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Uganda: New Coffee Firm Leases Bugolobi AGOA Plant

Uganda: New Coffee Firm Leases Bugolobi AGOA Plant
Published date:
Sunday, 23 April 2006

A new coffee-processing company, House of Uganda Coffee Ltd., has won a 49-year lease to use part of the former Coffee Marketing Board premises at Bugolobi. Uganda Property Holdings Ltd, the custodian of most government properties, granted the lease for which Uganda Coffee will pay an annual rental fee of Shs56m.

The company will share the premises with Apparels Tri-Star, the firm that produces textiles for the United States market under the African Growth and Opportunity Act, Agoa. With the Shs6 billion it plans to invest in processing local coffee beans into instant powder for export, Uganda Coffee is set to become the biggest player in the local coffee export sector.

A few firms export roast coffee while the vast majority export raw beans, something President Museveni has decried over the years saying Uganda was "donating wealth" to the outside world by not adding value to such exports and therefore earning more. One can earn up to four times more by exporting instant coffee instead of raw beans.

Equipment to roast coffee beans for export, for the start, is being fitted in the multi-storied end of the Bugolobi premises. The making of instant coffee powder for export will start two years later. "Our aim is to make that area an export promotions zone so that whatever is produced there is strictly for export," said Mr Albert Abaliwano, the managing director of Uganda Property Holdings. "We removed the original machines used for washing, grading and bagging coffee. The building will strictly be used for coffee processing or any industry producing for export."

House of Uganda Coffee applied for the lease a year ago and was granted in October last year. According to some of the conditions set for the lease, Uganda Property Holdings is to review the rental fees every 10 years. "We have given them two years as a quick start, if they have not began, then we shall begin to question them," Abaliwano said when asked when the company is slated to start operations.

Abaliwano added that the lease starts with a five-year sub-lease, which will subsequently be increased to 49 years if the leasing company meets all the set conditions. The premises were leased after Apparels Tri-Star failed to make good use of them leaving large parts redundant, said Mr Martin Kihembo, the operations manager of Uganda Property Holdings.

He said that some rehabilitation work on the plant such as fixing the roof, the toilet and drainage system was underway and that Uganda Coffee was already setting up a roasting facility.

"We gave them the premises 'as is' and it's up to them to make them habitable for their business," Kihembo said. There are reports, however, that the management of Apparels Tri-Star has not welcomed the idea of sharing the premises with a coffee-processing firm because of the strong aroma.

"They were given the first priority to utilise the facility but they could not afford, we have told them they should accept whoever it is that eventually comes in," Kihembo said. Apparels Tri-Star does not pay rent to Property Holdings because the space it occupies was "government contribution" to help Agoa exports get off the ground. But to use the main storey building, they were expected to pay, which they declined to do.

This is the space that has gone to Uganda Coffee.

"We intend to revive the operations of this place as it was in the past," Mr Andrew Kagolo Seguya, the operations director of Uganda Coffee, told Sunday Monitor at the site on Thursday. "But this will, of course, take some time as it requires encouraging farmers to grow more coffee and finding markets for that coffee on the international market."

"Hopefully, we will begin packing roast coffee for export by July," Mr Stephen Mukasa, a coffee farmer from Masaka and also the managing director of Uganda Coffee, said. "We are only hampered by the electricity [shortage]."

He said the company, which has already invested Shs2 billion, would start processing instant coffee for export after about two years of operation and building capacity. House of Uganda Coffee Ltd is owned by Akiba International, Mukasa and Mr Chris Kerere.




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