Coffee farmers appear before the Trade Committee at Parliament on April 26, 2022. PHOTO | DAVID LUBOWA
Parliament’s recommendation that an agreement the government entered into with Uganda Vinci Coffee Company Limited (UVCC) be cancelled could be the tip of the proverbial iceberg.
Sunday Monitor has learnt that one member of the House is harbouring plans of starting impeachment procedures against Mr Matia Kasaija if the Finance minister is not reprimanded as recommended by the Trade Committee report.
Mr Kasaija signed and Mr Ramathan Ggoobi, the Finance ministry Permanent Secretary and Secretary to the Treasury (PSST), witnessed the impugned agreement that gave UVCC—among others—tax concessions straddling a decade.
Mr Ggoobi and Attorney General Kiryowa Kiwanuka were also part of the call-out by the Trade Committee’s report.
The lawmaker, Mr Richard Lumu (Mityana South), is particularly interested in Mr Kasaija’s scalp in the belief that this will be a deterrent.
“When [the government] fails [to act], the rules of procedure will give us clear guidance. We will move a motion of censure,” Mr Lumu said.
READ: Coffee probe report gets blessing from Museveni
Mr Yusuf Nsibambi (Mawokota North), however, reckons his counterpart may end up down the rabbit hole with such an approach.
“I would personally differ from that path. We will go to courts to seek nullification of the agreement should government fail to act,” Mr Nsibambi said.
Asked about the growing intent to have him guillotined, Mr Kasaija said thus: “My friend Monitor, you never wish me well. I have said I will never talk to Monitor at all. I am an old man of about 80 years. All your stories have been negative on me.”
Several bites at the cherry
Mr Kasaija was a junior Finance minister (Planning) when the government penned its first Project Implementation Agreement (PIA) with UVCC on April 29, 2014. Italian businesswoman Enrica Pinetti signed on behalf of UVCC while Mr Keith Muhakanizi—the PSST then—did the honours for the government.
This agreement is thought to have followed a feasibility study that came to the conclusion that Uganda’s coffee chain required improvement.
The feasibility study also indicated that a coffee soluble plant was due to enable Uganda to fetch more from its green beans. The PIA was to facilitate the company’s initiative to set up a processing plant with a full capacity of 60,000 tonnes in phases. The first phase would see the plant process 27,000 tonnes of the green beans into roasted and instant coffee for local and international markets.
While this never materialised, an addendum was executed on December 21, 2015 to enhance the PIA. By this time, Mr Kasaija was fully in charge of the Finance docket.
In the addendum, UVCC was granted a number of tax exemptions. Still, the project never took off.
Nearly two years later, on October 17, 2017, a second addendum to the initial PIA was signed. This time UVCC was awarded exclusivity to buy and clean coffee beans. It was to export the excess after processing some.
The addendum made it unlawful for the government to register any other coffee exporting company for a period of 10 years.
READ: Court sets hearing date for case against coffee deal
The last amendment of February 10, which proved to be the final straw, was signed by Mr Kasaija with Mr Ggoobi (for government) and Ms Pinetti (for UVCC) acting as witnesses. After Sunday Monitor’s exposé on the same, the thrice amended PIA was tabled before the House by Dr Abed Bwanika (Kimaanya-Kabonera).
Parliament Speaker Anita Among ordered an investigation into the matter by the Trade Committee under the wing of Mr Mwine Mpaka (Mbarara City South). The Committee started its work on April 12, 2022.
READ: Inside the deal that got red flags flying
The conclusions of the investigation—whose contents were tabled before Parliament this week—have now recommended deterrent actions against officials at the centre of the impugned agreement (including Mr Muhakanizi). The agreement was deemed to have violated a series of Uganda’s Acts, including the NSSF, Excise Duty, and Coffee Acts. It was also ruled to have offered a monopoly of coffee supply to UVCC.
President Museveni—in a meeting with his party’s lawmakers—had attempted to save the agreement, but failed.
A March 23 investigation by Saturday Monitor unpicked the ownership puzzle of UVCC. We exclusively reported that the company was registered on January 9, 2014 and is owned by four individuals and one firm—Hawk Limited. All owners have registered addresses in the United Arab Emirates (UAE), a tax haven.
Ms Pinetti is registered as a single director and chairperson of the company. She is part of a board that comprises five slots, including the vice chair, secretary and two members.
According to Uganda Coffee Development Authority (UCDA), Uganda is the leading coffee exporter in Africa. Coffee also contributes 20 percent of the country’s forex. By March 2022, Ugandan coffee exporters sold 6.5million bags of green beans, each bag measuring 60kgs. $80m (about Shs291b) was fetched in export receipts.
READ: Tax incentives: Learn from Vinci coffee deal
At least 1.7million Ugandan households are involved in coffee farming. Uganda envisions exporting 20 million bags in 2025.
UCDA records indicate that Uganda has 47 companies involved in value addition to coffee. These companies sell soluble instant coffee. The country also has 20 top leading companies involved in coffee exportation.
During the NRM’s government economic restructuring and credit agreements, Uganda’s coffee exports declined to 20 percent from 80 percent. Under the Washington Consensus, which President Museveni entered into with the World Bank Agricultural Adjustment programme in 1990, the Coffee Marketing Act of 1969 was repealed. This disabled Uganda’s coffee unions.
UCDA data shows that in 2020/2021 Uganda exported 6.49 million bags.
In 2019/2020, the country exported 5.36m bags. Italy imports most of Uganda’s coffee followed by Sudan, Germany, Belgium and USA.
Parliament’s report established that five companies between 1994 and 2017 had carried out feasibility studies to set up coffee processing plants. None, however, took off with its plans despite all reports confirming the project was viable.
At one point—before the disbandment of the Coffee Marketing Board sought a paltry $8.8 million (Shs32b)—the government failed to offer a guarantee to companies that intended to kickstart the project.
Mr Robert Kabushenga, an outspoken coffee farmer, lauded the House for its bold stand on the coffee deal.
“This gives us a chance to define a meaningful way forward. There has to be a shared understanding of what it means to create value in the coffee production process and what value means to all stakeholders,” Mr Kabushenga said, adding that Uganda produces coffee primarily for export.
To Mr Kabushenga, four areas of coffee improvement should be considered. The bean quality and yield, which he says can move the nation into the billion-dollar income segment while it also directly hits the farmer’s pocket.
“Public investment in a medium-sized soluble coffee plant that uses low-grade coffees should be considered. This facility can be used by entrepreneurs who may wish to process their own instant coffee and low-grade coffee prices will go up,’’ Mr Kabushenga proposed.
He also rooted for incentives through cooperatives that will enable locals to participate in marketing and processing of coffee as the most effective way of ensuring that the benefits of the sector value chain accrue to the majority and increase financial return.
“Government should fix the railway, diversify seaport services and incentivise investment in packaging and logistics, tapping into the creativity of Ugandan youth, and enhancing awareness of our coffee,’’ Mr Kabushenga concluded.
There are growing fears that UVCC will seek legal redress in the event that Cabinet sides with the legislative branch of government.
“Vinci is the system and if this phoney company goes to court it will be an attempt by the regime to regularise the contract or buy time,” Mr Nsibambi, a trained lawyer, said.
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