A financial storm is brewing in the alcohol industry as the Excise Duty (Amendment) Bill, 2025 proposes a steep tax increase on beer made from at least 75% locally sourced raw materials.
The bill, tabled before Parliament last month, seeks to raise excise duty on such beer from sh650 to sh900 per litre which is a 38% hike that has sent shockwaves through the entire value chain, from breweries to farmers.
While the Ministry of Finance estimates the move could generate up to sh19.4 billion in additional tax revenue when combined with a similar hike on cigarettes, industry players warn that this well-intentioned fiscal strategy could backfire.
The Uganda Alcohol Industry Association (UAIA), led by chairperson Jackie Tahakanizibwa, on Thursday made a plea before the Parliamentary Committee on Finance, chaired by Amos Kankunda (Rwampara County), urging lawmakers to reconsider the bill’s long-term impact.
Brewing crisis: economic disruption from farm to factory
Emmanuel Njuki, the UAIA vice president and Legal and Corporate Affairs Lead at Nile Breweries Limited (NBL), argued that the proposed tax hike would have far-reaching consequences beyond the brewery gates.
“While there’s a belief that beer prices are inelastic, that’s not accurate,” Njuki told the committee. “If beer prices rise by up to 40%, we expect a significant drop in affordability. That decline will fuel inflation and could even reduce the government’s overall tax collections.”
Njuki stressed that contrary to expectations, aggressive tax hikes often do not translate into higher government revenue. “A high tax increase doesn’t provide the hoped-for collections because it reduces volumes, hurts everyone in the value chain, and undermines previous gains made in formalizing the sector.”
According to Njuki, one of the most concerning ripple effects will be on the agricultural supply chain. Beer production in Uganda relies heavily on local crops especially barley, cassava, maize, and sorghum.
While maize and cassava are also staple foods, NBL and other brewers work with approximately 25,000 contract farmers across the country who grow barley and sorghum as cash crops specifically for brewing.
“We believe this tax structure will force breweries to reduce their local grain purchases by around 30%, representing an annual income loss of about sh45 billion to farmers,” Njuki warned.
A farmer’s loss is a nation’s wound
In an exclusive interview, NBL Managing Director Adu Rando painted a grim picture of the potential fallout. “If breweries reduce production, it’s simple economics, we will not need as much barley, cassava, or sorghum,” Rando said.
“That’s an instant shock to the livelihoods of thousands of farmers who shifted to growing these crops for a reliable market.”
Rando emphasized that the brewing industry is one of the few sectors that offers consistent market access and pricing for farmers.
“Without that assurance, many may be pushed out of commercial agriculture altogether. The spillover effects could destabilize entire farming communities, undoing years of development.”
He urged the government to take a broader view of economic policymaking. “This isn’t just about beer. It’s about national priorities, rural development, food security, and job creation.”
Lawmakers also caution against short-term gains
Several Members of Parliament echoed the industry’s concerns. Sheema Municipality MP Dicksons Kateshumbwa questioned the consistency of government policy.
“We are promoting value addition and funding programs like Parish Development Model (PDM) and Emyooga to support local producers. How then do we justify a tax that directly undermines a sector that uses our raw materials to create value?”
Faith Nakut (Napak) added, “As people’s representatives, we must remain alert to any policy that touches our limited market for locally grown products. This tax, if passed in its current form, feels like a blow to the very heart of our economic inclusivity.”
Even as some lawmakers acknowledged the health risks associated with alcohol, they called for a balanced approach. Karim Masaba (Industrial Division), stated, “Even if you raise the price to sh10,000, people will find a way to drink. But we need to do a cost-benefit analysis. The jobs and revenue from a regulated industry could outweigh the health risks.”
The committee also raised concerns over cross-border smuggling and regional competitiveness. “We operate in a fragile economic space,” said Chairperson Kankunda. “We need to be aware that increasing taxes here might simply push consumers to cheaper alternatives across borders, or worse to illicit alcohol.”
Finance Ministry insists it’s about equity and public service
However, the Ministry of Finance remains firm on the proposal. While appearing before the committee, Minister of State for Finance (General Duties), Henry Musasizi, defended the tax hike as a necessary adjustment to Uganda’s fiscal demands.
“Beer manufacturers are growing, and they are making profits. We are saying that as your capacity grows, so should your contribution to national development,” Musasizi explained.
He dismissed claims that the move would fuel a shift to illicit alcohol. “The government is mindful of affordability, but also of the need to finance critical infrastructure like roads, schools, and irrigation systems. These are services the farmers depend on too.”
He added, “If we don’t raise revenues through such mechanisms, where else should we turn? It’s about asking those who are already benefiting from the economy to give a little more.”
Illicit alcohol: a hidden danger grows
Despite the minister’s assurances, industry stakeholders warn of an unintended consequence, a spike in consumption of unregulated and potentially dangerous alcohol.
“Illicit alcohol is mostly driven by affordability,” Njuki noted. “When consumers can no longer afford a bottle of regulated beer, they turn to cheaper, sometimes poisonous alternatives. This undermines public health, undermines regulation, and erodes the very tax base the government is trying to expand.”
He emphasized that rather than increasing taxes on the formal sector, the government should invest in curbing the illicit market and support regulated brewers who are contributing to the economy.
