BCU: Uganda’s only surviving cooperative on its knees

Bugisu Cooperative Union is on its death bed

The letter was terminating “all workers without contracts” and “all workers whose contracts had expired”. I was later to learn from the acting general manager William Isaiah Wabulo that what was happening was a “restructuring exercise” following the bankruptcy and incapacitation of the once giant Cooperative Union that had been the lifeline of the Bamasaba  as well as Bukedi coffee growers.

The story of BCU is one of resilience. As Uganda’s other cooperative unions were being annihilated largely by the changing dynamics of leberalisation and capitalism, following President Museveni’ acceptance of the 1990s ‘Washington Consensus’ that, among others, opened up Uganda to free market forces. Bagisu  farmers had, until now, remained united and upheld their coffee heritage through the Bugisu Cooperative Union.

The billion dollar question has been; why BCU has endured the test of time as other cooperatives have  collapsed. William Isaiah Wabulo, the acting General Manager, says that the Union has soldiered on because coffee farmers wouldn’t wish it to collapse in the first place. He says that the farmers keep on supplying their coffee to the union on credit and wait patiently before they receive their money.

“There are farmers who gave us coffee five months ago and up to now they are yet to be paid. We have now reached the point of being unable to pay the farmers for their coffee, something which has been uncharacteristic of BCU as a people’s organization,” he says.

The farmers, who are organised into 127 primary cooperative societies that form the Bugisu Cooperative Union, are now left on their own. Some of them are left to the vagaries of middlemen who are buying their coffee for as low as Shs2,000 a kg, from Shs13,000 a kg in 2010 when Nandala Mafabi and his board were suspended over financial impropriety at BCU.

The farmers through their primary societies used to receive fertilisers and pesticides, farm implements like hoes, pangas, wheelbarrows, all from BCU. The Union also used to offer bursaries to the children of some farmers, which is now no more from the time Nandala Mafabi had been suspended.  

Philemon Mafabi is one such farmer who is now struggling to pay school fees for his three children owing to the low coffee prices, and the dysfunctional state of BCU. The subsistence farmer is a member of Buwira Cooperative Society in Buwalasi Sub County, Sironko District. “This coffee plantation is our family asset, I inherited it from my grandfather who passed it down to my father, and right now am in charge. However, I have been harvesting declining yields because the soils are now exhausted and there’s no support I get from BCU such as pesticides to kill the coffee wilt, this season I have only managed to harvest 20kgs from 1000 coffee stems as the rest have been destroyed by the wilt. I used to harvest up to 200Kgs when I used to receive steady support from BCU through my cooperative society,” he explains pondering where he will find school fees for his eldest son who is in Senior Six at Mbale Secondary School.

Another coffee farmer, Paul Mabonga Wangila who grows coffee extensively in Bukhayaki village, Bukiabi Sub County in Manafwa District, and he is a member of Mahonge Cooperative Society. Unlike other farmers who would majorly depend on BCU, Mabonga has been lucky to receive support from NAADS, and he is among the model farmers in his sub county. He applies organic fertilisers from his banana plantation, and can afford to purchase pesticides. However, much as he harvested about 1000kgs last season from 2000 stems, he was let down by the low coffee prices following the troubles of BCU. “I used to get over Ushs 10milion per season selling my coffee at an average of Ushs 10,000 a kg, but this season I have only fetched not more than Ushs 3million when the prices hit a rock-bottom of Ushs 2,500 a kg,” he laments.

With the diminished financial base, BCU’s is currently surviving on assets which are shielding it from total collapse. The Union has got a strong asset base estimated worth Ushs15billion and it’s part of this money that the management would pick to pay up the farmers. The union boasts over 12 commercial buildings in Mbale town including its towering headoffice in Doko Industrial Area. It’s also reported that BCU owned a warehouse in Mombasa, which, unfortunately can’t be traced today.

Wabulo the manager says that BCU almost collapsed from the sheer weight of debts from 2006 to 2008. The Union had purchased a new processing machinery from Sweden on credit worth Ushs3.1billion, replacing the obsolete one which had been installed in 1957.

“We bought machinery for processing because the one we had couldn’t put up with the new volumes, the new machinery is installed with modern equipment which processes coffee at a much faster rate.” To pay off the debt, Wabulo reveals that management was forced to parcel out part of their land in Dokoto government under a special memorandum of understanding (MoU), and that the government would later on sell-off the land to clear the debts on behalf of BCU.

In 2005, BCU lost a major estate- Mt Elgon Hotel – to a Swiss firm, Jobbing Field Property Financial Company Ltd over failure to pay an accumulated debt of $2.5m (Shs6.2b).

Currently, Wabulo says that BCU needs not less than Ushs 5 biillion to come back to life.

Another setback is that the government under the guise of liberalisation has given leeway to multinationals to establish themselves in Bugisu and compete against BCU. The companies such as Drucafe, which has since rebranded to Kyagalanyi Coffee, Olam International, KawaCom, Great Lakes, and among others are continuing to beat life out of BCU. Ironically, these are the same companies to which BCU used to export processed coffee.

Wabulo laments that the above companies go down to the individual farmers and pay the farmers in advance for their coffee even before it repens. “We are not against competition, however, our recommendation is that the private companies should wait to buy processed coffee from BCU instead of going to the farmers directly.”

The onslaught of the private companies has drastically affected quality as the coffee companies are reportedly mixing the coffee varieties from other areas such as Palisa with the Arabica coffee from Bugisu and in the process losing the original pure taste and aroma of Arabica coffee. “When you travel to the UK or US which used to consume BCU’s coffee, those people will tell you that BCU no longer produces coffee because the coffee they are currently consuming is totally different from that BCU used to supply. This is the unfortunate situation BCU finds itself,” Wabulo narrates.

The giant BCU which was the leading exporter of coffee hasn’t exported any coffee since 2009 because of lack of finances to facilitate the exports. The acting manager says that the little coffee they have been receiving from farmers is what the BCU would sell to the local companies.

When Budadiri West MP Nandala Mafabi took over as BCU chairman in 2008, he tried to breathe life into the union. Mafabi restored the fortunes of the farmers and whipped up their spirits, and by the time he was forced out together with his board in 2010, a kilo of dry coffee beans had shot to Ushs13,000 from Ushs2,500 in 2008.

Mafabi had also revived the sponsorship scheme for the children of farmers in 2009. Over 200 children were being offered scholarships at secondary and university level. The bursary scheme has since been suspended after the Union running bankrupt, leaving the farmers the burden of paying fees for their children while others have dropped out.

Following Mafabi’s exit, the government appointed William Wepukhulu as caretaker manager. However, Mafabi says that the caretaker management had swindled Ushs1.34 billion in Bank of Baroda, $140,000 (about 350 million) in Barclays Bank, Ushs560m in Housing Finance Bank and about Ushs1 billion worth of coffee stock in the stores. “We left a lot of money and coffee stocks at BCU, but, we came back to inherit an empty shell. We are now looking for financing to enable us get back on our feet. Right now we can’t employ staff at the factory and neither can we buy coffee from the farmers,” says Nandala. Efforts by The Sunrise to get a comment from Wepukhulu via telephone failed.

The FDC politician avers that government’s aim is to kill BCU like has been the case with other cooperative unions. “The government realised that BCU was empowering the local people economically, and they also got this false information that money from BCU was being used to finance the opposition, this was ridiculous,” charges Mafabi. “Am happy that a forensic audit that was commissioned by Minister [Amelia] Kyambadde [trade and cooperatives] cleared me and my board of any wrong doing as per the charges of mismanagement and falsification of books of accounts.”

Govt response

The minister of trade, industry and cooperatives Amelia Kyambadde says that the government has rolled out a deliberate plan of reviving the cooperatives by organizing farmers into the various production zones as well as facilitating easy access to credit by farmers.”Government has gone back to the drawing board, and we have come to the conclusion that we must revitalize the cooperative movement. Government is now investing heavily in warehouse receipting, feeder roads to connect the farmers to the production centres and markets, and emphasizing value addition by establishing agro-processing firms through private sector investments,” she said.

On what lessons government could learn from the resilience of BCU, Ms Kyambadde says that the enduring story of BCU should form the basis for other cooperative organisations to realise the benefits of unity of purpose and collective support. “Cooperation means coming together for a common purpose and enhancing common benefits, the farmers of Bugisu Cooperative Union haven’t been deterred by the challenges that have bedevilled their union, and this is fundamental for every organisation, not just cooperatives.”

Other once famous cooperatives

” West Mengo Cooperative Union

”  East MengoCooperative Union

”  Wamala Cooperative Union

”  Banyankole Kweterana

”  Masaka Cooperative Union

”  Lango Cooperative Union

”  Teso Cooperative Union

”  Bukedi Cooperative Union

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