Parliament has directed Government to terminate the coffee agreement it recently signed with Uganda Vinci Coffee Company Limited (UVCCL), a foreign company that was awarded exclusive rights to buy Uganda’s coffee.
This followed a report by Parliamentary Committee on Trade, Tourism and Industry that recommended cancellation of the agreement the government signed with Uganda Vinci Coffee Limited terminated in public interest.
The Committee on Trade, Tourism and Industry chaired by Mbarara City South MP, Mwine Mpaka described the agreement as illegal further noting that, “officials who committed the Government to such illegalities should be penalized as a deterrent mechanism to stop similar occurrences in future.”
“The Government is directed to terminate this agreement and report to Parliament, within 6 months from the date of adoption of this report. Upon termination, the Government should regularize its relationship with Uganda Vinci Coffee Company Limited through proper due diligence, due process and proper stakeholder consultation before any further business can proceed. Thus initiating fresh negotiations,” said Mpaka.
According to the report, UVCCL monopoly is a threat to the already existing 47 licensed processors of coffee with the possibilities of causing unemployment, loss of tax and in the worst case scenario, shut down of operations.
The Committee noted that whereas Government spent colossal sums of money to grade, fence, and backfill the land allocated to a tune of Sh7 billion and had relocated the power lines to the proposed factory site, UVCCL had not commenced nor undertaken any activity as envisaged in the agreement.
“Whereas Government spent colossal sums of money to grade, fence, backfill the land allocated tune of shs7 billion and had relocated the power lines over the proposed factory site, UVCCL had not commenced nor undertaken any activity as envisaged in the agreement. The only structure on sight was an askari house made of iron sheets,” said Mpaka.
According to Mpaka, the committee observed that clause 4.2 creates a monopoly in favour of UVCCL to the purchase of superior quality coffee beans from Uganda by restricting gov’t from registering any contract or acknowledging any arrangement for the export of coffee beans.
“This means that no export of super quality coffee beans shall be allowed by Government until the quantity required by UVCCL is attained. Further still, a monopoly is created in favour of UVCCL since it controls the prices it pays for the coffee beans supplied to it,” he noted.
The committee also found that the grant of the tax waiver to UVCCL under the Income Tax Act was irregular and illegal since the provision of the law under which the waiver was granted did not apply to UVCCL at the time of grant.
After finding the massive tax waiver, the committee later interacted with the ministry of finance, Attorney General and Solicitor General who opined that all the tax incentives granted to UVCCL are provided for under various tax laws and are therefore lawful.
However, other stakeholders, including the Uganda Law Society opined that the incentives are irregular and illegal since they contravene various laws applicable in Uganda.
Mpaka also disclosed that even the signing of the agreement is questionable since UVCCL did not sign.
“The failure to sign the agreement by UVCCL brings into doubt the legality of the agreement since a party to the agreement did not append a signature. It is a known legal principle that a person who does not append a signature on a document is not bound by it. This seems to have been deliberate attempt to frustrate any possibility of terminating the agreement by either party,” he disclosed.
He further noted that the livelihoods of farmers and all persons engaged in the coffee value chain are likely to be affected due to the fact that the coffee requirements of the agreement represent approximately 15% of the total coffee production and 100% of the premium coffee beans.
The Committee concluded that Attorney General Kiryowa Kiwanuka failed to carry out an appropriate legal due diligence in the exercise of his statutory functions under article 119 (4) (b) of the Constitution to draw, peruse through and approve the agreement.
Nandala Nathana Mafabi the Budadiri West County MP noted 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,” said Mafabi.
While responding to the report, Muwanga Kivumbi the Shadow Minister of Finance expressed his dissatisfaction about the investors that are allowed in the country.
“We need to define who an investor is in this country. Somebody comes here with nothing, we give you land, water, tax holidays, free electricity, contingency liability to go and borrow. Is Uganda the investor or those people?” he wondered.
“Who is this investor, we have been told she has gone to Sango bay, the same woman is in Lubowa and we have been told the same person is in roads. What is so special about this person?” Muwanga continued.
Parliament adopted the Trade Committee report on the coffee agreement with all the amendments proposed by the MPs.