Natural Ingredients
The Natural Ingredients for Cosmetics and Pharmaceuticals (NICP) Sector Assessment is undertaken within the framework of the NICP Export Development Programme and the BioTrade Uganda Programme. The NICP Export Development Programme (EDP) is out to promote the trade in natural ingredients in Uganda for improved earnings, generation of employment opportunities, and to ensure sustainable utilization of the resource base. The BioTrade Programme encompasses the NICP EDP, and promotes the trade and investment in biological resources in Uganda for improved livelihoods, export diversification, employment generation, etc.

Global trade in natural ingredients has increased dramatically in the past ten years with trade in herbal medicines for example is estimated at € 10 billion annually and is growing in excess of 10% per year (CBI Market Surveys [2003]). These developments on the global front are an opportunity that Uganda could harness based on the rich biodiversity and the ongoing interest by the private, public and civil society as witnessed in the diverse ongoing initiatives.

The natural ingredients sector is one of the least known and yet most active enterprises as reported in the National Pre-assessment Study 2003 by UEPB and UNCTAD. A further assessment is made of the sector at two levels, sector level and enterprise level, to highlight the key actors and issues influencing the trade in natural ingredients in Uganda.

Sector Overview
A multiplicity of actors is active in the sector including the public and private sector, development partners, and NGOs (community based, local and international). A number of initiatives are on going that directly support or compliment the trade in natural ingredients. Government and Development partners are involved in research and development, development financing, laboratory services, conservation and the enterprise support through programme and project approaches. It is however observed that the players in the sector act in oblivion of the existence of the others, and therefore no networks or coordination mechanisms are registered in the sector.

In regard to current policy frameworks, none explicitly supports the development of the natural ingredients but rather the sector is accommodated within the general development frameworks such as the Plan for Modernisation of Agriculture (PMA) and Poverty Eradication Action Plan (PEAP) policy that emphasize commercialisation of agriculture and the sustainable use of natural resources for poverty alleviation.

The production of natural ingredients is mainly by small producers across the country and wild collections also constitute a significant supply for the buyers. Commonly produced are Aloe (vera and ferox), Shea nut, Papain, Citronella, Lemon grass, Garlic, Prunus Africana, Warburgia, Pyrethrum, and Neem. The products are supplied in raw form with minimal vae luaddition (drying). Out grower schemes are also a common practice for production where the buyer mobilises the small producers and buys off their supplies. Wild collections emanate from Protected Areas regulated by the Government. Enforcement of regulation is however very weak as cases of unsustainable harvesting and the depletion of the resource base are still reported. Products such as Shea butter are sourced from the communal lands that constitute private and public land ownership.

Processing is undertaken at two different levels, by small producers using rudimentary technologies (galvanised grinders, locally fabricated distillers, mortar grinders, etc) for powders and crude essential oils, and by large companies using modern technologies for extraction and distillation processes. No standards exist for the processing of natural ingredients in Uganda and the large companies tend to work along the buyers’ specifications. It is interesting to note at this level that even the large companies producing extracts and essential oils still produce crude products – not refined to the buyers’ specific requirements. It is therefore common to find companies contacting out the refining process to factories in Europe to complete the processing process.

In regard to trade in natural ingredients, no data is available in the country’s statistical database (domestic and export). Companies have however exported raw materials, ingredients and finished products to the regional and a few international markets. Countries cited in the regional market are Kenya, Tanzania, South Africa, Rwanda, etc.

The local market for ingredients and finished good is very vibrant as demonstrated by the number of shops, kiosks, open markets, etc selling the products. A few industries produce herbal medicines and household and cosmetic products, but most of these use imported ingredients for the reason that the local suppliers did not meet their specifications.

Among the key challenges cited as prohibitive to the development of the NICP sector is: The invisibility of the sector to policy makers and the public; Absence of an institutional coordination framework; Lack of national standards for the production and processing of extracts and essential oils for the local and international market; and Public research agencies’ continued focus on scientific as opposed to applied research relevant to the business sector.

Enterprise Level
The majority of companies active in the sector are micro and small in nature, with small volumes, semi processed products and tend to supply the local and the regional markets. The second category of companies are the medium sized companies, these have out grower producer schemes, with in house or collaborative arrangements for research and development, producing for export and with direct linkages to buyers on the international market.

Both categories of companies however are faced with similar issues and challenges that are worth mentioning as listed here below:
Financing: The companies can not find appropriate funding structures to support infrastructural, technological and production related costs required for the efficient and sustainable production of natural ingredients. Banks consider the cultivation of natural ingredients as an agricultural activity and therefore prone to high levels of risk. High borrowing costs are the norm and therefore the existing financial institutions are not attractive to entrepreneurs. Most of the companies have either used family savings, received grants from development organisations such as GEF and ADF, or under joint ventures with international corporations.
Technology: Limited information on modern technologies is cited and even when available, the technologies are very expensive. Technology gaps exist right from cultivation, processing to packaging levels of the product chain.
Research and Development (R&D): R & D is very expensive for the companies to undertake on their own. Collaboration arrangements have been initiated between the companies and research agencies, but this is some times expensive (if private agencies), while for public agencies, their priorities in most cases do not tally with the needs of the companies.
Standards: No local standards exist for the production and processing of natural ingredients. The companies are therefore faced with high operational costs attributed to efforts to comply to international standards or the buyer specifications. This ranges from certification, documentation to laboratory services, which services are limited and very expensive in Uganda.

By and large, the companies are faced with limited support from the public sector in regard to legislation, finances, standardisation, research, etc, elements that have to be streamlined at the macro level for their effective participation in the development of the sector.

Overall Recommendations

1. An institutional coordinating framework to integrate trade and environment related issues is necessary
2. Research and technology development work be tailored to the needs of the business sector.
3. Review the existing legislative framework for access to plant materials in light of the increasing trade demands
4. Develop national standards for raw material production and processing for natural ingredients
5. Equip and strengthen the existing laboratory infrastructure and manpower in the key BSOs (NCRL, UNBS, NDA) for the chemical analysis of natural ingredients
6. Design strategies for sector promotion for investment in industrial equipment for the processing of natural ingredients
7. Identify and facilitate linkages between enterprises and BSOs in areas of business financing, research, technology development, enterprise capacity development, etc
8. Enhance production and productivity through among others, group production practices, improved agronomic practices and value addition initiatives such as organic certification
9. Promote Out-Grower production schemes for increased supplies, quality enhancement and specialisation.
10. Develop enterprise level capacity through training in the formulation of marketing and promotion strategies, business planning, technical capacities, efficient production technologies, etc

Wildlife Trade
Trade in fauna – commonly refered to as wildlife trade - was initiated as a pilot initiative in 2000 by the Uganda Wildlife Authority, the Government regulatory body for wildlife activities. Companies are licensed for selected products and these collect the initial stock (based on predefined quotas) and using the collected species, breed for the export market. The initiative was primarily to promote conservation, but the activities of the companies have demonstrated other social and economic benefits resulting from the initiative.

The sector assessment undertaken by the programme revealed challenges to the development of the trade i.e high mortality rates, limited breeding skills, poor transportation and handling, lengthy licensing and inspection procedures – that have influenced the trade activity. Other external factors in the market place i.e fluctuating prices, limited skills in costing of products, etc have frustrated exporters, but of critical concern to the programme is the supply related issues such as capture and handling techniques, breeding and multiplication, resource monitoring, resource assessments and distribution, etc.

Through a well designed strategy with input from the companies and the regulating authorities, the programme shall address the above issues, enhance interaction and information sharing among actors, facilitate access to relevant information and also assist the companies to improve their business operations. All this shall be undertaken in close collaboration with UWA – the regulating authority and Makerere University among the national agencies, then CITES secretariat shall also be crucial to providing support and guidance to the development of the sector.
Wildife Trade Sector assessment and proposed strategy 2005
Wildlife Trade Strategy 2005

Biodiversity based tourism (Eco-tourism)
Tourism, just like most export sectors, is increasing being influenced by environment consciousness, with visitors seeking for more serene destinations characterized with environment and health benefits. Conventional tourism is a ‘thing’ of the past and Governments are struggling to integrate sustainability in tourism projects in order to meet up to the requirements of the diversity of tourists seeking for new and ‘fresh’ destinations.

Uganda’s tourism is primarily nature based and thereby offering an opportunity to explore the prospects in order to increase tourism, alleviate poverty while ensuring the sustainable utilization of the resource base. This is the premise for the Uganda Biotrade Programme intervention to promote nature based tourism or Eco-tourism as is mostly refereed.

A sector assessment made revealed limited understanding of the concept of ‘eco-tourism’ and its added benefits almost at all levels. This is compounded with limited Government support to the sector even with demonstrated private sector interest and organization as evidenced with the Uganda Tourism Association – the apex body of tourism associations.

The strategy earmarks the private sector and the communities as the drivers for implementation, while Government shall be expected to meet all its planned activities such as grading of hotels, to facilitate the development of the sector.

Carbon Trade
Trade in carbon is a relatively new activity in biodiversity based trade and has attracted the participation of public and private sector, including development partners in a bid to alleviate poverty among the rural based communities in Uganda.

A preliminary assessment of the sector reveals limited understanding of the concept and the need for further support to supplier communities and companies, to improve supplies and market their product efficiently.

The bio-sequestration and Clean Development Mechanism (CDM) constitute some of the enterprise initiatives identified in Uganda, with support from selected donors including the World Bank.

more information about value chains