Uganda MPs terminate thorny Vinci coffee deal but could it resurface?

Tuesday May 24 2022

Coffee being sorted in Sipi, Kapchorwa, eastern Uganda. Coffee is one of Uganda’s key cash crops. PHOTO | FILE


Even as Parliament on May 18 voted to terminate the agreement between the government and Uganda Vinci Coffee Company Limited (UVCCL), ending weeks of anxiety within the coffee sector, players warn the deal could resurface as it represents President Yoweri Museveni’s fight for value addition.

“We have to wait and see, but the way this thing happened in the first place was irregular. So we won’t be surprised if it bounces back in some other form,” says an executive of a leading coffee exporting company, who declined to be named.

Parliament’s committee on trade recommended that the memorandum of understanding signed on February 10 between Uganda government and UVCCL be cancelled on grounds it is unconstitutional, illegal and not enforceable in law.

“The government is directed to terminate this agreement and report to Parliament, within six months from the date of adoption of this report,” the first recommendation reads, citing a plethora of provisions in the constitution and other laws that the deal contravened.

Trade committee chair Mwine Mpaka also relayed the position of President Museveni that termination of the contentious Vinci coffee deal may have far reaching implications, even as he agreed with most of the report’s findings.

“The President agreed with most of the issues raised by the committee but emphasised that the biggest issue has been value addition… and strongly recommended that a review of the agreement between Vinci and government of Uganda be done in not more three months as opposed to termination, as termination could have reputational damage,” Mr Mpaka said.


Although the lawmakers rejected the President’s proposal to review the MoU, analysts argue that Parliament’s resolutions are only advisory and maybe shunted aside, leaving the door open for the Italian investor to return to the party.

Null agreement

Attorney General Kiryowa Kiwanuka conceded that the agreement is null and void, leaving no room for it to be reviewed but said the Cabinet would still review the committee’s report.

“I have read it and noted its contents. We have listened to the concerns. We have noted the concerns of Parliament and the people. We shall take the recommendations that have been given. We shall review them and report back to Parliament on the action taken,” Mr Kiryowa said.

Government sources told The EastAfrican that the Cabinet will now regroup around the President’s value addition proposal and report back to Parliament as ordered, a position that some players also welcomed, with a provision that any future agreements involve all sector players, especially the 12 million smallholder farmers.

“This gives us a chance to define a meaningful way forward. There has to be a shared understanding of what it means to create value in the coffee production process and what value means to all stakeholders,” said coffee farmer and entrepreneur Robert Kabushenga, in a tweet on Thursday.

False information

The committee report established that Vinci had neither the financial capacity nor experience in the coffee value chain to build a coffee plant, and as a result, the company had not undertaken any activity as envisaged in the agreement.

“The committee was informed that whereas government had spent colossal amounts of money to grade, fence, backfill the land allocated to UVCCL at a tune of Ush7 billion ($1.91 million) and relocated power lines near the proposed facility site, UVCCL had not commenced or undertaken any activity as envisaged in the agreement,” Mr Mpaka told Parliament.

Players protested the award to a foreign company, the monopoly to buy at a price determined by itself and tax exemptions and free utilities, which the existing 20 coffee exporters and 47 processors did not enjoy.

The committee alludes to the shadowy ownership of UVCCL, reflected in the agreement signed on February 10, where the government of Uganda was represented by the Minister of Finance and Secretary to the Treasury, while UVCCL did not sign.

“The representative from UVCCL, Ms. Enrica Pinetti, signed as a witness and no one signed on behalf of UVCCL. The committee notes that under the article and MoU of UVCCL, it is only a director, secretary or person appointed by the board who has the right to authenticate a document affecting the company,” said Mr Mpaka.

In the same unclear ownership structure, the committee found that 96 percent of UVCCL is owned by another company Hawk Limited, registered in Uganda.

Uganda is Africa’s second largest producer of coffee but the continent’s leading exporter of the commodity, which employs 12 million farmers and another three million across the value chain as traders, processors and exporters.

Last year, Uganda exported 6.55 million 60kg bags of coffee, which fetched the country $657.23 million, according to reports of Uganda Coffee Development Authority.

The report adds UVCCL could not prove its capacity to deliver on the project, withheld vital information on the feasibility study it had undertaken and structural engineering designs of the plant, and also did not adduce any evidence that it had participated in the coffee value chain in Uganda or elsewhere.

For instance, legislator Abed Bwanika, who petitioned Parliament and triggered the investigation into the deal, argued that coffee is a heritage for the people of Uganda, God-given and a strategic commodity which has shaped Uganda’s economy since before independence.

“What we don’t understand, is how the government of Uganda can decide to surrender our heritage to people other than Ugandans. We don’t understand that,” he said alluding to findings of the report, which established that all shareholders of UVCCL are Italian and British.