A woman picks ripe coffee beans.
A new study on alternatives to the oil and gas development has suggested that the coffee cash crop offers Uganda absolute advantage, with potential to generate an estimated $3b (Shs10 trillion) annually in earnings by 2030, if only the government can get the building blocks, such as massively rallying smallholder farmers, right. Conversely, according to the study titled “Economic Alternatives to Oil and Gas Development in Uganda” released last Wednesday, petro-revenues, from the sale of crude oil when commercial oil production starts somewhere in 2028, average between $1.5b and $2b (Shs5.4 trilion – Shs7.4 trillion) annually, “which is less compared” to earnings from coffee.
This is not to mention the energy transition fog suffusing the oil industry. The study commissioned by the extractives advocacy, Global Right Alert, non-governmental organisation, also draws parallels on the experiences of Ghana, which announced commercial oil finds in 2007 — months after Uganda’s announcement on October 8, 2006 — and started production in 2010, and Senegal which announced commercial oil finds in 2014 and started production in 2024.
“In conclusion, while Uganda is moving in the right direction, the key difference lies in the extent and timing of implementation, with Senegal and Ghana having more advanced and integrated strategies, particularly in energy sovereignty, renewable energy adoption, and agricultural value chain development. Uganda can certainly learn from these countries’ experiences and accelerate its efforts by adopting more comprehensive policies and projects that align with these successful models,” the comparative study undertaken by researchers at Makerere University Business School (MUBS) details.
The findings, however, drew mixed reactions from oil industry players, attending the release of the report, who underscored that coffee and oil are not mutually exclusive. Mr Clovice Irumba, the director of production at Petroleum Authority of Uganda (PAU), which regulates the oil sector, defended that Uganda formulated the national oil and gas policy in 2008, which underlines intergenerational equity; to ensure that “oil doesn’t suffocate other sectors but rather contribute”.
A coffee farmer savours the fruit of his crop. PHOTO/ GEORGE KATONGOLE
The chief executive officer of Uganda Chamber of Energy and Minerals (UCEM), Mr Humphrey Asiimwe, argued that the discussion should centre on how petro-revenues are managed responsibly and how the industry can catalyse other sectors of the economy through direct and indirect linkages. “How can oil resources ensure that there are roads to enable the small scale holder farmer to get his coffee to the market; ensure that they can get fertilisers for better yields,” Mr Assimwe said. The PAU director for environment, health and safety, Dr Joseph Kobusheshe, also underlined that “we shouldn’t look at the economic prosperity of our nation premised on one sector”. “We need to work together to harness our potential, ensuring that none of the sectors undermines the other. We need to focus more on strengthening economic linkages and diversification,” he said.
Neglected, but essential agricultural
Agriculture remains the bulwark of the economies of many countries. In Uganda it has a Gross Domestic Product (GDP) contribution of 24.09 percent, according to the World Bank, and employing about 65 to 70 percent of the working population engaged in the sector besides being a primary source of livelihood the majority rural poor. In Ghana, agriculture contributes around 21.1 percent to GDP; and, in Senegal, it contributes around 17.41 percent and employs about 30 percent of the population.
The economic alternatives to oil and gas development study details that the two western countries are leading in innovations such as climate-smart agricultural practices and developing strong value chains for key agricultural products (like cocoa in Ghana and groundnuts and cotton in Senegal), and investing heavily in agro-processing, market access, and partnerships with the private sector to ensure that local products are processed locally, creating jobs and retaining more value within, to fortify their agriculture sectors.
Uganda too has put in place some measures, although still far behind and constipated by regime survival politics and policies such as last year’s disbanding of the Uganda Coffee Development Authority (UCDA), which was established to regulate, promote and oversee the quality of coffee and related policies with broader economic goals. UCDA was subsumed into its parent Agriculture ministry, and the efforts to promote coffee exports entrusted in a loose coffee consortium which has so far drank Shs179b of taxpayers money, with another Shs53b allocated in the next budget, to, among others, construct a coffee processing plant in Ntungamo District.
There is no publicly available study to guide the abolition of UCDA rather than the broad proposal of rationalising Ministries, Departments and Agencies (MDA) to cut on costs of public administration. For cost cutting to make sense many expected that slashing MDAs would be followed by among others reducing the size of the rubber stamp parliament with 556 MPs, slicing the 123 senior presidential advisors on which Shs13.8bn is spent for salaries annually, and other wasteful expenditures. Rather, the Executive last week mooted a plan to split Tororo District into three new administrative constituencies.
According to the study, while Uganda has also worked on developing agricultural value chains, particularly for coffee, through initiatives to improve processing and quality control, the sector still faces challenges with post-harvest losses and inadequate agro-processing infrastructure. “Uganda’s coffee sector, while large and significant in terms of production, still lacks the extensive value-added industries found in Senegal (e.g., coffee roasting and packaging).
It exports large quantities of raw coffee beans instead of processed coffee,” the 32-page report reads in part. Regarding rolling out climate-smart practices particularly for crops like coffee and maize, the study details that Uganda has promoted agroforestry, improved irrigation systems, and water harvesting technologies, but these are not as widespread or institutionalised as in Ghana and Senegal.
“Uganda’s coffee sector, while robust, faces challenges related to climate change, with issues like fluctuating rainfall affecting production, but the country is only beginning to implement large-scale climate-smart agriculture strategies,” the study details. The study adds: “Overall, Uganda has already taken steps in similar directions as Ghana and Senegal in its energy and agricultural sectors, particularly regarding strategies for transitioning to renewable energy, boosting agricultural productivity, and leveraging energy for economic development. However, key differences lie in the extent of implementation, the specificity of strategies, and the current focus of those strategies, areas that require strengthening in the Ugandan case.”
Walking the tightrope
Uganda announced discovery of commercial reserves 19 years go, but the journey to production has been of ups and downs, albeit getting closer—currently marked for 2027 when construction of the 1,443km East African Crude Oil Pipeline (EACOP) is expected to be completed, to transport crude oil from the oil fields in mid-western Uganda to Tanzania’s Indian Ocean Tanga port. The government and the oil companies in February 2022 reached the much-awaited Final Investment Decision (FID) unlocking the country’s $20b (Shs72b) oil project encompassing the EACOP which is tagged to a capex upwards $5b (Shs18 trillion); the $7b (Shs25 trillion) Tilenga oil project that straddles Nwoya and Buliisa districts operated by TotalEnergies EP; and, the $2b Kingfisher Development Area between Kikuube and Hoima operated by operated by CNOOC. The government is also planning a 60,000 barrels per-day refinery, to refine some of the oil for domestic use and sale across the region. Negotiations for designing, financing and constructing the project are ongoing with a Dubai-based company without any publicly listed experience in investing in similar venture elsewhere.
Charles Peter Mayiga, the Buganda Kingdom premier, sips a cup of coffee during the International Coffee Day celebrations on October 5, 2022. PHOTO/GEORGE KATONGOLE
However, once commercial oil production starts—starting with Kingfisher and later Tilenga—and reaches peak by 2035, Uganda’s oil earnings have the potential to propel the economic growth to 7-10 per cent forecasts, up from the current stagnation marred in bureaucratic semantics. This is, according to the World Bank, possible if the petro-dollars are not plundered, and with endemic corruption already the regime’s Achilles heel.
As such, the government has doubled down to fast-track the $20b oil project amid targeted push back by environmental campaigners claiming among others human rights abuses and environmental concerns, and on the other hand, in light of the global energy transition discourse. Previous estimations have documented the Uganda oil project dropping in net value on account of the transition, which has since slowed down with the reascent of President Donald Trump who undid several anti-fossil fuels policies. The UCEM’s Mr Asiimwe said to finance the energy transition, exploitation of oil and gas resources is the answer.
The UCEM is the lobby for mining, oil and gas, and related players. “Oil and gas is not going anywhere. The expected decline in fossil fuels (oil) will start around 2050, and begin to decline in 2070. So if we are talking about transition we also need to start thinking how to exploit our critical minerals that are critical in the equation,” he said. PAU’s Corporate Affairs manager Gloria Sebikari argued separately that the oil industry is contributing to Uganda’s GDP “through linkages with other sectors of the economy such as agriculture, tourism, health, manufacturing, name it. “So, whether agriculture or oil, they are all pieces of the puzzle of the economy. What we need to be discussing is how sectors can jointly contribute through what we call linkages. The money currently being invested in the oil sector is mainly by the private sector. The government has invested in capacity building and institutional development,” she said.
Trade-offs, balancing
Coffee, according to the UN’s Food and Agricultural Organisation (FAO), is one of the most widely consumed beverages in the world and one of the most traded commodities globally. Uganda’s earnings from coffee hit $1.55b (Shs5.6trillion) in 2024, up from $1b in 2023, despite President Museveni and his technocrats at the Finance ministry’s continued throwing of the crop value chain into turmoil with various policy miscalculations. Once upon time the President and Finance technocrats plotted creating a monopoly around coffee exports through the shadowy, Uganda Vinci Coffee Company Limited, overseen by the controversial Italian investor Enrica Pinetti who has so far failed to deliver on the much-vaunted Specialised Hospital project along Entebbe Road.
Workers dry coffee on racks at Agri-Evolve premises. Ugandan coffee shipments are overflowing the European Union (EU) as traders scramble to get their hands on beans before the year-end implementation of new environmental regulations. PHOTO/ FILE
Uganda is the second top exporting country in Africa, and whose total coffee production currently represents about 5 percent of the global production. On the other hand, according to PAU, Uganda could earn between $1.5b and $2b during peak oil production based on price scenario of crude of barrel trading at $50 (Shs182,454), $70 (Shs255,436), and $100 (Shs364,908). At the price of $150 per barrel, the country could rake in $4b (Shs14.5trillion). It is worth noting that since Russia’s invasion of Crimea in 2014, the trading price for Brent crude plummeted from upwards $100 and never picked up again.
Coffee Vs Oil?
The study heavily makes a case for the coffee industry, recommending, among others, strengthening direct trade agreements and promoting specialty coffee to help farmers fetch premium prices and reduce dependency on volatile commodity markets. It also calls for the establishment of relationships with international buyers, saying participating in specialty coffee expos can help expand Uganda’s footprint in niche markets.
The study posits that propelling collaborations between Ugandan coffee cooperatives and global retailers such as Starbucks and Nespresso have led to increased recognition of Ugandan coffee in the specialty market, translating into better prices for farmers. As the continent’s second-largest coffee producer, growing of the crop is “deeply embedded in the rural economy, providing livelihoods for over 1.7 million households and 3.5 million people,” according to the former coffee regulator, UCDA. Smallholder farmers are the backbone of Uganda’s coffee industry, with over 90 percent of the coffee produced by small-scale growers. “These farmers not only cultivate coffee but also engage in value-added activities like processing, packaging, and marketing.
Moreover, the rise in demand for Ugandan coffee has further stimulated employment in the processing sector, where jobs are created in coffee mills and roasting facilities. Overall, the sector supports a broad value chain from farmers to exporters, processors, baristas, and traders, ensuring wide participation in the coffee economy.” The study further recommends improving rural roads, electricity supply, and irrigation systems will enhance efficiency in coffee production, processing, and export logistics, investments in transport networks, such as the upgrading of feeder roads, will facilitate easier movement of coffee from farms to markets, and reinforcing rural electrification projects to have expanded power access to coffee processing centres, enabling the use of modern processing equipment. On oil, the researchers opine that Uganda’s reliance on external financing for fossil fuel projects heightens the risk of asset stranding.
“The Energy Policy for Uganda (2023) and the Electricity Act (1999) stress the need for energy diversification to reduce economic vulnerability. The country’s dependency on foreign aid for oil investments could undermine its economic sovereignty. “Furthermore, long-term demand for Uganda’s oil and gas may decline as energy markets evolve, compounding the risk of stranded assets.”
