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

five or six days of the week. In fact, lack of space has been identified as one of the chief
problems at the central market of Ababa. Thus, decentralizing the central market by
establishing market centers at different corners of Addis Ababa is also important. For
example, wheat, teff, and maize marketing centers could be established along the Ring Road
or along the main roads leading to the surplus-producing regions. This decentralization of the
grain market would greatly improve the efficiency of the marketing system and benefit the
economy at large.
Fifth, there is a need to develop transport and communication systems. Severe infrastructural
deficiencies have increased transaction costs for regional traders. Telephone connections are
either absent or unreliable. Poor roads and trucking systems have increased the cost of grain
transport. Improving the quality of roads and communications would increase efficiency of
the grain market and increase production by reducing transaction costs and allowing for
timely delivery of inputs. Moreover, improved access to timely market information could
help traders respond to policy-induced measures or other shocks. It would also help
policymakers to monitor the evolving effects of grain market liberalization and identify
problems that require intervention in a timelier manner. Banking and credit facilities need
substantial improvement to make effective use of any improvement in physical infrastructure.
Sixth, the absence of strong wholesale activity has severely hampered the efficient operation
of the market. In particular, regional traders incur huge costs and uncertainty when searching
for buyers. The presence of regular wholesalers with sufficient capital and storage in the
market chain could mean that regional traders act as direct suppliers of the wholesalers with
no cost for the services of intermediaries. Building the capacity of existing processors and
encouraging the establishment of new ones would also create a similar opportunity for
regional traders.
Food aid has saved the lives of millions of people, but it has also negatively affected prices
and investments by traders and processors. Food-aid grains sold in the market are considered
distortionary because they create uncertainty over quantity released to the market and time of
arrival. This uncertainty makes it very difficult for traders, processors, and some surplusproducing
farmers to adjust and plan their investment. Cheap flour imports have also
adversely affected the market. Thus there is a need for more proper targeting of food aid and
protection of the domestic grain market from cheap imports.
Finally, one of the main factors responsible for the poor performance of the grain market is
low demand. Widespread poverty has depressed demand and constrained grain trade in the
country. Government intervention to improve income and employment opportunities would
boost demand and prices. The implication is that focusing on supply side interventions alone
would not bring self-sustaining development in the country. Demand for agricultural products
must expand rapidly to absorb expansion in supply. Demand side interventions should be
directed at facilitating transformation of the entire economic structure or ensuring rapid
expansion of the non-agricultural sectors. The whole exercises of agricultural development
led industrialization will be self-defeating unless it is accompanied by increasing employment
and rising productivity of the non-agricultural sectors to resolve demand constraints to
agricultural growth and development.