Won’t the Alcohol Bill cripple economy?

by Business Times writer
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Parliament’s Joint Committee on Trade and Health is scrutinising proposals made in the Alcoholic Drinks Control Bill, 2023.

Introduced as a private member’s bill by Tororo District Woman MP Sarah Opendi, the Bill seeks to regulate the manufacture, sale, consumption, and advertisement of alcoholic beverages, prohibit the sale of alcoholic drinks to persons below eighteen years of age; amend the Industrial Licensing Act, Cap. 9l; repeal the Potable Spirits Act, Cap. 97 and for related matters.

Clause 5 (2) of the Bill proposes that a person who intends to sell alcoholic drinks shall apply to the relevant authority for a license. Clause 22 calls for the prohibition of manufacturing, or sale of alcoholic drinks without a license.

Clause 5(7) says that alcohol business premises should be considered suitable if they are not within 400 metres of a school, health unit, residential area or place of worship, and not situated at a fuel station.

Section 14 of the Bill 2023 states that a licensee shall not sell an alcoholic drink or native liquor before 17:00 hours and after 22:00 hours on working days, and 12:00 hours and after 00:00 hours on public holidays and weekends.

Clause 17(2) states that the Minister shall, by regulations made under this Act, regulate advertisement of alcoholic drinks.

Clause 17(3) says that a person who contravenes subsection (1), commits an offence and is liable, on conviction, to a fine not exceeding one thousand currency points (UGX 20 million), or to imprisonment for a period not exceeding ten years, or both.

On matters packaging, the Bill states that a person shall not pack, import or sell an alcoholic drink in a sachet, plastic bottle or such other form as may be prescribed by the Minister, by regulations, made under this Act.

A person who, immediately before the commencement of this Act, was in accordance with any law licensed to manufacture for sale, import or erect, establish or operate a factory for the manufacture for sale of beer or alcoholic beverages, or sale of liquor, shall, within twelve months from the date of commencement of this Act, comply with the provisions of this Act.

Various industry stakeholders, including government officials have appeared before the House Committee scrutinizing the Bill to submit their opinions and positions on the matter.

Many have warned that if passed, the Bill will ruin Uganda’s night economy and hence downgrade the government tax base.

The alcoholic drinks industry plays an important role in the Ugandan economy, contributing significantly to tax revenue and employment, as well as supporting general economic development by sustaining farmers who grow the raw materials used in the manufacturing of beer.

The Private Sector Foundation Uganda (PSFU) – Uganda’s apex body for the private sector which brings together over 300 business associations, corporate entities, and major public sector agencies that actively support private sector growth has opposed the Bill on grounds that it will affect the tax base.

The Agribusiness Sector Coordinator at PSFU, Martin Maku while appearing before the House Committee said, “The bill is an attack on the national treasury (+1 trillion in taxes from alcohol, the sector contributes over 35% of the tax base. UAIA (Uganda Alcohol Industry Association) members are named among the top 5 taxpayers in Uganda.”

PSFU’s assertion is backed by the Government Ministry of Tourism, Wildlife and Antiquities which says that the Bill is detrimental to Uganda’s biggest foreign exchange earner (Tourism).

“Some of the regulatory regimes stipulated in the Bill may negatively affect the tourism sector, clause 14(3) which regulates the time of sale of alcoholic drinks is potentially detrimental to some of the tourism products including the night economy. The Bill also seeks to introduce a host of licences and taxes including; trading licences, signpost licences, billboard licences, occupational and health licences, medical examination fees, advertising fees, alternation licences, restaurant licences, bar licences, liquor licences, events and entertainment licence, will stifle the businesses in the industry if passed in its current form,” said Martin Mugarra, the State Minister for Tourism while appearing before the House Committee.

The Bill could inflict further damage on Uganda’s tourist sector that is just recovering from the effects of COVID-19 pandemic which brought the sector to its knees.

Before the COVID-19 outbreak, Uganda’s tourism and hospitality sector contributed significantly to the country’s economy, generating approximately $1.6 billion (equivalent to 5.6 trillion Ugandan shillings), establishing itself as a key economic driver.

Section 14 of the Bill 2023 states that a licensee shall not sell an alcoholic drink or native liquor before 17:00 hours and after 22:00 hours on working days, and 12:00 hours and after 00:00 hours on public holidays and weekends.

Minister Mugarra asserts that this will significantly cripple the tourism sector and the night economy.

“Some of the regulatory regime stipulated in the Bill may negatively affect the tourism sector. Section 14(3), which regulates time of sale of alcoholic drinks, is potentially detrimental to some of the tourism products, including the night economy,” Mugara told the House Committee.

As the industry now embarks on the path to recovery, it is imperative that legislative measures, such as the Alcohol Bill, are carefully crafted to avoid further hindrance to its revival. 

Any potential negative impact on tourism must be thoroughly considered and mitigated, ensuring that the sector can regain its momentum and continue to contribute significantly to Uganda’s economic growth.

Additionally, the Uganda Manufacturers Association (UMA) – an industry association that brings together Ugandan industrialists and manufacturers has also criticized the Bill over its potential impacts on the country’s economy.

The UMA officials while appearing before the House Committee recently, cautioned Parliament that enacting the proposed Alcoholic Drinks Control Bill, 2023 in its current form will likely crash Uganda’s economy.

It is important to highlight that the manufacturing sector has been increasingly contributing to the national revenue, with tax payments of Shs3.5 trillion in FY 2019/20, rising to Shs4.5 trillion in FY 2020/2021, and Shs5 trillion in FY 2021/2022. This represents 20.4%, 22.68%, and 22.62% of the total revenue collected respectively.

Notably, the significant contributions from the top two alcohol players and their associated value chains play a crucial role in this amount. 

Any adverse effects on this contribution resulting from the passage of the bill could lead to a reduction in government revenue.

UMA contends that the alcohol sector plays a crucial role within the industry, serving as a fundamental element in the ecosystem and making substantial contributions to tourism, especially the night economy. This encompasses the entire value chain, such as manufacturers, grain farmers, distributors, bars, and clubs.

The Nile Breweries Limited Board Chairman, Onapito Ekomoloit says the entire bill should be quashed.

“If you talk of closing hours, 65 percent of the alcohol does not have bars where it is consumed. So, what are you going to close? You cannot isolate alcohol from a 24/7 economy,” he says.

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