What Uganda’s Seed Problems Tell Us About How to Develop Dynamic Markets

A Ugandan man tends to his garden in Arokwo Village, Kapchorwa, Uganda | DFAT | Flickr CC license

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Reason Magazine has an excellent narrative feature on everything that has gone wrong with Uganda’s agricultural sector centering pn the problems with seed the country is facing. You should read the whole thing but I think it’s worth highlighting some of the issues that are more or less archetypal and tragically repeat elsewhere over and over again.

For Want of a Nail or a Surge Protector

Author Fransisco Toro’s first stop is The National Seed Testing Laboratory, an ode to development dysfunction:

Is insufficient funding the problem? Not quite. Expensive-looking machinery is all around us. Yet none of it, I slowly realize, is plugged into the wall.

“Oh, yeah,” an aid official tells me days later. “All the equipment at the Kawanda lab is fried.”

Between 2003 and 2008, a $1.9 million project by the Danish International Development Agency fully equipped this lab and trained staff to work here. But blackouts are frequent in Uganda. When the power comes back it often returns with a surge, and the Danes apparently forgot to put surge protectors in the budget. As a result, Danish taxpayers have paid top dollar for a collection of finely engineered paperweights.

This is a really common problem rooted in an understandable cognitive bias but one that should be in our rear view mirror at this point. The problem is that donors love giving clear tangible gifts like a big expensive gene sequencer. What they find far less gratifying is endowing the boring, but crucial maintenance of the equipment they donate. Among all the myriad frictions and pitfalls of poverty trap economics, the Want of a Nail looms particularly large.

For Want of a Nail

For want of a nail the shoe was lost.
For want of a shoe the horse was lost.
For want of a horse the rider was lost.
For want of a rider the message was lost.
For want of a message the battle was lost.
For want of a battle the kingdom was lost.
And all for the want of a horseshoe nail.

I remember reading Robert Klitgaard’s wonderfully written and horribly titled Tropical Gangsters back in mid-nineties about this very problem. Klitgaard was in Equatorial New Guinea for the World Bank trying to devise a plan of structural reform. He begins by surveying the country’s development assets. In case after case he finds exactly what Toro finds in Uganda. Hospitals and clinics with expensive equipment dormant for want of fuses and minor repairs, bulldozers and earth movers for much needed highway projects incapacitated by flat tires and bum carburetors.

Paul Farmer; the brilliant, ascetic doctor fighting aids, illness and poverty in Haiti; talks about how he could raise money for medical equipment and expensive prescription drugs, but it was like pulling teeth to get what he really needed: a donkey to serve as an ambulance to lug sick patients from their huts to the clinic two villages over.

This is an old problem and it’s really well understood. It’s crazy making that the donors of horses don’t include a lifetime supply of horseshoe nails and the bureaucrats in Denmark didn’t include a lifetime supply of surge protectors, but there you are.

Three Card Monte with Seeds

Toro’s next stop is Dandel, an earnest 19 year old who wants nothing more than to go to the agricultural training institute to become a ‘well-educated, technically astute “modern farmer” ‘ of the kind aid agencies are wanting to mint all over Africa. The problem is that Dandel’s family spent his tuition money on improved seed that didn’t prove out. They invested in supposedly high yielding soybean seed in order to bootstrap themselves out of subsistence farming and then only a quarter of the seed sprouted. What went wrong is anyone’s guess. Uganda’s seed markets are too opaque, unreliable, and unaccountable to find that answer. Did the farmer mishandle the seed, was the seed dealer unscrupulous? The wholesaler? The breeder? Uganda’s system of seed regulation and consumer protections is too weak to guarantee the sound transactions and backstop accountability.

Stories like this are distressingly common in East Africa. Uganda’s better seed companies are mired in a cat-and-mouse game with the fakers. About 10 years ago they began branding the bags that hold their seed to differentiate themselves, but then traders started buying up the empty bags and selling them to scammers to refill with commodity grain passed off as seed. The companies tried dyeing their seed in bright colors to make them visibly different from bulk grain, but the scammers quickly figured out how to dye the fakes too.

The legal system offers little recourse—the fees to bring a suit could easily amount to the Byansis’ lifetime earnings. And the police aren’t much help, either: In 2015, only a single seed faker was prosecuted in all of Uganda. He had made just about every mistake imaginable, paying a sidewalk print shop in the town of Jinja to reproduce seed company bags half a block from a police station, in plain view of everyone. After a summary trial, he was sentenced to two weeks’ community service, picking up garbage from the side of the road. But that’s the exception. If you’re minimally sophisticated (this guy wasn’t) and take rudimentary precautions (this guy didn’t), you won’t get caught.

Imagine having so little faith in a product you had to save up or go in debt to purchase with so much riding on success.

Orderly, functioning markets aren’t a fact of nature and they don’t self-organize automatically. They don’t necessarily require a ton of regulation, but they do need some. It needs to be firm and reliable.

Some might think this story has something to do with the need for strong intellectual property rights, but that’s not necessarily the case. India doesn’t grant IP rights for seeds. In that country, Mahyco, Monsanto’s local partner, dominates the market for Bt cotton seed, not because they have a patent backed monopoly on the Bt trait, but because the local seed market is so chaotic with unscrupulous dealers selling bogus Bt cotton seed, that farmers are willing to pay extra for Mahyco seed because the company is large enough that their reputation is strong and stable enough to stand in for the backstopping that better a regulatory and court system would provide in a healthier market economy.

In a paper [pdf] awaiting publication, researchers testing the quality of agricultural products in local markets in Uganda found:

Testing modern products purchased in local markets, we find that 30% of nutrient is missing in fertilizer, and hybrid maize seed is estimated to contain less than 50% authentic seeds. We document that such low quality results in low average returns. If authentic technologies replaced these low-quality products, however, average returns are high.

As Toro puts it, in the front runner for one liner of the year:

” The one thing worse than being exploited by Monsanto, it turns out, is not being exploited by Monsanto. “

Which brings him to Christine Masawi a subsistence farmer caught in the unfortunate treadmill of seed saving. She is too poor to purchase improved and hybrid seed and it’s too risky due to unscrupulous local seed dealers to boot. Instead she is stuck saving seed from part of her harvest from year to year. While yields from saved seed tend to diminish over time, in addition to being time consuming,  you can count on the seed to germinate. It may not be high yielding, but it is adapted to local conditions and it more or less “works”.

The result is that between farmers who can’t afford new seed and farmers who have learned that you can’t trust new seed, there is not enough of a market for new seed. Meaning the major seed companies have avoided or abandoned the Ugandan seed market – neither Syngenta nor DowAgrosciences has set up shop in Uganda and Monsanto pulled out in 2014.

Bicentina Auma, chairperson of a small farmer’s co-operative in northern Uganda, harvesting finger millet. | UK DFID | Flickr CC license

Co-dependence and Iso-Morphic Mimicry

The final and possibly most consequential site of dysfunction Toro highlights is the co-dependent relationship that the development aid agencies have developed with the state agriculture ministry. The dynamic starts with the incentive aid administrators have to spend their entire budgets or risk having them clawed back in the next fiscal year. The local government then adapts to facilitate this.

“When you go into a meeting with MAAIF officials, you feel the farmers are very far from view,” says an official attached to a Dutch aid project, who requested not to be named because her job brings her into constant contact with ministry officials.

A key element of this is the infamous “per diem” culture—the practice of paying a small sum to Ugandan officials to attend events sponsored by foreign partners.

“Say you go to the ministry and propose a capacity building workshop—you can be sure the first question they’ll ask is about the per diem,” the Dutch official says. The actual subject of the workshop is secondary, and its “goals” hardly merit a mention.

I attend one such event sponsored by the World Bank. It’s held in grand style at the Lake Victoria Serena Golf Resort and Spa, a luxury hotel with expansive views of the lake at the source of the Nile. Officials from four continents arrive to discuss institutional development. Many a fine word is spoken, and many a team-building exercise is led by young D.C.-based staffers.

MAAIF officials make sure their presentations include all the latest development catchphrases: multi-stakeholder platform and sustainable intensification and evidence-based monitoring and evaluation. To extract money from the international development machine, you need to sound just like it. At this task, if at no other, MAAIF excels.

Toro hits up an apt metaphor:

The same bureaucracy that can’t keep its lab equipment hooked up to a surge protector glides effortlessly among the leading lights of the development world.

One of these snakes only looks poisonous.

Lant Pritchett, a professor of international development at Harvard, calls this “isomorphic mimicry,” a phrase he borrowed from evolutionary biology. Think of the nonvenomous scarlet king snake, which has evolved to look uncannily like the highly venomous eastern coral snake. It borrows the deterrent effect of appearing venomous, he notes, without going to all the trouble to evolve venom. And it works: Animals won’t risk attacking an eastern coral snake, so they leave the scarlet king alone. There can be a clear evolutionary payoff to appearing to be something you’re not.

Pritchett posits that the governmental institutions in many developing countries do something similar: They evolve to mimic the trappings of a properly functioning bureaucracy, without investing scarce resources in the bothersome task of actually doing their jobs. To get resources out of international donors, such institutions have many incentives to look like agents of development but very few incentives to act like them.

Uganda’s problem isn’t a badly performing ministry of agriculture. It’s a ministry of agriculture that performs extremely well at the wrong thing.

However he ends on a hopeful note in looking at a project that sidesteps many of the traps laid by the rabbit warren of perverse incentives we’ve just catalogued.

The project is sponsored by USAID and run by Tetra Tech, one of the agency’s contractors. It upends the usual way international aid is carried out. Instead of hoping against hope that this time MAAIF really will change, it’ll sidestep the Ugandan authorities using a techno-utopian sleight of hand.

Under the eVerification system, a lottery-style scratchcard will be attached to every bag of certified seed in Uganda. Once purchased, the buyer can scratch it off to reveal a code. Send that code via text message to a central database, and an instant response will confirm that, yes, that bag of seed has indeed been inspected and can be relied on to produce the advertised results.

The techno-novelty, while neat, is actually a clever bit of misdirection. More important is that USAID has managed to keep the entire eVerification certification protocol outside of MAAIF’s purview. (The ministry takes what is euphemistically called “an oversight role.”) The program is, in effect, a quasi-privatization of the process: It may be funded by U.S. taxpayers (with some money also coming from participating seed companies), but the testing and certification system is carried out by private entities.

Private sector-led seed regulation is already in place in South Africa and Zambia. The system has made the latter country, which is just as poor as Uganda, home to a competitive seed industry with hundreds of new varieties tested, certified, and planted each year. A tougher place to farm (having a single growing season each year vs. Uganda’s two), Zambia even exports 16,000 tons of corn seed annually. Why?

Because larger firms have the confidence to invest there: They trust that their intellectual property won’t get ripped off by fakers.

Functioning, dynamic markets don’t arise spontaneously. While we figure out how to coax them into existence in the developing world, we shouldn’t take them for granted where we have them up and running. They are hard to create and resilient once they exist, until they’re not.

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