Finance Minister scraps incentive on rice imports
The minister of finance, planning and economic development has instructed the minister of East African community affairs, Mr Kirunda Kivejinja to terminate the rice incentives given to importers.
The directive which took effect of January 1, 2017 caught the importers unaware forcing some of them to rethink their operations. The importers argue that the directive is unfair and unjust as they were not given due notice to make adjustments in time.
“All of a sudden the ministry has decided to increase the taxes on husked rice to equal that of already processed rice which is not fair, this is going to drive up prices of rice in the market,” Mr Geoffrey Adito, the director operations at Kingdom Rice said.
Kingdom Rice is one of the major players in the market controlling a 60 per cent market share. They are also one of the largest importers of husked rice which is processed and packaged at their 500 tonne rice milling plant in Namanve.
Another major player SWT rice which imports half processed rice from Pakistan says the increase in the tax rate will drive up prices in the local market.
The rice importers say many of them have their shipments in Mombasa, at sea and as such will suffer huge loses due to the unplanned for directive. They want the government to make a segregation between finished rice and unfinished rice because those who import unfinished rice cannot compete with those already importing the finished product.
“When we set up the factory, Uganda Investment Authority had told us that there was more than enough supply of rice in the local market. So we mobilised investors, got money and set up a rice mill in three months,” an official from Kingdom Rice said.
However, when they went out to buy the rice, they bought off 50,000 tonnes of rice in two weeks and there was nothing more to buy in the local market. The 50,000 tonnes could not sustain the plant beyond a month.
Mr Geoffrey Adito, the Director Operations Kingdom rice said they approached the government with a proposal to import husked rice which would then be processed at the factory. “Government gave us that duty price of $250 (about Shs900,000) per metric tonne and they gave us one year to set up a farm and build local capacity. However, after six months without any notice to us we got directives from ministry of finance that on 1st the duty rates were changing,” he said.
Adito said the directive is going to drive up prices of rice in the market and investors would pull away causing job losses.
Directives in the letter
The letter which was sent to the EAC on 14th December is copied to the Permanent Secretary Ministry of finance, Auditor General’s office, the Accountant General, the Commissioner General Uganda Revenue Authority and the Uganda Development Bank.
“This is to request you to notify the East African Community Gazzette Legal Notice No. EAC/33/2016 where Uganda was granted a duty to remission to apply the rate of 75 per cent or $250/Metric Tonne on imported rice which has been enjoyed by some rice importers,”
The letter is also notifying URA to start to effect the directive which seek to reinstate the EAC tax rate charged on every tone of rice imported from the subsidized rate of $250 [about Shs900,000] per tonne to $345 [about Shs1.2million] per metric tonne.
“Accordingly all importers will pay the same common external tariff (CET) of 75 per cent or $345 per metric tonne of imported rice in accordance with the EAC common external tariff (CET),” the instructions read in part.
The minister of Finance, Mr Matia Kasaija, in a phone interview with Daily Monitor confirmed to us that he wrote the letter to the Minister of East African Community Affairs. He refused to give any further comments, instead directing us to read the letter that he wrote to the EAC.
“You read the letter you will find all the answers and details in it,” he said.
The minister however said that the ministry was going to create a fund for rice commodity development under Uganda Development Bank Limited to benefit all rice millers. When contacted, Ms Amelia Kyambadde the minister of Trade, Industry and Cooperatives said she will have to study the termination letter further and also ascertain how many people were importing the rice and would be affected by the directive so as to avoid distorting production and prices of rice in the market.
“I will study the issue further however, the termination of importing rice is good for promotion of local production and encouraging local production as opposed to importing what can be grown here,” she said.
Other experts from the ministry who did not want to be mentioned because of the sensitivity of the matter said the move was good for the country and that initially the ministry of trade had made a mistake which it was correcting.
However, according to statistics from ministry of trade Uganda consumes about 300,000 tonnes of rice a year and this demand has largely been supplemented by imported rice.
