Experts weigh in on the debate over the added value of coffee

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Stakeholders in the coffee sub-sector have described the concessions granted to the Uganda Vinci Coffee Company (UVCC) to add value to the country’s green beans as curious.
Mr. Nathan Nandala Mafabi, President of the Bugisu Cooperative Union (BCU), described the process that results in adding value to coffee as “unsophisticated” and reliant on capital and machinery.

“[Value addition in coffee] is one of the easiest things to do because [one is] mainly roasting, grinding [and packaging]Mr. Mafabi said, adding, “We don’t need fancy equipment…$5 million [gets you] huge gear…you don’t give all of these exemptions to one woman (UVCC Director Enrica Pinetti) to take in one day.
Mr Mafabi believes that instead of giving concessions to “an individual who has so far failed to provide the multi-billion specialist hospital [in Lubowa]the government should have channeled capital to local trading companies.

The government, however, objected to the deal it struck with the UVCC being called bad. Appearing before the House last week, Finance Minister Matia Kasaija was quick to say the deal will benefit Ugandans, not least because the UVCC will pay a competitive, market-determined price.
“This agreement does not prevent other potential investors from investing in value addition. The UVCC offers the country the opportunity to get better prices for high-quality coffee,” he said, adding, “[UVCC] aims to establish several hubs across the country intended to improve traceability of farmers and eliminate intermediaries.
Stakeholders in the coffee sub-sector have however noted that adding value is not the silver bullet that the government is planning.

In a February opinion piece, Andrew Rugasira, who tried to put high-quality roasted and packaged coffee on the shelves in the North, wrote: “…the market for value-added coffee is defined by historic asymmetries in the availability of capital, logistics, information technology and purchasing power between consumer and producer countries.
He further warned: “As I have learned, at great expense, simply roasting your coffees here does not guarantee that you will be competitive in European consumer markets. Five companies control 50% of the global roasted coffee market (Kraft, Sara Lee, Nestlé, P&G and Tchibo); and four companies control 40% of the world coffee trade (Ecom, Neumann, Louis Dreyfus and Volcafe).

Whether the UVCC has a magic wand to overcome such asymmetries remains to be seen. What seems clear is that Ugandan coffee farmers continue to face headwinds and the agreement between the government and the UVCC will not protect them from this.
“We have asked for capital investments but have not been successful…Instead of giving these incentives to non-Ugandans, give them to Ugandans who in turn will employ Ugandans and therefore contribute more to the economy,” Mafabi explained.

Butiru County Legislator Gerald Wakooli agrees. He says, “People are ready to add value, but they don’t have the capital. A few people tried to go to the bank for loans so they could outsource the necessary equipment, but they were rebuffed by high interest rates. »
He adds: “The VAT is extremely high, even on the basic equipment that our employees have to use. This makes it more difficult to access the base machine as a transporter. In the long run, grassroots farmers who attempt to polish it end up using motors to simply hammer it to remove the green coating.

Mr. Wakooli recommends that the government establish a farmers’ bank that will specifically cater to the financial needs of farmers. Once established, the bank can provide farmers with capital at low interest rates in addition to other forms of support.
Uganda is Africa’s largest coffee exporter and ranks seventh globally.

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