Summary:

• The sale of Hima Cement by Bamburi Cement sheds light on Uganda’s tax system, with unexpected costs leading to losses. The complex taxation structure and previous disputes highlight challenges in M&A deals, urging for tax incentives to encourage investment.

Amid high hopes for substantial returns, Bamburi Cement Ltd faced a $2.9 million net loss last year due to unexpected taxation and legal expenses linked to the sale of Hima Cement Uganda Ltd.

The deal saw Himcem Holdings, Cementia Holding AG, Sarrai Group, and Rwimi Holdings collectively acquiring 70 percent of Hima Cement’s shares, while Cementia Holding AG took the remaining 30 percent, totaling a $120 million acquisition cost.

Despite Bamburi Cement’s turnover increasing by 6.3 percent to Ksh22 billion ($162 million) by December 2023, a 25 percent projected drop in earnings for 2023 was attributed to the Hima Cement transaction.

The intricacies of Uganda’s taxation system, including a 30 percent capital gains tax, a one percent stamp duty, and around two percent in transaction advisory fees, underscore the substantial costs involved in mergers and acquisitions, discouraging further investment in this area.

Moreover, previous M&A deals like Tullow Oil’s acquisition of Heritage Oil and Gas’s Ugandan assets in 2009, and Bank PHB’s acquisition of Orient Bank in 2010, were marred by tax disputes, highlighting the challenges investors face in navigating Uganda’s tax landscape.

As uncertainties persist, with political transitions impacting investor sentiment, experts advocate for tax incentives to stimulate company mergers and acquisitions, emphasizing their potential long-term economic benefits for the country.