Could UCDA rationalization be a strategic maneuver or a mistake?

UCDA’s efforts have made Uganda the second largest coffee exporter in Africa, a testament to the agency’s critical role in improving quality and market access.

The government’s recent rationalization program aims to merge various departments back into their parent ministries to reduce costs and improve efficiency. Officials say the cost of running Uganda’s 180 agencies, including UCDA, is too high relative to their output.

The Treasury Department described these agencies as onerous, suggesting that UCDA’s functions could be effectively carried out within the Department of Agriculture.

However, critics argue that a takeover of UCDA would undermine the progress of the coffee sector as the ministry lacks UCDA’s industry expertise and flexibility.

UCDA’s independent structure allows it to respond effectively to the needs of the coffee market, while integration may delay critical responses, undermining Uganda’s competitiveness.

Some observers attribute the change in government policy to ideological changes in favor of centralized control, vital to the state-run economic structures of the past. Others see political motives, suggesting the government is consolidating control over economically powerful sectors ahead of upcoming elections.

Pressure from international financial institutions such as the IMF and the World Bank may be a factor, as both encourage efficiency-enhancing reforms.

These steps may come at the cost of sectoral autonomy, specialized oversight and Uganda’s reputation in these international institutions. The country’s previous experience with restructuring, particularly the sale of the Uganda Commercial Bank (UCB), illustrates the potential pitfalls.

The sale of UCB weakened Uganda’s ability to manage domestic financial policy, something the president later publicly regretted.

This story suggests that the UCDA merger could similarly disrupt Uganda’s coffee sector with long-term economic consequences and should serve as a cautionary reminder. A controversial coffee deal with Italian investor Enrica Pinetti further complicates matters.

By giving Pinetti exclusive rights to process and export coffee, the deal bypasses the UCDA’s established regulatory framework, raising concerns about transparency and economic sovereignty. Critics say it undermines the interests of local coffee producers, alienates Ugandan farmers and could reduce investor confidence.

The Pinetti deal, like the privatization of the Uganda Commercial Bank in the 1990s, which weakened Uganda’s economic control, could have lasting negative consequences for Uganda’s coffee industry. While the rationalization promises cost savings, the UCDA merger risks damaging Uganda’s coffee sector.

An alternative approach could include cost-sharing measures across agencies and greater oversight of UCDA to address accountability issues without compromising its focus.

Maintaining UCDA’s autonomy ensures the industry expertise and ongoing farmer support needed to sustain coffee production growth. And renegotiating Pinetti’s deal could protect Uganda’s coffee interests and maintain market confidence.

Thus, rationalization can lead to immediate financial savings, driven in part by financial constraints and the desire to streamline management. however, the risk of stifling the progress of Uganda’s coffee sector is significant.

This shift in policy requires a balanced approach that considers ideological, strategic, operational, tactical and political implications equally so as not to undermine the growth that these agencies have contributed to over the years.

It is essential to assess whether the long-term benefits of independent agencies outweigh the immediate benefits gained from mergers, and this can only be done by carefully considering both financial and sectoral priorities so that Uganda can ensure that its economic progress remains positive. trajectory.

Tayebwa James Bamwenda is a PhD student in the Department of Sociology and Social Anthropology at Makerere University.