By Stephen Asiimwe – CEO, Private Sector Foundation Uganda
Ambitions of securing stability and prosperity for the Ugandan people within the next two decades are being grievously compromised by the scourge of illicit trade.
Uganda’s Vision 2040 agenda seeks to advance our country to middle-income status by the year 2040. But threats posed by illicit trade to the nation’s economic growth, revenue generation, public health and security put that target in deep jeopardy.
Illicit trade, which includes the sale of smuggled, counterfeit and other tax-evading goods, undermines legitimate businesses, lowering their revenues and ultimately resulting in job losses.
This evasion of taxes and duties also deprives the Government of much-needed revenue, hindering its ability to invest in essential public services such as education, health and infrastructure.
Meanwhile, the proliferation of substandard and fake goods resulting from illicit trade poses significant health and safety risks to consumers.
And, perhaps even more alarmingly, the proceeds from illicit trade can fund other organised crime, including drug trafficking and terrorism, which undermine the country’s stability and security.
Such evident and dire consequences demand that policymakers act urgently on reports that show illicit trade is entrenched across key sectors of our economy.
The Uganda Revenue Authority (URA) stated in 2020 that smuggling alone deprives the country of Ushs 985 million in tax revenue every day.
There is no sign of that abating. According to the half-year results for this financial year 2022/23, URA has registered a revenue shortfall of Ushs 94.8 billion, with smuggling being one of the conspicuous revenue leakages.
URA has indicated that cigarettes, alcohol, fuels, textiles, cooking oil and rice are some of the most smuggled goods in Uganda.
By the end of 2022, approximately one in three cigarettes sold in Uganda was illicit – implying that it had either not paid taxes or was non-compliant with the Tobacco Control Act, 2015 and the Regulations. This reflects a 20% increase from the previous year. Available data shows that illicit tobacco trade alone accounts for an estimated Ushs 30 billion in lost revenue to Government annually.
According to Euromonitor, two out of three alcoholic drinks on the market in Uganda are illicit, with the trade growing at almost 10% per year and depriving the fiscus of more than Ushs 17 billion tax revenue annually.
While the proliferation of unregulated alcohol poses obvious risks to public health, the same can be said for counterfeit medicines, electrical products and other substandard goods that do not meet safety standards.
In the health sector, malaria remains a leading cause of deaths. Yet researchers from Stockholm and Harvard universities found that one in five anti-malarial drugs sold in Uganda were fake.
In the agricultural sector, which holds huge potential for poverty reduction, the Economic Policy Research Centre found 30% of nutrients are missing in fertilizer on the Ugandan market, and hybrid maize seed contains less than 50% authentic seeds.
Illicit trade is by no means the only obstacle facing Uganda in its efforts to uplift the lives of all citizens. In the wake of the COVID-19 pandemic, our country must also contend with several economic challenges, including a high unemployment rate, low productivity and weak infrastructure.
But illicit trade exacerbates all these problems and hinders the country’s ability to attract foreign investment, which is essential for economic growth.
To realise its dreams, it is imperative that Uganda tackles illicit trade.
Government must enhance law enforcement efforts, strengthen regulatory frameworks and raise public awareness.
It must also work closely with the private sector and international partners to develop innovative solutions and seal our porous borders.
Only once we have addressed the menace of illicit trade can Uganda start to achieve its development goals, grow businesses that create jobs and improve the lives of its citizens.
