Uganda: Coffee controversy deals Museveni a rare defeat in parliament

By Musinguzi Blanshe
Posted on Thursday, 26 May 2022 10:50

Ugandan coffee beans (twitter)

In power for 36 years, Uganda's President Yoweri Museveni has long held near total control over the country. But he recently suffered a rare defeat in parliament after legislators ignored his wishes and opted to terminate a lucrative coffee processing and export agreement that the government had handed to an Italian investor. Voting for the termination were many members of Museveni's ruling National Resistance Movement (NRM). 

On 10 February, Finance Minister Matia Kasaija signed an agreement with Uganda Vinci Coffee Company (UVCC) to establish a coffee processing plant at Kampala Industrial and Business Park in Namanve. The company, whose ownership isn’t clear, was represented by Enrica Pinetti, an Italian investor whose Finasi conglomerate also operates in Libya, Chad, Sudan and Egypt.

The deal raised quite a bit of controversy after it was leaked, with parliament setting up a committee that eventually recommended its termination. Coffee is Uganda’s main export commodity, earning more than $740m last year.

“The agreement executed between the government of Uganda and Uganda Vinci Coffee Company Limited is unconstitutional, illegal void ab initio and unenforceable at law,” said the committee that probed it. “The government is recommended to terminate this agreement and report back to parliament within six months.”

Sweet deal

The deal was full of sweeteners rarely offered to foreign investors in Uganda.

UVCC was promised an exemption from import duties, value-added taxes, excise duties, stamp duties, corporate income tax and employment-related taxes. The company was also given a 49-year lease for a huge chunk of land in Namanve Investment Park, on the outskirts of Kampala.

The current deal would mean that foreigners will take all the money.

Under the deal, Uganda committed to prioritise coffee supply to the company. Critics argue that the deal inadvertently created an export monopoly.

After parliament took interest in the deal, Museveni summoned his party’s legislators. He agreed with them that the deal should be reviewed, but lobbied against its outright cancellation.

“The president agreed with most of the issues raised by the committee, but strongly recommended […] a review of the agreement […] as opposed to termination, as termination could have reputational damage,” trade committee chairman Mwine Mpaka told parliament last week.

Backdoor investor?

Pinetti has had connections in Uganda for almost a decade. She first met Museveni in 2014 after setting up Uganda Vinci Coffee Company Limited, marketing herself as an investor who could unlock the country’s coffee potential despite her lack of international reputation.

However, her first deal, for which she earned widespread notoriety, was for construction of a $379m specialised hospital in Wakiso district, a few miles from Kampala. A company that she owned was contracted for the project and has been paid more than $180m to date, even as work on the hospital has ground to a halt with only the foundation laid so far.

Members of parliament who have repeatedly been blocked from accessing the construction site were irked by the government’s recent request for another $90m to pay Pinetti. Some of the excuses that officials cited for the delay are the Covid-19 pandemic, heavy rainfall and language barrier.

The notoriously secretive Pinetti has declined to respond to the committee’s summons. She could not be reached for comment.

Coffee politics

Mwambutsya Ndeebesa, a political historian at Makerere University in Kampala, tells The Africa Report that Museveni’s parliamentary setback was surprising.

“The history of parliament under the National Resistance Movement is the history of executive control of parliament,” he says.

Standing up to Museveni is a survival instinct for this particular case.

This time, Ndeebesa says, legislators refused to toe Museveni’s line because of coffee’s unique ability to trigger a voter revolt. The crop is grown by more than 1.7 million Ugandans and has been the country’s main export commodity for decades.

“Since coffee is grown throughout Uganda and it is emotive, if members of parliament give away the coffee rights of […] farmers, they may expect to be punished at the polls,” Ndeebesa says. Standing up to Museveni “is a survival instinct for this particular case”.

A spokesman for opposition leader Bobi Wine’s National Unity Platform (NUP), which championed the call to cancel the deal, tells The Africa Report that in the end the ruling party voted in its own self-interest.

“We are telling them [to] do the right thing, don’t even listen to us in […] opposition, listen to what people are saying,” says Joel Ssenyonyi. “We are glad they were able to listen.”

However, Museveni hasn’t given up on the deal. On 23 May, deputy speaker of parliament Thomas Tayebwa revealed that he had already met with the president on the matter and they agreed to “change a few things in that controversial coffee agreement”.

Both Ndeebesa and Ssenyonyi think that when the debate is returned to parliament, ruling party legislators will have been either bribed or intimidated into accepting it. The next phase of the battle, Ssenyonyi says, will be “time for our colleagues (in the ruling party) to prove their worth, to prove that they are solid, to prove that they cannot easily be bribed to change their mind”.

Top earner

Gold briefly overtook coffee as the country’s top export earner in 2019. Even so, economists argue that behind those figures, coffee remained the country’s top export earner as gold was being smuggled into the country from the neighbouring Democratic Republic of Congo and exported by foreigners who took all the proceeds.

Since July last year, Bank of Uganda has not recorded any gold exports and the US Treasury Department’s sanctioning of Belgian businessman Alain Goetz and his Uganda-based African Gold Refinery in March likely spelled the end of Uganda’s short-lived gold export boom.

Robert Kabushenga, a prominent coffee farmer in Uganda, says the crop’s highest value is at the processed end. The current deal, he says, would mean that “foreigners will take all the money”.

Instead, he says, the government should offer the incentives it dangled in front of its Italian investor to local farmers so they can acquire capital to set up a processing plant and run it themselves. “It’s not rocket science.”

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