Abstract:

Liberalized fertilizer markets in eastern Africa typically deliver fertilizer to smallholder farming regions at prices that render its use unprofitable. Simultaneously, faced with little demand for fertilizer in these regions, fertilizer traders appear unwilling to invest in measures that might reduce farm-gate prices. A basic question throughout the region is therefore how to cost-effectively increase smallholders’ access to fertilizer, under conditions of liberalized and privatised trade in the input. This paper explores that question for Uganda using data from a wide-ranging study of Uganda’s fertilizer sub-sector. The prevailing system of fertilizer procurement and distribution is found to imply a market structure dominated by retail-level trade, high prices, and low net margins. The study concludes that there is no inherent pressures in the extant system of fertilizer procurement and distribution toward development of a wholesaling backbone that might allow capture of scale economies. But with imaginative and sustained investments in institutional innovation and strengthening, there is scope to reduce prices and increase net trading margins.