Jonathan Dâ€™Souza, the BATU managing director, says the decision to halt tobacco leaf purchase effective 2015 was purely based on business considerations. In 2013, BATU exported tobacco leaf worth 140 billion Uganda Shillings, but made losses of 17.2 billion Uganda Shillings on the sales due fluctuations in foreign exchange, excise duty and Value Added Tax (VAT).
Addressing journalists today at their Head Office in Industrial Area, Jonathan D’Souza, the BATU managing director, insisted that this was purely a business decision.
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On Friday last week, BATU wrote to shareholders informing them that they had received notice that their main customer, British American Tobacco Global Leaf Pool (GLP), would no-longer be purchasing the tobacco leaf from them. The decision to halt these purchases means that at least 14,000 farmers will no-longer be supplying the leaf to BATU. In West Nile and Gulu, the last harvest that BATU will buy comes in at the end of October, whereas in Bunyoro it takes place in December.
Additionally, another 138 people in BATU’s leaf department will be laid off. There will be a new player in Uganda leaf buying business with the entry of Alliance One International, which will effectively take on some of the BATU farmers and also employ the laid off workers. According to D’souza the new company presents better opportunities for farmers in Uganda.
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Tobacco growing in Uganda has not been short of controversy. In 2013, the Supreme Court ruled against BATU ordering it to pay 14.3 billion Uganda Shillings to the Hoima farmers after it failed to purchase their tobacco in 2004. It is this among other risks to the leaf growing business that made the decision to halt the purchases “easy” according to the company officials.
In 2013, BATU exported tobacco leaf worth 140 billion Uganda Shillings, but made losses of 17.2 billion Uganda Shillings on the sales due fluctuations in foreign exchange, excise duty and Value Added Tax (VAT).
Paul Sine, the Finance Director at BATU, told reporters that the focus on cigarette sales and marketing is a more profitable venture and that it is less risky for them even with the ongoing in Parliament.
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Alliance One International has not confirmed its entry into the Ugandan market on its website. Neither has company responded to our request for information at the moment.