By Bwayo Emma
Its now almost three weeks after the contraversial coffee deal was came in to the public domain for consumption by the cartels with a concerned whistleblower preferring to run to media to expose it for the good of Ugandans. The deal which has brought an aproar in the sections of opposition, social critiques, business community and farmers continues to face resistance and rejection allover starting with our weak remote controlled Parliament who have now turned to make it a mockery on a famous NTV Friday show Zungululu.
But what explains this Cartel deal which was spearheaded by Finance minister Matia Kasaija who signed on behalf of government, with Ms Enrica Pinetti signing it on behalf of Uganda Vinci Coffee Company Limited (UVCC). The details of how the government surrendered the entire country’s coffee business to a controversial Italian investor emerged following a leaked February 10 legal document signed by both parties.
Finance minister Matia Kasaija signed on behalf of government, while Ms Enrica Pinetti signed on behalf of
UVCC and the witnesses included Mr Ramadhan Ggoobi, the Permanent Secretary in the Ministry of Finance, also the secretary to the Treasury, and UVCC’s company secretary Moses Matovu, the signing.
In the agreement, the company was given free land in the Industrial and Business Park at Namanve after it indicated its capability of establishing a coffee processing facility in Kampala. It must be remembered that this is the same company which was given a multi trillion deal to construct Lobowa hospital which until now it’s existence is yet to be known.
However, in what appears to be misrepresentation or fraudulent action and negligent misstatement in the legal document, UVCC is given exclusive rights to buy all Uganda’s coffee even before the government can look at other players.
UVCC’s concession will end in 2032, but it is subject to renewal. The total investment value is not stipulated as per the leaked legal document.
During the period, the government pledges support in the form of non-precedent concessions that in essence mean the investor will not be eligible to pay any form of tax from project commencement.
“[UVCC] shall be entitled to all tax exemptions available under the laws of Uganda. [These] shall extend to taxes and impositions applicable to all the activities of the company and its foreign staff in respect to the export of green coffee beans,” a clause in the agreement states.
Another clause makes clear the fact that the government further commits the Ugandan taxpayers. The said clause indicates that “where no exemption from tax is allowed under the law of Uganda or exemption provided is inadequate to provide the company with comprehensive relief from taxes or other impositions, then the government undertakes that it will bear the cost of all taxes.”
UVCC will enjoy exemption in regard to Import Duties, Value Added Tax, Excise Duty, Stamp Duty, Corporate Income Tax and employment related taxes, as well as any other tax or imposition levied or charged under the laws or any other laws that may be enacted.
Article 4.1.4 of the deed says: “If there is any change in law or change in tax which substantially alters the economic benefits accruing, the company may within one year from commencement of the deed (February 10) write to government in order to maintain the economic benefits of UVCC.”
It adds: “Upon receipt of the notification, government shall take immediate steps to restore the company to economic position it should have been in but for the change of law.”
This is a real package to Ugandan farmers of Coffee and coffee business men, who see this as a potential loss, danger and mockery to them with the history of the investor who in March 2019, Parliament hurriedly approved the Ministry of Finance’s request for issuance of promissory notes amounting to £379.7m (Shs.1.4 trillion) as security to the project developer and she has come back striking like thunder only this time to finish the remains of the local coffee farmers.
In clause (section 4.2.1) that commits the government to ensure reasonable measures to give priority of supply of coffee to the company before registering any contract or acknowledging any arrangements for export of coffee beans. This is so that UVCC will have ample supply of coffee to sustain its operations. Section 4.3 of the agreement says the government will protect existing coffee processors in line with existing local and international agreements.
Officially, the agreement formalises fraud by government. It creates monopoly which allows one player to determine prices in a free market economy, many pundits have asked why this doesn’t apply to other sectors of the economy and only targets coffee and specifically some regions which are traditional coffee producers. The initial agreement was signed seven years ago and there is little evidence that shows progress.
The real reason why the project has been resurrected is probably because the government is monopolising the coffee business through the backdoor. It is noteworthy that the agreement coincides with Uganda’s withdrawal from the international organisation of coffee exporters where Uganda was among the top members.
The agreement mostly emphasizs to prioritising supply of coffee to the company before any exports or sales elsewhere can be allowed, notwithstanding the fact that UVCC is a private company like any other. The fact that it enjoys certain legal privileges and exemptions are neither here nor there. This project smacks of similar well-connected ventures like Good Will Tiles and Lubowa hospital. It is a personal investment disguised as a legitimate private investment taking advantage of State concessions.
The concessions according to agreement with the company in respect to the project, are aimed at implementing the project in an efficient manner.
UVCC has already been given a huge chunk of land by the Uganda Investment Authority (UIA) within Namanve Investment Park.
Another provision in the agreement (section 3.1) empowers UVCC to roast coffee beans, manufacture coffee capsules, as well as grind and make instant spray coffee. All this production combined, is estimated to total 60,000 tonnes of processed coffee.
It is thought the company will create 246 jobs of skilled and unskilled labourers. Also, in the event that UVCC chooses to sell its interests, the government will be notified and given first priority.
A recipient of a trillion shillings loan courtesy of a government guarantee, the project continues to run with no tangible results.
Does the government have any hope for Ugandans? Why is it that this is the only investor who gets trillions of loans from the government with a hefty of tax exemptions and chunk of land but still does shoddy work? Ms Pinetti who was in 2019 given the green light to erect a children’s hospital in Entebbe has previously been accused of doing shoddy work in Libya
What does the New Coffee Law Say?
Was this Coffee Cartel deal planned earlier than we imagined?
In coffee growing circles, there is a fierce debate on the National Coffee Bill, 2018 which was later passed by Parliament in August 2020.
It seeks to provide for the registration of coffee farmers by the Uganda Coffee Development Authority (UCDA).
The registration of farmers was to entail capturing details of the size of land, number of coffee trees, particulars of a farmer, coffee buyers, sellers and nursery bed operators.
One is left to imagine where this will leave the coffee sector which appears to be the leading exporter by the government with a tune of eight (8) tonnes per year.
The author is a Councilor in Namisindwa district-Bugisu and the views are purely personal not those of the publisher-editor