BUSINESS: Uganda’s rice politics

In response, the State Minister for Finance, David Bahati, said the government has waived the tax for a period of four months and this is intended to bring down the price of rice on the market.

Prior to the tax waiver, importing a  metric tonne of rice attracted $345 or 75% of the value of import whichever is higher as a tax irrespective of the type of rice—husked, milled, processed or packed ready for distribution.

Rice millers in the country started to request for a tax waiver on the commodity in 2015 following shortage. This necessitated the finance ministry to introduce a special tax regime, enabling millers to pay $ 250 per metric tonne for unprocessed rice in the 2016.

However, in January this year, the government removed the incentive saying the decision was made without adequate consultation with sector actors and was probably based on a misrepresentation of facts about the level of the local rice production.

Speaking to millers during the launch of the Uganda Millers Council on Feb 07, Kyambadde said the decision by the East African Community to adopt the Common External Tariff (CET) as a policy to impose 75% tax on rice imports outside the bloc has attracted investment in the country’s rice industry over the past decade.

She said the industry attracted $360 million private sector investment in the rice industry through establishment of small and large scale millers as well as small and large scale rice farmers.

But the availability of rice at low and stable prices has lately become very political to the extent that governments have to handle it keenly.

For instance, a rise in rice prices coupled with inadequacy of supply were contributing factors to defeats in past presidential elections like President Carlos Garcia in 1961 and President Diosdado Macapagal in 1965 in the Philippine, according Elfren S. Cruz, a don at De La SalleUniversity (DLSU).

“Even in the more advanced countries of East Asia – China, Japan– governments have tended to intervene in the rice markets through taxes, subsidies and market protection in order to protect the domestic rice market from fluctuations in the international rice market,” he said.

He said the five largest rice importers in the world are China, Nigeria, Philippines, Iran and Indonesia, and it  is expected that African countries will begin to import more rice as their economies begin to improve.

Millers already import duty free rice

But even the debate on whether or not to impose tax on imported rice rages on,  millers told The Independent in an interview on May 05 that the import  of brown rice at duty- free  is already ongoing mainly from Pakistan and the earliest consignment is set to arrive soon.

“We expect the arrival of our first consignment of brown rice in a week’s time, something we think will lower the price of rice on the market once we start milling,” said Mike Bagenda, operations manager at SWT Tanners Ltd, one of the country’s biggest importers and millers of rice in Uganda.

Geoffrey Adito, the director technical services and development at FOL Group, the company behind the production of Kingdom Rice said they have placed orders for import of brown rice at zero tax in response to the finance ministry’s directive to URA.

“We are continuing to import brown rice as usual this time at zero tax,” he told The Independent on May 05. “We believe that the government’s decision to remove taxes on unprocessed rice was a good move because it will bring the cost of production down and thus making the product affordable to majority of the population.”

Adito said FOL Group’s production has over the last two years operated below its 300metric tonnes capacity of rice due to low rice supply especially from local producers.

He said the company now plans to involve nucleus farmers across the country to boost supply of raw material for rice processing for both local and foreign markets. He added that the 75% tax imposed on rice imported outside the EAC bloc has had little impact on production of rice locally.

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