NTUNGAMO – President Yoweri Museveni continues to push for the coffee deal signed between government and Uganda Vinci Coffee Company Limited [UNCCL], despite the project receiving strong criticism from both the public and parliamentarians on the ground that it gives the company exclusive rights to buy coffee in the country.
While launching a coffee industrial hub and coffee cooperative farmers expo in Kabuhungu village, Rwashamire, Kajara County in Ntungamo district days ago, President Museveni warned he would deal with politicians interfering with the coffee deal and development of the country.
Museveni said this time Uganda has good infrastructure and raw materials to take off with value addition.
“We delayed to start because of wars, roads, electricity, and also we never had focused entrepreneurs to look at such developments, a reason why we were pleading with foreign investors….Now we are blessed…we have our own children to start up such factories,” Museveni said
Museveni said Uganda would soon earn US$ 50 from a kilo of roasted coffee, adding that currently, farmers earn less than two dollars from a kilo. With roasted coffee, he said a farmer would be able to earn between US$10-12 from just a kilo of coffee.
He said that for Ugandan coffee to penetrate the external market there should be a good rapport with foreign investors to penetrate markets in America, England, and China.
“We shall improve the value of coffee because they [foreigners] are the ones who consume a lot of coffee and remember we are competing with others in the external market,” he said.
Instead of blocking the Vinci coffee deal, Museveni urged legislators to bring out their ideas to harmonise the deal awarded on February 10, 2022, which he said would help to build an independent, integrated and self-sustaining national economy.
“If there is something you don’t understand come and we discuss it together quietly rather than making a lot of noise. Nobody is going to get me away from something which is going to benefit Uganda unless you want danger,” Museveni said.
Nelson Tugume, CEO Inspire Africa thanked the president for bringing in investors that will add value to the coffee industry.
“We have bigger companies that come to Uganda to determine the price of our coffee. And how can we work to distance ourselves from the foreign market, which determines the price of our coffee here? I think we can only do that through value addition,” said Tugume.
Odrek Rwabwogo, Presidential advisory committee on exports and industry development advised coffee farmers and entrepreneurs in Uganda to export big amounts of roasted coffee and adhere to quality standards.
“I am very confident that if we have these mini-factories in the rural area it will change the entire mindset of the country and that is how all the other developed countries started. If you go to china the people who supply Africa with equipment are the small SMEs producing in rural towns,” Rwabwogo said.
Rwabwogo also defended the Vinci coffee deal, saying the project to produce soluble coffee comes with incentives like jobs and technology transfer.
Recap
In May last year, Parliament directed government to terminate the coffee agreement it recently signed with UVCCL, saying it gives exclusive rights to the company to buy Uganda’s coffee, leaving out local enterprises that include cooperatives.
This followed a report by Parliamentary Committee on Trade, Tourism and Industry that recommended cancellation of the agreement in public interest.
The Committee on Trade, Tourism and Industry chaired by Mbarara City South MP, Mwine Mpaka described the agreement as illegal further noting that, “officials who committed government to such illegalities should be penalised as a deterrent mechanism to stop similar occurrences in future.”
“The Government is directed to terminate this agreement and report to Parliament, within 6 months from the date of adoption of this report. Upon termination, the Government should regularize its relationship with Uganda Vinci Coffee Company Limited through proper due diligence, due process and proper stakeholder consultation before any further business can proceed. Thus initiating fresh negotiations,” Mpaka said in May while presenting the report in the House.
According to the report, UVCCL monopoly is a threat to the already existing 47 licensed processors of coffee with the possibilities of causing unemployment, loss of tax and in the worst case scenario, shut down of operations.
The Committee noted that whereas government spent colossal sums of money to grade, fence, and backfill the land allocated to a tune of Shs 7 billion and had relocated the power lines to the proposed factory site, UVCCL had not by then commenced nor undertaken any activity as envisaged in the agreement.
“Whereas g overnment spent colossal sums of money to grade, fence, backfill the land allocated tune of Shs 7bln and had relocated the power lines over the proposed factory site, UVCCL had not commenced nor undertaken any activity as envisaged in the agreement. The only structure on sight was an askari house made of iron sheets,” said Mpaka.
According to Mpaka, the committee observed that clause 4.2 of the agreement created a monopoly in favour of one UVCCL to the purchase of superior quality coffee beans from Uganda by restricting gov’t from registering any contract or acknowledging any arrangement for the export of coffee beans.
“This means that no export of super quality coffee beans shall be allowed by government until the quantity required by UVCCL is attained. Further still, a monopoly is created in favour of UVCCL since it controls the prices it pays for the coffee beans supplied to it,” he noted.
The committee also found that the grant of the tax waiver to UVCCL under the Income Tax Act was irregular and illegal since the provision of the law under which the waiver was granted did not apply to UVCCL at the time of grant.
After finding the massive tax waiver, the committee later interacted with the ministry of finance, Attorney General and Solicitor General who opined that all the tax incentives granted to UVCCL are provided for under various tax laws and are therefore lawful.
However, other stakeholders, including the Uganda Law Society opined that the incentives are irregular and illegal since they contravene various laws applicable in Uganda.
Mpaka also disclosed that even the signing of the agreement is questionable since UVCCL did not sign.
“The failure to sign the agreement by UVCCL brings into doubt the legality of the agreement since a party to the agreement did not append a signature. It is a known legal principle that a person who does not append a signature on a document is not bound by it. This seems to have been deliberate attempt to frustrate any possibility of terminating the agreement by either party,” he disclosed.
He further noted that the livelihoods of farmers and all persons engaged in the coffee value chain are likely to be affected due to the fact that the coffee requirements of the agreement represent approximately 15 percent of the total coffee production and 100 percent of the premium coffee beans.
The Committee concluded that Attorney General Kiryowa Kiwanuka failed to carry out an appropriate legal due diligence in the exercise of his statutory functions under article 119 [4] [b] of the Constitution to draw, peruse through and approve the agreement.
Nandala Nathana Mafabi the Budadiri West County MP and Chairman of Bugisu Cooperative Union which trades in Arabica coffee, noted that coffee is the leading foreign exchange earner and giving monopoly to a foreign company means sending all the forex benefits to that country.
“Such agreements are very dangerous. If you were given a license in 2014 and up to now you have not constructed a coffee factory, then you do not know what coffee is. Tomorrow, we shall deliver 600 packets of roasted coffee to confirm that if you empower locals, they have capacity,” said Mafabi.
While responding to the report, Muwanga Kivumbi the Shadow Minister of Finance expressed his dissatisfaction about the investors that are allowed in the country.
“We need to define who an investor is in this country. Somebody comes here with nothing, we give you land, water, tax holidays, free electricity, contingency liability to go and borrow. Is Uganda the investor
Parliament in May last year adopted the Trade Committee report on the coffee deal with all the amendments proposed by the MPs.
Meanwhile, Prof victor Murinde, Professor of Global Finance at the School of Oriental African Studies, University of London and also Director of the Centre for Global Finance, said the commissioning of a coffee roasting hub in Ntungamo district would help push the country from the low-income to middle-income economy.
He said that for Uganda to succeed in coffee value addition, it requires financial muscle, which must be supported by the banking systems within the country.
He added: “What is required is finance and this can be achieved through the commercial banks we have in this country. They should be able to provide finance for agriculture, insurance for covering the weather against coffee farmers, production, and finance for being able to trade internationally in any country in the world.”
https://thecooperator.news/divisive-vinci-coffee-deal-court-to-deliver-suit-ruling-in-december/
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