Investing in

Uganda

==========

Investment Potentials in Fruit Farming Sector

Project Title: Fruit Farming Project Proposed Total Investment (US$): 2,340,000

Contact:

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Uganda Investment Authority Twed Plaza, Plot 22B, Lumumba Avenue

P.O. Box 7418 Kampala Uganda, East Africa Tel: +256 (0) 414 301 000 Fax: +256 (0) 414 342 903 ipd@ugandainvest.com

October 2009

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Table of Contents ACRONYMS....................................................................................................................................... iv I. BACKGROUND INFORMATION ON THE PROJECT...............................................1

1.1 The Project and its Origin ................................................................................................1 1.2 History .................................................................................................................................1 1.3 Current Activities ...............................................................................................................1 1.4 Current Capabilities and Players ......................................................................................2 1.5 Markets ................................................................................................................................2 1.6 Competitiveness .................................................................................................................3

2.0 Proposed Project............................................................................................................................4 2.1 Purpose of the Project..............................................................................................................4 2.2 Rationale behind the Project ............................................................................................4 2.2.2 Water for Irrigation.......................................................................................................5 2.2.3 Access to Markets..........................................................................................................5 2.2.4 Capability and Competence .........................................................................................5 2.2.5 Favorable Location .......................................................................................................5 2.3 Projected Capacities, Sales And Preferred Technology ...............................................6

2.3.1 Planned products ......................................................................................................6 2.3.2 Potential Export Markets......................................................................................................7

2.3.3 Technological Needs and Possible sources...........................................................8 2.4 Estimated Total Investment Costs (US$ ‘000’) .............................................................8 3.5 Location, Logistics and Environmental Aspects...........................................................8

3.5.1 Environmental Issues...............................................................................................8 2.6 Studies Available ................................................................................................................9 2.7 Regulatory and Licensing Issues and Procedures .........................................................9 3.0 Organization and Management Aspects.........................................................................9

3.1 Proposed Manpower Structure ...................................................................................9 3.2: Project Implementation Plan ...........................................................................................10

4. Project Profitability and Sensitivity Analysis ....................................................................10 References And Important Study Reports ....................................................................................12

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ACRONYMS COMESA Common Market for Eastern and Southern Africa DFID Department for International Development (UK) DWD Directorate of Water Development EU European Union FORRI Forestry Resources Research Institute GOU Government of Uganda HORTEXA Horticulture Exporters Association HPOU Horticultural Promotional Organization of Uganda IRR Internal Rate of Return ITC International Trade Centre KARI Kawanda Agricultural Research Institute MAAIF Ministry of Agriculture, Animal Industry and Fisheries MT Metric Tonnes MWE Ministry of Water and Environment NAADS National Agricultural Advisory Services NARO National Agricultural Research Organization NOGAMU National Organic Agricultural Movement of Uganda NPA National Planning Authority NPV Net Present Value PAP Prosperity for All Programmes PEAP Poverty Eradication Action Plan PH Acidity and Alkalinity Measure PMA Plan for Modernization of Agriculture TEDDO Teso Diocese DevelopmentOrganization UEPB Uganda Export Promotion Board UGX Uganda Shillings UIRI Uganda Industrial Research Institute UNBS Uganda National Bureau of Standards UNCTAD United Nations Commission for Trade and Industry UNIDO United Nations Industrial Development Organization

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I. BACKGROUND INFORMATION ON THE PROJECT

1.1 The Project and its Origin

This project ‘Fruit Farming’ is presented as a case for marketing investment opportunities within and outside Uganda. It presents and analyses the viability and profitability of an integrated enterprise of oranges, pineapples and mangoes produced on 500 hectare nucleus farm under irrigation.

1.2 History

Commercial fruit production for domestic consumption and export was successfully undertaken in the 1960s. Government run schemes were established at Kiige (Kamuli District), Ongino (Kumi District), Odino (900ha in Soroti District) and Labori (800ha in Soroti District). These schemes produced various citrus fruits that supplied Nairobi Kenya, Kampala, Rwanda and Burundi. Production on these schemes went on until the mid -1970s when the political climate then made it hard to continue with meaningful management. In the initial plan the schemes were developed to use irrigation such that there is all – year - round production. These schemes’ massive and extremely productive land is still under government control and could be availed for reviving commercial fruit production.1

1.3 Current Activities

Current citrus production is purely in the hands of smallholders centred in the Teso region (Soroti, and Kumi Districts). Varieties grown all under rain-fed conditions include: Washington navel, Valentia, American tangerine and Hamlin. Pineapples are by far the most developed and widely grown commodity in the fruit crop range and value chain in Uganda. Current production is estimated at 5000 acres (2000ha) on 2500 smallholdings in Luwero and Kayunga where pineapples are grown as a sole crop or intercropped with bananas. In Uganda, there are no large scale pineapple growers at the moment and pineapples are produced exclusively as a smallholder crop. Varieties of pineapples grown currently include: the small sized spiked (Sasilima) also known as ‘Queen Victoria’ variety and the large smooth Cayenne (smooth, spikeless leaves). Mangoes are by far the most common fruit country-wide. Mangoes grow wild by gift of nature and adapt to all ecological zones of Uganda, dry or humid lowland, montane and Lake Shoreline. Production has been increasing over the years with increasing demand on the local and export markets. Varieties currently grown are predominantly local and a few exotic which include: Tommy, Atkin, Kent, Haden, Kiet, Zillate, Palvin, Palmer, Alphonso

1 Circular letter by PS MAAIF G.P. Kasajja addressed to all Chief Administrative Officers on ref FDD 137/312/01 dated 7th January 2001: Utilization of Government Agricultural Schemes, Workshops, Variety Trial Centres and Stock Farms

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and Irwin. Uganda has recently introduced some of these improved cultivars and the technology required to multiply improved varieties is largely unknown to the wider public of growers. On the part of Government, two projects are now being implemented to provide water for irrigation. Under the Farm Income Enhancement and Forest Conservation Project , the Government has secured Loan funds to rehabilitate four old schemes (Mobuku, Doho, Agoro and Olweny) and under the Water for Agricultural Production Project four other schemes will be rehabilitated (Kiige, Odina, Labori and Atera )..2 This gives credence to the proposed fruit production project under irrigation.

1.4 Current Capabilities and Players

The key fruit value chain actors are as indicated in the Annex. Recently and for the next three years, Agri-Net has come on stage to particularly improve collection, packaging and dissemination of commodity market information. Agri-Net’s presence deep in the country side was noted during field work networking and linking farmers, producer groups buyers and agro-processors.3 There is a cross section of emerging fruit traders, processors and exporters.4

1.5 Markets

Currently, the main outlet for fruits is the local and regional fresh market. The current supply for available fruits is lower than actual demand. Due to limited supply of fresh fruits generally in the country, buyers make no value addition such as sorting and grading by variety and size and pay uniform price for any type purchased. They only grade for supermarkets and large market centres on demand. Farm gate prices for oranges range from UGX 20-30,000 per 80kg bag in peak and UGX 50-80,000 in slack or off season period and for pineapples UGX 200-500 and UGX 1000-1500 per 1-2kg pineapple in the peak and slack season respectively5. It is not clear how much of the fruits are exported. There are, however, a few large scale growers who sell directly to buyers from Kenya, Rwanda and Southern Sudan. In terms of world export, fruits in fresh form represent roughly 10 % of total production. The bulk of exports of fresh fruits (oranges) are situated in the Mediterranean region accounting for nearly 60% of the world fresh fruits exports (UNCTAD /ITC 204). Consumption of fresh fruits is increasing in the United States as well as in Europe, Asia and the mid-East and is expected to continue to increase. Demand for fresh fruits on a year-

2 Eng.Toraci Farm Development Department Ministry of Agriculture, Animal Industry and Fisheries (MAAIF) Entebbe July 2009 3 Paul Nyende, MD AgriNet Plot 209 Upper Mawanda Road Kamwokya Kampala Tel 077-2-495-950 E-mail: pnyende@yahoo.com; pnyende@agrinetug.net 4 These include: Suntrade Consultants recently merged with Amfri Farms Limited, Uganda Organic Growers, Fruits of the Nile, Victoria Bio-Technologies, Britania, Jakana, Frechem Ltd, Elgonia Ltd , Sulma Foods and Craft Bazar. 5 Exchange rate is currently UGX 2100 to US$

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round basis is increasing, and consumers are willing to pay higher prices for out-of-season fresh fruit The major feature of the world market for juice is the geographical concentration of production. There are two main players: the State of Florida in USA and the State of Sao Paulo in Brazil. Production of orange juice between these two players makes up roughly 85% of the world market. These are the players Producers from Uganda will have to position with in the market. The export market is growing largely due to increased consumption demand. On the world market, the European Union is the largest importer of fruit juices6, accounting for over 80% of world imports. Most of the imports by the EU and Japan come from Brazil. Through out the world, there are changes taking place as far as consumption habits are concerned, giving a chance to consumption of juice as a priority for healthier bodies. This shift away from other beverages is expected to support the processing of fruit juice, since most of Ugandan production is done with minimal use of pesticides. In 2004, pineapple trade accounted for 0.9% share of US$61,023 of the informal trade to regional markets in Kenya, Tanzania, Southern Sudan and Rwanda. 7 There are strong regional competitors for export market in pineapples, namely: Ghana and Cote de Ivoire in West Africa and Kenya in East Africa. For the domestic market the quality criteria include: ripeness, size and no bruises.8 Only a very small fraction of Ugandan pineapples is exported. Among the exports, the largest volume goes to the regional market through informal trade. Regional and international markets for mangoes in whole fruit and processed products is very good .and has been rising for the last 10 years or so. However, nearly 70% of the export trade of fresh mangoes is concentrated in three top exporting nations (Mexico, Brazil and Pakistan). In Uganda, mangoes are traded as whole fresh fruit in local markets with some being sold to neighbouring countries: Kenya, Sudan and Rwanda. The prime destination of Uganda’s mango exports is the United Kingdom, where the main importers and consumers are British Asians, Caribbean and Africans.

1.6 Competitiveness

Uganda’s competitiveness rests with soils, climate, irrigation opportunities, government policies and labour factor prices. Uganda has unmatched comparative advantage for growing fruits 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 (oranges, Mangoes and Pineapples) and vast areas of this type obtain in Uganda. These soils are rare in the world. Uganda's climate is summer all year round: moderate temperatures (15 -30ºC) throughout the year with a bi-modal rainfall pattern. The soils have low levels of contamination due to prolonged periods of minimal use of chemical fertilizers, pesticides and herbicides creating natural quasi-organic conditions in most areas. The November to February harvest period in Uganda coincides with the northern hemisphere winter - a period of peak demand for fresh fruits and vegetables in Europe.

6 Prime destination of the fruits is the European Union market mainly UK, Holland, Belgium, Italy and Switzerland with slight quantities to the Middle East (Oman) and Japan. 7 UBOS 2004 8 DFID 2005

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Suitable Government owned land free of squatters, for commercial estate type production, is available at Odina former citrus farm (950 hectares) and Labori former irrigation scheme (800 ha). Finally Government policy is highly supportive to fruit production as a strategic export. All schemes put together provide a total of over 3000 hectares (Odino, Ongino, Labori, and Mobuku). One additional point which favours Uganda is the fact that, overtime, the key European countries re-exporting fruit products into Africa will increasingly have to produce without EU subsidies.

2.0 Proposed Project: (Fruit Production)

2.1 Purpose of the Project

The proposed Fruit Production Project is a flag bearer to potential investors within and outside Uganda as to how competitive and attractive producing fruits in Uganda actually are. The project derives from one of the core challenges identified in the GOU for poverty eradication (Production, Competitiveness and Incomes) under its Poverty Eradication Action Plan. (PEAP). It is being designed to support GOU’s Plan for Modernisation of Agriculture (PMA) which is aimed at increasing productivity and incomes of farmers. It also aims to putting to effective use otherwise dormant, poorly used but highly productive resources such as the former irrigation schemes for fruit production at Odina and Labori on the shores of Lake Kyoga in the Teso Region and Mobuku in Kasese district. The project design is hinged on a core investor joint venture with Government and out-growers within the catchment area of the estate. It is envisaged that investment options will include single or a combination of fruits on a single estate. The project will direct its efforts towards using a combination of large and small-scale irrigation facilities and improved soil fertility management practices to produce and market high value products paying due regard to value addition at various links of the fruits value chain. Training and improvement in institutional capacity and monitoring of effects and outcomes will sustain project outputs. The cropping programme targeting the combination of the three fruit enterprises is based on a 500 hectare nucleus farm to cover: Mangoes 100 ha; Oranges 200 ha; and Pineapples 200 ha, under irrigation.

2.2 Rationale behind the Project

2.2.1 Land One of the most critical inputs in the project is availability of and access to land .for an estimated block of 1000 hectares which must ideally be:

1) Free from squatters; 2) Basic production area of at least 500 hectares (annually); 3) Fifty (50%) Percent a ‘nuclear plantation-style commercial farm to ensure core

supplies; and

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4) Fifty (50%) percent network of ‘out-growers’ within a 50 km distance from the nuclear estate and processing plant.

Given the interest and commitment Government has to this proposed project, there is little doubt that consideration will be given to offer one or all the schemes formerly owned by the government for this purpose. All schemes put together provide a total of over 3000 hectares (Odina, Ongino, Labori, Mobuku).

2.2.2 Water for Irrigation

For the successful cultivation of fruits, allowing for harvesting during the ‘dry season’, it is essential to irrigate. Uganda has vast water resources for irrigation in ecologically suitable areas for fruit production. According to Background to the Budget 2009/10, provisions are made to rehabilitate former irrigation schemes to which the proposed project will have access. The Uganda territory is located mostly within the Nile Basin and is, for operational purposes, divided into eight sub-basins which are relatively small contributors to the Nile flow. The Nile River is one of the good potential sources of water for irrigation. Along its extensive flow through the country, there are many ideal nodes that permit the construction of economically viable diversion weirs for irrigation systems.

2.2.3 Access to Markets

Demand for fresh fruits on a year-round basis is increasing, and consumers are willing to pay higher prices for out-of-season fresh fruits. These trends present opportunity to the proposed project. However the market entry strategy must be carefully thought out. Given EU market entry barriers, Uganda would rather target domestic, border and regional markets. Currently, there is already an existing trade within the region supplying Southern Sudan, Kenya and Rwanda. The current production levels of fruits are yet to satisfy the domestic, border and regional demand. It is strategic to strengthen the existing trade which is not satisfied and yet expanding.

2.2.4 Capability and Competence

There will be need for capacity building programmes among the out-growers. This is an area which will need serious intervention in orchard management, pests and disease control and effective safe use and handling of agro-chemicals. By value chain analysis, this is a stage in the fruit value chain where most value is lost in terms of crop yields and profit margin to farmers.

2.2.5 Favorable Location

Over one third of the country (Uganda) has unmatched resource endowment for growing fruits, particularly the Teso Region. These include soils, climate, water bodies for irrigation,

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factor prices for land, labour save to a greater extent know-how and entrepreneurship. The case unfolds as follows: Fruit growing in Uganda dates as far back as the 1960s when trials were carried out at Kiige, Mobuku, Odina and Ongino Citrus schemes. These sites, particularly Teso region, were selected as one of the most promising areas to grow fruits due to their climatic conditions and proximity to water bodies for irrigation. Citrus and mangoes grow mainly in deep, aerated soils where the plants have to establish a deep tap root required to draw water during the dry seasons. The physical structure of the soil is far more important in the production of these fruits than the nutrient content, provided the basic micronutrients are present in available form. Soils of PH 5 to 6.5 are most ideal for citrus and vast areas of this type obtain in Uganda. The entire Teso and Lango regions, Kamuli and Kasese Districts fulfill these requirements. These soils are in few places in the world. For this project, three possible locations are recommended as there are no farmers currently at these sites. All sites are government owned, have good access to water either by river or lake and all have good fertile soils. The sites are Kiige, Odino and Ongom.

2.3 Projected Capacities, Sales And Preferred Technology

2.3.1 Planned products

The project is designed and intended to put on the market three principal products to be sold in fresh form or processed. These are: Citrus, Mangoes and Pineapples. It is envisaged that about 10% of total annual out put will be sold in domestic, regional and export markets in fresh form, while the balance will feed into fruit processing and canning industry proposed to be part of the nucleus farm of 500-1000 hectares. Processed products will mainly be fruit pulp (concentrate), juice and mango pickles ordinarily sold in Indian and Middle East markets. Based on the maturity periods of each of the fruits, output for the initial five year period is projected as shown in the table below. Table 2.1: Project out of fresh fruits per year (MT)9

Output (MT) Enterprise

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5

Mango (100 ha)

Establishment _____ _______ 2880 4320 5760

Oranges (200ha)

Establishment _____ _______ 6000 9000 12,000

Pineapples (200 ha)

Establishment _____ _______ 10400 10400 10400

9 Mango spacing is 288 trees per hectare. Maturity 24-36 months, yield (yr1 100kg per tree, yr2 150kg per tree, yr3 and thereafter 200kg per tree) Unit Price per kg UGX 600 Oranges: spacing is 300 trees per hectare, maturity 24-36 months, yield (yr1 100kg per tree, yr2 150kg per tree, yr3 and thereafter 200kg per tree) Pineapple spacing is 52,000 suckers/plants per hectare, maturity 18-24 months, yield, 52,000pineapples of 1-2kg each per hectare beginning in the 3rd year and remains constant for at least 3 years.

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Source: Semaganda Richard Luwero District Farmers Association (June 2009) 2.3.2 Potential Export Markets

2.3.2 Potential Export Markets

As indicated under section II.2.3 above the easiest and largest market to target will be the domestic, border and regional markets provided purchasing power rises. The current production levels of fruits are yet to satisfy this area demand. It is strategic to strengthen the existing trade which is not satisfied and yet expanding. The demand for and exporters of fruits in this market are as shown in the Table 2.2 below. As seen in the growth trend column, there is serious decline in supplies which Uganda needs to take up. Sudan, Zambia, Mauritius, Seychelles and Kenya were the top importers of fruits in the COMESA region and Sudan experienced the most significant annual import growth in value and volume in 2002-2006 as shown in Table 2.3. For the Kenyan market, South Africa supplied 65% of citrus imports followed by Tanzania (30%), and Israel. Uganda imported about 59 tonnes of oranges, with Egypt and Kenya being the main suppliers (88% and 13.3%, respectively).10 Table2.2: Major exporters of fresh or dried fruits in COMESA region in 2006

Trade Indicators Exporters

Quantity (MT) Annual Growth in Quantity 2002-2006 (%)

Value in US$ (‘000’)

Share in World Exports (%)

World 5,597,731 3 2,981,826 100 COMESA Total 8.78 Egypt 578,358 24 261,930 7.93 Zimbabwe 40,558 -5 236,575 0.55 Swaziland 14,532 -2 16,471 0.29 Ethiopia 896 -40 8,594 0.01 Djibouti 266 240 0 Kenya 6 -53 48 0

Source: ITC Trade Map Table 2.3: Major Importers of Fresh or Dried Oranges in COMESA Region in 2006

Trade Indicators Importers

Quantity (MT) Annual Growth in Quantity 2002-2006 (%)

Value US$ (000) Share in World Imports (%)

World 5,505,599 2 3,373,806 100 COMESA Total 15,182 0.45 Sudan 19,143 176 6,284 0.19 Zambia 8,314 11 4,871 0.14

10 NPA (April 2008) Development of Viable Value Chains for the Promotion of Citrus Marketing and Increased Earnings to Rural Farmers.

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Mauritius 3,852 -4 2,105 0.06 Seychelles 558 18 726 0.02 Kenya 5,749 79 424 0.01 Egypt, Djibouti, DRC

1800 -46 535 0.016

Others 518 -20 228 0.006

2.3.3 Technological Needs and Possible sources

As noted earlier Uganda has only recently introduced some of the mango cultivars for which the technology required to multiply improved varieties, like Alphonso, is largely unknown to the growers. Although substantive research has been done by NARO/FORRI on mango cultivars which are high yielding, and evaluations are on going on cultivars ecologically suited to the various agro-ecological zones, there is serious lack of grafted planting materials. Major sources in the country for quality grafted mangoes available to growers are limited. While a number of private nurseries exist, their capacities to produce sufficient and quality planting materials is a challenge, as they lack mother gardens for obtaining grafting materials (scion), and this is particularly the problem where the required cultivars are not yet in commercial production.

2.4 Estimated Total Investment Costs (US$ ‘000’)

Table 2.3 Estimated Total Investment Costs (US$ ‘000’) Description of Investment Item Cost in US$ (‘000’)

Fixed Assets 2,015

Land and Irrigation (Acquisition and Clearing 1000 hectares) 750 Buildings 575 Office Equipment 40 Agricultural Equipment and Tools ( Including Cold room &Trucks) 650 Preliminary Expenses 25

Working Capital 300

TOTAL INVESTMENT 2,340

3.5 Location, Logistics and Environmental Aspects

3.5.1 Environmental Issues

There are likely to be adverse consequences of some of the proposed activities such as irrigation, bush clearing, and application of fertilizers, pesticides, fungicides and disposal of fruit rejects and effluents from processing plants that may be released into the environment. As an adherence to the environmental laws, environmental impact assessment will be crucial at all stages of the project implementation. It is important to formulate mitigation and monitoring measures at early stages of project planning

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2.6 Studies Available

A number of studies relating to the proposed project have been carried out in recent years. These are among the references listed at the end of this profile.

2.7 Regulatory and Licensing Issues and Procedures

Current legislation in Uganda is largely related to taxation of imports and protection of the environment. Major concerns are on preservation of wetlands, maintenance of biodiversity, and prevention of desertification and control of pollution. Desertification is only of concern in the low rainfall zones in the north of the country and partly outside the proposed project areas. There is also the provisions of the Land Act 1998 and the Water Statute, 1995. Authority to allocate land under the Land Act is vested in District Land Boards. There is the problem of water Extraction permits in terms of the fee structure. An allocation of water for commercial purposes, without a water permit issued by the Director of the Directorate of Water Development (DWD), is prohibited. Installations capable of extracting or diverting more than 400 cubic meters of water per day are subject to the requirement of a permit by the Director DWD. This implies that developers of water for irrigation exceeding 400 cubic meters a day must apply for water extraction permits for which a fee is paid. Accordingly, irrigation is regulated by a disparate number of legal instruments including: the Water Statute, the Land Act; the National Environment Statute; and the Water sector and environmental regulations.

3.0 Organization and Management Aspects

3.1 Proposed Manpower Structure

The proposed manpower structure provides for: a Chief Executive (1); Finance and Administration Manager (1); Marketing Manager (1); Farm Managers/Supervisors (11); Farm assistant Managers (40), Farm laborers (100); Drivers and security guards (6). This manpower force may be reviewed and fine tuned at Feasibility Study stage. Given the level of negotiation and paper work that goes into a joint venture arrangement, the pre-implementation lead time may be between 12-18 months. The three fruit enterprises take about the same gestation period, if grown under irrigation (18-30 months). The maiden harvest can be 24-30 months after planting. For pineapples, full production is expected within 30 months and continues thereafter for the next three years before replanting, if the Smooth Cayenne variety is grown. For Mangoes and oranges, full production can be reached during the fourth year after planting. Progression of yield from maiden harvest is as shown in Table 2.1).

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Critical considerations to assure project success are mainly three: acquisition of planting materials of improved varieties which are not currently available in commercial quantities; irrigation; and linking and integrating production to markets.

3.2: Project Implementation Plan

Much of what is needed to implement the project will involve linking the proposal to investors and getting the government to mediate and facilitate the partnership. Constituent activities that relate to the implementation plan are indicated Table 3.2 below Table 3.1 Project implementation Plan Activity Timeline

(Months) 1 Linking opportunity to core Investors 6-12 2 Negotiating joint venture with Government 3-6 3 Feasibility Study 3-6 4 Establishment of nurseries and bulking planting materials 6-24 5 Developing estate infrastructure 3-6 6 Land clearing and irrigation infrastructure 3-12 7 Planting and maintenance Continuous

4. Project Profitability and Sensitivity Analysis

The Table below summarizes project viability in terms of Rates of Return, pay back period and sensitivity to changes in factor costs and prices. On the basis of the analysis, the project has a pay back period of 3 years, Internal Rate of Return (IRR) of 28 percent. At 20% change in factor prices and costs the project remains viable and profitable. If this level of viability is re-confirmed at feasibility study stage, the investment shall prove to be extremely attractive. Table 4.1: Cash Flow Analysis for 5-Year Project Implementation Period (Years 1-5 in US$) Item Year 1 Year 2 Year 3 Year 4 Year 5 Total

Bank Balance B/f 1,000 2,189,757 1,422,795 3,597,400 7,258,226 1000 Inflows: Revenue receipts (1,200,381) 2,738,952 5,638,667 7,059,192 8,515,264 22,751,694 Equity Injection 1,700,000 0 1,700,000 Development Bank Loan 6,800,000 6,800,000 Total 7,300,619 4,928,700 7,061,461 10,656,603 15,773,490 31,252,694 Outflows: Capital Expenditure 1,647,143 1,647,143 Purchases 1,481676 892,990 1,002,238 1,068,474 1,097,465 5,542,841 Operating expenses (excl.Depreciation)

562,228 562,228 562,228 562,228 561,828 2,843,140

Accrued Creditors 0 0 Long term loans 0 Interest payments 664,259 535,185 384,074 232,963 81,852 1,898,333

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Loan repayments 755,556 1,511,111 1,511,111 1,511,111 1,511,111 6,800,000 Taxation 0 Total 5,110,862 3,505,915 3,464,051 3,398,376 3,252,256 18,731,460

Balance C/f 2,189,757 1,422,795 3,597,410 7,258,226 12,521,235 12,521,235

4.2 Profitability (NPV Analysis) Parameter Year 1 Year 2 Year 3 Year 4 Year 5

Cashflows 2,189,757 1,422,795 3,597,410 7,258,226 12,521,235 Discount Factor 20%

NPV 13,426,990

4.3: Pay Back Period Period Investment

(in US$) Net cash-flow Balance on

Investment Rate of

return on Investment

Year 1 2,189,757 6,300,243 1 97%

Year 2 1,422,795 4,887,448 2 106%

Year 3 3,597,400 1,290,138 3 255%

Year 4 7,258,226 (5,968,188) 4 328%

Year 5

8.500,000

12,521,235 (18,489,423) 5 404%

Pay Back Period: 3 years Average 199%

4.4 Risk Analysis (Sensitivity Analysis Fall in farm gate prices by 20% Fall in Yield by -20%

NPV 8,492,457 NPV 11,295,955

Average Rate of Return 148% Average Rate of Return 172 %

Pay Back Period 4 Years Pay Back Period 4 years

Average Net Profit Margin 73% Average Net Profit Margin 77.6%

Fall in Farm Gate Price by 20%, Fall in yields by 20% Rise in Loan Interest Rate by 25%

Rise in Loan Interest Rate by 25% NPV 5,802,182

NPV 12,441,543 Average Rate of Return 127%

Average Rate of Return 199% Pay Back Period 6 years

Pay back period 4 years Average net Profit margin 69,2%

Average Net Profit Margin 77%

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ANNEX Key Value Chain Actors in the Fruit Farming Sector

1. Mother garden operators 2. Nursery operators 3. Farmers under an umbrella organization called Teso Tropical Fruit Growers

Association, 4. Extension service providers (National Agricultural Advisory Services-NAADS and

Teso Diocese Development Organisation-TEDDO) 5. Agro-Input dealers 6. Traders mostly from Mbale, Kampala, Kenya, Kigali, Juba, 7. Hospitals and schools. 8. Local government leaders in areas of influencing policy and thus value chain

development. 9. Government Boards and Agencies namely Uganda Export Promotion Board

(UEPB) and the National Agricultural Research Organization (NARO) at Kawanda (KARI). The Uganda National Bureau of Standards (UNBS) and Uganda Industrial Research Institute (UIRI) based at Nakawa, principally concerned with value addition technology and practices.

10. Private sector institutions like Horticultural Promotional Organization of Uganda (HPOU) and the Horticultural Exporters Association (HORTEXA).

REFERENCES AND IMPORTANT STUDY REPORTS

1. NPA (April 2008) Development of Viable Value Chains for the Promotion of Citrus

Marketing and Increased Earnings to Rural Farmers. 2. GOU (2004) Increasing incomes through exports: A Plan for Zonal Agricultural

Production. Agro-Processing and Marketing, Government of Uganda Planning Department Ministry of Finance Planning and Economic Development.

3. Musana S. and Rubaihayo E (May 2007): Horticulture in Uganda: In Agriculture in Uganda Vol 2 Crops, MAAIF, and NAADS.

4. Sonko R. Njue E. Ssebuliba, J.M. de Jager A, (2005) Pro-Poor Horticulture in East Africa and South East Asia: The horticulture sector in Uganda, Wageningen University: A collaboration between Wageningen University Research, Makerere University, Faculty of Agriculture and East African Trade Commission.

5. Teresa Sengoba, J.J. Hakiza, Patric Kalunda, Martin Amen, Yovani Ogwang (2002) Introduction and Evaluation of improved citrus and mangoes through Farmer Field Schools.Project supported by NARO?DFID COARD Project.

6. FIT (U) Ltd (Jan 2007) Study for Fruits Sub-sector (Pineapples, Passion Fruits, Mangoes).

7. Agona, A.L. Nabawanuka, J and Kalunda P. (2002) A Market overview of the dried fruit sector in Uganda. A FoodNet Grants Award Project, National Post Harvest Programme KARI.

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8. ICRAF, Ssemwanga Centre Ltd (2003) Market potential for selected tree fruits in Uganda.

9. JITAP CLUSTER 12 (2004) Strategy diagnostic report for the fruit and vegetable export sector for Uganda.