Worrying Economics of Tobacco.

With a gestation period of 7-9 months or approximately a year, Tobacco is still a non-priority crop and a killer. A lot of work is put into the production of tobacco, and it all starts with the farmers on  their vast farms, then the processing plants. In Uganda Tobacco is grown by about 75,000 farmers in 25 districts, mainly grown in West Nile, Bunyoro, middle-northern and south-western Uganda.

Tobacco farming is a very tiresome task, because for a farmer to realize maximum profits, one is supposed to have at least 3 acres of farm land. On top of that, a farmer is expected to put in at least 18 man hours a day for each acre of tobacco land. This forces farmers to use their families for labor since tobacco farming is labor intensive hence, many children have dropped out of school to help their parents with farming, weeding, stringing or harvesting these precious leaves and to some extent, this explains why there are many school dropouts in tobacco growing areas in Uganda especially the West Nile which is responsible for about 80% of the country’s tobacco. However, tobacco farmers don’t even gain much from tobacco farming, but they continue farming because of culture, lack of information and lack of other alternatives. In recent years, land for growing foood crops has been reduced in West Nile just so tobacco farm land could be increased. Farmers get about 30% of the real value of their crop, this is very low a percentage yet they put in alot of hard work to produce the crop. Children drop out of school to help in the fields, land for growing food crops compromised yet very little is earned.

When tobacco leaves are harvested, they are then cured at 74°C for atleast 5 days just so the leaves can get the much craved brown color and distinctive aroma, Unfortunately, tobacco curing is a threat to the environment as it has cost us very many trees, The natural forest cover in Tobacco growing areas has been reduced from 7225 ha to 3000 ha since 23M3 of wood energy is required to cure 1kg of Tobacco, approximately 130kgs of wood to cure 1kg of tobacco. Maracha in West Nile is one of those tobacco growing areas that have suffered the greatest levels of deforestation because of tobacco curing.

After which, tobacco is sold to cigarrete making/processing industries/plants like BATU(British American Tobacco Uganda) which is then exported to Kenya for the manufacture of cigarettes. Tobacco is classified into 3 brands; Premier Brands, Mid-level brands and economy brands. There are two types of taxes imposed on tobacco, the excise tax that’s based on the price of the product and the Advalorem tax that’s based on the value  of the product. We shouldn’t forget the fact that tobacco is addictive and has very few producers which makes its producers monopolies. However, taxation has still failed to raise the price of cigarettes as these industries make sure that their cigarettes are affordable.

In 2013, approximately 73.9Mn cigarette packs were consumed by Ugandans, this mathematically means atleast 2 cigarette packs for each Ugandan.                                           Since the real average price of cigarettes has been falling yet the economy is growing, there has been greater affordability of cigarettes and higher cigarette consumption in Uganda. Even with the 37% share of tax in the retail price of cigarettes, the tax system has failed to raise the price of cigarettes sufficiently to arrest the growing trend in cigarette consumption. In addition, with the tiered specific tax system, the industry has the incentive to underreport the value of cigarettes resulting in loss of revenue for the country. Research shows that Uganda imports 97% cigarettes from Kenya, this is so because BAT grows the crop in Uganda and leaves cigarette processing to its Kenyan Counter parts, unfortunately this importation is coupled with illicit trade that is characterised with tax evasion, tax avoidance, smuggling and counterfeits, this also has led to loss of revenue for the country and has contributed to the low cigarette price levels in the country despite the heaavy taxes imposed on it.

British American Tobacco(BAT) which has a monopoly on tobacco In the country is the leading buyer of tobacco leaves, hence about 10,000 small-scale farmers grow the crop for BAT in West Nile, the company supplies farming inputs to farmers on credit and purchases the cured tobacco from them, selling of supplies to farmers reduces a farmer’s income or gain from the crop.

Although, administering an excise tax of 70% on tobacco can lead to a 14%-26% reduction in tobacco consumption- Ronald. N Reagan

Despite the fact that Tobacco is one of the top 10 revenue sources for Uganda having contributed Shs.87.5 bn ($37.7 Mn) in taxes in 2011, It shouldn’t be forgotten that World Trade Organisation(WTO) won’t support trade of any item that undermines public health, further more, Tobacco is one of the world’s greatest killers causing Cancer, Emphysema & Heart Disease. Tobacco farming is also a threat to food security and environmental preservation, it has also led to increased number of school dropouts in Tobacco growing areas and very little is gained by farmers from growing Tobacco. Smoking is harmful to the health of every member in the country especially in a country where no-smoking areas are very few or non-existent, to the active and passive smoker, our health is all at risk hence, we should say yes to the Tobacco Bill… #TCAmb #PassTCBillUg

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Reference.

Extract from Panos Media Briefing : TOBACCO: The smoke blows South the environmental costs of tobacco production http://www.who.int/tobacco/framework/public_hearings/panos_institute.pdf

Muwanga- Bayego H. Tobacco growing in Uganda: The environment and women pay the price. Tobacco Control. 1994;3(3):255-256.

Lecture by Namanya Ronald Reagan- ‎Consultant Economist at World Health Organization… https://ug.linkedin.com/pub/namanya-ronald-reagan/33/348/260

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