Uganda faces storm in a coffee cup
This year, coffee has rarely been absent from the news in Uganda. In February, the finance ministry signed a contract with the Uganda Vinci Coffee Company, a mysterious company led by an Italian businesswoman that promised to construct a factory capable of processing 60,000 tonnes of coffee per year.
The agreement provoked outrage, not least because it granted Vinci enormous tax breaks and priority supply. In May, a parliamentary investigation determined that the agreement was “unconstitutional, illegal, null, and unenforceable,” and the legislature voted to terminate it.
How can Ugandans benefit from growing coffee?
In his June address on the state of the nation, President Yoweri Museveni responded.
“Continued export of raw materials by Africa is the new form of slavery,” he stated as an explanation for why he was willing to offer such generous incentives for the processing plant. The biggest beneficiaries of our coffee are now the external roasters, grinders, and packers of coffee. This is unfair to the farmers.
Although there was scepticism regarding the president’s true intentions, few could dispute his point. Uganda is the continent’s largest coffee exporter by volume, earning $627 million in 2020/21. However, the majority of value is captured elsewhere, on a global market dominated by European and American traders.
According to the International Trade Centre, a multilateral organisation, only 10 pence of a £2.50 ($3) cup of coffee in the United Kingdom is spent on the coffee itself, and only one penny of that goes to the grower.
The Vinci deal may not be the solution to this issue, but the fallout may prompt a deeper enquiry: how can Ugandans benefit from the coffee they cultivate?
A plantation of coffee in southern Uganda. (Image: Thomas from Adobe Stock)
Coffee and money
The current structure of the Ugandan coffee industry is largely the result of more extensive free-market reforms in the 1990s than anywhere else in Africa. In a few turbulent years, the government dismantled the institutions that had once organised rural life: the state-run Coffee Marketing Board and co-operatives, which had provided farmers with access to markets, training, and credit.
As a result of the reforms, farmers received a larger portion of the export price, but they were also left in the hands of extortionate middlemen, who frequently defraud them with rigged weighing scales. The intermediaries then sell to the multinational corporations that dominate the export trade, including Kyagalanyi, which is owned by London-based ED&F Man, Ugacof, which is owned by Geneva-based Sucafina, and Kawacom, which is a subsidiary of ECOM Agroindustrial, another Swiss firm.
“The middlemen exploit the poor farmers by giving them peanuts,” argues Nandala Mafabi, an opposition politician and chairman of one of the few surviving co-ops, the Bugisu Co-operative Union. Regarding multinational corporations, “their role is to extract profits.”
The international collapse of the quota system under the International Coffee Agreement in 1989, which shifted the balance of power away from producer nations, occurred concurrently with the liberalisation of domestic coffee marketing.
Today the value chain is controlled not by those who grow the coffee, but by those who hold capital – a dynamic which percolates right back down to the farm, where middlemen who receive cash advances from multinational exporters can elbow out credit-starved co-operatives.
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Source: Coffee Talk