countries is a significant share of the
46 Some countries seem to be underfunding
certain categories of recurrent
expenditures. In some countries, despite
budget. Two fiscal management reforms a significant scaling-up of public spending
that can significantly improve the technical on the sector, there has been no or little
efficiency of expenditure management are increase in some core administrative
implementing a treasury single account functions. Examples of public functions that
system and a centralized civil service involve mainly recurrent expenditures and
information system. appear to be underfunded are maintenance,
core budget planning and implementation,
M&E, and sector regulatory functions.
2.4.4 Shifting To Program Budgeting Underfunding budget planning and M&E
And Building Local Capacity capacity in ministries reduces the quality and
impact of public spending on agriculture.
45 Two other aspects of budget processes Inadequate support to undertake project

are likely to grow in priority but require M&E reduces the ability to track results
attention over several years to build and adjust to improve impacts or reorient
the capacity for improving the quality approaches. Similarly, underfunding
of budget outcomes. The first is a shift recurrent goods and services that are
to program budgeting, as some countries necessary to maintain capital investments
have committed to do. Backward-looking can adversely impact sector performance.
reconfiguration of sector public spending Recurrent budget planning is typically
by program categories to provide the recent conducted as an incremental adjustment
history of composition and trends helps to prior year levels. Yet significant policy
benchmark the programs and the specifics shifts, such as expanding reliance on private
of their expenditure foundation. The second markets for input provision, do not appear
aspect of budget processes that is likely to to be accompanied by funding regulatory
grow in priority is the decentralization and capacity for input quality in markets, a
deconcentration of government functions recurrent function.
in terms of the administration and fiscal
management. This trend flags the importance
of building expenditure implementation
capacity at the local level, and in the case
38
2.5 Conclusions
47 Irrespective of spending targets, the

evidence shows that countries in SSA
have consistently lagged countries in
other developing regions in the quantity
and quality of public agricultural
spending. Nevertheless, raising the volume
of spending requires political consensus—
among development partners, government
decision makers (particularly ministries of
finance), and above all electorates—that
money invested in agriculture will be well
spent. Measures to raise the efficiency
of existing spending in agriculture—and
demonstrating that it has a high impact on
growth and poverty reduction—will make
the case for higher levels of spending much
more persuasive.
48 The key recommendations to (1)

improve the quality of spending, and (2)
strengthen the institutional capacity for
better management of budget processes,
together with the foregoing conclusions,
are relevant for Uganda. The analysis
in the next chapter focuses directly on
Uganda, highlighting the trends in levels,
composition, and efficiency of spending in
the agriculture sector. The analysis attempts
as far as possible to benchmark the Uganda’s
performance with the NEPAD/CAADP targets
and in relation to selected African countries.
Additionally, where possible, Uganda’s
performance will be compared with the
performance of other developing countries
in Latin America, East Asia, and the Pacific.
39
03
UGANDAN AGRICULTURAL PUBLIC EXPENDITURES:
LEVEL, COMPOSITION AND EFFICIENCY
01
This chapter examines public expenditure
in the agriculture sector (PEAS) in Uganda
between 2013/14 and 2017/18. The analysis
Development; the Ministry of Trade, Industry
and Cooperatives; the National Forestry
Authority (NFA); and the Uganda Exports
delves into the level and composition of Promotion Board (UEPB). At the local level,
strictly on-budget (domestic and donor or the District Production Offices spend on
external sources of funds) expenditures agriculture activities as well.
using the World Bank Agriculture Sector
Expenditure Public Expenditure Review
Methodological Note (World Bank 2018a). 03 A crucial element in enhancing agricultural
productivity growth is improving the
provision of productive investments
Section 3.1 summarizes the data sources
and methodology. Note that donors through more and better public spending
account for substantial off-budget spending in the sector. The expectations that high-
in the agriculture sector in Uganda, which quality public spending can bolster growth
is not captured in this analysis, because have been recognized by MAAIF and
information on off-budget expenditures MoFPED, and over the years they have
(estimated to be 10–20 percent of the total intensified efforts to improve both the
sector budget) is fragmented, difficult to level (quantity) and quality (effectiveness)
obtain, and largely ignored by planners and of public spending. There are significant
policy makers. Another type of spending differences in the rates of return to different
that is not captured in the analysis is the categories of agricultural spending. Many
significant spending by non-governmental studies find quite low returns to aggregate
organizations and the private sector spending in agriculture. But almost all find
(agribusinesses), conservatively estimated at high returns to specific types of spending,
about 10 percent of the total sector budget. such as investments in core public goods
That spending poses additional problems related to technology generation, diffusion,
for coordinating and harmonizing the market links and infrastructure (Goyal and
agriculture sector budget. Nash 2017). In some countries, a large part
of the public spending in agriculture goes to
02 The analysis focuses on public resources

expended on the agriculture sector by a
number of agencies at the central and
low-return activities, dragging down overall
returns relative to what they could have
been if resources were allocated to the
local government levels. At the national higher-return activities.
level, MAAIF is the lead ministry responsible
for the agricultural expenditures, along with
six semi-autonomous government agencies 04 Although additional public spending
is required for agriculture in Uganda,
two important points must be borne in
(SAGAs): (1) NARO, (2) the NAADS Secretariat,
(3) the Uganda Cotton Development mind. First, the current level of spending
Organization (UCDO), (4) the Uganda Coffee is consistent with Uganda’s narrower fiscal
Development Agency (UCDA), (5) the Dairy space (as discussed in Section 3.1) and its
Development Authority (DDA), and (6) the greater need to invest in infrastructure and
National Animal Genetic Resource Centre human development. Second, international
and Data Bank (NAGRC&DB). But there are experience shows that lower public
also agriculture-related expenditures under spending does not necessarily amount to
the Office of the Prime Minister (OPM); the lower agricultural competitiveness, but
Ministry of Local Government (MoLG); the inefficient spending does. For example,
Ministry of Water and Environment (MWE); the large farm subsidies (spending on
the Ministry of Lands, Housing and Urban private goods) in the United States and
41
European Union have failed to keep farmers discussed in Chapter 2, public spending on
competitive internationally, while the modest agriculture is efficient if it is directed toward
public expenditures (spending on public generating knowledge (often in the form
goods such as research and development, of technology), disseminating knowledge
extension and advisory services, as well (technology), reducing transaction costs,
as regulatory aspects) on agriculture in and attracting private capital. Deliberate
Brazil, Australia, and New Zealand have not actions are therefore needed to improve
prevented farmers in those countries from the efficiency and effectiveness (quality or
being highly competitive on world markets. impact) of public spending.
05 The importance of getting the greatest

impact from public spending in
agriculture is further amplified by
07 This analysis examines the efficiency
(making the best use of inputs to provide
outputs in the form of public services)
competing national priorities. Increasingly of public spending in agriculture from
there is competition for budgetary allocation several angles. It investigates administrative
between agriculture and other key sectors efficiency by looking at the distribution of
of the economy, including education, health, sector spending across administrative units
and infrastructure (energy, transport, (central and local governments) at different
water), which are also critical for the overall geographic (regional) levels; it looks at
growth, national development, and poverty technical efficiency (doing things well) by
reduction. Even though budget will shift considering institutional aspects (capacity
to other areas, notably infrastructure and to better plan, manage and execute the
human development, these shifts will budget); it explores economic efficiency
indirectly benefit the agriculture sector (by by analyzing trends in recurrent (wage
helping to reduce transportation costs, bill and non-wage bill) and development
increase access to markets, reduce post- (current and capital outlays) spending; and it
harvest losses, and increase value addition examines functional efficiency by looking at
through agro-processing). Under the the composition of spending across various
decentralization policy, within the agriculture functions (infrastructure, R&D, extension
sector budget itself, resources are expected and advisory services, regulatory services).
to continue to shift from the central (MAAIF
and its agencies) to the local government
level. "Given this outlook, it is more critical 3.1 Data Sources and Methodology
than ever to ensure that scarce budgetary
resources are used in a highly efficient and
effective way at all levels in the sector". 08 The analysis for this Uganda AgPER relied
on data provided by MoFPED and drew
on two sources:
06 MAAIF and MoFPED recognize that

increasing the volume of public spending
in agriculture will be necessary but not
i. The MoFPED/World Bank BOOST public
expenditure database, April 2018
sufficient to spur sector transformation version, which covers 2003/04–2016/17.
and poverty reduction. Spending is For 2016/17, only budgeted amounts are
allocated efficiently when it is used to available in the database.
support the delivery of public goods (instead
of private goods, such as subsidies) that are ii. IFMS budget data from MoFPED for
most capable of spurring inclusive agriculture 2016/17 (includes both budgeted
sector growth (doing the right things). As amounts and expenditures) and 2017/18
(includes budgeted amounts only).
42
09 These two data sources were combined

to compute the PEAS indicators for
2013/14–2017/18. The combination of the
12 The analysis draws on an approach to
reviewing PEAS that builds on previous
work done by African governments
BOOST and MoFPED datasets resulted in a in collaboration with the World Bank,
single Excel raw data file containing about the Food and Agriculture Organization
127,000 lines of budget data. The analysis (FAO), and the African Union (AU) (World
used 20 core variables extracted directly Bank 2011; MAFAP 2015; AU 2015). In this
from the BOOST and MoFPED database.8 analysis, the perimeters of expenditure
considered as PEAS are delineated
10 Four more variables were constructed, as

follows:
and defined by four characteristics:
time, functions, administrative units,
and economic categories. According to
i. Scope: a variable that specifies whether
the International Monetary Fund (IMF)
the expenditure line is considered as
Government Finance Statistics (GFS) manual,
PEAS or not (included/excluded).
a functional classification of expense
“provides information on the purpose
ii. Subfunction: all expenditure lines that
for which an expense was incurred” (IMF
qualify as PEAS are mapped to a set of
2014). The functional core perimeter of
categories describing subfunctions,
agriculture thus defines what is considered
such as subsidies, research, extension,
as an expenditure whose function is to
infrastructure, and so on.
support agriculture directly. Expenditures
iii. Subsector: all expenditure lines that that support agriculture indirectly (through
qualify as PEAS are mapped to a set of positive externalities or long-term impact)
subsector categories, namely livestock, are not included in the functional perimeter.
cash crops, crops (general), forestry, and
fisheries.
13 The functional perimeter is based on
the Classification of the Functions of
Government (COFOG). The COFOG is a
iv. Commodity: all expenditure lines that
qualify as PEAS are mapped either to functional accounting system developed by
single commodities, commodity groups, the Organization of Economic Co-operation
or “all commodities.” and Development (OECD) and the United
Nations Statistics Division. It classifies public
11 Data gaps and implications

summarized in Table A2.1 in Annex 2.
The most critical data gaps are: (1) the
are expenditure by “functions or socioeconomic
objectives that general government units
aim to achieve” (IMF 2014). This perimeter is
geographical mapping of expenditures in further disaggregated into a sub-functional
the data sources was not fit for the purposes perimeter, using the methodology for
of the analysis; and (2) no disaggregated analysis of public expenditure on food and
expenditure data were available for agriculture of the Food and Agriculture
Operation Wealth Creation (OWC). Organization (FAO). The methodology
developed by FAO’s Monitoring and
Analyzing Food and Agricultural Policies
(MAFAP) program offers sub-functional
categories which are labelled “COFOG-
compatible”; that is, they can fall within
8 The whole set of variables can be found in Uganda’s BOOST database at boost.worldbank.org/country/Uganda.
43
the COFOG perimeter (MAFAP 2015). The (growing at an average of 20 percent per
detailed description of the data sources and annum), both in absolute values and in
methodology for analyzing the levels and per capita terms. The spike observed in
composition of public expenditures in the 2016/17, an electoral year, also coincides
agriculture sector in Uganda are provided in with the end of the Agriculture Sector
Annex 2. Development Strategy and Investment
Plan (DSIP) 2010/11–2014/16 and the
introduction of the new ASSP 2015/16–
3.2 Level of Public Expenditure 2019/20. Nonetheless, PEAS remained, on
in Agriculture average, at about 3.6 percent of total public
spending, much below the target. Uganda is
14 Recognizing the sector’s importance for not unique, however; in 2014, only Burkina
the national economy, the Government Faso, Malawi, Mozambique, and Zimbabwe
of Uganda (GoU) remains committed had barely met or surpassed the 10 percent
to funding agriculture. The GoU signed target (Malawi and Mozambique consistently
the African Union’s Maputo Declaration surpassed it). Three other countries—Niger,
in 2003, thereby committing to allocate Rwanda, and Zambia—were close behind at
at least 10 percent of its public budget to 9 percent. Overall, the annual average share
agriculture. It renewed this commitment of agriculture in total spending in Africa is
in the 2014 Malabo Declaration. The 2010 about 4.0 percent, and its annual growth
Uganda CAADP Compact9 underlines the rate is 0.8 percent.
necessity of meeting the 10 percent target
to achieve a 6 percent growth rate in annual
agricultural GDP, which is also an objective 16 "The low prioritization of the sector in
public spending contrasts sharply with
the weight of agriculture in the Ugandan
of the Malabo Declaration. The ASSP
2015/16–2019/20 indicates that Members economy", given that agriculture accounts
of Parliament adopted a resolution in 2011 for around one-quarter of national GDP and
that would increase the share of agriculture about 70 percent of employment. Again,
in the public budget to 7 percent in 2012/13, this fact is not surprising, as most African
and up to 10 percent thereafter. The ASSP countries spend much smaller proportions
notes that significant scope exists to scale of the public budget on agriculture than
up public expenditures on agriculture to the sector’s share in the economy. Public
meet the set 10 percent target. spending on agriculture as a share of
agricultural GDP in Africa is about 5.18
15 Despite this commitment and vigorous percent, substantially lower than in other
increase in recent years, PEAS in Uganda regions of the world.
has fallen short of the 10 percent target
of total public spending. Table 3.1 outlines
the main economic and spending indicators 17 General and annual trends also hold true
in constant terms. Table 3.2 replicates
some key PEAS indicators in constant
for the agriculture sector in relation to the
national economy. The PEAS, measured both terms. As previously shown, PEAS spiked
in nominal and relative terms, increased in Uganda in 2016/17, after stagnating in
markedly between 2013/14 and 2017/18 2013/14–2015/16. Expressed as spending
per rural inhabitant, the level of spending on
9 CAADP is the Comprehensive Africa Agriculture Development Programme, a pan-African policy framework to promote agriculture
sector growth and economic development. More than 40 African Union Member States have signed CAADP compacts, and more
than 30 have developed national agriculture and food security investment plans. See (https://www.nepad.org/caadp).
44
agriculture increased considerably in 2016/17 but did not extend into 2017/18. The increase of PEAS
in 2017/18 was lower than the increase in total PE, pushing shares of PEAS in the total budget down
again.
Table 3.1. Main PEAS indicators (nominal USh billions)
Average
2013/14 2014/15 2015/16 2016/17 2017/18 Average
growth rate
Budgeted PEAS 716 776 711 1,228 1,337 954 20%
Final PEAS 408 417 467 971 . 565 41%
Final PEAS per capita (USh) 16,957 16,774 18,146 36,460 . . 36%
Final PEAS per rural capita (USh) 13,733 13,678 14,915 30,240 . . 37%
Budgeted PE 14,033 15,767 23,977 26,251 29,009 21,807 21%
Final PE 9,701 12,114 16,643 24,098 . 15,639 36%
Agricultural GDP 17,371 18,350 19,655 22,744 25,343 20,693 10%
GDP 69,276 76,517 82,903 91,351 97,666 83,543 9%
Share AgGDP/GDP 25.0% 24.0% 24.0% 25.0% 26.0% 25.0% 1%
Share budgeted PEAS/PE 5.1% 4.9% 3.0% 4.7% 4.6% 4.5% 3%
Share final PEAS/PE 4.2% 3.4% 2.8% 4.0% . 3.6% 2%
Share final PEAS/AgGDP 2.3% 2.3% 2.4% 4.3% . 2.8% 27%
Share final PEAS/GDP 0.6% 0.5% 0.6% 1.1% . 0.7% 28%
Source: GDP figures from UBOS (2017).

Note: Budgeted amounts were assumed to be equal to actual (final) amounts for external financing over 2013/14–2015/16, as donor
actuals were not available in the data for those years. As a result, the share of final PEAS within total PE might be overestimated. Blank
cells with dots mean that data were not available. Averages excluded 2017/18 whenever data were missing for that year.
Table 3.2. Main PEAS indicators (constant 2013 USh)
Average growth
2013/14 2014/15 2015/16 2016/17 2017/18 Average
rate (%)
Budgeted PEAS 716 753 654 1,067 1105 859 15%
Final PEAS 408 404 429 844 . 521 34%
PEAS per capita 16,957 16,274 16,672 31,692 . 20,399 30%
PEAS per rural capita 13,733 13,269 13,703 26,285 . 16,748 31%
Budgeted PE 14,033 15,297 22,029 22,818 23,966 19,628 15%
Final PE 9,701 11,753 15,291 20,946 . 14,423 29%
Agricultural GDP 17,371 17,802 18,058 19,769 20,938 18,788 5%
GDP 69,276 74,233 76,168 79,403 80,688 75,954 4%
Source: Amounts in constant terms computed from Table 3.1 using the Consumer Price Index obtained from UBOS (2018).
18 The low prioritization of agriculture in public budgets is not uncommon across the developing
world. Between 2013/14 and 2015/16, the average share of agricultural public expenditures in
central government budgets stood at 2 percent for SSA (Table 3.3). Average shares were even lower
in Northern Africa (1.7 percent), as well as in Latin America and the Caribbean (0.7 percent). In South
East Asia, however, shares were slightly higher, averaging 3.7 percent. At 3.6 percent, the average
share of PEAS in Uganda over 2013/14–2015/16 is low in comparison with other countries in the
EAC. It is almost one-third of that of Burundi (9.7 percent) and about two-thirds of that of Rwanda
(5.3 percent) and Kenya (5.7 percent). Hence, while few African countries meet the ambitious 10
45
percent target, by increasing the share of administrative units, the analysis attempts
PEAS, for Uganda it is the quality of spending to determine the most efficient and effective
that matters the most. Thus, for MAAIF, the ways of allocating PEAS.
first step should be to improve the efficiency
and effectiveness of spending of the current
share of PEAS to strengthen the case for 3.3.1 Administrative Efficiency
increased allocation.
Table 3.3. Percentage share of final PEAS in Global and Regional Context
national budgets across countries of the East
20
African Community and developing regions Planned budget allocations favor a shift
from advisory services to MAAIF and
2013/ 2014/ 2015/ its SAGAs. The ASSP 2015/16–2017/18
14 15 16 Average
budget provides indicative cost estimates
Uganda 4.2 3.4 2.8 3.5
for the strategies that contribute to the
Other EAC countries
outcomes of the plan. These estimates
Kenya 5.2 6.5 5.5 5.7
serve as a basis for deriving reference
Tanzania 3.6 4.1 4.0 3.9
budgetary allocations for the agriculture
Rwanda 3.7 5.5 6.7 5.3
sector agencies. The ASSP budget
Burundi 7.0 11.0 11.0 9.7
designates the institutions responsible for
Other regions
all activities under all strategies. Based on
Northern Africa 1.9 1.59 1.47 1.7
the mapping described in Section 3.1, yearly
Sub-Saharan Africa 2.08 2.28 1.72 2.0
estimates were computed for all agriculture
Latin America and
the Caribbean 0.75 0.7 0.78 0.7 sector institutions. The resulting detailed
South East Asia 2.83 4.02 4.11 3.7 allocations are given in Table A3.1 in Annex
3 and summarized in Figure 3.1. Collectively,
Source: Shares for the other EAC countries obtained from FAO- MAAIF, NAADS, and NARO capture the bulk of
MAFAP (2018), by computing the share of “agriculture-specific
expenditures” in “total public expenditures.” Shares for other allocations in the sector (approximately 73.6
developing regions from FAO-GEA (2018). percent), but the composition has shifted
sharply in favor of MAAIF (about 39 percent)
at the expense of extension and advisory
3.3 Efficiency of Public Expenditure services. NAADS budget remained flat over
in Agriculture the 2015/16-2017/18 and was projected to
decline in 2018/19.
19 This analysis looks at the allocative

efficiency (doing the right things) among
the administrative units (including MAAIF
and its SAGAs), local governments, and
geographic distribution. Public spending on
agriculture is efficient if it is directed toward
generating knowledge (often in the form
of technology), disseminating knowledge
(technology), reducing transaction costs,
and attracting private capital. Based on
the functions performed by the various
46
Figure 3.1. Estimated budget allocations for agriculture sector agencies in the ASSP 2015/16–2019/20
(USh billions) (in the table, left) and relative proportions (in the figure, right)
2015/16 2016/17 2017/18 100%
MAAIF and sub-branches 149 293 327
NAADS 133 136 136

50%
NARO 80 97 103
Other SAGAs 47 49 51
Local governments 30 95 100 0%

2015/16 2016/17 2017/18
Donor agencies 19 75 109
Other 4 12 12 MAAIF & sub-branches NAADS
NARO Other SAGAs
Total 463 757 838 Local governments Donor agencies
Note: Totals in the table are smaller than PEAS totals given in Table 3.1, given that the PEAS definition used in this review is larger than
the one used in the ASSP.
21 It can be argued that the increase in

allocation to MAAIF is consistent with
the transfer of extension and advisory
the nominal expenditure levels). NAADS
was the biggest standalone expenditure
item, averaging 30 percent of PEAS across
functions from NAADS to the ministry. 2013/14–2016/17, before MAAIF became the
However, unless the additional resources largest spending unit in 2017/18. The bulk
are disbursed to the local governments as of NAADS spending, though, went to finance
production grants, this move is contrary the input subsidies under the OWC program.
to the spirit of decentralization. Budget This way of spending public resources—
figures over 2016/17–2017/18 reveal that namely, allocating public expenditure on
the increase in the local government budget private goods—is economically inefficient.
was insignificant (about 5 percent). Given The approach used to distribute subsidized
that it is the function of local governments inputs has been technically inefficient as
to provide frontline agricultural services well: it favored the wealthiest farmers, who
such as extension and advisory services, can already afford the inputs. Nor did it
market information services, and rural strengthen private input suppliers, improve
infrastructure (rural and feeder roads, the targeting of subsidies (through the use
small scale irrigation, rural markets, and of e-vouchers, for example), or invest in rural
storage facilities), this trend needs to be infrastructure to reduce transaction costs
reversed. "MAAIF should improve the quality and ensure that farmers can obtain inputs
of spending by disbursing the additional easily.
budget to the local governments to enhance
service delivery", which is necessary for
increasing agricultural productivity.
22 Actual disbursements, overall, follow

the same general trends. Table 3.4
summarizes the share of each agency in
the total disbursements of public funds in
agriculture (Table A2.4 in Annex 2 provides
47
Table 3.4. Distribution of PEAS across various national ministries and agencies (% of total final
expenditure)
Agency 2013/14 2014/15 2015/16 2016/17 2017/18† Average

MAAIF and sub-branches 17% 22% 16% 16% 25% 19%
NAADS 18% 38% 39% 33% 21% 30%
NARO 8% 9% 8% 10% 7% 8%
Other SAGAs 5% 7% 13% 12% 8% 9%
Rural development-related ministries 16% 13% 17% 22% 32% 20%
Local governments 37% 11% 4% 6% 7% 13%
Other 0% 0% 1% 1% 1% 1%
Total 100% 100% 100% 100% 100% 100%
Note: † Budgeted amounts (not final expenditure) are used for 2017/18. For other years, final expenditure is used. “Rural development-
related ministries” include MoLG and the Ministry of Water and Environment. “Other” includes the National Forestry Authority and the
Uganda Export Promotion Board.
23 NARO was the second-biggest spender

within the group of agricultural SAGAs.
This finding is consistent with the analysis of
percent in Latin America and the Caribbean,
0.6 percent in East Asia and the Pacific, and
0.9 percent in South Asia.
impacts of different types of public spending
in Africa described in Chapter 2, which finds
that R&D generates the highest returns to 24 Spending on agriculture by rural
development-related ministries
Uganda, particularly by MoLG, increased
in
investments in the sector. Large countries
in Africa have earned higher returns to R&D significantly in 2016/17. The increase
(an internal rate of return of 43 percent) can be attributed to the launch of the
than small countries (an internal rate of Project for the Restoration of Livelihoods
return of 17 percent), but even in small in the Northern Region and enhanced
countries, returns were still high enough spending within the Community Agricultural
(higher than a discount rate of 10 percent) Infrastructure Improvement Program (about
to justify the investments. Research shows USh40 billion each). These initiatives were
that recent spending by the CGIAR centers part of the GoU’s effort to provide targeted
in Africa has generated US$6 in benefits public services to areas that were previously
for every US$1 spent on research. Returns affected by conflicts and that currently have
to spending by national agricultural R&D high poverty rates and poor infrastructure,
agencies have been relatively lower but still which is warranted. As seen in Chapter
significant, averaging about US$3 in benefits 2, spending on productive investments
for every US$1 spent. In 2006, the NEPAD related to the development and diffusion
set an additional target to increase public of technological improvements, greater
spending on agricultural R&D to at least 1 connectivity in rural areas, and irrigation
percent of agricultural GDP, a target that development has done more to reduce
few African countries have met. Over the last poverty in Asia than input subsidies.
decade, spending on agricultural research
constituted about 0.4 percent of agricultural
GDP in SSA, compared with 1.3
25 At the agency level, however, some
notable gaps appear between planned
expenditure and actual disbursements.
Figure 3.2 shows the gaps between target
allocations and observed allocations for
48
selected agencies in the agriculture sector for increased productivity and enhanced
over 2015/16–2017/18. In those years, resilience in the agriculture sector.
NAADS received significantly more than its
planned budget, whereas MAAIF fell below
its targets by relatively similar percentages. 26 The tendency to prioritize NAADS is
also observed in the Medium-Term
Expenditure Frameworks (MTEFs). In the
NARO has also been receiving lower
allocations than expected. The other SAGAs 2015/16 MTEF, the share of MAAIF in the
were over-funded in relative terms, and so agriculture sector budget was projected
were the local governments. These gaps are to move from 28 to 35 percent between
examined in more detail in the next section. 2015/16 and 2017/18, while the share of
But the implications here are that either the NAADS was projected to move from 48 to
ASSP targets were set arbitrarily too high 54 percent. In the most recent 2017/18
for MAAIF and agencies, NARO, and local MTEF, the average MAAIF budget share for
governments, or for some political reasons 2016/17-2017/18 is 33 percent, and the
it was decided to increase the allocations for share of NAADS is 38 percent. While the
NAADS at the expense of the core functions MTEF foresees the MAAIF share declining to
of the ministry (policy and regulatory), 25 percent in 2020/21, the share of NAADS is
NARO (R&D), and local governments projected to move up and reach 51 percent
(extension services). If not corrected, this in that year. These MTEF allocation targets
could adversely impact the adoption of are inconsistent with the ASSP targets.
new technologies, which are necessary
Figure 3.2. Gaps between observed (final) PEAS allocations and ASSP targets for selected agriculture
sector agencies (deviations from relative shares)
30%
20%
10%
0%
-10%
-20%
-30%
MAAIF & NAADS NARO Other SAGAs Local governments
sub-branches
2015/16 2016/17 2017/18*
Note: Gaps for 2017/18 computed using budgeted expenditures from the PEAS database. Because the scope of expenditures under the
ASSP and the scope of PEAS used in the present review do not overlap precisely, shares were compared looking only at the restricted set
of agencies displayed in the figure.
49
27 The increase in NAADS budget, which is

mainly used to finance input subsidies,
means that more public resources are
access to improved technologies, and
induce proactive participation in value chain
development.” The ASSP describes the
spent on private goods. In addition, responsibilities of local governments more
the increase in NAADS budget for input generically, saying they are to “collaborate
subsidies will distort the factors market and with MAAIF on matters of increasing
crowd out the private sector. While some production and commercialization of
attempts were made to rebalance budgets agriculture” (MAAIF 2016:68).
in favor of MAAIF around 2015/16 (the year
in which the ASSP was introduced), the most
recent budget projections from MoFPED 30 In the PEAS database compiled for
this review, district-level spending
on agriculture relates to three major
indicate that NAADS is expected to increase
its dominance as a budgetary recipient in the subfunctions. Extension services is by far
coming years. Plans outlined in the ASSP for the largest subfunction, followed by input
the administrative organization of the sector subsidies and, to a smaller extent, feeder
appear to have only a limited influence on roads. Local governments in Uganda thus
the annual budgetary process and decisions have a key role to play in providing basic
for the sector. goods and services to smallholder farmers
to increase agricultural productivity.
Decentralization
31 The decentralization objectives are
not fully matched with corresponding
28 The GoU is committed to decentralization. allocation of resources. Using the ASSP

The country’s second NDP 2015/16– budget plan as a reference (Figure 3.1),
2019/20 includes a chapter on subnational decentralized spending on agriculture
development, with proposals to strengthen was supposed to increase to 12 percent
local governments by expanding their in 2017/18. After that, it was supposed
capacities for service delivery and by scaling to stay at around 10 percent through
up their revenue base. These objectives are 2019/20. During the period under this
regularly referenced in budgetary documents review, however, less than 10 percent of the
for the agriculture sector. For example, the sector spending went to local governments.
Sector Budget Framework Paper 2014/15 Over 2015/16–2017/18, the share of PEAS
says that the “Government will continue to going to local governments increased but
provide agricultural services through the remained below 12 percent. The low share10
decentralized system of government and needs to be seen from the perspective of the
will work to strengthen it.” general underfunding of the sector, implying
that local governments have in effect been
29 The Agriculture Sector DSIP 2010/11–

2014/15 outlines several core functions
of local governments for public service
left with very limited resources to deliver on
their assigned mandates. The underfunding
of local governments echoes concerns
delivery in agriculture: “deliver regulatory from MoFPED about budget absorption
and quality assurance services, collect capacity and the quality of service delivery in
agricultural statistics and information, decentralized spending units (BMAU 2014).
deliver advisory services to increase farmer These circumstances may trigger a vicious
10 Note however that some of the PEAS at the decentralized level may not have been included in this analysis, given that the project
output descriptions did not allow them to be identified properly.
50
cycle in which decentralization is further and political tensions that can emerge from
constrained because MAAIF and MoLG stark differences in economic development
become reluctant to transfer money to the across regions.
districts. Country-wide agencies like NAADS
are preferred owing to their better track
record in public services delivery. 34 The spatial disaggregation of PEAS shows
that indeed spending for a good cause
favors the Northern Region. The BOOST
public expenditure database12 and the IFMS
Geographic Distribution datasets of MoFPED make it possible to
disaggregate PEAS down to the regional level,
32 The ASSP does not provide very precise

spatial targets for agricultural spending
in Uganda. It merely states that the list
up to 2016/17. The share of PEAS allocated
to the regions closely matches the share of
PEAS allocated to districts and municipal
of priority commodities has been defined councils (the average shares are displayed
based on national agroecological zones in Table A2.4, Annex 2). Decentralized PEAS
(MAAIF 2016: 69). The NDP 2015/16–2019/20 chiefly targets the Northern Region, followed
says that the Northern and Eastern Regions by the Western Region and the Central and
should receive specific policy attention Eastern Regions. Per capita PEAS is also
because of their higher poverty rates and persistently higher in the Northern Region
potential for instability. Focus areas include (Figure 3.3). According to the poverty
productivity improvements in agriculture, assessment report (2016), households in
fishing, and agroprocessing. Uganda’s Northern, Eastern, and Western
Regions have much lower levels of human
33 According to the Ugandan poverty

assessment report (2016), regional
variations in poverty are large and
capital, fewer assets, and more limited
access to infrastructure than those in the
Central Region. The Northern Region is the
increasing, with most of the poor worst off, largely because conflict took lives,
concentrated in the north and east. In damaged communities, destroyed assets,
2006, approximately 68 percent of the poor and had lasting effects on the aspirations of
lived in the Northern and Eastern Regions.11 many individuals. In addition, households in
By 2013, this proportion had increased to the north are relatively large and more likely
84 percent. About 47 percent of the poor to be headed by a woman who has not had
live in the Northern Region and another 37 any formal education. The Eastern Region
percent live in the Eastern Region. In the also lags the Central and Western Region in
North East subregion, almost three in four nearly all of these metrics.
residents (74 percent) live below the national
poverty line. This subregion is also the least
populous. Poverty is also high in the Mid-
Northern subregion, where 35 percent of
the population lives in poverty. The report
concludes that a focus on the Northern and
Eastern Regions will be needed for Uganda
to end extreme poverty and boost shared
prosperity, as well as to reduce the social
11 Uganda poverty assessment report (2016).
12 See http://boost.worldbank.org/country/uganda.
51
Figure 3.3. Disaggregation of decentralized PEAS (final) by region (left); per capita PEAS (final) by
region (USh) (right)
100% 9000
90% 8000
80% 7000
70% 6000
60% 5000
50% 4000
40% 3000
30% 2000
20% 1000
10% 0
0% 2013/14 2014/15 2015/16 2016/17
2013/14 2014/15 2015/16 2016/17 Central Region East Region
Central Region East Region North Region West Region North Region West Region
Source: Per capita amounts given in the right-hand figure were obtained using population figures from UBOS (2016).
Note. No regional disaggregation of budgeted PEAS is available for 2017/18.
35 This pattern does not follow from

differences in population levels. In fact,
population in the Eastern and Central
imbalances (reducing inequality and
poverty), as well as by opportunities for rapid
agricultural productivity growth. In a way,
Regions is higher than in the Northern and and if well managed, such targeted spending
Western Regions. The budgetary focus on the can help address historic inequalities in the
Northern Region is in line with the objectives distribution of public goods and services in
of the NDP, but the low share of the Eastern Uganda for poverty reduction and shared
Region is probably not. The difference can prosperity.
be explained by the large donor-funded
projects that are targeting the conflict and
poverty-stricken northeastern areas, unlike
the Eastern Region, which depends largely
on domestic resources. PEAS targeting the
Northern Region tends to flow to areas
where agricultural potential is high, which
are not always the areas where poverty is
concentrated (see Box 3.1. ). This resource
flow is probably consistent with the general
hypothesis that the elasticity of agricultural
production with respect to spending in
the sector will be higher in areas with high
agricultural potential because of favorable
natural endowments and if the overall policy
environment is conducive to a positive supply
response. Geographic PEAS allocations thus
seem to rightly be guided by the country’s
need to correct broad socioeconomic
52
Box 3.1. Geographic disaggregation of PEAS
Uganda’s Northern Region is poorer and less populous than other regions of the country. The region extends across almost
35 percent of the national land area, and although it has only 21 percent of the country’s population, it has around 44
percent of the country’s poor.† Even if some degree of stability has been observed in recent years, the Northern Region has
been through decades of violent conflict and remains a fragile area. Value-added per acre tends to be lower in the Northern
Region than in other regions, both for rich and poor farmers.‡ The region has significant agricultural potential,§ but there
are significant constraints, such as poor enforcement of land tenure regulations.†† Economic performance varies within the
Northern Region. The Karamoja, Sebei, and Bugisu subregions (in the northeastern part of the region) are generally poorer
than subregions in the northwestern part (Acholi, Lango, and Teso).‡‡ Karamoja is an arid agroecological area, and Sebei
and Bugisu are much smaller. The table offers insights on PEAS allocations at the subregional level.
Final PEAS among the subregions of Northern Region, Uganda
Subregions of Northern Region 2013/14 2014/15 2015/16 2016/17

Teso, Lango, and Acholi 46% 48% 55% 51%
Karamoja, Sebei, and Bugisu 18% 18% 16% 17%
Other subregions 36% 34% 29% 31%
A mapping of GDP per capita across districts by the United States Agency for International Development (USAID) confirms
the Northern Region’s richer districts are in the Teso, Lango, and Acholi subregions.§§ As the table indicates, PEAS chiefly
targets those subregions, which are also more suitable for farming, especially in comparison with the arid northeastern
subregions. Both agricultural potential and growth potential seem to be major drivers of decentralized PEAS in the Northern
Region, along with poverty mitigation and efforts to channel public resources to the fragile zones of the country.
Source: † UBOS (2017). ‡ World Bank (2010b: 8). § Löwe and Phiona (2017). †† World Bank (2010b: 23).
‡‡ World Bank (2016a: 18). §§ USAID (2017: 10).
management capacity, improper appraisal

3.3.2 Technical Efficiency
and feasibility work, poor coordination of
project preparation and implementation
36 Technical efficiency (doing things well) in

public spending involves making the best
use of inputs to provide outputs in the
between MAAIF and local governments, and
inadequate operating budgets for technical
staff are within the purview of the ministry
form of public services. Most of the donor- itself. These constraints result in high cost
funded projects are being implemented overruns, low-quality work, and other kinds
inefficiently for various reasons. But not of wastage. Although budget execution rates
all of the blame for technical inefficiency are high for domestic resource spending
rests with MAAIF. Constraints such as on agriculture13 (approximately 90 percent
delayed budget ratification by Parliament, for the years under review), the execution
and untimely and insufficient release of rates for external resources (donor-
counterpart funds by MoFPED, are beyond funded projects) are low. Given that capital
MAAIF. They were identified during AgPER expenditures account for a large share of
2010, but to date are still unresolved. the development projects, MAAIF must work
These constraints cause several years to with MoFPED to address these constraints,
pass before a donor-funded project can prior to making a convincing case for scaling
be launched in Uganda. Other constraints, up funding for agriculture.
including weak procurement and financial
13 Execution rates for donor spending could not be computed as actual (final) amounts, for donor sources are not available in the
latest version of the database.
53
37 A sizable proportion of resources

budgeted for the agriculture sector
in Uganda comes from donor-funded
under OWC, reaching about 31 percent of
the PEAS in 2016/17. In 2017/18, the share
of externally funded PEAS going to MoLG
projects. From 2013/14 through 2017/18, declined sharply, while the share of MAAIF
budgeted amounts recorded under MAAIF continued to increase, probably because the
spanned 25 projects on average. "During this extension services function was transferred
period, as much as 33 percent of agriculture from NAADS to MAAIF. Given this increase,
sector budgets flowed from external sources MAAIF needs to improve technical efficiency,
through donor-funded projects". Such a high by aligning the donor funding with the ASSP
share may weigh negatively on the stability target. In other words, it must ensure that
of PEAS and create institutional distortions, external resources are financing national
such as wage gaps and the related movement priorities that are necessary for achieving
of skilled personnel from regular positions the ASSP objectives. MAAIF also needs to
in the civil service to “project” positions. An develop an effective framework for capturing
additional consequence of the high donor the off-budget spending by donors; then
presence in agriculture is “projectization,” MAAIF could track the off-budget spending
which is the tendency of projects with a in the sector and assess its impacts.
lifespan of three to five years to become
the usual way of intervening in the sector.
The lack of a programmatic approach for
using external sources of funds limits the
impact of individual projects and increases
transaction costs. Consistent with the Paris
Declarations on increasing development
effectiveness, MAAIF should move away
from a project mode to a programmatic
approach, implemented through a better
donor coordination framework.
38 In recent years, MAAIF has assumed a

much weightier role in managing donor
funds. Figure 3.4 shows how budgeted
external financing has evolved across votes
(ministries and agencies). Donors tended
to allocate a minor share of their resources
to MAAIF in 2013/14 and 2014/15. In those
years, on-budget support to agriculture and
rural development was mostly channeled
through MoLG and NARO. At that time,
donors were mainly supporting extension
services through NAADS programs and
R&D activities under NARO. From 2015/16
onward, however, shares of external
financing going to MAAIF rose, as donors cut
back their support to NAADS. This reduction
occurred as NAADS shifted its focus from
extension services to input distribution
54
Figure 3.4. Distribution of budgeted external financing in support of the agriculture sector across
votes
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2013/14 2014/15 2015/16 2016/17 2017/18
Office of the Prime Minister Ministry of Agriculture, Animal Industry and Fisheries
Ministry of Local Government Ministry of Water and Environment
National Agricultural Research Organisation
39 Increased spending from external

sources not only leads to the increase
in PEAS, but also creates a fiscal space
seldom produced benefits commensurate
with their fiscal costs, although they remain
politically attractive. Therefore, where
for increasing the allocation of domestic subsidies continue to be used, they should
resources across agencies. Figure 3.5 at least be reduced to a modest amount in
depicts the allocation of domestic funds by national agriculture budgets, with a clear
agency. As mentioned, noteworthy changes exit strategy. In the longer term, no program
include an increase in the shares of NAADS will sustainably raise fertilizer use until
and MoLG in total agricultural spending it becomes profitable for farmers to buy
in recent years, particularly the 2016/17 fertilizer on commercial markets after they
spike (70 percent). In line with this trend, graduate from the subsidy program.
donor contributions to the budget rose by
around 150 percent. The money was chiefly
channeled to MoLG and MAAIF. Interestingly, 40 Technical inefficiencies, however, have
emerged from how subsidized inputs are
being delivered to farmers. Considerable
contributions of domestic resources
to the MAAIF budget remained stable volumes of inputs are distributed under
throughout 2015/16–2016/17, implying that OWC, ranging from seed (maize, beans,
the nearly twofold increase in the MAAIF soybeans, rice, sorghum, groundnuts, and
budget (see Table A2.4 in Annex 2) came Irish potatoes) to banana plantlets, heifers,
from the increase in external resources. layers and broilers, and tilapia and catfish
Meanwhile, donors stayed out of NAADS, fingerlings. While these inputs are not
and contributions of domestic resources to costed in the National Budget Framework
the NAADS budget increased by 78 percent. Paper (NBFP) they average US$100 million
As noted, the increase in the NAADS budget equivalent per year (World Bank 2015:
presumably served to fund the activities of 19). The Parliamentary Committee on
OWC. However, we learned from Chapter Agriculture (2017) report found that the unit
2 that even “smart” input subsidies have costs of some of the inputs procured were
55
20–50 percent higher than comparable with no monitoring of results. This approach
market prices. The report also found that resulted in the wastage of inputs. The report
free inputs procured under OWC were often further states that “giving free inputs to
of poor quality; they were distributed late, farmers is not sustainable and will in the
without communication or consultation with long run breed dependency syndrome.” It
districts; without extension services (and duly recommends that GoU should address
rarely with complementary inputs such as these inherent technical inefficiencies.
fertilizers, pesticides, and irrigation); and
Figure 3.5. Distribution of budgeted, national (non-donor) PEAS across votes
100%
80%
60%
40%
20%
0%
2013/14 2014/15 2015/16 2016/17 2017/18
Local governments 306 Uganda Export Promotion Board
160 Uganda Coffee Development Authority 157 National forestry authority
155 Cotton development organization 152 NAADS Secretariat
143 Uganda Bureau of Statistics 142 National Agricultural Research Organisation
125 National Animal Genetic Res. Centre and Data Bank 121 Dairy Development Authority
019 Ministry of Water and Environment 015 Ministry of Trade, Industry and Cooperatives
012 Ministry of Lands, Housing & Urban Development 011 Ministry of Local Government
010 Ministry of Agriculture, Animal Industry and Fisheries 003 Office of the Prime Minister
41 The share of external financing in

agriculture budgets varies
national institutions. PEAS implemented
across
to domestic sources of funding. The donor-
funded part of MoLG concentrates on a
handful of projects, also with an emphasis
by the Office of the Prime Minister (OPM) are on the poorer regions of the country. The
almost entirely dependent on donor funds drop in 2017/18 reflects the fact that those
(Table 3.5). These donor funds have been projects were almost fully taken over by the
used to finance special programs focusing government, also calling for a compensatory
on agricultural and rural development in increase in the domestic fund allocation.
the Northeastern Region. As noted, this In MAAIF, donor funds are spread across
region is emerging from conflicts, has poor a larger number of initiatives. About seven
infrastructure, and has higher poverty rates projects received donor support annually
than any other region in Uganda. Donor funds from 2013/14 to 2017/18. The strong donor
therefore provide an important complement presence in MAAIF allows national funds
56
to focus on NAADS and, to a lesser extent,

3.3.3 Economic Efficiency
MoLG (decentralized government).
42 Despite complementarities, the high

shares of donor spending in PEAS remain 43 Analysis of the allocative efficiency
of public expenditure provides an
understanding of priorities and the
a challenge for technical efficiency. This
is because this spending is difficult to trace balance of spending. It essentially
accurately. For instance, no information consists of an economic and functional
was available in the BOOST database on decomposition of public spending. An
expenditure amounts for external funding in economic decomposition of public spending
2013/14–2015/16. Donor budgets are often on agriculture in Uganda shows that
easier to track than donor final expenditures, development expenditures dominate both
which might explain why such gaps are budgeted and final PEAS in Uganda (Table
observed. The budgets of donor-funded 3.6). They represented about 66 percent of
projects are usually agreed upon with budgeted PEAS for the years under review.
national institutions, and some data sharing There were no major differences between
inevitably occurs at that stage. As projects budgeted and final PEAS in terms of the
are implemented, however, reporting of relative sizes of recurrent and development
donor expenditures is poor. The problem spending, which is surprising because
is a recurring one: more than a decade development expenditure usually exhibits
ago, a study by the World Bank and the lower execution rates in comparison
Department for International Development with recurrent expenditure (salaries
(DFID) already pointed to the need to design must be executed each year to keep
incentive systems for effective reporting on the administration running, while capital
project finance by donors (Williamson 2008: expenditures can be delayed across the
27). lifespan of development projects).
Table 3.5. Share of external financing in

budgeted PEAS across votes
2013 2014 2015 2016 2017

Vote
/14 /15 /16 /17 /18
003 Office of the
81% 100% 91% 96% 92%
Prime Minister
010 Ministry
of Agriculture,
24% 22% 29% 62% 43%
Animal Industry,
and Fisheries
011 Ministry
of Local 88% 99% 79% 95% 3%
Government
019 Ministry
of Water and 17% 14% 14% 50% 9%
Environment
142 National
Agricultural
49% 70% 55% 59% 51%
Research
Organization
57
Table 3.6. Shares of recurrent and development spending within budgeted and final PEAS
2013/14 2014/15 2015/16 2016/17 2017/18 Average

Recurrent 36% 35% 37% 36% 22% 33%
Of which wage 9% 14% 11% 12% 7% 10%
Budgeted
Of which non-wage 26% 21% 27% 24% 15% 23%
PEAS
Development 64% 65% 63% 64% 74% 66%
Unspecified 0 0 0 0 3% 1%
Recurrent 31% 32% 35% 35% NA 33%
Of which wage 8% 14% 8% 12% NA 11%
Final PEAS
Of which non-wage 23% 18% 27% 23% NA 23%
Development 69% 68% 65% 65% NA 67%
Note: Final PE and PEAS do not include external financing (donor spending). No disaggregation between recurrent and development
spending is available for donor funds.
44 The share of development expenditures Note: Final PE and PEAS do not include external financing
(donor spending). No disaggregation between recurrent and
in PEAS was much larger in comparison development spending is available for donor funds. Spending of
with the national PE (Table 3.7). While the “unspecified” type (a minor proportion of 2017/18 budgets)
PE indicators are probably driven up by was omitted from the table.
spending on defense, education, or health

(sectors where wage shares in budgets
tend to be high), this nevertheless suggests
45 "In Uganda, 'development expenditure'
is not synonymous with 'capital
expenditure'.” The high share of
that agricultural budget holders are
development expenditures in PEAS is to
adopting long-term spending strategies.
some extent due to misclassification. First,
Relative proportions of wage and non-wage
many items reported as development
expenditures within recurrent expenditures
expenditures serve to fund recurrent
do not differ much between total PE and PEAS,
activities. For example, “support to
both for budgeted and final amounts. The
institutional development” is reported as
absence of any notable difference between
a project in the IFMS under development
execution rates for recurrent spending and
expenditures in all years throughout 2013/14–
execution rates for development spending
2017/18. Oxford Policy Management (2007:
also applies to overall PE.
20) had already recommended tagging
Table 3.7. Budgeted and final PE and this item as recurrent spending. Second, a
PEAS, recurrent (wage and non-wage) and high share of development expenditures is
development, 2013/14–2017/18 average (%) used to purchase goods and services that
are redistributed to farmers. For example,
Budgeted Budgeted Final Final during the reviewed period, 96 percent
PE PEAS PE PEAS of the NAADS budget was classified as
Recurrent 71% 34% 73% 25% development spending, even though much
Of which wage 19% 12% 18% 8% of this budget serves to buy seed and
Of which non- fertilizer. Thus, development expenditures
52% 22% 55% 17%
wage
within PEAS should not be viewed as “capital
Development 29% 66% 27% 50%
expenditures.”14 Only a small proportion
14 This issue was already identified in World Bank (2010a: 68).
58
of development expenditures goes into reduce the impacts of even small capital
investments with long-term effects such as outlays to a very low level. MAAIF therefore
infrastructure (see the next section).15 should ensure that a larger part of the
development budget allocation is actually
46 The above information suggests that the

economic efficiency of PEAS in Uganda is
rather low. But better budget monitoring
spent on capital expenditures.
systems are needed for a full assessment. 3.3.2 Functional Efficiency

Too little is invested in rural access roads,
47
small-scale irrigation, bridges, and wholesale The assessment of functional efficiency
and livestock markets. In addition, only looks at the composition of public
a minor share of the budget is allocated expenditures by main functions and
to veterinary, sanitary, and phytosanitary at how it aligns with national policies,
laboratories and equipment, despite strategies, sector objectives, and other
their importance for raising agricultural priorities. In 2016, the government formally
productivity. These expenditures generate endorsed a commodity-based approach
higher returns to investment. In Uganda, (CBA) in its agricultural policy (MoFPED
less than 1 percent of smallholder farmers 2016a: 75), although the idea of focusing on a
use irrigation. Across Africa, irrigated area as set of priority commodities had already been
a share of total cultivated area is estimated advanced in the DSIP (MAAIF 2010a: 59). The
at 6 percent, compared with 37 percent for CBA identifies 12 priority commodities. It is
Asia and 14 percent for Latin America. Recent assumed that PEAS will chiefly serve to build
studies show that irrigated land in Africa can up the value chains for these commodities.
be expanded from 13 million hectares to The ASSP provides estimated budget
24 million hectares in economically viable allocations for commodity-specific spending
ways, with returns ranging from 17 percent and maps activities to around 20 different
for large-scale irrigation to 43 percent for crops and livestock commodities.
small-scale irrigation. Investing in rural
roads is important for reducing transport Table 3.8. Target shares for commodity groups
costs and increasing access to markets in the ASSP budget
by smallholder farmers. Trader surveys in
Benin, Madagascar, and Malawi find that Commodity groups 2015/16 2016/17 2017/18
transport costs account for 50–60 percent All 159 405 486
of total marketing costs. A reduction in Cash crops 119 139 138
transport costs reduces both trade costs Crops, general 94 101 109
and interregional price gaps. The spillover Fisheries 10 13 13
effects are that farmers pay less for their Livestock and dairy 97 124 130
inputs and get more for their outputs, Total 480 782 876
hence increasing incomes. Not surprisingly, Share of identified

groups in total 67% 48% 45%
access to markets facilitates economic (excludes “all”)
diversification in rural areas and creates
incentives for smallholder farmers to adopt Source: Authors, using Annex D of the ASSP (MAAIF 2016).
Note: Cash crops include not only coffee and tea but other
modern production technologies. Technical commodities such as cocoa, oil palm, and oilseeds.
inefficiencies in capital expenditures further
15 Of course, recurrent or “non-capital development” expenditures such as the salaries of doctors, researchers, or teachers can
also have beneficial long-term effects. The point here is that not all development expenditures in agriculture in Uganda should be
considered as capital expenditures.
59
48 Cash crops, crops general, fisheries, and

livestock and dairy account for nearly
45 percent of the budget allocated for
The relative importance of the “crops,
general” subgroup increased in 2017/18
because of increased allocations under
agriculture in Uganda (Table 3.8).16 The the Commercialization of Agriculture in
remainder of the agriculture sector budget Northern Uganda Project. The rise in the
serves to fund goods and services that “other” subgroup in 2016/17 resulted from
benefit all commodity value chains without increased spending on a Vegetable Oil
making any distinction among them. The Development Project. The “crops, general”
share of commodity-specific spending has and “other” categories represent the main
declined in recent years, falling from 67 staples and grains, which are important
percent in 2015/16. This implies functional for food security, especially for the poorer
inefficiencies, because the declining households. Increased public spending on
spending on these priority and strategic these smallholder crops will help to increase
commodities leads to a slowdown in their productivity and incomes and have a
agricultural productivity and value addition. greater impact on poverty reduction.
Depending on the supply response, this
could weaken the backward and forward Figure 3.6. PEAS final expenditure,
linkages in the sector and have adverse disaggregated by identified subsector
effects on overall growth in value added and 100%
poverty reduction efforts. Its distribution 90%

80%
across broad commodity groups has 70%

60%
balanced out, however, with a more notable 50%
increase in the budget for livestock and

40%
30%
dairy. This increase could benefit the poor 20%
communities in Northeastern Region, where 0%

2013/14 2014/15 2015/16 2016/17 2017/18*
animal husbandry is the predominant Livestock and dairy Cash crops Crops, general Fisheries Forestry Other
economic activity.
Note: *Budgeted expenditures were used for 2017/18, not
actuals. “Livestock” includes cattle, dairy, poultry, pigs, and goats.
49 It is more difficult to map actual spending

to specific commodities; on average, only
21 percent of PEAS could be assigned
“Crops, general” includes crops that could not be associated with
cash or food crops. “Other” includes horticulture, vegetable oils,
insects, and honey.
50
to identified subsectors. The remainder In practice, commodity-specific spending
benefits the agriculture or rural sector is concentrated on a few commodities only.
as whole, including most recurrent costs By disaggregating commodity subsectors
as well as spending on infrastructure or into single commodities (see Table A3.2 in
multipurpose projects. Within PEAS specific Annex 2), it is evident that coffee, the main
to subsectors, the emphasis on cash crops export commodity and number one foreign
increased between 2013/14 and 2015/16, exchange earner, dominates the cash crop
reaching as much as 50 percent (Figure subsector. Budget allocations to the Uganda
3.6). The shift occurred simultaneously Coffee Development Authority (UCDA)
with the introduction of the CBA. Livestock, almost quadrupled between 2014/15 and
dairy, and forestry also received significant 2015/16, probably because coffee is a high-
proportions of the budget, whereas other value cash crop predominantly produced
crops and fisheries received less funding. by smallholders. The shares of tea, which
16 These are the 12 priority commodities under the ASSP, namely: bananas, beans, maize, rice, cassava, tea, coffee, fruits and
vegetables, dairy, fish, livestock (meat); and four strategic commodities, namely, cocoa, cotton, oil seeds, and oil palm.
60
is mainly a large-scale plantation crop, and as beans, cassava, bananas, and rice. As
other cash crops, including cotton, have mentioned, these crops are very important
remained close to zero over the period. for food and nutrition security, especially
Within the “livestock and dairy” subsector, for poorer households. Continued neglect
spending has focused more on beef and would mean slowing down the poverty
less on dairy products. Beef comes mainly reduction effort and increasing food and
from the northeastern areas, where pastoral nutrition insecurity in Uganda. The ASSP
production systems dominate, and poverty budget plan seldom refers to spending on
is high. forestry and fisheries, which explains why
small deviations are observed for these
51 The relative shares of actual spending

differ from those planned in the ASSP
budget. Traditionally, budget spending
groups. The CBA is reflected in the budget
data only to a limited extent, and allocations
of resources across commodity groups have
favored cash crops as well as items in the varied from what is outlined in the ASSP.
“other” category, which include horticultural This mismatch illustrates either that ASSP
crops and various innovative items such budget estimates were arbitrary and overly
as honey (Figure 3.7). Funding gaps have ambitious or that the budgeting process
affected “livestock and dairy” as well as “crops, does not adhere to the targets set in the
general,” which includes commodities such ASSP.
Figure 3.7. Gaps between observed (final) PEAS allocations and ASSP targets for commodity target
groups (deviations from relative shares)
30%
20%
10%
0%
-10%
-20%
-30%
Livestock and Cash crops Crops, general Fisheries Forestry '
Other
dairy
20/16 2016/17 2017/18*
Note: Gaps for 2017/18 were computed using budgeted expenditures from the PEAS database.
52 Extension and research jointly, along

with producer subsidies, take up nearly
half of the sector budget. Table 3.9 maps
and international trade, is low. Planned
ASSP allocations remained stable over the
whole 2015/16–2017/18 period. There is
the ASSP budget plan to subfunctions. an apparent willingness to gradually phase
Producer-subsidies are the largest category, out producer subsidies to the benefit of
comprising roughly one-quarter of the total, “processing, marketing, and storage” as well
and include fertilizer and seed subsidies as as other subfunctions such as irrigation,
well as on-farm support and mechanization. but the planned shift is expected to be
The allocation to inspection services, incremental across several years. The main
which are critical for promoting regional question is where the savings from reduced
61
spending on producer subsidies will be 3 percent for the period. Investments in

spent. Based on the findings discussed in this irrigation, rural or feeder roads, livestock and
review, it would be beneficial if the savings plant pest and disease control, regulatory
were transferred to the capital expenditures services, and institutional development are
that generate the highest returns on all core public goods—goods in which the
investment, such as R&D and small-scale private sector will not invest. But they are
irrigation systems (core functions of MAAIF) essential for catalyzing private investment
and extension and advisory services (core in agricultural production and agribusiness.
functions of local governments). This lack of investment in these areas limits
smallholders’ access to markets and reduces
53 Data on actual spending allow for even

further disaggregation of PEAS (Table
3.10) and are generally consistent with
their income. Increasing public expenditure
on R&D, extension services, and irrigation
is consistent with allocative efficiency—
planned amounts. In accordance with the spending public resources to provide public
ASSP targets, “input subsidies” have been goods and services. By contrast, increasing
the dominant category on average, followed public expenditure on producer subsidies
by extension and advisory services provided amounts to allocative inefficiency—
through NAADS. “Processing and marketing” spending public resources on private goods.
as well as “research” were other dominant Spending public resources on processing
subfunctions. Shares going to irrigation and marketing, which are primarily private
were lower, even though they increased goods, is encouraged if used to leverage
in recent years. Allocations for feeder private sector investments.
roads were rather small, averaging around
Table 3.9. ASSP budget targets mapped to major agricultural subfunctions
Subfunction 2015/16 2016/17 2017/18

Agricultural research 86.7 103.8 109.4
Extension 55.1 146.4 177.2
Producer subsidies 187.3 220.3 231.7
Inspection 51.2 75.1 74.2
Irrigation 6.1 40.3 68.4
Other 9.7 35.9 39.4
Processing, marketing, and storage 61.5 121.3 122.6
Training 22.3 39.3 52.9
Total 480.0 782.4 875.7
Source: Authors, using Annex D of the ASSP (MAAIF 2016).
62
Table 3.10. Final PEAS, disaggregated by agricultural subfunction (USh billion)
2013/14 2014/15 2015/16 2016/17 2017/18†

Input subsidies 79 122 153 258 328
Capital subsidies 5 5 5 13 15
Other subsidies 4 7 3 1 6
Research 46 50 60 159 153
Extension and advisory services 150 92 57 120 128
Training 17 39 16 29 33
Inspection and quality control 1 2 3 4 4
Feeder roads 2 0 9 59 58
Irrigation 28 32 39 53 159
Other infrastructure 4 0 5 3 12
Storage 0 0 0 0 2
Processing and marketing 35 30 68 150 282
Administrative costs 35 36 44 67 73
Other 0 0 2 48 79
Total 406 416 463 965 1,332
Note: † Budgeted expenditures were used for 2017/18, not actuals. There are very minor differences between total subfunctional PEAS
and total PEAS as reported in Table 3.1. The gap is due to apportionment of categories for multifunctional projects with components
falling outside the perimeter.
54 Some of the changes in the relative

spending shares mark improvements
in the policy direction, whereas others
of agricultural research budgets during
2016/17–2017/18. In 2015/16, input
subsidies saw a big boost to the detriment
are contextual. Processing, marketing, of extension services. After that, resources
and irrigation gained some ground in the allocated to extension services recovered
last couple of years, especially relative to somewhat. This development needs to be
input subsidies and extension. Increased analyzed in the context of OWC (Box 3.2),
investments in processing and marketing which, from 2015 on, changed how input
from 2015/16 on followed in great part from subsidies and extension services were
the government’s recognition that grain provided and funded. Initially, the goal was to
storage capacity was lacking across the procure inputs through NAADS; eventually,
country (MoFPED 2016a:76). As mentioned, extension services were shifted to MAAIF.
this kind of spending is encouraged if it
leverages private investments. Research
also came to absorb a larger proportion of 55 Deviations in spending from planned
targets varied by subfunction (Figure 3.8).
Producer subsidies (which include input
expenditures, especially in 2016/17. This
jump in research spending is attributable subsidies) and extension, the two largest
to a large inflow of World Bank funds in the subfunctions, deviated the least. A larger
context of the Agricultural Technologies and share than foreseen went to agricultural
Agribusiness Advisory Services Project. The research, and the behavior of budget holders
ending of this project in June 2018 (World reflected the ASSP objective of increasing
Bank 2018b) places the sustainability of investments in processing, marketing, and
research funding at risk, given that the storage. The relative funding gap observed
project represented about 40 percent for inspection is consistent with the gap
63
mentioned earlier for the “livestock and that it was profitability and not subsidies that
dairy” commodity group. drove technology adoption. Given increasing
climate variability and pest outbreaks (such
56 At the aggregate level, however, the

budget composition is not well aligned
with the country’s broader development
as fall army worm) in Uganda, it is vital that
the government increases spending on
agricultural R&D, irrigation, rural roads, and
strategy, which relies heavily on the pest and disease management to build the
expansion of the private sector. The resilience of agricultural production systems
ASSP states that incentives will be needed and rural livelihoods. To this end, farmers
to promote private sector engagement should be equipped with climate-smart
in agriculture (MAAIF 2016), even though agriculture technologies such as sustainable
the plan provides no specifics on those land and water management practices, and
incentives. Figure 3.9 shows that spending access to agro-weather and market (prices
on private goods such as input provision and quantities) information.
and processing, marketing, and storage
dominates agricultural budgets and is
growing. It represented 21 percent of
budgeted PEAS on average during 2013/14–
2015/16 and increased to 42 percent in
2016/17–2017/18. Such heavy investment
in private goods risks crowding out private
investors in the sector. It also reduces the
overall effectiveness of public spending by
diverting resources from investments with
higher returns, such as agricultural R&D,
rural infrastructure, or capacity building for
farmers.
57 Research from Latin America and the

Caribbean finds that a reallocation of 10
percentage points of public expenditures
from subsidies to public goods increases
per capita agricultural income by about
2.3 percent without increasing total
spending (Chapter 2). These findings from
cross-country analysis for Latin America are
consistent with the analysis for Asia, where
spending on rural infrastructure, agricultural
research, and dissemination had large
poverty alleviation effects. For example,
studies in four Asian countries—Bangladesh,
India, Indonesia, and Pakistan—conclude
that fertilizer subsidies were not significant
in farmers’ adoption of technology. They
instead identify R&D of new technologies,
irrigation expansion, and other investments,
such as roads, as the main drivers—indicating
64
Box 3.2. Operation Wealth Creation, the National Agricultural Advisory Services, and the
Ministry of Agriculture, Animal Industry, and Fisheries
Created through a Presidential Directive in June 2014, Operation Wealth Creation (OWC) aimed to “cure the inefficiencies
that had arisen in the NAADS program,” and a “team of military officials” was commissioned to “oversee the supply of inputs
originally in areas that had supported the military/political struggles that liberated the Country and with veterans as first
beneficiaries.”† Thus the core activity of OWC is to distribute inputs to farmers with the help of military personnel and
in collaboration with NAADS staff. The operation centers on logistics and not on training.‡ Its introduction is reflected in
the dominance of input subsidies in the 2015/16 NAADS budget (top figure). According to the budget database used for
this review, input subsidies prior to 2015/16 were channeled through district budgets. Resources available to extension
activities largely declined in 2015/16.
Extension services were replenished in 2016/17 through NAADS and MAAIF (bottom figure). In 2017/18, input subsidies
dominated the NAADS budget again, but the share of extension services in the MAAIF budget increased widely. There has
been some back and forth in the organization and funding of input distribution and extension services. The initial thinking
probably was for OWC to focus on logistics and NAADS on training. Yet in 2017/18 all extension resources (salaries for
trainers) were provisioned under MAAIF, and the NAADS budget became a channel for input subsidy procurement.
NAADS budget, disaggregated by subfunction
100%
80%
60%
40%
20%
0%
2013/14 2014/15 2015/16 2016/17 2017/18
Extension Input subsidies Research Inspection and quality control Processing and marketing
MAAIF budget, disaggregated by subfunction
100%
80%
60%
40%
20%
0%
2013/14 2014/15 2015/16 2016/17 2017/18
Input subsidies Capital subsidies Other subsidies
Research Extension Training
Inspection and quality control Irrigation Other infrastructure
Processing and marketing Administrative costs
The consequences of institutional restructurings and service delivery should be examined with care. The increase in
the extension budget at MAAIF goes against the spirit of decentralization promoted in the DSIP and ASSP. Indeed, both
documents identify extension as a key function of local governments. Budget management should reflect the institutional
roles and responsibilities outlined in the agriculture sector’s strategic frameworks.
Source: † Republic of Uganda (2017: 2). ‡ ACODE (2015: 5).
65
Figure 3.8. Gaps between observed (final) PEAS allocations and ASSP targets for agricultural
subfunctions (deviations from relative shares)
20%
15%
10%
5%
0%
-5%
-10%
-15%
Agricultural Extension Producer Inspection Irrigation Other Processing, Training
research subsidies marketing
and storage
2015/16 2016/17 2017/18*

!
Note: Gaps for 2017/18 were computed using budgeted expenditures from the PEAS database.
Figure 3.9. Relative size of agricultural subfunctions that could be assumed by the private sector
within budgeted PEAS
1,600
Billions USh
1,400
1,200
1,000
800
600
400
200
0
2013/14 2014/15 2015/16 2016/17 2017/18
Potentially transferable to the private sector Public goods
Source: Authors.
Note: Subfunctions that could be transferred to the private sector are input subsidies, processing, marketing, and storage.
66
about 4 percent of total PEAS. Spending on

3.4 Conclusions
research was starting to increase, but it was
cut from 17 percent in 2013/14 to 11 percent
58 Although the final share of public

spending on agriculture (PEAS) more
than doubled in real terms between
of the total budget in 2017/18. The private
sector cannot finance these expenditures.
But they are critical for leveraging private
2013/14 and 2016/17, the share of investments in the sector, as they contribute
PEAS in total public expenditure (PE) to improving access to markets, increasing
remained low throughout the period, value addition, and enhancing resilience to
averaging 3.6 percent. Uganda’s share is climate change and variability.
also low compared to that of its East African
60
neighbors (Kenya, Rwanda, and Tanzania) National decentralization objectives
and the Maputo/Malabo Declaration target are not fully matched by the allocation
of 10 percent, but it is higher than the SSA of resources. Local governments receive
average of 2.0 percent. Given the tight fiscal a much lower share of final PEAS than
space and competing needs for public agriculture-related ministries. Collectively,
resources from other key sectors such MAAIF, NAADS, NARO, and other SAGAs
as infrastructure (transport, energy, and capture the bulk of the allocations in the
water) and human development (health sector (approximately 92 percent). The
and education), it is unlikely that spending allocations to local governments declined
in agriculture will increase in the short- from 37 percent in 2013/14 to about 7
to medium term. To justify an increase in percent in 2017/18, falling slightly short of
budget allocation to move toward the 10 the ASSP target of 10 percent. Given that local
percent target (which is aspirational, as only governments provide frontline agricultural
a few African countries have achieved or services such as extension and advisory
are close to achieving it), MAAIF first needs services, market information services, and
to improve the quality and effectiveness of rural infrastructure, their budget allocations
spending in the sector. need to be increased. MAAIF should find
ways of reducing its headquarters operating
59 The economic efficiency of PEAS was low,

as depicted by the small share of capital
expenditures (which are necessary
costs and should retain a modest budget for
its policy, strategy, and regulatory functions.
61
for spurring inclusive growth) in the The technical efficiency of PEAS was also
development budget. Between 2013/14 low, as donor-funded projects continued
and 2017/18 the development budget in the to suffer delayed implementation.
agriculture sector declined from an average Delayed budget ratification by Parliament,
of 80 percent to 67 percent. The share of and the untimely and insufficient release
PEAS going to input subsidies increased of counterpart funds by MoFPED, are
from about 19 percent in 2013/14 to about beyond the purview of MAAIF, yet these
25 percent in 2017/18 (with a high of 33 constraints cause several years to pass
percent in 2015/16). This increase was largely before a donor-funded project can be
at the expense of extension and advisory launched in Uganda. Other constraints,
services, whose share declined from about including weak procurement and financial
37 percent in 2013/14 to 10 percent in management capacity, improper appraisal
2017/18. Other important functions such as and feasibility work, poor coordination of
inspection and quality control, feeder roads, project preparation and implementation
and storage had a combined share of only between MAAIF and local governments, and
67
inadequate operating budgets for technical

staff are within the mandates of the ministry
itself. These result in high cost overruns, low-
quality work, and other kinds of wastage.
MAAIF must work with MoFPED, MoLG, and
local governments to address these policy
and operational constraints.
68
04
UGANDAN INSTITUTIONAL ENVIRONMENT &
BARRIERS TO IMPROVING AGRICULTURE PUBLIC
EXPENDITURE
70
01 This chapter surveys the policy and

institutional environment for agriculture,
focusing on the organization and
Country within 30 Years.” Vision 2040 will
be realized through the implementation
of successive five-year NDPs. One priority
coherence of policy making, planning, of Vision 2040 is to enhance agricultural
and budgeting for the agriculture sector productivity and value addition by investing
and on the roles of the central and in new technologies, reforming the
local government in that process. This agricultural extension service, improving
discussion lays the groundwork for the land governance, enhancing market access,
remainder of the chapter, which is a deeper and improving value addition.
exploration of how barriers and enablers
at work in these institutions influence
the efficiency and effectiveness of public 04 The second five-year plan (NDP II), covering
FY2015/16–2019/20, was introduced by
the president “to propel Uganda towards
expenditures and the delivery of services in
the agriculture sector. lower middle-income status by 2020, in
line with the aspirations of Uganda’s Vision
2040.” It aims at strengthening Uganda’s
4.1 The Policy and Institutional “competitiveness for sustainable wealth
Framework for Agriculture creation, employment and inclusive growth.”
Agriculture is identified as a development
02 This section describes the policy priority in NDP II, although the plan devoted
framework for agriculture and illustrates only five general pages (out of 344) to the
the roles and responsibilities of the main sector .
central and local institutions in developing
policy and engaging in the planning and
budgeting process for agriculture. Drawing
05 The key targets for agriculture in the
medium term are: (1) increase productivity
by farmers to at least 50 percent of the
on this institutional perspective, the
yields at research stations; (2) transform
subsequent section will focus on ways to
subsistence farmers (producing for their
improve the efficiency and effectiveness of
own consumption) into enterprise farmers
public expenditure in the agriculture sector.
(producing for consumption and responding
to market needs), and transform smallholder
4.1.1 The national policy and farmers into commercial farmers; (3)
increase food security and food availability
institutional framework
in all parts of the country; (4) increase
agricultural exports to at least US$4 billion
per year; and (5) reform and strengthen
Pillars Of The National Policy Framework agricultural service institutions such as
research, extension, and regulatory bodies
03 The pillars of the national policy

framework are the Uganda Vision 2040
and the National Development Plan
to make them effective and efficient.
(NDP). Launched in April 2013, Uganda Vision

2040 is the nation’s long-term development
strategy. It describes the development
paths that will bring about Uganda’s vision
of “A Transformed Ugandan Society from
a Peasant to a Modern and Prosperous
71
The Ministry of Finance, Planning, and The National Planning Authority

Economic Development
08 The NPA is one of 11 autonomous
06 As part of its mission to “formulate agencies under MoFPED. It was established

sound economic policies, maximize by an Act of Parliament in 2002 to be the
revenue mobilization, [and] ensure principal statutory agency responsible
efficient allocation and accountability for for the management of national and
public resources,” MoFPED is responsible decentralized development planning.
for ensuring that sectoral investments, The NPA’s primary function is to produce
including investments in agriculture, are comprehensive and integrated long- and
well coordinated and appropriately funded. medium-term plans, like Vision 2040 and the
MoFPED comprises five directorates, NDP. There are two directorates in the NPA:
including the Budget Directorate, which is (1) Development Planning and Research
responsible for analyzing, assessing, and and (2) Development Performance.
challenging spending proposals. Each sector Development Planning is responsible for
is required to submit a written response coordinating and spearheading planning at
explaining areas of under-performance, and the national and decentralized levels. It has
MoFPED regularly calls together staff across six departments, including the Department
line agencies for training and briefings of Local Government Planning.
on budget preparation, execution, and
management.
The National Budget Framework Paper
07 During budget preparation, budget

officers in respective line ministries must
submit each iteration of the budget to
09 The NBFP, issued annually by MoFPED,
shows the budget strategy for the next
financial year. It is the mechanism for the
MoFPED in person, requiring extensive
government to implement its medium-term
face-to-face interaction among staff in
policy objectives as specified in the NDP—
ministries and agencies. Regular slippages
in other words, the NBFP provides the
in the budget calendar, and delays in
link between NDP policies and the annual
sending final budget ceilings to spending
planning and budgeting cycle. The NBFP
agencies, weaken the quality of the budget
is revised every year to reflect changes in
process, however, and limit the potential for
the macroeconomic framework, including
input from below (Krause et al. 2016). Line
fiscal resource projections. The NBFP has
ministry officials are said to feel that MoFPED
two parts: Part 1 essentially sets out the
dictates rather than coordinates, and that
macroeconomic forecast and the resource
some consultation processes are tick-box
envelope, and Part 2 provides details on
exercises rather than genuine opportunities
proposed sector plans and expenditures.
to influence the budget process. MoFPED
insists that new budgeting procedures
introduced over recent years have led to
better performance monitoring and better
budget discipline.
72
The Uganda Bureau of Statistics and sustainable and provide food and
income security to the citizenry.”
10 The Uganda Bureau of Statistics (UBOS)

is the principal agency for collecting,
processing, analyzing, and disseminating MAAIF and its agencies
data, and it is responsible for coordinating
and supervising the National Statistical
System. Formerly the Statistics Department 12 At the center of much of the agricultural
policy narrative is MAAIF, which consists
of a headquarters in Entebbe and several
under MoFPED, it was transformed into
a semi-autonomous body by the Uganda semi-autonomous agencies. The structure
Bureau of Statistics Act, 1998. The bureau’s of MAAIF is outlined in Figure 4.1.
main tasks as identified in the 1998 act
are: (1) providing high quality central
statistical information services on social,
13 MAAIF headquarters. Key responsibilities
of the ministry headquarters are to
formulate and support agricultural policy,
environmental, and economic conditions in
sector planning, regulation, standard setting,
the country; (2) providing guidance, training,
quality assurance, sector monitoring,
and other assistance as may be required to
and guidance. The headquarters is also
other users and providers of statistics; and
responsible for supervising agricultural staff
(3) being the focal point of cooperation with
in district governments. Recent changes at
statistics users and providers at regional
MAAIF Headquarters have expanded three
and international levels. UBOS takes the
directorates to four (Animal Resources,
lead in providing statistics for the agriculture
Crop Resources, Fisheries, and Extension).
sector, in conjunction with the smaller
Within each directorate are two to three
and limited-capacity Statistics Unit in the
departments headed by commissioners, a
Planning Department of MAAIF.
few standalone departments (most notably
one for planning), and four specialist units.
4.1.2 The Sectoral Framework
National Agriculture Policy
11 Achieving the CAADP goals is a key pillar of

the 2013 NAP, and its main objectives are
to achieve food and nutrition security and
to improve household incomes. The main
interventions for achieving these objectives
are: (1) production and value addition
according to agricultural zones; (2) internal
and external trade; (3) sustainable use and
management of agricultural resources;
and (4) development of human resources
in the agriculture sector. By implementing
the NAP, the GoU aspires to “transform the
agriculture sector from subsistence farming
to commercial agriculture” and thereby
“make agriculture profitable, competitive
73
Figure 4.1. Structure of the Ministry of Agriculture, Animal Industry and Fisheries
Office of the
Minister
Minister
of State NAADS
NARO
Permanent
Secretary NAGRIC
COCTU
DDA
CDO
UCDA
Directorate Directorate Directorate

Directorate
of Animal of Fisheries of Agricultural
of Crop
Resources Resources Extension
Resources Public Department of Department of
Services Department of
Internal Procurement Agricultural Infrastructure
Finance and and Disposal of Planning
Administration Audit Unit and
Public Planning and Mechanization
Assets Unit Development
14 MAAIF agencies. MAAIF agencies, with their

own allocations/votes under the MAAIF
budget, are NARO, NAADS, UCDA, CDO,
16 The planning period for DSIP II ended in
2014, and the document was superseded
by the Agriculture Sector Strategic Plan
NAGR&DB, COCTU, and DDA. The agencies (ASSP) 2015/16–2019/20. The ASSP focuses
of MAAIF, operating at both the national and on 12 “priority” commodities (bananas,
district levels, are responsible for executing beans, maize, rice, cassava, tea, coffee, fruits,
approved plans and projects. vegetables, dairy, fish, and livestock) and
four “strategic” commodities (cocoa, cotton,
oilseeds, and oil palm) based on “their
Agriculture Sector Plans contribution to household income and food
security.” The budget needed to implement
15 MAAIF has published agriculture sector

plans since 2004; before that, there
was the multisectoral Plan for the
the ASSP has been “computed at USh6.97
trillion (US$1.88 billion equivalent) over the
5-year period.” However, “as interventions
Modernization of Agriculture (PMA, will be funded through prudent resource
2001).17 The current round of plans probably allocation,” ASSP also provides for a
begins with the second Development “constrained budget” in line with NDP II,
Strategy and Investment Plan (DSIP II), amounting to USh4.6 trillion (US$1.24 billion
published in 2010 as part of the CAADP equivalent).
process.
17 Famously said by the PS, MoFPED (at the time) to be neither a plan nor about the modernization of agriculture, nor even specific
to agriculture, the PMA was a framework which set out the strategic vision and principles upon which interventions to address
poverty eradication through transformation of the agriculture sector could be developed. It identified priorities for interventions
and activities in the form of seven pillars, to be implemented by various government ministries and local government, and a non-
sectoral conditional grant to be administered by the PMA Secretariat, but allocated though local government. Much lauded at first,
it slowly died as a process, largely due to the challenges of getting all the stakeholders to work together.
74
17 Indicative budgets are shown by strategic

area in ASSP with no detailed breakdown
of the costs. There is no prioritization of
handling and agro-processing). The main
stages in the budget formulation process
are summarized in Box 4.1.
interventions or work plan in the ASSP:
“In developing the budgets of the ASSP,
consideration has been given to the need The Agriculture Sector Working Group
to remain within reasonable limits …it is also
necessary to take into account the equitable
distribution of the budgets among the 20 A key institution in the planning and
budget process is the Sector Working
Group (SWG). The SWG for agriculture
various priorities and commodities so that
allocation to one will not be at the expense of includes MAAIF’s heads of department and
other priorities….” In other words, all existing representatives of civil society, donors, the
vote-holders get a share of the allocation, private sector, and farmers/smallholders.
pretty much in line with the share they have MoFPED initiated the SWG approach and
been receiving. still has a key role in promoting it. The
intention was that SWGs would provide a
multi-stakeholder platform and consultative
The MAAIF Budget Process mechanism for formulating public
expenditure policy, setting priorities and
18 From the viewpoint of the agriculture

sector, the whole budget exercise, at
least in principle, lasts nine months, from
planning. In this capacity they are expected
to review and sign off on the NBFPs, monitor
performance, and ensure that projects and
the national consultative meeting scheduled programs are consistent with the NDP II and
to be held in October, at which the MTEF with sector priorities. The ASSP for MAAIF
ceilings for each line ministry are announced, describes the SWG’s other responsibilities,
to the reading of the National Budget in June including: (1) pursuing solutions to structural,
the following year. institutional, and other constraints to
effective ASSP implementation at the
19 The BFP for agriculture is prepared

in the Planning Department at MAAIF
with some support from the Agriculture
central, zonal, and local levels; (2) reviewing
mechanisms for enhancing stakeholder
participation in implementing the ASSP; and
Sector Working Group (see below). (3) reviewing the agriculture BFP as a basis
Annual assessments of performance against on which the annual budget for the sector is
the targets, year on year, are undertaken compiled.
and presented to the ASWG. However,
the value of these assessments (beyond
broad budget utilization) is hampered by
the availability of data and the capacity to
undertake meaningful analysis. The key
objective for the sector, for several years
now, has been to increase agricultural
production and productivity, presumably
through investments in irrigation schemes
and research and extension services. Less
attention has been given to addressing
access to markets (for inputs, output, and
finance) and value addition (post-harvest
75
Box 4.1. The Budget Preparation Process
October: Draft Budget Ceilings

• MoFPED distributes Budget Call Circular to all ministries, agencies, etc., with inter- and intra-sector MTEF allocations
• MoFPED hosts a Budget (Framework) Consultative Workshop
November – December: Preparation of Sector Working Group Reports

• Sector working groups use indicative budget ceilings to arrive at inter-sector allocations and prepare Sector Budget
Framework Paper (BFP)
January: Preliminary Estimates

• Sector BFP reports discussed with MoFPED during ministerial consultations
• Ministries and agencies prepare draft budget estimates on this basis
March: National Budget Framework Paper to Cabinet and Parliament

• MoFPED compiles Sector BFPs into the NBFP, which is presented to the cabinet
• After NBFP is considered and approved, it is submitted to parliament
April-May: Parliament and Public Expenditure Review

• The Budget Committee of Parliament discusses the NBFP and presents recommendations to the president and MoFPED
• National Public Expenditure Review meeting is held at which the NBFP is discussed
June: Finalization of Budget

• Based on parliamentary/Public Expenditure Review recommendations, the proposed Budget and Medium-Term
Expenditure Framework are amended
• The Budget is read
Source: GoU (2007).
4.1.3 The Local Government Structures

22 At the top of the five-tier local government
structure is the district, comprising
several counties and municipalities
21 In the early 1990s, the GoU issued a new

policy (Republic of Uganda 1993) that
decentralized powers essentially to two
lying within its territory. It has primary
responsibility for subnational service
delivery. An elected council (LC5) presides
levels of local government: the district over the district, headed by a chair and an
(LC5) and the subcounty (LC3). These levels executive committee. On the technical side,
were mandated to formulate and implement the Chief Administrative Officer is the head
development plans; draft, approve, and of the district administration. Originally, this
execute budgets; raise financial resources officer was appointed by the LC5, but central
and use them to respond to local priorities; government has taken back these powers.
make ordinances and bylaws; and manage The district structure includes the sector
and deliver services that had previously departments such as agriculture, education,
been the responsibility of the central health, works, water, environment, and
government. In 1997, the Local Governments planning. The elected leaders are supposed
Act formalized this structure, and central to oversee the activities of the technical staff.
government resources were made available Membership of the LC5 must be at least 30
to enable the new system to proceed. percent women.
76
23 Below the district is the county council

(LC4), constituted by members of
subcounty executive committees. These
27 At the base of the five-tiered local
government structure is the village,
which is Uganda’s smallest political
members elect an executive committee, administrative unit. Uganda has some
which has limited powers.18 Counties do, 60,000 villages (USAID 2015), and the average
however, constitute the parliamentary village comprises 50–100 households. Each
constituencies, with each county village has a council (LC1) whose members
represented in the national parliament by include all residents 18 years and older.
an elected member. Presiding over each village council is an
executive committee, with a chairman and
24 The next lower level is the subcounty

(LC3), made up of several parishes. The
subcounty chief works with an elected
nine members. These committees have no
service delivery function but are meant to
“mobilize” community members for matters
council, which has a chair, an executive of collective interest.
committee, and elected councilors
representing the parishes. The subcounty
chief heads a technical team of officials,
who are responsible for overseeing service
28 Another element in the
government structure is the Resident
District Commissioner from MoLG.
local
delivery, as inspectors and coordinators The commissioner represents the central

in, for example, the sector ministries of government at the district level and is
agriculture, health, education, and water responsible for supervising staff in the
provision. districts, providing advice, linking a district
government with the center, and overseeing
25 At the LC3 and LC5 levels, the responsibility

to implement council decisions and
central government directives belongs to
implementation of national policies.
appointed civil servants, who are overseen 4.2 Institutional Barriers to Improving
by the Chief Administrative Officer. In theory, Public Expenditure in Agriculture
elected leaders oversee the work of civil
29
servants and wield authority over them. This section develops a detailed analysis
Tensions inherent in the relationship of the of institutional barriers and enablers for
two groups frequently arise, however, and improving the efficiency, quality, and
they can negatively affect service delivery. effectiveness of public expenditures
and the delivery of services in Ugandan
26 A parish (LC2) comprises several villages.

Each parish has a council whose members
include all the chairpersons from the parish’s
agriculture. The analysis attempts to
answer three fundamental questions: What
are the barriers for effective agricultural
constituent villages. The role of parish
policy implementation? How could public
councils and their committees is largely
expenditure for agriculture be improved
restricted to settling local disputes referred
from an institutional perspective? What is
from LC1s, but currently they are dormant.
the relative balance and efficiency between
central and local government spending in
the context of fiscal decentralization?
18 Republic of Uganda (2001). See also Oxford Policy Management (2007).

See Rwamigisa et al. (2013) and Kjaer and Joughin (2012).
See World Bank (2010a).
77
30 The discussion will comment on actual

performance relative to policy where
possible. It will be seen that the policy
ceilings. In a detailed analysis of the
FY2017/18 budget, NPA notes that budget
performance across sectors of the economy,
narrative throughout the period under including agriculture, was unsatisfactory.
review is that the government aims to The sector budget targets, according to the
bring services closer to the people and in NPA analysis, significantly differed from NDP
the process somehow generate improved II targets, and slow budget releases and low
productivity. As this review will emphasize, absorption made matters worse.
policy in the Ugandan agriculture sector is
not what is laid out in the many documents
but is what is represented by the annual 32 The Agriculture Sector BFP is rarely
followed to the letter. In most cases, the
MAAIF budget is made up of last year’s figures
budget and how it is spent.
with a few extrapolations and adjustments.
The process is further weakened by the
4.2.1 Institutional Barriers at fact that the BFP may be rehashed before
the National Level cabinet approval without any input from
the technical staff. And should a real need
arise for additional budget later in the
year, a “supplementary budget”20 can be
Weak Agriculture Sector Planning And
requested (and has been many times).21
Budgeting Capacity Records for supplementary budgets have
not been aggregated over the years. But,
31 The planning process described in the

previous section is top down, lacks
analytical detail, and is deficient in
for FY2015/16, the MAAIF supplementary
budget totaled USh9.8 billion (USh6 billion
for NAADS and USh3.8 billion for CDO).
execution and in monitoring progress.
33
For example, NDP II was prepared by NPA MAAIF leadership has articulated the
with only limited input from MAAIF, perhaps need to strengthen planning within the
because of the ministry’s lack of capacity.19 ministry. In June 2018, a new commissioner
Exactly how any of the NDP II goals are to be was appointed to head the understaffed
achieved, let alone what the role of MAAIF MAAIF Planning Department, but part of the
might be in pursuing them, is not discussed problem, as MAAIF will concede, is that the
in the NDP document. The linkages between Planning Department lacks authority over
the NDP II, ASSP, MTEF, and budget targets the four MAAIF directorates. The possibility
are not obvious. The ASSP would be more of elevating the Planning Department to a
strategic if it gave some indication of: directorate has been mooted many times
(1) how “prioritization” was assessed; (2) since the Functional Review of 2002. It was
the expected outcomes; and (3) how the picked up during the DSIP restructuring
proposed investments fit into the MTEF process of 2009/10, for instance, but never
19 In fact, the performance of NPA may not be much better. Krause et al. (2016) write: “While the NPA is responsible for NDP,
interviewees suggest that the real powers rest with MoFPED, which sets the MTEF and thus shapes the country’s development
priorities.”
20 A Supplementary Budget is an expenditure statement introduced to provide funds to the government to meet new or additional
expenses in a fiscal year.
21 As illustrated in New Vision (April 26, 2017); the newspaper reports the minister telling the Parliamentary Committee that USh21
billion of the MAAIF budget will be allocated to backing up the president’s pledge to provide one million hoes to “less privileged
farmers” and 167 tractors to “various farmers’ groups.”
78
happened. The top policy management team the Agricultural Technology and Advisory
can be reluctant to take policy decisions Services Project. The GoU could not
around planning and budgeting, which are immediately fill this financing gap, which
essential improve the efficiency of resource inevitably has a significant impact on NARO’s
use. operational effectiveness.
34 MAAIF has defended its implementation

performance over the years by focusing
on “insufficient resources.” To some
36 Heavy reliance on projects can also
create “islands” of authority within
MAAIF. These islands are the basis on which
extent, however, the lack of resources is an funds, power, influence, and control are
issue of allocation efficiency. Records show traded. Project coordination units, which
that consistent with the ASSP budget targets aim to ensure timely project implementation
(Table 3.9, Chapter 3), MAAIF allocated may sometimes create parallel structures
more funds to input subsidies , followed by that undermine the formal structure of civil
extension and advisory services , than to service authority. Budget execution rates
R&D, irrigation, and rural roads, which could have also been lower for projects than for
have a sustainable impact on increasing government-funded activities, partly owing
productivity and building resilience. The to the procurement and disbursement
past weakness of planning and budgeting procedures of donor agencies. Establishing
at MAAIF Headquarters was one reason that Single Project Implementation Units that
contributed to the agriculture sector being support implementation of several projects
subject to ad hoc interventions by the either can improve efficiency, the sharing of
State House or MoFPED and NPA. specialized capacity and the sustainability of
expertise within the ministry.
Reliance On Projects And Special

Programs 37 Special GoU programs to provide
immediate ad hoc solutions are becoming
the new norm. For example, the MAAIF
35 Nothing is said in the ASSP about projects budget for FY2016/17 saw an increase of
at MAAIF or how they are managed and nearly 75 percent over the FY2015/2016
financed. In its latest Policy Statement budget. The increase was mainly to raise GoU
(Republic of Uganda 2018), MAAIF appears allocations for expenditures on: (1) “Wages,”
to have 37 discrete projects. The analysis for the additional agricultural extension staff
of the level and composition of PEAS to be recruited; (2) “Non-Wage Recurrent,” all
(Chapter 3) shows that a large proportion of which was allocated to UCDA to produce
of resources budgeted for the agriculture and distribute coffee seedlings; and (3)
sector come from external sources. Over “Domestic Development,” almost entirely
2013/14–2016/17, an average of 33 for the NAADS Secretariat (presumably
percent of agriculture sector budgets were to finance free input procurement and
sourced externally, particularly through distribution by OWC), the construction of
donor-funded projects. Such a high share grain storage facilities, and the purchase of
of donor support may weigh negatively on hand-hoes for distribution to smallholders.
the predictability and sustainability of sector
budgets. For example, the NARO budget for
FY2018/2019 decreased by USh22 billion
over the previous fiscal year (a reduction
of 26 percent) following completion of
79
Ineffective Sector Working Group Weak Coordination Under the

Agriculture, Rural, and Urban
38 The agriculture SWG has some authority
to reallocate the budget within the
sector to reflect ASSP, NDP II, and
Development program
MTEF priorities, but it may never have

used that authority. The SWG would
40 Programmatic budgeting means that
several ministries, departments,
and agencies play important roles in
be the entry point for agriculture sector
planning, budgeting, and executing
stakeholders to bring in ideas for reforms,
budget under the Agriculture, Rural, and
and it could be much more closely involved
Urban Development (ARUD) program. The
with annual work planning and budgeting by
ARUD program includes MAAIF (and all its
MAAIF, in addition to providing oversight of
semi-autonomous agencies); MoLG; MWE;
budget execution through monitoring and
the Ministry of Lands, Housing and Urban
evaluation. However, few SWG members
Development (MoLHUD); local governments;
have the time to scrutinize the annual activity
and the Office of the Prime Minister. The
plans and budgets for the sector, however.
analysis of the level and composition of
39 The SWG’s hesitation to get to grips with sector expenditures (Chapter 3) shows that
the big sector policy and strategic issues allocations to these rural development–
arises partly from the way it convenes and related ministries and local governments
conducts its meetings, which especially average 33 percent of the PEAS. Each
deters busy representative of the private ministry in the ARUD program has its own
sector and farmer organizations. MAAIF SWG, however, and there is no framework
commits to forward all relevant documents for coordinating those SWGs to ensure
for review and consideration by working complementarity in planned and budgeted
group members at least one week before activities, which would improve the technical
the meetings, and to deliver the minutes of and economic efficiency of expenditures in
the meetings no later than one week after the sector.
the meetings. Unfortunately, MAAIF often
has not been able to fulfill this promise.
Consequently, SWG members rarely
41 The intention of the proposed Uganda
Platform for Agricultural Coordination
and Transformation (U-PACT) is to
undertake a critical review of MAAIF budgets
“spearhead coordination and agricultural
and execution performance. Enhanced SWG
transformation,” and it may help to improve
oversight would help to improve budget
coordination under the ARUD program. The
implementation performance by MAAIF.
core ministries involved are MAAIF, the Office
An initiative by MAAIF and development
of the Prime Minister, MoFPED, MWE, MoLG,
partners is planned during 2019 to review
MoLHUD, the Ministry of Trade, Industries
the functioning of the ASWG, the experiences
and Cooperatives, and the Ministry of Works
of other sector SWGs and agreement
and Transport. Other relevant ministries can
of changes that would strengthen its
be co-opted from time to time as the need
functioning and effectiveness.
arises. One of the lessons learned from
implementing the PMA is that a multisectoral
coordination framework is complex and
difficult to manage. Whether U-PACT will
effectively coordinate the ARUD program
remains to be seen, but it is certain that
80
structural issues will need to be addressed to physical implementation of approved

to avoid the pitfalls encountered with the annual work plans, their outcomes and
PMA coordination framework. impacts, and budget execution rates, in
addition to reducing transparency and
accountability to citizens.
Weak Linkages Between MAAIF and
Local Governments
4.2.2 Agriculture Sector Reforms In Uganda
42 District or local government plans and

budgets are insufficiently integrated in
the MAAIF budget. The local government 44 Over the years, MAAIF has been
responsible for implementing
has three sources of funding: unconditional substantial reforms in the sector but has
grants, conditional grants, and equalization struggled with all of them: The Plan for
grants, each with different requirements. Modernization of Agriculture (PMA) in 2001,22
The abolition of the graduated tax has NAADS in 2007,23 and the ministry’s own
reduced the local revenue base. reorganization24 (Box 4.2). Almost all these
reforms sought to set definite priorities and
align them with functions and the budget.
Low Governance Capacity
43 Capacity within MAAIF to perform the

functions related to procurement,
45 Despite efforts at least since the 2000s,
the government retains an outsized
role in agriculture, where its continued
financial management, environmental presence creates opportunities for rents for
and social safeguards, and monitoring public officials and political elites and leaves
and evaluation is low. These deficiencies little room for private sector participation
are partly caused by the low number of and development. Government programs
qualified and experienced staff to carry include free distribution of inputs through
out these functions; and partly due to NAADS and the OWC, farm implements (hand
poor understanding of the requirements, hoes), and tractors. The government seems
procedures, and processes of various more focused on transforming subsistence
donor agencies. Low procurement capacity farming into modern commercial-oriented
delays the approval of contracts and farming with the free distribution of inputs
leads to cost overruns; when inadequate than with the exigencies of supporting
procurement capacity is coupled with low policies that (1) enhance the capacity of
financial management capacity, payments to MAAIF to efficiently and effectively deliver on
service providers take longer than expected, its mandates; (2) increase public investments
attract penalties, and result in low budget in infrastructure (such as irrigation and
execution rate. Low capacity to implement rural roads); and (3) crowd in private
environmental and social safeguards makes sector investment in agribusiness, such as
it difficult to ascertain the sustainability and firms that market inputs and outputs and
inclusiveness of MAAIF programs. A stronger provide agricultural services (for instance,
monitoring and evaluation system would mechanization and financial services).
support performance assessments related
22 Republic of Uganda (2001). See also Oxford Policy Management (2007).
23 See Rwamigisa et al. (2013) and Kjaer and Joughin (2012).
24 See World Bank (2010a).
81
46 Part of the MAAIF mandate is to support and build capacity in district authorities so that they
can provide extension advice, provide regulatory and quality assurance services, and collect
agricultural statistics and information. Given that NAADS in recent years has been allocated the lion’s
share of the MAAIF budget for procurement and distribution (through the OWC) of free inputs, the
ministry’s capacity-building functions are grossly underfunded.
Box 4.2: Reform initiatives of the Ministry of Agriculture, Animal Industry, and Fisheries since
2000
2001: As part of the Plan for Modernization of Agriculture (PMA), MAAIF undertook a “Core Functional Analysis” that
identified priorities for the ministry (policy and planning, regulatory services, agricultural promotion services) and proposed
a new structure reflecting those priorities. The new structure was not implemented, “largely because of lack of consensus
within MAAIF and other key ministries.”†
2002: The “Reorganization of MAAIF” study followed from the Core Functional Analysis. It made additional proposals for
reorganization to better deliver relevant aspects of the Presidential manifesto and PMA, with an emphasis on results-
oriented management and output-oriented budgeting, but it was not implemented.
2009: The ministry commissioned a “MAAIF Restructuring Report” as part of the process to approve the Development
Strategy and Investment Plan (DSIP). The report, with its recommendations on restructuring, was submitted to the Ministry
of Public Services (MoPS). During the dialogue with MoPS, a further study (“Review of the MAAIF Restructuring and Reform
Process”) was undertaken. The conclusions—presented in detail in the published DSIP (2010)—were to form a four-
directorate structure with the creation of two new directorates (significantly, one of the new directorates was Planning
and Policy). The proposals and a plan for transitioning to the new structure were approved by top management at MAAIF,
the cabinet, and development partners in March 2010. The transition was linked to the move of key headquarters staff to
Kampala in 2012. Although staff moved, restructuring never started. After two years funding expired, and staff went back to
Entebbe.
2011: MAAIF commissioned a review of institutional linkages to “make proposals for facilitating effective cooperation and
collaboration in the implementation of the DSIP between MAAIF, the sector agencies, local government authorities and
other key stakeholders.” The main findings were that no single or common institutional and regulatory framework existed,
and its absence detracted from achieving coordinated DSIP implementation. The report had no specific outcome.
2012: MoPS initiated a functional review of MAAIF by Adam Smith International “to consolidate past public service reform
initiatives dating back to early 1990s.”‡ The report proposed modified but very similar structures to the MAAIF Restructuring
Report. It also recommended creating an additional directorate of Regulatory and Quality Assurance Services. The
recommendations were not implemented.
2013: The National Agricultural Policy contained nothing about reforming MAAIF.
2015: Part of the argument against creating new directorates has been that MoPS processes are “too unwieldy,” but with
the collapse of the National Agricultural Advisory Services (NAADS), a new Directorate of Extension was created, bringing
back the very functions delegated to NAADS under the PMA.
2015: The Agriculture Cluster Development Project has International Development Association financing of US$15 million
for a component on “Project Management and Capacity Building for Policy, Regulatory, and ICT Functions of MAAIF,” but this
agenda is relatively limited.
2018: A proposed Uganda Platform for Agricultural Coordination and Transformation (U-PACT) is under consideration.
Source: † DSIP (MAAIF 2010a). ‡ Adam Smith International (2011).
functional responsibilities assigned to

4.2.3 Institutional Barriers at the District
the respective levels of government.
or Local Government Level The functions of the central and local
governments are clearly demarcated
47 In the context of fiscal decentralization,

the relative balance and efficiency of
expenditure by the central and local
in Uganda’s Constitution. To ensure
efficient and effective service delivery by
local governments, central government
governments needs to reflect the ministries, departments, and agencies
82
are responsible for providing direction

and assistance through technical support,
advice, supervision, and monitoring, with
50 The division of responsibilities between
central and local governments seems
clear, but in practice, considerable
the purpose of ensuring adherence to difficulties emerge. Based on the assigned
guidelines on policy, strategy, standards, roles and responsibilities, resources at
and regulations. The central government the central government level should be
provides grant funding through the weighted more strongly in favor of policy
budget, and local governments, in turn, are analysis and reforms, planning and technical
responsible for planning and implementing assistance, R&D, and regulatory and
their budgets in line with the guidelines. quality assurance functions. For the local
governments, resources should be weighted
48
MoLG is mandated to coordinate
implementation of the decentralization
program. To support efficient, effective,
toward the delivery of agricultural services
(such as advisory or extension services,
animal health and veterinary services, agro-
and sustainable service delivery by weather and market information services)
local governments, MoLG has four key and the development of rural infrastructure
responsibilities: (1) inspect, monitor, and, (irrigation, drainage, feeder roads).
where necessary, offer technical assistance, Intuitively, the bulk of PEAS spending should
supportive supervision, and training; be directed to local governments where
(2) coordinate and provide advice for investments are needed rather than to the
harmonization and advocacy; (3) link local central government agencies. In practice
governments with other ministries and this is not the case, primarily because of the
departments, parastatals, the private sector, erosion of the decentralization program,
and regional and international organizations; the fragmentation of districts, and low
and (4) research, analyze, develop, and institutional capacity at the local government
formulate national policies, including those level. These constraints are briefly discussed
pertaining to local revenue mobilization next.
through taxes, fees, levies, and rates.
49
The efficiency argument in favor of
decentralization is that local governments
can interact with local citizens better
4.2.4 Erosion Of The
Decentralization Program
than central governments because
of their geographic proximity. This
interaction enables local administrations to
51 Originally, in line with the principles
of decentralization, the government
intended for local governments to be
spend the budget more effectively and with
financed by locally generated revenue,
more impact. The argument is partly based
which would be topped up by fiscal
on a theoretical assumption that when local
transfers from the central government.
governments tax their local communities,
Locally generated revenue consisted of the
those people are likely to want something
graduated tax, fees from market dues and
in return, and hence a local revenue bargain
rates, various licenses, and property taxes.
evolves in which local officials are held to
Revenue was collected at the subcounty
account for the money which has been
level (LC3), which had the right to retain
collected locally (Kjaer and Katera 2017). In
65 percent of the collected revenue with
other words, local taxation increases the
the obligation to remit the balance to the
likelihood that the demand for local service
districts.
delivery is met.
83
52 These locally generated revenues were

to be supplemented by three types
of fiscal transfers from the central
and creating dependency on fiscal transfers
from the central government. As a result,
about 90 percent of the budget across all
government. First, unconditional grants districts is currently financed by the central
would allow local governments discretion government.
in the use of resources, while privileging
five national program areas (agricultural
extension, primary education, primary 54 The share of the budget allocated to local
governments has eroded substantially,
from 31 percent in FY2010/11 to 21
healthcare, feeder roads, and safe and clean
water). Population size and geographical percent in FY2015/16, and now averages
expanse are the main considerations in less than 10 percent (ULGA 2016). Coupled
the allocation of unconditional grants, with with feeble local revenue generation, it has
population accounting for 85 percent of resulted in severe financial shortfalls for
the weighting and geographical area 15 local governments. The decentralization of
percent. Second, conditional grants would functions is not buttressed with increased
finance predetermined programs under the allocation and spending in the agriculture
priority areas, ideally based on agreements sector; in other words, public spending on
between central government and the local agriculture is increasingly centralized.
governments. The third type of fiscal transfer
consisted of equalization grants, a subsidy
that came into operation in FY1999/2000.
4.2.5 Fragmentation Of Districts
The central government would make
equalization grants available to the least
developed local governments so that they 55 Aside from abolition of the graduated tax,
the major development that torpedoed
the decentralization dream has been
could meet minimum standards for service
delivery. the persistent creation of new districts.
In 1995, Uganda had only 36 districts. The
53 From the start, inevitably, revenues

were insufficient for the levels of service
delivery aspired to by local governments.
number had increased to 56 by 2002, to 80
by 2008, 112 by 2015, and further expanded
to 125 by September 2016. The GoU argues
The graduated tax, with its roots in the that the expansion of districts is a response
colonial era, was especially unpopular. to the rising population and the quest for
The Local Governments Act required the bringing government closer to the people.
graduated tax to be collected from all able- But those working in the districts are more
bodied male persons above the age of 18 cognizant of the evident problems with this
and all able-bodied women engaged in approach. Staff are now shared out among
gainful employment. According to studies the old and new districts, so already limited
undertaken by the Local Government Finance human resources are spread ever more
Commission, graduated tax contributed thinly. There is increased administrative
about 75 percent of locally generated confusion, especially in the new districts,
revenues in districts and 35 percent in some of which have close to zero capacity
municipal councils in FY1997/98. Then, in and are poorly resourced. The quality of
2005, in the run-up to the election, the GoU services is deteriorating steadily and the
suspended the unpopular graduated tax. In coverage across all districts is shrinking.
one swoop, this action wrecked the finances
of local governments, undermining service
delivery, limiting the autonomy of districts,
84
The limited budget for extension services staff, but particularly local councilors
has already been mentioned. But there (elected politicians), who often have a low
is a long record of limited staff numbers level of education and undertake actions that
in the districts and a long history of weak obstruct economic development. There is also
supervision. a need for a change of attitude towards the
private sector from being a major source of
revenues for the LGs [local governments] to
4.2.6 Low Institutional Capacity actors who need to be supported to generate
economic growth and create jobs in the
56 DFID (2013) describes institutional

capacity at the local level in northern
locality.

Uganda as follows:
The district LGs [local governments] in

58 The desperate vacuum in extension
service provision in the districts can
hardly be mentioned too often; as
Northern Uganda have very serious capacity emphasized by the World Bank (2015: 19),
problems, which constrains their effective “the several thousand advisors in the field
service delivery. It has been observed that under NAADS have been let go, and even
inadequate capacity in terms of staffing and under optimistic projections, it is likely to take
skills at district level has led in some cases well over a year to replace them in the field
to inadequate planning and procurement under the new institutional configuration).”
capacity, including procurement delays In early 2017, the press reported in some
and weak supervision of projects. Apart detail that 1,945 extension officers had
from the low staffing levels, the knowledge been recruited under the new system, but
and skills gap identified are in the areas there were no operational budgets for them
of planning and budgeting, procurement, to perform their duties. MAAIF continues to
financial management and reporting, M&E recruit extension workers to reach a target
[monitoring and evaluation], records and of 4,000 in FY2018/19. The ministry has been
data management, ICT, conflict and human lobbying hard for more budget to deliver
resource management. Furthermore, the extension services, but funding has not
communities are equally not aware of their been forthcoming and threatens to make
roles and therefore cannot hold the district the recruited extension workers redundant.
leadership accountable.
57 These problems may be worse in the

northern districts, but they are apparent
4.3 Conclusions
59
to some degree in all districts. According Public expenditures on agriculture
to USAID (2015), staffing levels are worse underperform because of structural
(only about 45 percent of posts filled) in deficiencies and capacity constraints—
newly created districts, particularly those but even so, MAAIF has ample scope to
that are more remote and hard to reach. improve the technical and economic
Another report (World Bank Group 2016) allocation of public resources to spur
goes even further: growth in the sector. To achieve this
improvement, MAAIF must continue with
The other major constraint identified was
radical institutional reforms to reflect its
the low capacity and understanding of
new roles, including its role in delivering
local economic development among local
extension services (transferred from NAADS),
governments officials, including technical
and reinforce its role in policy and planning.
85
Champions are needed from within MAAIF,

at the senior leadership level, to articulate
the rationale, significance, and outcomes of
the reforms.
60 "The balance and efficiency of central

and local government spending must
improve". Local governments should get
a bigger share of PEAS than the current
average of less than 10 percent. District
fragmentation, underfunding, and low
capacity at the local government level have
caused the quality of services to fall across
the board, even though the total number
of people with ostensible access to some
services may have grown.
86
05
THE ROLE OF THE PRIVATE SECTOR IN PROVIDING
AGRICULTURAL SERVICES
88
01 Leveraging private sector investment

in agriculture is critical to fully realizing
the sector’s potential for contributing to
unions provide agricultural services to
small-scale producers in various value
chains. The discussion concludes with policy
Uganda’s Vision 2040. Agriculture by nature recommendations in support of inclusive
is a private sector activity, with firms best private investment in the sector.
positioned to understand market potential
and to engage within their specific value
chains. Moreover, the Maximizing Finance for 03 The material for this chapter was
gathered through a thorough desk
review of key documents, case studies,
Development principles dictate—rightfully—
that scarce public resources be focused on and interviews with selected private
those core public goods and services for sector actors. That information was used
which private financing is unlikely. A rigorous to identify the key sector actors, identify
application of the Maximizing Finance for the attractive commodity value chains for
Development framework will help to identify private sector service provision, identify
those priority public functions. incentives that enable producer groups
to increase production, and assess public
02 At the same time, the constraints to

private investment in agriculture are
well known, particularly within those
sector enablers of improved agricultural
production.
value chains in which small-scale

producers can participate fully. This 5.1 The Private Sector and
chapter reviews Uganda’s experience and Agricultural Services in Uganda:
that of comparator countries to provide Background and Context
policy recommendations on innovative
04
models of leveraging greater private sector Guided by the Vision 2040, Uganda aims
investment in inclusive agribusiness, and to transition from low-income to upper
to adjust public expenditures to facilitate middle-income status within 30 years
private sector investments in agriculture. It through private sector led development.
does not assess the profitability or merits In this context, the private sector is defined
of specific value chains, given that hard as an element of the national economic
data on private investments are difficult system that is run by individuals and
to obtain, commercially sensitive, and companies, rather than by the government,
often indistinguishable from their regular with the intention of making a profit. The
business investments or working capital GoU recognizes the private sector’s key
outlays.25 Instead, the analysis focuses role in creating jobs, exploiting business
on current national and sectoral policies, opportunities, and—particularly in the
strategies, and plans to promote private agriculture sector—unlocking the potential
sector development in Uganda. It examines in value chains. Through policy and
models for the private sector to provide liberal economic structural reforms, the
agricultural services, together with the government has consistently sought to
opportunities and constraints for bringing create an enabling environment for these
those models to scale. Case studies review outcomes.
how the private sector and cooperative
25 Note that although this chapter sheds light on some investments made by the private sector as part of normal business
operations, it does not take into consideration financial outflows related to Corporate Social Responsibility, a self-regulating
business approach that contributes to sustainable development by delivering economic, social, and environmental benefits for all
stakeholders.
89
05 National policies and their implementation

are the critical levers for easing the
costs and risks of doing business with
07 A few strategies have rallied the
private sector to identify investment
opportunities in Ugandan agriculture,
small-scale producers and integrating including the PMA, the Medium-Term
them into value chains. The GoU has Competitiveness Strategy (2000–05), and
recently adopted a National Private Sector the first and second Competitiveness and
Development Strategy (2017/18–2021/22) Investment Climate Strategies (2005/06–
to reinforce its objective of private sector led 2009/10, and 2011/12–2015/16). MAAIF in
growth by improving the business enabling 2016 formulated the National Agricultural
environment, accelerating industrialization, Extension Policy (NAEP) to guide, harmonize,
and supporting firm-level productivity and and regulate the provision of agricultural
modernization.26 The strategy seeks to extension services to farmers, farmer groups,
strengthen the coordination of policies and users of extension knowledge products
and initiatives geared toward growing and in agricultural value chains throughout the
developing private enterprises. It also seeks country. The 2016 policy establishes MAAIF
to facilitate the management and measure as the hub for implementing agricultural
the performance of national efforts to extension and related services to address
improve private sector competitiveness. shortcomings in service provision, respond
In the absence of a public institution with to users’ demands, take advantage of
a specific mandate to engage the private emerging opportunities, and support the
sector, it is hoped that this strategy will much-needed progression of small-scale
coordinate efforts across and within sectors, producers from subsistence production to
as well as with development partners, to market-oriented commercial agriculture.
achieve that engagement.27
06 Missing from the current policy

framework, however, is a clear incentive
08 The policy emphasizes that agricultural
services will be provided through
a “pluralistic, inclusive, equitable,
mechanism through which the public decentralized, integrated, and
sector will support the private sector harmonious system” that links all
in providing agricultural services as categories of “users” along the value
public goods. The perception is that chain with appropriate services and
public interventions to support private innovative technologies. More specifically,
sector development are skewed toward the objectives of NAEP are: (1) to establish
manufacturing and industry, with incentive a well-coordinated, harmonized, pluralistic
mechanisms such as land acquisition in agricultural extension delivery system for
the recently developed industrial parks increased efficiency and effectiveness; (2) to
and tax relief for imported machinery. build institutional capacity for the effective
Fewer interventions appear to enhance the delivery of agricultural extension services;
performance and competitiveness of firms (3) to develop a sustainable mechanism for
involved in the agriculture sector. packaging and disseminating appropriate
technologies to all categories of farmers and
other beneficiaries in the agriculture sector;
and (4) to empower farmers and other value
chain actors (including youth, women, and
26 MoFPED (2017).
27 Global Partnership for Effective Development and Co-operation (2018).
90
other vulnerable groups) to participate to land use. Instead, the program has been
effectively in agricultural extension processes captured by elites who claim to be farmers
and build their capacity to demand services. and distribute inputs among themselves
What is striking about the NAEP objectives, (Tabaro and Katusiimeh 2018). Amid these
strategies, and implementation guidelines is implementation inconsistencies and gaps
that they say so little about the role of private in service delivery, it is not clear who is
sector actors in the provision of extension delivering which services to whom, and
services. although it seems that private companies
have increased their role, their contribution
09 The government has continued to

offer extension and agriculture-related
has not been fully documented.
services, despite disappointing results

and increasing criticism regarding low
staffing, limited engagement with farmers,
11 Garforth and Jones (1997) identify four
main drivers of change in the traditional
public extension services: the economic
and extension workers who are not trained and policy climate, the social context in rural
to address emerging threats in the sector. areas, systems knowledge, and information
NAADS, designed as a demand-driven technology. For the private sector, however,
program to deliver agricultural advisory it is the profit motive that drives the
services, was criticized for targeting only development of more independent, client-
“elite” farmers with a capacity to evolve into oriented, private extension services attuned
commercial farmers. Despite some success, to specific value chains of commercial
NAADS reached only 22 percent of the target interest. The development of a strong
farmers, and a majority of rural smallholders business relationship between the private
expressed no trust in the program. A study sector and producers emphasizes the
on trust and the effectiveness of NAADS quality of interactions between service
identifies trust as the starting point for providers and clients, which contrasts with
explaining farmers’ perceptions of the the traditional public extension model of
effectiveness of extension service delivery moving “messages” through a hierarchical
programs in Uganda (Turyahikayo and system (Adebayo 2004).
Kamagara 2016).
10 Like NAADS, the OWC, one of Uganda’s

biggest civil-military operations, faces
12 According to the Uganda Investment
Authority, the commercial opportunities
in agriculture and agroprocessing are
myriad challenges in serving farmers, vast, ranging from the production of
including the low number and weakness of cut flowers for export to production and
farmer groups and institutions, late delivery value addition in oilseeds, livestock, and
of inputs, inputs of low quality and quantity, cotton,28 and in fact some agribusinesses
and high mortality rates in planting materials have expanded rapidly in Uganda. In 2017,
and breeding stock owing to drought one-fifth of export earnings and one-third
and poor management. The stringent of foreign exchange earnings came from
eligibility requirements—for instance, land grains, sugarcane, cotton, tea and coffee.
is a basic requirement to participate in
the program—do not favor women and
young people, who either have no land or
cannot make important decisions related
28 See http://www.ugandainvest.go.ug/priority-sectors/agriculture-agribusiness/.
91
5.2 The Private Sector in Uganda 5.3 Private Sector Approaches to

Providing Agricultural Services
13 The status of the private sector in Uganda
16
is mixed. Private enterprises consist Many countries and governments
mainly of micro, small and medium increasingly partner with agribusinesses
enterprises. These mostly informal to share financial risks and/or defray
enterprises collectively account for over 90 the costs of investments. The public
percent of private sector production and sector has created enabling policy reforms,
employ over 2.5 million people. Only 14 implemented regulatory reforms, and
percent of these businesses operate in the installed supportive infrastructure to allow
agriculture sector.29 the private sector to thrive. Enterprise
surveys suggests that infrastructure
14 The private sector plays a major role in the

Ugandan economy, even in the presence
of typical bottlenecks and challenges,
constraints alone are responsible for as
much as 58 percent of economic productivity
constraints.32 This finding is more telling for
such as the disproportionately high cost of agribusiness, as infrastructure constraints
doing business. Uganda ranked 127 of 190 erode profits on investment and constrict
economies for ease of doing business in the space for firms to grow and expand. It is
2017.30 Other constraining factors include also worth noting that implementation of the
the cost of starting a (formal) business public-private partnership (PPP) approach to
and increased domestic borrowing, which agribusiness has been slow, despite its huge
crowds out the private sector by raising the potential to link producers to opportunities
cost of capital. for agroprocessing and value addition.
15 Because of these challenges, Uganda’s

private sector is dominated by fewer
than 30 large-scale firms, which control
17 It should be recalled that under NAADS,
the provision of agricultural inputs
and extension services was contracted
more than half of all manufacturing to private service providers on terms
and processing.31 Although leveraging and conditions that targeted specific
private investment in agriculture is critical services for specific commodity value
for Uganda to fully realize the transition chains. This PPP arrangement was hailed
to middle-income status expressed in the as an efficient means of delivering services
Vision 2040, private sector investment in only to those farmers who demanded them
agricultural value chains has not always (although the challenge with this approach
flourished. It is especially challenging for was the lack of supervisory monitoring to
private firms to invest in value chains guarantee the quality of the goods and
dominated by small-scale producers with services provided). The idea was that this
minimal resources, limited capacity, and arrangement would create a demand-driven
little experience in commercial farming— extension system that would minimize the
precisely the farmers who need agricultural cost of public financing to provide extension
services the most.
29 fsdUganda (2015).
30 See https://tradingeconomics.com/uganda/ease-of-doing-business.
31 UNDP (2018).
32 NPCA CAADP Unit (2015).
92
services and related public goods.33 The

NAADS contractors are not considered in
the analysis here, however, as they were
20 Typically, the private sector offers
agricultural services as means of securing
the required volume and quality of supply
simply paid by the public to offer a service to through service delivery models that aim
smallholders, and nothing else. to improve value chain performance
and value creation. For example, from
18 Following the experience with NAADS,

NAEP (2016) sought to reform the
delivery of extension services by creating
a marketing perspective, firms train and
advise suppliers to meet product quality
standards in their target markets, and from
a more streamlined, inclusive, better an investment perspective, they subsidize
coordinated, and decentralized “Single the public sector through commodity
Spine” service delivery system. The Single sourcing, merchandising, and distribution;
Spine approach entailed the creation of storage, primary processing, and other
a Directorate of Extension and Advisory types of value addition; and supporting
Services, although free input distribution primary producers, the majority of whom
remains under OWC. As discussed in Chapter are smallholder farmers. The private sector
3, because OWC focuses on procuring and invests in farmers and their organizations
distributing agricultural inputs and offers as a means of aggregating products to
little in the way of knowledge transfer, it reach economies of scale, and it may also
compounds the existential challenge of provide production inputs of assured
farmers who do not know how to use the quality to maximize productivity, product
technologies that are distributed, which quality, and uniformity. The specific services
limits technology adoption and potentially offered to producers by the private sector
slows the transformation of agriculture and may range from training to enhance quality
the agri-food system. and productivity (for example, training in
farm management practices and the use
19 There is a growing public perception that

the intense interest of the current political
establishment in retaining a stronghold
of agro-inputs), the provision of financial
services (input credit, direct financial credit),
and marketing services (bulking produce
in rural areas has caused OWC to appear
and providing access to the market). From
to serve more of a political purpose than to
the producer’s point of view, agribusiness
act as an enabler of rural agricultural service
actors are filling a critical gap by setting up
delivery and socio-economic transformation.
demonstrations to increase the adoption of
No policy framework guides the functions of
new products, developing farmer outreach
OWC. The contradictions described in this
programs, and establishing contract farming
review between the agriculture sector policy
and outgrower schemes. Although this suite
framework and implementation of OWC are
of services appears entirely to serve the
yet to be fully evaluated. The specific manner
purposes of agribusiness, it nevertheless
in which OWC constrains private investment
delivers benefits to farmers in the form of
in agriculture needs to be analyzed, but
improved productivity; greater awareness of
it is obvious that OWC crowds out private
new products, technology, and innovations;
participation in input marketing.
better post-harvest management of
agricultural output; and the development of
a value chain of commercial interest.
33 World Bank (2001).
93
5.4 Main Constraints Facing Agribusiness

23 The lack of defined standards for most
agricultural commodities also restricts
value chain development and marketing.
21 The challenges that private firms

encounter in providing agricultural
services to small-scale producers vary
In the absence of clearly understood
standards, private firms find it challenging
to do business with smallholders. For
depending on the value chain and the example, the farm-gate unit of measure for
area of engagement along the value chain— horticultural products varies from counts to
for example, they depend on whether the crates to baskets, while at the retail stage
firms are involved as input and equipment products are measured either in counts or
suppliers, nucleus producers and by weight. In addition, from the producer’s
processors, or marketers. In general, private perspective, pricing lacks transparency. This
provision of agricultural services in Uganda is informality increases market penetration
characterized by asymmetry of information. costs for agribusiness.
For example, the lack of information on
24
input use and technological advances Efforts to establish formal markets
prevents small-scale producers from using began with NAADS and continue with
them. At the same time, limited access the government’s current drive to revive
to input and output market information cooperatives. Small-scale producers receive
among smallholders creates opportunities support to form producer associations (PAs)
for informal businesses, which are normally and/or farmer organizations (FOs), which
unregulated, to exploit producers. can connect producers to formal national,
regional, and international commodity
22 Other challenges for agribusiness include

the high cost of finance, inadequate
physical infrastructure, and poor farming
markets. The PAs and FOs can also help
producers to aggregate produce, negotiate
farm-gate prices, and provide a link to
techniques, which translate into low agroprocessors for value addition. In other
productivity, low revenue, limited access to words, these rural institutions can increase
markets, and low agroprocessing capacity. transparency by facilitating access to
Only limited public financing and incentives market information—prices, quantities, and
are available to private agribusiness. The locations.
government has set up an Agricultural
25
Credit Facility (ACF) in partnership with The weak regulatory framework is
commercial banks, Uganda Development particularly pernicious problem. Informal
Bank Ltd., micro deposit taking institutions, agro-dealers thrive in the unregulated market
and credit institutions. The Agricultural for inputs and equipment at the expense
Credit Facility provides medium- and long- of formal businesses, and competition is
term loans for agricultural production and stiff. The informal service providers offer
agroprocessing with a grace period of three inputs that appear to be perfect substitutes
years and an interest rate of less than 10 for those offered by formal firms, while
percent. Lending to the agriculture sector targeting the same clients—small-scale
still remains stagnant, however, at about 7 producers. The inadequate enforcement
percent of all private sector credit. The lack of quality standards also encourages the
of financing and other incentives erodes dumping of low-quality agricultural inputs
profitability and prevents value chains from in Uganda with limited traceability. Formal
expanding to their full potential. firms normally meet the required standards
and can impart some knowledge on how
94
to use them, but they can be pushed out Side-selling occurs when outgrowers do not
of business by informal agro-dealers to the adhere to their supply contracts with the
detriment of smallholders. When farmers nucleus estate and sell their produce in the
stop using inputs because their quality is open market to other buyers. Side-selling
low, they resort to traditional production may occur despite significant investments
practices, which are not economically viable by the nucleus estate to support increased
and cannot help them transition from production by smallholders and provide
subsistence to commercial farming. a guaranteed floor price. This practice is
common among smallholders in sugarcane,
26 Many smallholder farmers remain

underserved by the public extension
system for reasons cited earlier:
coffee, and rice outgrower schemes, in which
competition for produce among processors
is intense.
inadequate extension staff, corruption,
inadequate central and local government
funding, limited PPPs, and a top-down linear
focus on service provision. Yet because
28 The challenge of enforcing supply chain
contracts is serious for the viability of
agribusiness. A typical example is Pearl
private agro-input dealers and other service Rice,36 an indigenous company working
providers tend to operate in the highly with over 800 smallholder rice outgrowers
productive agricultural regions where in Busembatya, eastern Uganda. The
poverty is relatively lower, they also leave company is involved in rice production,
smallholders underserved, especially in milling, packing, and marketing. It provides
areas such as the drier northeastern areas. a range of agricultural services to small-
scale rice farmers, ranging from tractor
27 The private sector can only meet

smallholders’ demand for extension
services when it supports their
services, quality rice seed, and agronomic
advisory services. In turn, Pearl Rice expects
the farmers to sell their produce to its mill.
commercial interests, and even then, When farmers decide to sell their rice to
the challenges can be significant. For other buyers, Pearl Rice incurs losses that
instance, in the last three years Simlaw adversely affect its business performance.
Seeds Company has spent over USh600
million on extension services in the
agroecological zones where it operates.34
Because the lack of quality market data and
29 Limited access to rural financial services
is another challenge for firms that elect
to work with smallholders. According to
information is a constraint, the firm projects FinScope,37 only 10 percent of the people
that its next budget will include over USh100 living in rural Uganda, where the majority
million for data acquisition. Nucleus estates of smallholders live, have access to formal
and processors35 also invest significantly financial services. Their limited access to
in delivering agricultural services to finance prevents them from investing in new
outgrowers, but they encounter challenges technologies to increase productivity and
such as side-selling by famers, limited access value addition. In the absence of functional
to financial services, and small land holdings. rural financial markets, agribusinesses
34 Source: Ms. Syliva Nanteza Kyeyune, Country Manager, Simlaw Uganda.
35 Adopted from Technoserve (2011).
36 The author is grateful to Mr. Taseer Alwi for time and space accorded.
37 See http://fsduganda.or.ug/finscope-2018-case-for-deeper-inclusive-financial-sector-uganda/.
95
working with smallholders are compelled deferred if the cost of plant and machinery
to provide credit, which adds to the cost of is above US$22,500. Agricultural processing
doing business and erodes profits. plants and equipment are also tax exempt
if they meet certain conditions, including
30 Finally, by definition, smallholders have

little land, which presents another set
of problems for agribusiness. Uganda’s
being destined for use by new entrants in the
agroprocessing industry and for processing
locally produced agricultural commodities
agricultural production systems are for domestic consumption.
dominated by approximately 3 million
geographically dispersed smallholder
farmers cultivating about 0.8–1.6 hectares.
These small farms are difficult to mechanize.
32 Various agro-inputs are also tax exempt.
They include all planting material certified by
the relevant authorities as eligible to enter
Widely scattered small farms increase the the country and all horticulture, floriculture,
cost of providing mechanization services and aquaculture implements. The VAT for
and transporting produce to factories, which agrochemicals is zero-rated. These tax
remains the biggest challenge for nucleus exemptions are temporary measures to
estates and processors. kick-start investment and provide relief
to struggling subsectors that face stiff
competition from within the region.
5.5 Incentives for Attracting Private
Investment in Agriculture
33 Some voices are calling for reversals in
the tax regime in the agriculture sector,
31 The GoU acknowledges that the agriculture however, arguing that it would broaden
sector continues to play a critical role in the tax base and provide relief to overly
the economy by creating jobs and wealth taxed areas. For instance, Kasirye (2015)
for its largely young population, and it contends that termination of the VAT zero
slightly increased the budget allocation to rating on processed milk could generate
the sector from USh832.42 billion in 2017/18 revenue in the range of USh19–22 billion.
to USh892.9billion in 2018/19.38 As part Also, removing the VAT exemption on maize,
of the initiative to promote private sector which is consumed by about one in every
led growth, the government through the two households in Uganda, would generate
Uganda Investment Authority established about USh129–148 billion in additional tax
a one-stop center to process applications revenue, but unlike the tax on milk, the
for investment licenses and land acquisition burden of a tax on maize would be borne
documents, and it published a compendium mostly by poorer households.
of feasible agribusiness opportunities for
potential investors to explore. As noted, the
government established the Agricultural
34 Investments in large-scale farming
increasingly draw accusations of land
grabbing, facilitated by lacunae in the land
Credit Facility with an interest rate ceiling
law. The dual civil and traditional land tenure
of 10 percent per annum, which is almost
system also constrains private investments
50 percent less than current commercial
in large-scale farming, notably in the sugar
bank rates. Plant and machinery for
subsector in northern Uganda and oil palm
agriculture are exempt from import duty.
in Kalangala in the South. It is relatively easier
The 18 percent value added tax (VAT) and
to acquire land for agroprocessing because
the withholding tax (WHT) of 6 percent are
the land requirement is smaller.
38 See http://www.ugandainvest.go.ug/priority-sectors/agriculture-agribusiness/.
96
are many players, however, side-selling is

5.6 Models Used by the Private Sector
a risk. Private firms often mitigate that risk
to Provide Agricultural Services by providing tractor services, cuttings cane
at rates lower than the prevailing market
35 The private sector has taken various

approaches to engage
communities in Uganda and provide
farming
rate and offering pre-harvest credit that is
guaranteed by the projected value of the
sugarcane. These mechanisms safeguard
agricultural services. The approaches the firm’s business interests to a large extent
differ in their degree of formality, the level of (see the case study on Kakira Sugar Works
investment by private firms, the negotiating later in this chapter).
power of producers, and the underlying risks
to both parties. The model of engagement
that is chosen by a private firm will reflect the
trade-off between increasing investment and
38 Production contracts are agreements
between producers and a private business
to deliver products of a certain quality
increasing risks, such as market crowding and quantity at an agreed price. These
and inconsistent supply of produce. agreements are less structured than
contracts for outgrower schemes. The
36 Formal models are characterized by

agreements between individual farmers
(or through their associations and
private sector partner provides technical
support to improve product quality but
purchases only produce that meets the set
organizations) and private sector actors standards. This approach has been used
that usually aim to benefit both parties. by seed traders who contract with farmers
Typically, a well-managed partnership to produce and supply seed meeting their
provides farmers with secure access to minimum requirements.
markets (a guaranteed market and basic
price); access to high-quality inputs, often
provided on credit; access to extension and/
or advisory services; reduced transaction
39 Credit schemes and guarantees have
been used by various private input stockists
and distributors as well as producers (such
costs; and improved cross-learning and as multipliers of certified seed). Given the
exchanges. Private sector interventions also risks, credit is usually provided to trusted
facilitate the participation of PAs and FOs farmers, stockists, and distributors who
in markets and reduce the costs of doing have a standing relationship with each
business along the value chain. The firms other. Services offered to farmers range
benefit from economies of scale in product from training in how to use products to
acquisition and trade in inputs. Examples demonstrations of product performance.
of formal engagement models include: (1) Some firms report giving a 30-day credit to
outgrower schemes, (2) production contracts, farmers and FOs to develop and strengthen
(3) credit schemes and guarantees, and (4) their professional relationship. The credit
farmer organizations and cooperatives. is part of the firms’ marketing strategy and
is not considered an extension service
37 Outgrower schemes have been widely

used in plantation agriculture, particularly in
investment in their book of accounts.
the sugar subsector. Farmers are contracted

as outgrowers to supply sugarcane to
processors. Farmers also receive extension
40 Farmer groups and cooperatives are the
most common approach used by the private
sector to engage with farmers. Working with
services and inputs aimed at managing farmer groups helps businesses obtain the
product quality and quantity. Where there required volumes and reduces transaction
97
costs. This approach has been used in more

specialized value chains such as Arabica
coffee (wet processing), cotton, and palm
42
An intermediary model also exists, in
which firms engage intermediaries who
sign contracts with individual farmers
oil. These value chains require producers or PAs/FOs that guarantee to purchase
to use specific varieties of seed, high-quality agreed quantities of their produce of
fertilizers, agrochemicals, and specialized acceptable quality. This model is very
equipment to achieve the desired quantity common in the Central Region value chains
and market quality. The private sector for Robusta coffee and vanilla. For vanilla
has been keen to invest in providing the producers, firms invest substantially in the
required inputs and extension services delivery of extension services to farmers
to farmers engaged in the business. For through third parties (intermediaries) to
instance, Fine Spinners Uganda Limited39 ensure the quality of the produce.
offers farmers a range of cotton production
services, from inputs (improved seed) and
advice on improved agronomic practices 43 Under the tripartite model of engagement,
farmers or PAs/FOs, private firms,
and third parties enter into contracts
to guaranteed purchase of the produce at
premium farm-gate prices, which are slightly to deliver on various commitments.
higher than prevailing market prices. The For example, the third parties may be
same model is applied by BIDCO under the providers of specialized services such
Kalangala Oil Palm Growers Trust, which has as production inputs, financial services,
over 1,800 outgrowers. and micro-insurance that are demanded
by producers and have the potential to
41 Informal models are less structured and

have no binding terms and/or conditions
governing the relationship between
remove bottlenecks along the value chain.
The aBi Trust used this model to promote
agribusiness development to increase the
the private sector actors and farmers, productivity and competitiveness of various
PAs, or FOs. The engagement is simply agricultural value chains. Both technical
transactional, and the private actors deliver and financial support is extended to
minimal services. Informal arrangements producers through third parties to support
may include promotions and outreach or improvements, efficiency, effectiveness,
demonstrations, particularly by agro-input and competitiveness in the preferred value
dealers seeking to increase awareness and chains, removing obstacles to the flow
purchases of new products and technologies. of produce from production to the final
To achieve scale, farmers and PAs/FOs consumers.
are targeted through their platforms, such
as subcounty farmer forums, which are
normally organized through the production 44
The models described here can be
generally termed centralized models,
in which firms directly engage farmers
officers in the local governments. This model
is mainly preferred by agro-input dealers through some form of relationship in
such as Simlaw Uganda. addition to providing extension and
other agricultural services directly. In
contrast, nucleus-estate models contract
directly with outgrowers while also engaging
in centralized production and processing on
estates. This is the working model for large
39 See http://www.finespinners.com/.
98
firms engaged in large-scale production of Table 5.1. Annual output and market share of
industrial crops such as oil palm. The risk for sugar manufacturers in Uganda
producers with this model is that the firms
may have a purchase monopoly and may 2014
Market
output
be able to manipulate contract farmers who Rank Manufacturer share
(metric
(%)
cannot find an alternative market for their tons)
produce. For example, Oil Palm Uganda 1 Kakira Sugar Works 180,000 41.06
Limited (OPUL), which operates in Kalangala 2 Kinyara Sugar Works Ltd 120,360 27.45
district, is a monopoly, and its outgrowers 3
Sugar Corporation of Uganda
73,500 16.77
Ltd
are merely price takers.
4 Sugar and Allied Industries Ltd 29,500 6.73
5 Others 35,000 7.98
5.6.1 Case Study 1: Private Sector Total 438,400 100.00
Involvement In Providing
Agricultural Services 46 The KSW is a subsidiary of the Madhvani
Group of Companies, the largest
conglomerate in Uganda. Madhvani
Group’s current turnover in Uganda
Kakira Sugar Works exceeds US$150 million per year, and its
assets are valued at more than US$300
45 Uganda is the largest producer of granular

sugar in the EAC. According to the Uganda
Sugar Manufacturers Association,40 sugar
million. The group also has investments
in other EAC countries—Rwanda, South
Sudan, and Tanzania. During the 1970s, the
production increased by 17 percent from Madhvani family was expelled from Uganda.
about 365,452 tons in 2017 to 428,000 tons Their businesses were nationalized and
in 2018. In 2017, sugarcane production mismanaged to near-extinction. In 1986,
in Uganda was about 3.86 million tons, the family returned to Uganda, revived and
increasing from 1.67 million tons in 1968, rehabilitated their businesses, and started
growing at an average annual rate of 2.95 new ones. The flagship of Madhvani Group
percent. Sugar production in Uganda was is KSW, which set up in the early 1940s but
for many years dominated by three big experienced a hiatus between the 1970s
manufacturers: Kakira Sugar Works (KSW), and 1986 due to political instability. Its
Kinyara Sugar Works Limited, and Sugar annual sugar output increased from 90,000
Corporation of Uganda Limited, accounting metric tons in 2006 to 152,600 metric tons in
for about 82.3 percent of the national 2010 and more than 180,000 metric tons in
output in 2014 (Table 5.1). In November 2014. KSW crushes over 6,000 metric tons of
2011, the government licensed several new cane per day and operates continuously for
sugar manufacturers41 to reduce the deficits 10.5 months per year. The company grows
in domestic sugar production. sugarcane on a nucleus estate of about
10,000 hectares and supplements that
production with cane sourced from 26,000
hectares owned by outgrowers. During 2006
40 See http://www.ugandaeconomy.com/trade-associations/uganda-sugar-manufacturer-s-association.
41 These include Amuru Sugar Works Limited, Atiak Sugar Factory, Bugiri Sugar Company, Buikwe Sugar Works Limited, Busia Sugar
Limited, Hoima Sugar Limited, Kamuli Sugar Limited, Kyankwanzi Sugar Works Limited, Mayuge Sugar Industries Limited, Mukwano
Sugar Factory, Ndiburungi Sugar Works Limited, Seven Star Sugar Limited, Sezibwa Sugar Limited, Sugar and Allied Industries
Limited, and Uganda Farmers Crop Industries Limited.
99
to 2014 period the number of contracted the company. The question is whether GoU
outgrowers rose from 3,000 to over 7,500, should subsidize KSW to offset part of the
who supply over 1 million metric tons of costs of providing public goods.
sugarcane, which is about 65 percent of the
factory’s annual requirement. Outgrowers
normally own over 1 hectare and are located 49 KSW also contributes immensely to
the Ugandan economy in terms of job
creation, tax revenue, and environmental
within a 25-kilometer radius of the factory.
sustainability. The company directly
47 The company maintains a sugarcane

nursery for treated seed cane and a
full-fledged agronomy section with an
employs over 8,000 persons on the
sugarcane estate and in the factory. Over
100,000 people depend on the company,
applied research center. The research and the community has seen not only jobs,
center conducts field trials and experiments but schools, hospitals, roads, and electricity
on various aspects of sugarcane production, arrive on the back of the sugar industry. The
including herbicides, fertilizers, spacing, company generates about 22 megawatts
and varieties; it also analyzes the nutrient of power from the bagasse, of which 12
status of the crop and soils. In addition, megawatts is supplied to Uganda’s national
the company has a laboratory and an grid. The company also produces biofuels
agro-meteorological station that records (ethanol) from molasses, which is used for
all weather parameters for more effective blending petroleum products to reduce the
planning of cane production both at the dependence on fossil fuels.
nucleus estate and on outgrowers’ farms.
The success of the company is reflected
in the steady increase of cane supplied Oil Palm Uganda Limited
by outgrowers. KSW’s expansion program
foresees outgrower production increasing
to over 1.7 million metric tons per annum. 50 In 2002, OPUL signed an agreement with
the government to invest in an integrated
palm oil project in Kalangala District.
This growth will be achieved by increasing
the area under cane production, increasing OPUL is a subsidiary company formed
the productivity of current outgrowers, through a joint venture between Wilmar
and registering new outgrowers. In the last Group of Malaysia, Josovina Commodities
decade, the company has invested over of Singapore, and BIDCO Oil Refineries
US$80 million in a sugar complex in the of Kenya. It is one of the largest direct
northern Uganda. foreign investments in Uganda. To date,
the company’s capital outlay has exceeded
48 KSW provides agricultural services and US$150 million for an oil palm nucleus estate
technical support to its outgrowers. in Kalangala District and a processing factory
Services and support include the provision in Jinja. The factory employs more than
of seed cane and agrochemicals, advice 1,200 workers, including workers from local
on agronomic practices and techniques, communities. So far, about 10,000 hectares
use of farm machinery and equipment, and have been sourced for oil palm production
transport of the sugarcane to the factory. in Buggala Island. The government has
Although the costs of delivering these agreed to source 30,000 additional hectares
agricultural services are not available, they for oil palm on the mainland, with 20,000
are likely to be substantial. Ultimately, the hectares for a nucleus estate and 10,000
costs of delivering these “public goods” hectares for outgrowers and smallholder
reduce the profits and competitiveness of farmers. OPUL has already established trees
100
on about 6,500 hectares. To meet its raw the outgrowers’ quality of life has immensely
material requirement, OPUL is supporting improved in the last decade. Oil palm trees
over 1,800 smallholder outgrowers, who have an economic life of about 28 years.
have planted over 3,500 hectares with oil They provide a sustainable alternative
palm. The outgrowers sell their produce to source of income to outgrowers and help
OPUL at a mutually agreed farm-gate price. to reduce pressure on the fisheries of Lake
Victoria. OPUL also provides other economic
51
OPUL is a beneficiary of the government’s
Vegetable Oil Development Project, which
aims to expand local palm oil production
services, including rural infrastructure such
as feeder roads, electricity, clean and safer
water, schools, and health centers. These
as a substitute for imported edible oils services contribute significantly to economic
worth over US$75 million per year. The transformation and poverty reduction in
Vegetable Oil Development Project is funded Kalangala District.
by the International Fund for Agricultural
Development (IFAD), and its target is to plant
over 40,000 hectares of oil palm in various
districts of Uganda. OPUL’s investments
53 The GoU will need to sustain the enabling
policy environment to help OPUL roll
out operations to other districts; the
are driven partly by government incentives, government recently announced intentions
including assistance in acquiring land to to expand oil palm production to 10 new
establish the nucleus estate, exemptions on districts. Bugiri, Bundibugyo, Buvuma,
import duty, and deferred VAT and WHT on Hoima, Iganga, Jinja, Kabarole, Kibaale,
factory and farm machinery and equipment. Masaka, and Masindi Districts have been
The GoU also provided tax incentives to identified as possible areas where oil
establish a palm oil processing factory, a palm can grow. In addition, a recent study
modern facility in Jinja that produces palm oil indicates that oil palm could also grow in
to international standards. The processing Amolatar, Bundibugyo, Dokolo, Mayuge,
is environmentally-friendly, since biomass- Mukono, and Oyam Districts.
powered boilers produce superheated
steam that generates electricity through
turbine generators. The lower pressure 5.6.2 Case Study 2: Cooperative
steam from the turbine is used to provide union involvement in providing
heat in the factory. agricultural services
52 OPUL provides agricultural services

to outgrowers during the production
season, including support to clear land;
54 Agriculture cooperative unions are quasi-
private entities that provide agricultural
services to their members. According to
the provision of disease-free and high-
the Uganda Cooperative Societies Act Cap
yielding seedlings, as well as agrochemicals
112, a cooperative union is an organization
(fertilizers and pesticides) on credit; the
formed by primary cooperative societies to
provision of extension services; and the
provide the primary societies with services
guarantee of a ready market for the produce
that the individual primary societies cannot
at harvest. An evaluation by IFAD finds that
afford in economic terms. Following the
this arrangement has helped to establish
liberalization of the agriculture sector in the
trust between OPUL and smallholder
mid-1980s, most of the major cooperative
outgrowers. The Kalangala Oil Palm
unions wound up their businesses, including
Outgrowers Association currently owns 10
Banyankole Kweterana Cooperative
percent of the shares in OPUL. As a result,
101
Union, Bugisu Cooperative Union, Busoga Agricultural services offered by the

Growers Cooperative Union, East Mengo cooperative unions include extension,
Growers Cooperative Union, Masaka education and training; bulking and
Growers Cooperative Union, South Bukedi marketing; farm input supply; and savings
Cooperative Union, and West Mengo and credit schemes. Each type of service is
Growers Cooperative Union. In the early briefly discussed below.
1990s the surviving cooperative unions
were reorganized to function in the context
of newly liberalized agricultural markets. Extension, Education, And Training
55 Several strategies were used to revive

the cooperative movement and help 57 Cooperative unions by their nature
are supposed to provide
added services to their members (the
value-
farmers adjust to the changing business
environment of a liberalized market cooperative societies). The services include
economy, including: (1) supporting training in leadership and management for
cooperatives as independent business staff of cooperative societies; promoting
units; (2) building autonomous democratic autonomous and democratic entities; and
institutions; (3) providing technical support providing members with technical services
to farmers to improve their productivity (extension services). Extension services
and profitability; (4) training cooperative can be provided through cooperative-
union staff in best practices for operating hired technical staff or by linking members
agricultural cooperatives; and (5) providing or PAs/FOs to the district production
policy guidelines for cooperative operations departments. The Uganda Cooperative
(Kwapong 2010). Survey (2010) reveals that 89 percent
of members surveyed reported having
56 Accordingly, cooperative societies were

reorganized as business entities with
some form of self-generated revenue
received some form of training, and 87
percent reported selling over 80 percent of
their total marketed produce through the
from commission charges, shareholdings, cooperative (Kwapong 2010). These findings
and membership fees. The cooperatives demonstrate the increasing importance of
formerly sold their produce to commodity cooperative unions in spurring growth in the
boards at fixed farm-gate prices, but the productivity and profitability of smallholder
newly reorganized cooperative unions would agriculture in Uganda.
negotiate prices, sell to the highest bidder
on the open market, engage in diversified
businesses, and promote value-addition. Bulking And Marketing
About 64 percent of households surveyed
for the Uganda Cooperative Survey (2010)
attributed improvements in their livelihoods 58 Cooperative unions have logistical
capacity to aggregate produce from
cooperative societies, store or transport
to the cooperative movement, while over 90
percent of respondents reported increasing the commodities, and undertake primary
their incomes by more than 24 percent as processing or value addition. These roles
members of cooperative societies. cannot be met by the primary societies or
even smallholders, who lack the means to
bulk, process, and deliver their output in the
required quantity to national, regional, and
international markets. This arrangement
102
helps to protect members of cooperative This practice has supported the

societies from exploitation by unscrupulous segmentation of agro-input markets into
intermediaries as they lack bargaining power. customer groups that share similar interests
Bulking and marketing arrangements can and needs in locations where cooperative
be formalized under various schemes, such unions are fully functional.
as contract farming, outgrower schemes,
warehouse receipts, and crop insurance.
Savings And Credit Schemes
59 A notable example is the Bugisu

Cooperative Union, which is owned by
coffee farmers in Bugisu subregion, 61 Savings and credit services are often
delivered together (bundled) to optimize
comprising the Bilambuli, Bududa, their effectiveness, encourage the
Manafwa, Mbale, Namusindwa, and efficient use of money, and promote
Sironko Districts. This cooperative union a culture of saving. For example, the
has been in existence for over 60 years and Bugisu Cooperative Union retains part of
has 277-member cooperative societies. The the proceeds of its member cooperative
union’s resilience and survival is attributed societies as savings that earn interest
to the importance of the Arabica coffee income and can be borrowed by members
market, over which the union has almost as needed. Savings can also be used to
monopolistic control, despite the presence of leverage credit from commercial banks as
other private sector actors in the region. The well as crop insurance. Interest income can
union trains farmers in the best agronomic be distributed to members as dividends
practices for producing Arabica coffee and or recapitalized to increase the value
in post-harvest handling, especially wet proposition of the individual cooperative
processing. Wet processing entails many society.
steps, and although costly, yields coffee
of very high quality. To maintain its edge
over competitors, the Bugisu Cooperative 5.7 Conclusions
Union provides wet processing facilities to
members as well as full market information.
62 For agriculture to act as a key economic
driver of Uganda’s Vision 2040 and the
transition to middle-income status,
Farm Input Supply private sector investment must be
leveraged. Agriculture by nature is a private
60 Cooperative unions operate at scale

both in business terms and geographical
coverage. Unions undertake aggregate
sector activity, in which commercial firms
are in the best position to understand
market potential and to engage within their
purchase, storage, and distribution specific value chains. Moreover, Uganda’s
of farm inputs to member cooperative scarce public resources should be focused
societies to take advantage of volume on those core public goods and services for
discounts and economies of scale. The which private financing is unlikely. A rigorous
cost of inputs for members of cooperative analysis will help to identify investments
societies is lower than if they purchased that generate largely public goods in which
the same inputs directly from commercial the private sector cannot invest, and
suppliers. investments that yield private goods that will
attract private sector financing.
103
Public-private partnerships could be

promoted in the case of relatively large
investments.
63 At the same time, the constraints to

private investment in agriculture are well
known, particularly within those value
chains in which small-scale producers
can participate fully. For the private sector,
the motive is obviously to facilitate business
development and to earn a profit. Yet the
large-scale agricultural services required for
agribusiness development are costly, and the
associated risks are too high to be mitigated
by individual firms. The financial markets
are equally hesitant to develop products for
financing agriculture, which to a large extent
has limited the operations of even relatively
larger agribusinesses. Consequently, they
have restricted their businesses to certain
geographical areas and specific value
chains. To further leverage private sector
investment in agriculture, the government
must implement policies that will help to
reduce the cost of doing business, and it
must also co-finance some of the services
provided by agribusinesses to smallholders.
104
06
CONCLUSIONS AND RECOMMENDATIONS
106
for increasing agricultural productivity and

6.1 Public Expenditure on Agriculture:
building resilience to climate change risks.
Level, Composition, and Efficiency The low capital expenditure is reflected in the
poor condition of rural infrastructure, which
01 Although the final share of public

spending on the agriculture sector (PEAS)
more than doubled in real terms between
adversely affected farmers’ productivity
and access to input and output markets.
Similarly, the underfunded regulatory
2013/14 and 2016/17, the share of PEAS functions (sanitary and phytosanitary
in total public expenditure (PE) remained services) impacted regional and international
low throughout the period, averaging 3.6 agricultural trade and ultimately poverty
percent. This share is also low compared reduction efforts. MAAIF therefore needs to
to that of Uganda’s East African neighbors increase the share of capital expenditure in
(Kenya, Tanzania and Rwanda) and the its development budget, which is essential
Maputo/Malabo target of 10 percent. To for productive investments.
justify an increase in budget allocation to
move toward the 10 percent target (which is
aspirational, as only a few African countries
have achieved or are close to achieving it),
04 Despite the government’s
on decentralization, the share of
decentralized PEAS is low (7 percent in
focus
MAAIF needs to first improve the quality and 2017/18, falling slightly short of the ASSP
effectiveness of spending in the sector. target of 10 percent). Collectively, MAAIF,
NAADS, NARO, and other SAGAs capture
02 An economic decomposition of public

spending on agriculture in Uganda
indicates that development expenditures
the bulk of the allocations in the sector
(approximately 92 percent). The allocations
to local governments declined from 37
dominate both budgeted and final PEAS. percent in 2013/14 to about 7 percent
Development and recurrent expenditures in 2017/18, falling slightly short of the
represented about 66 and 34 percent of ASSP target of 10 percent. Given that local
budgeted PEAS, respectively. There were no governments provide frontline agricultural
significant differences between budgeted services such as extension and advisory
and final PEAS in terms of the relative services, market information services, and
sizes of the development (50 percent) and rural infrastructure, their budget allocations
recurrent (25 percent) budgets. Given that need to be increased. A vicious circle appears
budget execution rates are high (around to exist in which local governments/districts
90 percent), this means about 15 percent receive limited resources because of poor
of budgeted PEAS was not disbursed by service delivery, and service delivery remains
MoFPED to the agriculture-related ministries poor at the district level because of limited
and SAGAs. resources. MAAIF therefore should find ways
to reduce its headquarters operating costs
03 Although development expenditures

averaged 66 percent, they were heavily
oriented to non-wage recurrent
and retain a modest budget for the policy,
strategy, and regulatory functions.
05
expenditures rather than to capital The geographic distribution of PEAS
expenditures. As a result, too little was shows high efficiency in addressing
invested in irrigation, rural access roads, inequality. Although the ASSP does
wholesale and livestock markets, and not provide precise spatial targets, the
veterinary, sanitary, and phytosanitary geographic disaggregation of PEAS shows
laboratories and equipment, which are critical that spending favors the Northern Region.
107
This region is emerging from conflict, has

much lower levels of human capital, is the
least populous, and has poor infrastructure.
07
The analysis of the PEAS data across
2015/16–2017/18 reveals that OWC
activities contribute to both allocative
Per capita PEAS is also persistently higher (economic and functional) and technical
in the Northern Region but is relatively the inefficiencies. From 2015/16, input
same in the Western, Central and Eastern procurement expenditures started to
Regions. In 2006, approximately 68 percent dominate NAADS budgets, and extension
of the poor lived in the Northern and services shifted to MAAIF. The budget for
Eastern Regions. By 2013, this proportion NAADS includes the allocation for OWC to
had increased to 84 percent. In 2016, about procure and distribute free inputs, of which
47 percent of the poor lived in the Northern 96 percent is categorized as development
Region and another 37 percent in the expenditures instead of recurrent
Eastern Region. In the Northeastern Region expenditures. The parliamentary report on
almost three in four residents (74 percent) implementation of OWC (Republic of Uganda
live below the national poverty line. The 2017) argues that the introduction of OWC
Northern and Eastern Regions would need had several negative effects on the provision
targeted spending to address inequality, of inputs and extension services across the
end extreme poverty, and boost shared country, including a sharp decline in the
prosperity. number of extension agents at NAADS, the
poor quality of inputs delivered by OWC,
06 The complexity of the institutional setup

and budget architecture contribute
to technical inefficiencies in public
and the failure to deliver inputs on time
or unreliability of private input suppliers.
Whereas the focus was on NAADS over
spending on agriculture. MAAIF has 2010–13, input distribution functions were
12 departments operating under four transferred to OWC from 2015/16 onward,
directorates, and there are six SAGAs. Under and in 2015/16 extension functions were
the circumstances, MAAIF can hardly play transferred to MAAIF (the shift appears to
an effective coordination role and take the be fully complete in the 2017/18 budget).
lead in budget planning, implementation,
and monitoring. This level of complexity
prevents the smooth implementation of
an agricultural transformation strategy
08 In this context, the respective roles of
MAAIF, NAADS, and OWC urgently require
clarification. Clear, well-defined roles are
that balances production support, training, vital to a renewed strategy for sustainably
research, infrastructure, storage, and providing input subsidies and extension
marketing. The challenges induced by services. A detailed budget breakdown for
persistent centralization and poor capacity OWC is necessary to understand how the
at the district level are well exemplified by operation’s introduction affected budget
the multiplicity of stakeholders (MAAIF, management and the provision of inputs
NAADS, OWC, and local governments) and and extension services. In addition, if the
issues surrounding input provision and extension subfunction of PEAS falls chiefly
extension. on NAADS and MAAIF, the role of local
governments and districts in supporting
productivity improvements should be clearly
determined.
108
09 Donor funding plays an important and

complementary role to national funding
for agriculture (for instance, donors
11 The policy and institutional landscape
for agricultural expenditures in Uganda
also needs to improve. The government’s
prioritize regions that are less well off). outsized role in agriculture leaves little
Although the share of donor funds (external room for private sector participation. The
resources) in PEAS has averaged 33 percent, government seems more enamored of
there is no credible system of monitoring transforming subsistence farming into
expenditures. Much of the donor portfolio modern, commercially oriented farming with
in agriculture shifted from MoLG to MAAIF the free distribution of inputs than with the
from 2015/16 on. This shift coincided with exigencies of supporting policies that: (1)
a significant increase in domestic resources enhance the capacity of MAAIF to efficiently
for NAADS. In 2017/18, domestic sources of and effectively deliver on its mandates; (2)
funds compensated for the decline in donor increase public investments in infrastructure
funding to MoLG. Complete information (such as irrigation and rural roads); and
on actual spending of donor funds is not (3) crowd in private sector investment in
available for most years reviewed here. agribusiness, such as firms that market
Data and information collection on external inputs and outputs and provide agricultural
partners must improve to inform budget services (for instance, mechanization and
performance assessments during the fiscal financial services). Table A1.1 in Annex
year. The additional information could help 1 summarizes the findings on policy
to mitigate excessive “projectization” of coherence for selected PEAS indicators in
PEAS, which is a challenge associated with Uganda. It compares PEAS indicators against
donor-funded investments. national policy and ASSP targets as well as
the Malabo/CAADP targets.
10
A large proportion of PEAS (more than 40
percent in 2017/18) was used to finance
private goods such as agricultural inputs 6.2 Institutional Environment and Barriers
or processing, marketing, and storage to Improving Public Expenditures
facilities. The increase in processing and on Agriculture in Uganda
marketing expenditures is not necessarily
bad, provided they are used to attract
private investments into the sector. But the
large shares devoted to the distribution of
12 A review of the agricultural policy and
institutional environment suggests that
MAAIF’s role in developing policy for the
free inputs at the expense of investments
sector has diminished over time. Some
that would yield higher returns, such as
agriculture sector policies have emanated
research, rural/feeder roads, and irrigation,
from NPA, an agency of MoFPED. The ASSP
is worrying. MAAIF should contemplate a
, which currently provides strategic direction
reallocation of PEAS toward subfunctions
to sector development, is not adhered to
that serve to deliver public goods, such as
strictly. The links between the ASSP, the
feeder roads and irrigation, rather than
MTEF for agriculture, and the budget are
private goods like inputs. Lastly, closure of
not obvious. Although the agriculture SWG
the Agricultural Technology and Agribusiness
provides a platform for stakeholders to
Advisory Services Project, which provided
participate in the budget process and for
40 percent of agricultural research funding
monitoring execution, its effectiveness has
since 2015/16, prompts the need for
been less than required. Finally, the roles and
renewed thinking on sustainable sources of
responsibilities of various MAAIF agencies in
finance for agricultural research.
109
budget planning and execution of budgets be most affected—MAAIF staff. Otherwise

are unclear, let alone the interface between their lack of commitment to implement
MAAIF and the local governments/districts reforms will generate the negative energy
in the budget process. These are some of that can eventually slow and even stop the
the barriers to the improved efficiency and them. Reforms must aim at increasing the
effectiveness of public expenditure that efficiency and effectiveness of delivering
must be removed to enhance the delivery of agricultural services to farmers. Finally, the
agricultural services. existence of champions to articulate the
rationale, significance, and outcomes of
13 Policy and institutional frameworks

for agriculture are in place in Uganda,
but as this analysis has shown, they
the reforms is a necessary condition. These
champions must be internal and at senior
leadership level. Several sources suggest
are ineffective. Public expenditures on that reforms without champions have
agriculture are underperforming because limited chances of success. Below are eight
of structural deficiencies and capacity recommendations on how to improve PEAS
constraints, but even so, MAAIF (and the from an institutional point of view:
ARUD program) have ample scope for
improving the allocative efficiency of public • Ensure that limited resources are
resources to spur growth in the agriculture used as efficiently and effectively as
sector. To do so, MAAIF must continue with possible. MAAIF should identify, agree,
radical institutional reforms. The ministry’s and target the highest priorities.
organizational structure should be reviewed
to reflect its new roles, including its role in • MAAIF should ensure transparency,
delivering extension services (transferred accountability, and participation
from NAADS). In addition, elevating the in its service delivery to maximize
Planning Department to become the the efficiency and effectiveness of its
Directorate of Policy and Planning would expenditures. This action is in line with
strengthen its role and authority. A stronger widely accepted principles of good
framework is needed for incorporating local governance.
government plans and budgets into the
• Public expenditures should address
ministry’s annual work plans and budgets
the roots, not the results, of market
and for monitoring their implementation.
failures. Rather than spending the bulk
The SWG should effectively provide technical
of PEAS on free distribution of inputs,
guidance, oversee budget planning and
efforts should be directed toward creating
execution, and monitor budget performance.
incentives or an enabling environment for
To enhance the coordination of the ARUD
the private sector to participate in input
program, U-PACT should be supported to
markets, and toward strengthening the
get off the ground.
regulatory functions of MAAIF to ensure
14 Past reform initiatives were largely the quality of inputs.

externally driven, particularly by
• Direct targeted input subsidies to
MoFPED, MoLG, State House, and donors.
producers who have the potential
As a result, MAAIF’s authority and leadership
to transition from subsistence
have been usurped by these ministries,
(producing for domestic consumption)
departments, and agencies. The processes
to commercial farming (producing
of initiating and managing reforms must
surplus for the market). The current
be owned by the people who are going to
110
provision of free inputs is fiscally to guide budget allocations across

unsustainable, creates dependency, and subsectors and address operational
constrains efforts to crowd-in private constraints in the portfolio.
sector investment in input distribution.
• Improve the efficiency of project

management to free MAAIF and local
15 There is an urgent need to balance
allocations and increase the efficiency and
effectiveness of spending on agriculture
governments to focus on delivering at the central and local government levels.
their respective mandates. Projects Unavoidably, local governments should get
need to be consistent with the strategy a bigger share of PEAS than the current
and priorities for agricultural growth and average of less than 10 percent. In the early
development (ASSP and NDP II). However, years after decentralization, the consensus
a programmatic approach to sector was that service delivery was improving.
development may reduce the number of This optimism has now been muted by
projects, and the establishment of Single the challenges with district fragmentation,
Project Implementation Units could underfunding, and low capacity at the local
reduce transaction costs. government level. The quality of service has
fallen across the board, even though the total
• Strategic improvements in public number of people with ostensible access to
spending on agriculture must begin some services may have grown. To reverse
by making much greater use of the this negative trend in service delivery under
BFP and better use of the SWG. Use local governments, the following measures
the BFP as a tool to provide feedback should be implemented:
to MoFPED and enforce the role of the
SWG regarding technical assistance, • Strengthen local government capacity
oversight for planning and budgeting, for planning and budgeting, financial
and performance monitoring. management, and procurement to
improve the efficiency and effectiveness
• The MAAIF planning process must of spending, and most important,
become much more credible and increase the quality and impact of
robust. The ministry should have a agricultural services.
Directorate of Planning with capacity,
authority, and influence. Much greater • Develop a framework to engage
attention needs to be paid to: (1) the citizens in planning, budgeting, and
criteria used for prioritization; (2) the performance evaluation to ensure
expected outcomes; (3) detailed transparency and accountability.
expenditure estimates; and (4) linking Sustained improvements in service
investment plans more closely to delivery depend, at least to some degree,
anticipated MTEF ceilings and indicating on the ability of stakeholders to hold local
how plans would change if MTEF ceilings governments accountable.
increase or decrease.
• Shift procurement from the central
• Much better impact evaluation is to the district level where possible
required to provide useful information to reduce transaction costs, minimize
about programs. Once these evaluations wastage and leakage, improve the quality
are established, policy makers and of supervision, and empower the people
planners will be in a better position of the district.
111
• Discontinue the fragmentation of smaller domestic agribusinesses and favor

districts (and if possible, consolidate large multinational companies, which can
to reduce administrative costs), and bring in the necessary expertise and have
strengthen the governance and service the financial depth to engage.
delivery capacity of existing districts.
• Explore other sources of local revenue

for local governments to fill the gap left
17
The GoU needs to recognize the role of the
private sector in providing agricultural
services demanded by smallholders in
behind by the abolished graduated tax. value chains. For the private sector, the
motive is obviously to facilitate business
• Address the human resource capacity development and to earn a profit. Yet the
vacuum at the local government large-scale agricultural services required for
level to ensure adequate staff numbers agribusiness development are costly, and the
and skill sets for planning production associated risks are too high to be mitigated
interventions, implementing them, by individual firms. The financial markets
and monitoring and evaluating their are equally hesitant to develop products
performance. for financing agriculture. This constraint to
a large extent has limited the operations
of even relatively larger agribusinesses.
6.3 Role of Private Sector in Providing Consequently, they have restricted their
Agricultural Services businesses to certain geographical areas
and specific value chains. To further leverage
16 Agribusinesses may invest in PAs/FOs as

a means of ensuring that producers can
provide a critical mass of the product
private sector investment in agriculture, the
government needs to put in place policies
that will help reduce the cost of doing
they need to attain economies of scale. business, and it needs to co-finance some of
Or agribusinesses may provide other the services provided by agribusinesses to
agricultural services to producers, such as smallholders. Below are some of the policy
seed and fertilizer, to maximize productivity reforms that are recommended:
and ensure product quality/uniformity. Such
arrangements may be formalized under a • Strengthen farmer organizations.
contract farming arrangement or left informal. These organizations are important for
These arrangements place additional cash integrating smallholders into agri-food
flow demands on agribusinesses (especially value chains. Small-scale producers are
in the presence of credit market failures), numerous and geographically scattered,
place further demands on their balance which increases the transaction costs
sheets (for instance in securing credit for of dealing with individual farmers.
inputs from suppliers), and augment project Through FOs, smallholders can gain
risks. Some agribusinesses are willing and access to knowledge and technologies
able to take on such expenditures, but and aggregate produce to achieve
others cannot, and therefore opportunities scale economies. FOs can provide links
for smallholder farmers to participate in to agroprocessors for value addition
value chains are denied. Moreover, the to further increase farm incomes and
propensity of agribusinesses to provide reduce poverty. Federated FOs (such as
agricultural services to smallholder farmers cooperative societies and unions) can
is not scale neutral. The transaction costs form productive alliances to commercially
involved often prohibit the participation of produce and supply agreed quantities
112
and quality of a specific commodity to arrangements, vertically integrated

a specific market. Under productive operations, and outgrower schemes
alliances, smallholders can also gain can provide input credit to farmers. This
access to credit. form of financing is increasingly used
in Uganda for tea, sugar, coffee, dairy,
• Support vertical integration of FOs barley, and sorghum (World Bank 2018c).
with larger producers and processors. Through smartphone-based FinTech,
To foster the competitiveness of smallholders and financial institutions in
Uganda’s agri-food system and the rural areas can access a range of financial
economic inclusion and market power of services, make mobile payments, receive
smallholders, it is vital to integrate FOs in remittances, or obtain higher prices
diverse value chains. Vertical integration for their produce because they have
of FOs into sustainable agri-food better access to market information. An
systems is important for smallholders example of FinTech is Smart Money, a
to commercialize their production savings and payment system operating in
and access credit and markets; for Tanzania and Uganda (AGRA 2017).
larger producers (nucleus estates and
agroprocessors), vertical integration • Reform the public expenditure
enables value addition. By organizing framework. Although there has
production and facilitating quality been strong growth in spending on
grading through producer integration processing and marketing, PEAS has
into processing firms, the challenges increasingly focused on the provision
of branding can be overcome (Delgado of input subsidies. A priority of the
1999). The use of digital technologies can government should be to steer public
help to reduce asymmetries in market investments in agriculture toward the
information and lower the transaction provision of public goods, such as R&D,
costs of dealing with large numbers of extension and advisory services, and
small-scale, widely dispersed farmers. rural infrastructure. Input and output
marketing should be left in the hands
• Increase access to agricultural finance. of the private sector. The government
Access to finance is critical for all parts should focus on regulating input quality
of agri-food systems. Large farms and and standards. In addition, it should fully
agroprocessors can potentially get loans implement extension reforms by allowing
from commercial banks, but financial public goods and services for agriculture
institutions are often reluctant to lend to be delivered by both public and non-
to the agriculture sector, particularly state actors (including agribusinesses),
smallholder farmers. To this end, savings and it should also directly offset/defray
and credit cooperative organizations and the costs to agribusiness of delivering
warehouse receipt systems are promising those services through subsidies and
vehicles for fostering financial inclusion PPP financing.
of smallholders and addressing the lack
of collateralizable land titles for loans. • Strengthen the policy and regulatory
Other options for smallholder financial framework. A range of policy and
inclusion are value-chain financing and institutional challenges need to be
smartphone-based financial technologies addressed, particularly those pertaining
(FinTech). In the case of value-chain to input regulations and quality controls.
financing, formal contract farming The prevalence of low-quality inputs in
113
the market significantly reduces returns

and technologies adoption rates. MAAIF
needs to beef up its capacity to regulate
the input market. Uganda has a Public
Private Partnership Act (2015), which
defines the role of the private party in
a PPP. The PPP Act focuses mainly on
infrastructure projects at the expense
of service provision. There is an urgent
need for the government to clarify the
role of the private sector (agribusinesses)
in providing agricultural services under
PPP arrangements as well as contract
farming.
• Address land tenure issues. Secure

property rights over land are central
for attracting private investment
in agricultural development and
commercialization. On the one hand,
there is an urgent need to analyze how
rising pressure on land is reducing the
productivity of smallholder farming
systems, diminishing prospects for
expanding cultivated area. On the other
hand, the land requirements for large-
scale farming (agribusinesses) to expand
also need to be addressed. Large-scale
farmers depend on land markets to
acquire property. Without secure tenure
for smallholders, land markets are
constrained, and land prices are likely
to continue skyrocketing as demand
outstrips supply.
114
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122
ANNEX
124
01
SUMMARY OF POLICY RECOMMENDATIONS
Table A1.1. Policy coherence assessment for selected PEAS indicators
Indicator Observed Target Source of target Gap Recommendation

Level 3.6% 10% Malabo (2014) -6% Build up capacity to allow sector
Declarations, 2010 institutions to receive greater
CAADP Compact, ASSP proportions of the national budget.
Administrative efficiency
MAAIF and sub-branches 26% 41% ASSP -15% Reconsider the role of NAADS in the
sector’s institutional framework and
rebalance budgets accordingly.
NAADS 41% 23% ASSP 17%
NARO 11% 16% ASSP -5%
Local governments 8% 12% ASSP -4% Build up capacity at the
decentralized level to increase
district resources and gear up local
service delivery.
Technical efficiency
Execution rates 90% No target, Maintain high execution rates but
high value seek to increase the magnitude of
desirable PEAS.
Share of donor spending 33% No target, World Bank (2011) Develop a strategy to phase out
in PEAS low value donor spending in the long run.
desirable Enhance expenditure monitoring
systems for donor spending.
Economic efficiency
Share of development 66% No target, World Bank (2011) Refine classification systems
spending in PEAS high value of recurrent and development
desirable spending. Contemplate the
reallocation of PEAS shares to long-
term investments (capital spending).
Functional efficiency
Share of PEAS allocated 21% 53% ASSP -32% Refine budget monitoring systems
to specific commodities to better track and understand how
(including priority ones) PEAS interventions support specific
commodities, including the priority
commodities of the CBA.
Allocation of PEAS across Replenish livestock and fisheries,
commodity groups as well as food crops (even if they
are poorly represented in the ASSP
budget).
Livestock and dairy 20% 36% ASSP -16%
Cash crops 41% 28% ASSP 13%
Crops, general 12% 3% ASSP 9%
Fisheries 6% 32% ASSP -26%
Forestry 4% NA ASSP NA
Other 16% NA ASSP NA
125
Indicator Observed Target Source of target Gap Recommendation

Allocation of PEAS across Replenish inspection for livestock.
subfunctions Envisage a gradual diminution of
spending on producer subsidies to
the benefit of irrigation or feeder
roads.
Agricultural research 26% 15% ASSP 11%
Extension 12% 17% ASSP -5%
Producer subsidies 28% 31% ASSP -3%
Inspection 0% 10% ASSP -9%
Irrigation 4% 5% ASSP -1%
Other 9% 4% ASSP 5%
Processing, marketing and 18% 14% ASSP 4%
storage
Training 3% 5% ASSP -2%
Share of private sector- 30% No target, World Bank (2011) Design a strategy to crowd in
related functions (inputs, low value private investment in the sector and
processing, marketing, desirable increase spending shares on public
and storage) in PEAS goods such as irrigation and feeder
roads.
126
02
DATA SOURCES AND METHODOLOGY
01 The analysis for this Uganda AgPER relied

on data provided by MoFPED and drew
on two sources:
subsector categories, namely livestock,
cash crops, crops (general), forestry, and
fisheries.
i. The MoFPED/World Bank BOOST public
expenditure database, April 2018 iv. Commodity: all expenditure lines that
version, which covers 2003/04–2016/17. qualify as PEAS are mapped either to
For 2016/17, only budgeted amounts are single commodities, commodity groups,
available in the database. or “all commodities.”
ii. IFMS budget data from MoFPED for

2016/17 (includes both budgeted
amounts and expenditures) and 2017/18
04 Data gaps and implications
summarized in Table A2.1. Annex 2.
The most critical data gaps are: (1) the
are
(includes budgeted amounts only). geographical mapping of expenditures in

the data sources was not fit for the purposes
02 These two data sources were combined

to compute the PEAS indicators for
2013/14–2017/18. The combination of the
of the analysis; and (2) no disaggregated
expenditure data were available for
Operation Wealth Creation (OWC).
BOOST and MoFPED datasets resulted in a
single Excel raw data file containing about
127,000 lines of budget data. The analysis
used 20 core variables extracted directly
05 The analysis draws on an approach to
reviewing PEAS that builds on previous
work done by African governments in
from the BOOST and MoFPED database.42 collaboration with the World Bank, the
Food and Agriculture Organization (FAO),
03 Four more variables were constructed, as

follows:
and the African Union (AU) (World Bank 2011;
MAFAP 2015; AU 2015). This Annex outlines
the approach followed to create the scope,
i. Scope: a variable that specifies whether
subfunctional, sectoral, and commodity
the expenditure line is considered as
variables. The content of this Annex was
PEAS or not (included/excluded).
adapted from the World Bank Agriculture
Sector Expenditure Public Expenditure
ii. Subfunction: all expenditure lines that
Review Methodological Note (World Bank
2018a).
categories describing subfunctions,
such as subsidies, research, extension,
infrastructure, and so on.
iii. Subsector: all expenditure lines that
42 The whole set of variables can be found in Uganda’s BOOST database at boost.worldbank.org/country/Uganda.
127
Table A2.1. Data gaps and implications for PEAS indicators
Data gap Implication for PEAS Significance for analytical results Next steps
indicators
No data were available 2017/18 figures in the Most recent budget behavior Incorporate 2017/18 actuals
on actual expenditures report are budgeted remains unobserved. Some when they become available.
in 2017/18 at the time of expenditures. recommendations may therefore
writing. already be endorsed.
No data were available on Analysis of external The level of PEAS may be Analyze donor finance
actual expenditures from (donor) financing uses overestimated. Execution rates matrices and off-budget
external sources, except for budgeted amounts. (economic efficiency) may be expenditure tables in the
2016/17. overestimated. The functional budget books to see if missing
efficiency analysis is based on actuals can be added.
donors’ planned behavior, not
actual behavior.
Geographic disaggregation Geographic analysis of Most recent trends in the Liaise with MoFPED to update
across regions was not PEAS does not include distribution of decentralized PEAS the geographical mapping in
available for 2017/18 2017/18 figures. are not covered. the BOOST database up to
figures. 2017/18.
Digital geographical PEAS levels are known The report does not contain maps Liaise with MoFPED and other
mapping of subregions, and for subregions, but PEAS of PEAS across districts. agencies to obtain a mapping
correspondence table of levels on associated of subregions to districts.
subregions to districts, were districts are unknown.
not available.
No disaggregated data on The level and composition How inputs and extension services Liaise with MoFPED staff to
OWC. of the OWC budget are are provided to farmers, how obtain disaggregated budget
unknown. provision of these inputs and data on OWC.
services has evolved over time, the
commodities that are prioritized,
and how the introduction of
OWC affected public financial
management in agriculture remain
unclear.
Scope disaggregation of local government

expenditure across districts was available
06 Four dimensions define the scope of

PEAS covered in this analysis: timeframe,
functions and subfunctions, administrative
in the 2017/18 dataset. Even though no
detailed analysis of district-level PEAS
was done for this review, the lack of these
units, and economic categories. Each is data could constrain future studies on the
discussed in turn next. decentralization of agricultural spending.
Timeframe Functions and Subfunctions
07 The analysis focuses on the 2013/14–

2017/18 period. Merging the BOOST
database and MoFPED IFMS budget data
08 According to the Government Finance
Statistics manual of the International
Monetary Fund (IMF), a functional
for 2016/17 and 2017/18 created some classification of expenses “provides
challenges. For example, the coding system information on the purpose for which an
for expenditure items differed in the BOOST expense was incurred” (IMF 2014: 114). As
and IFMS datasets, which made the creation such, agricultural expenditures are limited
of the additional variables and classification to those that support agriculture directly;
particularly intricate. In addition, no in contrast, expenditures that support
128
agriculture indirectly (such as through and hunting” (70423), and “agricultural

positive externalities or long-term impact) research and development” (7084).
are excluded.
09 The set of functions considered in

this analysis is consistent with the
10 Functions were disaggregated into
subfunctions using the methodology for
analysis of public expenditure on food
Classification of the Functions of and agriculture developed by FAO under
Government (COFOG), an accounting its Monitoring and Analyzing Food and
system developed by the Organization for Agricultural Policies (MAFAP) program.
Economic Co-operation and Development This methodology proposes “COFOG-
(OECD) and the United Nations Statistics compatible” categories for subfunctions
Division. COFOG classifies public (MAFAP 2015). Some MAFAP categories,
expenditure by “functions or socioeconomic however, go beyond the scope of COFOG to
objectives that general government units include rural expenditures and expenditures
aim to achieve” (IMF 2014: 142). The African in support of consumers. The analysis
Union Guidance Note (AUGN) on tracking excluded the subfunction categories that
and measuring the levels and quality of were not COFOG-compatible. The final set
government expenditures for agriculture of subfunction categories is shown in Table
(AU 2015) recommends using the following A2.2. Figure A2.1 is a visual representation
COFOG categories to define “agricultural of the functions and subfunctions included
public expenditures”: “agriculture (including in the analysis.
livestock)” (70421), “forestry” (70422), “fishing
Table A2.2. Subfunction perimeter for this AgPER, based on selected categories from the MAFAP
methodology of FAO (covers COFOG categories 70421, 70422, 70423, 7084)
Subfunction Description
Transfers to private agents in the agriculture sector in the form of variable inputs or
A. Subsidies
assets.
Transfers to private agents in the agriculture sector in the form of partial or total
A1. Input subsidies
payment of seeds, fertilizers, pesticides, fuel, electricity, credit, and other similar items.
Transfers to agents in the agriculture sector in the form of partial or total payment of
A2. Capital subsidies agricultural equipment, machinery, on-farm infrastructure, livestock, and other similar
items.
Transfers to public or private agents in the form of partial or total payment of
B. Research
agricultural research activities.
Transfers to public or private agents in the form of partial or total payment of
C. Extension & advisory services
agricultural extension and advisory services.
Transfers to public or private agents in the form of partial or total payment of training of
D. Training
agricultural private agents.
Transfers to public or private agents in the form of partial or total payment of inspection
E. Inspection and quality control and quality control activities: livestock vaccination campaigns, inspection of produce
quality for marketing, and other similar activities.
Transfers to public or private agents in the form of partial or total payment of the
F. Agricultural infrastructure
construction of infrastructure that directly supports the agriculture sector.
F1. Feeder roads
construction of roads that connect production areas to the market.
F2. Irrigation construction of irrigation for agricultural production that is not on-farm (for on-farm, see
A2): irrigation dams, canals, and other similar structures.
129
Subfunction Description
F3. Other infrastructure construction of other agricultural infrastructure that is not on-farm: for instance, wells
to supply water to livestock.
G. Storage construction of public or collectively owned storage infrastructure (for private
ownership, see A2).
construction of collectively owned market and processing infrastructure (for private
H. Processing and marketing
ownership, see A2), marketing or processing training, and other similar items or
activities.
Transfers to public agents in the form of partial or total payment of the costs of
maintaining efficient administrative functions in support of agriculture. This subfunction
Other – Administrative costs essentially includes salaries of staff in government agricultural agencies involved in
managerial and secretarial functions and the maintenance/running costs of these
agencies.
Source: Authors, based on MAFAP (2015).
Figure A2.1. Perimeters of functions and subfunctions for this AgPER
A. Subsidies
E. Inspection & quality
A1. Input B2. Capital
subsidies subsidies Control
F. Infrastructure
B. Research F1.
Feeder F2. F3.
roads Irrigation Other
C. Extension & advisory

H. Storage
services
D. Training I. Markets and

marketing
Note: Administrative costs are not displayed in the diagram but form another category of the perimeter.
130
11 Although this scope corresponds to the COFOG coverage as described in the AUGN, it does
not really match its “enhanced COFOG” coverage, which includes several additional categories
that are deemed too broad for this analysis. Table A2.3 lists the “enhanced” COFOG categories, along
with justifications for including them in this analysis or excluding them.
Table A2.3. AUGN enhanced COFOG functions included in the scope of this AgPER
AUGN enhanced Included in the scope of Justification

COFOG function this analysis?
There is no standard methodology to identify food and nutrition security
Food and nutrition expenditures, which can be far-reaching in scope, encompassing health
No
security and environment, food aid and humanitarian expenditures, and education,
among others. Their inclusion risks skewing the indicators heavily.
Only identifiable feeder roads were included. Rural roads entail massive
public expenditure items, which aim to support all sectors of the rural
Rural/feeder roads Partially
economy—health, education, resource extraction, and so on. Their inclusion
risks skewing the indicators heavily.
Rural land Rural land titling and administration have multiple institutional, social, and
No
administration economic objectives and support agriculture only indirectly.
Expenditures in direct support of the agriculture sector pertaining
to sustainable natural resource management are included, such
Sustainable natural
Partially as agroecology, agro-forestry, and conservation agriculture. Other
resource management
environmental expenditures are not included, as they support agriculture
only indirectly and their inclusion risks skewing the indicators.
Multisectoral/multi- Whenever they include an agricultural component, these projects are
Yes
purpose projects considered.
Mandated functions
Public funds that semi-autonomous government agencies (including state-
of state-owned Yes
owned enterprises) spend on agriculture are included.
enterprises
Agricultural marketing Yes See category H of the scope defined in Table A2.2.
Capacity development
for agriculture Yes See category D of the scope defined in Table A2.2.
development
Rural electrification entails massive public expenditure items which aim
Rural electrification for
No to support all sectors of the rural economy—health, education, resource
agriculture
extraction, and so on. Their inclusion risks skewing the indicators heavily.
Information and
communication ICT for agriculture is included through other categories of the scope defined
Yes
technology (ICT) for in Table A2.2 (B, C, D, E, H, mainly).
agriculture
Subnational PEAS that are implemented at the subnational level are included in the
Yes
expenditures scope of this analysis.
Source: Authors.
12 A two-step approach was used to extract

data from the BOOST and MoFPED
databases in a manner consistent with
13 Administrative selection/screening
automatically included all expenditures
managed by the following agencies:
the scope defined earlier for functions and
subfunctions: administrative selection/ • 010 MAAIF.
screening and keyword-based selection/ • 157 National Forestry Authority.
screening. • 306 Uganda Exports Promotion Board.
131
• The six semiautonomous government • 160 UCDA.

agencies (SAGAs): 152 NAADS, 142 NARO,
• 306 Uganda Export Promotion Board.
155 Cotton Development Organization
(CDO), 160 Uganda Cotton Development • All municipal councils and the Kampala
Authority (UCDA), 121 Dairy Development City Authority.
Authority (DDA), and 125 National Animal • All districts.
Genetic Resource Centre and Data Bank
(NAGRC&DB).
Economic Categories
14 Keyword-based selection/screening was
16
used to capture relevant expenditures The analysis of expenditures included
falling outside the agencies identified in the following economic categories: all
the previous step. The screening was done recurrent and development budgetary
by performing keyword searches in the items, budgeted, released, and spent
datasets to identify agriculture-related lines. (expenditure), excluding debt service and
In addition, project lists were manually including supplementary budget transfers.
screened for all agencies (ministries and Revenue foregone is not included.
agencies) to identify agriculture-related
projects.
Mapping Expenditures by Subfunction,
Subsector, and Commodity
Administrative Units
15 The analysis covered the following agencies:

17 Once the scope was defined, three
additional variables were created
(subfunction, subsector, and commodity),
and expenditures were mapped to each
• 003 Office of the Prime Minister (OPM). variable. Expenditures were mapped to
• 010 MAAIF. the subfunctions defined in Table A2.2 as
follows:
• 011 Ministry of Local Government
(MoLG). • Isolation of lines included in the scope of
• 012 Ministry of Lands, Housing and work (about 127,000 lines were reduced
Urban Development. to around 32,000 lines).
• 015 Ministry of Trade, Industry and • Concatenation of agency, program,

Cooperatives. and project codes for lines included in
• 019 Ministry of Water and Environment the scope of work. Each line thus has a
(MWE). 12-digit code with three components,
such as “010-010.00-0070,” where
• 121 DDA.
“010” is MAAIF, “010.00” the program
• 125 NAGRC&DB. (“Development”), and 0070 the project (in
this case, “AHRC-Ankole Ranch”).
• 142 NARO.
• 152 NAADS Secretariat. • Removal of duplicates in the list of
concatenated codes (around 32,000 lines
• 155 CDO.
were reduced to about 750 lines).
• 157 National Forestry Authority.
132
• Manual classification of the 750

remaining projects, either using project
name or through internet searches and
19 The attribution process left subsector
and commodity variables open for a
large proportion of expenditure lines,
the review of project documents. The because of information gaps or because
content of other core variables (such expenditures target multiple sectors (such
as “function,” “MTEF,” or “item”) was also as expenditures on agricultural research or
used to classify each budget line. marketing). For example, for the 2017/18
fiscal year, 24 percent of budgeted PEAS
• Many projects could not be mapped to could be mapped to identifiable subsectors,
a single subfunction, because they are and the remainder targeted agriculture,
multisectoral or multipurpose projects forestry, and fisheries without distinguishing
that implement a diverse set of activities. among them.
In those cases, multiple subfunctions
were mapped to the expenditure line.
After that, expenditure amounts were Selection Of PEAS Indicators
apportioned to each subfunction,
assuming equal shares. Around 50
projects and 2,250 expenditure lines 20 The data available and choices regarding
the scope of work and expenditure
mapping drove, to some extent, the
ended up being mapped to multiple
categories and apportioned in this way. selection of indicators. Some efficiency
There were also cases in which projects indicators, for instance, that rely on
were rejected from the perimeter subfunction, subsector, and commodity
following a closer examination of their mapping are therefore based on calculated
content. spending data.
18
The attribution of subfunctions also
involved linking to subsectors and 21 In this context, it is important to emphasize
two points. First, the overlap between
total expenditures for all national agencies
commodities for all expenditure lines
included in the scope of work. The included in the analysis and PEAS is almost
attribution used a simple list of five livestock complete, implying that the gap between
single commodities and four cash crops. the reported budgets and expenditures and
In addition to the “livestock” and “cash the calculated PEAS is close to nil (See Table
crop” sectors (for which disaggregation A2.4). Second, an exclusive focus on the
across single commodities was possible), figures reported in the budget books has
expenditure lines were mapped to three its limitations. The recurrent/development
other sectors: “crops, general,” “fisheries,” distinctions in the books are of little help in
and “forestry.” Expenditures were mapped differentiating between expenditures that
to the “crops, general” sector when they fund institutional activities (administrative
could not be mapped to a single commodity, costs) and expenditures that fund activities
considering the information available. Thus, that directly target economic agents in the
expenditures under “crops, general” include agriculture sector. The salaries of extension
but are not limited to food crops. workers or researchers, for example, may be
recorded in the budget books as recurrent
costs even though they result in services
being provided to farmers. Moreover,
assessing budget efficiency directly from the
books is not straightforward, because it is
133
difficult to determine how much goes to each subfunction or commodity only by skimming through
the project labels.
22 In sum, this analysis seeks to add value to more descriptive accounts of budget trends in
Uganda.43 It should be read jointly with the main reporting documents published by MoFPED, such
as the National Budget Framework Papers.
Table A2.4. Administrative disaggregation of PEAS, final expenditure (USh billions)
2013/14 2014/15 2015/16 2016/17 2017/18†

MAAIF
PE 68 92 76 160 331
Of which PEAS 68 (99%) 92 (100%) 76 (100%) 160 (100%) 331 (100%)
NAADS
PE 72 156 184 318 280
Of which PEAS 72 (100%) 156 (100%) 184 (100%) 318 (100%) 280 (100%)
NARO
PE 32 38 38 96 90
Of which PEAS 32 (100%) 38 (100%) 38 (100%) 96 (100%) 90 (100%)
DDA
PE 5 4 4 7 7
Of which PEAS 5 (100%) 4 (100%) 4 (100%) 7 (100%) 7 (100%)
NAGRC&DB
PE 5 4 4 13 15
Of which PEAS 5 (100%) 4 (100%) 4 (100%) 13 (100%) 15 (100%)
CDO
PE 3 12 10 9 9
Of which PEAS 3 (44%) 12 (91%) 10 (69%) 9 (33%) 9 (38%)
UCDA
PE 8 7 43 85 77
Of which PEAS 8 (100%) 7 (100%) 43 (100%) 85 (100%) 77 (100%)
National Forestry Authority
PE 11 7 24 16 30
Of which PEAS 1 (9%) 1 (12%) 5 (20%) 2 (14%) 8 (27%)
Uganda Export Promotion Board
PE 0 0 0 3 3
Of which PEAS 0 (0%) 0 (0%) 0 (0%) 3 (100%) 3 (100%)
MoLG
PE 35 31 45 154 282
Of which PEAS 15 (43%) 3 (9%) 20 (44%) 130 (84%) 245 (87%)
MWE
PE 156 177 250 497 528
Of which PEAS 49 (31%) 53 (30%) 61 (25%) 87 (18%) 184 (35%)
Districts, councils, other agencies
PE 2,071 2,308 928 2,781 3,047
43 Such as the descriptive approaches used in Kakuba (2016).
134
Of which PEAS 150 (7%) 46 (2%) 21 (2%) 61 (2%) 89 (3%)

Total PEAS agencies
PE 2,467 2,837 1,606 4,138 4,698
Of which PEAS 408 (16%) 417 (15%) 467 (29%) 971 (23%) 1,337 (28%)
Note: †2017/18 amounts are budgeted amounts, not final expenditure. Percentages in brackets are the shares of PEAS within PE. The
“districts, councils, other agencies” item covers all districts and councils, the Kampala City Authority, the Office of the Prime Minister, and
the Ministry of Trade, Industry and Cooperatives (see disaggregated list in “Administrative” section above). Ministries of “Lands, Housing
and Urban Development” and “Lands, Water and Environment” were grouped together under “Ministry of Water and Environment”
(MWE).
135
03
LEVEL OF PUBLIC EXPENDITURE IN AGRICULTURE
Table A3.1. Reference budget allocations across agriculture sector agencies from the ASSP 2015/16–
2019/20
Agency 2015/16 2016/17 2017/18

MAAIF and sub-branches 149.2 293.5 326.7
MAAIF 138.8 264.5 295.4
MAAIF/COCTU 5.0 19.9 20.3
MAAIF DAES/NARO 5.5 9.0 11.1
SAGAs 260.3 282.1 290.1
NAADS 133.3 136.3 136.3
NARO 80.4 97.1 102.6
UCDA 33.2 33.4 34.6
DDA 4.8 6.4 6.6
CDO 4.5 4.8 6.0
NAGRC&DB 4.0 4.0 4.0
Local governments 30.4 95.0 100.0
Other agencies 23.2 86.7 121.3
Donor agencies 19.0 74.7 109.0
Fisheries Training Institute 0.5 2.0 2.2
Other 3.6 10.0 10.1
Total 463.0 757.2 838.0
Note: Amounts computed by the authors using Annex D of the ASSP (MAAIF 2016). COCTU is the Coordinating Office for the Control of
Trypanosomiasis in Uganda. DAES is the Directorate of Agricultural Extension Services.
136
Figure A3.1. Administrative composition of PEAS
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2013/14 2014/15 2015/16 2016/17 2017/18*
MAAIF NAADS
NARO DDA
NAGRC CDO
UCDA National forestry authority
Uganda Export Promotion Board Ministry of Local Government
Ministry of Water and Environment Districts, municipal councils and other agencies
Note: *Budgeted expenditures were used for 2017/18, not actuals.
Table A3.2. Disaggregation of final PEAS across commodities
2013/14 2014/15 2015/16 2016/17 2017/18†

Livestock 5% 9% 3% 5% 6%
Beef 3% 8% 2% 4% 5%
Dairy 2% 1% 1% 1% 1%
Pigs 0% 0% 0% 0% 0%
Poultry 0% 0% 0% 0% 0%
Goats 0% 0% 0% 0% 0%
Cash crops 3% 5% 11% 10% 6%
Coffee 2% 2% 9% 9% 6%
Cotton 0% 3% 2% 0% 0%
Tea 1% 0% 0% 0% 0%
Other export crops 0% 0% 0% 0% 0%
Crops, general 2% 2% 2% 1% 5%
Fisheries 3% 2% 2% 1% 2%
Forestry 1% 1% 2% 0% 1%
Other 2% 4% 3% 5% 4%
General PEAS on agriculture and the rural sector 85% 77% 77% 78% 76%
Total 100% 100% 100% 100% 100%
Note: † For 2017/18, shares are for budgeted amounts.
137
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ACRONYMS & ABBREVIATIONS

AgGDP Agricultural Gross Domestic Product

MoPS Ministry of Public Services

GLOSSARY OF KEY TERMS

Analysis that permits one to understand priorities and balance of

2.0 SYNTHESIS OF PUBLIC SPENDING ON AGRICULTURE IN AFRICA

3.0 UGANDAN AGRICULTURAL PUBLIC EXPENDITURES: LEVEL, COMPOSITION AND EFFICIENCY 35

4.0 UGANDAN INSTITUTIONAL ENVIRONMENT AND BARRIERS TO IMPROVING AGRICULTURE 61

5.0 THE ROLE OF THE PRIVATE SECTOR IN PROVIDING AGRICULTURAL SERVICES 75

6.0 CONCLUSIONS AND RECOMMENDATIONS 90

National decentralization objectives are not fully matched by the allocation of

Institutional setup and budget architecture constrain efficient spending in the

The constraints to private investment in agriculture are well known, particularly

Reforming the policy on public spending for agriculture in Uganda should be a

Global Experience With Public Expenditure On Agriculture As A Benchmark For

09 Public spending in agricultural research and complementary services (irrigation, extension

Allocative Efficiency Of Public Expenditure In The Agriculture Sector In Uganda

15 Analysis of the allocative efficiency of public expenditure provides an understanding of

17 The economic efficiency is mixes because although development expenditures averaged 66

21 The functional efficiency of public expenditure on agriculture in Uganda has improved. An

Technical Efficiency Of Public Expenditure In The Agriculture Sector In Uganda

25 Technical inefficiencies pervade the delivery of subsidized inputs to farmers. Considerable

The Policy And Institutional Landscape For Agricultural Expenditures In Uganda

28 Public expenditures on agriculture underperform because of structural deficiencies and

29 More specifically, to improve PEAS from an institutional point of view:

• Develop a framework to engage citizens in planning, budgeting, and performance evaluation to

• Strengthening farmer organizations to integrate smallholders into agri-food value chains.

• Supporting vertical integration of farmer organizations with larger producers and

spur inclusive growth, increase food security,

01 This Agriculture Public Expenditure

02 The AgPER was undertaken in response to

sector budget in Uganda was still about twice

05 The Uganda AgPER (2010) concluded

06 The agriculture sector budget was not

while allocative efficiency is doing the right

09 Allocative efficiency. Allocative efficiency improve the targeting of subsidies (through

10 The first drawback identified through

13 At first glance, the functional composition

expenditure information, the sector Budget

18 AgPER 2019 also places a strong

2 World Bank (2018d).

capital spending to an estimated 4.4 percent

impact than agriculture, which remains

26 Continued low growth in agricultural

29 "Uganda is among the countries that

2017). These circumstances indicate that

30 Uganda’s agricultural systems are

31 Productive and sustainable agriculture is

of the yields obtained on research stations;

generating knowledge (often in the form

01 The rationale for public investments

03 Public spending on agriculture is also

06 While the Malabo-CAADP continues to

that are necessary for agricultural

07 Under the Maputo-CAADP, the 10

share of spending is its share of national

09 The fundamental question is how much

10 In the absence of a practical way to

capital spending to an estimated 4.4 percent