Following the news last week that Uganda would leave the ICO, the country’s regulator The Uganda Coffee Development Authority (UCDA) has issued a Media Release to explain their action.
The sentiment of recent comments from an advisor to the President, which we discussed last week, are evident here also in the first and second points. I’m not sure how much influence the ICO will have over the EU’s trading tariffs, but perhaps they should be expected to try harder.
In point 3, they refer to price volatility and structural weakness of the coffee sector. We know this is an important point, and one that Guatemala also raised when they left. I’d like to see Uganda offer some clarity about what they think the ICO should do. Stablising prices globally, is going to be a monumental task, but that shouldn’t be an excuse to do nothing.
In point 4, they refer to a lopsided classification in which only Brazil and Colombia types are separated, and everything else is grouped under ‘Other’. If that’s correct, it’s a tone-deaf move on behalf of the ICO, and while there may be practical difficulties in having a highly fragmented classification, they can do better.
Point 5 claims there’s a statistical anomaly which adversely affects Robusta, for which of course Uganda is a major producer. I’d like to know more about this.
Uganda, which is the leading coffee exporter (by volume) in Africa and the seventh leading exporter in the world, joined the ICA 2007 in 2009 with a view of enhancing its interests.
Point 6 is interesting. Uganda claims that 70% of funds raised by member fees are spend on the ICO administration, that sounds like a lot, but it depends on how it is measured, for example, is debt included, or depreciation expenses? Operating expenditure of a private business as a ratio of revenue should typically be between 60-80%. But it’s hard to tell if the ICO is allocating finance correctly without a deep-dive into the accounts. I tried accessing their accounts, but that section of their website is password protected. Uganda clearly thinks the money is not being well spent, and the ICO should be able to address that concern. At the very least, it’s an opportunity for the organisation to conduct an expenditure review and report if they are offering value for money.
Finally, in point 7, the UCDA says the organisation never replaced a scheme that finished in 2012 to help member countries tackle issues in the sector.
I’m pleased to see Uganda being transparent about their grievances. We’ve known for several months the country had issues they were trying to resolve with the ICO. The fact that they wrote an open letter, and say that they will continue to negotiate, shows that they do in fact care about membership and see the value, but presumably only when it’s working.
Whether the ICO agrees or disagrees with the UCDA, some of the problems cited, such as the classification, are easily dealt with. By not addressing even the simple requests, the ICO is in danger of looking complacent.
On the subject of complacency, we noted with interest that while the ICO had updated their members page to remove Uganda from the list, they did not update the statistics to show the percentage of global exporting countries they represent – see below screenshots. In February, there is one less member (Uganda) which I believe contributes about 1% of global Arabica and 6% of global Robusta production. But the statistics have not been updated from January, when Uganda was included.
Uganda Media Release
Uganda’s Position on the Extension of the International Coffee Agreement 2007 (ICA) 9 February 2022, Kampala – On 10 September 2021, the Government of Uganda notified the Depository of the ICA 2007 of its intention not to join the extension of the International Coffee Agreement 2007.
The extension of the ICA came into effect on 2 February 2022 and will be in effect until 1 February 2024 to give more time for
negotiation of a new agreement.
Uganda has raised key issues that the agreement has not addressed including the following:
i. Barriers to trade imposed through high tariffs on processed coffee by developed/importing countries which disadvantage producer countries like Uganda resulting in farmers getting low prices.
ii. Promotion of value addition: Uganda needs unconditional market access that allows for export of value-added coffee not only green coffee. The ICA should have increased focus on value addition with protracted programs that aim at transferring value to the farm gate prices.
iii. Coffee price volatility which threatens the incomes of farmers and the sustainability of the coffee sector. There is urgent need to address and solve the structural weaknesses of the coffee sector and to ensure its sustainable growth and prosperity for farmers and all stakeholders.
iv. The lopsided classification of coffee by ICO which only lists Brazilian and Colombian types of coffee and refers to the rest under the category ‘others’.
v. ICO indicator prices which are used by coffee buyers as a benchmark yet their computation may not have sound statistical basis, thereby disadvantaging especially Robusta coffee producers.
vi. ICO not focusing on programs that could benefit coffee producing countries but spending over 70% of funds contributed by members on staff emoluments and administrative costs which is increasingly making ICO less valuable to its members.
vii. Projects to address challenges in coffee producing countries: Since 2012, when the Common Fund for Commodities stopped funding ICO member countries’ projects, member countries have requested for an alternative to aid them to address challenges such as climate change, low production and productivity, pests and diseases and price volatility.
Uganda, which is the leading coffee exporter in Africa and the seventh leading exporter in the world, joined the ICA 2007 in 2009 with a view of enhancing its interests.
The Government of Uganda will continue to engage with the International Coffee Organisation (ICO) to negotiate better terms. It is important to note is that the negotiations will have no effect on coffee trade as ICO does not market coffee.
Furthermore, following the expiry of the extension, Uganda like any other coffee producer, will ratify the new agreement once her interests have been catered for.
About Uganda Coffee Development Authority To regulate, promote and oversee the quality of coffee along the entire value chain,
support research and development, promote production, and improve the marketing of coffee in order to optimize foreign exchange earnings for the country and payments to the farmers.
With its GSP-EBA Regulations in place since 2005 is the EU actually the focus for the point on tariffs? I note the Ugandan release itself does not make any specific reference to particular countries/ blocs
You’re right they don’t make a reference directly, but last week I read an article from an Advisor to the President which made it very clear the EU trade rules was a concern for them. https://bartalks.net/are-eu-trade-rules-holding-back-uganda-coffee/