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Coffee prices up but Bugisu farmers downcast

By Agather Atuhaire

Allegations of forged accounts and government meddling leave their once-vibrant union on the brink of closure

Coffee prices are at an all time high but farmers of the Bugisu Cooperative Union (BCU) in eastern Uganda have never seen darker days as a mixture of local and national rivalries threaten their livelihood.

Ironically, trouble started when the Union which for over 30 years had never turned a profit made an unexpected Shs 1.7 billion windfall. What should have been a local reason to celebrate for members of the 60-year old union was ruined by squabbles over money, power, and positions.

At stake is an industry which, according to the Uganda Coffee Development Authority (UCDA) figures, raked in over US$ 100 million  in foreign exchange last year for the Uganda economy from the mainly Arabica coffee growing region.

Even as international coffee prices double from about US$ 1.5 to US$ 3.5 per ounce on the global market, latest reports from BCU, which has swung back into red with a Shs352 million loss for the financial year ending December 2010 – but should be raking in millions now, are not good.

Nandala Mafabi, the chairman of Uganda’s biggest coffee cooperative with over 280 coffee grower societies, is being accused of falsifying its financial statements.

But Benard Mujasi, who as LC 5 chairman is the political head of the biggest district in the region, Mbale, blames BCU’s current problems on government meddling and faults the fighting groups for providing the excuse.

“They gave government an opportunity to meddle in the affairs that the farmers have always resolved themselves,” he told The Independent in a conversation in his office which overlooks the former Mbale library, one of several assets of the union in Mbale town which the cash-strapped union leased off to clear debts five years ago.

He says the government is wary of Mafabi, who is the Leader of Opposition in parliament and MP for Budadiri, leveraging the success of the union for political gain.

But he warns that if the government does not withdraw from meddling in BCU and let farmers run their affairs like they always have, there will be a political problem and government will be blamed for it.

“It is selfish of the government to put the financial status of millions of people at stake because they are interested in fighting a single man,” Mujasi says.

Mafabi, who is from the opposition Forum for Democratic Change (FDC) party, faces challenges for the leadership of BCU from Ignatius Wamakuyu Mudimi, the MP for Bulambuli from the ruling NRM party. At the constituency level he battled and defeated Beatrice Wabudeya, the former minister for the presidency. He fought one of the most violent elections to defeat her in the February parliamentary election.

Mujasi, who belongs to the ruling NRM party, says Mafabi is popular because farmers see him as the only one capable of saving the union “because he is a professional accountant and a competent man with a clear record of fighting corruption”.

He says the government pumped a lot of money into a campaign to oust Mafabi from BCU and the constituency so that NRM-leaning people take over but failed.

“The NRM’s trick has not worked,” says Mujasi.

Mafabi’s fight is traced to April 17, 2008 when a ministry of Trade decree that politicians were not eligible to head BCU was perceived to target him.

At the time, Mafabi was fighting to oust the old BCU management of Steven Wachaya. He ousted them but they have swung back with a petition challenging the 2009 year-end financial statements he produced.

Led by former Vice Chairman John Wamulugwa, the anti-Mafabi group says it wants to expose his phony character, the truth about his financial reports and the Shs 1.7 billion profit, and clear their names of allegations that they stole from the union.

Phony accounts?

The group of farmers from Gyewa, Nagawoya, Nakyero, Budwale and Bubentsye society growers are an outnumbered by Mafabi supporters. But their challenge has proved formidable for Mafabi since they petitioned the commissioner of cooperatives in the ministry of Trade and handed the government the perfect excuse to suspend Mafabi and his board from running the affairs of BCU.

“We had issues with the accounts the management presented and we asked for explanations,” said John Wamulugwa, the former Vice Chairman and leader of the petitioners, “But Mafabi refused to address our concerns.”

They claim Mafabi’s rosy financial figures were propped up by unexplained item called “other income” which allegedly fetched the Union Shs1.6 billion.

Note 13 (b) of Mafabi’s financial report presents the source of “other income” as Rental income (Shs 1.1 billion), Sale of polythene bags (Shs 77,200), Revenue from weighbridge (Shs729, 544), milling (Shs 498 million), and Bank interest (Shs 9 million).

But the petitioners say the report is doubtful because the external auditors of the union accounts, BVL & Co Certified Public Accountants, note in their report that the financial statement’s bank reconciliation and income of comprehensive income were not “reconciled to individual ledgers” and the “amounts presented in the financial statement may, therefore, not be fairly stated”. The auditors note that that Shs 1.6 billion stated as total bank balances were not reconciled to the cash book balances. The petitioners say Mafabi’s profits are a concoction. Accountants who spoke to The Independent said, without these two contentious figures on the books, Mafabi should have declared a loss for BCU for the 15 months ended December 2009. But Mafabi defends the financial statements.

“Falsification of accounts is a criminal case and he (Wamulugwa) should take this matter to police and to commissioner Cooperatives if he has evidence. Otherwise, the external auditors should take up this issue,” he said.

Mafabi says instead it is Wamulugwa who stole and mismanaged BCU funds and property.

Mafabi told The Independent that Wamulugwa’s group just wants to come back to the union they looted and start from where they stopped.

He says their board was ejected because they had run the union into bankruptcy and that he was not even part of the group that spearheaded their exit.

“They ran the union down with debts and sold all its property, he said. “Now they know it is successful, they want to come and steal again.”

He lists sale of Mt Elgon Hotel for Shs 750 million yet improvements to the property had costs Shs 750 million; the Shs 1.5 billion owed to an Italian called Luigi and Shs 1.4 billion crop and export finance that was allegedly stolen, and alleged dubious losses due to exchange rate shifts and so-called wash-out coast amounting to over Shs 800,000 that was also allegedly stolen from BCU by the Wamulugwa management.

“Unless the government condones theft, this person (Wamulugwa) should be in prison by now,” Mafabi says.

Despite his denials, Mafabi was suspended from the leadership of BCU by the Commissioner of Cooperatives based accusations made by the Wamulugwa group on December 15, 2010, barely two months to the February 2011 elections.

Chairman Mujasi says it was obvious that Mafabi’s suspension was masterminded by the NRM in the hope that it would block access to union money.

“They thought it was the money he was using during his campaigns,” he says.

At the time, the minister of Trade told MPs that he was setting up a Commission of Inquiry into BCU to report by March. Almost a year since the commission was set up, no report has been released. Instead, The Independent has seen a letter from the minister giving the commission up to December to conclude their investigations.

Mafabi to sue

Mafabi says he is going to court because if the commission of inquiry could not find anything in the 10 months they have been at the union, it only means there is nothing to find.

“The more time they take the more resources they waste and the more time they waste for the union’s activities,” he says.

Since he was suspended amidst allegations of mismanagement, the union has drifted from one financial scandal to another.

The first caretaker manager, Cyprian Batala, who was appointed by the government left after just a month amidst allegations that he had illegally withdrawn Shs 700 million from the company account.

Mafabi accuses the current caretaker manager, William Wepukhulu , of misappropriating over Shs 3 billion from the union between January and September this year.

But Wepukhulu, who has been in charge since February, says the union is doing well and “better than when Mafabi led it.”

“We are getting normal deliveries, even much more than we expected,” he said during a quick walk around the BCU Coffee factory in Mbale Industrial area, “The prices are not yet good and stable but we will adjust, only that we still have internal problems to resolve at the moment.”

Wepukhulu says the BCU issues are being unfairly politicised and everyone wants to criticise even when there is nothing to criticise.

“The commission of inquiry is still going on and their report will determine whether these people have any moral right to criticise us or not,” he said.

Farmers plight

As the political fight rages, ordinary coffee farmers like Amnon Gogo a coffee farmer from Bulambuli say they no longer benefit their coffee as much as they did under Mafabi.

Gogo says the union had increased coffee prices. Some reports claim the price to farmers had gone from Shs 800 per kilo when Mafabi came in to Shs 6,200 when he was suspended. He had also started offering extension support to grow quality coffee and increase output.

“This whole season that started in May has not benefited us at all,” says Gogo. “The ones running the union now are buying our coffee at very low prices and selling to other companies which export at prices benefiting only them.”

Gogo argues that there is no longer any need for the farmers to sell to the union because they can also sell to the exporting companies.

Wetaka John, another farmer from Sironko fears if government does not stay away from BCU affairs, the union will close in less than a year.

He is unhappy that the union is selling unprocessed coffee to other companies at a much cheaper price and making farmers incur losses.

“Government came and started saying Mafabi is eating the union’s money so what? “ Wetaka angrily asks, “He is the one that put the union back on its feet, doesn’t a man eat where he works? Were the farmers complaining?”

A man in LC5 chairman Mujasi’s waiting room says “even the blind could see that Mafabi and his team found the union at the verge of collapsing”.

“I am not a coffee farmer but I have eyes,” said Paul a resident of Bungoko. “The little I know is that Mafabi has done a lot for not only people of Budadiri that he represents but the whole Bugisu region.”

But Wephukulu says the farmers should not blame him for not exporting coffee directly because even Mafabi and his group marketed the coffee through middlemen.

“The union last exported coffee I think in 2008,” he says, a claim that Mafabi denies saying the union was exporting coffee and had pending contracts with coffee importers in China and Japan.

“All that is money for the farmers and the economy that is being wasted,” he told The Independent, “I will look for all the best lawyers in Kampala so that we save what almost everyone in Mbale has toiled for,” he said. Unfortunately, as chairman Mujasi said, the BCU problems are political and the courts are unlikely to resolve them.

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