Cotton Business Creates New Opportunities in Uganda
A new market opportunity for a business in eastern Uganda is poised to leave a positive impact on the surrounding community.
For farmers like Samuel Baale, chairman of Bulongo Farmer Business Group in eastern Uganda, cotton is vital to life. The area’s main cash crop, cotton helps pay for homes, provide food and send children to school. And the market for Samuel’s cotton comes from one major buyer: Mutuma Commercial Agencies Ltd.
Ugandan entrepreneur Amos Mugisha launched Mutuma in 1999 as a cotton processor and oil miller. In 2005, he bought a cotton gin factory in the community of Kiyunga, where local farmers supply cotton to be processed, or “ginned,” into lint and seeds. The cotton seed is further processed into cooking oil and seed cake for animal feed.
Mutuma quickly became an economic engine for the Kiyunga area, employing nearly 250 people at peak processing season and buying cotton from thousands of smallholder farmers. But the business faced a number of challenges. Local producers lacked farming and business skills that would help them increase their yields. They were disorganized, making it difficult for Mutuma to collect their cotton. And the business was exporting all of its cotton lint, meaning that much of its potential value was being realized elsewhere.
In 2008, TechnoServe began working with Mutuma and another cotton gin to improve the competitiveness of Uganda’s cotton industry. After conducting an analysis of the industry landscape, TechnoServe identified a promising new market opportunity for Mutuma: absorbent cotton wool for the medical industry.
As with Mutuma, most other Ugandan gins exported their cotton lint at low profit margins. Only one domestic business was producing absorbent cotton wool, leaving plenty of room for another player in the market. Working closely with Amos and the rest of Mutuma’s management team, TechnoServe business advisors helped develop a business plan that would allow the company to capitalize on the opportunity.
Mutuma secured financing for machinery and began constructing a new production facility in 2009. In the meantime, TechnoServe worked to organize farmers in the area and develop their capacity to supply Mutuma with seed cotton. Our advisors helped form or strengthen farmer business groups that allowed producers to aggregate their crops, access finance and receive support services more easily.
Farmers received training on best production practices, such as planting seeds in rows, spacing them properly and spraying their cotton plants to control pests. The trainings also showed farmers how to better produce and market staple crops such as maize (corn) and beans. The improvements helped farmers increase their yields by double or more, in some cases. Moreover, TechnoServe helped Mutuma’s staff to deliver these trainings to farmers, ensuring that the knowledge will reach future generations.
“TechnoServe trained the trainers,” said Moses Kwijuka, finance manager for Mutuma. “Even when TechnoServe is gone, the trainers will be in a position to train others.”
Samuel Baale and his fellow producers from the 100-member Bulongo Farmer Business Group have realized the benefits from these training sessions. Before working with TechnoServe, the group collectively produced six tons of cotton. In the most recent growing season, the group sold 30 tons to Mutuma.
Samuel used to produce about 660 pounds of cotton per acre. Today, his productivity has improved to 2,600 pounds per acre, and his income from cotton has risen sixfold. With the additional money from cotton, Samuel started a small store and bought an additional two acres of land to cultivate. He is building a new house and paying school fees for his eight children.
As for Mutuma, the company has benefited from the improved productivity and organization of its suppliers. In the most recent season, Mutuma produced more than 3,500 bales of cotton lint – a 42 percent increase from 2008, when TechnoServe began working with the business. Mutuma has built a strong reputation with small-scale cotton farmers. In total, the business buys cotton from about 6,000 farmers, including 3,700 farmers organized into groups with TechnoServe’s assistance.
In June 2011, the new production line for absorbent cotton wool began operating. Already, the product is the main driver of Mutuma’s profits, with margins three times higher than those for cotton lint. Mutuma sells the absorbent cotton wool to hospitals and clinics in Uganda, and the business is exploring opportunities in export markets.
With a promising new business and an organized and productive group of suppliers, Mutuma is poised to improve the livelihoods of even more farmers and employees in the coming years.