The Business Environment in Uganda

Introduction: A short history of trade in Uganda.

Uganda is a Sub – Saharan country located at the heart of Africa. She is also fondly named the Pearl of Africa.  Since it sits at the Equator, it is naturally a beautiful tropical country with sunshine all year round. Its proximity to the Great Lakes of Africa renders it mildly humid with regular rainfall. She is bordered to the east by Kenya, to the west by Rwanda, to the south by Tanzania and to the north by Southern Sudan.

Business in Uganda has been vibrant even before the arrival of the Arab Traders. In 1845, John H. Speke arrived at the Buganda Kingdom, becoming the first European to do so. He was followed soon enough by many others, including Grant and H.M. Stanley.

What followed was rich history whereby Uganda interacts with the rest of the world to date (albeit commercially). Uganda has been the pipeline for commodities and production factors since time immemorial. It has seen strong kingdoms rise and, more recently, the economy recover after economic turmoil that hit the world, as a result of its special position.

In the administrative sense, it was divided into 4 regions, both historical and geographic. There is the Northern region, Eastern, Western and Central Regions. These are no longer administrative but they still lend credence to the characteristic differences between them.

Post-independence Uganda has faced many political ups and downs. This resulted in the adverse effect on the economy; many times before 1986, Uganda was no place for safety of property and indeed, life. However, since then, the country was born afresh and has seen continuous years of peace and productivity. In 1995, a new constitution was promulgated in Uganda and this contributed positively to the enhanced business gains of her people. To date, Uganda has continued to maintain sustainable growth in many economic sectors.

Currently, the country has a population of about 33 million. The Northern region of Uganda has faced many challenges due to the political turmoil but is, happily, on its track to regaining its lost glory of the heydays when it boasted the lead of trade in the East Africa. The Eastern Region is known best for its agricultural output (agriculture is the main economic activity, employing around 80% of the workforce) which is phenomenal, while the Western Region boasts unique tourist – attraction sites. The Central Region is where Kampala, the Capital of Uganda, and the hub of business, is located. More than a third of the national GDP is sourced from here.

These regions are further subdivided into sub-regions that have cohesive characteristics. They either have people of the same linguistic trait or different dialects, or united by the same cultural institution- in this case kingdoms or chiefdoms, dating back to the pre-colonial era. The sub-regions are further divided into districts. These provide the administrative structures whereby control and development of the respective district levels are coordinated, in association with the Central Government.

Doing business in Uganda

The most notable places to do business in Uganda are its cities and towns. Kampala is the largest; there are also Entebbe, Jinja, Gulu and Mbarara, with really unique variations. They are all ideal for conducting business. In the strictest sense, living or visiting any town can be a bit challenging, but fun. What determines the outcome of interaction with a town or city, of an individual, depends on, among many things, their resilience. The Ugandan locales are really friendly. A lifetime experience in a Ugandan town is full of great memories.

Kampala, being the capital, has the highest cost of living in the country; elsewhere falls below that.  Rent, water, electricity, security and transport understandably makes up most of the concerned person budget. The property market and real estate is booming in the urban areas. These determine the places one would choose to live or do business.

According to data form the World Bank, the categories under which doing business in Uganda can be summarized are as follows:

• Procedures required to register a firm:                        14
• Number of days required to register the same:           33 (the mean for Sub-Saharan Africa is 34)
• Cost required for the same:     77% of the per-capita income
• The amount that an entrepreneur requires to deposit in escrow of bank or notary before registration:         0% of per capita income against 116% mean for Sub-Saharan Africa.

The procedure for setting up an enterprise is as follows:

1. Reserve a name for the enterprise at the office of the Registrar.
2. Pay fees for the same at the Bank
3. Obtain some 5 forms from the Uganda Bookshop
4. Signing a declaration that you will comply by the laws of operation. This is done before a Commissioner of Oaths
5. Obtaining a requisition for bank pay-in slip and some bank payment advice forms from the Uganda Registration Services Bureau at no charge
6. Making the payments for registration fees at any bank
7. Filing with the Registrar General
8. Filing for tax returns with the local office of the Uganda Revenue Authority. Also filed here are a corporate preliminary inquiry form, personal inquiry form for every director and application for value-added tax. You receive a tax identification number (TIN). The process takes approximately 5 days.
9. An inspector then comes from the Uganda Revenue Authority to inspect the business.
10. Application for license: the forms for this are available from a licensing officer. The licensing officer arranges an inspection of the premises and fills out an assessment form.
11. Paying for the license at the Bank
12. Obtaining the trading license
13. Filing a form with the NSSF
14. Making a company seal

(Source: World Bank)

It is relatively easy, then, to start a business enterprise in Uganda.

The economy of Uganda is poised for growth; and with this is the business opportunity. Since the economy is heavily reliant on agriculture, it is usually regarded as the food basket of the region. The land is fertile and rainfall is regular. Entrepreneurs in the sector are potentially in for rewarding results.

Technology in Uganda: according to a study by Martin Prosperity Institute (U.S, 2008), Uganda comes only second to South Africa and is followed by Madagascar. Globally, the nation is among the 82 countries which have reached the category of advanced technology, and is also endowed with innovation capabilities. This has contributed greatly to the advancement in the development of human resource, capital development and overall economic competitiveness (Uganda even rolled out production of electric car, Kiira EV, in 2011). It has seen the trend of economic growth rise progressively.

Moreover, the tourism industry in the country is flourishing. Uganda has increasingly grown to be a preferred tourism destination, what with several UNESCO sites and amazing national parks. There are scenic landforms including the Ruwenzori mountains and the Bwindi Impenetrable National Park; along in line with the other Eastern African countries.  The gains of trade from foreign exchange are huge and present opportunities for investment.

Oil has been prospected and successfully found. There is projected a start in the export for oil by 2016. This is indeed good news for the economy since it will be among the peaceful oil-producing democracies, associated with tremendous prosperity. There is infrastructure in place for the full production of oil for export. Indeed, overseas oil prospector, Tullow Oil, has started paying tax to the government.

In terms of health, Uganda is on the frontline. The hospital at Mengo and private practices in major cities are very well equipped and they cater comfortably for the population’s health needs. Secondly, the medical information technology in Uganda is in an advanced stage. There rolled out production of her own anti-malarial and ARVs, and even antibiotics even as early as 2007.

In real estate, the property market is on the boom. The consumer confidence is on all-time high, which has caused financial organizations to step in and engage the market in innovative packages. However, due to the vibrancy of the market, there have emerged predatory lenders who take advantage and provide sweetened packages, whose downsides are unsustainable rates and are overwhelming to the consumer in the end. The potential entrants to the market: both supply and demand – do well to invest after a thorough research of the field.

Finding land here is easy; the constraints being the size and location. One can engage realtors or real estate agents. The price, as in everywhere else, depends on the location of the land; for example, finding land close to the lake(s) will cost one more. However, there are more factors one considers when acquiring land, including validity of the deed, debt financing and so forth.

Further still, Uganda has had increased external support. The country previously initiated a policy with the IMF and the World Bank to implement the economic policies designed to create produce incentives; though proper pricing policies,  rehabilitation of infrastructure, improvement of capacity utilization, restoration of price stability and sustainable payment of debts and improvement of mobilization of resources.

This led to the reduction of inflation- from 3 digits, to a stable single digit by 2009. The implication was the enhanced confidence and competitiveness of commerce in the economy.

Conclusion

Uganda is a great place to live. Her people are warm and welcoming. There is serene coexistence between nature and humanity. Even though the Ugandan Shilling was weakened by the instability before 1986, it has shown promising results of recovery and is on track ever strengthening. Policies and structures within the economy are driven by individual business operations. The technology used has a substantial impact on the economic cycle: the extraction, manufacture, use and waste.

There is opportunity at whichever stage of the cycle. The natural and human resources in the country are ample and chances for investment are rive and competitive as compared with the rest of the East African countries. The free trade area within the region also encourages substantial business operations in the export line of business. Kenya, her neighbor, offers a great chance for goods to pass through, what with great infrastructure in both countries.

The free trade area comprises three member states, namely: Uganda, Kenya and Tanzania. It was established in order to recognize the free trade movement in Africa. The three countries intend to establish a customs union, a regional court, a legislative assembly and eventually, a political federation. Their program includes cooperation on immigration, road and telecommunication networks, investments and capital markets.

That said, the task is up to the investor to decide from a whole spectrum of activities to undertake. The opportunity for interaction in the economy is limitless.

Sources

1. 1.      IBRD, the World Bank Group, 2013, Doing Business in Uganda,
2. 2.      Pearsons Publications, 2007, Essentials of entrepreneurship; how to start and maintain SMEs.