I heard the most bizarre story the other day.
A big beverage company wanting to beef up its portfolio of locally made drinks linked up with a local enterprise with a long history of agro-processing.
They struck up a deal that the drinks company would take up all the fruit juice they can produce from their farmer networks.
But first the beverage company laid down the standard of juice they would expect from the company.
The higher demands of the international beverage company meant that the local producer would have to commission a purpose built factory just to service this new client.
The beverage company of course was not in this for charity. Government in the 2017/18 budget had provided incentives, zero excise duty, for manufacturers who used more than 30% local input in making their non-alcoholic drinks.
So in a bid to dot their ‘I’s and cross their ‘t’s the beverage bottler went to our tax man to get any administrative business out of the way.
The processing company, which was about to take delivery of its plant and machinery to fulfill their contract, all $2m (sh7.5b) is in a bind. It’s hundreds of farmers are in a bind, are as their suppliers.
The beverage company in question is Century & Rwenzori Bottling Companies, the local agro-processor is Reko, who have 10,000 farmer under contract from 65
districts around the country.
Last Nile Breweries had to shut down their Chibuku line because government slapped an 30% excise duty on the drink that the brewer said made the beer uncompetitive.
The drink a mixture of maize and sorghum was to be supplied by thousands of farmers. In addition, the beer, which was to sell for about a thousand shillings a bottle, was likely to make a dent in the unregulated alcohol market.
It boggles the mind.
Calls to the responsible official at Uganda Revenue Authority (URA) went begging.
This story is bizarre because the story of
Uganda’s economic growth over the last three decades is that an urban elite have benefitted disproportionately from it.
Mainly because, the growth in the agricultural sector has not been robust enough to show a comparable improvement in living standards of the seven in ten Ugandans who derive their living from the land.
Our farmers continue to use rudimentary methods of production, lose up to half their crop in post-harvest handling and the little surplus they can get, they are robbed blind by middle men who take advantage of their lack of bargaining power.
This situation has resulted in a widening of income and wealth inequalities, with the rich getting richer and the poor getting poorer.
Government is making some attempts to improve production through providing inputs under the Operation Wealth Creation (OWC), beefing up the extension services budget at the agriculture ministry, opening up the roads and pushing for regional integration to improve market access.
It was therefore a master stroke of strategic thinking to provide the incentive to boost investment in agro-processing.
This move recognizes that government does not have the resources to absorb the increased farmer output and secondly, that government – anywhere in the world is not a good businessman.
The Soroti fruit factory is a case in point. A good idea poorly executed, has disappointed the farmers and continued government interest in the project may not be unlike throwing good money after bad.
We will give our officials the benefit of doubt and assume they are acting on some misplaced sense of patriotism. That they believe that these industries should be ring fenced for local businessmen and hence their obstructing genuine businessmen. But even this is wrong thinking.
Real patriots, who love their country, would see that the facilitating of industry and hence the production of jobs and therefore the raising of more people’s incomes should be the main driver of their patriotism.
At the back of everybody’s mind is the real challenge this country is faced with, which is the youth bulge – 80% of our population is aged below 35, and the urgency for jobs is a real one. A failure to create jobs as fast as our youth hit the job market threatens instability and worse.
We need to stop shooting ourselves in the feet or we will have no feet to shoot or stand on.
A big beverage company wanting to beef up its portfolio of locally made drinks linked up with a local enterprise with a long history of agro-processing.
They struck up a deal that the drinks company would take up all the fruit juice they can produce from their farmer networks.
But first the beverage company laid down the standard of juice they would expect from the company.
The higher demands of the international beverage company meant that the local producer would have to commission a purpose built factory just to service this new client.
The beverage company of course was not in this for charity. Government in the 2017/18 budget had provided incentives, zero excise duty, for manufacturers who used more than 30% local input in making their non-alcoholic drinks.
So in a bid to dot their ‘I’s and cross their ‘t’s the beverage bottler went to our tax man to get any administrative business out of the way.
"The tax man shocked at how much excise duty would be walking out the door refused to allow the beverage company to benefit from the tax incentive...
The processing company, which was about to take delivery of its plant and machinery to fulfill their contract, all $2m (sh7.5b) is in a bind. It’s hundreds of farmers are in a bind, are as their suppliers.
The beverage company in question is Century & Rwenzori Bottling Companies, the local agro-processor is Reko, who have 10,000 farmer under contract from 65
districts around the country.
"This is not the first time an investor has been left holding the bag after government reneges on an agreed position....
Last Nile Breweries had to shut down their Chibuku line because government slapped an 30% excise duty on the drink that the brewer said made the beer uncompetitive.
The drink a mixture of maize and sorghum was to be supplied by thousands of farmers. In addition, the beer, which was to sell for about a thousand shillings a bottle, was likely to make a dent in the unregulated alcohol market.
It boggles the mind.
Calls to the responsible official at Uganda Revenue Authority (URA) went begging.
This story is bizarre because the story of
Uganda’s economic growth over the last three decades is that an urban elite have benefitted disproportionately from it.
Mainly because, the growth in the agricultural sector has not been robust enough to show a comparable improvement in living standards of the seven in ten Ugandans who derive their living from the land.
Our farmers continue to use rudimentary methods of production, lose up to half their crop in post-harvest handling and the little surplus they can get, they are robbed blind by middle men who take advantage of their lack of bargaining power.
This situation has resulted in a widening of income and wealth inequalities, with the rich getting richer and the poor getting poorer.
"The common sense way to redress this to encourage high productivity in the rural areas and a ready market to take up this new production...
Government is making some attempts to improve production through providing inputs under the Operation Wealth Creation (OWC), beefing up the extension services budget at the agriculture ministry, opening up the roads and pushing for regional integration to improve market access.
It was therefore a master stroke of strategic thinking to provide the incentive to boost investment in agro-processing.
This move recognizes that government does not have the resources to absorb the increased farmer output and secondly, that government – anywhere in the world is not a good businessman.
The Soroti fruit factory is a case in point. A good idea poorly executed, has disappointed the farmers and continued government interest in the project may not be unlike throwing good money after bad.
"By keeping their eye on the strategic objective, which is lifting the incomes of the rural person and by extension their living standards, the incentives sought to coopt the owners of capital into the scheme....
We will give our officials the benefit of doubt and assume they are acting on some misplaced sense of patriotism. That they believe that these industries should be ring fenced for local businessmen and hence their obstructing genuine businessmen. But even this is wrong thinking.
Real patriots, who love their country, would see that the facilitating of industry and hence the production of jobs and therefore the raising of more people’s incomes should be the main driver of their patriotism.
At the back of everybody’s mind is the real challenge this country is faced with, which is the youth bulge – 80% of our population is aged below 35, and the urgency for jobs is a real one. A failure to create jobs as fast as our youth hit the job market threatens instability and worse.
We need to stop shooting ourselves in the feet or we will have no feet to shoot or stand on.
