Time for the eyes to smell the coffee

It doesn’t matter if coffee gives one palpitations or sleepless nights. Almost everyone has received an invitation to smell the coffee.

In February, a contract was signed between a company, Uganda Vinci Coffee Company limited (UVCC), and the government of Uganda. Contracts are signed all the time but this one is special as we shall see.

The company, whose face is Ms Enrica Pinetti, starts off defending itself from a barrage of criticisms for sins it has not yet committed.

Pinetti is the famous investor who came to help poor, desperate Uganda build a specialised international hospital at Lubowa to save the money we spend on treating our important people abroad annually through medical tourism. Uganda, according to the Accountant General Lawrence Semakula, gave her Shs 348.212 billion in the 2021/2022 financial year.

Before she puts up a single functional structure on the land in Lubowa, she, like Charles Dickens’ Oliver Twist, has requested for a further Shs 319.552 billion, to bring her total request to Shs667.765 billion.

Her problem is that Covid-19 lockdowns that disrupted the economy held her back. Many Ugandan businesses similarly affected by Covid-19 have folded under the weight of debt. Others have lost their property to financial institutions because no one was there to bail them out.

Parliament, to which the Ministry of Finance goes to request for the approval of Pinetti’s funds, is not allowed to allow access to the Lubowa site.

The same Pinetti has now come to help in the value addition of Uganda’s Coffee. She will allegedly bring in about $ 80 Million to roast and market Ugandan Coffee. Coffee is big and is growing. According to a report by Uganda Coffee Development Authority (UCDA) between January and December 2021, Uganda exported a record 6.77 million coffee bags worth $718.57 million which is the highest total for 12 months in 30 years.

Between January and December 2020, Uganda exported 5.49 million bags worth $ 520.01 million. This represents an increase in volume of 23.3 percent and in value of 38.2 percent. The leading export destination market is Italy which took about 37 percent. Pinetti is from Italy so that sounds good to start with. But because there is nothing like a free lunch, for helping Uganda’s coffee sector, something that has eluded the millions of Ugandans for the last 50 years, UVCC will be given free land and will have exclusive rights to buy Uganda’s coffee. It won’t pay taxes of any form until 2032. Additionally it will be entitled to tax exemptions which will be applicable to all the activities of the company and its foreign staff. There will be no import duties, VAT, excise duty, stamp duty, corporate income tax and employment related taxes. In the late 80s the government in step with structural and sectoral restructuring privatised the sector to make it efficient and that ended the monopoly of Coffee Marketing Board which was the sole buyer and exporter of Uganda’s coffee. With it subsidies went as well.

Now we are mooting the idea of monopoly with UVCC and subsidies too.The government of Uganda is breaking an arm and a leg to help a foreign investor to help us. The question is why can’t the government help the Ugandans who have toiled in the coffee sector for years, with all these generous incentives and instead favour a foreign investor who is already blemished?

The government is full of brilliant people and they rarely do things guided by inanity. They know that many incompetent governments are kept in place by lording it over people who are relatively needy. Rich people especially farmers like those whose lush gardens helped the NRA sustain its war with the UPC government between 1981 to 1986 can be a security problem in case the idea of subversion comes up.

So the governments deliberately disrupt thriving sectors under the guise of regulation and value addition. That is how over the years, real estate, agriculture, fisheries and commerce have attracted government intervention. This ironically has either knocked many out or left the resilient barely surviving after paying their taxes.  This UVCC agreement has a potentially damaging effect on land holding especially in Buganda. Coffee is the sort of crop a farmer uses to protect their land from grabbers and those who want to buy it on the cheap. The growth of coffee exports is partly due to the concerted effort through the ‘Mwanyi Terimba campaign. If the prices go down as offered by the monopolistic investor, people might be under pressure to sell land to those who have accumulated money and have nowhere to hide it.

Meanwhile the foreigner who has no political base and genuine interest in ‘lofty ideals’ like democracy and good political governance, is promoted with all manner of incentives and favours.

The foreigner is easy to manipulate and scare with deportation and withdrawal of special treatment so they are likely to remain compliant.

He is also one that a government may run to for the financing of its political campaigns to retain power. They pay a good protection tax as long as the economic regime favours them to dominate the market and make even more money. But that is the clearer part. The one masked in the dark is the one where the so-called foreign investor is a mere front of local political and financial interests. The sourced investor is used as a conduit to siphon public funds which are delivered legally as ‘incentives.’ They then engage in activities that the locals are capable of doing if they are trained and supported.

So you end up with a foreign investor doing something as mundane as being in charge of weighing the cotton for export. The farmer pays a fee to get a certificate of quantity!

Then somewhere in the small print you have clauses that grant them hefty compensation in case the country does not produce enough cotton to be weighed. The same applies to the cancellation of the contract or the coming up of any form of competition.

The local contact usually in government is then left with the task of ensuring that there is default that leads to the penalty. Road construction taught us that. Government officials rush to sign contracts to build roads when they are not ready with counterpart funds or have not secured the land on which the contractor is to work. The contractor then claims they hired equipment and borrowed funds which accrued interest before they started work so the taxpayer has to pay. That is why whenever foreign investors are queried by the public, it is government officials who mourn more than the bereaved.

UVCC is not only about the bad smell of coffee and neither is it only about the good heart of a foreign investor.

Even the closed eye will see this one day.

Mr Sengoba is a commentator on political and social issues

Twitter: @nsengoba