Agribusiness in Uganda is in a crisis. The case of the Uganda Land Alliance where large fraud and misuse of donor funds was detected, doesn’t stand alone. It is rather symbolic for a much wider trend, as demonstrated by the growing number of non-performing loans in the banking sector, which were partly due to the same problem. aBi supported over 230 agribusinesses, many of them farmer organizations and small companies, in the period of 2010-2016 and found that about 60 per cent of them had questioned costs. These were mainly along two lines:
- Inadequate supported expenses, ineligible or non-project related expenses, fraud or misuse of funds;
- Internal control weaknesses or inefficiencies related to budget monitoring and management, cash handling, management of procurements, asset management, compliance with national laws and regulations and management of document storage or filing systems;
The reasons for this dismal situation are poorly understood. It is not just a question of lack of technical and financial capacity by the agribusinesses to manage and turn the project into a success, but also a general leniency and lack of seriousness by Ugandans to respect rules and procedures.
Moreover, private as well as public institutions are purposefully kept weak because it suits those in positions of power and influence (founder/owners and managers) to bend the rules to their benefit. In case the misuse or fraud is discovered, these people use their position and patronage network to avoid prosecution. It’s hard to see how this will change any time soon.
This is also the reason why donors are bound to be disappointed again in the future.
So should we throw the towel in the ring when it comes to supporting agribusiness and the private sector in Uganda? At aBi, we are not ready for such defeatism, but instead have decided to take the bull by the horns and get much better at our trade.
It is encouraging to see that from the 60 per cent questioned costs across the portfolio of projects, most issues were about reporting, not following guidelines or agreed procedures, poor administration etc. but not necessarily about fraud or misuse of funds.
Moreover, the trouble was concentrated in a limited number of agribusinesses and only represented about 5 per cent of aBi’s total investments. At aBi, we took many steps to meet the challenge, such as:
- We developed a new recruitment system and hired a complete new team under aBi Trust, which will be supported by financial and business expertise from aBi finance;
- We are improving our communications with better guidance on what aBi is looking for and how applicants can ask for support. We will be more present at selected forums and meet with the public such as the Seeds of Gold campaign;
- We developed a much more comprehensive, transparent and accountable grants management system that will be launched in July this year;
- We have become very serious about the due diligence prior to contracting and monitoring of activities once the project is up and running. Zero tolerance on suspected fraud cases even if it takes aBi years in court;
- We will get involved in every sizeable procurement by the agribusinesses and the capital goods will remain aBi’s property until the end of the project after which it is handed over to the company, but only if the project was managed well and results were achieved;
- We are developing a business development ecosystem of short and long term technical assistance, including professional management services;
We hope that this effort will assist in turning the situation around and boost the growth of the agribusiness in Uganda.
Andre Dellevoet, Group CEO, aBi