Uganda's coffee bill: the case for co-operatives

AGRICULTURE

By David Muwanga

The co-operatives sector in Uganda was at one time one of the strongest, especially in the 1930s and 40s.

There was a fully fledged ministry of co-operatives once led by the late John Sebaana Kizito and Yona Kanyomozi.

The structures were from the national to parish levels, supported by established co-operative officers, who were properly facilitated by the Government to traverse the country.

By 1960, there were about 2,000 registered cooperatives, composed of primary societies who came together to form tertiary co-operative societies. These then created the co-operative union or area cooperative enterprise. It is these enterprises that form the current Uganda Co-operative Alliance (UCA).

By then, there were 70 unions and more than 2,000 co-operative societies creating jobs for millions of farmers in Uganda.

Co-operative unions by then were given 100 per cent monopoly to gin cotton. All cotton from the farmers was sold to the primary co-operative societies, who could then sell to the tertiary and these sold to the co-operative unions.

The unions would then export cotton and coffee through the Lint Marketing and Coffee Marketing boards. Government would then control the farmers and stabilize prices. The unions were also authorized to control 60 per cent of Robusta coffee and 90 per cent of Arabica coffee.

"This meant that coffee and cotton growing was in the hands of the unions. Beneficiaries of co-operative education at Bukalasa Agricultural College then were the managers of the co-operative unions, unlike today when the sector has been penetrated by investors," says Ivan Asiimwe, the CEO of UCA.

In 1964, the unions started the former Cooperative Bank to provide finance to farmers and this is no more.

Asiimwe says that although the Government put in place a credit facility through commercial banks, the facilities are lending out the money to farmers not as agricultural but as commercial loans.

By 1965, the unions had 14 cotton ginneries and seven coffee curing plants.

"At that time, the unions had a net worth of sh325m and the economy was vibrant and in the hands of the farmers," adds Asiimwe.

What happened to that good story?

In 1970, then-President Milton Obote realized that he needed to control the co-operatives sector. He amended the Co-operatives Act 1963, giving birth to the Co-operatives Act 1970.

The Act gave the minister powers to control co-operatives. The minister would appoint the board of directors and secretary managers of the unions. This made the unions become government parastatals and the jobs were given to the Uganda People's Congress (UPC) youth wingers. So this removed the independence of the unions.

Then came the 1979, 1981 and 1986 wars, during which the co-operative unions lost a lot of properties. For example, Uganda Co-operative Transport Union (UCTU) lost many trucks that were loaded with coffee being intercepted at roadblocks and diverted to other destinations.

Banyankole Kweterana Co-operative Union lost many cows.

Many politicians of the time benefited from the confusion by selling union assets and factories to Kenya, Tanzania, DR Congo and Rwanda while buildings were hit by saba sabas. Many farmers also died in the wars. The then-managers also shared in the loot.





The World Bank and IMF factor

The World Bank and the International Monetary Fund (IMF) then advised the Government to liberalize the economy.

This paved the way for competitors to enter the market, marking the end of co-operative unions.

During privatisation, the Government was advised to overhaul the ministry of co-operatives and it was swallowed by the Ministry of Trade, Industry and Tourism. The co-operatives section remained with three staff - commissioner, assistant commissioner and one member of staff.

"This meant there was no grassroots participation and the activities of co-operatives. Government again decentralised services as a result of liberalisation.

They created a post of district commercial officer. The occupant of this post was recruited by the district service commission and was answerable to the chief administrative officer, who was under the Ministry of Local Government.

"This means there is no direct linkage between the district commercial officer and the co-operatives department. This is a mismatch from the national to grassroots levels," says Asiimwe.

Currently, we have 19,718 registered co-operative societies, including SACCOs that are acting as financial co-operatives but not involved in agricultural production and marketing.

Other SACCOs are in housing, transport, education and health, among others.

"These are opposed to the old co-operatives that trained farmers, provided pesticides, seeds and tractors to their members," Asiimwe tells New Vision. When fully revived, these very co-operative unions would help exporters, importers and the Government in registering and tracking farmers instead of Government spending money in a completely new project of registering farmers.

How Government should revive cooperatives

Asiimwe proposes that Government should expedite compensating co-operatives that lost properties during the different wars.

"It is true Government has compensated some of them but not all. They are demanding billions of shillings - for example, West Nile Co-operative Union lost 20 trailers that included Scanias and Leylands."

He also proposes that Government comes up with a favorable tax regime for co-operatives. "Co-operative unions are paying taxes like any other private company. Why exempt investors and not co-operatives that would create more jobs for the Ugandans?"

He points out that in the 2015 and 2017 financial years, the Government granted waivers for a ten-year tax.





Why Uganda is not among 15 top coffee exporters?

According to Asiimwe, Uganda is still exporting Kiboko coffee (unprocessed coffee), which is rebranded in the importing countries and brought back to the Ugandan market as ready coffee for consumption.

He said Germany and The Netherlands are ranked third and fourth in coffee exporting yet they don't grow coffee.

"Where do they get it from? Switzerland is ranked fifth and exports Nescafe, but they also don't grow coffee.

"They buy our coffee, export, rebrand and re-import to Uganda and a kilogramme of this coffee is sold at sh4,000 to the exporters and resold here in Uganda at sh140, 000 per kilogramme. This means government needs to support coffee farmers and add value so that we also appear on the global list," says Asiimwe.

He points out that in Brazil and South Africa, if the Government is procuring agricultural products such as maize and rice, 30 per cent must come from local farmers.

Asiimwe says that in Brazil and South Africa, if the Government is procuring agricultural products such as maize and rice, 30% must come from local farmers

The story of co-operative education

It is understood UCA has signed a memorandum of understanding with the National Curriculum Development Centre (NCDC) to have co-operative education imbedded in the curriculum.

Co-operative education started in 1954 at Bukalasa and was later transferred to Kigumba in 1970s.

"The institute had a large chunk of land but a larger part of it has been given to the Uganda Petroleum Institute at the expense of the co-operative college.

Asiimwe says Uganda also had Tororo Co-operative College but it is only offering certificates and diplomas.

"While Uganda is only offering certificates and diplomas, Tanzania that established a constituent cooperative college of the University of Dar es Salaam in 1963 now has a fully fledged Moshi University of Cooperatives offering degrees and PhDs."

Neighbouring Kenya in 2014 also started a constituent cooperative college at Jomo Kenyatta University but now has a fully fledged Cooperative University of Kenya.


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