By Nelson Mandela Muhoozi
With agriculture employing over 70 percent of Ugandans, there is a need to close potential performance gaps in agribusinesses through training and equipping farmers with the right knowledge.
According to John Michael Ikara, an opinion leader, most farmers conceive a range of ideas in their minds about different crops and livestock they want to invest in for improving income and livelihood in their households.
However, he notes that the problem majority of farmers face arises from a lack of professional knowledge relating to investment decision-making regarding the most suitable farm enterprises to invest in for economic gain.
Accordingly, the World Bank’s recent report, ‘Closing the Potential-Performance Divide in Ugandan Agriculture’, shows that there is booming domestic and regional demand for higher-value foods arising from income growth, urbanization, and dietary shifts offering massive opportunities for Ugandan farmers.
However, the report also notes that the agriculture sector continues to be hindered from realizing its full potential.
The report combines poor agricultural practices, low technological adoption, insecurity over land ownership, poor access to extension services, low-quality inputs, and lack of credit as some of the most outstanding hindrances to profitable commercial agriculture.
According to Ikara, farmers need to apply the principle of comparative advantage as a tool to aid in enterprise selection if one is to succeed in the farming business.
He defines comparative advantage to simply mean that each unit of resources should be used where it will earn the greatest returns.
Ikara notes that when faced with different investment options, it is prudent to choose an enterprise that takes relatively fewer resources for production to be able to break even and increase the profit margin of the enterprise.
Another important factor that one should bear in mind when selecting the enterprise according to Ikara, is the availability of the market of what you plan to produce.
“It is not economically viable to engage in an enterprise whose output you will not have a ready market for since lack of demand results in losses,” he notes.
Ikara advises that it is important for a farmer to do a little bit of market research so that the business is demand-driven.
“One also needs to carry out a study of the potential risks which could have adverse effects on the success of alternative investment options and choose one with less and manageable risks”, he says, adding that things like poor soils, climate patterns, pests, and disease infestations could inform decision making while selecting the enterprise.
Ikara advises that a farmer needs to know in advance how long it will take for the enterprise to recover the working capital invested in it before it starts generating profits.
The shorter the payback period for an enterprise, Ikara says the better it is for a farmer.
According to Ikara, it is important to note that the right decision-making results in the realising of the intended farm objectives.