Uganda: Local farmers losing out to foreign suppliers

11 July 2007, The Monitor
URL: http://allafrica.com/stories/printable/200707091700.html

Kampala:  Ugandan farmers are missing out on a huge market for fresh produce each month because they are not selling to supermarkets like Uchumi and Shoprite. Supermarkets are one of the fastest expanding businesses in East Africa, with South Africa's Shoprite leading the pack in Uganda.

According to business executives, supermarkets in Uganda are set to double in number in the next two years as both Shoprite and Uchumi plan to open new stores.

It is critical that Ugandan farmers find a way to access this burgeoning market, rather than shrug their shoulders as Uchumi imports mangos from South Africa and Shoprite imports watermelons from Kenya.

Mr David Njenga, the country manager of Uchumi Supermarkets Ltd., insists there is a "huge potential to increase local sourcing for fresh produce". Uchumi currently deals with 50 produce suppliers; the five major suppliers are from Kenya and South Africa, the rest are local producers or traders.

"We want to deal directly with the farmers, rather than with traders" Mr Njenga says, "but we know that transportation is hard for small farmers."

Uchumi imports 50 per cent of its produce, buying all of its bananas, passion fruit, and pineapples from Ugandan farmers, but sourcing oranges, mangos, tangerines, and apples from foreign suppliers. Other products like tomatoes, potatoes, lemons, pawpaws, and onions are partly sourced locally and the rest are imports.

Constraint

"It's hard because they don't have commercial farms for these products here, so the quality is not as good," Mr Njenga says, "but I would prefer to source locally if someone approached me with a good quality product."

So how does a farmer begin to supply large supermarket chains? Quality, consistency, and communication are the key.

Here is the process: To approach Uchumi, bring a letter of introduction describing your farm. Bring a list of items, price suggestions, and a yearly schedule of when products will be available. And, importantly, bring samples of any goods you wish to supply.

"Don't just bring the very best tomato you have," cautions Mr Njenga, "because when you come with your whole delivery and the quality is not what we expected we will be disappointed and will be less likely to source from you in the future."

Listed suppliers

Once listed as a supplier, Uchumi issues a weekly plan indicating to each supplier the type of produce, amount, and day of delivery.

"One challenge we have with local suppliers is that when they can't make the delivery they don't call to tell us. That puts us in an emergency situation to source a product last-minute."

The lesson: call in advance. "Communication is key," Mr Njenga says, "even if you call to say 'Sorry I can only bring in half the order' then at least we can prepare other sources."

Mr Denis Ochan director of procurement for Freshmark (Shoprite's produce branch), pointed to a similar picture.

"The market is there, trust me" he says, "if you have a quality product, bring it in." Like Uchumi, Shoprite also works with about 50 suppliers, of which 10 have larger farms and the rest work from 2-3 acre plots.

"Two factors determine if we can source from a farmer: Low price and high quality," Ochan says, "but if the product is quality, we are willing to negotiate on the price."

The procedure to become a supplier is similar to Uchumi but in addition a supplier must have a bank account because Shoprite pays in bank cheques.

"Organising transportation, packaging, and cool storage are the main challenges Ugandan farmers face to ensure quality products" says Mr Chebet Maikut, advisor and former president of the Uganda National Farmers Federation.

"After a lot of lobbying they are finally opening up to Ugandan suppliers. We are focusing on developing farmers cooperatives so that we can meet the high volume demands of the supermarkets."

According to a supplier for Shoprite, it can be much more lucrative to produce less common items, such as herbs or lettuce.

"If you only have a small piece of land, you should grow a crop that is very valuable even in small amounts." People do not buy kilos of herbs at a time, so you do not need to have such a big harvest to supply supermarkets," he suggests.

Suppliers also caution farmers to get a written contract with the supermarket with all the terms and conditions of the agreement stated. For example, Uchumi may ask farmers to buy back their produce that has gone bad on the shelf. According to seasoned suppliers, this is not professional and new suppliers should be sure that the terms of the contract do not make suppliers pay for low supermarket sales.

Agriculture

An estimated 75 per cent of Ugandans rely on agriculture for their livelihood. While it is unlikely that farmers with tiny plots will be able to supply directly to supermarkets, farmers with even 1-2 acres have the opportunity to develop a consistent, profitable business from their land.

"You have to stop seeing farming as just subsistence and start treating it as a business" Mr Njenga says, "I know that we can produce quality produce here in Uganda, but it will take a concerted effort at first."

The emergence of an agricultural middle class indicates that a country is on-track for continued growth and development.

As the supermarket industry expands, don't just sit back and let Kenyans and South Africans use our markets to develop their industry. The market is there, trust me.