To ease your site search, article categories are at bottom of page.

April 02, 2008

Libya to assist Uganda build instant coffee factory

Uganda will build its first instant coffee factory by the end of this year following an agreement between the governments of Uganda and Libya.

According to the Uganda Coffee Development Authority (UCDA), the terms of the agreement signed last September oblige the government of Uganda to provide land for the plant as well as technical support, with regulatory requirements.

Libya, through its Libyan Africa Investment Portfolio, will provide the capital.

UCDA officials said Libya had agreed to invest between $20 million and $60 million depending on the type of equipment chosen for the plant. They also confirmed that the Uganda Investment Authority had already secured land for the factory at Namanve industrial park in Kampala.

This is the third time the government is engaging a foreign investor in attempt to set up an instant coffee plant.

In 2006, the government signed a similar agreement with Tata Ltd of India although implementation of the project is over a year behind schedule, while in 2005 negotiations with Continental Coffee — an Indian and British-owned firm — stalled after the government declined to give it monopoly status.

News of the proposed Libyan-backed project comes at a time when coffee prices in the international market have increased threefold over the past five years to $2,600 a tonne for robusta and $3,527 a tonne for arabica, the highest in 12 years.

In Uganda, farmgate prices are $2 per kg for arabica and $1.76 per kg for robusta. When translated to 30 bags of 60kg of coffee each, which most farmers produce per year on average, they earn about Ush6.1 million ($3,600) at the farm-gate.

An instant coffee plant would add value to Ugandan coffee, fetch premium prices for the farmers.

Currently, the quality remains low due to poor post-harvest handling, says UCDA.

Some countries in the region like Rwanda have revived their coffee production with the emphasis on quality and are now exporting more speciality coffee than Uganda, which sells only a third of its 150,000 tonnes output, according to UCDA. The ideal situation is to follow in the footsteps of Ethiopia and add value to the commodity. This would create more jobs and increase revenue from coffee.

However due to constraints such as capital, a more feasible investment is in processing instant coffee whose demand stands at about 18 per cent of the international market as against speciality coffee at about 12 per cent.

Uganda exports 95 per cent of its coffee as green beans, maintaining its primary producer status.

UCDA has blamed the situation on the inability of the private sector to put up a coffee plant.

Henry Ngabirano, managing director of UCDA, said, “You need more than $20 million to put up an instant coffee plant, and to get that kind of credit, one would need assets in collateral worth about $33 million. Private sector players interested in the coffee business don’t have that kind of money or security.”

However, observers say there is little government commitment to add value to coffee.

“For a sector that earns the most export revenue for the country — $256 million in 2007 — and generates about $500 million in total, the government should have little difficulty in finding $20 million for a coffee factory; it guarantees loans to other sectors that contribute much less to the economy,” said an observer.

In 2006, UCDA introduced a group of private coffee firms in Uganda to the Danish government, which had expressed interest in funding an instant coffee plant in the country.

However, an appraisal mission from the prospective financiers rejected the group on the grounds that they had a weak capital outlay, little experience in the business.

“It is mainly because capital constraints that the government decided to engage foreign investors to take up the business,” said Mr Ngabirano.

Some experts feel that for an instant coffee plant to succeed, there must be a local market as well, as against the government strategy to produce only for export to countries such as Dubai and the US.

David Barry, treasurer of the East African Fine Coffees Association and managing director of Kyagalanyi Coffee Ltd, a member of Swiss-owned Volcafe, was quoted recently as saying, “A healthy volume domestic market is almost a pre-requisite for developing a roasting and soluble business in the producing country.”

The East African

Article Categories

AGRA agribusiness agrochemicals agroforestry aid Algeria aloe vera Angola aquaculture banana barley beans beef bees Benin biodiesel biodiversity biof biofuel biosafety biotechnology Botswana Brazil Burkina Faso Burundi CAADP Cameroon capacity building cashew cassava cattle Central African Republic cereals certification CGIAR Chad China CIMMYT climate change cocoa coffee COMESA commercial farming Congo Republic conservation agriculture cotton cow pea dairy desertification development disease diversification DRCongo drought ECOWAS Egypt Equatorial Guinea Ethiopia EU EUREPGAP events/meetings expo exports fa fair trade FAO fertilizer finance fisheries floods flowers food security fruit Gabon Gambia gender issues Ghana GM crops grain green revolution groundnuts Guinea Bissau Guinea Conakry HIV/AIDS honey hoodia horticulture hydroponics ICIPE ICRAF ICRISAT IFAD IITA imports India infrastructure innovation inputs investment irrigation Ivory Coast jatropha kenaf keny Kenya khat land deals land management land reform Lesotho Liberia Libya livestock macadamia Madagascar maiz maize Malawi Mali mango marijuana markets Mauritania Mauritius mechanization millet Morocco Mozambique mushroom Namibia NEPAD Niger Nigeria organic agriculture palm oil pastoralism pea pest control pesticides pineapple plantain policy issues potato poultry processing productivity Project pyrethrum rai rain reforestation research rice rivers rubber Rwanda SADC Sao Tome and Principe seed seeds Senegal sesame Seychelles shea butter Sierra Leone sisal soil erosion soil fertility Somalia sorghum South Africa South Sudan Southern Africa spices standards subsidies Sudan sugar sugar cane sustainable farming Swaziland sweet potato Tanzania tariffs tea tef tobacco Togo tomato trade training Tunisia Uganda UNCTAD urban farming value addition value-addition vanilla vegetables water management weeds West Africa wheat World Bank WTO yam Zambia Zanzibar zero tillage Zimbabwe

  © 2007 Africa News Network design by Ourblogtemplates.com

Back to TOP