BAT Uganda has called upon the Government to ramp up efforts to curb illicit trade, which it says is impacting the sustainability of its business.
In its unaudited half-year 2023 results announced today, the Company posted a 4% decline in gross revenue to USD 48.6 billion.
Profit after tax was reduced by 2% to USD 3.8 billion reflecting the lower revenue, partly offset by a decrease in cost of operations. Operational costs were reduced by 4% to USD 18.7 billion, in line with the drop in sales volume and an inflationary increase in input costs.
“Our business continues to be impacted by general macro-economic volatility and rising inflation, which is mounting pressure on consumer purchasing power. This is exacerbated by a high prevalence of illicit trade in tax-evaded cigarettes, estimated at 29% as of the end of 2022 (Source: 3rd party research),” said BAT Uganda Managing Director, Mathu Kiunjuri.
“While our business remains resilient, the impact of illicit trade cannot be overstated. For the first half of 2023, our contribution to the exchequer declined by 4% to USD 27.2 billion due to reduced sales. It is estimated that illicit trade in cigarettes denies the Government approximately Ushs 30 billion annually and threatens the livelihoods of legitimate Ugandan businesses and their value chains. Third-party research 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. Additionally, we have noted the unlawful sale of flavored cigarettes, especially those smuggled from neighboring countries and further afield,” he noted, adding:
“We acknowledge efforts by the Government to fight illicit trade, including seizure of illicit cigarettes and public education on tax compliance by the Uganda Revenue Authority. However, given the dire situation, the Government must double its efforts for a 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.”
“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 approximately 1,200 local (East African) shareholders, and contributing to domestic tax revenue,” said BAT Uganda Chairman, Hon. Dr. Elly Karuhanga.
He added: “As we work to build a future-fit business, BAT is on a transformation journey anchored on our purpose to build A Better Tomorrow™️ by reducing the health impact of our business. This is underpinned by our 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.”