The Independent Uganda: You get the Truth we Pay the Price
Illicit cigarette inflows continue to be the biggest headache to the country’s product distributor
Kampala, Uganda | JULIUS BUSINGE | BAT Uganda, a distributor and seller of cigarettes in Uganda has reported a 2% decline in net profit to Shs3.8 billion for the six months of this year ending June 30, citing a decline in product sales.
Gross revenue decreased by 4% to Shs48.6bn despite a 4% decline in operational costs to Shs18.7 billion, in line with the decline in sales volume and an inflationary increase in input costs.
BAT Uganda is a member of the BAT Group, one of the leading multi-category consumer goods businesses, with brands sold in more than 180 markets across the world.
In Uganda, it began operations in 1928. It has been listed on the Uganda Securities Exchange since 2000 and has about 1,230 shareholders as of the end of December 2022, of whom approximately 1,200 are local (East Africa) shareholders.
To improve performance going forward, company executives have called upon the government to ramp up efforts to curb illicit trade, which they claim is impacting the sustainability of the business.
“Our business continues to be impacted by general macro-economic volatility and rising inflation, which is mounting pressure on consumer purchasing power,” said BAT Uganda’s Managing Director, Mathu Kiunjuri.
“This is exacerbated by a high prevalence of illicit trade in tax-evaded cigarettes, estimated at 29% as at the end of 2022.”
For the first half of 2023, the firm’s contribution to the treasury declined by 4% to Shs27.2 billion due to reduced sales.
It is estimated that illicit trade in cigarettes denies the government approximately Shs30 billion annually and threatens the livelihoods of legitimate Ugandan businesses and their value chains.
Third-party research, according to Kiunjuri, indicates that the most prevalent illicit cigarette products are those without the required tax stamps, have fake tax stamps and or have absent or altered graphic health warnings on their packaging.
“We have also noted the unlawful sale of flavoured cigarettes, especially those smuggled from neighbouring countries and further afield,” he added.
The government’s efforts to fight illicit trade have included the seizure of illicit cigarettes and public education on tax compliance by the Uganda Revenue Authority.
However, given the dire situation, executives said, the government must double its efforts for meaningful and lasting impact.
This includes ramping up multistakeholder and cross-border collaboration to ensure full implementation of the Tobacco Control Act, 2015, and the Tax Procedure (Tax Stamps) Regulations, 2018, which contain measures to address illicit trade.”
The company’s Chairman, Elly Karuhanga said, “This year we are proud to mark 95 years of operations in Uganda. Over the years, we have made sustained contributions to the socio-economic development of the country, including supporting the livelihoods of over 30,000 Ugandans in our value chain, delivering sustained value to our shareholders, and contributing to domestic tax revenue.”
Karuhanga said BAT is on a transformation journey anchored on the company’s purpose to build a better tomorrow by reducing the health impact of the business.
He said, their purpose is underpinned by their Environment, Social and Governance (ESG) priorities – driving excellence in environmental management, delivering a positive social impact, and ensuring robust corporate governance across the business.
“As we navigate this transformation, we will continue to contribute transparently to national dialogue to advocate for sustainable fiscal and regulatory frameworks,” he added.
