Uganda’s food, beverage and milling industry has made great strides, with increased investments by local, regional and international companies. We review the trends and opportunities in one of the most promising African countries
The East African country of Uganda has a unique profile: vast agricultural potential, a young and fast growing population and a country that is well located at the entry point to one of Africa’s remaining frontiers: the Great Lakes region. After decades of war and poor governance after its independence, the country has increasingly become one of the best options in Africa to set up businesses related to the food industry
Uganda offers a wonderful location for businesses that are looking at the emerging Great Lakes region market – which comprises Uganda, Rwanda, Burundi, Democratic Republic of Congo and South Sudan. Its vantage position at the entry point to the Great Lakes region provides businesses with access to a market size of more than 120 million in one of the remaining frontiers in Africa.
Uganda’s food industry has existed for a long time, with some of the leading sectors like sugar industry, where leading lights like Kakira Sugar and Sugar Company of Uganda (SCOUL) having been established in the early 1900s. Uganda is a leading coffee and tea producer, as well as a leading oilseeds producer in the region.
The country continues to draw in investments led by a strong local entrepreneur base; regional giants like Mukwano Group, Bakresa Group, Pembe Flour Millers and Bidco Africa who have significant operations in the country; and international giants including Coca-Cola, PepsiCo, AB InBev and Diageo.
With a population of nearly 45.5 million according to the United Nations, the population of Uganda is expected to rise to nearly 60 million in less than a decade to 2030 and pass the 100 million people mark by 2050, by which time it will be 18th in the world in terms of countries with the highest populations, and number 6 in Africa.
The fast-paced population growth rate in Uganda is due to the country’s exceedingly high population growth rate of 3.32% per annum and the total fertility rate of 6 children per woman – some of the highest in Africa.
Uganda stands to gain great economic dividends in terms of stable economic growth and available work force due to its very young population. According to the UN, 48.5% of its population is aged 0-14 years, while 21.2% is between the ages of 15-24, meaning that a whooping 69.7% of the country’s population is below 25 years. Only 2% of its population is aged 65 years or older.
To add to the impressive population growth numbers, is the surge in urbanization being experienced in the country.
According to the World Bank, Uganda’s annual urban growth rate of 5.2% is among the highest in the world and is expected to grow to 22 million people by 2040, from 6.4 million in 2014.
The country therefore provides an abundant resource base and a young consumer market for food companies targeting the youth market.
Uganda is a country blessed with vast agricultural potential, driven by good quality soils and a tropical climate that opens up the country to abundant rainfall and many water sources, including lakes, rivers and swamps.
The country has a substantial portion of Lake Victoria, which is the source of River Nile, Africa’s longest river and a lifeline to many countries along its 6,400 km journey to the Mediterranean Sea.
Despite the agriculture sector lagging behind in the adoption of the latest technologies, agricultural productivity country has grown enormously with the return of peace in the country over the last 30 years, with the country becoming a leading producer of meat, poultry, fish, pork, coffee, tea, grains, milk, fruits and vegetables, maize, oilseeds and may more, which has earned the country the distinction of a leading exporter of such commodities into the East African market and beyond.
The vast agricultural resources have attracted a growing list of local, regional and international companies to set foot in the country to add value to the produce, buoyed by the strong economic prospects of the country and a young population.
In this analysis, we are reviewing some of the emerging and interesting sectors to invest in in Uganda.
KEY FOOD INDUSTRY PROSPECTS
Grain milling and bakery
The grain milling sector has grown extensively in Uganda over the last 10 years, following the changes in consumption habits as urbanization takes its toll.
Although bananas and other tubers including cassava, continue to be part of the diet in the country, the growth in consumption of maize (locally called posho), rice and wheat flour continues to thrive as young urban consumers dictate more of the consumption habits in the country.
According to the United States Department of Agriculture (USDA), in the latest available estimates, Uganda produced about 2.8 million tonnes of maize, with consumption of just above 2 million tonnes, while rice production stood at 238,000 MT, compared to 346,309 MT consumed in the country. Wheat consumption stands at 500,000 MT compared to 20,000 MT produced locally.
From the above figures, Uganda fails to meet its demand for rice and wheat from local production, key commodities where local demand is forecast to rise substantially, while although local processing of maize is increasing, the country is a critical supplier of the commodity to the East African market, especially to Kenya, South Sudan and other countries.
The grain milling industry in Uganda is in its nascent stages, even as regional giants Bakhresa and Pembe continue to lead the sector, and having invested more than a decade in the country.
The recent entry of Mandela Millers, with a new 300 tonnes per day wheat and a 48 tonnes per day maize milling plants, is an indication that the country’s milling sector has many untapped opportunities. Another recent investment in the sector was by Master Grain Millers based in the second city of Jinja, which was a 300 TPD plant.
Uganda has also seen the entry of tens of small scale millers, which are increasingly visible at the retail trade across the country, to meet the rising demand for maize meal and rice.
The sector has also witnessed some exits, with Unga Millers closing its loss making maize milling plant in the country in 2017. In the rice sector, one of the largest rice growing and processing plants in East Africa, the Kibimba Rice factory, which packages the popular Tilda rice, has been in operation for nearly 20 years.
The rising demand for wheat flour in Uganda is largely driven by the surging demand for baked goods, including bread, biscuits, cakes and cookies, as home consumption of wheat flour lags behind other East African countries like Kenya and Tanzania.
The bakery sector in the country is thriving, but from a lower base and phase of sophistication. Some of the most popular brands are owned by Ugandan entrepreneurs, including Hot Loaf, Ntake and many others. Specialty bakeries and cake shops, mainly located within high end malls that dot the main city Kampala, are also growing in prominence.
An important component of the grains sector, the animal feed manufacturing industry in Uganda is still at the development stage but with huge potential, considering the country is the leading supplier of animal feed grains, oilseeds and cakes to the region.
A 120 tonnes per day chicken feed plant by HRM-Rainbow a few years ago at their farm indicates the huge potential that investments of this kind can help add value to the livestock sector in Uganda.
Soft and alcoholic beverages
The soft and alcoholic beverages industry in Uganda is one of the most vibrant in Eastern Africa, with a mix of local and international brands sitting side by side in the many retail outlets and bars that give Uganda’s urban and rural areas the famed fun and entertainment hot spots in the region.
In the soft alcoholic sector, Coca-Cola Beverages Africa (CCBA) and PepsiCo through their local bottling partners Century Bottling and Crown Beverages respectively, have invested heavily in the country, with each seeking to be the leading producer of carbonated soft beverages, energy drinks and water, but they are not alone.
An increasing number of local companies led by the Hariss International, the makers of the Riham brands have made their mark in the growing and highly competitive market that has seen several entrants in the last 10 years.
CCBA, which had acquired the country’s leading water brand Ruwenzori from SABMiller, recently invested in 2018, breaking ground on a new US$8.35million (UGX30.7 billion) packaged water bottling line more, part of its US$15 million investment plan for Uganda in 2018. Recent entrants in the soft beverage sector include Kiri Bottling.
The alcoholic beverages sector in Uganda has also witnessed a resurgence of investments, as the two leading multinationals AB InBev (Nile Breweries – 2 brewing plants) and Diageo (Uganda Breweries – one brewery and a distillery) jostle for the leadership position.
The sector has seen phenomenal growth in the spirits market where tens of companies have entered in the last 10 years, with one of them Premier Distilleries recently investing in a new modern processing and packaging plant, that takes the sector into new territory, where other players include Chief Distillers, among many more new entrants.
Uganda’s alcoholic beverages sector is also unique for its proliferation of cottage makers of wine from local produce, some of which have become known brands in the region e.g. Bella Wine.
Fruit and vegetables processing
According to the Uganda Investment Authority, Uganda is the leading producer of fruits in Africa, with pineapple the most widely developed and grown commodity in the country, with mango not far behind.
“Uganda has unmatched comparative advantage for growing fruits and vegetables due to its warm, less humid tropical climate, plentiful rainfall and vast opportunities for irrigation. Soils of pH 5 to 6.5 are most ideal for the fruits (such as oranges, mangoes and pineapples) and vast areas of this type obtain in Uganda. These soils are rare in the world,” notes the UIA.
There are about 4 main fruit processing companies in Uganda, led by Britania Allied Industries and House of Eden, while about 15 companies export fruits to the European market regularly, leaving huge potential for investments in the fruits and vegetables value chain in the country.
Opportunities exist in the production and processing of a number of fruits and vegetables in the country, including banana, avocado, macadamia, tomato, onions and hot pepper.
The government has been a keen player to the development of the fruit processing sector in the country to tap into the huge potential, recently commissioning a US$12.88 million pineapple processing plant in Soroti and another one in Nyakihanga worth US$380,000 to improve the fruit supply chain in the country.
Meat, poultry and fish
The meat, poultry and fish value chains in Uganda are very vibrant due as the country takes advantage of vast land and water resources, abundant feed stock from the crop value chain and a population that consumes such products in many forms.
Uganda is a regional leader in the production of fish, chicken, eggs, pork and other products, while the livestock sector is thriving again after many decades of low production.
Opportunities exist to produce and process poultry and meat products for the growing local demand, regional and export markets, especially for those markets that are seeking organic products.
However, apart from fish and some poultry processors that have grown accustomed to the strict requirements for the export market, the potential in the poultry and meat value chain in Uganda to enter the export market faces many barriers, including failure to meet these requirements.
Some of the leading companies in this sector include HMH-Rainbow, Fresh Cuts, Ugachick, Biyinzika, Uganda Meat, Sokoni Africa, Lake Bounty, Greenfields Uganda, Fresh Perch, Infra Uganda and Nyanza Perch among others.
The entry of RCL Foods, South Africa’s largest chicken producer and marketer into the Uganda poultry industry has changed the game, with the firm’s products currently being sold into the regional markets in East Africa.
The dairy industry in Uganda has made great strides in less than 15 years to be the fastest growing and the number two player in Eastern Africa in the dairy sector.
With a production of about 2.4 billion litres per year, Uganda is performing way below the 10 billion litres that the Dairy Development Authority says is its true potential due to a myriad of challenges, chief of which is the lack of adoption of the latest practices and technologies at the farm level.
However, on the processing side, Uganda has made extremely good progress, with leading player Pearl Dairy, having an installed capacity of 800,000 litres per day and producing a array of products including fresh and long life milk, milk powder, butter, yoghurt, flavoured milk and ghee for local, regional and export markets.
US-based Rise Fund managed by TPG Capital recently took a 34% equity investment in the company, joining another investment by Kenyan-based Brookside Dairy that took over the operations of Sameer Agriculture and Livestock.
Danone, the French dairy giant owns a 40% in Brookside Dairy. Other players in the dairy sector include Amos Dairy that processes anhydrous milk fat, ghee, casein, and whey for the export market; Jesa Dairy, Rainbow dairy and many others.
The dairy industry in Uganda continues to offer stiff competition to other dairies in the region, with milk products from the country on sale and loved by consumers across Eastern Africa.
UGANDA – FACTS & FIGURES
GEOGRAPHY & POPULATION
Bordering Countries – DRC, South Sudan, Kenya, Tanzania, South Sudan
2020 Population – 45.5 million; Number 31 in the world
Population Growth Rate – 3.32%
Population distribution: Uganda’s population density is relatively high in comparison to other African nations; most of the population is concentrated in the central and southern parts of the country, particularly along the shores of Lake Victoria and Lake Albert; the northeast is least populated
Total Area – 241,550 km²
Capital City – Kampala
Other important towns – Entebbe, Jinja, Mbarara, Gulu, Mbale and Masaka.
Languages – English, Swahili
Total Area – 241,550 km²; Land – 197,100 km²; water: 43,938 km².
Capital city – Kampala
Currency – Uganda Shilling
Geographical features of note: Uganda is a landlocked country with fertile soils. The country is has an abundance of water resources, with many lakes and rivers. The country relies on neighbouring countries Kenya and Tanzania to access port services, with which it also shares Lake Victoria, the world’s largest tropical lake and the second largest fresh water lake.
Climate – Uganda’s climate is tropical. The country is generally rainy with two dry seasons (December to February and June to August). It is semiarid in northeast, near the border with Kenya
Economic prospects – Uganda has substantial natural resources, including fertile soils, regular rainfall, substantial reserves of recoverable oil, and small deposits of copper, gold, and other minerals. Agriculture is one of the most important sectors of the economy, employing 72% of the work force. Substantial investments have been made in the nascent oil sector, with production expected to begin within 5 years, providing substantial potential uptick in the economic prospects of the country.
GDP (IMF) – US$33.62 Billion
GDP Per Capita – US$735.01
Macroeconomic issues: The Ugandan economy reported strong growth in 2019, estimated at 6.3%, largely driven by the expansion of services. Services growth averaged 7.6% in 2019, and industrial growth 6.2%, driven by construction and mining. Agriculture grew at 3.8%. Retail, construction, and telecommunications were key economic drivers. Inflation is expected to remain below 5%, strengthening the domestic economy. More than two-thirds of the working-age population is in agriculture. The country is animportant exporter of food to the East Africa region.
Land use: Agricultural land: 71.2%; arable land: 34.3%; permanent crops: 11.3%; permanent pasture: 25.6%; forest: 14.5%; other uses: 14.3%
Natural resources: Uganda has a number of natural resources including copper, cobalt, hydroelectric power, limestone, salt, arable land, gold.
GDP composition – agriculture: 28.2% (2017 est.); industry: 21.1% (2017 est.);services: 50.7% (2017 est.)
Agricultural products: Coffee, tea, cotton, tobacco, cassava, potatoes, maize, millet, pulses, cut flowers; beef, goat meat, milk, poultry and fish
Key Industries – Sugar processing, brewing, tobacco, milk processing, grain processing; textiles; cement, steel production
Exports destination – Kenya 17.7%, UAE 16.7%, Democratic Republic of the Congo 6.6%, Rwanda 6.1%, Italy 4.8% (2017 figures)
Main export commodities – Coffee, fish and fish products, tea, cotton, flowers, horticultural products; gold
Source: CIA, World Bank, IMF and Uganda of government
This article appeared in the March/April issue of Food Business Africa magazine. You can access the entire magazine HERE