Govt smells the coffee in bad deal, softens

Farmers picking red coffee cherries that are desirable at the world market. Photo | File

What you need to know:

  • The Secretary to Treasury, Mr Ramathan Ggoobi, and Investment minister Evelyn Anite have separately confirmed plans to review the controversial coffee deal and invited new investors who are willing to add value to Uganda’s coffee to contact Uganda Investment Authority.

Faced with a simmering fury over a multi-billion coffee deal with Uganda Vinci Coffee Company Limited (UVCC), the government is now considering reviewing contentious clauses in the agreement, and has lined up a cocktail of incentives for new investors.

The Secretary to Treasury, Mr Ramathan Ggoobi, and Investment minister Evelyn Anite have separately confirmed plans to review the controversial coffee deal and invited new investors who are willing to add value to Uganda’s coffee to contact Uganda Investment Authority.

“We have not in any way created monopoly in coffee business as some people claim, our door is open to any investor who would like to do value addition to coffee and will be supported with tax and non-tax incentives,” Ms Anite said.

Mr Ggoobi yesterday declined to discuss the disputed clauses in the MoU that Finance minister Matia Kasaija signed with UVCC on February 10.

He instead warned those against key economic reforms that “the days of debates and normative economics are over”.

Mr Ggoobi added: “Some interest groups wouldn’t want the status quo to change since they benefit from it. So they would deliberately mislead the public to resist policy change”.

Ggoobi explains errors

The Finance Permanent Secretary, however, admitted: “Sometimes policy makers make mistakes but the errors shouldn’t be exaggerated to throw the baby out with the bathwater. They [errors] should be pointed out and corrected and let the greater good to flourish. That’s how countries develop”.

Mr Kasaija is expected to issue a statement after a joint stakeholders’ meeting, tomorrow, specifying the detailed amendments to clause 4.2.1 and 4.2.2 of the Memorandum of Understanding signed with UVCC.

There are also calls from MPs to review clauses 4.1 and 4.1.1 that had provided for “a tax-neutral” basis and tax exemptions.

In the aforementioned two clauses, the government had promised to take all reasonable measures to give priority of supply of coffee beans (including screen 18 and above) to the company and allowed the firm to determine the coffee prices.

Some lawmakers as well as players in value chain have criticised the coffee deal for creating a monopoly in a free market economy.

They have also accused the government of pampering UVCC to the detriment of local coffee producers and other potential investors.

Speaking to Daily Monitor at the weekend, Ms Anite confirmed government plans to look into the MoU and invite local and foreign investors to tap into coffee industry and benefit from government incentives.

“As government, we will look into the MoU we signed with UVCC, but people should know that our main objective is to attract investors who can help us process our coffee into roasting and instant coffee for the local market to the level of Nescafé and others,” Ms Anite said.

“Selling our coffee in raw form is not helping us. More than 95 percent of our coffee is exported as green beans… We are throwing away money and that is why we have put in place incentives to change this. We are inviting investors to add value to our coffee. We want to see better coffee quality and better prices for our products,”  she added.

Mr Ggoobi reiterated: “Whoever comes up to add value to people’s produce in agro-processing and value addition, particularly for export, qualifies for generous support, including investment incentives. There is misinformation that only investors are benefiting from these incentives. This is not true”.

“The short time I have been in office as [permanent secretary] I have signed tens of letters offering incentives to investors both local and foreign to add value to our agricultural produce,” he added.

Mr Ggoobi also said they would spend more time implementing what is written in policy documents and plans such as NDP III, NRM Manifesto, and annual budgets.

Although contracts involving foreigners attract more attention and controversy, Mr Ggoobi said: “There are many Ugandans who have benefited from government incentives. We are only decent and professional not to publicise them...Ugandans must get organised and benefit from the government incentives.” 

The UIA board chairman, Mr Morison Rwakakamba, said Uganda is a liberalised economy and that all domestic and foreign investors have access to codified incentives to invest in any sector including coffee.

“We see an increase in investors seeking licensing from UIA to invest in value chain and this is the news,” Mr Rwakakamba said. 

Nakaseke Central MP Allan Mayanja, however, told Daily Monitor that inviting new investors without amending the coffee agreement is self-defeating.

Mr Mayanja cited clause 4.2.2 which he said unfairly creates a sole buyer of Ugandan coffee and allows the same company to set the prices in a liberalised economy.

“Government is trying to put the cart before the horse. The right thing to do is first amend the coffee agreement, remove all the toxic clauses and then invite new investors to do value addition. We need to create an enabling environment for investors in ventures that process our coffee into roasting and instant coffee for local and export market,” he said.

On April 12, Speaker of Parliament Anita Among  directed the Committee on Trade Tourism and Industry to probe the controversial coffee deal signed between Mr Kasaija, who represented government and Italian investor Enrica Pinneti on behalf of UVCC.

The Kimanya-Kabonera MP, Dr Abed Bwanika, raised a matter of national importance and questioned the deal.

He said it alienates Ugandans from the coffee business as it gives monopoly of purchase and export of coffee to only one company in violation of Section 52 of the Coffee Act.

The Trade committee is still investigating the matter and has summoned Ms Penetti and other government officials to explain the controversies in the deal.

Some incentives

Agriculture sector

· 10-year exemption on Income from commercial farming.

·  10-year exemption on income from agro-processing.

·  Exemption on export processing zone on imported raw materials and intermediate goods, machinery and equipment, spare parts for exclusive use in the Free Zone.

· Exemption from import duties on plant and machinery.

· For commercial farmers, upon registration for VAT, are entitled to full VAT claims.

·Unprocessed agricultural products are exempt from VAT, which relieves processors from cash flow constraints.

Manufacturing sector

·  10-year exemption on export of finished consumer and capital goods for investors exporting 80% outside domestic market.

· VAT deferment on plant and machinery

· 0% import duty on plant and machinery