Kampala. The government’s decision to disburse Shs100 billion to middlemen to buy maize and stabilise market prices yesterday came under scrutiny after it emerged that an individual owning a silo could borrow up to Shs20b.
This in theory would mean that only five persons or entities could snap up the entire allocation, crowding out other would-be beneficiaries.
Finance Minister Matia Kasaija on Wednesday announced the Shs100b offer in response to what he said were cries by commercial maize farmers that a plentiful harvest this year caused a drop in price of maize grain to as low as Shs200 per kilogramme, wiping out their planned earnings.
The money will be sliced from the Agricultural Credit Facility (ACF) kitty at Bank of Uganda and officials say the central bank will funnel the cash through some 23 eligible commercial banks and micro deposit-taking institutions.
The government, in partnership with financial and credit institutions, established the special fund in 2009 to provide a line of cheap financing to farmers who find difficulty accessing loans from commercial banks through regular arrangements.
Borrowers eligible to pick the Shs100b ACF loan are maize dealers with large storage facilities that can guarantee highest quality preservation of the grains for six months.
“Funds will be accessible by all interested traders in the maize business who have requisite storage, cleaning and drying facilities in order to allow the maize to be stored for at least six months when prices are expected to recover,” Mr Kasaija said on Wednesday.
The traders will return the money to the banks with interest not more than 15 per cent per annum.
Mr Kasaija added that the storage facility and maize grain will be used as collateral.
With only a handful Ugandans owning silos befitting the government description, and most of the owners connected to higher echelons of government, a top official of an NGO that follows spending of national budget money flagged a possible abuse of the resources to enrich a few and widen inequality.
Mr Julius Mukunda, the coordinator of Civil Society Budget Advocacy Group (CSBAG), told this newspaper last evening that the amount of money that can be disbursed to an individual borrower should be capped alongside a target for quantity of maize to be bought.
Without such safeguards, Mr Mukunda said: “Some traders will not buy that maize but will go and import other things from China, Germany using government money.”
“The idea of buying and setting prices for maize is very good because farmers are crying because of low prices.
Investigations by this newspaper show that some silo owners are maize growers who are stuck with abundant yields, meaning they potentially could pick the ACF cash and buy their produce first before purchasing from others.
In the end, the farmer that the government intends to bail out will receive Shs500 per kilogramme of maize grain which, although doubles the current prevailing market prices, is still less than what each kilogramme fetched last year.
The downside of the arrangement, some economists suggest, is that when the prices stabilise over the next six months, the rates could rise beyond or double the Shs500-per-kilogramme price tag and silo owners would turn to supply and profit from stocks they would have bought on the cheap on tax payers’ back.
Mr Kasaija has said loan applications for up to Shs20b would be processed within 21 days while amounts of below to Shs5b would be cleared in a week.
According to Mr Mukunda, allowing an individual borrower to take home Shs20b is “bad” because it concentrates wealth in the hands of a few and betrays the plan to re-distribute wealth by making commercial agriculture the mainstay of the country’s economy viable and attractive.
In the past, the government marketed farmers’ produce through the Produce Marketing Board but this was privatised and eventually collapsed, leaving farmers in the hands of exploitive middlemen. Over the years, the World Food Programme and the government have built storage facilities in Kapchorwa, Gulu, Kasese, Tororo, Soroti, Nakapiripirit and Moroto districts. Eastern, Bunyoro, Rwenzori and northern regions top in maize production.