THE DETERMINANTS OF COFFEE EXPORTS IN UGANDA FROM 1991-2024, ACASE STUDY OF MASAKA DISTRICT
CHAPTER ONE
Exporting is one of the most important channels through which developing countries can link with the world economy (Verter et al.,2015). Exporting allows firms in developing countries to enlarge their markets and benefit from economies of scale. Additionally, several scholars have pointed out the importance of exporting as a channel of technology transfer (Lubega, & Owino, 2016). Thus, for better performance of a developing country, it is vital to identify the major determinants of its export supply. In order to formulate trade and industrial policies aimed at stimulating exports, it is important to understand which factors stimulate or deter firms from entering foreign markets.
Byanyima, (2011), investigate the relative contribution towards export performance. They find that internal components related to supply capacity such as internal geography and institutional quality played a significant role in explaining the observed differential in export performance. According to Mohamoud Mohamed, (2019), the relative export performance of the African and Middle Eastern countries tended to deteriorate over 1980s and 1990s. This was driven by relatively poor performance in supply capacity. However, since the late 90s, East Asian and Pacific countries in particular have been among the main beneficiaries of foreign market access which coincides with their successful diversification efforts. Real exchange rate which reflects the underlying relative movement of prices at home and abroad is proved to have a significant effect on the export performance of the lowest performers.
One of the world’s most widely traded commodities is coffee. Coffee beans when roasted produce a flavorful, aromatic and caffeine filled drink that is popular all over the world, with over 600 billion cups sold each year (Phiona, & Ambrose, 2023). Two botanically different trees can produce coffee. Arabica coffee trees produce coffee beans that are more labor intensive in its cultivation and are grown at higher altitudes. This coffee is milder, more aromatic and more complex than its Robusta counterpart (Abafita, & Tadesse, 2021). For many countries, over 50% of their total export earnings can be accounted for by coffee exports. In fact, the top 10 Arabica coffee exporting countries in the world are considered developing. The UCDA estimates that approximately 77 million 60 Kilogram bags were exported from the top 10 coffee exporting countries in 2011-2012.
Coffee is one of the most significant exported commodities by Brazil Colombia, Guatemala and Honduras, and as previously noted, these are among the top exporting countries of Arabica coffee. Naturally, coffee plays a significant role in the composition of the Gross Domestic Product and Agricultural Gross Domestic Product of these countries, Coffee makes up the highest percentage of both GDP and AGDP for Honduras with 7.37% and 48.17 %, respectively. Honduras is similarly followed by Guatemala with 2.49% and 21.08%; Colombia with 0.86% and 12.53%; and finally Brazil with 0.35% and 6.41%, (Mohamed, 2018).
For most low developed economies in Sub-Sahara Africa (SSA), agriculture has been the main source of livelihood both in terms contributing 34% to Gross Domestic Product (GDP) and 64% to employment, either directly or indirectly, Dependence on agricultural commodities like coffee for exports has been accompanied by a high degree of price risk in terms of both volatile and declining prices, a phenomenon which has not only affected the way households allocate their resources but also affected their welfare in terms of consumption and export volume to the world market (Nsabimana, & Tirkaso, 2020).
Uganda’s export sector is dominated by primary products (about 74.1 %), These include agricultural products; mainly coffee, cotton, flowers, simsim, fish; unprocessed minerals such as gold; live animals, hides and skins among others. At independence time (1962), Uganda’s traditional exports constituted agricultural commodities and unprocessed minerals. By the end of the 1970s, coffee was the largest foreign exchange earner accounting for about 51 percent leaving cotton, copper, tea and tobacco sharing the other portion of the earnings (Mohamed, 2018).
Coffee continues to play a leading role in the economy of Uganda, contributing 18% of the export earnings between 2000 and 2010, despite the vigorous efforts by Government to diversify the economy. Though large scale coffee producers are gradually emerging, the coffee sub-sector is almost entirely dependent on about 500 000 smallholder farmers, 90 percent of whose average farm size ranges from less than 0.5 to 2.5 hectares (UCDA, 2012). The coffee industry employs over 3.5 million families through coffee related activities. Though large scale coffee producers are gradually emerging, the coffee sub-sector is almost entirely dependent on about 500000 smallholder farmers, Domestic consumption of the commodity in Uganda is relatively small ranging from 4-10% of production. As such, coffee is primarily an export crop, between 2005 and 2010, (Uwimana et al., 2018).
Coffee has continued to play a leading role in the economy of Uganda (UBOS 2011). It contributes between 20-30 percent of the foreign exchange earnings (Uganda Coffee Development Authority, 2009). In 1995, the National Union of Coffee Agribusinesses and Farm Enterprises (NUCAFE), this has led to the coming up of some large scale coffee farmers. Though large scale coffee producers are gradually emerging, the coffee sub-sector is almost entirely dependent on about 500,000 smallholder farmers, 90 percent of whose average farm size ranges from 0.5 to 2.5 hectares. The coffee industry employs over 3.5 million family members through coffee related activities. From the 1920s, coffee was grown for export and in the 1950s an extensive coffee production programme was launched. In 1972, coffee production reached 4.2 million bags of 60Kgs each. Thereafter, coffee production declined tremendously because of civil strife, poor marketing systems, and low producer prices arising from government monopoly and controls (Mwebaze, Kavuma, & Hisali, 2013).
Uganda ranks fourth after Burundi, Ethiopia and Honduras in terms of contribution of coffee exports in total export earnings in the period 2000-2010 with an average share of 18% during this period , the post-1997 coffee price decline has had a negative effect on production and exports. Although coffee contributed as much as $400 million annually to total merchandise exports during the mid-1990s, it currently (2010) contributes about $280 million (MAAIF, 2011). Understandably, the sector’s poor performance raised concerns among policy makers. However, despite the declining foreign earnings compared to the mid-1990s, coffee remained the main foreign exchange earner for the country. Its share in total export earnings declined marginally from 17.9 percent in 2009 to 17.5 percent in 2010 (Jalata, 2021).
Uganda’s export sector is dominated by primary products (about 74.1 %), (Roberta, 2004). These include agricultural products; mainly coffee, cotton, flowers, simsim, fish; unprocessed minerals such as gold; live animals, hides and skins among others. At independence time (1962), Uganda’s traditional exports constituted agricultural commodities and unprocessed minerals. By the end of the 1970s, coffee was the largest foreign exchange earner accounting for about 51 percent leaving cotton, copper, tea and tobacco sharing the other portion of the earnings (Tumwebaze, & Nahamya, 2015).
In Uganda, Robusta Coffee is mainly grown in the low altitude areas of Central, Eastern, Western and South Eastern Uganda up to 1,200 meters above sea level. Arabica coffee requires cool, moist and higher altitude. It is mainly grown on Uganda’s mountain fringes, on Mount Elgon in the east (notably in Bugisu, on the western slopes of Mount Elgon in Mbale district) and on the Ruwenzori’s and West Nile (Nebbi and Okoro districts) on the border with Congo. Some Arabica is also grown in Mbarara district in Western Uganda (Sayer, 2002), the decline in coffee exports over the years This is mainly due to adverse prices on the international market, and there exists a huge value gap between the global revenues generated from coffee and what producing countries earn, due to a long supply chain with very many participants. For instance, in the year 2006/2007, the global coffee revenues were US$90 billion but farmers in producing countries all combined including Brazil earned only US$9 billion which is 10 percent of the global value share (UCDA, 2009). Basing on this background, this study therefore intends to investigate into the determinants of coffee exports in Uganda from 1991-2024.
Problem statement
Uganda ranks fourth after Burundi, Ethiopia and Honduras in terms of contribution of coffee exports in total export earnings in the period 2000-2010 with an average share of 18% during this period (ICO, 2012). According to figure 1 above there has been unstable export volume of coffee in Uganda from 1991 up to 2010, this is also shown by the fact that there was a rise in coffee export to the world market from 159,983 tons in 2004 up to 200,640 tons in 2008 however the coffee exports generally declined from 200,640 tons in 2008 to 159, 433 tons in 2010. Coffee exports have been declining since 1998 (refer to fig 1) despite the measures undertaken by the government to boost the sector. Although coffee contributed as much as $400 million annually to total merchandise exports during the mid-1990s, it currently (2010) contributes about $280 million (MAAIF, 2011). Understandably, the sector’s poor performance raised concerns among policy makers. However, despite the declining foreign earnings compared to the mid-1990s, coffee remained the main foreign exchange earner for the country. Its share in total export earnings declined marginally from 17.9 percent in 2009 to 17.5 percent in 2010. This volatility in coffee exports has been a matter of concern to the government of Uganda. This study therefore intends to investigate into the determinants of coffee exports in Uganda from 1991-2024.
The general objective of the study is to find out the determinants of coffee export volumes in Uganda between 1991 and 2024.
Specific objectives
- To investigate the effect of real exchange rate on coffee export in Uganda
- To establish the effects of coffee prices on coffee exports in Uganda.
- To assess the effects of coffee quality on its exports in Uganda.
CONCEPTUAL FRAME WORK
Determinants (IV) Coffee Exports (DV)
Intervening variables
5.0 Methodology
This section of the study will include; study design, study site, sampling procedure, methods of data collection, data analysis and ethics.
5.1 Study Design
This study will adopt a cross sectional survey design. This design is preferred because it enables collecting data in a short time (Creswell 2003 and Koul 2005). Quantitative approach will also be used because of its flexibility to form multiple scale and indices focused on the same construct (Ahunja 2005).
5.2 Study Site
Study site refers to the organization, agency or community in which the study will be conducted. In this study the study will be carried out in Masaka district.
5.3 Sampling Procedure
The study specifically will be carried out in Masaka District the study will use random sampling procedure to sample the farmers and different coffee producing groups. The leaders will be sampled using purposive sampling procedure.
5.4 Methods of data collection
After the approval of the research instruments, the researcher will get an introductory letter from the research supervisor in the Faculty of law at makerere university. This will help the researcher to get introduced to coffee farmers and leaders in masaka. After being granted permission, the researcher will make telephone calls to the respondents before the actual data collection date and also to introduce himself to the respondents.
3.5.1 Questionnaire method
According to Kothari (2012), questionnaire is a form of inter-related questions prepared by the researcher about the problem under the study, and based on the research objectives. The information for this study will be gathered by use of questionnaires. In the questionnaires, there will be both closed-ended and open-ended questions that will be administered to the selected respondents in masaka district . The questionnaires will be filled in and collected before leaving to the next selected respondent. Such data can best be tapped on closed ended questionnaires which allow respondents make quick decisions; in addition, closed ended questions will help the researcher to code the information easily for subsequent analysis and narrow down the error gap while analyzing data.
Interview method
The study will employ interview method. Interviews in this study will help the researcher obtain more information on the topic under investigation. This method will also be used because it offers the researcher an opportunity to adapt questions, clarify the questions by using the appropriate language, clear doubts and establish rapport and probe for more information (Sekaran, 2003).
6.0 Data Analysis
The data will be analyzed using the SPSS computer program. The SPSS computer package will be s used to generate frequencies, descriptive statistics, tables and graphs. The researcher will use both quantitative and qualitative methods during data analysis. Quantitative data will involve the use of frequencies, tables against their percentages, and other statistical expressions like; bar graphs and frequency graphs as to show values that aide in data interpretation. Qualitative data will be presented in writing useful information from the respondents as presented in relation to the study variables. After collecting all the necessary data, this data will be quantified, coded and analyzed and rephrased to eliminate errors and ensure consistency, while for qualitative data will be analyzed thematically.
7.0 Ethics
In ensuring that the research is ethical this will include briefing the respondents about the research objectives and roles of the respondents and how they will be going to benefit from the research. By explaining to the respondents the objective of the study, the researcher will not force them to participate in any way but they are allowed individually to decide whether or not to participate in the study. The researcher will also assure the respondents about the degree of confidentiality in the information that will be gathered from them. Additionally, the names or identifications of the respondents will be kept anonymous by assignment of unique identifiers/codes on the questionnaires and information collected from them will be treated with utmost confidentiality. Moreover, the researcher will act honestly, fairly and respectfully to all other stakeholders that will be involved in this study. Not only that, the researcher will accurately attribute to the sources of information in an effort to celebrate the works of past scholars or researchers. This will ensure that no plagiarism will occur.
REFERENCES
Mwebaze, T., Kavuma, S., & Hisali, E. (2013). Export Supply Response Capacity Constraints: A focus on the Uganda’s Export Performance.
Verter, N., Bamwesigye, D., & Darkwah, S. A. (2015, September). Analysis of coffee production and exports in Uganda. In International Conference on Applied Business Research (Vol. 1, pp. 1083-1090).
Abafita, J., & Tadesse, T. (2021). Determinants of global coffee trade: Do RTAs matter? Gravity model analysis. Cogent Economics & Finance, 9(1), 1892925.
Nsabimana, A., & Tirkaso, W. T. (2020). Examining coffee export performance in Eastern and Southern African countries: do bilateral trade relations matter?. Agrekon, 59(1), 46-64.
Uwimana, C., Mugemangango, C., Kipsat, M., Sulo, T., & Nsabimana, S. (2018). An Analysis of Causality between Tea Exports and its Determinants in Rwanda.
Lubega, C., & Owino, A. (2016). Analysis of determinants of coffee farm gate prices in Uganda. LAP LAMBERT Academic Publishing.
Tumwebaze, H. K., & Nahamya, W. K. (2015). Determinants of Uganda’s Export Performance: A Gravity Model Analysis. International Journal of Economics & Business Studies, 5.
Jalata, D. H. (2021). Competitiveness and determinants of coffee export in Ethiopia: An analysis of revealed comparative advantage and autoregressive distributed lag model. Journal of Economics and Sustainable Development, 12(5), 43-62.
Mohamed, O. S. (2018). Exchange rate volatility and export of coffee in Uganda (1992-2016) (Doctoral dissertation, Kampala International University, College Of Economics And Management).
Byanyima, F. B. (2011). Determinants of export volumes of Uganda’s coffee, 1991-2007 (Doctoral dissertation, Makerere University).
Mohamoud Mohamed, S. (2019). Determinants of export growth in Uganda (1991-2o16).
Phiona, N., & Ambrose, A. R. (2023). Factors influencing the intensity of market participation of coffee processors in Uganda. Journal of Agribusiness in Developing and Emerging Economies.
