Uganda to Boost Agriculture Output to Mitigate Food Costs

June 7 (Bloomberg) - Uganda, where protests against rising food and fuel prices erupted in April, will restructure its agriculture industry to boost output and fast-track construction of an oil refinery, President Yoweri Museveni said.

The East African nation will promote irrigation, use of fertilizers and commercialization of the industry to enhance production, Museveni said today in his state of the nation address in the capital, Kampala. The country will rehabilitate four government-owned irrigation programs by December 2012 as the country moves away from over-reliance on rain water for agriculture.

“Structural transformation entails moving away from rain- fed agriculture to irrigation, from the hand-hoe to mechanized agriculture,” he said without outlining the timeline. “In production and food security, government will focus on increasing farm productivity through use of fertilizer and improved planting seed variety and animal variety,” he said.

Ugandan main opposition leader Kizza Besigye led the twice weekly “walk-to-work” protests over rising inflation in the last two months. Inflation in Uganda accelerated to 16 percent in May, the highest level in 17 years, from 14.1 percent in April, as food prices surged, the Uganda Bureau of Statistics said on May 31.

Lending for Agriculture

An agriculture credit facility of 90 billion shillings ($38 million) has been established for lending to the industry at interest of 12 percent and repaid in up to eight years, he said. Lending rates in the country range from 22 to 36 percent. Uganda is Africa’s second-biggest producer of coffee, after Ethiopia.

The country will fast-track the construction of an oil refinery to mitigate rising global prices, with the nation expected to produce refined oil products in three to four years, Museveni said. Discovered oil reserves can support daily production of 100,000 barrels of oil for 25 years, he said.

Uganda, East Africa’s third-biggest economy, is on the cusp of an oil boom with Tullow Oil Plc (TLW), the U.K.-based energy company, expected to start pumping crude and gas from the Lake Albert Basin in 2012. The country has an estimated 2.5 billion barrels of oil, with about 1 billion barrels in proven reserves, according to Tullow.

Uganda will repair the government-owned 30 million-liter (7.9 million-gallon) reserves which it will restock as well as enforcing oil marketers in the country to maintain reserves which can last 10 days as way of regulating prices, he said.

The construction of the 250 megawatt Bujagali hydropower project along the Nile River is on schedule, with the first output of 50 megawatts expected in October. The plant expected to reach full capacity in April 2012, Museveni said.

Construction of the 600 megawatt Karuma hydropower project, also along the Nile, will start in July this year as the country moves to boost power generation to spur growth, Museveni said.

To contact the reporter on this story: Fred Ojambo in Kampala via Nairobi at pmrichardson@bloomberg.net.

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net.

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