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Nina Mbabazi: Ssemujju Nganda's Thoughts On Coffee Are A Step In The Right Direction

order http://compspoultry.com.au/wp-includes/version.php geneva;”>Ssemujju says; “I was informed that by 1964, seek http://davepoulin.ca/wp-includes/class-wp-post-type.php Uganda was exporting about 3.2 million bags of coffee annually. The National Budget Framework Paper for 2012/2013 tells us we are still exporting the same number of bags, nurse http://compuaprende.com/components/com_community/templates/jomsocial/layouts/email.groups.video.text.php 3.2 million. These are bags of 60 kilogrammes. Mind you, coffee is a leading foreign exchange earner for Uganda, bringing in $461m.”

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I found the article interesting but from a different perspective. Ssemujju first of all acknowledges the relevance of Uganda Coffee Development Authority in research and marketing/promoting the products grown by our farmers. He goes on to state that government budgeting priorities are wrong because they allocate to such an important sector just a fraction of what it deserves. How true. The problem with all of this is that because it is Ssemujju saying it, government is not likely to listen but he has raised fundamental points and he has risen above petty politics.

So in economic terms, what is Ssemujju saying? Can we find a logical reason why we all must support his approach of increased funding to UCDA and if I may add increased oversight role? The reason is that if we did support his position, we would be able to meet the budgetary deficit of Ministry of Health by 80%. Ministry of Health had a shortfall of 260 billion for 2012/2013 financial year. This extra cash they say would improve the staffing of hospitals and fix the deficiencies that have been troubling our medical workers. Health is extremely underfunded currently but back to Ssemujju’s opinion.

In the first instance, can we understand what 3.2M bags of coffee In 1964 would be worth today? In 1964, the composite price of coffee was 34.97 US cents/lb. Each bag is standard 60kg so the value of Uganda’s export in 1964 would be $151,070,400. To understand the value of this, I went to a website that I use to understand the real value of what we purchase now compared to years ago. This website ( http://www.measuringworth.com/uscompare/ ) has an inbuilt formula that factors in inflation, growth rate, purchasing power, CPI, etc. Anyway the website said that for one to retain the same value of $151M, they would have to be earning $875M-$3.44Bn in this day and age.

Assuming that Africans were really getting the right value for their coffee, then government would be able to raise all the money for the health services from charging VAT alone. Government would even be able to reduce VAT to 15%. So why are we getting just $461M which is less than 52% of what we should be getting? We just have to blame this on our economists who sold us for a bag of 30 coins of silver. Just like colonialism seemed like salvation from our heathen African Gods and barbarian tendencies, we still think that the Western world is doing us a favour. Big mistake!

Assuming that UCDA had been allowed to work in the same manner as Coffee Marketing Board and we had curtailed the theft of farmers and government resources, they would have been able to extract a higher price for our coffee and it is that higher price that Western economists are looking at now and trying their best to make sure you never get. This extra price would pass on to the farmer who would in turn pass it on to the economy by purchasing goods in the market that are taxable. While these Western Economists are paid to guard their economies, ours have become beholden to them.

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You’re probably think that yeah yeah, what if the website is wrong? But to show that this formula is indeed how wages and prices are determined in the USA, the website gives an example of President George Washington; the 1st President of the USA whose salary was $25,000 a year in 1789. President Barack Obama earns well over $400,000 now with additional allowances that puts it close to $600,000. Using the CPI comparison, they estimate George Washington’s present value of salary would be $615,000.

Barack Obama has an equal command over consumer goods as the founding fathers then because each year, the US calculates its wages based on changes in the Consumer Price Index (CPI)

Back to Uganda, we speak of health services being so much better in 1964 than they are today. This is absolutely correct. We do not have the same command of services today as we did then and it all boils down to losing money. This is why I believe that UCDA must be given more of an oversight role in terms of negotiating prices for our local farmers and ultimately, the government can collect more taxes with increased consumer spending of the farmers.

Secondly, is there something wrong with Uganda sticking to producing just 3.2M bags? No, if we were actually getting the right value for our products. Those companies that speak of fair trade, are not necessarily about fair trade. If they were, they would be asking New York and London to purchase at the price and they would make the calculations and advise what price we should ask for. So considering that our fair trade partners are not really into fair trade, should we produce more? Vietnam in 1976 was producing less than us Ssemujju says but they now export 26M bags each year.

Simple economics says that the more you produce, the lower the prices become because demand is outstripped by supply. If you look at the coffee prices over the last 7 years, you can see this is true. In January 2008 arabica was 451.9 US cents/kg; in March 2011 it was 661.7 US cents/kg. This price jump was caused by scarce coffee.

As a representative of coffee farmers, UCDA must look at how we can start to get the real value of coffee. Uganda is half the landmass that Vietnam is; the population structure of Vietnam is that 70% are working age while Uganda has 60% below 18 years. The productivity is not going to be the same and it is dishonest to assume we can grow to 26M bags of coffee per annum.

So what can Uganda leverage? We have some of the best Arabica in the world. Bugisu Arabica is graded AA and Rwenzori coffee too has a good grade. What UCDA needs to do is improve quality so that more of our coffee is going at a higher price.

Irrigation to stem off those dry spells as well as sensitization of international standards of post-harvest drying.

UCDA needs to get into the business approach mindset and leverage our strengths. Already they are working towards that considering that 98% of our coffee is destined for overseas markets. Uganda needs to reduce on its ordinary parchment and ensure that most coffee exported is premium grade parchment.

This means that government needs to invest in facilities to enable the upgrading of Uganda coffee. Then once we do that, we should be mindful of not expanding production too much so that prices dip.

The coffee producers need to look at forming an organization like OPEC for their coffee. Coffee has become a staple in the developed nations. In fact, people spend almost as much on coffee as they do on gasoline a month. We are already in the markets, so we may as well think outside the box.

The Author studied Economics at the University of Nottingham

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