The information provided in this volume is designed to provide an introduction to the opportunities and challenges
of ‘private entrepreneurship on SME level’ in the country specified. Exchange vzw. has compiled the information and
the references from various public and formal sources, as well as from its own activity, research and experience in the
country. The ambition is to give insights, not to provide a complete economic or legal guide to the private sector. The
information is continuously updated and
completed. Exchange vzw. can not be held responsible for errors, omissions or lack of accuracy and disclaims any liability in connection with the use of this information.
Feedback is welcome at info@exchangevzw.be
Table of Contents – Country Strategy Paper -‐ Uganda
Introduction ... 3
Economic situation ... 4
Facts & Figures ... 4
Summary of the economic situation ... 5
Political situation ... 8
Administrative divisions ... 8
Bilateral Representation... 8
Bilateral Economic Relations ... 9
Belgian export and import to/from Uganda (2017) ... 9
Uganda's Membership in International Organizations ... 10
Human Rights ... 10
Entrepreneurial context ... 11
The private sector ... 11
Sectors that Uganda is aiming to develop in the coming years ... 11
Entrepreneurship in Uganda ... 14
Legal Framework ... 14
Starting a Business ... 14
Other Government Approvals ... 15
Taxation ... 16
Support for private entrepreneurship ... 18
First steps in Uganda to establish a company ... 20
Representation and Economical missions ... 22
Belgium ... 22
Flanders ... 26
Brussels ... 29
Wallonia ... 30
Belgium in Africa ... 32
Europe ... 33
Economical missions ... 35
Bibliography (list of documents reviewed) ... 37
Introduction
This document is a practical and theoretical guide for Belgian entrepreneurs interested in doing business in Uganda. This information is based on existing information (country papers FIT, JCA and JSF from the Belgian development organisations, UNDP reports, WB reports etc.) & experiences in the country gathered by Exchange programme managers and local business development managers1.
This document will be continuously updated in order to capture most of the changing circumstances in private entrepreneurship in Uganda.
The final goal of this document is not only to offer Belgian entrepreneurs a complete guide into doing business in Uganda but also to create a larger network encompassing our partners and stakeholders in North and South in order to foster cocreation between Northern and Southern entrepreneurs.
By supporting the growth potential of the private sector in the context of market economies across the North-‐South divide, Exchange commits itself to stimulate decent work and economic growth (SDG 8) and to create global partnerships (SDG 17).
List of abbreviations: FIT (Flanders Investment & Trade), JSF (Joint Strategic Framework), JCA (Joint Context Analysis), NGA (Non-‐Governmental Actor), UNDP (United Nations Development Program), WB (World bank)
Economic situation
Facts & Figures
General Economics
§ Estimated population: 39.570.125 (CIA 2017)
§ GDP: 27.529 US$
§ GDP growth rate: 4,5% (2017 est.)
§ GNI (Gross National Income) per capita: 700 US$
§ GDP -‐ composition, by sector of origin:
agriculture: 25.8%
industry: 23.2%
services: 51% (2016 est.)
§ Inflation rate: 6% in 2018
Import
§ Total Import: $4.592 billion (2017 est.)
§ Main import products: capital equipment, vehicles, petroleum, medical supplies;
cereals
§ Most important suppliers (import): China 17.4%, India 13.4%, UAE 12.2%, Kenya 7.9%, Japan 6.4%, Saudi Arabia 6.3%, Indonesia 4.4%, South Africa 4.1% (2017)
Export
§ Total Export: $2.902 billion (2017 est.)
§ Main export products: coffee, fish and fish products, tea, cotton, flowers, horticultural products; gold
§ Important export destinations: Kenya 17.7%, UAE 16.7%, Democratic Republic of the Congo 6.6%, Rwanda 6.1%, Italy 4.8% (2017)
General Development
§ Unemployment rate: 9.4% (2014 est.)
§ Population below poverty line: 21.4% (2017 est.)
§ Exchange rate: Ugandan shillings (UGX) per US dollar: 3,695 (2017 est.)
§ Human Development Index: 0.516, rank 162/188 (2018)
§ Population Growth: 3.28%
§ Adult literacy rate: 78.4%
§ Mean years of schooling: 6.1
§ Child mortality rate: 4.9%
§ Life expectancy at birth: 60.2
§ HIV/AIDS prevalence: approx. 6%
§ Corruption Perception Index: ranking 151 of 176 (2016)
Sources:
https://www.unicef.org/infobycountry/uganda_statistics.html https://data.worldbank.org/indicator
https://www.indexmundi.com/uganda/
Summary of the economic situation
With a young and rapidly growing population, extremely productive agricultural lands, a nascent oil sector, and a strategic location in the heart of East and Central Africa, Uganda offers great economic potential.
Uganda has substantial natural resources, including fertile soils, regular rainfall, substantial reserves of recoverable oil, and small deposits of copper, gold, and other minerals. Agriculture is one of the most important sectors of the economy, employing 72% of the work force. The country’s export market suffered a major slump following the outbreak of conflict in South Sudan, but has recovered lately, largely due to record coffee harvests, which account for 16% of exports, and increasing gold exports, which account for 10% of exports.
Uganda has a small industrial sector that is dependent on imported inputs such as refined oil and heavy equipment. Overall, productivity is hampered by a number of supply-‐side constraints, including insufficient infrastructure, lack of modern technology in agriculture and corruption.
However, Uganda’s economic growth has slowed since 2016. The economy has faced adverse weather, civil unrest in South Sudan, global economic uncertainties, and private sector credit constraints.
Nonetheless, government spending and public debt has grown. Uganda’s budget is dominated by energy and road infrastructure spending, while Uganda relies on donor support for long-‐term drivers of growth, including agriculture, health, and education. The largest infrastructure projects are externally financed through concessional loans, but at inflated costs. As a result, debt servicing for these loans is expected to rise.
Uganda is willing to start refining its own crude oil, in order to end its economy’s dependence on donor aid. In 2006 commercial oil deposits were discovered in the Albertine basin along its border with the Democratic Republic of Congo and oil reserves of 2.5billion barrels have been confirmed.
Oil revenues and taxes are expected to become a larger source of government funding as oil production starts in the next years. Over the next three to five years, foreign investors are planning to invest $9 billion in production facilities projects, $4 billion in an export pipeline, as well as in a $2-‐3 billion refinery to produce petroleum products for the domestic and East African Community markets.
Furthermore, the government is looking to build several hundred million dollars’ worth of highway projects to the oil region.
Uganda faces many economic challenges. Instability in South Sudan has led to a sharp increase in Sudanese refugees and is disrupting Uganda's main export market. Additional economic risks include:
poor economic management, endemic corruption, and the government’s failure to invest adequately in the health, education, and economic opportunities for a burgeoning young population. Uganda has one of the lowest electrification rates in Africa -‐ only 22% of Ugandans have access to electricity, dropping to 10% in rural areas.
Nonetheless, Uganda has a market-‐based economy rich in natural resources with one of the fastest growing populations in the world. With comparative advantages in agriculture and one of the largest oil reserves in the region, Uganda is seeing increasing interest among foreign investors. More international companies are investing in Uganda and setting up local and regional operations to take advantage of Uganda’s economic growth potential.
Sources:
https://www.cia.gov/library/publications/the-‐world-‐factbook/geos/ug.html https://www.flandersinvestmentandtrade.com/export/landen/oeganda https://ug.usembassy.gov/business/getting-‐started-‐uganda/
Key sectors
The key sectors driving Uganda’s economy are: agriculture, fisheries, forestry, manufacturing and IT.
Agribusiness
Uganda is among leading producers of coffee and bananas. It is also a major producer of tea, cotton (including organic cotton), tobacco, cereals, oilseeds (simsim, soya, sunflower, etc.), fresh and preserved fruit, vegetables and nuts, essential oils, orchids, flowers and sericulture (silk). Opportunities include commercial farming and value addition, as well as the manufacture of inputs and supply of agricultural machinery.
Fisheries
It is the second-‐highest foreign exchange earner for Uganda. Large fresh water expanses offer a variety of investment opportunities for fish farming and the establishment of more fish processing factories.
Forestry
With over 4.9 million hectares of rich forest vegetation, Uganda possesses abundant potential in areas like timber processing for export, manufacture of high-‐quality furniture/wood products and various packaging materials.
There are also opportunities in afforestation and reforestation especially of medicinal trees and plants, soft wood plantations for timber, pulp & poles.
Manufacturing
Uganda’s manufacturing output has been expanding by more than 10% annually over the last eight years. Opportunities exist in areas ranging from beverages, leather, tobacco-‐based processing, paper, textiles and garments, pharmaceuticals, fabrication, ceramics, glass, fertilizers, plastic/PVC, assembly of electronic goods, hi-‐tech and medical products. Mining Uganda has large under-‐exploited mineral deposits of gold, oil, high grade tin, tungsten/wolfram, salt, beryllium, cobalt, kaolin, iron-‐ore, glass sand, vermiculite and phosphates (fertilizer). There are also significant quantities of clay and gypsum.
Uganda provides special incentives to the mining sector with some capital expenditures being written off in full. Petroleum wells discovered in the Lake Albert region will bring Uganda to the 5th rank of oil producers in Africa.
Infrastructure
Transport & logistics and energy sectors still require further investment, despite the efforts that have been made to develop and rehabilitate the existing physical and non-‐physical infrastructure. With less than 10% of the mainstream capacity of 2,700 megawatts of power exploited, Uganda has the potential to be a major supplier of hydroelectric power to the entire East African region.
Financial Services
Opportunities for investment exist for international multinational banking groups particularly promoting new or innovative financial products, micro finance saving institutions and insurance.
Tourism
Uganda boasts of a variety of game and unspoiled scenic beauty. It offers mountain rain forests and snow peaked mountains in the south western parts of the country. The opportunities in tourism range from constructing high quality accommodation facilities, operating tours and travel circuits to the development of specialized eco-‐tourism.
Printing and Publishing
In the printing and publishing sub-‐sector, opportunities exist for the printing of textbooks for schools.
Currently, imports supply over 90% of Uganda’s textbook requirement (estimated at over U$7 million a year). Investment opportunities therefore exist in flexography, screen printing, off-‐set printing and digital printing
Education
Investment opportunities exist in setting up of independent private universities, branch universities and offshore campuses. Other areas of investment include technical & vocational training, technology-‐
based education & distance education and student financing Information
Communication Technology (ICT)
Opportunities in ICT include establishment of information and communication infrastructure and broadband services, business process outsourcing services, computer and related equipment hardware assembly, high level ICT training facilities on international standards, ICT business services incubation, hardware repair training facilities, software development niches, setting up information technology virtual zones (ITVZ), and setting up Internet service provider facilities in other parts of Uganda There is a mood of optimism and a belief that Uganda will once again emerge as the 'Pearl of Africa' the name given to it by the late Sir Winston Churchill in 1907.
Political situation
Official name: Republic of Uganda President: Yoweri Musevini
Prime Minister: Ruhakana Rugunda
The President of Uganda is both head of state and head of government. The president appoints a vice-‐
president and a prime minister to aid him in governing.
The parliament is formed by the National Assembly, which has 449 members. These include; 290 constituency representatives, 116 district woman representatives, 10 representatives of the Uganda Peoples Defence Forces, 5 representatives of the youth, 5 representatives of workers, 5 representatives of persons with disabilities and 18 ex-‐official members.
Unlike some of its neighbours, Uganda remains a largely peaceful and stable place. But its politics are increasingly about one thing: keeping Presdient Museveni in power.
President Museveni came to power in 1986, after decades of internal strife. Under Museveni, Uganda has experienced relative political stability, democratic progress, and economic growth. Uganda faces numerous challenges, however, that could affect future stability, including explosive population growth, power and infrastructure constraints, corruption, underdeveloped democratic institutions, and human rights deficits. Uganda has been a reliable partner for the U.S. and other Western and African countries in promoting stability in the Horn and East/Central Africa and combatting terror, particularly through its contribution to the African Union Mission in Somalia.
Administrative divisions
As of 2018, Uganda is divided into 121 districts. Rural areas of districts are subdivided into sub-‐
counties, parishes, and villages. Municipal and town councils are designated in urban areas of districts.
Political subdivisions in Uganda are officially served and united by the Uganda Local Governments Association (ULGA), a voluntary and non-‐profit body which also serves as a forum for support and guidance for Ugandan sub-‐national governments.
Parallel with the state administration, five traditional Bantu kingdoms have remained, enjoying some degrees of mainly cultural autonomy. The kingdoms are Toro, Busoga, Bunyoro, Buganda, and Rwenzururu. Furthermore, some groups attempt to restore Ankole as one of the officially recognised traditional kingdoms, to no avail yet. Several other kingdoms and chiefdoms are officially recognized by the government, including the union of Alur chiefdoms, the Iteso paramount chieftaincy, the paramount chieftaincy of Lango and the Padhola state.
Source:
http://molg.go.ug/sites/default/files/MoLG%20-%20%20Fact%20Sheet.pdf
Bilateral Representation
The current Belgian Ambassador to Uganda is Mr. Hugo Verbist.
Uganda maintains an Embassy in Belgium at Avenue de Tervueren 317, 1150 Woluwe-‐Saint-‐Pierre (tel.
+32 (0)2 7625825).
More information about Uganda is available from the Federal Public Service Foreign Affairs and other sources, some of which are listed here:
https://diplomatie.belgium.be/en
https://www.cia.gov/library/publications/the-world-factbook/geos/ug.html
http://www.worldbank.org/en/news/feature/2017/02/08/uganda-economic-update-fact- sheet
Bilateral Economic Relations
Trade Commissioner:
Ivan Korsak
Belgian Embassy Nairobi +254.20.712.25.47 +254.20.712.26.13 (Fax) ivan@belemb.eu
Uganda is one of the 18 partner countries for bilateral cooperation with Belgium. After the successful implementation of the first cooperation program 2005-‐2008, to which 24 million euro was allocated mainly for primary health care and strengthening of decentralisation, a new budget of 64 million euro (approx. 155 billion UgSh) is earmarked for the 2009-‐2012 programme. For more information:
https://diplomatie.belgium.be/en/policy/development_cooperation/where_we_work/partne r_countries/uganda
Belgian export and import to/from Uganda (2017)
Source:
https://www.flandersinvestmentandtrade.com/export/landen/oeganda/cijfers
https://www.abh-ace.be/nl/statistieken/buitenlandse_handel_belgie
European exports (EU-‐28) to Uganda amounted to EUR 510.3 million in 2016. Belgium accounted for 10.1% of these exports and ranked as the 5th largest European exporter of goods to Uganda.
European imports (EU-‐28) from Uganda amounted to EUR 446.4 million in 2016. Belgium accounted for 12.1% of these imports and ranked 4th in the EU.
In 2016, Belgium saw a drop in its imports from Uganda faster than the European average. It therefore becomes a relatively less important European customer of Uganda.
The Exporters Registry of the Foreign Trade Agency lists 752 Belgian companies exporting to Uganda and 1,720 showing signs of interest in this market, out of a total of just over 23,000 companies.
Further information on this can be obtained from the ICT department:
ict@abh-ace.be.
Belgian exports to Uganda (2016):
In 2016, the top two sectors accounted for more than 80.0% of merchandise exports to Uganda.
Chemicals, the leading export sector, accounted for 67.1% of total Belgian sales to Uganda, i.e. EUR 34.5 million.
The sub-‐section "vaccines for human medicine " totalled EUR 27.4 million.
The machines and appliances took the second place with a share of 14.0% and sales of EUR 7.2 million.
These sales concerned "centrifuges" for EUR 2.2 million.
Common metals, which completed the podium, accounted for EUR 2.2 million, representing a 4.3%
share of the total exported to Uganda.
Imports from Uganda (2016):
In 2016, the most imported products from Uganda were the vegetable products. These acquisitions, which amounted to EUR 28.0 million "coffee, non-‐roasted, non-‐decaffeinated", accounted for 58.9%
of the total imports into Belgium from Uganda, amounting to EUR 31.7 million.
Purchases of animal products, the second largest import section from Uganda, account for 32.0%, or EUR 17.2 million. The main sub-‐sector, "nile perch fillets" (fish), reached EUR 12.6 million.
With a share of 9.0%, food acquisitions amounted to EUR 4.8 million. The sub-‐section "tobaccos, non-‐
ecoté" represented EUR 2.1 million.
More information on commerce with Uganda:
https://www.abh-‐ace.be/nl/statistieken/bilaterale_notas/bilaterale_nota_oeganda
Uganda's Membership in International Organizations
Uganda and Belgium belong to a number of the same international organizations, including the United Nations, International Monetary Fund, World Bank, and World Trade Organization.
Human Rights
The law introduced a maximum penalty of life imprisonment for those convicted of homosexuality and requires Ugandans to report anyone they suspect of being gay. The bill, which originally called for the death sentence for “aggravated homosexuality”, has dominated Western relations with the East African country since it was proposed in 2009. Local media have made anti-‐gay sentiment synonymous with patriotism. The tussle over gay rights has drawn attention away from Mr Museveni’s increasingly autocratic rule, under which dissent is often violently stifled. Some European governments have said they are suspending aid to Uganda. But as long as Ugandan troops continue to be the mainstay of the peacekeeping mission in Somalia, anything more than a rebuke is unlikely.
Entrepreneurial context
The private sector
Over the last three decades, Uganda has pursued a Private Sector-‐led approach to its economic policy and management. This has put the Private Sector at the forefront of the growth and development process of the country. Long-‐term plans for private sector development are embedded within an overall strategy referred to as Vision 2040. Under this, six National Development Plans (NDPs) are to be followed to ensure that Uganda’s economic development goals are attained. The NDPs are five-‐
year strategic plans with the current one (NDP II) covering the period 2015/16 – 2019/20. It is within the NDP II that priority sectors for development are outlined.
Sectors that Uganda is aiming to develop in the coming years
The following are the priority sectors for development according to the NDP II. These were earmarked because they have the biggest multiplier effect. Although the NDP II is left with only two years to be concluded, it is highly likely that the NDP III will continue with the same priority sectors and just build on achievements of the NDP II.
AGRICULTURE
Agriculture has been and remains central to Uganda’s economic growth and poverty reduction. It is a major source of raw materials for the manufacturing sector, a market for non-‐agricultural output and a source of surplus for investment. Government’s strategic investments for modernization of this sector will transform it into a spring-‐board for socio-‐economic transformation.
Through gender responsive mechanization, commercialization and provision of infrastructure to facilitate marketing, production and productivity will increase leading to increased competitiveness and profitability of the sector. This will lay the foundation for the establishment and expansion of agro-‐
processing and consequently light manufacturing industries. As the commercialization and mechanization of agriculture picks pace, the human resource working in the sector will transfer to the manufacturing and service sectors with better wages, thus accelerating the pace of economic growth and transformation.
For this Plan period, focus is placed on investing in the following agricultural enterprises along the value chain: Cotton, Coffee, Tea, Maize, Rice, Cassava, Beans, Fish, Beef, Milk, Citrus and Bananas.
These enterprises were selected for a number of reasons including, high potential for food security (maize, beans, Cassava, Bananas); high contribution to export earnings (e.g. Maize -‐ USD 21 million in 2005; coffee -‐USD 388 million in FY 2007/08; fish -‐ USD 143 million at its peak; tea -‐ USD 56 million in 2007); increased female labour force participation in cash crop production; high multiplier effects in other sectors of the economy; great potential to increase production and productivity through better management; high returns on investment; favourable agro-‐ecological conditions; high potential for regional and international markets; percentage contribution to GDP and high potential for employment generation while being mindful of the nutritional needs of the country.
TOURISM
The tourism sector has demonstrated high potential for generating revenue and employment at a low cost, implying a high return on investment. In 2012, government expenditure on tourism as a percentage of the national budget was only 0.13 percent and yet its total contribution to GDP was 9.0 percent as of 2011/12.
Uganda’s tourism sector is mainly nature dependent and with the advance of climate change impacts such as high temperatures and prolonged droughts, pose a threat to temperature sensitive vegetation
and animal species. Therefore, emphasis will be on harnessing and developing tourism products that are climate resilient to ensure the sustainability of the sector and the market segment that thrives on natural products. Special attention will be on promoting and strengthening inter-‐sectoral linkages and co-‐ordination that enhances value chain development.
MINERALS, OILS AND GAS DEVELOPMENT
The minerals, oil and gas sector has a great potential of contributing to economic growth and poverty alleviation through mineral exports, use of oil and gas for local consumption/generation of electricity and employment generation. Exploitation of minerals and other resources, especially oil, will provide vital resources needed to fund the backlog of infrastructure investments.
This sector is projected to be a major driver in employment creation and GDP growth over the medium term through value addition. In addition, lifeline industries will spur growth in manufacturing, infrastructure development, agriculture and ICT industries.
INFRASTRUCTURE
The key strategic infrastructure that the NDP II focuses on include: transport, energy, ICT, oil and gas, as well as, water for production. Well-‐developed energy, transportation, and communication network infrastructure will accelerate the harnessing of opportunities thereby spurring growth in the country.
HUMAN CAPITAL DEVELOPMENT
The Uganda Vision 2040 identifies human capital development as one of the key fundamentals that need to be strengthened to accelerate the country’s transformation and harnessing of the demographic dividend. The availability of appropriate and adequate human capital facilitates increase in production, productivity and technological growth thus making it one of the key endogenous drivers of economic growth.
Economic Programs Currently Being Pursued
Agriculture Priority Area
1. Agriculture Cluster Development Project (ACDP)
2. Markets & Agriculture Trade Improvement Project (MATIP II) 3. Farm Income Enhancement and Forest Conservation II 4. Storage Infrastructure
5. Phosphate Industry in Tororo
Tourism Development Priority Area
1. Tourism Marketing and Product Development Project (Namugongo, Kagulu Hills and Source of the Nile)
Minerals, Oil and Gas Priority Area 1. Hoima Oil Refinery
2. Oil-‐related infrastructure projects 3. Albertine region airport
4. Albertine region roads
5. Other oil-‐related support infrastructure 6. Mineral Development for strategic minerals 7. Development of Iron Ore and Steel Industry
Infrastructure Development Priority Area
a) Energy
1. Karuma hydro power plant;
2. Isimba hydro power plant;
3. Industrial substations;
4. Ayago hydro power plant;
5. Grid Extension in North-‐East, Central, Lira and Buvuma Islands;
6. Masaka-‐Mbarara Transmission Line;
7. Kabale-‐Mirama Transmission Line;
8. Grid Extensions including those for Region Power Pool
b) Transport
1. Standard Gauge Railway
2. The Entebbe Airport Rehabilitation;
3. Kampala-‐Jinja highway;
4. Kibuye-‐Busega-‐Nabingo;
5. Kampala Southern by-‐pass;
6. Kampala-‐Bombo Express highway;
7. Upgrading of Kapchorwa-‐Suam Road;
8. Kampala-‐Mpigi Expressway;
9. Rwekunye-‐Apac-‐Lira-‐Kitgum-‐Musingo Road;
10. Road Construction Equipment
Human Capital Development Priority Area a) Health
1. Renovation of 25 Selected General Hospitals 2. Mass Treatment of Malaria for Prevention b) Education and Sports
1. Comprehensive Skills Development Programme c) Social Development
1. Uganda Women Entrepreneurship Programme (UWEP) 2. Youth livelihood Programme (YLP)
Economic Management and Accountability
a) Strengthening Effective Mobilization, Management and Accounting for the Use of Public Resources (SEMMA)
b) Revitalization of UDC and Recapitalization of UDB
ICT
ICT National Backbone Project
Entrepreneurship in Uganda
Uganda’s private sector is dominated by Micro, Small and Medium Enterprises (MSMEs) comprising approximately 1,100,000 enterprises and employing approximately 2.5 million people equivalent to 90% of total non-‐farm private sector workers. Evidence from the Uganda Business Registry (2010) shows that majority of enterprises operate on a micro to small scale with more than 93% of the enterprises categorized as micro enterprises and employing less than 5 persons each.
Enterprises by Size
Enterprise Size Number of Enterprises Share per Category (%)
1 – 4 Employees 428,100 93.5
5 – 9 Employees 19,027 4.1
> 10 Employees 10,979 2.4
Total 458,106 100
Source: Census of Business Establishments (UBOS, 2010/11) Enterprise Size Number of enterprises Share per category (%)
Total private sector contribution to GDP is nearly 80% going by the GDP share of the national budget in FY 2015/16. Most enterprises are located in Kampala Business District (45%) and Central region (21%) with the rest distributed across the other regions–Western (14%), Eastern (13%), and Northern (7%).
In terms of ownership, sole proprietors constitute 43% of enterprises and private limited liability companies 33%. Others include: Partnerships (18%), Associations (2%) and Cooperatives (4%). In the MSME sector, sole proprietorship is the most frequent form of business operation, reflecting the dominance of micro enterprises. MSME’s are predominately informal and young, majority of which have not been in existence for more than 5 years.
There is a high mortality rate of enterprises with 90% of them operating for less than 20 years and only 30% living to celebrate a third birthday. Currently, the mortality rate is 26%. At the top end of the spectrum, only a handful of indigenous enterprises have survived the demise of their founders. The majority of these small enterprises are family based with no formal skills, no clear addresses and usually operating in an informal manner, using basic technology. This undermines the ability of these enterprises to gain access to services such as advanced technology, information or financial services for them to compete favourably in the market.
Legal Framework
Ugandan policies, laws, and regulations are generally favourable towards foreign investors, although poorly enforced legislation and corruption hamper trade development. Ugandan law allows for 100 percent foreign-‐owned businesses and foreign businesses are allowed to partner with Ugandans without restrictions. The government also provides generous incentives for industrial development.
Starting a Business
Companies, both local and foreign must be registered. A local company is one which is incorporated and registered in Uganda or a company whose major shareholding is held by Ugandans and the majority of its business is conducted in Uganda. Foreign companies and branch offices are required to register as foreign companies.
Information required for a local company:
- The proposed name of the Company’s business and the proposed principal place of business.
- The full names, address, age, nationality, position and other occupations of all members/
shareholders and directors of the proposed company.
- The share capital of the company and the capital contribution of each member to the company.
- The statutory minimum number of members/ shareholders required for a limited liability company is one. Note that all the shareholders and directors of the company can be foreigners.
Information required for a foreign company:
- Three certified copies of the company’s certificate of registration from the Country of origin.
- Three certified copies of the Memorandum and Articles of Association/ Constitution of the company.
- A complete list of all the directors and the secretary of the company, their names, postal addresses, nationalities, business occupations and dates of birth.
- A statement of all subsisting charges created by the company (particulars of subsisting debts of the company) if any.
- A list of the shareholders of the company.
- The name and postal address of someone resident in Uganda authorised to accept on behalf of the company service of court process and any notices required to be served on the company.
- The full address of the principal/registered office of the company in Uganda. The company can initially use the address of its attorneys in Uganda.
Other Government Approvals
Besides company registration, there is also a requirement for tax registration for any person doing business in Uganda. Upon application, the Uganda Revenue Authority issues a Tax Identification Number. This is the identifier in Uganda for business purposes.
Trading or operating licenses are issued by the respective Government or professional bodies where necessary, depending on the nature of business being undertaken. Local Government Authorities, for example Kampala Capital City Authority (KCCA), usually issue the trading licenses for businesses that are being established within the city. The investment license is issued by Uganda Investment Authority.
Visa Requirement
Under Ugandan immigration regulations, the requirement to obtain a visa to visit Uganda varies according to the visitor’s country of origin. Ugandan visa policy is based on the principle of reciprocity i.e. all countries that require visas for Ugandans are also subject to visa requirements in Uganda.
Visitors from the following countries do not require visas: East African citizens and nationals of COMESA member countries, Angola, Comoros, Eritrea, Kenya, Malawi, Mauritius, Madagascar, Rwanda, Seychelles, Swaziland, Tanzania, Zambia, Zimbabwe, Antigua, Vanuatu, Cyprus, Tonga, St.
Vincent and The Grenadines, Solomon Islands, Singapore, Sierra Leon, Malta, Lesotho, Jamaica, Grenada, Gambia, Fiji, Belize, Barbados, Bahamas, Italy (only diplomatic passports).
Visitors from other countries must obtain visas from Uganda’s diplomatic and consular missions abroad. Visas can also be obtained on arrival at Entebbe Airport or any other entry point in cases where foreign nationals cannot access a Uganda diplomatic and consular mission abroad, provided one satisfies the entry requirements. It is however advisable to get a visa before embarking on a trip to
Uganda to avoid unnecessary paperwork at point of entry.
Entry visas should be distinguished from work permit / work visa. Once the company decides to hire a non-‐citizen, such an employee must apply for work permit. Uganda Immigration board is responsible for issuing work permits.
Where to Register your Uganda Business:
§ Registration with a Locality, Village or Market: Is suitable for Micro Businesses.
§ Registration with the District Authorities: Is suitable for bigger businesses localized in a particular District.
§ Registration with the Registrar of Companies: Is suitable if your business will operate across the country.
To register a company in Uganda, please check the information that the Chamber of Commerce provides on the procedure:
http://www.chamberuganda.com/news/steps-to-register-a-company-in-uganda/
Taxation
Taxation of companies
A corporate tax is levied on companies, partnerships and sole proprietorships. Any income arising out of any trade, profession, vocation or adventure in the nature of trade is taxable under special rules applicable to business entities unless otherwise specified as being exempt under the tax code.
The income of all companies accruing or derived from Uganda is taxable. A company is liable to pay tax separately from its shareholders. The sources of a company’s income on which tax can be levied include profits and gains from any business carried on for whatever period of time. Other sources include dividends from shares in other companies and interest from the use of the company’s property.
The income tax rates are; Resident and Non-‐Resident Companies -‐ 30%, Branch tax -‐ 30%, Branch profit
Remittance tax -‐ 15%.
The Uganda Tax System can be summarized within Five (5) major Elements.
• Corporate and personal income tax,
• Value added tax (VAT) on goods and services,
• Customs and excise duties,
• And stamp duty.
• There are also a number of statutory levies and social security payments.
Taxes are collected by self-‐assessment and by withholding tax on payments to residents and non-‐
residents. As an Employer you are obliged to withhold and account for income tax on your employee remuneration and benefits (the PAYE system).
You will be charged with penalties and interest for non-‐compliance and late payment of taxes in Uganda
The Uganda Revenue Authority is the central body mandated to assess, collect specified tax revenue, administer and enforce laws relating to such revenue. This statutory body conducts regular audits and investigations of taxpayers.
Summary
Summary of taxes and mandatory contributions that a medium size company must pay or withhold in a given year:
Tax
rates Contributions No. of Payments
Statutory rate Tax Base Mandatory or optional Corporate Income
Tax 3 30% Taxable Profits Mandatory
Employee Social
Security Cont. 12 10% Gross Salaries Mandatory Pay As You Earn 12 Various Rates Gross Salaries Mandatory
VAT 12 18% Value Added Mandatory
Withholding Tax Depends 6%, 10%, 15% Gross Amount Optional Tax on Interest 1 15% Interest Income Optional
Property Tax 1 7 – 10% Property Rental
Value Mandatory Trading License 1 Various Rates Nature of Trade Mandatory Stamp Duty on
Contracts 1 Various Rates Per Contract Optional
Capital Gains Tax 1 30% Amount Mandatory
Support for private entrepreneurship
Uganda Government Investment Incentives
It is common knowledge that tax is a cost to business and one of the main considerations in making investment decisions. In designing tax policies therefore, the government of Uganda has to pay attention to the levels of marginal tax rates charged to business and other income.
The government offers a fair incentives package that provides generous capital recovery terms, especially if your project will entail significant investment in plant and machinery and you're likely to yield profits over the longer term.
The rights and incentives package includes:
- Zero rate of tax on imports of plant machinery and equipment.
- 7% Import duty on specialized tourist vehicles.
- VAT Deferral facility for plant, machinery and specialized tourist vehicles.
- Guaranteed repatriation of profits and dividends.
- Guarantee against non-‐commercial risks is through the multi-‐lateral investment guarantee agency (MIGA) of the World Bank.
- Up to 100% foreign ownership of investments allowed.
- Capital allowances of 50% on plant and machinery for projects located in Kampala, Entebbe, Namanve, Jinja and Njeru. Outside these areas the deductible allowance is 75%.
- Start-‐up costs allowance spread over the first 4 years at 25% per annum.
- 100% allowance on scientific research expenditure and training expenditure also deductible once from the company’s income.
- There is deductible annual allowance on depreciable assets, which are specified in 4 classes (sixth schedule) under declining balance method.
1) Class I: Computers and data handling equipment 40%
2) Class 2: Plant and machinery, vehicles 30%
3) Class 3: Furniture, fixture 20%
4) Class 4: Industrial buildings, hotels and hospitals 5%.
- A nominal corporate tax of 30%, which is among the lowest in Africa and the world, and - Duty draw back or refund for exporters is available.
Attractiveness of Uganda is based on:
§ Fully Liberalized Economy-‐ All sectors of the economy have been liberalized for investment and marketing, with a free inflow and outflow of capital.
§ Market Access-‐ Uganda enjoys a unique location at the heart of Sub-‐Saharan Africa giving it a commanding base for regional trade and investment. Uganda is a member of the Common Market for Eastern and Southern African states (COMESA) and the East African Community (EAC) comprising Burundi, Kenya, Rwanda, Uganda, and Tanzania with a population of over 160 million people.
§ Strong Natural Resource Base-‐ There is abundant rainfall, rich loamy soils and favourable temperature which enhance the productivity of the land to support the cultivation of both food and cash crops organically. Unexploited mineral deposits of Phosphate, Gold, Zinc, Wolfram, Petroleum, Diamond, Vermiculite, Silica etc.
§ Government Commitment to Private Sector-‐ Dialogue in policy formulation greatly attracts foreign investors, in addition to the continuous improvement in provision of infrastructure and other social services
§ Skilled Labour
§ Security of Investment-‐ Constitution of Uganda guarantees protection of investments.
Uganda is also signatory to major international investment related institutions.
