In April 2022, the Ugandan Parliament recommended that a government agreement with Uganda Vinci Coffee Company Limited be terminated on grounds that it was unconstitutional and contravened several other laws of Uganda.
In 2015, the government entered into an agreement with Vinci Coffee to set up a coffee processing plant to add value to the Ugandan coffee industry.
Vinci Coffee was to design, finance, construct and operate a processing plant with a capacity of 60 000 tonnes of coffee per year. The government agreed to give Vinci Coffee priority for the supply of quality coffee and not to license any exports of coffee beans unless the requirements of Vinci Coffee were satisfied. Vinci Coffee was also left to determine the price it would pay to its suppliers for coffee, provided the price was not lower than that set by the relevant authority or the prevailing international price.
Parliament found that Vinci Coffee would require 58.2% of Uganda’s coffee production, including the entire supply of premium coffee beans. The agreement gave Vinci Coffee control of a large part of the coffee market. This coupled with its power to control prices would result in the stifling of competition and a restriction on freedom of commerce in Uganda.
Parliament ruled that the agreement created a monopoly and therefore it contravened the constitutional economic rights of farmers and persons engaged in the coffee value chain by restricting them from accessing and trading in coffee.
However, parliament wrongly relied on the East African Community Competition Act, 2006 (the “EAC Competition Act”) to support its conclusions against Vinci Coffee. The EAC Competition Act only applies to regulate anti-competitive practices where an economic activity has a cross-border effect, ie, where a transaction involves two or more EAC member states.
The case for a national competition law
Consumer protection and competition law have received scant attention from government despite calls from various stakeholders. Eighteen years ago, the Uganda Law Reform Commission recommended the enactment of a national competition law. A Competition Bill was drafted in 2004 but was never presented to parliament. Most recently, a government minister undertook to the Parliamentary Committee of Trade, Tourism and Industry to table a competition bill before parliament but this has still not been done.
The Vinci Coffee agreement is not the first deal of its kind where a government grant of contractual rights creates a monopoly over economic activity in Uganda. A similar agreement was previously entered into giving a company a 10-year monopoly over the management of all Uganda’s imports and exports through the port of Mombasa, Kenya, which accounted for 97.5% of Uganda’s imports and exports at the time. In Spedag Interfreight Uganda v Attorney General & Great Lakes Ports, the Constitutional Court declared that the act of the government in executing a contract that purported to grant monopoly rights over clearing, forwarding and handling services of all imports and exports from Uganda through the port of Mombasa to Great Lakes Ports was unconstitutional (see also Uganda Inland Ports v Attorney General).
Similarly, an attempt by the Uganda National Roads Authority to award an exclusive contract for the maintenance and installation of street lights along Entebbe Road in exchange for exclusive outdoor advertising rights was struck down as illegal, unjust, discriminatory, ultra vires, unlawful and therefore void (Prime Media v Uganda National Roads Authority).
Most recently, the Uganda Communications Commission (“UCC”) found an agreement between Airtel Uganda Limited and American Tower Corporation Limited (“ATC”) in which Airtel had granted ATC a right of first refusal to build new tower sites for Airtel to be unfair and anti-competitive.
The UCC found that the agreement restricted Airtel from giving any contract for building new tower sites to any other tower company unless ATC did not want the site. This restricted the rights of other licensed tower operators from freely negotiating or engaging with Airtel for possible business in building new sites. (Ubuntu Towers Uganda Limited v American Tower Corporation Limited and Airtel Uganda Limited).
The absence of a competition law leaves room for deals that have a negative impact on trade, competition and consumer welfare. Businesses can only look out for their own interests and there is an urgent need for regulation to check and control excesses.
Kenya and Tanzania have their own national competition laws that govern their local competition and consumer protection issues.
Ugandan lawmakers should wake up and smell the coffee. Consumer protection and the regulation of competitor is long overdue.
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Read the original article at ENSafrica.