In Summary
Ø Government to develop a Tea Policy in order to tackle quality concerns.
Ø The Cabinet approved a resolution to provide support to the tea industry through the provision of a subsidy on fertilizers, with an allocation of sh20bn to further the aid.
Ø To address the issue of mounting debts faced by tea factories, measures will be taken to enable these factories to access affordable financing.
Ø Furthermore, all tea processing factories will be categorized as export processing zones. Another decision made by the Cabinet is the establishment of a tea market for auctions in Kampala.
UGANDA: The crisis faced by tea farmers due to plummeting prices has been acknowledged by the Government, forcing them to come up with various interventions to support and stabilize the industry.
Dr. Chris Baryomunsi, the Minister of Information Communication Technology and National Guidance, highlighted that farmers in tea-growing regions such as Kigezi, parts of Ankole, and Toro are grappling with the issue.
The situation has led some farmers to consider uprooting their tea plants, while others have abandoned their tea gardens to opt for other ventures.
This alarming trend underscores the severity of the crisis.
Baryomunsi also mentioned that farmers had already taken their concerns to Parliament for redress.
However, he noted that the Cabinet initiated discussions on this matter towards the end of last year (2023), leading to the formation of a committee to investigate the tea crisis and come up with a report.
The committee presented its findings and recommendations to the Cabinet on March 4, 2024, leading to the implementation of several decisions.
Baryomunsi stated that in addition to various obstacles, the crisis stemmed from global factors, encompassing political and economic challenges triggered by events like the Russia-Ukraine, Sudan wars, and economic crises in Egypt and Pakistan.
“Those two have affected our sales of tea especially in the East African region because they are the major consumers of our tea. But also, the economic crisis in Pakistan and Egypt because they are also major importers of tea from Uganda and other East African countries. In simple economics, when there are these supply and demand dynamics they affect the price,” he added.
He noted that due to the impact of pricing, numerous factories have been unable to operate, posing a challenge for tea farmers.
Government to support the sector
According to Baryomunsi, the committee’s report highlighted an issue with the tea quality in the country.
Consequently, as part of their decisions, the Cabinet instructed the Ministry of Agriculture Animal Industry and Fisheries (MMAIF) to develop a Tea Policy that would oversee and provide guidance to the industry.
“We realized that tea is one of the most important economic crops that are not guided or supported by any legislation. Others like coffee, there is a law (Coffee Act), there is Uganda Coffee Development Authority (UCDA)…so there is a policy and legislative framework that guides the coffee industry,” he said. “But for tea, we do not have authority and we do not have a legislation and proper policy,” he continued.
He emphasized that this indicates, in part, concerns regarding quality, which is why they instructed the MAAIF to create a policy that is expected to be finalized by May of this year (2024).
He stated that the policy will outline several actions “that we must take” to tackle quality issues and ensure support for the entire industry, including extension services.
He stressed that the seedlings provided to farmers must undergo thorough examination, testing, recommendation, and approval, rather than allowing farmers to plant any seedlings of their choice.
“All these speak to quality issues. The plucking of tea must be done in a manner that is guided, the transportation of tea from the gardens to factories, all these we found they stick to the quality issues and once the policy has been put in place to be able to guide so that the industry can be given full support,” he added.
Fertilizer revolving fund
Baryomunsi mentioned that they have also identified a problem with the utilization of fertilizers among farmers.
“We realized that the factories, many of which are privately owned or community owned, have been on their own getting fertilizers, sending it to farmers and then recovering money from farmers without a well-coordinated arrangement,” he noted.
Baryomunsi noted that the Cabinet has made a decision to create a revolving fund for fertilizers.
Under the arrangement, the government will provide the capital for the fund and it will work in collaboration with tea processing factories to distribute subsidies to farmers.
The aim is to enhance both the quality and productivity of the farmers.
Baryomunsi further stated that the government will offer a 50% subsidy for the first two seasons, with the fund continuing its operations thereafter.
“Eventually the farmers will be able to buy the fertilizer themselves but we shall be extending it through the factories,” he added.
He mentioned that in light of the decision made, the Ministry of Finance must promptly allocate a sum of up to UG shs20 billion to procure fertilizers from Dong Song Factory located in Eastern Uganda.
This is to ensure that farmers can obtain the fertilizer at the earliest for the first upcoming season.
Factories designated as export processing zones
The Cabinet has also decided to classify tea processing factories as export processing zones.
“There are many benefits that come with that decision. So, we have declared the tea processing factories as export processing zones in accordance with the Free Zones Act. That means we shall be waving off the licensing fees,” he noted.
He emphasized that this will result in providing them with more affordable electricity, as one of the main issues faced by the factories is the expensive energy costs, among other benefits.
Furthermore, he highlighted that the factories will no longer have to pay the 18% Value Added Tax (VAT) on fuel under the new arrangement.
“This tax will be waived off because these will not be processing zones wherever the factories are,” he added.
Soft loans
He also noted that the government acknowledged the financial struggles faced by numerous factories due to loans, and highlighted the importance of providing support.
Baryomunsi said the Ministry of Finance will assist the tea industry by facilitating access to affordable financing, to enable them to settle their debts effectively.
“Through the agricultural credit facility, we shall be able to provide soft loans through Uganda Development Bank (UDB) at an interest rate of 6% per annum in order to push on these factories, so that they are able to pay back the debts and also be able to resuscitate themselves,” he added.
He mentioned that they have already calculated the outstanding dates for each factory.
Establish tea market
Baryomunsi noted that a decision has been made to set up a tea auction in Kampala.
He said experts from the government have been tasked with studying the necessary requirements for establishing a tea market for the auction to take place in Kampala.
Previously Uganda’s tea was being auctioned in Mombasa-Kenya.
“Farmers out there who are listening to us and watching are in the crisis because the prices have come down, the factories that usually buy the green leaves are not buying and those that buy at very small prices which are not benefiting the farmers,” he noted.
He observed that through such intervention, the factories would have the ability to adjust the prices and purchase the tea at rates that are satisfactory to the farmers.
“Farmers please don’t uproot the tea; we have come up with measures that are going to resuscitate the tea industry. The Crisis is not local Uganda crisis, it is a global crisis occasioned by factor which are extrinsic to us as Uganda,” he noted
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