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ICO exit has no consequence on Uganda’s coffee trade: Experts

Ugandan coffee production and exports have risen to new records

Kampala, Uganda | THE INDEPENDENT | The government of Uganda has explained that the decision to stay away from the International Coffee Agreement (ICA) extension was inevitable for the good of the local industry, a position agreed to by some private sector players.

The ICA is an instrument for international cooperation between the coffee consumers and producers, who come together under the International Coffee Organisation (ICO), with its headquarters in London, UK. The formation of ICO in 1963 was to tackle the challenges facing the world coffee sector and improve its environment for the betterment of all participants.

This involves exchanging views on coffee matters, developing and seeking finance projects that benefit the global coffee economy, market transparency and promoting training and information programs to assist the transfer of technology relevant to coffee. The organisation uses the agreement in setting the indicative prices for the coffee produced and bought by its member countries.

But in September last year, Uganda filed a notice to the International Coffee Organisation of its intention not to join the extension of the agreement which took effect on February 2, 2022. Uganda says it does not see the benefits from being a member and paying a subscription when it is not being helped.

However, the withdrawal by Uganda sent fears in the local coffee sector that Uganda’s coffee will not find its way to the international market controlled by the International Coffee Organisation, especially Europe which accounts for 70 per cent of the country’s coffee market. This was due to the fear that Uganda’s coffee would not be able to get the Certificate of Origin provided by the organisation.

The Uganda Coffee Development Authority-UCDA says this move will in no way affect the exports or trade because the  International Coffee Organisation does not regulate the coffee trade. Dr Immanuel Iyamuremye, the UCDA Managing Director says the government will use its own Certificate of Origin and the COMESA Certificate of Origin which it has always used to trade with non-ICO members.

The chairman UCDA Board of Directors, Charles Francis Mugoya, says ICO has made sure that poorer producing countries like Uganda do not export processed coffee, which would otherwise greatly increase the earnings for the country and the farmers.

This according to Mugoya is done by the high tariffs that ICO members set on Uganda’s exports, yet the importing countries do not pay any taxes when processing Uganda’s coffee and re-exporting it.

This makes any attempts by Uganda to export processed coffee to ICO very noncompetitive.

Coffee exports from Uganda for 2021 grew to 6.7 million bags valued at 718 million dollars, the highest in more than three decades. It is hoped that this year, export volumes will grow to more than 8 million bags, assuming that the exit from ICO will have no effect on the exports.

In the top 51 producing countries, there is no country from Europe, while Switzerland and Germany are ranked second and third top exporters, with France and the Netherlands also featuring among the top 10. This means the European countries thrive on importing and processing coffee from poor countries like Uganda. In 2018, the US also exited the ICA citing a lack of benefits from its membership.

Last year, Guatemala, the 10th largest exporter after Uganda also announced it was exiting the organisation citing the low prices for its exports, and the poor earnings by the farmers. John Leonard Mugerwa, the Deputy High Commissioner at Uganda High Commission in London is part of the negotiations between Uganda and ICO, but says the best way forward is for Africa to have its own way and start exporting speciality coffees.

A local coffee farmer, Victoria Sekitoleko says the ICO staff are the main beneficiaries from the organisation and not the producing countries. Sekitoleko, who attended previous ICO meetings representing groups of farmers, says the organisation is concerned about Uganda’s position hence the threats because it might influence other producers to exit.

The industry leaders say the ICO is not the only channel through which Uganda or any other country can export its coffee. The African coffee-producing countries have been trying to promote the industry through the Africa Fine Coffees Association and other initiatives, which would enable them easily process and export coffee, instead of green beans.

Solomon Rutega, the Secretary-General of the Inter-African Coffee Organization (ICAO) says it is time Africa grew its own industry and created its own market supply chain because the continent has what it takes to sustain markets.

IACO was established in 1960 to serve the interests of the African coffee industry to enhance the image and position of Africa’s unique coffees in the global coffee industry, ensuring it is competitive and sustainable while maintaining quality and productivity for all stakeholders involved.

Hamidah Ibrahim, who has been a director at the ICO for almost three decades says the African Union, through the African Continental Free Trade Area, should be used to promote coffee trade and processing on the continent. She explains that the Certificate of Origin is no longer important since the quota system was abolished decades back.

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