Agribusiness Industry Markets

Illicit cigarettes damaging Uganda’s Tobacco industry

BY PAUL TENTENA

A farmer inspecting his tobacco garden.

KAMPALA, UGANDA-The trade in illicit cigarettes which is estimated at 23% of the total cigarettes sold in Uganda has remained a key concern in addressing loss of legal industry cigarette volumes according to the Managing Director of BAT Uganda.

Mathu Kiunjuri told the media in Kampala that this has impacted a lot on the government revenue collections by creating a loss of approximately Ush30b.

He said at the BAT Uganda Annual General Meeting, where the company declared a dividend of Ush12b paid to its shareholders. Kiunjuri also announced a payment of Ush81b in government taxes.

“We shall pay 100% dividends in line with our pay out policy. These divedends are subject to withholding tax and will be paid on or before 21st June 2018 to shareholders on the company’s share register at the close of business on 31st May 2018,” said Kiunjuri.

BAT Uganda cigarette sales in 2017 grew marginally by 0.5%  compared to 2016. The gross revenue grew by 8% driven by excise led price increases and lower cost of operations.

Kiunjuri said operating margin improved by 8.3% during the year, reflecting growth in profitability and lower operating costs.

Dr. Elly Karuhanga, the BAT Uganda Board Chairman commended the company performance notwithstanding a slowdown in economic activities due to factors such as adverse weather conditions and low purchasing power which subdued demand in the first two quarters of 2017.

The Managing Director also decried the challenges presented by the application of different excise duty rates for locally manufactured products and products imported from East African Community member states.

“The steep and differentiated excise duty increase not only gave our competitors an unfair advantage over our products, but threatened our viability by rendering our products uncompetitive,” said Kiunjuri.

“Accordingly, the company filed a case in the East African Court of Justice to challenge the legal basis for the application of the differentiated excise rates.

“In January 2018, the EACJ issued an injunction barring the Government from levying and collecting excise duty in accordance with the new rates until the main case is concluded.

“We will continue to advocate for formulation of balanced and equitable laws and collaborate with the Government and relevant stakeholders towards realization of the full benefits of the EAC’s regional integration agenda,” said Kiunjuri.