Uganda's agriculture sector provides by far the country's main sources of income, employment, food and foreign exchange: more than 88 percent of the country's population lives in the rural areas, earning its livelihood from agriculture. But its cotton exports declined dramatically from over 500,000 bales per year in the early 1970s to less than 30,000 bales per year in the 1980s due to lower cotton lint prices.
The IDA Cotton Subsector Development Project aimed to revive cotton production and exports by increasing competition in cotton processing and marketing and improving supporting services to farmers. Specifically, the project aimed to improve performance of the cotton gin industry, provide a national research and extension program, and improve credit and seed delivery for farmers.
The cotton industry has been rehabilitated from a dilapidated state: production increased by more than 400 percent over pre-project levels.
- Average cotton production reached 120,000 bales in 2001/02 per year, from 35,000 bales in 1993/94.
- Area of cotton production increased to 119,000 in 2000/01, from 55,000 hectares in 1993/94.
- Cotton yield increased to 440 kg/ha in 2000/01, from 360 kg/ha in 1994/94.
- State-owned ginneries were restored to credit-worthiness through a debt-relief program financed by the project. Effective competition in cotton processing resulted in prompt payments to farmers.
- The industry is now well served by the semi-autonomous Cotton Development Organization Authority and the Uganda Ginners and Cotton Exporters Association.
- The rehabilitated Serere Agricultural Research Institute restored genetic purity and physical quality of planting materials.
- Integrated pest management technologies were successfully tested and adopted by farmers.
- Although poverty reduction was not an explicit project objective, the rate of rural poverty in eastern Uganda, where poverty is high, fell from 58.8 percent in 1992/93 to 46.0 percent in 2002/03.
- Total project cost was US$28.5 million of which IDA financed US$13.8 million from 1994 to 2001.
- IDA's rigorous analytical and policy advice formed the basis for effective dialogue with the government, the private sector and farmers; this resulted in increased commitment to liberalize the cotton industry.
- IDA supported the successful piloting and adoption of new technologies by farmers and effective credit delivery mechanisms.
International Fund for Agricultural Development (IFAD).
Cotton production reached 150,000 bales in 2003/04 aided by support from USAID (aimed at increasing the competitiveness of Uganda's cotton on the international markets). Cotton export earnings have only about doubled due to low international prices, but the subsector has shown resilience to price movements, making sustainability highly likely. Prospects for rural credit access are improving and the basis has been laid for a reliable seed supply system. IDA has continued its support through the National Agricultural Advisory Services, an innovative approach designed to shift provision of agricultural extension services from the public sector to farmer-owned and managed delivery.