Coffee Value Addition Can Earn Uganda Eight Times More
Henry Ngabirano, Uganda Coffee Development Authority (UCDA) chief confirmed that Uganda has been the number one coffee exporter in Africa for over a decade even though Ethiopia produced more coffee in 2012.
Uganda exported 1.6 million bags of coffee, with Ethiopia's 1.4 million bags right behind it. This means Africa is supplying 9% of the world's demand but unfortunately, most of it is raw unprocessed beans, which fetch the country almost just a quarter of actual value. Stakeholders should now be debating whether we should move towards exporting processed coffee as opposed to raw beans.
President Yoweri Museveni has maintained a spirited campaign for value addition. However, Ngabirano says there is no market for processed coffee given that the 50 coffee producing countries export not more than 10% of their production as value added. Several companies in Uganda are however, exporting processed coffee beans.
"We should support initiatives that allow us to slowly enter coffee processed markets like a few people have done," said an analyst. Ngabirano agrees that there is need for more value addition although there has been growth in the last 15 years.
Today, more than 15 companies are processing coffee as opposed to the days when Nguvu as the only coffee roasting company.
"If we had a market for value added coffee, our revenue would increase by more than eight fold (over $3 billion)," Ngabirano said.
Currently, the country earns about $400m from exports. Locally, prices of parchment Arabica coffee from eastern Uganda have dropped to sh3,000 per kg from sh5,000, although there is hope that it will rise as the harvest season grinds to a peak in November.
If processed, the price would be about sh20,000 per kg which not only would be shared along the different value addition chains but would all be retained locally in the economy.
"The bigger challenge we have as a country is that much of the coffee that is produced locally is exported. Only 5% of the coffee produced in Uganda is consumed locally. If we had high local consumption, the fluctuation of coffee prices at the international market would not affect us much,"
Fred Ruzinda, the UCDA finance officer said. Ngabirano says issues to do with changing perception and confidence building should be at the forefront of driving the industry towards value addition for export. But the journey to add value to most of the 190,000 tonnes has been painstakingly slow and analysts advise more robust government intervention including supporting the different stages from the farm to factory.