Agricultural input quality forum: New research, private sector solutions & policy directions

Anyone interested in Ugandan agriculture knows that inputs sold across the country are often substandard. But conventional wisdom is intangible; policy needs a more concrete basis. New research presented at this event went beyond the anecdotes. It provided concrete evidence of the nature, scale, and implications of the quality problem in agricultural inputs. The first objective of this event was to disseminate the findings of completed studies, and also emerging results from ongoing work. For the IGC, the key study – and also the event’s headline presentation – is the paper ‘Low quality, low returns, low adoption’ by Jakob Svensson, Tessa Bold et al, which was funded under the IGC project “Why is the agricultural revolution so slow in Africa?”

From a policy perspective, research is only as useful as the action it can inform. Evidence-based policymaking requires clear insights, but there still is much we don’t know. The second objective of this event was to discuss what we can learn from the studies, and to identify areas in which more evidence is needed. The forum thus helped chart a way forward for both researchers and policymakers.

Discussions of business issues are incomplete without private sector representation. In the absence of an effective regulatory framework and lacking an effective market mechanism, agricultural firms have had to find their own solutions. The third objective of this event was to learn from the way businesses get by in this challenging environment. Finally, participants explored innovative models that have the potential to change the Ugandan agricultural input markets’ dysfunctional dynamics.

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Sessions

Morning presentations: Research

The morning session featured three research presentations. Prof. Jakob Svensson from Stockholm University presented the IGC-study ‘Low-quality, low trust and low adoption: Evidence from the market for fertilizer and hybrid seed in Uganda’. As part of this study, Prof. Svensson and his co-authors conducted a mystery shopper experiment, anonymously buying fertilizer and hybrid seeds from more than 360 randomly selected shops. The fertilizer bought was then taken to the laboratory and tested for its nitrogen content.  The lab results showed that the average fertilizer sold by retail shops on the Ugandan market contains 33% less fertilizer than authentic fertilizer. Similarly, hybrid seed that was bought was tested on experimental plots, to show that the ‘hybrid’ seed being sold is subject to massive counterfeit too, with only 45% of it being authentic hybrid seed on average.

The high amount of counterfeit in the market has led to a deterioration of trust in the market among farmers. The research team conducted interviews to map farmers’ perceptions, and found that farmers have a fairly accurate perception of the amount of counterfeit in the market. And farmers are drawing the right conclusions: Using hybrid seeds and fertilizer available on the market just isn’t profitable, because such a large share of it is counterfeit. To show this, Prof. Svensson trialled the purchased inputs on experimental plots and showed that mean expected return is negative, and positive in only 20% of cases.

The second study titled  ‘Uganda FTF E-verification Impact Evaluation Study’ presented by Lucy Billings from the International Food Policy Research Institute is an on-going evaluation of a private sector solution to the problem outlined by Prof. Svensson’s research. Feed the Future, the co-host for the event, is supporting the introduction of an e-verification system for agricultural input. This system uses scratch tags containing codes that can be verified via SMS, allowing farmers to check whether the input they are offered in shops is genuine or not. Baseline data has been collected, and the introduction of the e-verification system to the Ugandan market was announced during the presentation. The study will collect data on the prevalence of counterfeit inputs, farmers’ perceptions and effects of the e-verification system on these variables. Data on household effects will also be collected.

The third study titled ‘Revisiting Uganda’s Inorganic Fertilizer Supply Chain’ was presented by Swaibu Mbowa from the Economic Policy Research Centre. His research traces the quality of agricultural inputs along the supply chain using mystery shoppers, taking into account moisture content, nutrient (nitrogen) content, and weight accuracy. Per each of the four Ugandan regions, the study sampled 2 districts, and from there 4 wholesalers and 3 retailers. Among retailers, one firm was picked that was registered with the Ministry of Agriculture, Animals and Fisheries (MAAIF), one firm that was a member of the Uganda National Agriculture Dealers Association (UNADA), and one firm that was not registered (illicit). The results surprisingly show that the highest share of counterfeited or low quality inputs are sold by MAAIF registered dealers, the second highest share is being sold by UNADA members, with illicit traders selling inputs with the highest quality, followed by wholesalers.

Panel discussion: What can we learn from the research?

The current Chairperson of the Uganda Agribusiness Alliance and former Minister for Agriculture, Honourable Victoria Sekitoleko, opened discussion. Welcoming IGC’s initiative to host this forum, she congratulated the researchers for delivering important factual evidence that can guide policy discussion. In her remarks, she emphasized that resources dedicated to enforce regulations are inadequate, and that solutions lie with government as well as with farmers and private sector players. A point in case she raised is the re-packaging of inputs, asking: Is there nothing that can be done? Points of discussion raised by Hon. Sekitoleko were complemented with a long session of questions from the audience. General opinions voiced in the discussion were that a lot lies on the shoulders of the MAAIF, who currently doesn’t use its resources effectively. Why for example, asked the audience, have no arrests been made for counterfeiting? Who controls the controls? Is counterfeit being imported, suggesting that the MAAIF cooperate more closely with URA, or produced in the country?

The discussion took an interesting turn when it centred on farmer’s perceptions and knowledge. In this context, Prof. Svensson pointed out that to move out of the low quality – low trust – low adoption equilibrium, interventions to increase the quality of agricultural inputs need to be accompanied by interventions to change farmers’ perceptions and improve companies reputations. This is because agricultural inputs are experience goods, and perceptions only change slowly, so that improvements of the average quality of inputs available on the market by themselves will not lead to high uptake, at least in the short term.

Towards the end of the discussion, the Director of Crop Resources, Mr. Okaasai Opolot from MAAIF joined the event, and delivered the closing remarks for the morning session. He echoed Hon Sekitoleko in emphasizing the importance of the event. He acknowledged that the MAAIF has not been effective enough in enforcing regulation, but justified this with resource shortages. He also explained that occasional arrests have been made, and that the recent formation of an agricultural police will help improve enforcement further. He noted that ultimately, there will have to be cooperation with suppliers, whom he wants to make responsible for following the quality of inputs sold by retailers, as well as with farmers, who need to be empowered with bottom-up verification systems.  This, he explained, is particularly important in light of the discussion of subsidies for agricultural inputs.

Afternoon presentations: Private sector solutions

The afternoon session was begun with a presentation by Benjamin and Philipp Prinz from the Joseph Initiative Ldt. The Joseph Initiative is a grain management and trading company active in Uganda, with an innovative business model. Mr Prinz motivated the presentation by outlining why most producers in Uganda currently do not achieve their full productive potential: (1) lack of access to reliable and value responsive markets, (2) lack of genuine inputs, (3) lack of access to credit. Speaking to the theme of the event and bringing in their knowledge of the market, they then identified market failures responsible for the low quality and low uptake of inputs on the market: (a) limited verifiable real-time information, (b) high price sensitivity due to output market risk and illiquidity, (c) misconception of productivity of inputs due to improper use, (d) ineffective implementation of the regulatory framework.

The second part of the presentation explained how the Joseph Initiative responds to the market failures and challenges the farmer faces by integrating input and output markets: They sell farmers genuine inputs, improving farmers’ yield and quality of produce, then go on to buy and feed this produce into their supply chain for sale to bigger regional buyers. Their buying centres are open during the whole harvest season and equipped with storage and processing facilities that allow them to ensure that the farmer can achieve a good price at any time. Their business also helps farmers get access to credit through a partner bank, this way fully integrating the supply chain. In closing their presentation, they proposed policy interventions identified from their experience in the market.

Bringing the perspective of a large agricultural input importer to the discussion, the second presentation in the afternoon was given by Agnes Mbabazi from Balton, one of the largest importers in Uganda.  Ms. Mbabazi began her presentation by giving a detailed overview of the fertilizer market in Uganda, and identification of the products with the highest prevalence of counterfeiting. She further explained that other sources for low quality of inputs are related to poor storage, transport, labelling. Measures that Balton has taken to counteract counterfeiting and quality decline are the introduction of a pre-export verification system, spot check on fertilizers imported (samples are taken to government analytical labs), dealing exclusively with reputable manufacturers of fertilizers, on time stocking. However, Ms. Mbabazi also emphasized that policy measures are needed: An anti-counterfeit bill, more involvement of UNBS in the agricultural sector, more logistical support for MAAIF to increase policing, PPP’s with MAAIF, government subsidies, sensitization on fertilizer usage and quality, more quality checks.

The last presentation of the day featured an innovative solution to the problem of counterfeit products: scratch-cards that allow verification via SMS. The presentation was given by Bright Simons, the President of M-Pedigree, whose company is introducing the system for agricultural inputs on the Ugandan market, in collaboration with the USAID sponsored Feed the Future, the Uganda Bureau of Standards, and the Ugandan company RenPublishing. Once rolled out, the system will allow consumers real-time verification of the authenticity, with no direct costs to the consumer. Apart from benefiting the consumer, the system also carries benefits for producers, importers or retailer by allowing mobile phone based surveying, promotions, coupons, blacklisting of distributors and sales analytics through real time data collection.

Panel discussions: Supporting the private sector

The Director of Crop Resources from MAAIF, Mr. Okasaai Opolot, served as discussant during the closing session. He showed strong interest in the business solutions presented, and explained that quality issues are a private public affair: The MAAIF doesn’t need hundreds of inspectors if the private sector can lend support in verification exercises.

Director Opolot then went on to highlight that one of the biggest challenges his Ministry faces is the fast appearance and disappearance of actors on the agricultural input market. To improve regulation, he therefore plans to introduce an electronic platform that would allow to collect data on quality of inputs, institute a recall system, and manage potential subsidies. However, this idea is still in development, and he therefore invited all participants of the event to join him in an agricultural inputs workshop that the MAAIF will hold on regular basis.