The priority is to maintain business continuity and work with relevant government agencies to ensure a stable and predictable regulatory environment.
British American Tobacco Uganda, which is listed on the Uganda Securities Exchange by its abbreviation "BATU" released its half-year financial results for the year ended June 2020 indicating a 2% climb in profits after tax to sh9.9b in spite of COVID-19 effects to the economy.
The resilient performance came despite a significant drop in topline revenues to sh76b from sh86b in June 2019. The financials indicate that the BATU's half-year profit came on the back of a decline in excise duty and value-added tax to sh39b from sh48b.
"For the first half of 2020, gross revenue reduced by 12% to sh76b, mainly due to the impact of the COVID-19 pandemic on the consumer purse. With rising unemployment and a significant increase in the cost of various basic consumer goods, the pandemic has left many consumers more cash-stretched than ever," Mathu Kiunjuri, BAT Uganda managing director, said.
He noted that BATU had closed some retail outlets which led to constrained consumer access to the firm's products. Despite these challenges, he noted that BATU's performance was down to prudent cost management measures undertaken to mitigate the decline in revenue.
"As we navigate the particularly challenging business environment occasioned by the COVID19 pandemic, the menace of illicit trade is entrenching itself now more than ever, on the back of heightened consumer affordability challenges," Kiunjuri said.
He added that despite the enhanced border controls put in place to mitigate the spread of COVID-19, BATU's trade teams continue to report an increased presence of illegal tax evaded cigarettes in the Ugandan market, primarily tax-evaded cigarettes from Kenya.
He noted that at the end of 2019, about 44% of illicit cigarettes sold in Uganda had been smuggled across the Kenyan border. Kiunjuri pointed out that in addition to eating into the firm's market, illicit trade in cigarettes denies the government in excess of sh30b every year.
Subsequently, he explained that the illicit trade problem is partly evidenced by the reduction of BATU's contribution to government taxes in the form of Excise Duty, Value Added Tax (VAT), and Corporation Tax. Although he applauded Uganda Revenue Authority's (URA) Digital Tracking Solution (DTS) as one of the solutions to curb the illicit cigarette problem, he noted that immediate action is required to redouble enforcement of anti-illicit trade regulations.
One way of improving enforcement could be through enhanced action includes cooperation between Uganda and Kenya officials in stemming the flow of illicit cigarettes into Uganda, which requires identification of the source of these illegal products and their supply routes.
"As part of our continued effort and commitment to build a sustainable business and contribute to Uganda's economic development, we will continue to engage transparently with the relevant Government agencies to support the fight against illicit trade in cigarettes," Kiunjuri said.
"We also reiterate our call to the Government to ratify the World Health Organisation (WHO's) Protocol to Eliminate Illicit Trade in Tobacco Products (ITP)," he added.
Also commenting on the results, BAT Uganda Chairman, Dr Elly Karuhanga said that the firm's primary focus is to ensure the safety of its employees as the country battles the COVID-19 pandemic. He said that the next priority is to maintain business continuity and work with relevant Government agencies to ensure a stable and predictable regulatory environment.
"Looking forwards, I am confident that with sustained investment in our business, the exceptional quality of talent within the Company, and our partnerships with over 30,000 business partners and tobacco farmers, we have the right strategy in place to deliver a better tomorrow for consumers, society, employees, and shareholders," he said.