Uganda: Coffee Producers Are the Biggest Losers

By Alexis Okeowo, Kampala
Inter Press Service (Johannesburg)
Via All Africa

August 29, 2007

Coffee producers in Uganda suffer from an unfair trade relationship with Europe, even though their beans produce some of the best quality coffee in the world, says the Ugandan coffee industry's governing body.

"The biggest loser is the person directly involved in coffee bean production," says Henry Ngabirano, director of the Uganda Coffee Development Authority. Moreover, Ugandan producers get an "unequal share of the revenue generated by coffee beans".

Combined, Ugandan growers and exporters receive 6 percent of the finished product's price, according to the Uganda Coffee Development Authority. "This shows what level of exploitation there is," Ngabirano says.

Coffee beans are Uganda's top cash crop and their production accounts for nearly half of the nation's economy. The country has become a leading Robusta producer since the political crisis erupted in Ivory Coast, a former top producer. Exporters said their earnings grew 65 percent to 17,9 million dollars in May this year, compared to last year.

This growth is due to higher prices and consumers in the North and in Asia buying higher-grade coffees. African countries have an advantage of high altitudes and smaller-scale farms, along with a natural abundance of organic farming that has made their coffee beans more attractive on the global market.

According to East African Fine Coffees Association director Philip Gitao, the demand for African coffee beans is at an all-time high. He says that African coffee was increasingly being used to upgrade traditional blends and to be marketed on their own as specialty brands.

The 1990s in Uganda saw a government policy shift on coffee production. The market was liberalized and hurdles in the way of coffee producers removed. The Ugandan shilling became fully convertible with any other currency and price controls were removed.

"The government saw coffee as having a role in poverty eradication," Ngabirano says. The number of coffee farmers surged during this time as "Ugandans began to see the business potential of coffee".

But farmers face a number of challenges, involving the unavailability of bank loans or government subsidies to jumpstart their farming. "What we are lacking as Ugandan farmers, is support," says Ronald Buule, a coffee bean farmer in central Uganda.

Although farmers form local associations to negotiate fairer prices for their raw beans from intermediaries, the profits they earn are still not enough to ensure that supply stores remain stocked and that they have sufficient tools, Buule says.

"Farmers work a lot but generate little money," Buule claims. Many coffee farmers are forced to heavily diversify their farms, growing other crops such as cocoa, cassava, bananas, oranges and vanilla and even raising poultry.

"It is a shame, really" that the retail coffee brands are not owned by Ugandan companies, though the raw material is bought from the country, Ngabirano says. Ugandan President Yoweri Museveni has said his country will only develop when it makes its own finished products instead of just selling raw materials.

The pending economic partnership agreement (EPA) between the European Union (EU) and developing countries will further exploit the producers, Ngabirano says. The EPAs require that the 77 African, Pacific and Caribbean countries offer reciprocal market access to their EU trade partners.

"The EPAs would have been better if European countries removed the subsidies on their domestic coffee industries, which runs to an estimated 365 billion dollars a year," Ngabirano says, adding that since Uganda is a low-cost producer, "there would be no competition". He adds, "if the EU is really streamlining trade, they should address the issues of subsidies."

Uganda began organic coffee bean farming ten years ago, and now over 2,000 tons of organic coffee beans are produced a year. "We produce organic coffee in five regions of Uganda, two Arabica and three Robusta," Ngabirano tells IPS, referring to the different types of bean.

Farmers are certified by various European boards responsible for ensuring organic quality. "It is a protracted story," Ngabirano says of the organic certification process. Farmers should not have used chemicals on their plots of land for three years in order to move from conventional to organic production, a period that is called the transitional phase.

They are taught to avoid chemicals at all costs and how to properly substitute regular with organic manure. Outside analysts inspect the land after the three-year period to guarantee that all inorganic materials have degraded. But, according to Ngabirano, "in most cases, such inorganic materials have never been there, so we lose time (by being forced to go through the transitional phase)."

Inorganic fertilizers and chemicals are either unavailable or too expensive in many farming regions. As a result, out of one million coffee farmers, most are "organic by default", though not certified, Ngabirano says. Some 15,000 farmers are officially certified as organic producers.

But Ugandan coffee experts debate whether organic coffee bean farming is actually profitable. There is a 20 to 30 percent premium on top of the normal price, but farmers suffer a considerable loss in yield by not using chemicals and fertilizers on their crops. "We have not been able to establish as a fact which is better," Ngabirano said.

To complicate matters, Uganda is facing potentially harmful non-tariff barriers from the EU. Some European conservationists are saying that transporting products by air to sell in other countries increases pollution and is therefore bad for the environment.

Such talk could foreclose Uganda ever moving on to producing its own finished coffee products and sending them abroad to be sold.