BAT Uganda not satisfied with 80 pc cigarette market share

May 22, 2019 in Business, Companies, Markets by Editor

Karuhanga said last year, BAT Uganda paid about $23 million in taxes, but the illicit trace in cigarettes is hurting business.

May 22—With almost a complete stranglehold of the domestic market, BAT Uganda wants the government to tighten on the illicit trade in cigarettes.

All the company’s brands destined for Uganda are manufactured in Kenya after a restructuring of operations to cut costs was completed just over 12 years ago. However the country remains an important producer of tobacco leaf.

Speaking following its AGM in Kampala today, Elly Karuhanga, the BAT Uganda Chair said, “BAT Uganda in 2018 remitted UGX 90.5 billion ($24 million) in taxes to government. This is despite the trade in illicit cigarettes that are on the market. If the illegal cigarettes were controlled and removed from the market, BAT Uganda and other legit cigarette producers and importers would make more profits and pay more taxes to government.”

BAT Uganda officials say during 2018, about 22 pc of all cigarettes sold on the Ugandan market were illicit which is putting a strain on competing legitimate manufacturers. The company’s flagship Sportsman brand competes with Supermatch which features similar packaging but is priced lower.

Karuhanga asked the Uganda Revenue Authority (URA) and other concerned bodies to put in place measures and safeguards that will remedy the situation. However he also suggested that the government revise the relatively heavy taxation on cigarettes, something the government and anti-smoking activists are unlikely to accept.

Listed on the Uganda Securities Exchange, BAT Uganda is the biggest buyer of local tobacco leaf from over 13,500 farmers mainly from northwest. The company enjoys 80 pc of the cigarettes market in Uganda.

“We believe that a stable regulatory and taxation environment is crucial for business as well as for the government and consumers. As such, we continue to advocate for formulation of balanced and equitable laws that enable growth and sustainability of the cigarettes sector in Uganda and East Africa,” Karuhanga told a news conference.

BAT Uganda managing director, Mathu Kiunjuri said the company despite its taxation burden and the challenge of illegal cigarettes was able to make profits and pay dividends to shareholders.

“BAT Uganda is going to pay UGX 13.7 billion ($3.6 million) in dividends to its shareholders for the year ended 31th December 2018. This represents a 14 pc increase from the dividends paid out in 2017,” he said. Payments are expected to be completed by the end of June 2019.