Growth Challenges Faced by Local Seed Companies in Uganda

Abstract

This study is an assessment of growth challenges faced by local seed companies in Uganda. It looks at aspects of production, financial, environment that exacerbate constraint. The impetus behind the study is drawn from the constraints experienced by seed companies across sub Saharan Africa. A combination of research techniques such as questionnaires, telephone interviews and review of available literature was used in this study. The study reveals that the 16 respondent seed companies are young. The local seed companies lack the capacity to generate new or improved germplasm through research and therefore rely on public sources of parent material. Furthermore, many of the seed businesses do not have access land and irrigation facilities so many of them rely on out growers, thus, are exposed to quality issues and price fluctuations. Equally important, most local seed farmers and out growers rely on rain feed production, hence, are prone to adverse changes in weather patterns, which eventually may affect seed production The majority of the seed companies are owner managed, and exhibit weak corporate governance structures, with most decisions resting with the owner manager. The companies are in an industry which is perceived as high risk by commercial banks and have a weak asset base which hinders access to external financing for the acquisition of efficient processing equipments and working capital. Consequently, they have relied on the owners‟ limited equity this is exacerbated by delayed collection of receivables from major creditors. Difficulty in accessing grants for expansion and the prevalent macroeconomic conditions was also identified as a challenge. In conclusion, most seed businesses depend on unreliable out growers for seed production who are poor and risk-averse and are cash constrained often with limited ability to make investments to grow their businesses. Possible remedies to these challenges include improvement in the regulatory frame work, provision specialised financial products to finance capital expenditure and working capital, skills development, increased availability of improved varieties, sensitization of farmers on the benefits of using improved seeds, In conclusion, the major constraints facing local seed companies are a function of their size, lack of adequate capital, rudimentary production and processing capacity resulting

in poor seed qualities and vulnerability to the macro economic environment in the country as well as unfavourable climatic conditions, unethical practices and poor regulation.