Presented by Emily Ouma, Justus Ochieng, Michel Dione and Danilo Pezo at the 5th International Association of Agricultural Economists Conference, Addis Ababa, 23-26 September 2016

1. Governance structures in smallholder pig value
chains in Uganda: constraints and
opportunities for upgrading
Emily Ouma, Justus Ochieng, Michel Dione and Danilo Pezo
5th International Association of Agricultural Economists Conference
UNCC – Addis Ababa, Ethiopia
23-26th September 2016

2. Motivation
• Transformation of agri-food value
chain systems in developing
countries
– Shift to more coordinated linkages
and value chain governance
– Driven by increased demand from
consumers for food safety and better
food quality specifications
– Risk of SMEs being left out as value
chains get more organised to meet
changing patterns of consumer
demand

3. Motivation
• Challenges for developing country
SMEs
– Being competitive in agri-food value
chains
– Asymmetric power relationships
that impact on distribution of costs
and benefits
• Need for governance systems and
upgrading interventions that
enhance benefits for the SMEs
• Focus - Uganda pig VC

4. Why pig value chains in Uganda?
• Dynamic and rapidly growing pig
sector in Uganda.
• Pig population increased from 0.19
to 3.2 million pigs (last 3 decades).
• Highest per capita consumption (3.4
kg/person/year) of pork in the
region:
– 10 times increase in the last 30
years, whereas beef is declining.
• Agribusiness opportunities for SMEs
(farmers, traders, processors,
transporters)
– Growing and changing demand
• Identified by Livestock and Fish
CGIAR Research Program – potential
for pro-poor development

5. Objective
• Analyze value chain governance structures and its
determinants in the smallholder pig value chain & identify
opportunities for value chain upgrading
• Value chain governance structures definition
₋ Relationships among buyers, sellers, service providers and
regulatory institutions that influence range of activities required
to bring a product from its inception to end use.
₋ Power and ability of a firm to exert control in the chain
• Study sites
₋ 4 districts (Masaka, Kamuli, Mukono and Kampala) representing
high supply and demand areas
₋ Cross sectional survey data: random samples of 376 pig farmers,
101 pig traders, 36 veterinary service providers, and 36 livestock
feed stockists.

6. Methods
• Application of the New Institutional Economics
framework:
₋ Transaction cost economics (TCE) to assess rationale for
governance structures and relations in the value chain
₋ TCE offers rules on how trading partners choose governance
structures to mitigate contractual hazards to minimize
transaction costs
₋ Important properties of underlying transactions that
influence governance structures (asset specificity,
uncertainty, frequency and complexity of transactions)
• MNL to assess determinants of levels of vertical
integration among pig traders

7.  Village breeding boars
 Agro-veterinary stockists, Livestock feed stockists, private and government
vets
Pig value chain map
Production
Collection/bulking
Slaughter
Processing
Retail
Consumption
Inputs and services
Key actors
 Pig slaughter slabs
 Kampala slaughterhouse
 Pork butchers
 Supermarkets
 Processor retail shops
 Brokers (selling to in country live pig traders and cross border traders)
 Live pig traders (in country also carrying out transport functions)
 Only 2 main processors (Fresh Cuts and Sausage King - private
companies located in Kampala)
 Imported processed products from Kenya (Farmers Choice)
 Pork joints
 Restaurants
 Individual households
 Piglet producers – sale of weaners
 Pig fatteners – sales of pigs for slaughter

8. Results
Value chain node Dominant governance
structure
Characteristics
Pig production – individual
farmers
Uncoordinated spot-
market transactions
- Sales to local traders
- Limited market information on
prices, and preferred attributes
- Low asset specificity
Collection and bulking -
brokers
Verbal contracts
(based on trust and
repeat transactions)
- Sales to pig traders
- Low asset specificity (motorbikes
main fixed investment and mobile
phones for networking)
Live pig trade (pig traders) Vertically integrated - 60% perform multiple functions
under single ownership
- Involved in transport, pig slaughter,
pork retail (butcheries and pork
joints)
- Slaughter slab, butcheries and pork
joints in close proximity to reduce TC
- Members of live pig trader groups –
collude to set producer price of pigs

9. Results
Value chain node Dominant governance
structure
Characteristics
Pig slaughter –
backyard slaughters
and Kampala
slaughterhouse
Kampala slaughterhouse
– Verbal contracts with
traders based on trust
Backyard slaughters –
vertically integrated
- Absence of designated slaughter
facilities for pigs in rural and urban areas
- Emergence of informal backyard
slaughters with resulting pork is not
inspected
- Poor hygiene of slaughter slabs and poor
pork handling and lack of a cold chain
- Pork sold through retail outlets –
butcheries and pork joints (no grading or
standards)
Processing Formal written contracts
with Kampala
slaughterhouse and
supermarket chains
- Main pork supplier is the Kampala
slaughterhouse
- High levels of investments (processing
and chilling equipment)
Input supply Spot market transactions
with farmers
- Weak implementation of national feeds
policy resulting in poor quality feeds in
the markets due to adulteration

10. Vertical integration determinants of pig
traders in the value chain - ME
Variables Low
integrated
Medium
integrated
High
integrated
Age -0.001 0.010 -0.009
Education (years of formal
education)
-0.039** 0.000 0.039**
Gender -0.210 0.250** -0.039
Experience 0.001 -0.017* 0.016*
Access to market information -0.281*** -0.127 0.408***
Trade association member -0.033 0.225 0.192
Value of investments in the
value chain
0.000 -0.105*** 0.129***
Market perception (pig supply
in next 3 years)
0.090 -0.044 -0.046**
Base group – low integrated traders n=101 Log likelihood function – 82.38
LR (χ2) = 44.87 Prob>χ2= 0.000 Pseudo–R2= 0.284

11. Summary and implications
 Most relationships in the production and input supply
nodes are based on spot market governance structures
 Power by pig traders – collude to set pig producer prices
 Interventions to improve value chain position of farmers
and reduce TC associated with individual spot market
transactions:
₋ Business models involving horizontal integration of
farmers to improve bargaining power and TC
₋ Linkages with other business development services
through marketing contracts

12. Summary and implications
 Severe gaps in implementation of policies to ensure
supply of quality inputs, and safe pork and pork
products
₋ Advocacy efforts
 Lack of investments by public sector for pig slaughter
facilities and private sector for value addition
₋ Opportunities for PPPs
₋ Value chain financing for cold chain investments

13. This presentation is licensed for use under the Creative Commons Attribution 4.0 International Licence.
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