Govt loses billions of shillings in illicit alcohol

Kampala. According to a 2015 study by Euromonitor International Consulting, the alcoholic beverages market stood at $2.8b (Shs10 trillion) in value.
Of this, $676m (Shs2.4 trillion) was illicit alcohol.

In terms of consumption, Ugandans consume 110 million litres of alcohol annually and 67.7 million of this is illicit. Only 43 per cent is from the formal, regulated, taxed sector.
Uganda Breweries Limited (UBL), a player in the alcoholic beverages industry, has asked the government to tighten laws and regulate the production and sale of illicit alcohol as Uganda is losing potential tax revenues.

Speaking at a media roundtable with business journalists in Kampala last week, Mr Mark Ocitti, the managing director UBL said there is an untapped potential on illicit alcohol market worth Shs2.4 trillion that could widen the government’s tax base.

In 2015/16 financial year, the excise duty on beer made from locally sourced materials rose from 20-30 per cent.
Mr Ocitti noted that because of this, people resorted to illicit alcohol which reduces revenues through reduced tax remittances.
He said a lack of consistent or proper enforcement, inspection and registration of traders and transactions has, to this point, allowed illicit production to flourish often with disastrous health consequences.

He cited the recent unfortunate death of six people and hospitalisation of several others, after consuming illicit gin in Kawempe Zone, Maganjo Parish, Nabweru Sub-County, Wakiso District.
“The illicit alcohol market in Uganda continues to grow due to ease of access of the product, affordability, lack of quality standard manufacturers adhere to, and uncontrolled sale and distribution, affecting especially the youth,” he said
He urged the government to continuously focus on widening the tax base by recruiting more tax payers from the informal sector which is enjoying undue advantage.
“Efforts by all stakeholders to regulate illicit alcohol by a mere 20 per cent could see tax revenue gains and a reduction on the health risks caused by the illicit alcohol industry.

Performance
On their financial upturn, Ocitti said UBL registered 7 per cent growth in volumes contributing to the East African Breweries Limited profit after tax of Shs297b in the brewery’s half year financial results. The key performing brands were Uganda Waragi, Senator and Smirnoff.

“Our Profit delivery came out at a higher gearing with a 31 per cent growth driven by great brand positioning, productivity initiatives and managing our cost,” Mr Ocitti said
He noted that the growth acceleration was driven by increase in outlet coverage to almost double, focused regional initiatives to target the exclusive needs of each area, explosion of innovative brands and offering of quality and affordable brands.

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