Coffee firm needs Sh1 billion bail-out

KAMPALA – Members of Parliament have appealed to the Government to give Uganda Egypt Coffee Manufacturing Company (UGEMCO) a sh1b stimulous package.

The money is to purchase equipment and promote Uganda’s coffee in the Arab world. The trade and industry committee, while reviewing a draft report, said the firm was doing a great job promoting Uganda’s coffee in the Arab world, but needed urgent assistance.

“The Government should borrow the money and lend it to the company because its impressive achievements,” the report states. The achievements, the Members of Parliament said, included the creation of two brands of coffee that meet the Egyptian taste, the increment in coffee export volumes to Egypt by other Ugandan companies. The legislators added that Ugandan coffee was also now being sold in the Egypt and other neighbouring Arab countries. Appearing before the committee, a delegation from UGEMCO on the recommendation of the deputy Speaker of Parliament, Rebecca Kadaga, appealed for the assistance, saying it would increase coffee sales outside the country.

UGEMCO based in Egypt, is a joint venture between Uganda and Egypt. Uganda holds 60%, while Egypt has 40% shares. It was initiated in 2002 by President Yoweri Museveni as an avenue for adding value to Uganda’s coffee and fostering economic cooperation between Uganda, Egypt and the entire Arab world.

Ugandan shares are held by the Uganda Coffee Development Authority in trust for the Uganda National Coffee farmers’ Association, the Uganda Coffee Roasters Association and the Uganda Coffee Traders Association.

The Member of Parliament noted that the region had great potential of opening up huge markets for coffee because of the high consumption rate of the product.

Uganda had entered separate ventures with Denmark, Egypt and China to sell its coffee more than five years ago. Uganda Egypt Coffee Manufacturing Company reported $86,743 losses as of September 2006, a performance the Auditor General said eroded the firm’s share capital of $100,000.

“A review of the company’s financial statements for the 2003/04 to 2005/06 fiscal years revealed that Ugemco’s performance has been very poor.

“At the current level of operation, the company’s sales income cannot cover its cost of production,” the Auditor General’s report to Parliament for 2008 read, adding that its production capacity needed to be enhanced.