Government’s proposal to terminate exemption of supply of feeds for poultry and livestock from value added tax (VAT) is a disaster, industry players have said.
Players have instead asked government to regulate the industry and save the farmers from a threatened hike in the prices.
In a statement released by their umbrella organisation, Uganda Feeds Industry, the players said: “The Uganda Feeds Industry is composed of formal producers and a substantial informal sector. As a result of removal of Vat exemption, feeds prices will inevitably increase the formal producers will collect the VAT for onward transmission to URA through selling price adjustment”.
They further allege that individual feed producers in the informal sector fall below the VAT threshold. This will therefore undercut the formal producers through lower prices.
Currently, these small producers may have more than 50 per cent of the feeds market share.
“This will make the formal producers uncompetitive, undermine viability of their operations, jeopardise their survival, impede growth and development and discourage investment in the sector,” the communication added.
They further said that the anticipated increase in the tax revenue may not be realised because the greater part of the poultry feed industry falls below the VAT threshold.
Already farmers are threatened by high costs and may opt to either mix their own feed or buy VAT-free feed from small-scale producers, which puts them at the risk of falling prey to sub-standard feeds.
“The bulk of cereals or unprocessed grains such as maize and soya are gathered from farmers by middle men who also fall below the Vat threshold,” the communication added.
“We believe this is the same reason our neighbours in Kenya have withdrawn the proposed VAT on poultry feeds.”
They further added that absence of a regulation for the industry provides a loophole for the informal players to compromise feed quality; substandard feeds also lower the production yields of poultry and livestock farmers.
The communication said: “Quality feeds are an essential ingredient for growth and development of the poultry and livestock sector in Uganda”.
To achieve this, regulation of feeds industry is of paramount importance. It will ensure consistent maintenance and enforcement of quality standards, eliminate shoddy producers and level the ground for fair competition.
Poultry production has increased from 42.7mn birds in 2010 to 44.3mn in 2011 and 45.9mn last year. Egg production increased to 27,057 tonnes (807,634 eggs) compared to 26,269 tonnes (784,111 eggs) reported back in 2011.
Investment in the sector
At least over 70 per cent of Uganda’s households are engaged in livestock rearing and 99.1 percent engage their families as the main source of labour for livestock rearing according to the (National Livestock Census 2008).
The sector has attracted vast investments of over $176 million (UIA Database) from both local and foreign investors.
The investments include ranching, meat processing, poultry breeding/farming and leather processing.
The sector has created employment opportunities for farmers, butchers veterinary doctors, farm engineers and researchers among others.
about the sector
The livestock is one of Uganda’s important growth sectors contributing about $290m (Shs758.3b ) to total Gross Domestic Product (GDP) in 2008/2009 up from $210m (Shs549.2b) in 2007/2008. It constitutes 17 per cent of the agricultural GDP and is a source of livelihood to over 4.5 million people in the country.
The sector is categorised into cattle, goats, pigs, sheep and poultry. The growing local and regional demand for meat and milk products has escalated the number of livestock in the country over the years to an estimated 68 million in 2008 compared to about 49 million livestock in 2002.
The 2008 national livestock census estimated the number of cattle at 11.4 million whereas the sheep, goats, pigs and poultry were estimated at 3.4 million, 8.5 million, 3.2 million and about 27.5 million respectively.