Staff sent home as BAT closes Jinja cigarette factory
Jul 02, 2005
British American Tobacco Uganda (BATU) has closed down the Jinja-based cigarette factory and sent 85 production staff on leave.
By Abubaker Mukose
British American Tobacco Uganda (BATU) has closed down the Jinja-based cigarette factory and sent 85 production staff on leave.
Tobacco growing and leaf processing for export will continue at the Kampala plant.
The closure follows government’s recent hike in excise duty on locally manufactured cigarettes. The new rates came into force yesterday.
This is the first time BATU suspends its operations since its establishment in 1928.
“We have temporarily suspended manufacturing pending discussions which are already underway with the Government. We can’t compete with the current smuggling rate while carrying such huge overheads,†Jimmy Kiberu, the head of corporate and regulatory affairs (Equatorial Africa), said yesterday.
Kiberu said the current market dominated by smuggled products made the business unviable under the new duty rates.
Under the new Finance Bill, excise duty on soft-cap cigarettes increased from sh19,000 to sh21,000 per mille (1,000 cigarettes) while tax on hinge-lid that comprises largely exported brands like Benson & Hedges remained at sh48,000 per mille.
The third category rose from sh25,00 to sh27,000 per mille.
Before the close of last financial year, BATU owned about 90% market share in cigarette sales. “Now a lot of the share is being lost to smuggling,†Kiberu said.
He said the sale of the existing stock shall continue alongside negotiations. “Marketing of the products shall also continue,†Kiberu added.
Other divisions, including the Kampala leaf processing plant, the leaf centres in west Bunyoro-Mubende, north Kigezi and mid-north covering Apac and Kitgum, shall remain operational basically for export purposes.
Kiberu said prior to the budget, BATU made a submission to the finance and budget committee of Parliament, requesting government to maintain the excise duty rate for 2004/05.
He said their sales were growing by 2% in the legitimate market.
“Unless the duties are revised, BATU shall not re-open. This is seen as a death knell for us the legitimate players. If we continue production, it shall not only affect us as BATU but also affect government revenue from cigarettes by about 39%.â€
That is the reason why we should come up with a win-win situation for us and government,†KIberu said.
He said if talks fail, Uganda risked becoming a net-destination for smuggled cigarettes.
British American Tobacco Uganda (BATU) has closed down the Jinja-based cigarette factory and sent 85 production staff on leave.
Tobacco growing and leaf processing for export will continue at the Kampala plant.
The closure follows government’s recent hike in excise duty on locally manufactured cigarettes. The new rates came into force yesterday.
This is the first time BATU suspends its operations since its establishment in 1928.
“We have temporarily suspended manufacturing pending discussions which are already underway with the Government. We can’t compete with the current smuggling rate while carrying such huge overheads,†Jimmy Kiberu, the head of corporate and regulatory affairs (Equatorial Africa), said yesterday.
Kiberu said the current market dominated by smuggled products made the business unviable under the new duty rates.
Under the new Finance Bill, excise duty on soft-cap cigarettes increased from sh19,000 to sh21,000 per mille (1,000 cigarettes) while tax on hinge-lid that comprises largely exported brands like Benson & Hedges remained at sh48,000 per mille.
The third category rose from sh25,00 to sh27,000 per mille.
Before the close of last financial year, BATU owned about 90% market share in cigarette sales. “Now a lot of the share is being lost to smuggling,†Kiberu said.
He said the sale of the existing stock shall continue alongside negotiations. “Marketing of the products shall also continue,†Kiberu added.
Other divisions, including the Kampala leaf processing plant, the leaf centres in west Bunyoro-Mubende, north Kigezi and mid-north covering Apac and Kitgum, shall remain operational basically for export purposes.
Kiberu said prior to the budget, BATU made a submission to the finance and budget committee of Parliament, requesting government to maintain the excise duty rate for 2004/05.
He said their sales were growing by 2% in the legitimate market.
“Unless the duties are revised, BATU shall not re-open. This is seen as a death knell for us the legitimate players. If we continue production, it shall not only affect us as BATU but also affect government revenue from cigarettes by about 39%.â€
That is the reason why we should come up with a win-win situation for us and government,†KIberu said.
He said if talks fail, Uganda risked becoming a net-destination for smuggled cigarettes.