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UCDA position on coffee pact misguided
Author: Andrew Rugasira. PHOTO/COURTESY
What you need to know:
- “...it is... important for us to take a realistic and practical view of the efforts that will be needed to shift the structural barriers we face...
The arguments advanced by the Uganda Coffee Development Authority (UCDA) for not joining the extension of the International Coffee Agreement 2007 (ICO) are in many respects valid and well- intentioned but they are also misguided in expecting the agreement to address what are structural distortions in the global coffee industry.
Uganda is the seventh largest coffee exporter and number one in Africa, having exported almost seven million bags in 2021. We now have a say in the global coffee industry and it is right to demand that our voice is heard. Already, a new leadership at ICO is being ushered in and the hope is that this will translate in improved representation of our interests.
However, UCDA might end up disappointed because many of the reasons they give point to global structural realities underpinning the coffee industry, which the ICO is unable to ameliorate.
UCDA, for example, argues correctly that market access and pricing for our value-added coffees is a critical issue that must be addressed. As I have experienced with my own efforts, the problem with market access isn’t necessarily with tariff barriers, but the non-tariff barriers that confront exporters of value added coffees.
I remember spending two years just to get supermarket buyers to accept to list our coffees, and this was just half the battle! Even with duty-free access, we will find it hard to sustain a presence in these highly sophisticated markets where our competitors have a 100-year head start!
Take Germany, for example, which doesn’t grow a single coffee bean; they exported almost 400,000 tons of green coffee yet Uganda exported just over 420,000 tons in 2021! They are simultaneously Europe’s largest importer of green coffee (1.1 million tons), the largest re-exporter of green coffee (356,000 tons) and the second largest exporter of roasted coffee (236,000 tons worth).
How do they do this? They have first-class logistics and supply chain systems that get the commodity in and out, fast.
They have also invested billions in roasting capabilities. There are over 1,600 coffee roasters in Germany; the largest of which - Tchibo, Jacobs, Dallmayr and Melitta dominate the market for value added coffees in the world. For change to happen here, we need knowledge-based manufacturing, marketing, promotion and distribution strategies.
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% of the global market for roasted coffees (Kraft, Sara Lee, Nestle, P&G and Tchibo); and four companies control 40% of the world coffee trade (Ecom, Neumann, Louis Dreyfus and Volcafe). I don’t think the ICO is able to shift these tectonic plates.
The value-added coffee market is defined by historical asymmetries in capital availability, logistics, information technology and purchasing power between consumer and producer countries.
The other flawed premise of the value-addition argument is: the more value addition we do here, the higher the farm-gate prices for the producers. This just isn’t the case. Let me use a local example of matooke. When restaurants here increase their plate prices for matooke, does this really translate into higher farm-gate prices for matooke producers in Bushenyi? Do higher tea prices translate into higher farm-gate prices for farmers in Tooro?
Similarly, the retail prices for coffee have been going up in the last 40 years, but can the same be said of the farm-gate prices? Chocolate prices have also been rising for decades, can cocoa producers in Ghana or Uganda attest to this at their farm-gates?
The only way value addition translates to higher producer prices is when producers/farmers are organised, capitalised and control as much of the value chain processing as they can.
Value retention is not just about the mechanical side of setting up factories but committing long-term investments to strategic brand marketing, retail partnerships, logistics and distribution infrastructures. Brazil, Colombia and Vietnam give us insights into the possibilities of these investments as well as promoting local consumption.
And this is not just a coffee story.
Uganda is the second largest producer of bananas in the world after India, producing 9 million tons yearly. Yet, the world’s biggest exporter of bananas is an Ireland based 100-year-old company called Fyffes.
When I visited their factory in Dublin in 2014, I saw no banana farmers, only the highest ripening, packaging and supply chain technologies. They import bananas from Columbia, Honduras, Belize, and Costa Rica and then re-export them throughout Europe.
UCDA knows that fighting from within has its merits. Some years back, Uganda wanted to withdraw from IACO over mismanagement of our contributions. President Museveni reversed this decision for prudent reasons and today, Uganda’s Solomon Rutega is the IACO Secretary General, influencing from within.
The coffee struggle in Uganda is a protracted one. We are just beginning to see some wins in both the quantity and quality of our coffees and for this, we must commend the efforts of UCDA. However, it is equally important for us to take a realistic and practical view of the efforts that will be needed to shift the structural barriers we face in the global coffee industry.
Mr Andrew Rugasira, Entrepreneur
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