Inside multi-billion coffee deal government signed with UVCC

Details of how the government handed over the country’s entire coffee sector to a controversial Italian investor have emerged following a leaked February 10 legal document signed by both parties.

Finance Minister Matia Kasaija signed on behalf of the government, while Ms. Enrica Pinetti signed on behalf of Uganda Vinci Coffee Company Limited (UVCC).

Mr. Ramadhan Ggoobi, the permanent secretary of the Ministry of Finance, who is also the secretary of the Treasury, and the general secretary of the UVCC, Moses Matovu, witnessed the signing.

UVCC is registered and located at Plot 2, Summit View in Kololo, Kampala. The company received free land in the Namanve Industrial and Business Park after indicating its ability to establish a coffee processing facility in Kampala.

However, in what appears to be a misrepresentation or fraudulent action and negligent inaccuracy in the legal document, the UVCC is granted the exclusive right to purchase all Ugandan coffee before the government can even look at it. other actors.

The UVCC concession will end in 2032, but is subject to renewal. The total value of the investment is not stipulated according to the leaked legal document.

During the period, the government promises support in the form of unprecedented concessions which basically means that the investor will not be eligible to pay any form of tax from the start of the project.

“[UVCC] shall be entitled to all tax exemptions provided for by the laws of Uganda. [These] shall extend to taxes and charges applicable to all activities of the company and its foreign personnel with respect to the export of green coffee beans,” reads a clause of the agreement.

Another clause clarifies that the government engages more Ugandan taxpayers. The said clause states that “Where no exemption from tax is permitted under Ugandan law or the exemption provided is insufficient to provide the company with full relief from taxes or other charges, the government undertakes to bear the cost of all taxes.”

UVCC will enjoy exemption from import duty, value added tax, excise duty, stamp duty, corporate income tax and employment related taxes , as well as any other tax or charge levied or imposed under the laws or any other law that may be adopted.

Article 4.1.4 of the deed stipulates: “In the event of a modification of the law or taxation which substantially modifies the economic advantages resulting therefrom, the company may, within a period of one year from the entry into force of the act (February 10), write to the government in order to maintain the economic advantages of UVCC.

It adds: “Upon receipt of the notification, the government will take immediate action to restore the economic position of the business to which it should have been but for the change in law.”

Another potential sticking point is a clause (Section 4.2.1) that commits the government to take reasonable steps to prioritize the company’s coffee supply before registering any contract or recognizing any agreement. export of coffee beans. This is so that the UVCC will have an adequate supply of coffee to sustain its operations.

Section 4.3 of the agreement states that the government will protect existing coffee processors in accordance with existing local and international agreements.

The deal was called “fraudulent” by Mawokota constitutionalist and lawmaker Yusuf Nsibambi.

“The deal formalizes government fraud. How would you create a monopoly – allowing one player to determine prices in a free market economy? How is it that this does not apply in other sectors? asks Nsibambi.

Mr Stephen Lwetutte, a human rights campaigner, says the original agreement was signed seven years ago and there is little evidence to show progress.

“The real reason the project was resurrected is probably because the government is monopolizing the coffee trade through the back door. It should be noted that the deal coincides with Uganda’s withdrawal from the international exporters organization where Uganda was one of the leading members,” Mr. Lwetutte said.

He added: “Furthermore, the agreement specifically alludes to prioritizing the company’s supply of coffee before any export or sale elsewhere can be permitted, notwithstanding the fact that the UVCC is a private company. like the others. The fact that it enjoys certain legal privileges and exemptions is neither here nor there. This project resembles similar well-connected companies like Good Will Tiles and Lubowa Hospital… It is personal investment disguised as legitimate private investment profiting from state concessions.

The concessions – according to the agreement – with the company with regard to the project, aim to implement the project in an “efficient” way.

UVCC has already been awarded a huge piece of land by the Uganda Investment Authority (UIA) within the Namanve Investment Park.

A 49-year lease was also signed with the UVCC. The agreement, however, gives carte blanche to the company to “use the land for any purpose it deems appropriate in connection with the project”.

Another provision of the agreement (Section 3.1) authorizes the UVCC to roast coffee beans, manufacture coffee capsules, and grind and manufacture instant coffee spray. All this combined production is estimated at 60,000 tonnes of processed coffee.

It is believed that the company will create 246 jobs for skilled and unskilled workers.

In addition, if the UVCC chooses to sell its interests, the government will be notified and given priority.

Mr Ggoobi, who witnessed the signing of the agreement, offered no response when contacted.

But it’s safe to say that coffee growers are in shock.

“This act puts Ugandan coffee in the hands of a single buyer and deprives farmers of the benefits of perfect competition between buyers,” said Mr. Moses Kasibante, a coffee farmer and former MP, who represented Rubaga North in the 10th Parliament.

UVCC was incorporated on January 9, 2014.

On July 13, 2014, President Museveni met its owner, Enrica Pinetti.

Ms Pinetti is the woman behind the controversial Lubowa National Specialty Hospital.

Recipient of a loan of one trillion shillings thanks to a government guarantee, the project continues without tangible results.

Ms Pinetti – who in 2019 was given the green light to erect a children’s hospital in Entebbe – has previously been accused of doing bad work in Libya and Chad.

Efforts to get a comment from Ms Pinetti or her legal representatives were unsuccessful at press time.

In coffee growing circles, there is fierce debate over the National Coffee Bill, 2018.

The National Coffee Bill was passed by Parliament in August 2020.

It aims to provide for the registration of coffee growers by the Uganda Coffee Development Authority (UCDA).

Farmer registration was to involve entering details of land size, number of coffee trees, contact details of a farmer, coffee buyers, sellers and nursery operators.

The Buganda kingdom, among other power centers, has objected to some contents of the bill, arguing that they will affect the thriving sector, which is recovering from decades of ruin.

Last year, President Museveni refused to approve the bill, asking parliament to review several provisions of the bill.

Mr. Museveni wants the House to revise Article 14 of the bill regarding the appointment of the UCDA board, the appointment of the chairman of the board and the director of the authority.

He also wants Parliament to revise Article 26 on the registration of coffee growers and the issuance of a registration certificate for coffee nurseries.

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