MARKETABILITY OF UGANDA’S NILE PERCH (LATES NILOTICUS) IN THE EUROPEAN UNION (EU) FISH MARKET.

BY

KIBOMBO MAHMOOD

ABSTRACT

The Fisheries sector remains the second highest foreign exchange earner for Uganda. In 2008, 24,965 tons of fish were exported which earned Uganda an estimated $124 million in export revenues. The fish products exported included fresh fish (not chilled), chilled and frozen fish, dry/smoked fish, fish maws, fish meal, fish oil, fish skins and live (ornamental) fish. Nile Perch, which forms the bulk of the exports and foreign exchange earning (up to 90% of fish products), has been found to be a perfect substitute for the traditional fish fillets (cod, hake, halibut and hoki) favoured by  the European market. Given a market opportunity for the near substitute like Nile perch, Uganda shares only 0.2% of the EU fresh fish market share which is negligible compared to other Nile perch exporting countries. Thus there is need to determine the constraints to the marketability of the Ugandan Nile perch in the EU in order to increase competitiveness and market share. Demand for fishery products in the EU are expected to increase. Fish consumption trends in the EU indicate that Nile perch is a highly preferred cheaper near substitute for the popular white flesh fish species. Results indicated that it is possible for Ugandan processors to profitably add more value to their current products by packaging, glazing, and portioning to the required retail packs for EU consumers.

The SWOT analysis indicates that the Nile perch export sector is an ideal business with many opportunities and few threats. Quality and promotion are the main tools for sustainable competition in the Nile perch export market. In order to build a sustainable competitive advantage for the Nile perch in the export market, strong collaboration in strategy design is recommended for all the three East African countries. However, in the short to medium term Uganda will most likely continue to rely on importers and middlemen for the distribution of Nile perch products in Europe.

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND

Uganda is endowed with a warm climate, ample fertile land and regular rainfall all of which provide one of the best environments for agricultural production in sub-Saharan Africa. Agriculture has for several years formed the backbone of Uganda’s economy contributing approximately 37% of the Gross Domestic Product (GDP) and 85% of national export earnings. Agricultural products contribute nearly all of Uganda's foreign exchange earnings, with coffee (of which Uganda is Africa's leading producer) contributing the largest percentage of 19% of the country's exports. Exports of non-traditional products, including hides, skins, vanilla, vegetables, fruits, cut flowers, and fish are growing, while traditional exports such as cotton, tea, and tobacco continue to be mainstays. According to the Ministry of Agriculture, Animal Industry and Fisheries (MAAIF, 2000), there are three sub-sectors; crops contributing 80%, Livestock contributing 13%, and fisheries contributing 6% to the overall agriculture industry.

Uganda is richly endowed with natural water bodies, and fisheries play a very important role as a basis for subsistence and commercial livelihood. Lake Victoria is by far the largest, and economically most significant, of the national fisheries. However, other large lakes, including George, Edward, Albert, and Kyoga, along with the River Nile and a great variety of swamps and streams, also contribute substantially to the annual national catch. The dominance of fish production from the five large lakes has had the effect of marginalizing production from other water bodies, and has resulted in little attention being paid to production data from water bodies such as swamps, rivers, streams, minor lakes and water reservoirs. Although individually small, in aggregate this production is fundamental to nutrition and livelihood needs of riparian communities, which are mainly the rural poor. Production from these waters is often underreported, if reported at all. However, the continued growth in fish exports from the large lakes has re-awakened fish production from these originally marginalized water bodies as significant and critical sources of supply of fresh fish to peri-urban areas and urban centres (MAAIF, 2000).

1.2 Position of the fisheries sector in Uganda’s economy

Fishing has always played an important economic role in the modern state of Uganda, and has assumed an even greater profile with the advent of the Lake Victoria Nile perch fishery. By some estimates, annual exports, primarily of Lake Victoria products, amount to as much as US$ 81 million. It is estimated that some 700,000 Ugandans are involved in fisheries-related employment (around 150 000 for the harvest sector as fishers, crew, and boat and gear owners; 550 000 engaged in secondary or tertiary sectoral activities relating to processing, trading and the provision of miscellaneous support services). Fish comprises the single most important source of animal protein available to the national population (Helga, 2009).

Uganda like other developing countries depends on agriculture for food and foreign exchange with coffee as the major export earner. The country has, however for the last ten years suffered from a major slump in the world coffee prices thus there is a need to widen, strengthen and diversify her export base. Recognizing the need to develop an export strategy, the GoU (Government of Uganda) in September 2001 issued a report “Government interventions to promote production, processing and marketing of selected strategic export” MFPED (2001) and attention was directed to a range of government’s interventions of which fishing was identified in addition to other six agriculture related sub-sectors such as fresh fruits and vegetables, livestock.

Fish is now one of Uganda's major non-traditional exports and its demand on international, regional and internal markets has been steadily increasing while the fisheries sector has about 17 fish processing factories following government policies that encourage the sector, including investment in fisheries research. More than 30 landing sites will be developed under an African Development Bank project while another five would be upgraded under the Implementation of Fisheries Management Plan Project (Helga, 2006).

The Ugandan fisheries industry is currently based on inland capture fisheries mainly from five major lakes: Victoria, Albert, Edward, George and Kyoga. Lake Victoria, which supplies about 50% of the catch, is the most important source, both in terms of commercial value and absolute quantity. In 1999, total catch from Ugandan waters was estimated at 223,800 metric tones (Kaelin and Cowx, 2002).

The Ugandan fisheries sector is now globalised, heavily influenced by international competition and extremely dynamic. Between 1997 and 2000, the industrial export fisheries experienced significant problems, notably in relation to its need to meet the European food quality/safety requirements (Dijkstra 2001, Kaelin and Cowx, 2002). Consequently, a temporary ban was imposed on fish exports from Uganda to the European Union (EU). Given the nature of the participants in this sector, the impact of periodic denial of access to export markets, undoubtedly had a significant negative socio-economic impact on the country. The temporary ban on fish exports to the EU led to an investment in quality assurance infrastructure in an attempt to satisfy the needs of the market. This paid off when the ban was lifted in late 2000. Since then, fish exports have continuously expanded and have sometimes surpassed coffee the major agricultural export (Dijkstra, 2001). The major commercial fish species in Uganda are Nile perch (Lates niloticus), Nile tilapia (Oreochromis niloticus) and mukene (Rastreneobola argentea), in order of importance. Nile perch, mainly exported to the EU constitutes up to 90% of foreign exchange earnings from fish products. The main importing countries in the EU are the Netherlands, Belgium, and the United Kingdom. Other export markets include Australia, USA, Egypt, Israel, Hong Kong, Singapore and Japan (Kaelin and Cowx, 2002, UIA, 2008).

The main fish products on the market include chilled and frozen products (frozen fillets/pieces) mainly for export as well as dry/smoked fish mainly produced by artisans and consumed predominantly on domestic and regional markets (UIA, 2008). 

At about 0.2% Uganda’s market share of the global fish market is very negligible. However it is still significant.  The main market for Ugandan fish exports is the EU accounting for some 73% of the value of fishery product exports in 2004. The EU market is also supplied with Nile Perch products from the other two countries sharing Lake Victoria. Tanzania is the largest supplier of the EU market among the three countries (57%), followed by Uganda (31%) and Kenya (12%). Uganda also exports fish to neighbouring countries mainly Rwanda, DRC and Kenya. About 25,000 tones of fish are also exported informally across land borders (UIA, 2009).

1.3 Problem statement.

The Fisheries sector remains the second highest foreign exchange earner for Uganda. In 2008, 24,965 tons of fish were exported which earned Uganda an estimated $124 million in export revenues. The fish products exported included fresh fish (not chilled), chilled and frozen fish, dry/smoked fish, fish maws, fish meal, fish oil, fish skins and live (ornamental) fish. Nile Perch, which forms the bulk of the exports and foreign exchange earning (up to 90% of fish products), has been found to be a perfect substitute for the traditional fish fillets (cod, hake, halibut and hoki) favoured by  the European market (UIA, 2009). Given a market opportunity for the near substitute like Nile perch, Uganda shares only 0.2% of the EU fresh fish market share which is negligible compared to other Nile perch exporting countries. Thus there is need to determine the constraints to the marketability of the Ugandan Nile perch in the EU in order to increase competitiveness and market share.

1.4 Objectives of the study

The major objective of this study was to determine the marketability of Uganda’s Nile perch (lates niloticus) in the European Union (eu) fish market.

1.4.1 Specific objectives

The specific objectives were:

1. To determine the market structure of the Nile perch.

2. To determine the marketing macro-environment and trends.

3. To determine the market positioning strategies used by the participants.

4. To determine the SWOT analysis in the Nile perch market.

1.5 Significance of the study

Availability of timely and appropriate market information is a pre-requisite of sustainable competition in a global setting. Little information about the characteristics of the export market is available to local participants in the export fish industry, students at different institutions in Uganda. It is possible that such a loophole can be used to create unnecessary overseas middlemen, resulting in lower returns to the local investors and the country as a whole.

Results from this study will be potentially useful in providing market information that can be utilised by market participants and policy-makers to improve the competitive advantage of the Ugandan fisheries sector in the foreign markets.

CHAPTER TWO

2.0 LITERATURE REVIEW

2.1 Introduction

There are over 250 species of fish in the Ugandan waters. However, the main species commercially exploited include; Letes Niloticus (Nile perch), Tilapia Spp, Oreochromis Niloticus (Nile tilapia), cat fishes, Bagrus spp, Clarias spp, Protopherus spp. Of these, only six are relatively abundant. That is, Letes spp, Clarias spp, Bagrus spp, Tilapia and Oreochromis spp. Nile perch and Tilapia account for about 55% and 32% of the total catch respectively. Domestically fish is a major source of animal protein for the population and demand for fish is projected to continue growing as the population increases (Cai et al, 2009). Fresh fish is central in the utilisation of fish as food. First, it is in itself the most important both on local and international fish markets, and second because it is not possible to obtain a safe and quality fish product unless fresh fish is used as the primary raw material. FAO understands that these are the basic concepts on which it is necessary to insist in order to provide safe fish and fishery products of improved quality and to contribute to the reduction of post harvest loses (FAO, 2000).

2.2 Fisheries in the Ugandan Economy

The fisheries sector in Uganda is one area that is being considered by the government to play a participatory role in promoting the overall development of the country’s economy. There are several reasons to make one believe that the fisheries industry is a big contributory developmental tool for the whole country. These include: - One, the enormous employment possibilities that the fisheries sector offers. Over one million people in Uganda in one way or the other derive their livelihood from the water resources of the country. This number is a good contributory factor to development if employment per se is a good measure of development. Two, currently fish and fisheries products are one of the leading foreign export earners for the country (Oketh, 2006). This is being accomplished in line with the World Bank idea of promotion of non traditional export commodities (Kaelin and Cowx, 2002). Thus since the mid nineties, the foreign exchange earning generated from the industry has increased tremendously. According to 2004 report from the Bank of Uganda concerning foreign exchange earnings, the export earnings from the fisheries industry were leading even the export earnings from the traditional export commodity, coffee. Coffee is Uganda’s major foreign exchange earner. However, despite all these benefits that are derived from the fishery, the management system today has a number of challenges and problems (UEPB, 2009).

2.3 Fish processing in Uganda

Nile Perch, which forms the bulk of the exports and foreign exchange earning (up to 90% of fish products), has been found to be a perfect substitute for the traditional fish fillets favoured by  the European market. Other products being exported are whole frozen fish, frozen gutted and  headed  fish,  frozen  fillets,  chilled  fillets  and  air-dried  fish maws. With  the  beef scare associated with mad-cow  disease,  demand  for  fish  in Europe  has  increased making market  potential  quite  high  .The Uganda  fish  and  fish  products  have  also  found  a  ready market in USA, Australia, Hong Kong, Singapore, Japan, Egypt and Israel (Kukunda, 1999). Uganda  currently  has  nine  operational  fish  processing  plants which  process  for  the  export market, with  a  further  two new  licenses  awarded  recently  and  four pending.  It  is  estimated that  fish  exports  in  2001 were  of  the  order  of  28,000  tons, with  a  value  of  approximately 78 million  US$.  This makes  up  a monthly  total  of  about  2300  tons  of  finished  goods, which  is equivalent  to about 70,000 tons  fish weight harvested annually  from  the  lake for export. A further  estimated  50%  of  harvested  fish,  often  immature  fish,  are  consumed  locally  or exported  to DRC, making  the harvest of Nile perch from the lake around 110,000 tons in 2001. This compares with a total catch of 72,000 t in 2000 (export value approximately 38 million US$) when the export ban was imposed by the European Union for much of the year. This current rate of harvest is not considered sustainable, but is being driven to some extent by the excess processing capacity that exists on a regional basis. This is especially true of plants in Tanzania and Kenya (UBOS, 2002).

2.4 Markets

The fish markets in Uganda are divided into three major categories. These include the local markets which consist basically of the domestic market, the regional market which consist of fish trade from Uganda to all the countries within Africa and the international markets consisting of fish going outside Africa. This is what is referred to normally as the export markets. The statistical data for fish export in Uganda does not normally include the value and quantities of fish exported to the regional market and the domestic consumptions. According to sources from the Fisheries Department in Uganda, the European Union is the major import market of the fish and it accounts for approximately 70% of the total exported quantity of fish from Uganda. The other international markets are Japan, Singapore, Hong Kong, Australia, Israel, United Arab Emirates and USA. These international markets only import fresh chilled or frozen products mainly filleted but some like Israel takes those that are headed and gutted. Notable among the regional markets are Egypt and South Africa for factory processed products of frozen fish. The regional market also includes DR Congo which is very prominent for salted fish, Sudan for sun dried Mukene (Rastreneobola argentea) and Kenya mainly smoke products. Rwanda also takes sizable amount of fresh tilapia from Uganda (Wilson, 2003).

2.4.1 Marketing Stages and Channels

The marketing of fish in Uganda takes place through a series of stages and a wide variety of sites. Usually the primary stage occurs at landing sites, when canoes return to the fishing grounds and discharge their catches to waiting traders, processors and consumers. In some cases, however, and particularly on Lake Victoria in recent years, fish can be sold directly on the water to those operating collection boats. It can thus be said that catches are sometimes sold as soon as they leave the nets (Ecaat, J. and Odongo, I. 1999).

2.4.2 Producer-consumer linkages

The different avenues through which fish may ultimately reach the consumer, directly or indirectly, formally or informally are summarised below.

·         Canoe to Consumer. Fish is sold directly to those residing at or near landing sites.

·         Canoe to Head load or Cyclist Trader to Consumer. Local traders buy from fishing operators at the landing sites and carry their consignments by head load or bicycle for sale to households in nearby localities.

·         Canoe to Wholesaler to Retailer to Consumer. The term “wholesaler” rarely if ever applies in its true or full sense within the context of local fish trading in Uganda, for reasons that will be spelled out later on. It is however frequently used by UFD officials and others to designate those who regularly collect consignments of fish in fairly large quantities, e.g. by pickup load, and therefore depend on either hired or personally owned motor transport.

·         Canoe to Processor to Trader. A variation of the Canoe-Wholesaler-Retailer-Consumer mode just described occurs when fish is diverted for local processing, either by smoking, sun-drying, salting, or frying. Local processing is often necessary to prolong product shelf life when catches are high and not all fish can be readily disposed off in a fresh state, and/or where landing sites or market destinations have difficult access.

·         Canoe to Primary Wholesaler to Secondary Wholesaler to Retailer to Consumer. In the larger Kampala markets a wholesaler may advance a part of his or her fresh fish consignment to another on credit at an agreed upon price. The second party, perhaps after negotiating similar arrangements with other wholesalers, then moves around and sells the fish either in smaller lots to retail traders or, if necessary, in individual pieces to consumers.

·         Canoe to Processing Plant Agent to Retailer to Consumer. It has become a routine practice of late for fish processing plants to send insulated Lorries and trucks to some of the larger landing sites on Lake Victoria. Their agents buy up catches directly from returning canoes, and keep them chilled on ice until a full load is gathered for delivery to the plant.

·         Canoe to Collection Canoe to Wholesaler/Processing Plant to Retailer to Consumer. Boat-to-boat transfer of fish is a long-established practice on Lake Albert and to some extent on Lake Edward, in the western fisheries regions. Uganda shares the waters of these two lakes with Zaire, a country that has always provided a ready market for fresh and salted fish. On Lake Victoria there is an increasing use of the collection canoe by large-scale fish traders. Collection boats buy directly from fishing operators whilst still on the water, or from more remote landing sites on offshore islands (Ecaat, J. and Odongo, I. 1999).

2.4.3 Recent changes in marketing patterns

Fish distribution and marketing in Uganda has been marked by dramatic changes in recent years, altering a pattern that had remained more or less the same from the time when commercial fisheries first developed on a significant scale during the 1920s. To a large extent these changes are related to events affecting the fisheries of Lakes Victoria and Kyoga. The fall-off of Kyoga catches can be attributed to several factors, including: increased use of illegal gear and destructive fishing practices due to a severe shortage of inputs; a gradual decline in water level over the last decade or so; deterioration of feeder roads providing access to and from the landings; and a severe disruption of fishing operations from several landing sites due to problems of civil insecurity. A recent and even more worrisome problem that seems bound to curtail the Kyoga fisheries very drastically unless countered somehow is the appearance of water hyacinth in the lake (Reynolds, 1997).

Quite severe setbacks have occurred in other fisheries besides Lake Kyoga. Lake Wamala, a shallow water body located some 70 km west of Kampala, is managed as a restricted-entry fishery. For many years it was a major source of tilapia and other fish for the city market. By the mid-1970s, however, production levels had collapsed due to overexploitation. At the same time the highly productive fisheries of Lakes Edward, George, and Albert in the west were suffering disruptions. A general breakdown in road communications and the cash economy, as well as outbreaks of civil unrest, cut them off from traditional major markets for fresh and processed fish in the central and north-western parts of the country. In particular, the Lakes Edward/George fisheries of Kichwamba Region were isolated from the vigorous market for fresh fish around Kampala and its environs (Reynolds et al, 1995). This trade depended on good roads and minimum delays en route. Fresh fish had to be collected by pick-up load from the Kichwamba landings early in the morning and rushed to be in Kampala markets by midday. The popular Luganda names by which this pick-up trade became known, mali egenya (“the money is spoiling”) and zivunda (“it is rotting”), convey the sense of urgency involved.

Also by the early 1970s, the supply of frozen Lake Edward and George fish products from TUFMAC (The Uganda Fish Marketing Corporation) and other small fish factories in the Kichwamba area had started to decline. TUFMAC's processing plant on Lake George finally ceased operations in the late 1970s, after a number of years of mismanagement and other problems (Reynolds and Mukasa 1990).

Despite the fact that the situation has now stabilised and road links to the west and elsewhere are steadily being improved, reversals in distribution and marketing patterns that were attendant upon the political upheavals and the great influx of Nile perch products, both fresh and processed, remain in effect. Very little fish from the west is now marketed eastwards. Instead it is fish from Lake Victoria that moves west, to and through Kichwamba and Fort Portal Regions, most of it destined for export to Zaire (Reynolds and Ssali 1990).

Another recent development is the rapid expansion of the Rastrineobola argentea fishery. In contrast to its early evolution within the other riparian states of Kenya and Tanzania, this fishery was much underrated and underutilised in Uganda until only a few years ago. Harvested at night using light attraction techniques and scoop and seine nets, the small pelagic mukene or dagaa, as Rastrineobola are locally called, can easily be sun dried and packed into gunny bags for long-term storage and transport. The fish command a good export market in Kenya, southern Sudan, and eastern Zaire. All of these places, and particularly Kenya, now receive considerable quantities of mukene through either formal or informal avenues. The domestic market is also becoming quite strong. The fish is very well-liked in northern Uganda and is becoming increasingly popular around the fringes of Lake Victoria, especially amongst lower-income consumers. It is also in heavy demand by the domestic animal feeds industry (Reynolds and Ssali 1990).

2.5 Trader Functions and Characteristics

In Uganda it is sometimes difficult to distinguish between the “small-scale” and “large-scale” trader. Bearing in mind that any line of distinction will be somewhat arbitrary, the “small-scale” label is here reserved for those traders who operate in and out of local markets throughout the country, whether by foot, bicycle, hired transport, or privately owned pick-up. Compared with the trading operations of industrial filleting plants or long distance hauliers, which may involve investment on the order of hundreds of thousands of dollars (that is., millions of Uganda Shillings), the local trader is not likely to be heavily capitalised. As a “small-scale” operator, his or her level of investment and operating capital would range anywhere from a few dollars up to a several thousand dollars (that is., hundreds or thousands of Uganda Shillings) (Muramira, 1999).

2.5.1 Small-scale trader functions

Small-scale traders in the sense just defined play an essential role in the distribution of fish throughout the country, supplying major concentrations of consumers in towns and cities as well as villages and homesteads scattered across rural areas. Their importance derives from the multiplicity of vital functions they perform. These may be summarised as follows.

·         Risk-taking. Many risks are involved in the fish trading business, especially for those handling fresh product in a tropical setting where ambient temperatures are high, refrigerated or insulated transport facilities are virtually nonexistent, and road conditions frequently extremely bad.

·         Credit Provision to Fishing Operators. Traders are a major source of credit for fisher folk who may not have adequate capital to develop and maintain their operations. From the industry point of view, informal credit arrangements help to keep operators supplied with productive equipment such as boats, nets, and engines, and therefore ensure a steady supply of fish for the market and the consumer. From the fishing operator's point of view, informal credit can be a mixed blessing. On the one hand, it may spell the difference between being able to continue to work or not during difficult times. On the other hand, one may be trapped into a debt situation from which it is hard to escape. Terms of repayment may be left deliberately hazy, but the sense of dependence and obligation will remain clear.

·         Processing. Bulk processing is often done by middle-agents operating at landings, offshore islands, and local markets. At market places processing very often serves as a preservation method in cases where a trader fails to dispose of all the day's supply of fresh fish.

·         Transport. This function is carried out either by fish wholesalers using personal or hired vehicles or by specialised transporters. At many distant landings, fish vehicles are the only means of transport. They thus tend to be used for general purpose haulage. Pick-ups coming to Kampala from a landing like Lwampanga on Lake Kyoga in Luwero District, for instance, may be seen carrying people, charcoal, jerry cans of milk, chickens, and goats on top of their loads of fish. Fishmongers claim that a new vehicle can work efficiently for only two years in the fresh fish business and after that it needs replacement or has to be diverted to lighter duties.

·         Wholesaling and Retailing. As already noted traders perform a variety of wholesaling or quasi-wholesaling and retailing functions.

2.5.2 Small-scale trader characteristics

Based on findings of the 1990 FISHIN market survey, it appears that the great majority of small-scale fish processors and traders operating in local markets in central and south western Uganda are men. In the 495 markets surveyed, a total of 10,035 traders were enumerated, of whom some 77% are male and 23% female. The gender proportions are the same for both “wholesale” and “retail” sectors. The proportion of women's participation is somewhat greater in the fish processing business. Of the 1181 processors enumerated, about 32% are female. Processing operations recorded include smoking, frying, sun-drying, and salting. In each case the participation of women is less than 25% except in smoking operations, where the rate is almost 48%. It is hoped that further case study work will provide more insight into the reasons for these patterns (Sabiiti, 1999).

Fish trading is rarely the sole occupation of those involved in the business. Survey data reveal that farming and shop keeping frequently supplement fish mongering and fish processing as sources of income. Such occupations as transporting, brewing, brick making. And civil service work also figure to some extent as additional means of livelihood for traders. In only 20% of the markets surveyed was it found that traders had no other source of income. Almost all of these markets are located in major urban areas, where business is active enough to warrant a full-time commitment.

Small-scale fishmongers in the districts surveyed do not seem very inclined to join together in trade-related associations or co-operative societies. Traders and processors in the 495 marketplaces surveyed belonged to a total of 43 separate organisations. It turns out however that many of these organisations are fishing societies rather than traders' groups. This mostly occurs in places that are landings as well as markets. Even if fishing society participation is included in the count, it is still the case that only 1638 or 16% of all traders enumerated were reported to have association/society membership. The gender rate of participation (number of members by sex/total traders) is 2% for women and 14% for men (Muramira, 1999).

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CHAPTER THREE

3.0 METHODOLOGY

3.1 Introduction

This chapter was mainly about making a research design, showing the main informants and data analysis of the study.

3.2 Study scope

The study was only concerned with the marketing of Lake Victoria Nile perch from Uganda to the EU market. Other upstream marketing and production activities in Uganda were only analysed to improve the understanding of the competitive advantage of Ugandan Nile perch export fishery industry in the European market.

3.3 Study Area

The study was carried out in the areas around Lake Victoria in Entebbe and Kampala. These are located in Wakiso and Kampala districts respectively. Entebbe sits on the northern shores of Lake Victoria, Africa's largest lake. Entebbe lies at 00.04N, 32.465E. It is situated in Wakiso District, approximately 37 kilometres (23 miles), southwest of Kampala, Uganda's largest city and capital.

3.4 Research design

The study mainly used primary data from authoritative data sources. In addition, questionnaires were utilised to collect data from main informants along the fish export value chain. A rapid assessment of the available information was undertaken to help fine-tune data collection methods and analysis.

3.5 Main informants

The main informants were fish processors, exporters and administrators. Nine fish processors and one senior fisheries inspector in Uganda, three Europe based Nile perch importers,  two Europe based fish processor/exporter Global fish and African, Caribbean and Pacific Group of States (ACP Group) were contacted for the study using questionnaires. The main informants who agreed to co-operate included Uganda Investment Authority, Uganda fish exporters association, fisheries department ministry of agriculture animal industry and fisheries, Uganda Export Promotions Board (UEPB), Uganda Bureau of Statistics (UBOS), Uganda Fish Processors and Exporters Association (UFPEA) and Lake Victoria fish Organisation (LVFO) in Uganda, and one European based market surveyor CBI.

3.6 Data sets

Data sets included standard products in the market, physical product in the market, the size and number of firms involved in fish marketing, value addition activities and product positioning. Data was collected on market segments, market trends, the marketing macro-environment, and the market conduct of participants.

3.7 Analysis of data

Data was coded and entered in Microsoft Excel spreadsheets. Descriptive statistics such as measures of central tendency and percentages were used to analyse the data. Trends in the market were evaluated by use of simple graphical analysis and appropriate growth models. Since a great amount of data was qualitative, appropriate qualitative methods e.g. the SWOT analysis was utilised.

3.8 Limitations of the study

• Since the respondents were not located in the same area, the cost of covering them all was high. Thus limiting the number contacted.
• Some respondents were reluctant to respond to the questions which reduced the adequacy of the information collected.
• The distance between the different respondents made it hard to collect data hence increased costs.

CHAPTER FOUR

4.0 RESULTS AND DISCUSSION

4.1 Regulatory framework governing fish exports to the EU, relevant to the Uganda Nile perch export fishery

4.1.1 Tariffs and quotas

In line with everything but the arms (EBA) initiative, there were no tariffs and quota limitations for exports from the least developed countries like Uganda to the EU. The Government of Uganda strongly supports global economic integration as it increases volume of trade as well as offers other economic opportunities. Because of our membership, Uganda’s exports qualify for preferential tariff rates in COMESA, EAC. In addition Ugandan products enter the European Union and USA markets duty and quota free under the Cotonou Agreement (ACP – EU) and the African Growth and Opportunity Act (AGOA) initiatives respectively. However, indirect tariff barriers exist in the form of subsidies under the European Common Fishery Policy. It is possible for these subsidies to negatively distort the market conditions for Nile perch in the EU.

4.1.2 Potential non tax barriers (NTB)

a) Compliance with European market access requirements

To prevent unsafe fishery products from entering the EU market, there were strict rules on the import of Nile perch fishery products from outside the European Union. Fishery products, as food products of animal origin, were subject to extensive legislation regarding food safety, traceability, animal health and presence of contaminants. Legislation applied to fresh, chilled, frozen and processed fishery products. Compliance with all health and food safety legislation was crucial for gaining market access. Without official approval and the proper export documentation, Nile perch exports to the EU are not possible.

Table:1. Showing the non tax barriers to Nile perch export to EU

BARRIER	PERCENTAGE (%)
Food safety	35
Health requirements	33
Labeling	20
Convenience and value addition	08
Price conscious consumers	04

Food safety

This accounted for 35% restriction of Nile perch to the EU. General requirements regarding the production and marketing of fishery products in the EU were subject to Council Regulation 852/2004 on the hygiene of foodstuffs and Council Regulation 853/2004 laying down specific hygiene rules for food of animal origin. The major consequence of legislation was that imports of fishery products were only allowed from those countries that were eligible to export fishery products to the EU. For Uganda to be eligible, it had to comply with a number of criteria regarding the animal health situation in the country, competence of national authorities, a control plan for contaminants, and more.

Health requirements

This accounted for 33% restriction of Nile perch export to the EU. All fishery products that are imported into the EU must meet the health and veterinary requirements. An official health certificate must therefore accompany each consignment of fishery products. Products imported into the EU will be subject to the same hygiene measures as products from member states.

Labeling of fishery products marketed in the EU

This accounted for 20% restriction of Nile perch export to the EU. As of January 2002, fishery products sold by retailers in the EU had to carry information on the package of the name of the product, its origin (catch area) and the production method (caught at sea, caught in inland waters, farmed). This information must be available at each stage of marketing of the product and must be provided by labeling, packaging or an enclosed commercial document such as the invoice. This requirement was dealt with in Commission Regulation (EC) No 2065/2001. Non-EU products marketed in the Union should be accompanied by the following information: country of origin, scientific name and commercial designation of product, mode of presentation, freshness category, size category and product weight contained in the packaging, date of classification, date of dispatch, name and address of consignor. The products to which this regulation applied were fishery and aquaculture products in Chapter 3 of the Combined Nomenclature for customs duties (HS code 03), irrespective of their origin and whether or not pre-packaged. Thus Ugandan Nile perch needed to be labeled in order to meet the required standards.

Convenience and value-added products

This accounted for 08% restriction of Nile perch export to EU. Due to time constraints, people spend less and less time on shopping and preparing meals. This trend is related to the increasing participation of women in the labour market and the increase in the number of single-person households. Therefore, consumers often shop only once a week in super or hypermarkets where they buy all their necessities at once, the so-called ‘one-stop shopping’. To respond to the demand for convenient products, supermarkets offer conveniently packed and easy to prepare fishery products such as fresh (chilled) or frozen fish fillets or ready-prepared fishery products. This way of offering Nile perch products is likely to increase consumption levels. Nile perch products are also made more convenient to fit other consumer trends. Ugandan Nile perch exporters need to adopt value-added and convenience products which are designed to:

• Expand the opportunities when fishery products can be consumed, by offering fish salads and spreads for lunch, fish snacks for eating on-the-go, and fish products for starters or party snacks (for instance tapas, hors d’oeuvres, sushi, and dim sum);

• Expand to new distribution channels by offering fishery products that can be consumed for lunch, dinner or on-the-go;

• Attract new consumers that find fish difficult to prepare or are not familiar with eating fishery products; 

• Attract high-income consumers with luxury fishery products;

• Attract low-income consumers by introducing lower-priced species;

• Attract new fish eaters by introducing species with a more neutral taste.

Price-conscious consumers

This accounted for 04% restriction of the Nile perch export to the EU. Several countries such as the Netherlands, the UK and France have price-sensitive markets where retailers keep prices low to target price-sensitive consumers and increase their market share. In this competitive environment, there is a clear need for low-priced, simple products. The success of ‘exotic’ species such as Ugandan Nile perch, tilapia is partly related to this trend. These are cheaper than the scarce and more expensive EU products. For some market segments, taste may even be of secondary importance, which explains the success of low-priced ‘double-frozen’ Alaska pollack cuts and fillets produced (but not caught) by China (sometimes misleadingly named ‘China cod’). 

b) Meeting specific industry challenges

Table:2. Showing specific industry challenges

CHALLENGE	PERCENTAGE (%)
Sustainability	65%
Logistics and packaging	35%

Sustainably produced fishery products

This challenge contributed 65% restriction of Nile perch export to the EU. European consumers increasingly express their concerns about social and environmental issues in food production. Citizens and consumer groups regularly press both governments and companies to address these issues, and some adapt their purchasing behaviour. There are several major consumer concerns with regard to the fishery products market which Ugandan producers and exporters need to take notice of:

• Over-exploitation of fishing grounds, depletion of wild-catch fish stocks and competition between fishing activities and nature conservation;

• Environmental and sanitary aspects of fish farming (e.g. use of antibiotics, contamination of freshwater, use of fish as feed);

• Social aspects in aquaculture and in capture fisheries, such as child labour (for example on Lake Victoria), gender issues and the position of local producers;

• Concern about animal welfare and biodiversity - too many small fishes, are caught as side catches.

• Organic fishery products: this is a small but growing trend especially in Germany and the UK. Currently, only farmed fish can be certified organic. Captured fish cannot easily be certified organic because the history of the product is not known. Thus Ugandan Nile perch faces a challenge of being certified organic in European market.

These consumer concerns are often channeled through major retailers, who persuade suppliers to source more sustainably produced fishery products. Several supermarket chains have started to provide information about sustainability on the fishery products they sell. For instance, retailer Albert Heijn in the Netherlands introduced a label.

A well-known certification is the Marine Stewardship Council (MSC), a seafood eco-label which recognises and rewards sustainable fishing (http://www.msc.org). The label is present on retail packages and therefore visible to the consumer. Another certification initiative for fishery products is GlobalGAP. It applies to retail suppliers only and therefore no trade mark is visible on the retail pack.  Ugandan Nile perch firms need to acquire the eco-label from MSC which is working with Ugandan competitors like Tanzania thus sidelining Ugandan products in the European market.

Logistics and packaging

This challenge contributed 35% restriction to Nile perch export to the EU. Fishery products are highly perishable and the proper handling of the products during storage and shipping is very important to avoid food safety risks. These risks are mostly associated with contamination, infestation or bacterial spoilage of the product. It is therefore important to cool or freeze fishery products as soon as possible after catching or harvest. This has proven to be difficult tasks in capture fisheries in many DCs like Uganda because cooling facilities are not always present at the place of landing. Maintaining the cold chain during collection, storage and transport is a major logistical issue. Moreover, choosing the proper packaging is necessary to protect the safety and quality of the products. The greater weight accorded to traceability in international fish marketing has made appropriate labeling more important. The Ugandan fish exporters should always discuss the preferred type of packaging with the European trading partners or organisation. Some of the exported fishery products are directly forwarded to the end-user (retailer or food service) and the importer may want to have the printing of boxes and packages done in Uganda.

Both tariff and non-tariff barriers are dynamic and there is need for Ugandan fish firms to be continuously updated on the situation if they are to be competitive exporters. Thus the importance of a strong market information system needs to be over-emphasized.

4.2 Uganda Nile perch export fishery market structure

4.2.1 Channel structure

While the complete fish chain could be construed as extending from the lake to the oven, this research concentrates solely upon human involvement in the chain (from ‘trawler to table’). The fish supply chain then can be defined as a set of interdependent agents (fishers, processors, and distributors) that work together, consciously or unconsciously, to convey a fish derived product to the eventual consumer. 

Most of the Nile perch exports from Uganda are destined to go through the marketing channel, which is depicted in Figure 1 below. The main source of Uganda’s export Nile perch is around Lake Victoria. The Ugandan channel was characterised by many fishers who sell their fish mainly to middlemen (suppliers) who then sell it on to fish processors. Sometimes the factories purchase fish directly from fishers. Prices were generally competitive and determined by the market. Suppliers usually used insulated boats and ice for transporting fish but fishers rarely used ice in their operations. The perishability of fish held by fishers was sometimes taken advantage of by suppliers to reduce their bargaining power. Fish in the hands of agents and fishers was usually in the form of whole un-gutted fish.

 

Figure 1: Major marketing channel for Ugandan Nile perch exports to Europe.

Importers, agents and processing companies outsourcing production were the most important business partners. The fish exporter (processor) must be aware of the different channels in the market so as to weigh the possibility of either transacting business directly with the end chain or through middlemen. Two types of agents could be identified in the EU fish import channel: buying agents and selling agents. The former represented the buyers, such as the food industry. The latter represented the sellers, mainly exporters. Agents are usually well informed about current market trends, prices and users. Importers buy fishery products on their own account and sell, mainly to the food industry and re-exporters. The channel structure is therefore much more complex in reality than the diagrammatic representation above (Figure. 1).

Retailers or catering services carry out the final stage of selling fishery products to consumers, accounting for a very large share of the total sales. Except for some of the bigger supermarket chains and retail multiples, retail/catering organisations hardly ever purchased directly from abroad. In the marketing of Uganda’s Nile perch to the EU the direct linkage of processors to the retail/catering outlets is represented by importers who own processing factories in Uganda like Alpha group, Igloo food industry and Unique food Ltd.

Retail chains possess a lot of market power and are responsible for setting a fair price. They rarely work on the spot market but prefer to work with the same suppliers. Exporting directly to the EU retail fish market required a lot of financial capacity to support exclusive contracts, advertising campaigns and to service special requirements. In addition, the supplier must know the detailed requirements of the local market and of individual end users. Partly for this reason, Uganda’s fish processors were likely to rely on EU importers and agents in the short to medium term. Of course the scenario can be different if the processor is a branch of the EU importer. In this regard, promotion of Nile perch exports that target retail outlets should preferably be directed to the respective dominant channels.

4.2.2 Nile perch standard products on the market and their positioning in the EU

The standard Nile perch products produced by Ugandan fish processors included chilled fillets and portions of 200g – 800g and frozen fillets of 500g – 1200g packs. Other products as shown in Table.3 were headless and head on gutted fish, gilled and gutted fish, steaks, loins, and red meat. In addition, some by-products and value added products were also produced (Table. 3). Apart from Nile perch leather, value added products do not currently have a competitive edge in Europe. This can be attributed to the bulkiness of some of them, low market confidence and tight EU food safety and quality regulations.

Table.3: Showing the Nile perch standard products on the market.

a) Chilled and frozen products
Chilled	Frozen
Skinless fillets, portions, headless gutted Nile perch, whole gutted, skinless loins	Skinless fillets; skin on, scale less, fillets; portions; headless gutted Nile perch, head on, gilled and gutted Nile perch, steaks, loins, IWP fillets, red meat,
Fillet and portion size range
200 g – 800 g	500 g – 1200 g
Main chilled and frozen products
Chilled fillets (most exported overall)	Frozen fillets (2nd most exported overall)
b) Other products (minor category c.f. to a above)
Value added products*: Nile perch leather, battered fish portions, fish burgers, fish cakes, breaded fish balls, fish sausages, Nile perch tikka kebabs By-products: roe, head and cheeks, fats, belly flaps, skins, scales, fish maws, fish bladder, fish stomachs
c) Positioning
Near cheap substitute for highly demanded cod and cod like species

N.B: Apart from Nile perch leather, which is exported to Europe, the value added products are mostly meant for the local Ugandan market and at most exported in the regional market.

However, different Nile perch products may be found in the EU retail markets because of added value along the channel. As far as positioning is concerned, data from fish processors indicated a poorly developed market information function in Uganda. All the main informants interviewed were unable to clearly articulate the positioning of Nile perch in the EU market. This was partly attributed to their being too far from the end product consumers. Available literature indicated that, Nile perch fillets along with hake fillets are positioned as cheaper near substitutes to the traditionally demanded cod and cod like North Sea species. Promotion of Nile perch as a unique fish was therefore vital in improving market penetration. The steps being taken by UFPEA in the form of participation in export expositions were very commendable.

4.2.3 Revenue flows along the Nile perch market channels

The total average production cost per kg of Nile perch fillets produced was estimated at 4,096 Uganda shillings (about US $ 1.95). The average FOB price of Nile perch fillets per kg using the information from the main informants was estimated at US $ 3.2. Therefore the current profit margin for Ugandan Nile perch processors could be estimated at US $ 1.05/kg.

Supermarket.

Taking individual quick frozen (IQF) fillets as an example of ready to cook products, an attempt was made to evaluate the viability of such a business undertaking. The cost of added value for the ready to cook packs in terms of physical transformation and place utility, based on labour intensive operations, was estimated as follows (Table 4):

Table 4:  Additional production costs for ready to cook IQF packs in Uganda (Survey data, interview with main informants).

Description of item operation	Cost/kg (US$)
Labour for portioning = 100 kg/hr	0.01
Labour for production of glazed IQF packs = 200kg/hr	0.05
Labour for packaging finished products = 50 kg/hr	0.02
Packaging material	0.3
Average freight cost (ship or chartered plane when in great need of supplies)	0.8
Over head cost = US $ 0.25/kg	0.25
Total cost  (rounded to two decimal)	1.43

N.B: Direct labour cost in Uganda is estimated at US $ 1/hr, in the above computations it is assumed that one person is working.

Currently, Uganda Nile perch processors are paid up to US $ 3.5/kg on average, the difference of about $ 2.9 /kg (6.4 – 3.5) at a minimum, pays for value addition activities of European based importers. As indicated in Table 4, there is a net margin of US $ 1.47/kg (2.9-1.43) after catering for physical transformation and freight costs. This margin can be assumed to cater for the other value addition activities including promotion, distribution, risk bearing and other marketing activities down stream. For instance in Europe, marketing firms like SIF can charge a commission of 2.2% of the total revenue for selling clients fishery products under a commission sales contract. The main value addition activities on the chain, which increase the form utility, are packaging, glazing, and portioning to 800g packs. Ugandan Nile perch processors can profitably undertake these activities using the available cheap labour. Additional cost savings are likely to be experienced under reduced handling in terms of packing and un-packing and lowered losses in yield reduction that can be experienced in the EU portioning factory. As already discussed, the market structure seems not to favour direct contact of Ugandan Nile perch processors with retail outlets. In the short to medium term importers or agents can still continue undertaking the other value addition activities in the chain, provided a win-win situation is reached by the two parties.

4.2.4 Competition in the Uganda Nile perch export fishery

The intensity of competition in the relevant export market segment was ranked as strong to very strong (Table 5). This can be attributed to the ease with which new people could easily go into production of fish fillets (Nile perch and near substitutes) and the low bargaining power of Ugandan fish processor in the export market. Relative to the typical EU fish importers’ investment resources, Ugandan fish processors were definitely much smaller. Moreover, the market for Ugandan fish raw material was relatively competitive. Generally, the results agree with Porter’s (1990) five forces model advocated for the structure analysis of industries.

Table 5:  Processor level competition in the Ugandan Nile perch export fishery (Survey data, interview with main informants).

a) Main competing countries and relative strength and weakness
Main competing countries and rank in bracket	Comparative competitive advantages	Comparative weakness
Tanzania (1)	Shares more of Lake  Victoria, transport costs of frozen products are low	Quality of raw materials poor
Kenya (2nd)	Share  section of Lake  Victoria, transport  costs  of  frozen products are low  More market experience	Quality of raw materials poor  Less raw materials
b) Overall relative competitive rank of Uganda		Stronger than Kenya
c) Main competing tools in the export market
Tool		Rank
Reliable supply of quality product		1st
Promotion		2nd
d) Intensity of competition in the export market		very Strong/high

According to the processors, the main competitors were the two other East African countries: Tanzania followed by Kenya. The main competitive advantage that these countries had over Uganda were more raw materials (in the case of Tanzania), more experience (Kenya) and lower transport costs for frozen products for the two countries relative to Uganda. The relatively poor quality of raw materials was pointed out as a weakness for both countries while less raw materials was pointed out for Kenya. The low quality evaluation by the Ugandan processors for the two other East African countries’ raw materials was probably based on EU regulations. This may also account for the main informants overall ranking of Uganda’s competitive capacity as being relatively stronger than Kenya than Tanzania.  

 It was worth noting that Nile perch caught from Tanzanian fishing grounds had shown to have better organoleptic characteristics compared to that of Uganda or Kenya. Trends in the growth of Nile perch processing factories around Lake Victoria seemed to be more governed by the availability of raw materials and investment policies rather than the transport cost of frozen products. Under this criterion, Tanzania came out as the most important competitor in the regional Nile perch export fishery industry. The issue, however, was whether this was currently strategically important in the Uganda Nile perch export market. 

 Uganda being landlocked has increased transport costs relative to the other East African countries in as far as transportation of frozen products by sea. However, it is worth noting that the location of the fisheries is similar. Apart from Kenya it is open to question whether the transport costs from Lake Victoria to Mombasa are significantly less than those of the Ugandan counterparts. However, Kenya has a very low supply of raw materials. Also the Nile perch processors were not significant players in setting the export price. Provided a good margin exists for the processors in all the three countries, location may not be a strategically significant factor in the regional Nile perch export market competition under the current scenario. At most it can be an important factor in the location of Nile perch fish processing plants, which apparently doesn’t show this leaning. The processors rightly pointed out that reliable supply of quality products was the main basis of sustainable competition in the European market. All three East African countries faced this problem and Uganda was in fact better off although this was a short-term advantage. Therefore, one can argue that there was no serious strategic competitive advantage in the Nile perch export market between the three East African countries. Promotion, the second competitive tool indicated by the informants was pointed out as one of the main factors responsible for increasing seafood sales in any liberal market. In the global market Nile perch competed with all the cheaper near substitutes of the highly demanded white flesh fish species. These included fish such as hake and tilapia that are highly promoted and produced in relatively stable large marketable quantities. In contrast, supply of marketable Nile perch was irregular and promotion was also relatively poor. The confluence of these two drawbacks highly reduced the competitive advantage of Nile perch in the export market, particularly in the more lucrative higher value ready to cook/eat products market.

4.3 Important trends in the market

Consumer trends and behaviour

EU had average consumption of 22kg per person. However, consumption is increasing. Household consumption is growing more rapidly in terms of value than of volume. Household consumption of fishery products was 116 thousand tones. Imports from developing countries were growing faster than imports from other countries.  The most important factors that consumers mentioned when purchasing food were quality, freshness and taste. Price was less important but, in practice, did influence decision making, especially when prices were considered high. For this reason, sales of frozen fish were increasing.  Despite the lack in supply, prices of Nile perch were going down. This was mainly caused by the strong competition of pangasius fillets in the market. Prices were relatively low at EUR 6.20/kg, which compared with EUR 7.00/kg one year ago.

Trends in lifestyles

Fresh fish and shell fish were more popular than other fishery products but the long-term trend showed a decline. The increase of prices of these products, especially for sea fish such as cod, made consumers look for cheaper alternatives. These alternatives are freshwater fish such as Nile perch and frozen fish.

 Trends in innovation

Convenience in fishery products was an important trend. Europeans increasingly bought fish fillets, which already comprise 60% of all fresh fish sold. Sales of fish preparations (fish-based ready meals, fish salads etc.) were among the best performing fishery products in retail sales. Prepared and preserved fish were also growing in popularity, especially smoked fish. Thus Ugandan processors needed to adapt to this so they could conquer a larger market share.

4.4 Main markets for the Ugandan Nile perch in Europe

The main four EU countries importing Ugandan Nile perch are the Netherlands, Belgium, the United Kingdom and Germany in order of importance (Table.6). Nile perch trade in Europe was mainly in the hands of Dutch companies for two principle reasons: 1) the long  tradition of the Dutch in  fish trade and 2) the well organised logistic and the strategic geographical location of the Netherlands, which makes it easy for traders to dispatch fish more quickly to specific markets in need. 

 On the other hand the main Nile perch consuming countries in Europe were Spain, Italy, France, Germany, Belgium, Portugal and Holland in order of importance. Apart from Holland, which had a very low market share in terms of fish consumption in Europe, the rest of the major Nile perch consuming countries also had the highest share of value of total fish consumption in Europe. This trend could be an indicator of Nile perch suitability as a substitute for the highly demanded white fish varieties in Europe. 

Table.6 Showing the Nile perch importing countries

Importing Country	Percentage (%)
Netherlands	19.4
Belgium	16.3
United kingdom	12.8
Germany	11.6
Others	39.9

Fig.2 Showing Nile perch importing countries

 

 

Table.7 Showing Nile perch consuming countries

Consuming country	Percentage (%)
Spain	15.4
France	14.2
Italy	13.9
Germany	12.7
Others	43.8

 

Fig.3 Showing Nile perch consuming countries

4.5 Market segmentation

The market for fishery products from developing countries can be broadly divided in two:

1) Northwest European countries: cold water species mainly herring, mackerel, Pollack, cod, flatfish, and trout are popular.

2) Mediterranean countries: cephalopods, molluscs and hake were popular.

 Species like tuna, salmon, sardines and shrimps were popular throughout Europe. Since Nile perch is a near substitute of cod and hake it is possible for it to be promoted across both broad sub-divisions.

 Specific sub-divisions within the two broad categories include the following.

1) The market for the catering industry and restaurant sector: Middle class and top restaurants were increasingly looking for special and exotic fish and shellfish species. There was a growing niche market for fresh high value species (popular ones mentioned above) imported by airfreight.

2) The market for substitutes of European species: Products under this category must be able to effectively substitute the traditionally demanded North Sea species. Substitute products stand a high chance of market success in Europe. Qualifying products under this segment included double skinned Nile perch fillets, skin on hake fillets and substitutes for Dover sole and sole. These substitute products didn’t directly compete with traditionally demanded Northern European species. Rather they were used to fill the supply gap in the market. Therefore, it can be deduced that Nile perch directly competed with the specific substitute products in the segment. 

 3) The market for ethnic minority groups: There were over 15 million non EU residents that preferred certain species of fresh water fish especially tilapia, Nile perch and other fish.

 4) The re-export market:  This segment consisted of the importing firms, which re-export fishery products to other European countries. The current marketing channel of Uganda Nile perch exports in Europe can also be categorised under this segment.

 5) The market for non-human consumption: Apart from human consumption, fishery products could be used for industrial purposes, e.g.  Pharmaceutical sector, or animal feed. The industrial sector was potentially a very high value addition market segment. 

 4.6 General demand trends in farmed fish

Farmed fish versus wild fish: In general, consumers were not very discriminating between farmed and wild fish but retail multiples were becoming interested in farmed fish because of its perceived advantages in supply chain management and consistent quality. Moreover, the globe trend increasingly indicated aquaculture as much more positioned to increase the future supply of fishery products as opposed to wild sources.

Organic fish: Demand for organic food was rising and was expected to reach 2.5% of the total value of food consumed in Europe by 2010. Organic fish Fishery products that were produced according to organic standards represented only a very small share of the market. In general, organic labeling was used for food that had been farmed without artificial inputs and with the use of environmentally sound farming techniques. Organic labeling was available for aquaculture products only. There were no general EU standards yet for organic fish farming. However, several EU countries including the largest markets for organic products, UK and Germany, had developed standards. FAO had developed guidelines for setting standards for sustainable fisheries and eco-labeling, which were used by other organisations to develop certification schemes.

4.7 The challenge of the future

The future of this important trade was by no means clear. It was threatened by environmental pressures on the Lake, over fishing and problems of quality and access to the European market.

Several environmental problems could adversely affect the fishery in the future. Development around the lake shore had caused increased pollution through agricultural, sewage and industrial effluents. Deforestation of the lake margins (to provide domestic cooking fuel) increases topsoil erosion and silting. In recent years there has been an explosion of water hyacinth, cutting off sunlight and oxygen to the water below and causing difficulties for shipping and fishing. Algal blooms occur, resulting in local de-oxygenation and fish kills. Environmental pressures on the Lake are tremendous and so far all efforts to manage both their causes and effects have proved fruitless.

There was also strong evidence that Nile perch is being over-fished. The average size of landed fish has declined from over 50kg in 1980 to less than 15kg in 2010. Catch rates were also reported to be in decline. Fisheries scientists believed that the Nile perch fishery was being sustained only by cannibalism of the young fish. Despite the attempts of several aid donors, there was still no systematic approach to the management of the fishery, which by definition will require the active support and collaboration of the three nations. There was a critical lack of information about the fishery (for example. numbers of boats, fishing gear, landings and utilisation of the catch) which would be the first step in establishing a management system. A crash in the fishery was frequently predicted, and would undoubtedly have severe consequences for the estimated 1 million people who depend on Nile perch for their livelihood.

Even if the fishery can be managed effectively, there were some problems to be overcome on the marketing side. Although the processors have been successful in identifying and exploiting markets on several continents, there are now some doubts about the quality and safety of the product. Despite the considerable investment in the processing sector to upgrade factories, there is still an unscrupulous element to the trade (for example processing in unregistered and unhygienic factories - some as far away as coastal cities).

4.8 SWOT analysis of the Ugandan Nile perch export fishery industry

The profile of the SWOT analysis for the Ugandan Nile perch export fishery (Table 8) indicated an ideal business with many opportunities and few threats. Important threats, based on their seriousness and probability of occurrence, included dwindling catches and non-tariff barriers in the form of EU regulations/legislation. The most strategically important opportunities, based on attractiveness and the probability of the Nile perch export fishery’s industry ability in tapping them, are EU reductions of catching efforts, low coffee prices and the rebirth of the East African community.

Table.8 Showing the SWOT analysis of Ugandan Nile perch export to the EU

A) Opportunities 1) EU countries are reducing their catching efforts. 2) Existence of East African community and other regional organisations. 3) The Everything but Arms (EBA). 4) Information technology. 5) Unification of all the rules in the EU. 6) Continued low prices for coffee	B) Threats 1) Dwindling catches of Nile Perch. 2) The EU regulatory environment. 3) Competition from cheaper near substitutes, especially tilapia.
C) Strength 1) Low pollution of Lake Victoria. 2) Commercial Nile perch only in Lake Victoria. 3) Low cost of land and labour. 4) “Harmonized” country status. 5) Nile perch is a near perfect substitute to cod and cod like species. 6) Relatively low flight costs in Uganda. 7) Lower landed fish prices in Uganda.	D) Weakness 1) No developed aquaculture system. 2) Open access nature of fisheries. 3) Low market information access. 4) Small fish processing firms. 5) Uganda is a land locked country. 6) Inadequate funding and regional commitment.

4.8.1 Opportunities

1) EU countries are reducing their catching efforts especially of codfish to be more environmentally friendly. At the same time, demand for fishery products in the EU market is increasing. Prices and margins for fishery products are, therefore, expected to increase, improving developing countries’ prospects of accessing the EU market. This gives Nile perch, which is a near substitute to the cod and cod like species, a market entry point.

2) The existence of the East African community and other regional organisations is important in the context of the Ugandan Nile perch fishery. The rebirth of the East African Community opens new opportunities for regional co-ordination of strategic policies and development plans. For instance, the three East African Countries may better ensure the sustainability of Lake Victoria fishery resources through collective management. Other regional organisations/projects e.g. the Lake Victoria Fisheries Organisation and fishery institutions complement the East African Community.

3) The Everything but Arms (EBA) Initiative, for the least developed countries’ exports in the EU. Under this initiative, all products except arms shall enjoy duty free and quota free Access to the EU. This reduces expected tariff barriers for value addition Nile perch fish exports to the EU.

4) The development of information technology worldwide and in Uganda in particular. More than half of the fish processors that are currently exporting possess a website. There is also a general website for the Uganda Fish Processors and Exporters Association. This reduces transaction costs, with resulting improvement in marketing efficiency and increased returns to both the fish processors and importers. Firms in Europe prefer e-commerce sales as these imply bigger and quicker profits.

5) Developments towards the unifications of all the rules and regulations across the whole of Europe, concerning locally produced or imported products. This also reduces transaction costs, tariff and non-tariff barriers in some EU countries, consequently improving marketing efficiency.

6) Continued low prices for coffee, the main export crop for Uganda against the expected increase in price and demand for fishery products in the world. While low coffee prices are bad for Uganda’s economy in general, they provide a socio-marketing opportunity for the fisheries sector in Uganda. The fisheries sector should utilise this development to market itself to the effective international, regional and national audience.

7) New, tropical species like Nile perch are becoming more popular and can replace more scarcely available traditional species and supplement the supply of fish.

8) Demand for value-added products from DCs will increase, as they are often competitively priced compared to products from the EU.

4.8.2 Threats

1) Dwindling catches of Nile Perch, sometimes under un-explained conditions but partly attributed to deteriorating environmental conditions, over-fishing and the dwindling feeds of Nile perch. In this connection, the current expansion of Nile perch exports, which was based on quantity rather than increased unit value, was not sustainable.

2) Potential changes in the regulatory environment: tightening on safe residue levels and more environmental concerns. The seriousness of this threat was best measured by the three successive bans of Ugandan fish exports to the EU that occurred between 1997 and 2000. As technology improves further in the EU and high-income consumers’ food demand motivations shift towards food quality, safety and environmental concerns, the EU regulatory framework is adjusting accordingly. Moreover, the EU currently has a poor image of Africa, Caribbean and Pacific (ACP) countries on quality and reliability of supply. Therefore ACP countries, like Uganda, have to do more than enough to convince the EU of the quality and reliable supply of their products. Partly because of these export channel expectations, Ugandan fish processors may have an up hill task in dealing directly with retail multiples.

3) Competition from cheaper near substitutes, especially tilapia, those are capable of being produced at a high rate from a highly developed farming system and which have a strong promotion strategy. Although, Nile perch is a superior substitute to highly demanded European fish species relative to tilapia, it is poorly promoted in comparison to tilapia. For instance, in Italy Nile perch penetrated the market as a type of tilapia, which happened to be a more valuable species there. As it has already been emphasised, promotion is one of the main tools used in creating competitive advantage in the fish export market.

4) Competition among suppliers from DCs will increase as production of fishery products in those countries is growing fast.

5) Growing demand for food safety and traceability will impose more rules and regulations on exporters from DCs. 

6) Growing demand for sustainably produced fishery products can raise trade barriers for small and medium exporters who lack resources to have their products certified.

4.8.3 Weaknesses

1) Virtually no developed Nile perch aquaculture system. Given the finite supply of wild Nile perch, availability of raw materials can be highly constrained. There is also a growing preference to aquaculture products by retail outlets because of their expected stable supply and quality. However, this weakness could be exploited by tailoring the Ugandan aquaculture development programme to market trends in the EU. In other words, the development should be done in a strategic orientation to the market, taking into consideration the current strengths of the fisheries.

2) Open access nature of fisheries in Uganda, reduces efficient management. There are too many small fishers who apart from over exploiting the resources, are also hard to orient towards EU export based fishery production systems. Fishing methods are often poor and fishers are hardly aware of the requirements of the export market chain. This can bring future problems in attempts at product positioning.

3) Ugandan fishery industry participants have low market information access in the export channel and Nile perch is poorly promoted as a fish from Uganda. This reduces bargaining power and the ability to design appropriate market access strategies.

4) Ugandan fish processing firms are small (lack capital) and have no capacity to strategically intervene in the whole value chain to improve competitive advantage. The global competitive advantage of firms is increasingly a function of how well a firm can manage the entire value chain system.

5) Uganda is a land locked country. There is a comparatively higher transport costs for frozen products and other bulky fishery products. There is need to develop high value products that can be transported by air. The possible product range developed by processors may thus be affected.

6) Inadequate funding and regional commitment for the implementation of sustainable fisheries management plans/regulations. This can highly affect up stream strategic intervention in the fishery sector to create a sustainable competitive advantage.

4.8.4 Strength

1) Lake Victoria is not yet significantly polluted, especially waters on the Uganda side. If further controls of pollution are stepped up, this could help the industry to be compliant with future tight EU environmental legislation.

2) The Lake Victoria system is the only environment where there is wild Nile perch in commercial quantities. No other countries apart from the East African Countries are supplying any type of Nile perch to the European market. This can be used to pull international funding for development projects aimed at preservation of this fish as an endangered species. Such an undertaking, if well integrated within a strategic marketing framework, can lead to increased long run returns to market participants and the economy as a whole.

3) Low cost of land and labour in Uganda relative to other East African countries. This reduces both the initial capital investment and operating costs.

4) The EU granted Uganda "harmonized" country status in October 2000. In a way, this gives a quality label to Ugandan fishery products throughout the EU.

5) Nile perch is a near perfect substitute to cod and cod like species, which constitute the popular white products in the EU. It has a competitive advantage in product characteristics over tilapia as a substitute for white fishes’ popularly in Europe.

6) Relatively low flight costs in Uganda compared to competing sources of substitute products from Southeast Asia (personal communication from EU based exporter). High value chilled products, which are among the most demanded fishery products in Europe, can exploit this advantage.

7) Lower landed fish prices in Uganda relative to other countries in the East African region. This, in addition to cheap labour, further reduces the operating costs per unit product.

CHAPTER FIVE

5.0 CONCLUSIONS AND RECOMMENDATIONS

5.1 Conclusions

While hygiene and quality regulations are meant to protect health, they effectively function as technical barriers to trade for investment capital starved developing countries, Uganda in particular.

Fish in the hands of Ugandan agents and fishers is usually in the form of whole un-gutted fish. Ugandan agents (Nile perch raw material suppliers) usually use ice and insulated boats for transportation but fishers hardly use ice in their fishing operations. The main Nile perch products produced by Ugandan fish processors for export include chilled fillets and portions of 200 g – 800 g and frozen fillets of 500 g – 1200 g packs.

The total average cost for the whole bundle of products per kg is about US $ 2.8/kg while the estimated average profit before tax per kg for the same product bundle is US $ 1.5/kg. Ugandan Nile perch processors are paid up to US $ 3.5/kg on average product bundle while the EU agents/importers receive up to US $ 6.4/kg. The difference of about $ 2.9/kg pays for the value addition activities of European based importers including stock keeping, promotion and distribution costs. The main value addition activities on the chain, which increase the form utility, are packaging, glazing, and portioning to the required retail packs. A net margin of US $ 1.5 can be realised after catering for the physical transformation and freight costs for the ready to cook retail packs in the EU market.

Market power in the fishery export channel is as follows:

EU retailers>EU importers/argents>Ugandan fish processors>Ugandan middlemen>Ugandan fishers. Market channel members in the EU are expected to be fewer and more powerful (concentration). Supermarket and hypermarket retailing is increasingly becoming more popular in the EU at the expense of the traditional fishmonger.

Main Nile perch importing countries in Europe are not necessarily main consumers indicating some attractive returns from adding utilities along the marketing channel. Results indicate that it is possible for Ugandan processors to add some more value to their current products.

According to Ugandan processors, Tanzania is the most important competitor in the regional Nile perch export fishery industry. However, further analysis suggests that there is no serious strategic competitive advantage in the Nile perch export market between the three East African countries. Quality followed by promotion is the main tool for sustainable competition in the Nile perch export market pointed out by the main informants.

Ugandan fish processors have limited information about the macro-market environment and promotion of Nile perch in the export market is relatively poor.

In the short to medium term, macro environment analysis indicates that Uganda may not have a competitive advantage in the supply of products directly to supermarket chains. In this connection and considering the current weakness of the Ugandan Nile perch export fishery industry, it is likely that Uganda will in the short to medium term still rely on importers and middlemen for distribution of Nile perch products in Europe.

The market for fishery products from developing countries can be broadly divided in two:

1) Northwest European countries: Cold water species mainly herring, mackerel, Pollack, cod, flatfish and trout are preferred.

2) Mediterranean countries: cephalopods, molluscs and hake are popular.

The main EU fishery products consuming countries according to the market share of sales value were: Spain, France, Italy, Germany and UK, in descending order. Fresh chilled fishery products followed by frozen ones were the most preferred fishery products in all the main fish consuming countries in the EU. Growth rates in fishery sales experienced in European countries were spurred mainly by increased unit value and physical quantities were relatively stable. Demand for fishery products in the EU is expected to grow against the reduction of catching efforts on cod, one of the most preferred white flesh fish species.

Nile perch products in Europe are positioned as a near cheaper substitute for popular white fish like cod and hake. Consumption trends for Nile perch products generally follow typical consumption trends for popular white flesh fish products in the EU indicating that Nile perch is a highly preferred cheaper near substitute for those popular species. Trends further indicate that Nile perch products can be successfully promoted in all the major EU fish consuming countries. Creation of a competitive scope for Nile perch exports is more possible in the chilled and frozen Nile perch fillets, the same products being marketed now.

Fish demand trends in the EU indicate that consumers are sensitive to convenience, food safety, health and the environment and are ready to pay a price premium for high fish quality. Retail multiples’ expectations about farmed fish are relatively high because of its perceived advantages on supply chain management and stable quality.

The recent demand trend for Nile perch has been declining due to Global financial crisis where many consumers lost the sources of income thus reduced their expenditures by resorting to cheaper fish species than the Nile perch.

The profile of the SWOT analysis indicates an ideal business with many opportunities and few threats. Important threats are dwindling such as Nile perch catches and non-tariff barriers in the form of EU regulations/legislation. Strategically important opportunities are the EU reduction of catching efforts, low international coffee prices and the rebirth of the East African community.

Despite the inherent weakness and external threats, the Nile perch and the fisheries sector in Uganda has got a lot of potential, which can be strategically exploited to contribute towards improvement of balance of payments and poverty alleviation. Markets exist locally, regionally and it fits in with food demand trends of high-income developed countries and can be exported as a high value product. Technologies of production can fit in with the means of low-income people and thus has great potential for participation of the poor. Above all, it is an excellent protein source whose increased production, if followed by consumption at least by those participating, can help reduce the high level of malnutrition prevalent in the country. Thus it is strategically positioned in the local, the regional and the international economy.

Against this background it is tempting to suggest that the Ugandan government carry out a focused strategic intervention in this promising sector. In the next section recommendations that can be used as a guide in strategy formulation are given.

5.2 Recommendations

In the short to medium term, the growth in the supply of Nile perch fish to the market is limited by natural factors. Given such a scenario the desire to increase value must over ride quantity, since an increase in quantity may not easily be sustained under the current production arrangement and in the near future. Even if more Nile perch were to be produced in the future it would still benefit from this product differentiation strategy. Moreover, market trends in the EU have clearly indicated that a future increase in fishery product sales is dependent more on per unit value than quantity. However, whether to diversify into those high value products is the decision of individual investors based on the market resources at his/her disposal

More research on costs and benefits should be carried out to determine the specific value addition options for Nile perch. Value addition may not necessarily be a tangible product transformation. It can, for example, be achieved by positioning all Nile perch exports from Uganda with a specific quality label, e.g. eco-products. Products sold under a quality label are reportedly commanding a price premium up to 10% at the retail level in Europe. A competitive scope that can be identified across all Nile perch products from Uganda/Lake Victoria should be preferably created. However, the sustainability of such a strategy may require a joint effort from all the East African states.

Aquaculture must be given serious consideration as part of creating a competitive advantage in the export of fisheries products from Uganda. It can reduce some constraints on the upstream supply chain of raw materials. However, the development of this sector should not be haphazard. Rather, it should be tailored in the overall framework of creating competitive advantage for Ugandan fisheries exports.

The market information system should be strengthened. It is desirable that the secretariat of the Uganda Fish Processors and exporters Association (UFPEA) make this its number one priority. In this connection a promotion programme within an identified strategic competitive scope needs to be drawn up for Ugandan Nile perch exports to the EU. Currently, the generic positioning of Nile perch products in the EU export market is more by default than by a clear charted out strategy.

The profile of the Ugandan Nile perch export fishery SWOT analysis and the marketing macro-environment suggests the desirability of strong collaboration between the three East African countries in order to achieve a sustainable competitive advantage in the Nile perch export market. Tackling the major threat, i.e. decreasing Nile perch stocks, with no doubt require the cooperation of the three East African states. Even the threats of increasing competition from aquaculture products and tightening legislation can be tackled more efficiently by increased cooperation in targeted fisheries management. In reality, these three countries are not serious strategic competitors in the European Nile perch export market, rather they are better off being considered synergistic. The trends in Nile perch exports from the three countries are similar. Major external environmental threats, like dwindling Nile perch exports and regulations in the EU market (ban on fish exports) have affected the three countries similarly. They even face many similar opportunities and constraints.

A joint approach by seemingly competing market players has already been pursued in research and development of safety systems. Moreover, the three countries already have more cooperation than competition in the utilisation of Lake Victoria fisheries. In addition, firms like ANOVA and Alpha group of companies (Uganda Fish Packers and Masese Fish Factory), which process and import fish from the region, have linkages in all three countries.

By the nature of the fisheries, the effects of important threats like over-exploitation and pollution of Lake Victoria fisheries have a high probability of affecting all three East African countries regardless of location. The effects of fish poisoning provide a good example. When Uganda was imposed on a ban on fish exports to the EU, it was very difficult for Tanzania and Kenya to convince the EU about the safety of their fishery products. The lesson is that no East African country can celebrate the inability of another member country’s’ failure to meet EU regulations. In a way, the net result is low market confidence for all fishery products originating from Lake Victoria fisheries.

Market structure conditions indicate that Uganda processors, apart from those that are branches of powerful importers in Europe, may not easily access the high price retail markets directly. Market channel trends and SWOT analysis indicate that it is advisable for Uganda in the short to medium term to concentrate on using agents or importers to market its fishery products in the EU. Uganda should, however, try to strengthen its bargaining power with these companies and differentiate its products based on its strengths to create a niche market. In Europe marketing firms like SIF can charge a commission of 2.2% of the total revenue for selling clients’ fishery products under a commission sales contract. In order to achieve such favourable bargaining terms a well-developed market information system must be developed by the industry.

A clear and effective coordinating desk/team dealing with strategic marketing of Uganda fisheries exports should be established under a mandated organisation. Also, there is need to develop a socio-marketing strategy for the fisheries sector, targeting national, regional and international stakeholders. Socio-science professionals have a great ability to package information in a form that appeals to decision and policy makers at various audience levels. Applied economists with a general background in natural/applied fishery or related sciences can be especially useful in improving the co-ordination between the natural/applied fishery scientists and general socio scientists.