Uganda searches for alternative coffee trading channels following International Coffee Agreement exit

UGANDA – Uganda has stepped away from the International Coffee Agreement (ICA), 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 and projects that benefit the global coffee economy, market transparency and promoting training and information programs to assist the transfer of technology relevant to the sector.

The organisation uses the agreement in setting the indicative prices for the coffee sold and bought by its member countries.

However, in September last year, Uganda filed a notice to the International Coffee Organisation pertaining its intention not to join the extension of the agreement which took effect on February 2, 2022, reports Business Focus.

The East African nation says it does not see the benefits from being a member and paying a subscription when it is not being helped.

Uganda also pointed out that ICO members set high tariffs on its 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 non-competitive.

It is important to note that in the top 51 coffee producing countries, there is no nation 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, processing and reporting coffee from poor countries like Uganda.

Africa to beef up regional market routes

The withdrawal has sent fears in the local coffee sector, that its produce 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.

The uncertainties were based on the fact that Uganda’s coffee would not be able to get the Certificate of Origin provided by the organisation.

However, Uganda Coffee Development Authority-UCDA highlighted the move will not have any repercussions to exports or trade because the International Coffee Organisation does not regulate the coffee trade.

Dr Immanuel Iyamuremye, the UCDA Managing Director, said 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.

Meanwhile 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.

Other than Uganda relinquishing its participation in ICA, US also exited the agreement in 2018 and Guatemala, the 10th largest exporter after Uganda also announced it was exiting the organisation last year, citing the low prices for its exports, and the poor earnings by the farmers.

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