Affordable irrigation systems
Affordable irrigation systems
Business Model Description
Provide low cost solar pump-based irrigation systems for smallholder farmers through pay-as-you-go or lease-to-own model, including capacity building for farmers.
Expected Impact
Enhance agricultural supply chain with reliable supply of produce contributing to improved food security and higher farmer incomes.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Uganda: Western
- Uganda: Central
- Uganda: Teso
- Uganda: Karamoja
- Uganda: Lango
Sector Classification
Food and Beverage
Development need
70% of Ugandans are employed in agriculture (IX), and the sector constitutes approximately a quarter of gross domestic product (GDP) and a large proportion of exports (III). The agriculture sector is marred by low levels of productivity and output, mainly caused by poor agricultural practices as well as the impacts of climate change.(VII)
Policy priority
The government supports the development of the agriculture sector, emphasising agro-industrialisation in the Third National Development Plan 2020/21 – 2024/25.(IV) The Vision 2040 recognises agriculture as one of the key pillars for the country's development and acknowledges the need for innovation and integration of the sector.(X)
Investment opportunities introduction
Approximately 80% of Uganda's land is arable, however only 35% is currently being cultivated. Agricultural development is predicted to contribute to domestic wealth creation and increased employment.(IV)
Key bottlenecks introduction
The Agriculture Sector Strategic Plan 2015/16 - 2019/20 provides a detailed analysis of opportunities and challenges in agriculture, emphasising agro-processing, innovation, improvement of skills and establishment of market linkages, which will help transform the sector towards industrialisation and higher value adding.(IV)
Agricultural Products
Pipeline Opportunity
Affordable irrigation systems
Provide low cost solar pump-based irrigation systems for smallholder farmers through pay-as-you-go or lease-to-own model, including capacity building for farmers.
Business Case
Market Size and Environment
15% of Uganda's surface area is covered by fresh water resources, providing great irrigation potential.
In 2017, Uganda’s ratio of cultivated area under irrigation to the irrigation potential was only 0.5%.(18) Between 2017 and 2018, the percentage of agricultural households using irrigation grew from 0.4% to 2.2%.(17)
Uganda has one the highest irrigation potential rates in the world, with over 15% of the surface area covered by fresh water resources.(19)
In the 2018 agricultural year, total crop area was 8,164,230 ha (including maize, rice, sorghum, millet, soya beans, groundnuts, potatoes, cassava, beans, cow peas, banana and coffee).(16) However, in 2010 alone, drought accounted for 38% and 36% of production losses for beans and maize respectively.(22)
Indicative Return
> 25%
A small-scale irrigation project can achieve an internal rate of return (IRR) equal to 17% - 32%.(26) Regional examples from Kenya achieve approximately 30% IRR for small-scale irrigation constructions.(27)
Others sources, such as the International Fund for Agricultural Development (IFAD), predict higher IRRs of up to 46% for investments in irrigation systems in Uganda generally.(40)
Investment Timeframe
Medium Term (5–10 years)
The median payback period is 9.5 years, based on 8 projects focusing on solar-powered irrigation pump projects in developing countries.(41)
During interviews in Kenya, stakeholders mentioned investment timeframes of 7 -10 years for small-scale farming irrigation.(42)
According to an investor from Rwanda, it is possible to generate revenue even after 4 years, depending on the size of the investment and the type of crops to be irrigated.(43)
Market Risks & Scale Obstacles
Market - Volatile
Capital - CapEx Intensive
Capital - access to finance
Impact Case
Sustainable Development Need
Between 2013 and 2018, Uganda's food balance self-sufficiency and import dependency ratios were 95.4% and 7.2% respectively. Domestic food production was not high enough to meet internal needs.(3)
According to the Uganda Bureau of Statistics, the prevalence of undernourishment increased from 27.1% (2013) to 43.0% (2018).(4)
With less than 3% of agricultural cropland under irrigation, subsistence farmers in Uganda depend on seasonal precipitation for crop production.(8)
Gender & Marginalisation
Women suffer particularly from dependency on imported food stuffs, given the high costs.
Children are most affected by undernourishment, at least in part caused by limited agricultural productivity.
With a high share of rain-fed cultivation, all the plantains, cassava, sorghum and more than 90% of the maize produced in the country are not irrigated and hence vulnerable to climatic changes.(9)
Expected Development Outcome
Improved food security for the entire nation and nutrition at household level; higher levels of protection of biodiversity and the entire ecosystem
Increased agricultural value chain development; increased income of farmers and agricultural growers, new market opportunities and economies of scale
Development of agricultural supply chain, reduced price volatility, reduced agriculture vulnerabilities and reliance on rain
Gender & Marginalisation
Greater level of predictability to care for families all year around, especially benefitting women
Primary SDGs addressed
2.1.1 Prevalence of undernourishment
2.3.1 Volume of production per labour unit by classes of farming/pastoral/forestry enterprise size
6.4.1 Change in water-use efficiency over time
6.5.1 Degree of integrated water resources management
15.3.1 Proportion of land that is degraded over total land area
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Indirectly impacted stakeholders
People
Planet
Public sector
Outcome Risks
Aquifers, river systems and downstream groundwater depletion may be under risk due to increased water extraction as a consequence of irrigation activities.(11)
Waterlogging and salinization of soils (12)
Increased incidence of water-borne and water-related diseases (malaria, bilharzia) (13)
Risk of a need for resettlement or changes in the lifestyle of local population (14)
Impact Classification
What
May increase the level of agricultural resilience and contribute to food security, as well as improve yields, increase cultivation and productivity, improve revenues and reduce risks.
Risk
Potential negative environmental and social impacts need to be tackled for the project to be safely deployed. Better access to finance may be necessary to facilitate rollout of technology.
Impact Thesis
Enhance agricultural supply chain with reliable supply of produce contributing to improved food security and higher farmer incomes.
Enabling Environment
Policy Environment
Third National Development Plan (NDPIII) 2020/21-2024/25: This plan emphasizes the significance of water provision for production, like irrigation schemes and valley dams for productivity and economic growth.(20)
Uganda National Climate Change Policy 2015: This policy encourages irrigation systems that use water sustainably.(24)
National Irrigation Policy 2017: The government will implement suitable public-private partnership mechanisms to develop irrigation, by facilitating financing by the private sector and by investing public funds.(22)
Agriculture Sector Strategic Plan 2015/16-2019/20: This plan acknowledges investments in irrigation infrastructure (starting with Eastern Uganda) are a means to increased agricultural production and higher exports.
National Adaptation Plan for the Agricultural Sector 2018: This plan acknowledges that with only about 0.1% of production coming from irrigation, Uganda`s agricultural production is particularly vulnerable to climate variability and change.(26)
Financial Environment
Fiscal incentives: Supply of irrigation works, sprinklers and ready to use drip lines: value added tax exemption if goods are imported under the VAT Act(38); all taxes exemption if goods are imported by persons engaged in agriculture.(39)
Regulatory Environment
National Water Act 1997: This Act allows for the use of water resources for purposes other than domestic use (including irrigation).(27)
Water Resources Regulations 1998: These regulations provide an application template for a surface water permit for irrigation purposes.(28)
National Environment Regulations 1999: These regulations require every industry or establishment to install at its premises, antipollution equipment to treat effluent and chemical discharge, and sets standards for discharge of effluent and wastewater.(29)
National Environment Act 2019: This Act lists projects for which environmental and social impact assessment are mandatory. These include large-scale irrigation of more than 20 ha. For irrigation of between 5 ha and 20 ha, project briefs must be submitted to the relevant authority.(30)
The Ministry of Agriculture, Animal Industry and Fisheries formulates and implements national policies, plans, strategies, regulations and standards and enforces laws, regulations and standards along the value chain of crops, livestock and fisheries.(31)
Marketplace Participants
Private Sector
OPEC Fund for International Development (OFID), Weis Engineering Ltd, Akvo International Ltd, Sprinktech Ltd, Davis & Shirtliff Group, Water Power Engineering Services Ltd
Government
Ministry of Agriculture, Animal Industry and Fisheries; Ministry of Water and Environment; National Agricultural Research Organization (NARO); The National Agricultural Advisory Services (NAADS); National Environment Management Authority (NEMA)
Multilaterals
World Bank (WB), European Investment Bank (EIB), KfW, Islamic Development Bank (IsDB), Food and Agriculture Organization of the United Nations (FAO), World Agroforestry Centre (ICRAF)
Non-Profit
German Corporation for International Cooperation (GIZ), Japan International Cooperation Agency (JICA), Agence Française de Développement (AFD)
Target Locations
Uganda: Western
Uganda: Central
Uganda: Teso
Uganda: Karamoja
Uganda: Lango
References
- (I) Sachs, J., Schmidt-Traub, G., Kroll, C., Lafortune, G., Fuller, G., Woelm, F. (2020). The Sustainable Development Goals and COVID-19. Sustainable Development Report 2020. Cambridge: Cambridge University Press. (II) United Nations Development Programme (2019). Briefing note for countries on the 2019 Statistical Update: Uganda. (II) Ministry of Agriculture, Animal Industry and Fisheries. Agricultural sector potential in Uganda. https://www.agriculture.go.ug/agricultural-sector-potential/ (IV) National Planning Authority. National Development Plan III (NDPIII) 2020/21 – 2024/25. (V) Fowler, M. and Rauschendorfer, J. (2019). Agroindustrialisation in Uganda. https://www.theigc.org/wp-content/uploads/2019/11/Fowler-and-Rauschendorfer-2019-working-paper.pdf (VI) Rakotoarisoa, M.A., Iafrate, M. and Paschali, M. (2011). Why Has Africa Become a Net Food Importer? http://www.fao.org/fileadmin/templates/est/PUBLICATIONS/Books/AFRICA_STUDY_BOOK_REVISED_low_res.pdf (VII) Government of Uganda. Uganda Green Growth Development Strategy (UGGDS) 2017/18 – 2030/31. (VIII) United Nations Development Programme (2019). Inequalities in Human Development in the 21st Century. Briefing note for countries on the 2019 Human Development Report. Uganda. (IX) World Bank (2018). Making Farming More Productive and Profitable for Ugandan Farmers.https://www.worldbank.org/en/country/uganda/publication/making-farming-more-productive-and-profitable-for-ugandan-farmers (X) Government of Uganda. Uganda Vision 2040. https://consultations.worldbank.org/sites/default/files/materials/consultation-template/materials/vision20204011.pdf
- (1) World Bank (2020). Population, Total - Uganda. https://data.worldbank.org/indicator/SP.POP.TOTL?locations=UG
- (2) World Bank (2020). Uganda Overview. https://www.worldbank.org/en/country/uganda/overview
- (3), (4) Uganda Bureau of Statistics (2020). Uganda Food Balance Sheets Report 2013-2018. https://www.ubos.org/wp-content/uploads/publications/10_2020Uganda_Food_Balance_Sheets_Report_2013-2018_Final_08Oct2020-1.pdf
- (5) World Bank (2020). Uganda Overview. https://www.worldbank.org/en/country/uganda/overview
- (6) Jones, M.R., Kondylis, F., Loeser, J.A. and Magruder, J. (2019). Factor Market Failures and the Adoption of Irrigation in Rwanda. http://documents1.worldbank.org/curated/en/496531576687282363/pdf/Factor-Market-Failures-and-the-Adoption-of-Irrigation-in-Rwanda.pdf
- (7), (8), (9) Sridharan, V., Ramos, E. and Zepeda, E. (2019). The Impact Of Climate Change On Crop Production In Uganda—An Integrated Systems Assessment With Water And Energy Implications. MDPI, Water. https://www.mdpi.com/2073-4441/11/9/1805
- (10) Development and Cooperation (D+C) (2017). Droughts In Uganda Deepen Amidst Food Shortage And Famine. https://www.dandc.eu/en/article/droughts-uganda-deepen-amidst-food-shortage-and-famine#:~:text=Several%20parts%20of%20Uganda%20are%20experiencing%20severe%20droughts.&text=The%20most%20hit%20regions%20are,which%20is%20Uganda's%20economical%20backbone
- (11) National Geographic Society (2020). Environmental Impacts of Agricultural Modifications. https://www.nationalgeographic.org/article/environmental-impacts-agricultural-modifications/
- (12), (13), (14) Food and Agriculture Organization of the United Nations (1997). Irrigation Potential In Africa: A Basin Approach. Rome: FAO Land and Water Development Division. http://www.fao.org/3/W4347E/w4347e00.htm#Contents
- (16) Uganda Bureau of Statistics (2020). Explore Statistics – Uganda Bureau Of Statistics. Crop Area (Ha) And Production(MT) _AAS 2018 Agricultural Year. https://www.ubos.org/explore-statistics/2/
- (17) Uganda Bureau of Statistics (2018). Annual Agricultural Survey 2018. https://www.ubos.org/wp-content/uploads/publications/06_2020AAS_2018_Report_Final_050620.pdf
- (18), (19), (22), (23) Ministry of Agriculture, Animal Industry and Fisheries; Ministry of Water and Environment (2017). National Irrigation Policy. Agricultural Transformation Through Irrigation Development. https://www.mwe.go.ug/sites/default/files/library/Uganda%20National%20Irrigation%20Policy.pdf
- (20) National Planning Authority (2020). Third National Development Plan (NDPIII) 2020/21-2024/25. http://www.npa.go.ug/wp-content/uploads/2020/08/NDPIII-Finale_Compressed.pdf
- (21) Ministry of Agriculture, Animal Industry and Fisheries (2018). National Seed Policy. https://www.agriculture.go.ug/wp-content/uploads/2019/05/Ministry-of-Agriculture-Animal-Industry-and-Fisheries-National-Seed-Policy.pdf
- (24) Ministry of Water and Environment (2015). Uganda National Climate Change Policy. https://www.mwe.go.ug/sites/default/files/library/National%20Climate%20Change%20Policy%20April%202015%20final.pdf
- (25) Ministry of Agriculture, Animal Industry and Fisheries (2016). Agriculture Sector Strategic Plan 2015/16-2019/20. https://www.agriculture.go.ug/wp-content/uploads/2019/05/Agriculture-Sector-Strategic-Plan-ASSP.pdf
- (26) Ministry of Agriculture, Animal Industry and Fisheries (2018). National Adaptation Plan For The Agricultural Sector. https://www.agriculture.go.ug/wp-content/uploads/2019/09/National-Adaptation-Plan-for-the-Agriculture-Sector-1.pdf
- (27) Republic of Uganda (1997). National Water Act (Cap. 152.). https://www.mwe.go.ug/sites/default/files/library/Uganda%20Water%20Act.pdf
- (28) Republic of Uganda (1998). Water Resources Regulations 1998. http://extwprlegs1.fao.org/docs/pdf/uga14414.pdf
- (29) Republic of Uganda (1999). National Environment (Standards For Discharge Of Effluent Into Water Or On Land) Regulations. http://extwprlegs1.fao.org/docs/pdf/uga40868.pdf
- (30), (33) Republic of Uganda (2019). National Environment Management Act. https://nema.go.ug/sites/all/themes/nema/docs/National%20Environment%20Act,%202019%20(1).pdf
- (31) Ministry Of Agriculture, Animal Industry And Fisheries (2020). The Ministry http://www.agriculture.go.ug/the-ministry/#Mandate&Functions
- (32) Ministry Of Water And Environment (2020). About The Ministry. https://www.mwe.go.ug/mwe/about-ministry
- (34), (35), (36), (37) Republic of Uganda (2019). National Environment Management Act. https://nema.go.ug/sites/all/themes/nema/docs/National%20Environment%20Act,%202019%20(1).pdf
- (38), (39) Uganda Revenue Authority (2019). A Guide On Tax Incentives/Exemptions Available To The Uganda Investors. https://www.ebiz.go.ug/wp-content/uploads/2020/03/TAX_INCENTIVES_GUIDE_FOR_INVESTORS_IN_UGANDA_October_2019.pdf
- (40) International Fund for Agricultural Development (IFAD) (2015). Agricultural Risk Assessment Study - Uganda. https://p4arm.org/app/uploads/2018/04/uganda_risk-assessment-study_full-report.pdf
- (41) Hartung, H. and Pluschke, L. (2018). The benefits and risks of solar-powered irrigation - a global overview. FAO.http://www.fao.org/3/i9047en/I9047EN.pdf
- (42) UNDP/PwC stakeholder interviews in Kenya, 2020.
- (43) UNDP/PwC stakeholder interviews in Rwanda, 2020.
- (44) Uganda Bureau of Statistics (2020). The Annual Agriculture Survey 2018. Statistical Release. https://www.ubos.org/wp-content/uploads/publications/Annual%20Agricultural%20Survey%202018%20Statistical%20Release%20May%202020.pdf
- (45) Agribusiness Initiative Trust Uganda Ltd (2018). Irrigation Investment And Market Analysis Study. Final Report (Background Paper). https://www.abi.co.ug/wp-content/uploads/2020/06/Irrigation-Investment-and-Market-Analysis-Study-MAIN-REPORT-FINAL-July-18-2018.pdf