Farms, cities and good fortune – assessing poverty reduction in Uganda from 2006 to 2013

Uganda has made big strides in reducing poverty. Much of Uganda’s progress has been due to agricultural income growth, peace and stability, education, urbanization, as well as sustained economic growth averaging 7% annually.

According to a new poverty assessment conducted by the World Bank, the number of people in extreme poverty in Uganda (those living on less than $1.90 (2011 PPP) a day) has fallen from 53.2% in 2006, to 34.6% in 2013. This reduction of 2.7% per year is higher than the regional average of 0.74 over the course of the same period, making it one of the fastest percentage point reductions in extreme poverty in Sub-Saharan Africa and the developing world.

Poverty reduction among households working in agriculture accounts for 79% of the national poverty reduction observed between 2006 and 2013. This underscores the important role the sector plays in creating lucrative livelihoods, especially given that it currently employs over 60% of the population. As the backbone of Uganda’s economy, the sector also contributes to over 70% of Uganda’s export earnings and provides the bulk of the raw materials for predominantly agro-based industries.

The growth in agricultural incomes of households over this decade was driven by favorable food prices and good rainfall, enabling poor smallholder farmers to obtain higher incomes from their produce. The government’s increased spending on road infrastructure, education, growth in urban centers, promotion of trade and access to new regional markets, as well as the return of peace to the war-torn northern region contributed significantly to further poverty reduction. Nonetheless, it was not driven by the adoption of modern farming techniques and practices.

“The use of agricultural inputs remains low, despite the important gains they would represent for farmers,” explains Ruth Hill, senior economist and co-author of the report. “In 2012, only one in four farmers was using fertilizer for their crops, while only one in ten used pesticides. Similarly, less than 12% of farmers received extension services – all of which affect their yields.”

Low input use can be linked to the low quality of inputs prevalent in local markets – on average, 30% of nutrients are missing in fertilizers available to farmers in local markets. It is also be related to the fact that for technology adoption to pay off, it must be complemented by access to credit and access to markets.

Reducing Non-Monetary Poverty

Despite these gains, the country’s performance on some important non-monetary dimensions of well-being is low. Access to basic services such as electricity and sanitation facilities remains limited, educational completion and progression remain low. For example, only a small fraction of households (14%) have adequate sanitation, half of the average in Sub-Saharan Africa, and only one in seven households use electricity for lighting, compared to one in three on average for the region. What’s more, one in three children are stunted, a sign of chronic malnutrition. Lack of progress in these areas poses a formidable barrier to the country’s aspiration of becoming a low middle income country by 2020. It must be noted however, that Uganda has made significant progress in other human development outcomes, such as child and infant mortality, maternal mortality and access to improved water, in the last decade.

Regional inequality persists and appears to be on the rise. Poverty reduction has been generally slower in eastern and northern Uganda, two regions which have undergone 20 years of civil conflict. The proportion of the total number of poor people who live in the Northern and Eastern regions increased between 2006 and 2013, from 68 percent to 84 percent, according to the report. Poverty incidence is also higher in the north (43.7 percent) and the east (24.5 percent) compared to the central (4.7 percent) and the west (8.7 percent). Three out of ten people in northern Uganda don’t have adequate sanitation and access to electricity is practically nonexistent.

A third of Ugandans remain poor and vulnerable to shocks despite the reduction of poverty. Between 2005 and 2009, for every three Ugandans who were lifted out of poverty, two fell back in. In addition, high fertility rates have held back poverty reduction in the country, by increasing the dependency ratio and slowing consumption growth among poor households by 15 to 20 percent, and have limited the participation of women in the economic development of the country.

“Those possessing higher levels of education are more resilient to shocks and are more likely to diversify their activities beyond agriculture,” noted Clarence Tsimpo Nkengne, senior economist and co-author of the report.

In addition, high fertility rates have hindered poverty reduction in the country. The increase in the dependency ratio of poor households from 1.38 in 2006 to 1.47 in 2013 held back poverty reduction by around 15 to 20%. While total fertility rates have been falling in Uganda (from 6.6 in 2005 and 5.9 in 2013), they remain high compared to the average in Sub-Saharan Africa (5.0 in 2013). Lower fertility rates can have a positive effect on household living standards and the participation of women in the economic development of the country.

“Most Ugandans are either poor or vulnerable to poverty. For every three families who escape poverty, two fall back in,” said Christina Malmberg Calvo, World Bank Country Manager for Uganda. “Bridging the regional divide is critical by spurring agricultural growth and improving education, health and basic infrastructure services.”

The long-term development vision of Uganda is to transform from a predominantly peasant and low income country to a competitive low middle income one by the year 2020. Reducing the number of people living in poverty will require both modernizing agricultural production and expanding employment income in non-agricultural sectors, according to the report. Lower fertility could also contribute significantly to further poverty reduction. The report emphasizes the continued transformative role of agriculture and proposes policy measures that focus on making better quality inputs and extension services available to farmers, alongside affordable credit.

Continuing the Fight Against Poverty

The report recommends several policy measures and actions that can help the country to sustain progress and achieve further poverty reduction.

• Ensuring that all households in Uganda have access to high quality basic public services is an important step to improve the wellbeing of the population.

• Modernizing agriculture is critical to empowering the poor and vulnerable. Providing smallholder farmers with better extension services, quality inputs, and credit will improve their livelihoods and further contribute to poverty reduction.

• In the long-term, raising the contribution of key non-agricultural sectors to poverty reduction – particularly education, health, and urbanization – will offer more sustainable options to further reduce poverty, and spur progress toward Uganda’s aspiration to attain the status of upper middle income country by 2040.

» Download: Uganda Poverty Assessment Report 2016 (PDF, 7.58 MB)