Parliament recommends termination of controversial coffee deal

Parliament has adopted the report of the Committee on Trade, Tourism and Industry Committee recommending that the government terminates the controversial coffee agreement with Uganda Vinci Coffee Company Limited (UVCCL).

In a unanimous decision taken at around 9pm on Wednesday evening, the House adopted the report of the Trade Committee with all the amendments.

Presenting the report findings during plenary, committee chairperson Mwine Mpaka said government should terminate the deal and report to Parliament within 6 months from the date of adoption of the report.

According to Mpaka, the government officials – the Attorney General Kiryowa Kiwanuka, the Finance minister Matia Kasaija and Finance Permanent Secretary Ramathan Ggoobi- be held accountable for their role in the agreement.

“The officials who committed Government to such illegalities should be penalized as a deterrent mechanism to stop similar occurrences in future,” he said.

The Committee faulted the Attorney General for failing to carry out an appropriate legal due diligence in exercise of his statutory functions under article 119 (4) (b) of the Constitution to draw, peruse through and approve the agreement between Government of Uganda and Uganda Vinci Coffee Company Limited in spite of the agreement containing provisions infringed the Constitution and various other laws.

“The committee also found out that the Minister responsible for Finance, Hon. Matia Kasaija exceeded his mandate when he executed Project Implementation Agreement dated 29th April, 2015 and addenda No.1 and N0. 2 and the amendment and restatement agreement dated l0th Feb, 2022 containing provisions that granted tax waivers and waivers to various impositions to Uganda Vinci Coffee Company Limited without lawful authority,” Mpaka said.

The Committee concluded that the Agreement is unconstitutional, illegal, void and unenforceable at law since it violates various provisions of the laws of Uganda, including Articles 2, 79 and 152 of the Constitution of Uganda, sections 4 (1), 7(l), 19 and 21 of the Income Tax Act sections 4 and 5 of the Value Added Tax Act, Section 4 (1) of the Excise Duty Act, 2014, section 7 of the NSSF Act, sections 54 and 59 of the Uganda Citizenship and Immigration Control Act Cap 66 and section 80 of the Local Government Act Cap 243.

“The Committee observes that Article 8 of the Constitution was infringed upon by the Agreement when the execution of the Agreement was concluded without the input of coffee farmers, who are the owners of the coffee beans w/c are being granted to UVCCL in the Agreement,” Mpaka said.

The Committee observed that the non-consultation of coffee farmers, who number about 12 million, was contrary to Article 8A, which now entrenches the democratic principle of consultations in our constitution.

The Committee observed that allowing UVCCL to determine the price for coffee beans not only contravenes the provisions of the National Coffee Act but also amends, by infection, the price determination mechanisms prescribed by law.

The Committee noted further that, the VAT Act does not grant any person, not even the Minister, the right to waive a tax.

“In that regard therefore, the Minister acted irregularly and illegally in granting the VAT exemptions to UVCCL,” he said.

The Committee also found that since UVCCL was granted a lease in Namanve industrial park, it has not undertaken any activity on the land. The Committee was also further informed that all the activities carried out on the land were carried out by Government.

The Committee further observed that UVCCL was not eligible to benefit from the 49-year lease extension since it had not complied with the building covenants under the initial Lease agreement. This means that the lease was irregularly extended.

The committee also observed that at the time this agreement was executed in February 2022, UVCCL did not possess a valid investment license since the one that had been issued to it in 2O14 expired in 2019 without being renewed.

“This means that UVCCL was not eligible to receive the tax incentives and other benefits granted to investors in Uganda,” the report states.

The Committee observed that UVCCL could not prove its capacity to deliver on the project and withheld vital information from the Committee relating to the feasibility study it had allegedly undertaken as well as the architectural and engineering designs of the plant.

“UVCCL did not adduce any evidence or information to show that it had participated in the co value chain, in Uganda or elsewhere, thereby casting doubt on its ability to deliver on the project. It is therefore, a considered opinion of the committee that the feasibility study and market survey for UVCCL does not exist,” the report adds.

“UVCCL did not adduce any evidence or information to show that it had participated in the co value chain, in Uganda or elsewhere, thereby casting doubt on its ability to deliver on the project. It is therefore, a considered opinion of the committee that the feasibility study and market survey for UVCCL does not exist,”

mwine mpaka, trade committee chairperson

The Committee also observed that whereas the company is allowed 2 start constructing the factory within 1 year of the effective date, there are no timelines provided for the company to finish this plant within a particular time, neither are there guarantees or penalties.

The Committee notes that this agreement has no termination clause. It is concerned that even where a force majeure event occurs the agreement cannot be terminated in its terms but can merely be modified.

The Committees observed that the representative from UVCCL Ms. Enrica Pinetti signed as a witness and no one signed on behalf of Uganda Vinci Coffee Company Limited (UVCCL).

“The Committee is therefore of the considered opinion that the agreement between Uganda & UVCCL, having not been signed & sealed by Ms. Pinetti can be challenged as not binding on UVCCL unless where Govt can lead evidence to show that UVCCL  conducted itself in a manner that led it to believe that the agreement was binding on it as was held in Reveille Independent LLC Vs Anotech International (UK) Limited (2016),” the report adds.