Experts weigh in on debate about coffee value addition

Coffee farmers appear  before the Trade Committee at Parliament on  April 26. PHOTO/ DAVID LUBOWA

What you need to know:

  • Some coffee experts opine that instead of  awarding concessions to an individual the government should have channeled capital to local firms in the trade.

Players in the coffee sub-sector have described concessions given to Uganda Vinci Coffee Company (UVCC) to add value to the country’s green beans as curious.
Mr Nathan Nandala Mafabi, the chairperson of Bugisu Cooperative Union (BCU), has described the process that ends up with value being added to coffee as “unsophisticated” and hinged on capital and machinery.

“[Value addition in coffee] is one of the easiest things to do because [one is] basically roasting, grinding [and packaging],” Mr Mafabi said, adding, “We don’t need sophisticated equipment…$5m [gets you] huge equipment…you don’t give all those exemptions to one woman (UVCC director Enrica Pinetti) to take them in one day.”
Mr Mafabi opines that instead of awarding concessions to “an individual who has so far failed to deliver the multi-billion specialised hospital [in Lubowa]”,  the government should have channeled capital to local firms in the trade.

The government has, however, taken exception to the agreement it entered into with UVCC being framed as bad. Appearing before the House this past week, Finance minister Matia Kasaija was quick to say the agreement will benefit Ugandans not least because UVCC will pay a competitive and market-determined price.
“This agreement does not deter other potential investors from investing in value addition. UVCC provides an opportunity for the country to fetch better prices for high grade coffee,” he said, adding, “[UVCC] aims to establish several hubs across the country intended to enhance traceability of farmers and to eliminate middlemen.”
Players in the coffee sub-sector have, however, noted that value addition is not the silver bullet that the government projects it to be.

 In a February Op-Ed piece, Andrew Rugasira, who attempted to put high-quality roasted and packaged coffee on shelves in the Global North, wrote: “…the value-added coffee market is defined by historical asymmetries in capital availability, logistics, information technology and purchasing power between consumer and producer countries.”
He further warned: “As I learnt, at great cost, just because you roast your coffees here doesn’t guarantee that you will be competitive in European consumer markets. Five companies control 50 percent of the global market for roasted coffees (Kraft, Sara Lee, Nestle, P&G and Tchibo); and four companies control 40 percent of the world coffee trade (Ecom, Neumann, Louis Dreyfus and Volcafe).”

Whether UVCC has a magic wand to surmount such asymmetries remains to be seen. What appears to be clear is that Ugandan coffee farmers keep running into headwinds and the agreement between the government and UVCC won’t insulate them from this.
“We have applied for capital investments, but we have not managed…Instead of giving those incentives to non-Ugandans, give them to Ugandans who will in turn employ Ugandans and therefore plough more into the economy,” Mr Mafabi reasoned.

Butiru County lawmaker, Gerald Wakooli agrees. He says: “People are willing to add value, but they don’t have capital. Some few people tried to go to the bank to get loans so that they can outsource the required equipment, but they get knocked back by high interest rates.”
He adds: “The VAT is extremely high on even the basic equipment that our people need to use. That makes it harder to access the basic machine like a hauler. In the long run, the grassroot farmers who attempt to polish it end up using motors to just pound it as a way of removing the green coating.”

Mr Wakooli recommends that the government sets up a farmers’ bank that will specifically address the financial needs of farmers. Once created, the bank can give farmers capital at low interest rates in addition to other forms of support.
Uganda is Africa’s largest coffee exporter and sits in seventh position on the global scene.