Kenya, Uganda economies wilt as drought cuts coffee, tea crops

"This is a very bad year for me, because the drought failed my coffee crop,'' said Wagweku, 84. "At most, I expect to reap only a quarter of the crop I always harvest.''

Drought swept across East Africa this year, withering coffee, tea and food crops and hurting the economies of Kenya, Uganda and Tanzania, where agriculture is an $8,75-billion industry. About 8-million people in the region need food aid because of the drought, which began in 2005, said Shukri Ahmed, an analyst at the United Nations Food and Agriculture Organization.

"It is one of the worst droughts that have been experienced in the region,'' Ahmed said. "It is one of the worst in terms of the number of people and livestock affected.''

Declining production and incomes may destabilize rural economies, said Robert Bunyi, Africa economist at Johannesburg-based Standard Bank Group Ltd. For instance, farmers may save money by keeping their children home from school, resulting in a long-term reduction of productivity and employment, he said.

Economists are scaling back growth forecasts because of the drought. Uganda's gross domestic product probably grew 5,3% in the year ended June 30, less than the 6,2% previously forecast, the Finance Ministry said. The International Monetary Fund in April said drought would cut Tanzanian growth to 5,8% this year from the 7,2% forecast in June 2005.

The more immediate problem, one that strikes visitors to the region, is the search for water by people and livestock, said the Rome-based Food and Agriculture Organization's Ahmed, who traveled to Kenya in March.

"The other thing that hits you immediately is the carcasses of animals that litter the landscape,'' he said.

Agriculture is the linchpin of the economies in the region, accounting for three-quarters of employment, according to the FAO. Most are small-scale farmers, whose lives are being disrupted by the drought.

"Our incomes will be severely hit,'' said Joseph Njau, a coffee farmer in the northern Tanzanian town of Moshi.

"Flowering came in March and was poor, which will affect production next season.''

Agriculture accounts for 17% of the $13,8-billion Kenyan economy, 44 percent of Tanzania's $9,9-billion GDP and 33% of Uganda's $6,2-billion production, according to the latest FAO numbers available. Per-capita GDP is $434 in Kenya, $337 in Tanzania and $288 in Uganda -- all less than the sub- Saharan African average of $576, according to the International Monetary Fund.

The lack of rain for irrigation led Kenya, the world's biggest black-tea exporter, to cut output forecasts by a fifth.

That pushed up the average price at the world's biggest tea auction in the Kenyan port of Mombasa, where Unilever Plc's Lipton is the No. 1 buyer. Prices averaged 38% higher this year at $2,01 a kilogram.

Uganda, Africa's biggest producer of Robusta coffee, lowered its crop estimate by 8%. Tanzania, the continent's sixth-biggest coffee producer, reduced its forecast by 30%.

Robusta prices have risen to $1,30 a kilogram in the growing season that began in October, from 89 cents in the previous season, said David Kiwanuka, manager of quality, regulatory and information services at the Uganda Coffee Development Authority.

Uganda, which produced 2,7-million bags of Robusta last year, accounts for about 8% of global output.

Manufacturing is being hurt as well. The production of goods such as cleaning and personal-care products is being curbed as falling water levels cut hydropower supplies.

"The use of a diesel generator has drastically increased my operational costs,'' said Patrick Chore, general manger of Kampala-based Tarpo Industries Uganda, which makes tents and tarpaulins.

The impact of the power shortages on manufacturing may be significant, said Standard Bank's Bunyi.

"Production costs could rise 100% because of power cuts,'' he said. "In Uganda, at the moment you have power today and none tomorrow.''

Much will depend on whether the March to June rains were sufficient to avert widespread hydropower shortages, said Standard Chartered Bank's London-based Africa economist, Razia Khan. Although rainfall in the three countries was slightly above average through May, according to data from the Climate Prediction Center, it's too early to say whether that has added enough water to reservoirs to reduce power outages.

Wagweku isn't optimistic. He plans to provide for his wife and three grandchildren by selling parcels of land inherited from his father.

"I always depend on coffee for my simple basic needs,'' he said. ``But the situation will be hard this year.'