Cooperatives: A mouthpiece coffee farmers could do with

A coffee processing deal the Government of Uganda (GoU) entered into with Uganda Vinci Coffee Company (UVCC) stresses the relevance of cooperatives, Nathan Nandala Mafabi has said.

Mr Mafabi, who is the chairperson of the only remaining cooperative in Uganda (Bugisu Cooperative Union or BCU), said cooperatives used to be mouthpieces for farmers.

“The problem is that this government disbanded cooperatives, which were the voices of the farmers,” Mr Mafabi, who is also the Budadiri West lawmaker, said, adding, “Now the government can sign deals that will affect farmers without consulting them, which wasn’t possible when we had cooperative unions.”

The processing agreement handed UVCC a string of tax holidays, including exemptions from paying import duties, value-added taxes, excise duty, stamp duty and corporate income tax, inter-alia. Ramathan Ggoobi, the secretary to the treasury who signed the agreement as the GoU’s witness, said UVCC will help Uganda tap into a market with a global value of $460billion. It, he added, will do this by “export[ing] our coffee in its finest, finished form” to the Global North. And that if done well, Uganda could get “$5.4 billion” annually.

Mr Mafabi, however, believes that cooperatives would have rejected the deal outrightly had they not been referred to in the past tense presently. BCU is the only cooperative that survived the structural adjacent programmes advocated for by Western institutions such as the World Bank and the International Monetary Fund (IMF) and implemented by the National Resistance Movement (NRM) government.

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During the pre- and post-colonial times, agricultural cooperatives such as BCU, West-Mengo Cooperative Union, Masaka Cooperative Union, and Banyankole Kweterana Cooperative Union (BKCU), to mention but four, were used as engines for smoothing farmer harmonisation, nurturing access to agricultural financing, cumulative productivity, collective bargaining and market entrée, and raising incomes.

Steeped in history

In his paper titled ‘Cooperatives: The sleeping economic and social giants’, Dr Lawrence Kyazze writes that Uganda is one of the few British Colonies that advocated for the establishment of cooperatives as early as 1900.

“Some pseudo cooperatives were subsequently established to operate along with the ideals of the Rochdale cooperative pioneers of 1844,” Dr Kyazze writes referring to the Rochdale Equitable Pioneers Society, which was established by 28 artisans working in the cotton mills in the north English town of Rochdale. The artisans in question were faced with hopeless working conditions and low wages, and they could not afford the high prices of food and household goods.

The impact of cooperatives in colonial times was felt in 1945 when the Uganda African Farmers’ Union (UAFU) listed on April 2, 1941. It had Ignatius Musaazi at its wheel, spearheading riots that spread across Buganda. The rioters demanded the right to circumvent the price controls on the export sales of cotton imposed by the British colonial government; removal of the local Asian monopoly over cotton ginning—the Asians in Uganda were considered to have an unfair advantage by having exclusive rights over cotton ginning.

Musaazi’s UAFU morphed into the Bataka Party in 1946, and it advocated the interests of farmers while rejecting foreign control of the Ugandan economy.

“Pamphlets distributed throughout the countryside attacked the ‘Indian millionaire ginners’,” writes Prof Mahmood Mamdani in his book, Politics and Class Formation in Uganda. “Ginnery owners found groups of people requisitioning their trucks, cash and petrol, and Indian shops in semi-urban trading areas were sacked.”

With the government giving a foreign company the coffee deal, Mr Nandala seems eager to draw parallels with the past.

“The Ugandan economy was dominated by foreigners and that’s why Musaazi championed those riots. The same thing is happening today.  The coffee company is interested in making profits not the welfare of farmers. What if they fix prices, what will coffee farmers do?” Nandala asked.

Economic nationalism

Uganda exported a record 6.08million coffee bags—the highest total for 12 months in 30 years—in the financial year 2020-2021. Mwambutsya Ndebesa, a political-historian at Makerere University, insists that such performances are indicative of the abilities of indigenous Ugandans.“Therefore we should either directly invest in coffee processing under UDC [ Uganda Development Cooperation] or facilitate our existing cooperative Unions like Bugisu CU or Banyankore kweterana CU to process our coffee so that proceeds from coffee remain in the country among Ugandans,” Ndebesa said.

He added: “Even if you are too generous and welcoming, you don't allow a visitor to go to your bedroom. Coffee is our bedroom. We need economic nationalism. We need to aim at maximising welfare not maximising profit all the time. The Vinci company seeks to maximise profits not welfare for Ugandans.”

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Legally speaking, the colonialists instituted the Cooperative Ordinance of 1946. In 1962, the Cooperative Societies Act of 1962 served to formalise the already organised cooperatives. Dr Kyazze noted that the performance of cooperatives in the immediate post-colonial period was remarkable, with the government of the day offering them monopoly status in agricultural marketing.

“Their performance was good. However, this was short-lived as political interference and insecurity started to trickle in the 1970s. With political control from outside the movement, members’ involvement in the management of cooperatives eroded. Primary cooperatives and unions increasingly became indebted so that they could not effectively provide services to members,” Dr Kyazze says.

Factors that led to the liquidation of BKCU, for instance, were the effects of years of political instability, the loss of valuable assets, huge accumulated debts, general mismanagement, and most importantly the inability of the union to compete in a liberalised market.

Enter liberalisation, denationalisation

Whereas the political mayhem and instability of the ‘70s and ‘80s took their toll on Uganda’s cooperatives sector, the NRM’s move to liberalise the economy became the final nail in the coffin. Economic liberalisation and denationalisation saw the liquidation of the ministry of cooperatives, the divesting of the Cooperative Bank, and the privatisation of agricultural produce marketing.

Whilst NRM officials tout liberalisation for enabling the economy to achieve an average of six percent growth per annum over the last 30  years, this is in stark contrast to the depressed economic reality of the majority of Ugandans—about 80 percent of whom reside in rural areas. “These are the people whose cooperative assets were appropriated without compensation, and their social system destroyed, while some of the handling infrastructures they used were left to decay,” a 2013 research entitled the Cooperative Movement and the Challenge of Development done by Action Aid revealed.

It added: “Many of the respondents strongly argued that the introduction of the liberalisation policy came at a time when the cooperatives were still counting war losses. The loss of their assets, including social assets and overnight loss of their historical monopoly over marketing and exportation, without a transition period to the new competitive environment, disabled them. It became nearly impossible for co-operatives to seize opportunities that the liberalisation policies potentially offered, losing to skilled multinationals and shrewdness.”

The Coffee Marketing Board (CMB)—whose role was to regulate, promote and oversee the quality of coffee along the entire value chain, support research, and development, promote production, and improve the marketing of coffee—also didn’t survive the  SAPs with the government breaking its monopoly on coffee marketing in 1990.

“ …With the government initially giving export licenses to three unions; later many more unions and private companies received licenses, Arne Bigsten and Steve Kayizzi – Mugerwa write their book entitled Crisis, Adjustment, and Growth in Uganda from being exclusively borne by government and peasants, the risks of commodity trade became more evenly spread, with more than 100 registered coffee exporters by mid-1990s. By 1996 CMB handled less than 10 percent of coffee exports, with the rest in private hands.”

What next?

While other traditional cooperatives closed shop, BCU has managed to weather the storm thanks to a strong leadership and large asset base. Politics, however, still poses an existential threat to the cooperative.

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“You have seen how the NRM has been interfering in our cooperative. I don’t think they are really interested in improving the livelihoods of people. They think of politics all the time,” said Mr Nandala, who also is the Secretary-General of the opposition’s Forum for Democratic (FDC).

BCU has threatened to sue the government on grounds that farmers were never consulted yet the Bugisu sub-region’s economy is reliant on coffee.

The GoU, however insists no local entrepreneur has the capacity to pull off the task they have tasked Vinci to do.

“Vinci is the investor that came forward with a plan to do what the government wanted to be done. They offered to invest $80m to process coffee here, and then sell it in virgin markets in Europe and elsewhere,” Ggoobi said. “The cost and risk of penetrating those virgin markets are for Vinci to shoulder. All the Government has done is to provide Vinci with a measure of incentives that are available to every strategic investor—in coffee, dairy, iron, and steel, name it.”

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