Ugandan company caught in bitter coffee contract row
Sunday October 31 2021
A farmer tends to her coffee in a farm. PHOTO | FILE
Ugandan coffee exporting company Hampage (U) Ltd has been accused of breaching a $933,046 coffee supply contract by a Singaporean firm .
Documents seen by The EastAfrican show that in May 2021, Singaporean firm — Suncof Global Pte Ltd — entered into a contract with Hampage to buy 747,000kg of natural robusta green coffee (FAQ Quality) valued at $933,046 from Uganda, with the Kampala-based coffee dealer acting as an agent.
But Hampage allegedly failed to abide by the agreed terms and defaulted in supplying the consignment.
According to correspondence between the two firms and the coffee regulator, Uganda Coffee Development Authority (UCDA), Hampage delivered 663,650kg of graded coffee valued at $839,818.21 and defaulted on 83,350 kg of coffee worth $93,227.79. This is despite having been paid the full amount of the contract totalling $933,046, which included processing and export handling charges.
Now, Suncof, which is 100 percent owned by one of India’s largest coffee roasting firms, Vayhan Coffee Ltd, is demanding delivery of the outstanding coffee consignment or a refund of $93,227.79 plus interest at the rate of 24 percent per annum. According to the agreement, Hampage was to supply all coffee by June 10, 2021. Under the arrangement, Hampage was to procure coffee with a maximum of 14 percent moisture content , process it , grade, colour-sort, and hand it over to Suncof on free-on-truck (FOT) terms with all the grades.
The prices negotiated and agreed included FAQ Coffee ($1.18 per kg), processing without colour-sorting ($0.038 per kg), colour-sorting ($0.016 per kg) and export documentation ($0.07 per kg). Suncof argues that the failure by Hampage to deliver on its contractual obligations has put its operations in Singapore in a difficult position, with risks of shutting down due to a shortage of coffee.
The firm brought the issue to the attention of the UCDA on June 21, requesting for the regulator to intervene and take suitable action against dealer and make them either refund the cash paid to them or deliver the coffee for which they have received money. “We request your good office to take action against Hampage (U) Ltd as may be appropriate and do justice to us in either making them deliver the balance coffee of 83,350Kgs or refund the excess advance of $93,227.79 paid to them long with interest at the rate of 24 percent per annum,” says Suncof’s letter to UCDA managing director Emmanuel Iyamulemye Niyibigira dated July 12, 2021.
Dr Niyibigira and Hampage director Lubega Shafik could not be reached for comment as they did not respond to e-mailed questions by press time.
Coffee is Uganda’s main cash crop and a major foreign exchange earner, contributing about 15 percent to the country’s total export revenue. The country, the largest coffee exporter in Africa, has relaunched an ambitious campaign to become the world’s largest exporter of coffee by 2025 after Brazil and Vietnam. Uganda is the fourth largest Robusta producer in the world, after Vietnam, Brazil and Indonesia
According to the UCDA monthly report, Uganda exported 700,990 60kg bags of coffee valued at $75.09 million in August 2021, at an average weighted price of $1.79 per kilogramme. Uganda grows two types of coffee, Robusta and Arabica, in a ratio of 4:1.
The farm-gate prices for Robusta Kiboko averaged Ush2,650 ($0.73) per kilogramme, FAQ Ush5,150 ($1.43), Arabica parchment Ush8,000 ($2.23) and Drugar Ush 7,250 ($2.02) per kilogramme.
The destinations of Uganda’s coffee exports in August 2021 were Italy, which maintained the highest market share at 34.02 percent, followed by Germany (13.39 percent), Sudan (10.43 percent), Algeria (10.22 percent) and India (7.76 percent).
Europe remained Uganda’s main destination for coffee exports, taking 61 percent, with Africa controlling a market share of 24 percent.
African countries importing Ugandan coffee are Sudan, Morocco, Kenya, Algeria, Egypt, Madagascar and Somalia.