Sourcing raw materials locally drives growth

Dec 14, 2016

Our natural resources are a driving factor in our national economy.

Greg Metcalf with farmers 

By Greg Metcalf

Uganda is blessed with bounteous natural resources, from its beautiful national parks, to its world-renowned coffee plantations and abundant natural reserves.

Our natural resources are a driving factor in our national economy. The agricultural sector provides more than 25% of Uganda's GDP and employment for 72% of its workers, though few have formal jobs. Women in particular play a huge role in agriculture, with about 75% of farm workers in Uganda being female. On average, farm sizes in the country are between 0.2 and 3 hectares, and it can be hard for many smallholder farmers to make ends meet.

In my time as head of Nile Breweries, I've seen how businesses like ours work closely with smallholder farmers to support them and ensure they thrive. As they prosper, so do we - and therefore we want to and must play an active role in ensuring their success. Not only does this ensure the stability and strength of our supply chain, it also contributes to the ongoing development of the country.

This is why, when we came to developing a new product for Uganda, we looked to the land for inspiration - we looked to a local crop, sorghum. In 2002, Nile Breweries launched Eagle - Uganda's first ever commercial-scale sorghum based beer.

It is a high-quality but affordable locally-sourced beer that helps create a sustainable income for more than 20,000 smallholder farmers. And half of the farmer associations that supply Nile Breweries with sorghum are led by women, helping ensure they benefit from the critical role they play in agriculture across Uganda.

The beauty of this approach is that it creates a win-win virtuous cycle, in a sustainable way. The farming communities win because they get access to secure markets for their produce. The government gains because the project creates employment, alleviates poverty and substitutes imports.

However, we haven't achieved this alone - no organisation could. Collaboration and relationship building has been key. Partnerships with Enterprise Uganda and USAID have been crucial in helping develop and implement our approach. And we are working with TechnoServe to identify opportunities to improve our approach.

The Ugandan government too has played a critical role, reducing the excise rate on the beer because of its home-grown status. This enables the affordability of the beer and ensures local sourcing of crops like sorghum for brewing is commercially viable.

As a result, we have seen large business, smallholder farmers, local cooperatives, NGOs, donors and government collaborating for the greater good. Our enterprising farmers and their families are thriving, and so are we. Clearly, it pays to think small.

Building on our local sourcing of sorghum, we are now trying to extend into barley, which presents a greater challenge. It's a more difficult crop to manage, and not many regions in Uganda have the right climate. But if we succeed, we'll open up opportunities for many more farmers. Right now, 70% of our raw material purchases are local - with barley, our ambition is to grow that to 80-90%.

I'm convinced that enabling micro enterprises like smallholder farmers to thrive is good for big business, and helps drive inclusive economic development in our country.

However, I do think there is more that can be done to unlock the greatest value for all. Companies must collaborate with others to support micro-enterprises and to strengthen the whole ‘market system' in which their value chains operate.

This approach is not easy. It requires a deep understanding of the operating environment, commercial relationships across the value chain, the legislative and regulatory environment as well as social norms. It also requires extensive partnership building and collaboration between large companies, governments, NGOs and donors to provide joined-up support that tackles the wide range of challenges that micro-enterprises face. Put simply, working together with a common goal of enabling smallholder farmers and similar small enterprises to thrive creates a much better chance of success and prosperity for everyone.

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