‘Counterfeits affecting BAT, tax revenues’

British American Tobacco Uganda (BATU) has blamed illicit trade in the cigarette industry for its dismal performance.

Releasing the company’s half-year financial results on Monday, Managing Director Jonathan D’Souza said counterfeit cigarettes were being sold in Uganda and the region, with no action being taken by government.

“Government levied a huge excise duty (42 per cent) on cigarettes but we believe this can’t be realised unless they first deal with illicit traders,” D’Souza said.

The company’s unaudited half-year net profits, up to June 2013, fell to Shs 4.8bn, from Shs 8.1bn for the same period last year. Cigarette sales volumes fell by 24 per cent.

Last year, the company’s net profits fell from Shs 22bn to Shs 12bn. Shareholders only received an interim dividend of Shs 141 per share, down from Shs 309 per share in 2011. Early this year, the company closed its tobacco-processing plant in Kampala, rendering at least 26 employees jobless.

In June, the High court also held that BATU was liable to pay contract farmers in Hoima, the value of tobacco that was delivered to the marketing sheds with an interest rate of 26 per cent per year since 2004.

Big threat

D’Souza said over 20 per cent of the cigarette market in Uganda was dominated by illicit trade manifesting itself through both dumping and the porous borders between Uganda and South Sudan.

He showed the press different cigarette packs of Supermatch sold in illicit trade. Of the five, only one had a tax stamp, UNBS sticker and a health warning message.

“The problem is not identification, it is enforcement. The laws are not helping anyone if they remain shelved. We think the authorities can do more in stopping this vice,” D’Souza said.

However, Uganda Revenue Authority (URA) supervisor Customs, Alex Nyakahuma, says several arrests of perpetuators and impounding of illegal products have been made.

“It is true there is illicit trade and we are doing everything possible to fight it,” Nyakahuma said. “To fight dumping, we make sure all goods passing through Uganda are given physical escorts from border to border.The introduction of electronic cargo tracking shall also be very important,” he added.

Barbara Kamusiime, the UNBS spokesperson, says the recent introduction of Pre-import Verification of Conformity programme would wipe out trade in and importation of such counterfeits.

“Our focus now is on locally-produced products. We have a market surveillance team to make sure all goods on the market have the mandatory Standards and Quality marks,” Kamusiime said.

Border controls

D’Souza says there is need for stringent border controls highlighting that the Uganda and South Sudan border was very porous. However, URA and UNBS are currently carrying out countrywide Anti-Illicit sensitisation campaigns.

“If people can identify and report these products, then it becomes easy for us to act and intercept the perpetuators,” Nyakahuma said.

It is the Supermatch brand that has been susceptible to counterfeiting and illicit trade in recent past.
The BATU corporate and regulatory affairs manager, Diana Apio, applauded the 2012 Ant-illicit trade manual. But she urged the government to enforce prohibitively punitive measures against this trade.

Paul Claude Sine, the BATU finance director, believes the company shall be able to bounce back from this bad spell.

“Our profits from operations, especially from leaf shipments are improving. We expect to spend about Shs 50bn to buy up to 14m kilogrammes of tobacco leaf from our farmers in Arua and Hoima,” he said

However, D’Souza insists that despite closing the Kampala plant, the company is still committed to Uganda.

“We are still listed; we employ over 200 people and impact on 18,000 farmers. We are still here,” he said.

kimbowa@observer.ug