The Independent Uganda: You get the Truth we Pay the Price
COVID-19 and harsh regulations blamed
Kampala, Uganda | RONALD MUSOKE | Cigarette distributor, British American Tobacco (BAT) Uganda executives have attributed the company’s recent drop in revenue to the lingering impacts of the COVID-19 pandemic and stringent tobacco control regulations enforced by the government.
In their half-year performance report ending June 30, BAT Uganda reported a 4% decrease in gross revenue, amounting to Shs 48.6 billion. This decline also affected their net profit, which dropped by 2% to Shs 3.8 billion.
Speaking at a press briefing dubbed “Facts Behind the Figures” at the Uganda Securities Exchange in Kampala on Sept. 6, Mathu Kiunjuri, the Managing Director of BAT Uganda, acknowledged the company’s historical profitability but noted that there have been challenges in recent years.
Kiunjuri highlighted the year 2020 as the beginning of the troubles. He said the onset of the COVID-19 pandemic led to not only a significant decline in BAT Uganda’s product sales but also resulted in job losses and reduced disposable incomes, affecting the purchasing power of consumers, especially those in the hospitality industry.
“The year 2020 is the place where we should start,” Kiunjuri said, “I hope we never go back to that year. Things were not good; many people went out of jobs, and disposable incomes dwindled for many people, especially those in the hospitality industry. So, we got this kind of perfect storm that impacted our performance.”
He said BAT Uganda also faced a growing challenge of illicit cigarette trade, which surged from 15% before 2020 to 29.4% by the end of 2022. Kiunjuri noted that three out of every ten cigarettes sold in Uganda do not pay taxes, and this undercut the legitimate market.
However, beyond the impact of COVID-19, BAT Uganda executives also cited the harsh tobacco control regulations introduced by the government. The Tobacco Control Act 2015, along with its subsequent regulations, placed additional burdens on the local tobacco industry.
“In 2019, the Tobacco Control Act was regularized; we went to court asking for certain things to be amended because we said we accept regulations that are sensible; that allow people to operate,” Kiunjuri said. “Unfortunately, certain players did not adhere to those regulations in good time, and we saw a spike in illicit trade.” This spike in illicit trade led to a 4% reduction in BAT Uganda’s gross profit, primarily due to a decrease in sales.
Future remains bright
Despite these challenges, Kiunjuri expressed optimism about the company’s future, citing improvements since 2021. “The first year (following the re-opening of the economy) was tough, but there are certain things we have put in place in the second half (of this year) which should turn the numbers to profit, and then we shall start going up again,” he said.
Kiunjuri also emphasized BAT Uganda’s commitment to working with stakeholders, including the Uganda Revenue Authority (URA), to combat the illicit cigarette trade. He noted that URA’s revenue collection is closely tied to BAT Uganda’s performance and highlighted the significant financial contributions made by the company to the Ugandan government.
He said BAT Group is actively exploring less risky tobacco-related products to align with evolving consumer preferences and global trends. The Group is aiming at having 25% of their products come from new and less harmful categories by 2025. However, the current regulatory framework in Uganda restricts the importation and sale of these products.
“As a company we accept that currently our product, the factory-manufactured cigarettes are harmful to consumers and we are working on products that are less harmful. Globally, we have gone into new categories; vaping, nicotine pouches and tobacco-heated products,” Kiunjuri said.
He added that BAT Uganda is engaging with the government to amend some regulations, backed by evolving scientific evidence that supports the relative harmlessness of these new product categories.
Paul Bwiso, the CEO of the Uganda Securities Exchange, acknowledged BAT Uganda’s consistent dividend payments to shareholders since its listing in 2000.
“BAT was listed in October, 2000 and the IPO was oversubscribed by 5%. It has a long history of operation in this country and it has shown business resilience and continuity of this period,” he said.
BAT Uganda is a subsidiary of the BAT Group, one of the leading multi-category consumer goods businesses, with brands sold in more than 180 markets across the world. It has been operating in Uganda for 95 years.
