The Future of Smallholder Farming in Eastern Africa - Uganda ...

It has been reported that grain purchasers face security problems in visiting the central
market. They are often surrounded by gangsters acting as brokers and facilitators. Innocent
and uninformed buyers are cheated into buying very low quality grain at very high prices
from collaborators. There are no effective police forces to protect the public from such
criminals. Brokers and traders reported that they have frequently complained about the
problem to government offices, but to no avail. Indeed, the problem is getting out of control
as increasing numbers of unemployed youth have found the crowded central market
convenient for all kinds of criminal activities.
2.4.3. Membership in associations
One way to deal with the weak regulatory framework is to establish associations and increase
brokers’ stock of social capital. Collective action could overcome some of the weaknesses in
government services. Nonetheless, the majority of brokers (73 percent) are not members of
any type of trade association (either the Grain Traders’ Association or the Chamber of
Commerce) (Table 2.29). It appears that the associations are not providing effective services,
and hence most brokers do not see the need for joining them. About 78 percent of the sample
brokers belonging to the associations revealed that they are disappointed with the services
provided.
Table 2.29: Membership in trade association and level of
satisfaction
Yes No Total
Membership
Number 18 49 67
% 26.9 73.1 100.0
Levels of satisfaction
for members
Number 4 14 18
% 22.2 77.8 100.0
Source: Survey, 2002.
2.5. Barriers to entry and major problems faced
Many institutional and technical problems hinder traders from entering the grain market.
Shortage of capital (90 percent), high cost of rent (81 percent), lack of access to stalls (76
percent), and high levels of taxation (75 percent) are the main constraints to entry into the
brokerage business (Table 2.30). Since the central market facilities have not expanded in
more than four decades and they are owned by the government, a new broker cannot easily
access a stall. The only option is renting from original owners at high rates or working in
partnership with a broker who has a stall. As a result of these and related problems, informal
trade seems to have expanded, and many traders are reported to have returned their licenses
to do the same business informally. 4