The agricultural sector in Uganda has been dealt a huge blow with the ongoing winding down process of the Uganda Cocoa and Commodities Limited, which is set to be wound up together with Grow More Seeds and Chemicals Limited, over insolvency.
The two enterprises are to be wound up following a petition by Wadia Sukaria referenced as High Court Company Cause No. 00.39 of 2024, in the Matter of Insolvency Act 2011.
As a result of this petition, the Ugandan cocoa industry is bracing itself for a significant blow because Uganda Cocoa and Commodities, headed by Swaminathan Kalyanaraman as Chief Executive Officer, was a major player in the sector, but is now insolvent.
This development has sent shockwaves among cocoa farmers across the country, who rely heavily on the company for market access and support.
According to the Uganda Coffee and Cocoa Association, there are over 50,000 cocoa farmers in Uganda, with the majority operating on smallholder farms.
These farmers produce an average of 20,000 metric tons of cocoa beans per year, with Uganda Cocoa and Commodities being one of the primary buyers.
It’s obvious that the closure of Uganda Cocoa and Commodities will have far-reaching consequences for cocoa farmers.
Blow To The Economy
Without a reliable market, farmers will struggle to sell their produce, leading to reduced incomes and livelihoods. This, in turn, will affect the overall economy, as cocoa farming is a significant source of employment and income for many rural households.
This is because statistics from the Uganda Bureau of Statistics (UBOS) indicate that cocoa exports earned the country approximately UGX 36.7 billion (USD 10 million) in 2020.
With the closure of Uganda Cocoa and Commodities, this revenue is likely to decline significantly, affecting government revenue and the overall economy.
Loss Of Revenue
The government’s revenue from cocoa exports will also be impacted. According to the Uganda Revenue Authority (URA), cocoa exports attract a 2% withholding tax. With reduced cocoa exports, the government can expect a decline in tax revenue, which will have a ripple effect on public finances.
Solution For Farmers
To mitigate the effects of the closure therefore, the government and other stakeholders must act quickly to provide support to cocoa farmers.
This could include initiatives such as:
Providing alternative market access for cocoa farmers
Offering training and capacity-building programs to enhance farmers’ productivity and quality, plus
Implementing measures to improve the overall competitiveness of the Ugandan cocoa industry.
The insolvency of Uganda Cocoa and Commodities therefore poses significant challenges for cocoa farmers, the government, and the overall economy.
Urgent action is required to address the fallout and ensure the long-term sustainability of Uganda’s cocoa industry.