Wednesday 29 June 2022

Uganda’s Parliament calls for termination of coffee agreement

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KAMPALA, Uganda – The Parliament of Uganda unanimously called for the termination of the agreement between Uganda Vinci Coffee Company Limited (UVCCL) and the Government, which sought to grant the company monopoly over the coffee sector.

The report of the Committee on Trade, Tourism and Industry on the alleged unfair terms of the Memorandum of Understanding (MoU) between government and UVCCL further directed government to report back to Parliament within six months of adoption of the report.

Presented by the Committee Chairperson, Hon. Mwine Mpaka during plenary on 18 May 2022, the report revealed that the agreement was illegal as it contravened the Constitution and other tax laws.

“Article 8(a) of the Constitution was infringed upon by the agreement when the execution of the agreement was concluded without the input of coffee farmers who are the owners of coffee beans which are being granted to UVCCL by the agreement,” read the report in part.

The committee further observed that the structural adjustments that government undertook between 1981 and 1990 led to the liberalisation of Uganda’s coffee sector and yet the agreement introduces monopoly into the coffee industry which is against the principle of liberalization.

“The committee observes that the agreement creates monopoly in favour of UVCCL to the purchase of superior quality coffee beans from Uganda by restricting government from registering any contracts or acknowledging any arrangement for the export of coffee beans,” Mwine Mpaka said

The committee discovered that UVCCL failed to commence the construction of the US$440 million coffee factory when it was allocated 25 acres of land in Namanvanve Industrial Park.

“The committee was informed that whereas government had spent colossal amounts of money to grade, fence, backfill the land allocated to UVCCL at a tune of Shs7 billion and relocated the power lines near the proposed facility site, UVCCL had not commenced, nor undertaken any activity as envisaged in the agreement,” Mwine Mpaka read.

It was also recommended that government should consider extending appropriate incentives to the already existing 47 local companies that are doing value addition as well as fast-track the capitalization of Uganda Development Corporation to invest in soluble coffee plant.

“The already existing 47 local processors are in the business of adding value including roasted coffee beans, roasted and ground coffee as proposed by the Vinci Coffee Company. This is being done without similar incentives as those proposed in the UVCCL agreement,” the report read.

The MPs recommended that officials who committed government to such illegalities should be penalized as a deterrent measure to avert similar occurrences.

According to the committee’s findings, the agreement signed on 10 February 2022 revealed that whereas Government represented by the Minister of Finance and Secretary to the Treasury, the agreement was not signed by UVCCL.

“The representative from UVCCL, Ms. Enrica Pinetti signed as a witness and no one signed on behalf of UVCCL. The committee notes that under the article and MoU of UVCCL, it is only a director, secretary or person appointed by the board who has the right to authenticate a document affecting the company,” said Mwine Mpaka.

Mwine Mpaka said that the agreement can be challenged as not binding on UVCCL.

Mwine Mpaka also refuted allegations that the committee’s recommendations were influenced by President Yoweri Museveni.

“Some findings leaked in the media and the President invited the committee. We sought guidance from the Speaker who gave us a go ahead to meet the President,” said Mwine Mpaaka.

He said that President Museveni agreed with most of the issues raised but emphasized that the biggest problem has been on value addition.
“He recommended that three months should be given to cater for revision of the agreement as opposed to termination, which may have far-reaching implications,” Mwine Mpaka added.

Hon. Abed Bwanika (NUP, Kimaanya-Kabonera Division) who was the chief petitioner against the agreement contended that government should have consulted stakeholders in the coffee sector before signing the agreement.

“How can government give an individual company to determine the price of coffee and export it against the will of Ugandans. Coffee is a heritage for the people of Uganda. It is God given, a strategic commodity and at the centre of the country even before independence,” Bwanika said.

Budadiri West County MP, Hon. Nandala Mafabi pointed out that coffee is the leading foreign exchange earner and giving monopoly to a foreign company means sending all the forex benefits to that country.

“Such agreements are very dangerous. If you were given a license in 2014 and up to now you have not constructed a coffee factory, then you do not know what coffee is. Tomorrow, we shall deliver 600 packets of roasted coffee to confirm that if you empower locals, they have capacity,” Nandala Mafabi said

The Leader of the Opposition, Hon. Mathias Mpuuga recommended that a caveat should be put on the land that was allocated to UVCCL to stop further activity on it, ‘since the nature of the agreement did not stop the company from carrying out any activity on the land, even after its termination’.
“Any attempt by the company to try and litigate, those are other matters; we have to on our part protect the Ugandans,” Mpuuga said.

He also applauded the MPs for supporting the report in solidarity, saying that whereas it started in the Shadow Cabinet, the whole House took interest in the matter.

“We must all legislate for prosperity. I support that the report is adopted with amendments. The committee observed that the agreement was potentially not signed. Does that agreement exist in form and function? Has the law changed? We need the Attorney General to clear us on that,” Mpuuga said.

The Attorney General, Hon. Kiryowa Kiwanuka said that government will look into the recommendations and report back.

“The law has not changed. If the agreement is null and void, it is null and void. We shall look into the recommendations and we shall be happy to report back,” said Kiryowa Kiwanuka.

On 12 April 2022, Hon Abed Bwanika raised a matter of national importance pertaining to the agreement between government and UVCCL. He was concerned that the agreement would eliminate the people of Uganda that are involved in coffee production and would give monopoly of purchase and export of coffee from Uganda to UVCCL.

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