TRENDS AND IMPACTS OF FOREIGN INVESTMENT IN DEVELOPING COUNTRY AGRICULTURE

TABLE 5
Sources of investment financing for selected TNCs operating in Uganda
6.4 Impact on agricultural financing
Access to finance for smallholder farmers
Small farmers who work with TNCs usually have
improved access to finance. As Box 7 illustrates,
foreign-owned enterprises sometimes provide
credit facilities to contract farmers or out-growers
so that they do not need to obtain credit from
financial institutions. The financing provided by
the foreign-owned enterprises (including TNCs),
is at a low interest rate and is usually tied to
farmers’ outputs. What the farmer borrows
from the enterprise is deducted from earnings.
Although some domestic-owned enterprises may
also be providing credit financing to smallholder
farmers, the authors could not find supporting
information to this effect.
Impact on the domestic banking sector
Transnational corporations in the three sectors
have limited impact on the domestic banking
sector. Most of these companies source funding
either from their parent company or from a bank
overseas. Findings from the field interviews showed
that only two companies, Royal Van Zanten and
Great Lakes Coffee Ltd, obtained investment
financing from a bank in Uganda (Table 6).
6.5 Impact on technology and
knowledge sharing
Agricultural technologies include labour
technologies: soil fertility management, crop
Part 3: Policies for attracting FDI and impacts
on national economic development
Company Source country Percentage of funding sourced from :
Bank overseas/Parent company Bank in Uganda
%
Other sources
IFTRA (U) Ltd UAE 100
Royal Van Zanten Ltd Netherlands 60 40
Great Lakes Coffee Ltd Greece 95 5
Xclusive Cuttings Ltd Netherlands 10 90
Kyagalanyi Coffee Ltd Switzerland 100
Fiduga Ltd Netherlands 100
Source: Field interviews, May 2009.
protection, disease control, farm management,
on-site storage, and non-labour technologies such
as improved agricultural inputs (Uganda: Uganda
National Household Survey 2005/06). The Uganda
National Household Survey reports that the
percentage of agricultural households that utilize
labour technologies ranges from 7.1 percent to
23.2 percent (UBOS, 2005: 104). Further, only 7.3
percent of agricultural households reported that
they were visited by an extension worker. Below,
the authors highlight how the companies in the
coffee and flowers sectors are utilizing agricultural
technologies:
The nature of the flower and cuttings
sector requires a 100 percent utilization
rate of labour and non-labour agricultural
technologies to ensure profitability.
Successful production of flowers and
cuttings requires that the company ensures
soil fertility management, crop protection,
disease control, farm management, on-site
storage, and utilizes agricultural inputs. For
example, flower companies use fertilizers
and agro-chemicals purchased from Balton
(U) Ltd, a TNC, or Greenhouse Chemicals Ltd
(agrochemicals only), a domestic company.
They apply steam to the soil to ensure
disease control, and are obliged to protect
their crops by constructing greenhouses.
Transnational corporations in the coffee
sector are becoming involved in the lower
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