Twezimbe Area Co-operative Enterprise (A.C.E) Limited

INDUSTRY PROFILE

Agriculture accounts for about 23% of Uganda’s Gross Domestic Product (World Bank, 2009). Over 80% of the population is employed in Agriculture. The sector provides livelihoods to over 3.5 million households. For a long time, Uganda has benefitted from the favorable soil conditions as well as the rains received twice a year as compared to many countries in Africa which receive rain once a year. Agriculture provides a large proportion of raw materials for industry. Food processing alone accounts for 40% of total manufacturing. The sector employs 73% of the population aged 10 years and above (UBOS, 2005). Agriculture will be the key determinant in the country’s efforts to reduce poverty in the immediate years ahead. The biggest players in Uganda’s agriculture are small holder farmers and yet they receive the least in spite of all the effort they seem to contribute. One of the reasons for this is the fact that most of the people engaged in farming do it as a last resort, when everything else has failed. Many of these small-holder farmers do not know that even applying simple technologies like using improved seed can improve their yields, income and therefore livelihoods. It is therefore important to embark on a sensitization initiative.

Market Trends

Maize production in Uganda is dominated by small scale subsistence farmers. These account for 95% of the production. The other 5% is by commercial farmers. The small scale subsistence farmers essentially cultivate small pieces of land 0.2-0.5ha, use the hand hoe as the basic technology, use home saved seed and have poor crop husbandry methods.

Recent statistics show that maize production in Uganda has been rising steadily from about 1,258,000 MT in 2006 to 2,361,956 MT in 2008 (Uganda Census of Agriculture 2008/09 at a Glance – Handbook). Maize is the most important cereal crop in Uganda providing over 40% of the calories consumed in both rural and urban areas. The crop has increasingly become a staple food in many parts of the country due to changes in peoples’ eating habits. Maize consumption is steadily increasing from the current 15 kilograms per person per year (NARO, 2002).

As the Ugandan economy continues to grow, especially with the discovery of Oil and Gas, indicators show a steadily rising demand for agricultural produce within Uganda and the Eastern Africa region. Twezimbe A.C.E strives to be number one provider of high quality differentiated and value added agro-products to the consumers and the market in Kyankwanzi District. The undifferentiated market in the region is easy to penetrate as it requires less promotional costs to get a foothold in the industry as opposed to the differentiated one in the market. Our strength lies in the building strong business value chain linkages, relationships and networking.

Other market perception drivers for the business growth include;

  • Increase in urbanization which has led to demand for more food in towns
  • The demand for high quality inputs to increase agricultural production as a result of the rising demand for food in towns;
  • Increase in population especially in rural trading and urban centers;
  • Genetic modification has changed production methods and altered consumer attitudes towards food consumption.
  • Food hygiene, safety and quality issues, identity preservation and property rights issues are increasingly prominent in agricultural marketing.
  • The transformation underway in agriculture has changed farmers’ relationship with the rest of the agricultural and food industry.
  • An increasing interdependence of the farm production sector with the rest of the supply chain, an interdependence reflects the trend towards closer vertical coordination in the agri‐food industry.
  • Globalization-recent impact of innovations in communication and transport which have enabled access to high value markets and information.

The Strengths, Weaknesses, Opportunities and Threats of Twezimbe Area Co-operative Enterprise (ACE) Limited are analyzed using the SWOT matrix below.

STRENGTHS

WEAKNESSES

  • Highly experienced team and Board.
  • Diversified enterprises
  • 18 strong primary co-operatives (RPOs) with knowledgeable and informed they are 3268 individual members in Twezimbe ACE.
  • Visionary Board of Directors.
  • Strong relationships with key industry members
  • Weak governance and leadership gaps
  • Inadequate financial resources/working capital
  • Poor agricultural storage facilities
  • Poor quality products bulked and marketed by Twezimbe ACE farmers
  • Production not yet market-oriented
  • Lack of access to viable markets and business management skills.Weak Marketing Information System
  • Inadquate value adding & processing equipments Poor linkages between stakeholders

OPPORTUNITIES

THREATS

  • Growing demand in rural & urban areas
  • Changing customer tastes/preferences
  • New agro-products uses & regulations
  • Government support to cooperatives through Prosperity for All program.
  • Strong and vibrant financial institutions
  • Good networks and Strategic alliances with agricultural development partners e.g Producers Cooperatives, NAADS, USADF, UDET, URDT, UCA,aBi-Trust.
  • Un exploited market opportunities
  • Outreach for expansion
  • Existance of communication media eg Local Radios, MTN, Airtel, UTL etc.
  • Competitors
  • Long chain of Agricultural markets.
  • Long droughts and climatic changes
  • Political interferences
  • New rules and regulations
  • Pests and diseasesExtensive cutting of trees by the general community.Weak agricultural marketing systems.

Key issues arising from the SWOT analysis

  • Providing value addition services to member farmers and others to improve their incomes and profitability;
  • Promoting integrated postharvest handling and processing technologies at farm
  • Ensure timely acquisition of quality inputs for better yields from farmers;
  • Promoting bulking and marketing of farmers produce to high value markets for better incomes;
  • Providing a range of business development services (BDS) to farmers to improve their entrepreneurial and business management skills;
  • Upgrading the capacity of Twezimbe ACE for efficient and effective services delivery.

There are not many competitors offering high quality and value-added agroproducts in Kyankwanzi District although there are quite a number of traders engaged in produce buying and marketing. The low numbers in value addition is a result of the high operational costs for electricity. The main competitors to Twezimbe ACE value addition services will be;  Wattuba maize millers, Kiboga finest maize flour, Kakande and Sons, and Kikonyogo millers. The other competitors are the small-scale rural and urban agro-processors and millers located in towns and trading centers.Twezimbe A.C.E Limited will capitalize on the weaknesses of the competitors while at the same time build on the goodwill of its existing members who are the small-scale farmers within Kyankwanzi district to entrench into the market currently being enjoyed by the existing players.

Competitive advantages for Twezimbe ACE

  • Easily accessing of raw materials-farmers supply raw materials directly to Processing Unit units.
  • Contractual farming with farmers to guarantee raw materials input to the processing plant.
  • Twezimbe has and will have office premises, Maize and Coffee processing facilities strategically located within Ntwetwe Town Council, with enough space for expansion;
  • A well organized network of over 3268 farmers and network of 18 strong producer co-operatives with potential to double their current production.
  • Customized services tailored to the needs of the customers and farmers
  • Competent, experienced, long serving dedicated and committed staff in place.

The table below shows the main anticipated risks of Twezimbe ACE’s business.

Risk

Measure to counteract the risk

Fire and Burglary in store -Insurance for Warehousing Services-Twezimbe will install fire extinguishers at the bulking center/Storage facility and security-Frequent monitoring of premises by responsible management staff-Use of strong pad locks and doors will be enhanced.
Breaching of contracts by partners Signing legal documents with stakeholders to guarantee effective performance.
Production Risks: Natural disasters and Long drought affects Maize, Beans and Coffee production -Introduction of Agricultural Insurance product in partnership with insurance companies.Promotion of conservation farming practices.
Political Interference -Sensitizing political leaders on the co-operative business activities.-Ensuring transparent rules and procedures including procurement and human resources
Poor quality bulked by farmers -Twezimbe ACE will ensure quality throughout the value chain to mitigate this risk-Develop a Quality Management plan
Vulnerability to the vagaries of pests and diseases -Twezimbe ACE will greatly utilize the services of Agricultural Extension Workers to assist the farmers in these areas.
Volatile prices -Contract farming agreements with buyers
Environmental wastes from operations -Twezimbe will ensure value is attached to all the wastes or by-products arising out of value addition operations.