Cooperatives in the Cotton Industry: the good, the bad and the ugly

Just over two decades ago, cotton was known as the household income generator. Many Ugandans recall how their parents used the proceeds from cotton sales to finance their education under the Cooperatives societies and unions of the time. In the 1970s and 1980s, Uganda produce over 100,000 metric tonnes of cotton per year, but this has since slumped to just 18,000 tonnes per year in the last five years. The country’s cotton was ranked among the best, earning a premium of US 5 cents per kilo in the global market price.

What went wrong?

In an exclusive interview with theCooperator, a former Cooperative Officer in the then Ministry of Cooperatives and Marketing carried us through this history. Way back in the 1960s to early 90s, thousands of Ugandan farmers were organized in clusters of cooperatives spread across the country with monopoly of cash crop markets. In the 1990s, government policy liberalized the economy including the cash crop sector allowing the inflow of foreign direct investors with big money working through local private agents.

In the 1980s and early 90s, the Uganda Cooperatives Central Union (UCCU), secured machines from India, that were supplied to thousands of farmers’ cooperatives on loan. The machines, which they later established were being tested on African farmers by the Indians, phased out the original and strong UK made machines completely. 

“Not so long, the Indian made Nipher started to wear out. During the wars, fighters from the different groups looted the machines, like Lorries (Tata), and Iron sheets from the ginneries leaving the loan indebted cooperative unions in total mess,” he said. 

Government then urged the unions to form joint ventures with the private investors, but this only led to those cooperatives like North Bukedi and Lango Cooperative Unions that tried, losing one or all of its ginneries to the investors.”

Moreover, cotton cooperatives failure to service the heavy loans incurred, and the closure of the Cooperative Bank negatively affected their credit worthiness. Eventually, most cotton cooperatives were unable to get any viable financing facility to revamp their businesses, many close shop, remaining dormant to date.

“This is the story of the once powerful cotton cooperative   Unions such as;  South Bukedi Cooperatives  Union based in  Tororo, North Bukedi Cooperative Union in  Pallisa, Teso Cooperative  Union, Sebei Cooperatives  Union, Lango Cooperative Union in Lira. The West and East Acholi Cooperative Union in Acholi sub- region; Madi Cooperative Union in West Nile, Bunyoro Growers Cooperative  Union, Busoga Cooperative Union in Busoga. Only Nyakatonzi, West Acholi, & Bunyoro Growers Cooperative Unions have maintained a fairly large cotton business through this difficult period”.

A mix bag of recovery efforts and challenges

While the cotton cooperatives struggled to recover, government initiated the Cotton Development Organisation to regulate the cotton sector. The cotton farmers would be supported by the Union Export Services (UES) to export their produce. This did not work as well as was expected, leading to the emergence of many rival organizations and groups. Investors with big offshore cash flows and venture capital took over the ginneries, then teamed up with CDO to form the Uganda Ginneries and Cotton Export Association (UGCEA).

TheCooperator   has established that the UGCEA purchase the cotton from the local farmers, add little value to the cotton prior to export mainly to the United Kingdom. Though the UGCEA was supposed to bring all the cotton farmers and ginners under one roof, this has not been achieved, according to our source.

The tale of “illegal” levy on cotton

Cotton farmers under their different unions whom theCooperator talked to, told us that on top of the official government  tax on cotton (CESS) levied at UGX300 per kilogram of cotton sold, they have to pay an additional Shs 200 per kilogram of cotton sold that is charged  by UGCEA.  

“We are bitter at this additional levy of Shs 200 per kilogram, yet we understand government also releases about Shs 5bn annually for development of the cotton sector,” said a distressed farmer.

The cooperative   unions complained that when it comes to discussing how the money collected from additional Shs 200 levy will be utilised, the farmers who contribute towards this are thrown out.

TheCooperator established that UGCEA has 34 members, who sit every year, without the cotton farmers in attendance. The cotton cooperative unions strongly believed that they are kept out of this meeting because the UGCEA members share out the levy amongst themselves. Consequently, these disgruntled farmers and cooperatives   formed a parallel, Cotton Farmers’ Forum, to among others, unite the farmers, generate consensus on how to compel government to compensate them for the war of losses and demand for fair taxation.

As they hoped from pillar to post in search for a solution that works, farmers touched base with the National Enterprise Finance and Marketing Agency (NEFIMA) that shaped them to line. Mr. Madira, the Managing Director of NEFIMA revealed to theCooperator in an interview how long the journey to revive the cotton industry has been. 

“Then I was doing consultancy work for the United Nations Capital Development Fund  (UNCDF) under the Local Governments’  Local Economic Policy,” said Madira.

Madira explains that to align the cotton farmers, they were advised by the Ministry of Local Government to form something in line with the Local Economic Policy in order to be supported. 

“They formed the Uganda Local Economic Enterprise Association, registering it as a company limited by guarantee,” explained Madira. 

Even then, the Local Government Ministry still referred the association to the parent Ministry of Trade, Industry and Cooperatives.

“While at the Trade ministry, they were advised to form a body that would unite them as one under the new cooperative policy. After many consultations, they came up with the Uganda Cotton Cooperatives Union (UCCU).  

Mr. Etore Joseph who doubles as the Chair of Teso Cooperatives Union also Chairs UCCU, while Philip Y’Pakrwoth serves as its secretary.

“We now have 17 unions spread across the different regions of the country with 1500 primary cooperative societies,” said Philip.