Research paper by Emily Ouma, Justus Ochieng, Michel Dionec, and Danilo Pezod for World Vegetable Center.
This paper analyses governance structures in Uganda’s smallholder pig value chains by applying the New Institutional Economics framework. It utilises cross sectional and qualitative survey data from randomly selected pig value chain actors in 4 districts. A multinomial logit model is applied to assess the determinants of vertical integration among pig traders. The findings indicate that most relationships at the pig production node of the value chain are based on spot market governance structures supported by personal relationships and trust. Live pig traders are mostly vertically integrated. High integration levels of the pig traders are positively influenced by access to market information, value of investments in the value chain, and dedicated asset specificity in terms of backyard slaughter premises. Upgrading opportunities in the value chain in the form of value addition strategies, policy implementation and promotion of business models that link producer organisations to quality inputs and service suppliers through contractual arrangements are identified.
The pig sector in Uganda is generally underdeveloped although it has high potential for growth, given the rising demand for pork domestically and in neighbouring countries such as South Sudan, Rwanda and the DRC. The smallholder pig production node is dominated by spot market and informal relationships. The implication of this is that pig producers are generally price takers and lack a common voice. In order to improve the value chain position of farmers, their value capture and reduce transaction costs associated with individual spot market transactions for inputs and sale of pigs, business models along the lines suggested by Cadilhon and Kobusingye (2014) could be promoted. Such models necessitate horizontal integration of producers into collectives in order to improve their bargaining power for better terms of trade and reduced transaction costs associated with transportation due to economies of scale. The farmer collectives can then be linked to different business development service providers to improve access to quality inputs and services including market information, through contractual arrangements.
The results show minimal investments by private sector players for value addition and processing of pork and pig products, yet these are critical avenues for upgrading the value chain. The gap for processed pork products in the country is currently met through importation. Opportunities for such value addition exist but the cost of the investments including equipment, cold chain infrastructure that meets quality standards, and energy for processing tends to be high. This study reveals gaps in the pig slaughter node of the value chain, currently dominated by pig traders. Opportunities for investment in appropriate pig slaughter facilities exist, through private or public-private partnerships. Dedicated supply of pigs to such facilities can be in the form of contractual arrangements with pig farmer collectives. Government has a role in supporting the development of the pig value chains by providing a favourable business environment to incentivise private sector investments in the value chain. An additional and critical role of government in upgrading the value chain is the establishment of functional systems for implementation of rules and regulation for quality input supply, pork quality assurance and standards as documented in other studies such as Lee et al. (2012).