BAT Uganda Impacted by Illicit Trade

BAT Uganda’s 2022 performance was impacted by the country’s slow economic recovery and growing illicit trade, according to a report in The Independent.

Gross revenue increased by 6 percent to UGX99.5 billion ($27 million) driven by higher sales volumes. However, general inflation rates drove up the cost of production by 15 percent, causing after-tax profits to drop 6 percent.

“Whilst the fundamentals of our business remain solid as evidenced by our sustained investment in the country for 95 years, the increasing incidence of illicit trade in Uganda remains a major threat to the sustainability of our business going forward,” said BAT Uganda Managing Director Mathu Kiunjuri during the company’s annual general meeting on July 6.

The incidence of illicit cigarettes rose from 23.8 percent in December 2021 to 29.4 percent in December 2022, according to industry research.

According to Kiunjuri, the government loses up to UGX30 billion annually to the illicit cigarette trade. Third-party research indicates that most illicit cigarettes are mislabeled as exports or smuggled in from neighboring countries.

Uganda is reportedly also increasingly becoming a source of illicit cigarettes in regional markets such as Kenya.

A recent market study revealed that several BAT Uganda and BAT Kenya brands intended for sale in other countries end up in shops in Uganda.

Despite the challenges, Kiunjuri praised the Uganda Revenue Authority  (URA), which he said has made significant progress in fighting the illicit cigarette trade. “However, for meaningful and lasting impact, it is critical that government redoubles its efforts, including ramping up multi-stakeholder and cross-border collaboration to ensure effective enforcement and enhancement of anti-illicit trade regulations,” he said.

According to the URA, cigarette smuggling accounts for up to 27 percent of smuggled goods in Uganda, with the Supermatch brand accounting for more than 90 percent of the seized cigarettes.