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"A Synopsis of Uganda’s Private Sector Growth Challenges and Proposals for Policy Reform"

PRIVATE SECTOR PLATFORM FOR ACTION 1

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PRIVATE SECTOR PLATFORM FOR ACTION

A SYNOPSIS OF UGANDA’S PRIVATE SECTOR GROWTH CHALLENGES AND PROPOSALS FOR POLICY REFORM

MARCH, 2012



A synopsis of uganda’s private sector growth challenges and pro-posals for policy reform

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THE PSFU PROFILE

Apex Body of the Private Sector:

PSFU is the apex body of the Private Sector in Uganda. It was established in 1995 to coordinate the various Private Sector actors in creating a conducive business environment in partnership with Government. This was to be achieved through an effective Policy Advocacy and Dialogue with Government and its oversight as well as implementation machinery. PSFU aims at ensuring that the Ugandan Private Sector is competitive nationally, regionally and internationally. Regionally, PSFU is the National Focal Point for the East African Business Council (EABC) and the COMESA Business Council (CBC)

Membership of PSFU:

Much as PSFU coordinates the entire Private Sector in Uganda, it has a membership currently standing at about 166, of which 110 are business associations with country wide representations such as the Farmers Federation, Uganda Manufacturers, Federation of Uganda Employers, Professional associations including Uganda Law Society, ICPAU, Uganda Institute of Professional Engineers, Public Procurement Association of Uganda, among others with all sectors represented. There are also a few Government agencies that support Private Sector growth i.e. UIA, UNBS, CMA, USE, NAADS, Enterprise Uganda and the UEPB. Of the membership, about 43 are corporate companies with extensive international investment experience.

Project Management:

Since its inception, PSFU has been managing projects (on behalf of Government) that enhance Private Sector Competitiveness on behalf of Government. They include; Private Sector Competitiveness Projects funded by the World Bank, BUDS-DFID (13 M British Pound Sterling) funded by the UK Government through the Department for International Development (DFID) through the Prime Minister’s Office, and BUDS-Energy for Rural Transformation funded by the World Bank, among others.

The Mandate of PSFU:

The twin mandate of PSFU is;

To advocate for an improved business environment and work with Government to reduce the cost of doing business in Uganda.

To build local entrepreneurial capacity and help improve the competitiveness of the local enterprise



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TABLE OF CONTENTS

EXECUTIVE SUMMARY ..................................................................................................................................SUMMARY OF KEY RECOMMENDATIONS ....................................................................................................1.0 BACK GROUND/INTRODUCTION .............................................................................................................1.1 Rationale for 2012 Platform for Action ...........................................................................................................1.2 The State of business today: ...........................................................................................................................2.0 GOVERNMENT’S COMMITMENT .............................................................................................................3.0 THE PRIVATE SECTOR IN UGANDA .........................................................................................................3.1 State of the Uganda’s Economy and impact on the Private Sector ......................................................................3.2 State of the Private Sector in Uganda to date ...................................................................................................3.3 The cost of doing business in Uganda .............................................................................................................3.4 Uganda’s competitiveness position in the EAC and global market .....................................................................4.0 CROSSCUTTING ISSUES ............................................................................................................................4.1 Infrastructure ................................................................................................................................................

4.1.1 Energy infrastructure .......................................................................................................................

4.1.2 Transport Infrastructure ...................................................................................................................

4.2 Skills, Education and Health for enhanced National Development .....................................................................

4.2.1 Industrial training/internships: ...........................................................................................................

4.2.2 Tax incentives: ...............................................................................................................................

4.2.3 Financial Support to the Health and vocational sector: ...........................................................................

4.2.4 National Health Insurance Scheme: ....................................................................................................

4.3 The Extractive Industries; Mining, Oil and Gas ................................................................................................

4.3.1 Land access and acquisition: .............................................................................................................

4.3.2 Training: .......................................................................................................................................

4.3.3 Legislation/draft petroleum Bill: ........................................................................................................

4.4 The Finance and banking sector ......................................................................................................................4.5 Tax Policy issues ...........................................................................................................................................4.6 Rural Development & Industrialisation ...........................................................................................................4.7 The Role of SME’s in National Development ..................................................................................................4.8 ICT for Development and Business Process Outsourcing ..................................................................................4.9 Legal and regulatory frameworks....................................................................................................................4.10 Enactment of Priority Commercial Bills ........................................................................................................4.11 Implementation of agreed policy actions ........................................................................................................5.0 SECTOR SPECIFIC GROWTH CHALLENGES ............................................................................................5.1 The Agricultural Sector ..................................................................................................................................

5.1.1 Re-streamline the NAADS program/Value Chain approach .....................................................................




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5.1.2 Access to Credit for Agricultural Production ........................................................................................

5.1.3 Policies and Regulation: ..................................................................................................................

5.1.4 Storage Facilities: ...........................................................................................................................

5.1.5 Promotion: ....................................................................................................................................

5.1.6 Incentives for rural industrialization: ..................................................................................................

5.1.7 Agric-farm inputs and equipment: ......................................................................................................

5.1.8 Land for Commercial Agriculture: .....................................................................................................

5.1.9 Enforcement and regulation of standards: ............................................................................................

5.2 SPECIFIC AGRICULTURAL SUBSECTOR CONCERNS: .............................................................................

5.2.1 The Horticultural Sector...................................................................................................................

5.2.2 The Coffee Sector ...........................................................................................................................

5.2.3 Tea ..............................................................................................................................................

5.2.4 The Sugar Sector ............................................................................................................................

5.2.5 Flower ..........................................................................................................................................

5.2.6 Apiculture .....................................................................................................................................

5.2.7 Cotton ..........................................................................................................................................

5.2.8 The Fish Sector; .............................................................................................................................

5.2.9 The Live Stock Industry ...................................................................................................................

5.2.10 The Leather, Hides and Skin Sector ..................................................................................................

5.2.11 The Beef Sector ............................................................................................................................

5.2.12 The Dairy Sector ..........................................................................................................................

5.2.13 The Rice Sector ............................................................................................................................

5.3 THE MANUFACTURING SECTOR ..............................................................................................................

5.3.1 Foods and Beverages Sector .............................................................................................................

5.3.2 The Plastics and Packaging Sector .....................................................................................................

5.3.3 The Iron and Steel Industry ..............................................................................................................

5.3.4 The Pharmaceuticals Sector ..............................................................................................................

5.4 THE TOURISM SECTOR .............................................................................................................................

5.4.1 Hospitality and Tourism Training Institute of Excellence ........................................................................

5.4.2 Infrastructure development ...............................................................................................................



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5.4.3 Marketing Uganda’s Tourism Potential ...............................................................................................

5.4.4 Institutional weaknesses ...................................................................................................................

5.4.5 Domestic Tourism ..........................................................................................................................

5.5 THE SERVICES SECTOR.............................................................................................................................

5.5.1 The Insurance Sector .......................................................................................................................

5.5.2 The Banking Sector ........................................................................................................................

5.5.3 The Real Estates Sector ...................................................................................................................

6.1 The East African Community .........................................................................................................................6.2 Southern Sudan Threat of war ........................................................................................................................6.3 FTA-EAC/ COMESA/SADC .........................................................................................................................6.4 The Economic Partnership Agreements ...........................................................................................................7.0 CONCLUSION .............................................................................................................................................8.0 ANNEXES ...................................................................................................................................................8.1 ANNEX 1: UGANDA’S COMPARATIVE PERFORMANCE ON THE GLOBAL COMPETITIVENESS

INDEX, 2011/2012 .............................................................................................................................................8.2 STATUS AND REMARKS OF THE OUTSTANDING COMMERCIAL BILLS ...............................................8.3 CONSULTED PRIVATE SECTOR STAKEHOLDERS....................................................................................8.4 PSFU MEMBERS PER SECTOR AS OF MARCH 2012 .................................................................................




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LIST OF ACRONYMS AND ABBREVIATIONS

AREA Association of Real Estates AgencyAUTO Association of Uganda Tour OperatorsBOU Bank of UgandaBPO Business Process OutsourcingBTVET Business, Technical and Vocational Education and TrainingCAA Civil Aviation AuthorityCAADP The Comprehensive Africa Agriculture Development ProgrammeCBC COMESA Business CouncilCBET Competence Based Education and TrainingCET Common External TariffCICS Competitiveness and Investment Climate StrategyCIS Collective Investment SchemeCMA Capital Markets AuthorityCOMESA Common Market for Eastern and Southern AfricaDIT Directorate of Industrial TrainingDUCAR District, Urban and Community Access RoadsEAC East African CommunityEAMU East African Monetary UnionEPA Economic Partnership Agreements EPRC Economic Policy Research CentreERA Electricity Regulatory AuthorityFTA Free Trade Area FUE Federation of Uganda EmployersFY Financial Year GDP Gross Domestic ProductICT Information and Communication Technology IP Intellectual PropertyISO International Standards Organisation JKIA Jomo Kenyatta International Airport JLOS Justice Law and Order Sector KRA Kenya Revenue AuthorityKRC Kenya Railways Corporation MAAIF Ministry of Agriculture Animal Husbandry and FisheriesMBI Mauritius Board of InvestmentMFI Micro Finance Institution MOFPED Ministry of Finance, Planning and Economic DevelopmentMOJCA Ministry of Justice and Constitutional AffairsMOWT Ministry of Works and TransportMSME Micro, Small and Medium EnterpriseNAADS National Agricultural Advisory Services NARO National Agricultural Research OrganizationNCDC National Curriculum Development CentreNDP National Development PlanNPA National Planning Authority NSSF National Social Security FundPAYE Pay As You Earn PIRT Presidential Investors’ Round Table

The Comprehensive Africa Agriculture Development Programme



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PPDA The Public Procurement Disposal of Public Assets AuthorityPSCP Private Sector Competitiveness ProjectRRA Rwanda Revenue AuthorityRVR Rift Valley RailwaysSACCO Savings and Credit Cooperative OrganisationSADC Southern Africa Development CooperationSCT Single Customs TerritorySPS Sanitary and Phyto-SanitaryTRA Tanzania Revenue AuthorityUCDA Uganda Coffee Development Authority UDB Uganda Development Bank UEPB Uganda Export Promotion Board UFEA Uganda Flowers Exporters Association UFFA Uganda Freight Forwarders AssociationUFPEA Uganda Fish Processors and Exporters AssociationUIA Uganda Investment Authority UNADA Uganda National Agro-Input Dealers AssociationUNBS Uganda National Bureau of StandardsUPE Universal Primary Education URA Uganda Revenue AuthorityURF Uganda Road FundURSB Uganda Registration Services BureauUTB Uganda Tourism Board VAT Value Added Tax WHO World Health Organization




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EXECUTIVE SUMMARY

Uganda’s business climate is increasingly becoming more favourable for investment growth, owing to Government’s commitment to support Private Sector Development. Government has undertaken various interventions to enhance the legal, regulatory and the general business environment key among which are: Development of road Infrastructure; institutional reforms, prioritization of energy infrastructure. Transport by road is still a challenge especially in the rural areas to help farmers link up with markets. Access to the sea though still a big challenge, is being improved and infrastructure at the landing ports of Port Bell and Jinja Piers is gradually getting better. Once im[proved, this should be a drive for investments in the ferries which would not only improve water transport over Lake Victoria but also connect Uganda to the sea through Dar- es- Salaam. Regarding ICT, creating a backbone for the Faber Optic cable interconnection throughout the country and to the rest of the world through the Marine Cable at Mombasa is expected to be a basis for reducing the costs of transmitting Data and using ICT to improve Uganda’s exports especially through business processing operations. This technology will make Ugandan businesses more competitive locallyand in export markets.

Government appreciates the challenges of Energy and the Railway. Theseare particularly very poor yet the availability of cheaper power and efficient rail system would greatly reduce the cost of doing business for Uganda. The two are extremely vital for a competitive economy and call for more investments. With regard to Commercial Laws; - Government continues to make efforts to ensure that they are enacted so that it is easy to start, operate or close business. Some of the bills that are crucial for business yet still pending include; Counterfeits goods bill, the Hire Purchase Act No. 3, 2009, Insolvency bill, computer misuse law, electronic (digital) signatures bill, Industrial Property bill 2007, Investment Code Amendment Bill, The Contract Bill, Uganda National Bureau of Standards (Amendment Bill), among others. These have still not been debated and passed by Parliament.

In the area of Agriculture; Government has attempted to step up its support with the objective of modernizing the sector (through the DSIP) and making it more profitable. Special support of Shillings 90 Billion, Agricultural Fund, was provided to avail value adding equipment at interest rates not more than 10 % per annum. The Government of Uganda also continues to support Agriculture through NAADS to achieve the planned objectives. However while the Private Sector is expected to tap into such opportunities to compete favourably, Government will be required to streamline implementation and improve coordination. Government should as well accelerate the implementation of the Comprehensive Africa Agriculture Development Programme (CAADP) Plan of Action, and particularly meet its commitment to allocate at least 10% of the national budget to agricultural development. This year, the budgetary allocation to agriculture has dropped from 4.5% to a mere 3.7%.

Trade/business facilitation; the Government continues to provide support to the business community by improving trade facilitation through; the Uganda Export Promotion Board, Uganda National Bureau of Standards, Uganda Investment Authority, Uganda Revenue Authority, among others, working towards improving their services for efficient service delivery. Now in place at the border in Malaba is a 24 hour service in which goods clearance is done in a day as compared to more than 4 days previously.

There is need to fully exploit the potential of the Tourism sector as a fast growing industry and a major invisible export revenue source. This is especially since Uganda was ranked among the top most preferred tourist destinations for 2012. The Tourism Act must be fully implemented with priority focus on improving competitiveness of the sector through product development. Uganda is also strategically positioned to provide Business Process Outsourcing services to other countries such as the USA, UK, Canada, among others. There is therefore need for various Government interventions to enable the Private Sector tap into this potential. The Government of Uganda should also put in place enabling environment for the Private Sector to tap into other services like Insurance, Capital Markets and Real Estates. There is need to create a more favourable investment climate for the Private Sector to become more competitive.



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Despite the above efforts, the cost of doing business still remains high as rated by the Cost of Doing business index and by the competitiveness ranking by the World Bank and the World Economic Forum respectively. Reforms to effectively address regulatory barriers to trade and investments among others will be required to ease business cost pressures on investments. Through the NDP, the Private Sector expects a stable macroeconomic policy stance backed by timely implementation of planned activities – but only if we have a clear M&E framework. For achieving output, there is need for effective follow up and efficient accountability of resources deployed. It is observed that government reform agenda has been slowed this year inspite of the huge supplementary budgets.

The above achievements notwithstanding, the Private Sector through its apex body, PSFU continues to advocate for better policies and regulated environment for investments to foster competitiveness in the region and internationally. Below is a summary of key recommendations for both cross-cutting and specific growth challenges, as raised by the Private Sector in 2012 through the PSFU Platform for Action:




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SUMMARY OF KEY RECOMMENDATIONS

CROSSCUTTING RECOMMENDATIONS

Implementation of Agreed Government Policy Actions:

MoFPED to strengthen Budget monitoring and insist on proper outputs and value for Money •rather than financial absorption by Government.Prime Minister to host Private Sector Forums every quarter to get the private sector more involved •in economic monitoring Strengthen partnerships with the private sector in programme development and project •execution

InfrastructureEnergy

Plan energy tariff adjustments to help in business planning and project management. •Reduce VAT on commercial consumption from 18% to 5% to encourage value addition . And •for rural establishments reduce VAT to 0%. These measures will stimulate production, increase the GDP and more importantly will contribute to the tax revenue recovery from Industrial sector which continues to be low.VAT calculation should include input and output VAT across the value chain from generation to •UMEME. UMEME should not to load-shed the purely industrial line of (33KV line) which forces •manufacturers & industrialists to shut down heavy plants that require a 24 hour continuous operation.Encourage use of alternative energy source like solar power and biogas by removing taxes on •the importation of energy equipment powered by this alternate power source. (these imported appliances include but not limited to; Stoves, pressure gauges, gas valves and lamps)Government should encourage & make laws that promote the usage of solar power in homes and •SMEs so as to reserve the hydro power for industriesCategorize industries and offer subsidized / duty free diesel for generator use so as to maintain •production & supply of goods and products on the market.VAT should be removed on energy for at least commercial users (medium, large) consumers. •Should there be a charge, then it should be not exceed 5%.Generation support is also required at level of industries. Tax WAIVER on diesel for generators •of from 40kv be reinstated. This is because at the time this policy was initiated in 2006; many manufacturers bought generators which acted like back up to the grid power. The situation now is that Grid power acts like backup for generators. Support therefore would be well placed.Incentive for generation be improved further and may even include equity support by Government •on a basis of PPP. This May include issuance of energy bonds.

Transport Railways

Fast track the Rail lines rehabilitation of the Kampala- Malaba line to include parking slippers so •as to increase RvR carriage in the short run. Start rehabilitation of the Northern and western lines•

Water WaysRehabilitate the two ferries on L. Victoria- Pamba and Kawa to become operational, this will help •in diversifying the sea route through Dar es Salaam and reduce over reliance on the Mombasa route. Furthermore purchase a ferry for Lake Kyoga and other water ways.



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RoadsBuild strategic economic support roads: Tourism roads such as; Katungulu – Ishasha, Kabale-•Kanungu-Butogota-Buhoma, Kampala-Masindi-Paraa (work in progress), Kitgum-Orom-Kanenga (to Kidepo national park), Kabale to Lake Bunyonyi among others. Also construct a dual carriage high way between Kampala, Jinja and Entebbe. Oil development roads in the Albertine area; Connection to the markets like the ones to South Sudan through Atiak from GuluCentral government support local government roads especially those in urban centers. Increase •budget for Kampala metropolitan area so as to decongest and reduce traffic which is so costly for business.Ensure the PPDA processes are faster, transparent and roads are built in time. The process should •benefit among others SME’s and support development among the population including the youth..Ensure Government’s contribution to the Energy and Road funds is sustained•

AirImprove airport infrastructure to align services to international standards. Focus ought to be on •run ways and airport facilitiesMake EAC routes to become local and not international so as to reduce the costs charged. This •will drastically reduce the costs of air transport in the region

ICTComplete the laying of the National Optic fibre back borne to connect the entire country and link this to the Marine Cable in Mombasa through Kenya.

Initiate the development of ICT parks on a PPP basis.•

Skills Development and Productivity issuesPopularize and implement the reforms under the BTVET Strategy•Set up an independent directorate to specifically focus on BTVET and help coordinate skills •development across all sectorsGovernment should consider supporting Private Sector BTVET institution to provide the much •needed skills through sponsorship of students Equip schools/universities with laboratory equipment to promote science subjects•Develop a programme to support internships, industrial attachments and apprenticeships•Extend tax credits to manufacturers currently incurring costs to train technical staff, which costs •are part of the production costsSet up a certified national instructor training institution, running parallel to the Nakawa based •Vocational Training Institute, with a mandate to enhance the quality of instructors.Support practical skills development of priority sector through a PPP arrangement. Some of the •sectors to urgently consider are; Oil & Gas, Tourism, Construction, Agriculture, Manufacturing/ Industry.

The Extractive industries; Mining, Oil and GasLegal framework: Expedite Petroleum law that will be a foundation for a legal framework which •will create predictable investment environment, transparent and development oriented Oil sector. This will further be a basis for creating confidence in the oil sector by both Investors and people of Uganda.Land Availability: Government quickly address the issue of land especially for upstream •development of oil and mining activities. This is an urgent issue Government has to take on so as to make these natural resources accessible.Support the building of Capacity in-terms of manpower to support the industry. Training and •skilling of the locals should be a direct intervention which must be done now so as to prepare for the local content participation in the industry. Companies should be supported to be able to build capacity to partner with foreign expert companies especially in the businesses axillary to the oil




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industry. This is where there is greatest potential for employment rather than the direct oil related companies. The PRIVATE Sector and particulary PSFU could be supported to start these capacity building related initiatives.Support more dialogue among Government institution, population to appreciate the sector, reduce •tension and suspicion so that the country takes a clear path that will benefit the all the stakeholders in the sector.Invest heavily in Infrastructure development critical for the development of the subsector. This •should include, reconstruction of roads in the mining areas, railway , among others

Cost of Business FinanceDouble the Agricultural Credit Facility and broaden the beneficiary to from value addition to •farmersEstablish similar facility for Education and Health Investments.•Capitalize UDB to support Industrial development and cheaper interest rates.•Strengthen Collateral registration and promote PPP’s in favour of rural financial transformation•Implement reforms in the Pension sector as a way of mobilizing local development funding, in •order to increase availability of long term development finance for SME’sBuild capacity and strengthen Anti money laundering institutions in the sector in order to adhere •to internationally acceptable financial governance standards including enhanced financial sector supervisionEnhance capacity of institutions regulating and participating in activities of the sector with the view •to increasing capital flows as well as client confidence/promote capital market developmentsPromote research in financial development aimed at accelerating, deepening and broadening the •sectorIdentify, sign, ratify and domesticate international protocols related to financial sector, governance •with the view to making Uganda a regional centre of Excellence in Financial transacting and investmentDevelop and promote insurance programmes with a view to increasing appreciation and •participation at all levels

Tax Policy IssuesFormulate tax policies that target widening the tax through incentivizing the informal sector as •opposed to increasing the burden on the already compliant tax payers. Reduce the VAT rate on electricity from the current 18% to 5% for industrialist in general and 0% •for value addition units in upcountry rural to support rural development as a policy. Remove VAT on Mobile Telephone Handsets as in Kenya and Rwanda to increase their usage; •revenue and smuggling and costs related to curbing this vice.Support reduction of communication costs and that of doing business by progressively reducing •the excise duty on air time from 12% to 8 %Consider implementing a varied VAT and not stick to 18%•Exempt charges on Pre-Printed flexible Packaging Materials and further provide special incentive •for packaging industries. (See coffee and diary sectors)Increase PAYE threshold from the current UGX 130,000 to UGX 250,000 for effective demand •and a level play field for business in the region. Increase the threshold in subsequent years at the rate of the economic growth.Reduce the VAT rate from the current 18% to 16%•Explore the possibility of URA working with the Private Sector in assessment and collection of •rental taxExplore the possibility of raising revenue through taxes on real estate transactions•Reduce Withholding tax on dividends from 10% to 5% to match Kenya and Tanzania for purposes •of harmonization and better competition in the regionRe-align Uganda’s tax policy with the EAC integration process .•Maintain the tax structure for beer; introduce the same structure for the spirits and remit CET for •



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barley to 0%URA should develop measures to reward and motivate compliant tax payers/contributors. 0.02% •rebate could not only motivate but also help support costs for these collections on behalf of URA.Remove VAT on edible oil produced from raw materials produced locally. Remove the distortion •created by the exemptions in Palm.All the EAC Partner States do enjoy lower tariff given that Kenya, Rwanda & Burundi are in •COMESA FTA and Tanzania in the SADC. If Uganda implemented the CET fully, it would be hurt in some selected areas especially in Paper and Steel products. GoU should therefore negotiate for an exemption in some specific areas of industrial inputs to be 0% so as to bring the Uganda Private Sector to be at par with other Partner States

Rural Development & IndustrialisationProvide tax incentive for value adding investments directly operating in the rural areas. This •should be for both new investments and old ones.Stabilise the supply of electricity and also rethink the costs for those using electricity for •production i.e light to heavy manufacturing. For example the VAT on electricity be 0% for those establishments in rural areas.On PPP basis roll out improved seeds, planting and stocking materials availability in Rural •AreasOn PPP Basis create the storage capacity in rural areas to act as quality improvement and Marketing •Centres.On PPP Basis use nucleus farmers’ support clearing of land through Tractor (including hand held) •support services. Remove VAT on tractor hire services to spur investments in the tractor services as a business•

Micro Small and Medium Enterprises (MSME’s) DevelopmentFocus on SME’s’ financing; create a revolving fund, and work on Improving access to long term •financing through establishment of an institution to intermediate development finances (e.g. BOU Credit lines):Capacity Building for SME’s through access to BDS Support innovation and Accelerated •technology TransferSupport to Business Start-Up and Improvement•Improving enforcement of business contracts•Streamline institutional support for SMEs•Develop and implement SME targeted incentives especially for Rural Industrialization•Expedite enactment of the MSME Policy to ensure Corporate Governance•

ICT for Development and Business Process OutsourcingExpedite the completion of linking Uganda to the world through the fibre optic cables as the •backbone for Uganda and connect to the Marine fibre optic cable already at Mombasa with the view of lowering the cost of international transmission of data.Improve affordability of Telecom and ICT services in Uganda through VAT tax exemption•Develop basic ICT literacy amongst the wider population in Uganda/nationally •Integrate the clusters initiatives concept in the Government Strategy in order to enhance Private •Sector CompetitivenessExpedite operationalisation of the ICT Policy for sector guidance•

•Legal and Regulatory Frameworks

Fast track efforts to expedite enactment of key commercial laws including; Company Bill, •Insolvency Act, Counterfeit Bill, Investment Code Bill and Free zones BillFast truck the ongoing comprehensive Business Licensing Reform work•Expedite business registration reforms/ improvements in registration process, this is to increase •




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efficiency, and reduce the number of days and costs incurred to register a business.Increase funding to the URSB to ensure that its capacity is strengthened. This will support the •expansion of the formal sector and grow the tax baseSet up regulation and law enforcement•

Budget Discipline and Implementation of agreed Policy ActionsEstablish an implementation structure and M&E system that works in a timely manner and •delivers. Ensure systematic planning of resources and speedy implementation of agreed policy decisions•Commit to zero tolerance for corruption and wastage of public resources, through accountability, •good governance, public service reform and monitoring and evaluation of Government programmesReconsider spending priorities and redirect scarce resources to productive areas of the economy, •in line with the NDP and the MTEF

TRADE AND THE EAC REGIONAL INTEGRATION ISSUES

Uganda should Join the COMESA FTA•Special care need to be taken on negotiations of EAMU to avoids similar challenges like in the •Euro Zone challenges. Speed up and finalize negotiation under EPA. Speed up the process and finalize negotiation under •EPA.Ensure we implement and remove supply side constrained as elaborated in the various •recommendations.Involve the Private Sector in the High Level Task force for the Single Customs Territory •discussions.Implement the recommendation here proposed in the document so as to remove the supply side •constraint which intern will make Ugandan more competitive and that will further lead Uganda to participate effectively and gain from all the integration process and economic partnership

SECTOR SPECIFIC RECOMMENDATIONS

General Agricultural Development IssuesIn partnership with the Private Sector, support the construction of storage facilities to handle the •bumper harvests and maintain phyto-sanitary and standard’s needs. This will succeed with a well-developed Warehouse receipt systems especially in major grain producing districts and regions to keep farm products safe and ready for marketEnsure availability of adequate storage facilities at sub counties and mainstream functional •warehouses to avoid post-harvest losses as well as improve commodity pricingDevelop a policy to guide implementation of the crop protection Act and improve the •regulationsDevelop and gazette an inventory of agricultural inputs that qualify for tax exemption. •Subsidize agricultural input dealers such as UNADA and Crop Life who work to match demand •and supply needs of farmers, need government support in terms of funding.Strengthen MAAIF plus its affiliate agencies and the UNBS for improved capacity to curb and •avert the fake agricultural in puts plus adulterators in order to protect farmersInstitutionalize a special agricultural bank for farmers. •Establish a special fund to support SMEs engaged in agricultural production and agro-•processingMAAIF should develop a comprehensive agricultural extension policy to guide implementation •of agriculture extension services to farmers



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The Horticultural SectorAdapting our quality assurance systems to the Global GAP certification system to ensure •international Standards are metThere is need for funding so as to train and recruit technical & production managers to address •this gap especially when new flower varieties are being introduced.give work permits to horticulture expatriates at the immigration department •Put a fund in place to invest in Modern Production Units•Invest more in Training and Research •Public Investment in facilitating Services at the Airport, Roads among other Infrastructural •Facilities

The Coffee SectorExpedite formulation of the Coffee Policy and include farmer concerns to effectively guide •operations of the sector and lead into growth. The policy should address the quality improvement and increase in out putExempt 120% Excise duty, VAT and withholding tax on Pre-Printed flexible Packaging •Materials given that imported items are only charged on the finished products and not packaging hence disadvantaging our coffee value addition market in the country. Furthermore, provide special incentive for packaging industries.Put in place sustainable funding mechanisms for the Coffee research Centre in Kituuza, develop •technologies to avert climate change and Coffee wilt disease Provide funds to replicate the Coffee Wilt resistant variety seed varieties and supply to all •farmers better quality farm inputs, This should be done on a PPP basis with either lead farmers of associations supporting the process.Provide support towards strengthening the Coffee farmers i.e. a percentage from the cess levied •on Coffee exports need to be channelled in this direction. Review the UCDA statute and the NARO Act. Through UCDA, more resources would be made •available to enhance capacity and research to enhance productivity and enforce best practices for better out puts.

The Tea SectorRe-instate Rwebitaba research station as a specialized tea research station on a Public Private •Partnership basisPut in place a deliberate Government policy to promote local tea consumption e.g. removing VAT •on locally sold tea. For example in Tanzania, removal of VAT on locally sold tea resulted into an increase in consumption of tea from 2% to 9% in just a period of two years.Remove Cess on produce especially export commodities, particularly, the cess tax of one shilling •per a kilogram of green leaf proposed by Kyenjojo district.Formulate a national tea policy to guide the growth and activities of the sector•

The Sugar SectorPublish the recently drafted National Sugar Policy following the review and increase of the sugar •cane growing radius limit from 25 km to 35 km and strictly enforce these sugar milling zones. Continue supporting the out grower farmers with improved services such as; access to cheaper •loans and subsidies on fertilizers Enforce Jaggery millers to operate in separate zones, similar to zoning provisions made for other •crops as recommended in the National Sugar Policy. Register jaggery millers for VAT as in the past. Carefully review the treatment of COMESA sugar entering Kenya as the current lifting of their •restrictions for duty free sugar quota as residual duty levels may have serious consequences for the entire regional industry. Defend the Safeguard measures as agreed by the EAC to ensure the lasting survival of the Ugandan •and in general the EA sugar industry. Sugar should therefore remain on the EAC sensitive list




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The Flower SectorFinalize the transfer and hand over of ownership of the Cold Storage facility at Entebbe from •CAA to Fresh handling. This will enable the industry lower costs, renovate and expand the facility for an effective cold chain management system to handle growing volumes.

Remove levy on aviation fuel, and other levies by CAA in order to reduce costs by at least USD •40 cents on airfreight costs or a compensation package for the industry to cover for loss of profits in order to make the industry more competitive in the region

Put in place an accreditation body in order to reduce the high costs of certification and ensure •phyto-sanitary standards

Ensure sufficient Infrastructure Support - i.e. avail un-encumbered land on leasehold as well as •other utilities such as, good roads

The Apicultural SectorQuickly fast track the enactment of the National Apicultural Policy to guide the development of •the sector as a viable and sustainable income source for the poor

Commercialize bee farming to increase volumes required by International Markets•

Support the Private Sector to establish a data base for improved information flow to all stakeholders •in the sector.

Provide for Subsidies on bee hives given that bee keeping is mainly practiced by small holder •farmers

The Cotton Sector Expeditious implementation of the National Textile Policy of November, 2008, for incentives to •be accessed by the targeted investors and improve production.

Continued duty remission of 0% for textile raw materials •

Establish a Cotton Development Fund, managed by a trust and funded by Cotton levies; provide •financial support to mini ginneries to empower farmers to sell lint cotton

Establish and implement a technology fund to facilitate investment in vertical integration;•

Prioritize mechanization and provide subsidies to Cotton Farmers so as to enhance large scale •production

The Fish SectorEncouraging fish farming as a means of supplementing the deteriorating fish stocks in the natural •water bodies

Strengthen the maritime Policy by providing more equipment to strengthen the policing role to •avoid illegal fishing that has more than caused depletion of the fish stock since the 90’s to date

Improve infrastructure such as roads in addition to water transport for quick truck movements. •Key roads include but not limited to Kasensero road – Rakai, Bukakata road – Masaka, Katosi road, Kiyindi road, Senyi, among others

Undertake pragmatic stocking of viable water bodies; such as Valley Dams, small lakes and •extensive open swamps for Fish to breed and grow –Aquaculture promotion



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Support the sector through the UFPEA’s Task Force to train and sensitize fishing communities to •adopt hygiene in handling practices to meet international standards/EU

Fund the Quality Assurance Unit of MAAIF in Charge of the Value Chain of Fish in order to •improve on Uganda’s Fish Exports

Remove the import duty on fish nets to make them cheaper.•

The Leather, Hides and Skin SectorEstablish controls at • abattoirs to monitor the movement of raw hides and skins stocks, so that these hides and skins can go direct to the many tanneries now available.

Ask all EAC states to mutually implement the same export levy on the exports of raw hides and •skins so as to deter smuggling and disguised transit shipment from states where the duty isn’t in place (Rwanda and Burundi) to Mombasa for export.

Invest more in Value Addition for high returns on finished and semi-finished products, i.e. for •every $ 1 worth of raw hides exported there is a $ 3 worth when processed to finished leather and $ 12 worth when processed to finished product

Waive the VAT on raw materials like chemicals because it takes long to process yet this money •can be used as capital to buy more hides and skins

The Beef SectorConstruct a standard export abattoir to promote export of beef and beef related products•

Invest in more water dams for the animals, and in animal diseases•

Avail long-term credit facility to support investment in ranching for increased beef production to •ensure adequate capacity for the growing market demand for Uganda’s Beef

The Diary SectorRemove the 120% duty charged on poly-layered plastics for the packaging of all the dairy •products.

Zero-rate VAT imposed on milk cream products•

Reduce the Import duty on processed milk powder from 60% to 25% to curb smuggling•

The Rice SectorThe CET of 75% needs to be maintained in Uganda and in the region. Should Kenya, which is •now the largest importer and supplier in the region continue to stay application then it may be prudent for Uganda to charge rice from Kenya at 75% which corresponds to the EAC CET rate.Support Irrigation infrastructure to ensure availability of water during the cropping season;•Improve Land consolidation, design and management to ensure sustainable rice production for •the present and future needs;Support Research on improved rice varieties, seed multiplication and development of sustainable •farm technologies. This may be done on a PPP basis;Support Dissemination of quality seed and technologies;•Empower the Private Sector on mechanisation for production and processing to ensure timely •farm activities and quality; Support Market sourcing and stability , partly through the EAC -CET to ensure that the high ROI •in rice production are maintained; and




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Model PPP’s to expand on rice cultivation and processing in Eastern Uganda and spread to •Northern Uganda which is rapidly taking up this production process with the peace ushered in the region.

THE MANUFACTURING SECTOR

Foods and beveragesReduce the excise duty on soft drinks from 13% to 10% in 2012 and a further gradual reduction to 0% in •the next three years.

Harmonize the Excise duty of Water, Soda and Juices as in the EAC region•

The EAC meaning of local content for industrial in-puts/raw materials should apply to raw •materials grown only within a Partner State.

Introduce tax stamps for spirits & wines to fight tax evasion. •

Maintain a no change to the current ad valorem rates of excise on beer, i.e. 60% for malt beer (beer •made from predominantly imported barley malt), 40% for beer from locally grown and malted barley, and 20% for non-malt beer (beer made from 75% local raw materials). Establish the same tax structure for spirits i.e exercise duty for spirits manufactured from raw material attracts 6o% Excise Duty while those produced from local content is charged 20% Excise Duty.

Establish incentives to encourage alcohol companies to undertake noble but expensive agro-•processing investments in rural areas.

The Plastics and packaging SectorLift the ban and instead effectively and efficiently implement the waste management & disposal •policy in Uganda.

Ensure that all polythene / carrier bags manufacturers & importers have a recycling plant to •recycle any related waste material that’s generated in their vicinity

A countervailing tax should be imposed on imported goods to avail a well levelled playfield•

Value Added Tax on packaging materials should be Zero rated.•

The Pharmaceuticals SectorProvide Tax exemption on industrial parts &machinery to all manufacturers & industrialists in •this sector.

Create a level playing field by reintroducing a 10% duty on imported finished pharmaceutical •products which are produced locally so as to reduce the unfair competition into the region. .

Consider and invoke countervailing measures which product Ugandan Producers from heavily •subsidised exporters of medicine from China and India to ensure a level play field for Ugandan Producers

Heavily Subsidise the Pharmaceutical dealers as compared to their counterparts in India and •China to ensure Uganda competes favourably in this sector

Heavily Invest in Energy to ensure constant flow to enable production continuity •



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THE TOURISM SECTOR

Support the skills development of the sector by enhancing the capacity of the tourism institute in •Jinja and also support Private Sector institutions in carrying out this function

Develop a branding and marketing drive for Uganda’s Image with a view of improving the tourism •sector. This can be done on a PPP basis.

Encourage domestic tourism as a first step to promoting tourism in the country•

Increase funds to UTB and tag it to the activities which will effectively develop, adapt and promote •Ugandan Tourism

Upgrade roads supporting the tourism industry expeditiously, more attention ought to be on the •key Tourism roads in the circuit1

Under a PPP approach, Government should consider buying shares in Air Uganda and gets the •airline fly the National flag

Support UWA to create a buffer between wild animals and local farmers in the short run and •also help farmers bordering parks to develop tourism products so that they can diversify their economic activities to tourism related activities

Fully implement the Tourism Act with priority focus on improving competitiveness of the sector, •also fast track the implementation of the Tourism Sector Policy to guide its operations and fully realize its potential.Create a fund / facility for tour operators to borrow at low interest rates to purchase Tourism •vehicles (modified) so as to compete favourably within the EAC region

THE SERVICES SECTORThe Insurance Sector

Provide Incentives (including tax rebates, catastrophic reinsurance pools, premium subsidies, etc) •to enable development of micro and Agriculture insurance products

Enforcement of importation of goods into Uganda on C&F basis- Insurance should therefore be •taken locally, and the Marine Insurance Certificate should be made one of the required documents necessary for URA to clear all imports from outside EAC region

Exempt Insurance and auxiliary services from VAT and Withholding Tax•

Expedite the enactment of regulations to operationalize the Workers Compensation Act and review •the Motor Third Party Legislation to bring it in line with regional and international standards

The Ministry of Local Government should prevail over Local Governments to recognize the •annual license issued under the Insurance Act {Trade Licensing Act (Cap. 101)}

Ensure that the format of Insurance bonds (as a conditional bond) is accommodated for Government •contracts to avoid stifling business in the economy

The Real Estates SectorReview Land legislations to speed up land transactions and finish computerizing the Land registry. •Also streamline the land policies, develop zoning, building code legislation

1 Details of these in Text above




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Establish the overall Real Estate legislation that will address the key players which include; Real •Estate agents/managers, real estate developers and mortgage institutions

Develop a regional real estates training centre which would attract brokerage and valuer •associations from surrounding countries such as Kenya and Rwanda

Expedite the passage of the mortgage law and viability of the credit reference bureau to ensure •availability of descent housing to a wider segment of the Ugandan Population

Encourage the National Social Security Fund (NSSF) to invest more heavily in the housing Sector •and take steps to increase the efficiency of the NSSF and protect Ugandans’ retirement packages

Develop mechanisms that will encourage more commercial banks and other formal financial •sector institutions to begin mortgage lending which would increase competition in the real estates sector at the same time may reduce interest rates



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1.0 BACKGROUND / INTRODUCTION

1.1 Rationale for 2012 Platform for ActionEach year, PSFU through consultations with the Private Sector develops and produces an annual Platform for Action as a key Policy Document, which is an analysis of Private Sector growth challenges and hence proposals for Policy Reform. The issues and facts raised in this policy document are largely drawn from PSFU members through a wide consultative process2. They are then analyzed and categorized into short-term and medium/long term issues to ease the advocacy process. It is from this that major issues are identified for advocacy in various fora such as the Pre-Budget Consultations, PSFU Sector-based Meetings, Presidential Investors Round Table, Parliamentary Committee Meetings, regional integration negotiations i.e. EAC, COMESA, EPA, among others, Budget discussions with Ministries, Departments and Agencies of Government, and Development Partners. The rationale behind the development of an annual ‘Platform for Action’ policy document is to among others; highlight emerging binding constraints to private sector growth in Uganda for purposes of further dialogue with the major policy-making institutions, propose short to medium term interventions to mitigate the above challenges and, provide an update on the progress of the PSFU advocacy agenda and particularly, the status of impending issues from previous advocacy efforts.

This year’s document also focuses on identifying possible remedies to mitigate the impact of the witnessed unstable macroeconomic environment in key economic parameters (i.e. Inflation, Exchange Rate, Interest rates, high and rising costs of energy/fuel, e.t.c) due to trickle-down effects of the 2009 global economic crisis on the Private Sector in Uganda while following up on the advocacy agenda3. This Platform for Action is mainly into two key sections; i.e. the cross cutting growth constraints (i.e. the traditional challenges to competitiveness in the Private Sector including: Infrastructure (energy, transport, ICT support systems) and storage facilities for agriculture); Skills development; Access to low cost credit; Regulatory framework; Tax policy; Regional integration related issues; Poor implementation of Government programs, plus the Sector Specific concerns in the Manufacturing Sector, Services Industry, Tourism, among others.

1.2 The State of business today:Uganda has enjoyed a stable macroeconomic environment for the last 2 decades, with inflation in single digits, progressively decreasing interest rates from as high as 45% to an average of 16-18% and a relatively stable exchange rate. All these created the required predictable environment to spur growth to an average of 6-7 % per annum and attract investment both local and Foreign (FDI’s). Noticeable however is that in the last one year and more specifically the last 6 months (September 2011 to-date), these fundamentals of the business environment have continued to change negatively and characterised with heightened uncertainty of Marco economic parameters resulting from both domestic and external shocks. For instance, Inflation accelerated from 5 % in January 2011 to 21.4% in August, 28.3% in September, and peaked at 30.5% in October 2011 and mildly eased to 29%, 27% and 25.7% in November, December 2011 and January 2012 respectively. The Ugandan shilling has also been depreciating all through to a low of close to Ugx 2,900 per USD in September 2011 and a quick appreciation is seen to the highs of Ugx 2,550 per USD in late November and eased further to 2,495 per USD December 2011, 2,321 per USD in January 2012. Fuel pump prices of Petrol and diesel also closed in to 3.900/= and 3,600/= respectively, despite the appreciation of the shilling. In the same period, there was also a growing sense of un-predictability in Uganda’s Economy coupled with serious power shortages and outages following limited supplies hence rationing. More so, Government through ERA increased electricity rates for medium and large industries by 38 % & 69% respectively (i.e. from Shs. 333.2 to 458.9 and Shs. 184.8 to 312.8)4.

2 For a more concrete analysis, other facts and figures from, the UBOS Statistical Abstract for 2011; Sector BFP’s and Performance Reports for FY2010/11 and the current FY; PIRT Working Group Reports; Global Competitiveness Reports for 2010-11 and Bank of Uganda Statistics and Economic Reports for 2010-11 have been used3 The aim of the advocacy agenda is to reduce the high cost of doing business in Uganda so as to ensure that the business environment is favourable and, more competitive and attractive for investment.4 These new Power Tariffs were effected by January, 15 2012, Uganda Manufacturers Association Press Release




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This has led to enormous losses and the latest increase in tariff will increase the losses to the business community using power in all sectors and by all sizes. It should also be noted that the Private Sector has witnessed increasing costs of doing business which has seen Uganda continue to slide back in terms of competitiveness as a business location5.

The Private Sector believes that policies which will help stimulate production and increase production is a win –win situation for all the stakeholders in the economy. It will certainly increase productivity and also increase Government revenue and as indicated earlier it is a more sustainable way of supporting a favourable Macro Economic framework. Let us make that bold move and allocate more resources to productive sector and also have policies that will support increased production.

5 The Doing Business Report, World Bank, 2011



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2.0 GOVERNMENT’S COMMITMENT

The contribution of the Private Sector in Uganda has been remarkable, but this can be better if conditions for Private Sector operation are improved. Efforts should be made to ensure that the Private Sector is more competitive in the local, regional and international markets particularly with the advent of regional integration. The challenge for the private Sector and indeed Government is no longer how to find or open up markets, but rather how to prepare the Private Sector to compete effectively in these markets, including our own market here in Uganda. I.e. the cost of production and placement of goods and services on the market should be competitive. Government institutions appreciating the role of the Private Sector hence supporting investments in place include; URA, UNBS, UEPB, NAADS, UMEME, NWSC, UTB, among others. The Government today acknowledges the need to enhance Competitiveness of the private sector as well as empowering Ugandans to be able to improve their incomes and the quality of life. Therefore, through PPP dialogue process the private sector in Uganda has been able to influence some of the key Government policy processes such as, the national budget process. However, implementation of agreed priorities is still a major challenge stemming from capacity issues and procurement delays. Nonetheless, the need for Uganda to ensure a better and enabling business environment cannot be over-emphasized especially in light of the regional and global developments that continue to render the economy less competitive on the World Market. Therefore, the issues highlighted in the subsequent sections should be given due consideration in the planning of resources by the Government if indeed Uganda’s business and investment climates are to remain competitive. Some of the key recommendations in this year’s policy document focus on the following areas, infrastructure development and particularly, transport; improving the business/regulatory/investment climate; increasing access to affordable business finance especially for agribusinesses; refocusing the national growth strategy on export of niche products; widening the tax base to reduce the burden on compliant tax payers; organization of the MSME sector to ensure that they actively participate in national development processes and; prudent management of public resources to ensure that planned actions are implemented6. An illustration of Government’s response rate to Private Sector proposals (2006/7-2011/12) as herewith below;

Source: PSFU Policy Advocacy Unit November, 2011

6 The lack of Government action/delayed decision making to create a favorable business environment by addressing obstacles to competitiveness and growth is in itself a big challenge




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3.0 THE PRIVATE SECTOR IN UGANDA

3.1 State of the Uganda’s Economy and impact on the Private SectorOver the last 13 months, the Ugandan economy has been experiencing a high level of macroeconomic instability, which is having a high toll on economic activity and growth. Prior to this, the country had enjoyed a long period of relative stability and growth. This growth was estimated at over 6% per annum for most of the preceding years. In comparison to other countries in the region, Uganda displayed an impressive growth in year 2009-10 compared to its counterparts as shown in the Figure below. However, as a result of increasing economic instability in world commodity prices and an economic crisis in the OECD region, the economy has begun to experience serious price instability that has had a huge impact on economic activity, especially on the part of the Business Community in the Private Sector.

Uganda’s economic growth in comparison with other countries 2009/10

Source: IMF estimates, World Economic Outlook (2010), Uganda Trend Outlook Report, 2011Double Digit Inflation:

Prices have risen rapidly since January 2011and headline inflation hit the highs of 30.5% in October 2011. The consumer price index (CPI) rose from 5 per cent in January 2011 to 21.4% in August and 29 % in November 2011.This is the highest inflation recorded since January 1993 when inflation was at 34.2%. Food price inflation increased to 50.4 per cent in September 2011 compared to 42% in August while Non-food inflation, which accounts for 72.8 per cent of the consumer basket, rose to 18.1 per cent in September 2011 from 11.8% in August. The current high food prices are not unique to Uganda or the region but are a global phenomenon. Inflation though still very high, it was seen to slightly decline from 29% to 27.5 and recorded at 25.7% in January 2012. Fuel pump prices of Petrol and diesel also were closing in to 3.900/= and 3,600/= respectively, despite the appreciation of the shilling. It should however be noted that these are still high though reducing to Ugx 3,450/=. There is also a growing sense of un-predictability in Uganda’s Economy coupled with serious power shortages and outages following limited supplies hence rationing. More so Government through ERA has increased electricity rates for medium and large industries by 38 % & 69% respectively. This has led to enormous losses and the latest increase



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in tariff will increase the losses to the business community using power in all sectors and by all sizes. For a clear analysis of the above see illustration below;

Source; Uganda Bureau of Statistics, Consumer Index ReportsExchange rates:

The exchange rate of the Uganda shilling against the dollar depreciated by 71% from September 2009 to September 2011 while in the last 12 months it has depreciated by 25%. The prices of traded goods, which are mainly imported, have increased by 33% compared to non-traded goods at 8%. According to Bank of Uganda there are two main reasons for the exchange rate depreciation. First, Uganda’s balance of payments has deteriorated markedly, largely because of problems in the global economy. Exports as a percentage of GDP declined from 15.3 per cent in 2009/10 to 14 per cent in 2010/11. Aid inflows as a percentage of GDP declined from 4.3 per cent to 3.5 per cent in the same period. In addition, workers’ remittances and foreign direct Investment have been subdued largely because the major source of these is Europe and North America which have been experiencing severe economic contraction since 2007. An Illustration of a depreciating Shilling in Uganda against the US Dollar below;-between December 2010 and January 2012.

Source; Bank of Uganda Statistics




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It should however be noted that a depreciating shilling is good for exports. However, where the export base is very narrow, the depreciation becomes a redundant opportunity. For instance Tourism is at the moment in high season but has not been promoted to the extent that Uganda can take advantage of and defend the shilling. So is coffee where the quantities available cannot meet the demand at the auction at Mombasa. Food prices have gone up and the argument has been that farmers must take advantage. This will remain farfetched as long as the farmers have not been supported through agronomic practices, post harvest handling, standards and quality assurance, storage as well as market assurance7, as long as sufficient volumes can be mobilized, only then can farmers help defend the local currency.

High Interest Rates:Commercial Banks raised interest rates from an average of 16-18% to between 28% - 35% on both new and old loans following Bank of Uganda’s tight Monetary Stance in a bid to control inflation. In the process of stabilizing the macroeconomic fundamentals various monetary tools were used on the economy to control inflation and manage exchange rate. One of them is the Central Bank Rate: A peak of 23% in the last months of 2011 from 20% in Oct and 16% in Sept, this raised the cost of finance further to close to 35% per annum. This has negatively affected the business community who can no longer easily access credit for their businesses but more importantly increased drastically their costs of doing business.

3.2 State of the Private Sector in Uganda to dateThe Private Sector is largely dominated by Micro Small and medium Scale Enterprises of which about 1,100,000 are enterprises employing approximately 2.5 million people, 90% of non-farm Private Sector workers. The sector contributes about 75% of the country’s Gross Domestic Product. 45% of these businesses are located in the Central region, 21% and the rest are distributed across the other regions as follows; Western, 14%, Eastern, 13% and Northern 7%. Key activities include Agriculture, Trade, Construction, Manufacturing, services such as hospitality and entertainment industry, finance, health, education, professional Services and Information Communication Technology related business. There is equal distribution of ownership of these businesses among men and women, i.e. 47.4% and 52.6% respectively, with more females engaged in micro enterprises. Of these, 435 are Sole proprietors and 33% private limited liability companies. Others include partnerships (18%), associations (2%) plus cooperatives at 4%.

MSME’s are mainly informal and young enterprises, the majority of which are within the age bracket of 1-5 years, suggesting a high mortality rate. Generally, less than 10% of Uganda enterprises have operated for more than 20 years. Even at the top end of the spectrum, only a handful of indigenous enterprises have been able to survive the demise of their founders. The Partnership PSFU has with the Public Sector is aimed at creating sustainable conditions for these enterprises to establish, grow and remain in business.

3.2.1 GDP Contribution/Sectoral Performance of the EconomyNational GDP growth stood at 6.3% in 2010/11 up from 5.5% the previous year. This is comparable well to Kenya’s 5.7% Tanzania’s 6.4%, Rwanda’s 6.5% and South Africa’s 3.5%. The composition of GDP growth reveals to the greatest extent the contribution of Private Sector to the Economy as follows; Agriculture/Forestry/Fishing, 0.9%, Industry 7.5%, services 8.0%. More specific sectors with very high growth include; Post & Telecommunication-21.2%, Transport & Communications, 13.9%, construction, 7.7%, electricity supply 13.1%, mining and quarry 15.8%, financial services 10.3%.

In terms of the contribution of the individual sectors to the GDP, The share of industry and the services sector has continued to dominate the other sectors especially agriculture. The agriculture, forestry and fishing sectors have annually shown a declining share of the national GDP at 2002 constant prices from 20.2% in 2004-05 to 14.6% in 2009-10 as shown in the figure below as compared to the industry and services sectors that have had an upward trend.

7 Government can provide assured markets for products such as poultry, dairy, maize etc in schools and universities



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Sectoral contributions to GDP from 2004/05 2009-10

Source: Uganda Bureau of Statistics, 2010a and MoFPED (2010)

A closer look at the sectoral GDP growth performance through the table below shows marginal but declining growth rates for the agriculture, forestry and fisheries sectors. The growth rate for the agriculture forestry and fisheries sectors peaked in 2008-09 with a growth of 2.5%. A declining growth trend is also observed for the services and industry sectors.

Real GDP growth rates by sector

Real GDPgrowth rates

2005-06 2006/07 2007-08 2008-09 2009-10

Agriculture, forestry and

fishing

0.5 0.1 1.3 2.5 2.1

Industry 14.7 9.6 8.8 5.8 8.9

Services 12.2 8 9.7 8.8 5.8

GDP at market prices

10.8 8.4 8.7 7.2 5.8

Source: UBOS and MoFPED 2010

3.2.2 Employment and job creation Private Sector being the largest employer, continues to be the sector to improve the quality of employment in Uganda’s labour force, which stood at 13.4% in 2010, an increase of 23% from 2006 which was 10.6M. Government directly employs a labour force of approximately 300,000, this means that the majority of labour force engaged in economic activity and making an economic earning is in the Private Sector. Employment by sector revealed that 66% were in the primary Sector (Agriculture, Fisheries, Forestry etc), 28% in Services, while 6% were involved in Manufacturing. 76% of Uganda’s labour force is self




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employed while 24%are employed by others. The figure below illustrates the Investment and employment by sector.

Investment and employment by sector (1991 – July 2010)

Source: Uganda Investment Authority (2010)

3.2.3 Exports and the depreciation of exchange rateExport growth is essential for the development of our economy. Increase in foreign exchange guarantees the ability to import in a manner that maintains macro-economic stability. While Uganda’s export receipts have been growing ($2.7 billion), the import requirements have grown even faster ($4.5 billion) resulting into a severe trade deficit. This must be closed by attracting more FDI’s, export growth and diversification, increased remittances from Ugandans abroad as well as tourism receipts. These areas must continue to be supported in order to ease the exchange rate and ultimately other Private Sector challenges such as Fuel and Inflation. The answer to the current Private Sector economic challenges is to focus on increased production and value addition for export.

3.2.4 Cost of service deliveryThe cost of service delivery in Uganda is still too high (between 0.5-0.8 USD); this must change if there must be value for money interventions and programmes to help position the Private Sector to lead the Economy into growth. The private sector itself can play a significant role in service delivery.

3.2.5 Provision of services by the Private Sector The Private Sector complements Government efforts in providing services in sectors such as Education, Health, Transport and Housing, among others. The Private Sector has organized itself in such associations as; the Uganda Private Hospital Owners, Hotel Owners, Real Estates, cooperative Transport Union, Freight forwarders, literacy and adult basic education, private vocational institutions, among others. This has resulted into deliberate Government Policy to encourage the Private Sector invest in these strategic sectors.



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3.3 The cost of doing business in UgandaDespite its incredible performance in ensuring a stable macroeconomic environment, Uganda is still ranked to have the highest investment and business operational costs within the EAC region, especially Kenya and developed countries such as Mauritius and South Africa. Selected indicators for analysis as affecting business start-ups and general operations were selected including; dealing with construction permits, getting electricity, credit, protecting investors, paying taxes, trading across borders, enforcing contracts, among others. An analysis of these indicators reveals that, Uganda’s soaring business costs are further exacerbated by; many procedures and time taken to register and start a business, difficulty in getting and retaining a sustainable electricity and energy level, enforcing contracts, among others. These plus other indicators render local businesses less competitive in the region and in the global market. The need for an enabling business environment to boost investment growth cannot therefore be over-emphasized especially in light of the growing competition for potential investments in the region. The Government of Uganda must hence force give priority consideration to the competitiveness and growth barriers in its distribution of development resources if indeed Uganda is to remain a Private Sector led economy. From the table below, it should be noted that;

Table: Uganda’s Comparative Performance on the Doing Business Ranking, 2011/2012

Indicator Uganda Kenya Rwanda Tanzania Mauritius S.Africa

Overall Index 123 109 45 127 169 23 35Starting a Business

143 132 8 123 108 15 44

Dealing with Construction permits

109 37 84 176 159 53 31

Getting Electricity

129 115 150 78 151 44 124

Registering property

127 133 61 158 109 67 76

Getting Credit 48 8 8 98 166 78 1Protecting Investors

133 29 29 97 46 13 10

Paying Taxes 93 19 19 129 125 11 44

Trading Across Borders

158 155 155 92 174 21 144

Enforcing Contracts

116 39 39 36 172 61 81

Resolving Insolvency

63 165 165 122 183 79 77

Source: data extracted from the Doing Business Reports, WB 2012




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Uganda retained its third position in the region after Rwanda and Kenya. Uganda tops other countries •with respect to resolving insolvency. Uganda performed well in Registering property ( moving + 28 points)•However, Uganda is at the bottom of the pack with respect to starting a business and protecting •investors. This therefore calls for more work on 7 indicators that are in triple digits to improve its rankings.•

The following indicators will need further improvements to improve Uganda’s overall ranking. These are; trading across Borders, Starting a Business, Protecting Investors, Getting Electricity and Registering Property;

Efforts to expedite Company Bill, Insolvency Act, Investment Code and Free zones Bill•Ongoing comprehensive Business Licensing Reform work•Business Registration reforms•Reforms done by URA and other Border agencies•

3.4 Uganda’s competitiveness position in the EAC and global marketThe East African Economies are still ranking low and performing poorly globally. In this case, competitiveness is measured using the following basic indicators; institutional performance, infrastructure, macroeconomic stability, health and primary education, technology readiness, market size, financial and market developments, among others. These indicators are subdivided into three i.e; Basic requirements, Efficiency enhancers plus Innovation driven8. Out of the 183 countries assessed in 2011, the positioning of the EAC countries were as follows; Uganda ranked 123, Kenya - 109, Tanzania – 127, Rwanda – 45 and Burundi – 169. These GCR rankings have taken into account the state of the economies under review to allow for better scrutiny that is, the EAC member states have been categorized as factor-driven economies.

Source: Global Competitiveness Report 2011/12; http://gcr.weforum.org/gcr2011/World

Whereas the economy has fairly maintained a stable macroeconomic performance, very little has been 8 Please see Annex 1 at the back of this document for details of ranked indicators



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done to ensure that it combines its factor endowments, economic efficiency and comparative advantage to achieve high levels of competitiveness. Uganda’s poor rankings are reflected in poor performing institutions, wasteful spending by Government and the poor quality of education and health. Mauritius and South Africa have invested substantially in infrastructure and ensured well-functioning institutions, which factors have boosted investments in the respective economies as shown in the figure above. To compete favorably on the global market therefore, the Ugandan economy must combine its robust macroeconomic environment with economic and institutional efficiency.




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4.0 CROSSCUTTING ISSUES

The Cross Cutting issues reported included the traditional issues which impede competitiveness like Infrastructure- Energy, Roads, Railways, ICT fibre backbone, Storage facilities ; Research; Credits facilities, Regulatory environment , Tax Policy etc. These seem traditional. However the consultation revealed two major cross cutting issues which need urgent attention. These include Credit challenges and Energy which have been prioritised. Uganda’s Private Sector is largely constituted by nearly 90% MSME’s with significant challenges such as financing, cost of power, procurement procedures, constrained technology acquisition and use, inadequate skills, limited access to Markets as well as rigidities in paying taxes and registering business. Such challenges if addressed could significantly increase Private Sector contribution to National Economic development. While some of the business obstacles may originate from the international world (Euro zone & imported inflation due to high prices), some are regional (e.g. Non-Tariff barriers, standards plus language barrier), most of them remain are local. This is true in such areas as Infrastructure, skills development, credit facilities, regulatory environment, tax policy, rural development, SME development, regional Integration and sectoral development including Tourism, Agriculture, Services and Industry, Fuel, energy, food security, procurement procedures, tourism development and export diversification. For these, enabling policies are expected to be originated and managed from within and ought to be in the full control of Government. It may therefore be important for policies for which Government has control to have effects which will help mitigate the challenges arising from outside the country and not in control of Government.

4.1 Infrastructure

4.1.1 Energy infrastructure During the year 2011, Business experienced worsening power shortage and paying dearly in alternative energy- one company reported- 6M UGX per day for use of generators which were purchased when government provided the incentive of tax free diesel for generators of100kv and above9.The demand at 515 MW against only 340MW available and reduced further to 300MW after the switch off by IPP’s has complicated the situation. The hope of Bujagali which is finally here is not however clear regarding the amount of power on the grid; it is supposed to be 250 MW, to be delivered in 50 MW portions till April 201210. Industries are currently shifting as a result of the load shedding but this still is not helping expansion of investment, industrial output and therefore employment. November 2011 witnessed the height of power outages to the Private Sector and this has continued through January 2012 as full production regains after the recess of the festive and holiday season. To support the resultant increased costs of generation, subsidy increased from 420Bilion in 2006 cumulating to about 1.3 Trillion in 2011 with thermal costs contributing 670Billion. Obviously there has been a strain on Government. The increase in energy costs is on account of depreciation of shilling from 1874/USD in Nov.2009 and yet more than 80% costs are Forex denominated. Government has indicated that it cannot sustain this subsidy and has withdrawn support resulting into increase of up-to 69% & 38% in energy tariffs for larger and medium industries respectively. Resultant from the energy challenges some companies reported overall cost of production increasing by about 14% of turnover while at the same time also noticing a reduction in production. The taxes paid especially the internal taxes of excise duty and VAT reduced up-to a high of 40%. As much as the larger and medium industries have experienced such drastic hikes, the mega large producers are facing more challenges. The mega producers include Cement and Steel sectors.

Cost Vs Earnings: Government argues that the cost of subsidy over the years could have supported building another dam which would be a more sustainable energy solution. Government is however ignoring the benefits resulting from the cost of support in form of taxes which could have been lost resulting from increased costs and un-competitiveness this would have rendered to businesses. This cumulatively is more than what has been the short measures put to support business. Employment and backward linkage to the productive

9 Quality Chemical Industries Limited reported the Ugx 6Million shillings a day for alternate source of power10 Government commissioned the 1st 50 MW of the 250 MW from the Bujagali project



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sectors like agricultural sector should not be ignored. It is therefore important for Government not to only consider the costs of support but also the gains of support so that the cost benefit analysis is examined before taking a decision. It is certainly not fair for Government to make decisions based on costs alone.

VAT on Energy.

Method of calculation: Concern is also expressed on the tax method of VAT for which Government may actually be getting much more than they are supposed to, given that final VAT is charged on electrify without input VAT calculation from generation through to distribution processes.

The Charge of 18% VAT: Given the importance of this service, it may be important to waive part of the VAT. In Kenya for example the VAT is at 12%. It is always good practice not charge at all or if there is a charge the VAT should be minimal for vital services which support the economy. Electricity in the current circumstance fits such services. Over a period of time, Uganda’s power tariff has been highest in the entire East African Community region. An illustration is as follows;

Uganda’s Tariff Vs. other EAC Member States (Cost of Energy in US$/KWH)

Customer Category Uganda Kenya Rwanda Tanzania

Domestic 0.212 0.22 0.186 0.205

Commercial 0.198 0.214 0.186 0.165

Medium Industry 0.186 0.187 0.174 0.099

Large Industry 0.127 0.181 0.174 0.088

Street Lighting 0.198 0.208 0.186 0.136

Source: Electricity regulatory Authority, 2011, Kenya Association of Manufacturers

The key challenges facing the sector currently include; Exchange rate depreciation: Since November 2009, the shilling has depreciated by over 600/US$ FROM Shs.1874U/S$. The current sector revenue requirement is estimated at US$400 million of which 80% is foreign currency based. As result of this depreciation, the sector revenue requirement has increased by about Shs.192 billion over the past 18 months.

Increasing fuel prices: International oil prices have increased to reach the highs of US$ 120/barrel against the earlier forecast of US$ 60-70/barrel at the beginning of 2010; this increment has had a significant impact on sector costs.

Fixed tariffs: Uganda’s electricity tariff has not been adjusted upwards to absorb the effects of the exchange rate depreciation and high fuel costs, which is contrary to our neighbors Kenya where there is an automatic adjustment of the tariff for inflation, exchange rate and fuel prices. This makes our tariffs much lower than those of Kenya and the extra burden of financing has been pushed to government in form of increased subsidies.




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Government Subsidies/ incentives: Due to unchanged tariffs amidst a depreciating shilling and increasing fuel prices, the impact on government subsidies has reached unsustainable levels, as illustrated below;

Table of Subsidies (in UShs. billion)11.

2006 2007 2008 2009 2010 2011 (est.)107 78 169 229 351 600

All in all therefore, the un-announced & uncoordinated load-shedding of the 33KV line used purely by heavy power users which is very expensive & unreliable as well as other power lines, plus very high power tariffs with a recent power tariff increment of up to 70%, there is great need for Government’s intervention for the Private Sector especially the manufacturing sector to continue thriving12. In addition to the already existing Government incentives for renewable energy generation development such as the cost share support grant through the PSFU BUDS-ERT scheme for pre-investment costs, especially feasibility studies, for Uganda to be competitive and boost energy supply therefore, the following recommendations should be considered urgently;

The principal of drastic hikes of costs to business environment should be avoided. The hikes in •energy costs will be extremely difficult for business to mitigate. Reduce VAT from 18% to 5% for Business in general. Further reduce VAT for rural areas to •0%. These measures will stimulate production, increase the GDP and more importantly will contribute to the tax revenue recovery from Industrial sector which has of recent been reducingVAT calculation should include input and output VAT across the value chain from generation to •UMEME. Encourage use of alternative energy source like solar power and biogas by removing taxes on •the importation of energy equipment powered by this alternate power source. (these imported appliances include but not limited to; Stoves, pressure gauges, gas valves and lamps)Government should encourage & make laws that mandate solar power usage in homes and •SMEs so as to reserve the hydro power for industriesCategorize industries and offer subsidised / duty free diesel for generator use so as to maintain •production & supply of goods and products on the market.VAT should be removed on energy for at least commercial users (medium, large) consumers. •Should there be a charge, then it should be not exceed 5%.Generation support is also required at level of industries. Tax WAIVER on diesel for generators •of from 40kv be reinstated. This is because at the time this policy was initiated in 2006; many manufacturers bought generators which acted like back up to the grid power. The situation now is that Grid power acts like backup for generators. Support therefore would be well placed.Incentive for generation be improved further and may even include equity support by •Government on a basis of PPP. This May include issuance of energy bonds.Given the uncertainly of costs, and period which major generation plants will start operating, •Uganda could consider importing electricity from Ethiopia. This is an important medium term option for consideration.

4.1.2 Transport InfrastructureUganda being a land lock country depends on Road / Rail transport from Mombasa, however still there isn’t a major change in the road / rail transport facilities for many years. One of the key constraints hampering Private Sector competitiveness at regional, sub regional and international level is poor and high transportation costs. Linkages between the markets and production centres are really lacking and

11 Source: ERA Sector Up dates Newsletter Dec, 2011. Issue 6 12 Uganda Manufacturers Association Reports, January 2012



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Uganda’s opportunities to tap into trade within the EAC and beyond are hampered as well. It should be noted that over 40% of the costs in business today are on account of poor transport services/facilities. Transport networks & infrastructure development & maintenance globally are the role & responsibility of the Government with the Private Sector coming in to complement. The major concerns raised by the Private Sector businesses regarding transport infrastructure include; The rail network from Mombasa, which is the most viable transit route (in-terms of cost) for goods to Kampala is unreliable and still very inefficient, absence of a cost effective alternative transit transport route in light of the numerous problems encountered along the Mombasa – Kampala route;- Rail transport could reduce the transport cots from the sea from 131USD/ Tonne to about 40USD / Tonne. The implementation of the major trunk/feeder roads linking the production sectors in Uganda to better markets is still very slow, Regional imbalances in transport sector services that render Uganda’s transporters less competitive in the EAC Common Market, increasing traffic of commercial and personal vehicles into the city centre following poor public transport, which has created congestion and reduced productivity on a whole. For un veiled potential and to ensure that our cost of production is considerably brought down and reasonable, that also goods & services are delivered timely and at competitive freight rates, the Government of Uganda should therefore quickly fix the following;

Government should take on the paving & tarmacking of roads as well as developing •dual carriage roadways in a phased approach i.e. a section of 50-100kms per financial yearRevamp the rail route from Dar es Salaam to Mwanza Port for purposes of providing •alternative means of transit for Uganda’s import/export cargo.Work on reducing the bureaucracies of PPDA to ensure they don’t fail the road & other •infrastructural developments in UgandaExpedite the procurement process for the water vessel replacing MV Kabalega to service the •identified transit route from Mwanza Port to Port Bell.Fast-track the implementation of reconstruction and rehabilitation of the major highways and •market access routes identified in FY 2008/09. Put major emphasis on key roads like the northern corridor and other key transit highways for •dual carriage and ensure regular maintenance.Expedite actions to decongest greater Kampala Metropolitan area to enhance productivity, •which is lost in the time spent in traffic jams.Focus more on heavy capital investments so as to improve the road, rail & water transport •facilities and have a clear & time bound action plan for the sector. Ensure Government’s contribution to the Energy and Road funds is sustained.•Expedite re-investment in water transport on Lake Victoria & the rivers as this is the cheapest •mode of transport globally followed by rail.Expedite Railway sector development to cover the 5 EAC states so as to fastly move raw •materials & finished goods within and out of the EAC.Improve airport infrastructure to align services to international standards. Focus ought to be on •run ways and airport facilities

4.2 Skills, Education and Health for enhanced National DevelopmentFor enhanced labour productivity, a human being ought to be healthy and well equipped with the relevant skills in totality. Labour productivity has been identified as one of the major challenges to Private Sector Competitiveness. This has been a cross cutting concern with all the sectors. There is a big mismatch in the current market demand and supply of adequately skilled labour partly due to low quality education offered and the limited capacity of the vocational and technical training institutions (poor Education systems which floods the market with humanity graduates as opposed to technical graduates). The productivity of labour also has a bearing on the level of state interventions in the health sector. The low level productivity is further exacerbated by the high unemployment levels, a poor work ethic/culture, gender relations, inadequate and poor state of economic infrastructure, plus lack of modern and inappropriate technologies. Other challenges such as brain drain like in the health sector are inevitable, the poor labour laws/motivation at work leading to multiple job holdings, inadequate skills, among others. To increase productivity and




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alleviate the current state of economy, there is need to institute measures to address the current mismatch between the trends in skills attainment or development and skills actually required.

4.2.1 Industrial training/internships:There is urgent need to change the approach to skills development with prioritizing the current labour force and those to support production in the very short term. Sectoral approach type of training supported by government and private sector needs to be carried out urgently. The private sector is willing to support this process. The Construction, Tourism, Agriculture, Oil, Distribution, Manufacturing are some of the priority Sectors which could initiate this approach. To reinforce the above, GoU should quickly develop a program to support internships, industrial attachments and apprenticeships. The education system in Uganda trains more theory as opposed to practicals, there’s therefore need to have industrial attachments and legalized monitoring and supervision of students especially in the Health sector. The Private Sector is formulating a body ‘Professional council for medical services’ which needs financial support from the Government13. This would further lead to improved skills and the professional ethics of the medical world in Uganda thus enhanced labour productivity. (There is need for career guidance at all levels for enhanced productivity in the future to match demand and labour supply in Uganda). The current education system should be assessed to ensure there’s more hands-on as opposed to theory, 75% should be made practical and at least 25% theory, learning from international best practices if Uganda is to compete favourably.

4.2.2 Tax incentives:The Gou should work on extending tax credits to the Private manufacturers currently incurring costs to train technical staff, which costs are part of production. It should be noted that some learners end up spoiling heavy expensive equipments while on the job, which goes back to the owners of the businesses. This increases the cost of production, hence need for Government intervention. The employers mentoring graduates and instilling good skills and work ethics, better attitude towards work, should be given incentives in order to continue with the same. Our productivity is expected to be enhanced if such measures are in place and the current rising costs of doing business, prices, would subside.

4.2.3 Financial Support to the Health and vocational sector: There is need for creation of special credit to the private dealers in health and vocational skills institutes. For instance, 65% of Uganda’s health is provided by the Private Sector, this calls for Government intervention to support Private initiatives following the current high interest rates, making it difficult for such sectors to borrow. It should be noted that heavy machinery for practical works are expensive, tax weavers should therefore be put in place and also have their VAT zero rated to enable the dealers file and claim. The health and skills sector should be able to access cheap credit at reasonable interest rates in good repayment time as compared to the agricultural credit guarantee support by the GoU.

4.2.4 National Health Insurance Scheme:Uganda needs a national Health Insurance Scheme for all her citizens. This if well implemented would promote the health of the citizens/workers, but also the investments of the Private Business practitioners. The proposed national health insurance is expected to impose an 8 % levy to pay role and this will increase the liability to employers to about 53%. (PAYE 30%, NSSF 15% and health 8%). Initial consultation with NSSF indicate that they are willing to provide cover for their members for who the majority of the

private sector belong, but on condition that there is the national identification program so that they can easily identify them since NSSF does not intend to invest in hospital management but outsource this. It is therefore recommended that Private Sector does not join the national health program and leave it for Government and non NSSF Members at the initial stage, then this position be reviewed after three years of implementation of the NHIS.

13 The Uganda �ealth Care Federation �U�CF�, Reports, 2011 The Uganda �ealth Care Federation �U�CF�, Reports, 2011



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4.3 The Extractive Industries; Mining, Oil and GasThis is perhaps one of the youngest sectors but with lots of potential to spur growth in the whole economy. I.e. Uganda’s Oil reserves are estimated at about 6bn barrels of Oil. The opportunities in this sector exist in; Petroleum bi-products; Plastics, Chemicals, specialized fabrication services, engineering, environmental and logistical services. Uganda has a large under exploited mineral deposits of Gold, Oil, high grade tin, tungsten/wolfram, salt, beryllium, cobalt, kaolin, iron-ore, glass sand, vermiculite, phosphates (fertilizer), there is also significant quantities of clay and gypsum. With the current high Fuel, Oil and Gas prices which has a direct effect on the cost of doing business, the Ugandan Government therefore ought to intervene in this sector as well. For instance, the Kenyan Government is directly involved in the Oil and gas sector trading helps shield the public & consumers from excessive exploitation due to the monopolistic tendencies of the Private Sector. This would ensure that the cost of production is reasonable. The challenges affecting the players are in the upstream, middle and downstream ends. The cross-challenge mentioned earlier of lack of cohesive government action perhaps is affecting this sector most. Inactions by government possibly resulting from the oversight role of Parliament is paralyzing activities in the sector. Investors at the upstream are at crossroads. The middle stream especially the service providers cannot progress with setting shop while the downstream are bogged down with non payments for supplies. Other issues of concern in the Oil sector include but not limited to:

4.3.1 Land access and acquisition:There are a number of land related issues which, if left unresolved, will not` only adversely affect impacted local communities, but also the timely development of the sector. Land is a critical resource which needs to be carefully managed to ensure communities and the oil sector can coexist. A robust legislative framework needs to be established which secures land for upstream oil development , a refinery and pipelines in an efficient manner but also minimizes land take and accounts for community needs. This will involve a wide variety of stakeholders and the Government has an important role to play in involving the respective parties in the resolution of land issues. While this is a complex subject matter, some of the immediate challenges also stem from a lack of understanding of rights and could be alleviated through informed communication with impacted communities. This would ensure communities are aware of their rights with regards to land and also provide for a more conducive operating environment for oil investors. There is also need to set up a railway in advance in order to facilitate easy and affordable transportation of oil and other mineral resources.

4.3.2 Training:The Oil Industry experts expect that up to 10,000 jobs will be created directly and indirectly related to the development of the oil sector14. The majority of the workforce requirement will be for trade and manual skilled labor. It is expected that the demand for workers to carry out these jobs will increase dramatically over the next two to five years, before demand peaks and then decreases to a lower stable level. As Uganda has a high share of un employed youth reaching over 30% in some areas, it is imperative that the new jobs created through oil extraction can be primarily occupied by Ugandans. Currently, the vocational training system is neither delivering the skills nor the quality needed for Ugandans to be employed, requiring a much greater effort to fulfil the skills requirement of the industry over the coming years. Although there are emerging institutions, such as the Uganda Petroleum Institute of Kigumba (UPIK), there is a need for a much broader industry education and training strategy that aligns with government aspirations while encompassing an international and standardized curriculum across both private and public institutions and ranging from Non-Vocational Qualifications to vocational, Graduate and Post –Graduate degrees.

4.3.3 Legislation/draft petroleum Bill:Ensuring the successful implementation of the new draft Petroleum Bill will lay an important foundation for the efficient development and operation of the oil sector. It will also set the framework for cooperation between the government and investors. We recognize that investors will have important role in supporting the Bill, but it is important that the BILL and supporting regulations are thoroughly understood.

14 Tullow Oil Reports, 2011 Tullow Oil Reports, 2011




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The scope and details of the Bill will have important implications for investment in the development of the sector and therefore it will be important that prior consultation with industry is undertaken. Further to this, clarity is required around how existing arrangements which fall under the current petroleum Exploration and Production Act will be protected under new legislation. Endless timelines for this bill and also the agreement with Tullow oil created lots of anxiety with investors in the whole sector. This was signed and introduced two major players in the upstream market these are TOTAL and CNOOC. Government should build on this progress made and ensure a predictable framework in the sector and prepare the country for absorption of this major resource. Government therefore should consider the following additional interventions to harness the potential in the sector;

Legal framework: Expedite Petroleum law that will be a foundation for a legal framework •which will create predictable investment environment, transparent and development oriented Oil sector. This will further be a basis for creating confidence in the oil sector by both Investors and people of Uganda.Land Availability: Government quickly address the issue of land especially for upstream •development of oil and mining activities. This is an urgent issue Government has to take on so as to make these natural resources accessible.Support the building of Capacity in-terms of manpower to support the industry. Training and •skilling of the locals should be a direct intervention which must be done now so as to prepare for the local content participation in the industry. Companies should be supported to be able to build capacity to partner with foreign expert companies especially in the businesses axillary to the oil industry. This is where there is greatest potential for employment rather than the direct oil related companies. The Private Sector and particulary PSFU could be supported to start these capacity building related initiatives.Support more dialogue among Government institution, population to appreciate the sector, •reduce tension and suspicion so that the country takes a clear path that will benefit the all the stakeholders in the sector.Invest heavily in Infrastructure development critical for the development of the subsector. This •should include, reconstruction of roads in the mining areas, railway , among others

4.4 The Finance and banking sectorAccess and the cost of finance in Uganda today has been and is still a key challenge to Private Sector investments and smooth business operations. Government through Bank of Uganda last year introduced monetary policy tools aimed at dampening erratic and disruptive fluctuation in exchange rates and reducing inflation through withdrawal of Money supply (M2). Some of the tools being used include sale and auction of Treasury Bills and Bonds; the CBR which was 23% In November from 20% in October and from 16% in September. Today the CBR has been locked at 21%. The exchange rate has responded and gained about 13.7% of the September value but remain 5% higher a year ago. However this may not be sustainable given that this is like borrowing money from off-source investors at about 21% interest and this money can be withdrawn as fast as it was brought in and increases the level of indebtness. The inflation monthly increase has reduced despite the fact that it is still high. The interest rates from Commercial Banks have been increasing from an average of 18% in June, 19% in July, 21% in September and November is between 28% and 35%. These are for both new and previous loans. The indebtedness while the cost of doing business is increasing. See table below for further illustration of Commercial Banks Interest Rates since June to November 2011

Trend of Interest Rates between June and November 2011

Month/2011 June July September November Interest Rate (%) 18% 19% 21% 28%-35%

Source: PSFU Data Base, November, 2011



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The financial market is extremely shallow and possibly the money in the financial systems is about 40%. This tool may actually be mis-targeted because the bulk of money may be out of reach for the CBR tool, The tools are expected to withdraw money and make it difficult to borrow. Initial information indicates that credit to the private sector has reduced and possibly because of the cots and caution banks may be taking. Uganda’s economy is heavily reliant on imported goods; with a large BOP deficit hence we may not easily protect ourselves from imported inflation. Attempts to fight imported inflation will, on their own appear to only lead to higher prices, without extinguishing the inflow of goods and services on which the economy is heavily dependent, the high cost of credit will increase the cost of production, forcing small firms that cannot pass on the cost to consumers to suffer losses (crowding out). Many SMEs have already reduced the scale of their operations as they take huge losses from the wildly fluctuating cost of inputs. The reduction of output no doubt is affecting the GDP growth. The 1st and 2nd QGDP released clearly this trend and this must be true with the 3rd QGDP . Such a situation will result in reduced Government revenues and inability to meet public service obligations by Government. It may be appreciated here that while it is the prerogative of BoU to make monetary policies/adjustments; those adjustments have circular externalities and may not be conceived in total disregard of other competing macroeconomic objectives or outcomes. Higher interest rates mean a higher cost of production and loss of competitiveness of local industry. There is a need for further consultation and certainly caution.

As mentioned in the above on credit the banks are now beginning to be affected. Already banks are starting to notice payment difficulties from their customers. Despite the strong end of year banking sector report for which Government revenues benefited immensely from Corporate tax, the new year may be showing a rather difficult business environment for banks.

Despite the above, it is important to note that inflation must be fought and in the process productive sectors may suffer. It will however require a mix which will ensure fight of inflation and growth especially from productive sectors like Agriculture, Industry social service sectors of Health and Education.

Double the Agricultural sector credit and broaden the beneficiary to from value addition to •farmersEstablish similar facility for Education and Health Investments.•Capitalize UDB to support Industrial development with more competitive interest rates.•There is need for use of fiscal policy to stimulate production and increase supply so as to help manage inflation from the supply side. This will supplement the strict monetary tools and will eventually ease the CBR.Prudent Government expenditure is required with emphasis to productive sectors. •Increasing expenditure in unproductive sector will only lead to high inflation.

4.5 Tax Policy issues Taxes are a very important aspect of Government revenue as they are allocated to provide services that stimulate growth and provide social amenities. These combine well to support further growth in the economy. In Uganda however, the tax system is still very inelastic and the tax base narrow so that the tax yield is largely dependent not on the natural growth in economic activity (GDP) but on discretionary measures by Government. Our tax revenue mix is such that more taxes are recorded from trade (cross border) activities rather than domestic economic activity for which we have control as a country. The more business and investments we open up locally the more control we shall have in managing and financing our budgets.

This year, tax revenue is expected to contribute 54% of the budget, this excludes the Oil tax expected to be 11%. Both tax related revenues will contribute 65% of the revenue which is part of the 74% domestic revenue mobilization, leaving only 26% revenue mobilization to foreigners. This contribution must be made by the Local Private Sector. This goes to emphasize the need to ease the way we do business and pay taxes15.15 Ease of doing business means and includes getting institutions and civil servants understand where Uganda ought to be in a decade and how �uickly to Ease of doing business means and includes getting institutions and civil servants understand where Uganda ought to be in a decade and how �uickly to




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Uganda has had a very low tax to GDP ratio of 11-13% for over a decade16. This has been in spite of efforts by Government to improve the ratio that has remained far below the Sub-Saharan’s average of 18-20%. Uganda’s low tax/GDP ratio is mainly on account of a narrow tax base. Taxes tend to concentrate on complaint tax payers and only 30% of tax payers contribute 90% of total tax revenues.

Despite the need to improve further the tax administration, there is more urgent need to implement policies which will increase the GDP. Some of the measures require increased government expenditure to facilitate production while at the same time removing or reducing taxes which does not help increase the GDP. Taxes should not discourage creation of more wealth. Unfortunately some of the taxes create unlevelled play field nationally and even regionally making Ugandan producers become uncompetitive. Some of the concerns of the private sector related to this include; PAYE in Uganda threshold in Uganda being so high to make it more costly for labour and a discouragement for labour productivity. Kenya is 150USD, Tanzania is 85USD ,Uganda is 55 USD; Further in Uganda the Edible Oil Sector the tax distorts competition in that processors of Palm oil are not charged VAT while producers of other oil seeds pay VAT this means that the farmers in the value chain less by about 38% resulting from the 18% VAT of the finished. This means the [policy favours the producers of Pal to other oil seeds.

Imported Packaging Material charges for local producers in value added products are disadvantaging local producers in comparison with imports. For example Pre- Printed flexible packaging materials are charged as follows; - 120% Excise Duty, 18% VAT, 6% WT, 25% Import duty. While imported packed product with the same packaging materials do not pay tax which can be attributed to the packaging elements. They only pay taxes related to the product coffee.

In order to increase GDP through creation of more wealth and eventually lead to increased taxes Private Sector proposes changes in the Taxes. Several tax administration reforms have been undertaken to enhance the efficiency of tax administration and reduce the costs of compliance. These reforms include rolling out of online tax services to the regional cities, in Jinja, Gulu, Kampala, Mbale and Mbarara. These developments allow tax payers to register, file returns and pay tax online. Other improvements include quicker customs processes and improvements in the management of bonded warehouses. The improvements in the tax administration have enabled efficiency in the service delivery, leading to reduction in the number of hours/time to prepare, file returns and pay taxes, and reducing the number of taxes filling into a single Tax Identification Number. These Government initiatives are appreciated but it should be noted that, for an improved tax system thus more revenue collection, the Government should consider the following recommendations;

get there. Therefore, Institutions, Systems and mind sets of Ugandans must be of main focus for the country to move forward.16 Ministry of Finance, Planning and Economic Development and Uganda Revenue Authority Reports, 2011 Ministry of Finance, Planning and Economic Development and Uganda Revenue Authority Reports, 2011



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Some of the tax policy related issues have been elaborated in other sectors of this document. The ones below are an emphasis.

Formulate tax policies that target and motivate the informal sector to pay taxes as opposed to •increasing the burden on the already compliant tax payers. Reduce the VAT rate from the current 18% to 16%. Consider holding a varied VAT regime and •not fix it to a maximum charge for all sectorsRemove VAT on Mobile Telephone Handsets as in Kenya and Rwanda to increase their usage •given the competitiveness effect mobile is having in operations of business. Increase PAYE threshold from the current UGX 130,000 to UGX 250,000 for increased effective •demand and a level play field for business in the regionStrengthen the possibility of URA working with the Private Sector in assessment and collection •of rental taxExplore the possibility of raising revenue through taxes on real estate transactions•Reduce Withholding tax on dividends from 10% to 5% to match Kenya and Tanzania for •purposes of harmonization and better competition in the regionRe-align Uganda’s tax policy with the EAC integration process• Maintain the sensitive rates of CET especially on Sugar ( 100% or 200USD whichever is •higher), Rice at 75% ( Make sure if Kenya stays the CET then their rice should attract CET rate)URA should develop measures to reward and motivate compliant tax payers/contributors. Given •that they collect lots of money on their behalf and of recent URA is asking them to demand so many things from suppliers which further increase their costs of collecting taxes. A modest rebate of 0.05% is proposed for tax collectors of a threshold of more than 50 Billion UGX a year for a beginning. Then lower the threshold in other years after evaluating the impact. Remove VAT on edible oil produced from raw materials produced locally. Remove the distortion •created by the exemptions in Palm processors which affect farmers. Exempt charges ( Excise duty 120%, withholding tax , VAT 18%, Import duty 25%) on Pre-•Printed flexible Packaging Materials and further provide special incentive for packaging ( especially for flexible ) industries.EAC Common External Tariff: All the EAC Partner States do enjoy lower tariff given that •Kenya, Rwanda & Burundi are in COMESA FTA and Tanzania in the SADC. If Uganda implemented the CET fully, it would be hurt in some selected areas especially in Paper and Steel products. GoU should therefore negotiate for an exemption in some specific areas of industrial inputs to be 0% so as to bring the Uganda Private Sector to be at par with other Partner States

4.6 Rural Development & IndustrialisationThis is essential to ensure increase in production / GDP and will contribute greatly to sustainable growth and taming macro-economic challenges. Government there for should make targeted interventions which will cause rural development which is livelihood for over 70% of the population. Boosting of agriculture production should be prioritized. A value chain approach type of intervention on a PPP basis is required, but with private sector taking a lead. Synergy with lead players is important who will support smaller players. Further interventions recommended include;




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Provide tax incentive for value adding investments directly operating in the rural areas. • This should be for both new investments and old ones.Stabilise the supply of electricity and also rethink the costs for those using electricity for •production i.e light to heavy manufacturing. For example the VAT on electricity be 0% for those establishments in rural areas.On PPP basis roll out improved seeds, planting and stocking materials availability in Rural •AreasOn PPP Basis create the storage capacity in rural areas to act as quality improvement and •Marketing Centres.On PPP Basis use nucleus farmers’ support clearing of land through Tractor (including hand •held) support services. Remove VAT on tractor hire services to spur investments in the tractor services as a business•

4.7 The Role of SME’s in National DevelopmentSME’s constitute about 90% of Private Sector, formal and informal in terms of composition. They are mainly trade, agro-processing and small manufacturing, one-third of start-ups do not see their first birthday. 80% of these are in urban areas, they contribute to GDP a tune of 75% and employ approximately 2.5 million in retail trade, basic food processing, services of which 19.5% in Manufacturing and 0.8% Agriculture. With a great role SME’s play in economic development, they are faced with a number of obstacles to competitiveness including but not limited to; High cost of finance and constrained access to credit, SMEs are risky in terms of lending, Lack of acceptable collateral, Limited sources of long term finance, Limited information on financing products, Lack of business Start-Up capital, Lack of credit guarantee schemes and venture capital Funds, management culture, Poor entrepreneurship and inadequate skills, Lack of appropriate technologies to meet market standards, Inadequate opportunities to support Technology Transfer reforms to ease contract enforcement, Inadequate and expensive supply of power and Telecommunication facilities, Lack of an Incentive regime, Lack of sound corporate governance, Lack of capacity and the zeal to form groups/associations, among others. Therefore, to harness contribution made by these SME’s in Uganda, there is need to; Build firm capacities, confidence, Transparency and responsiveness to policy and the market system, Make it easier, cheaper, faster and more user-friendly for new businesses to register, make profits and continue operating, support individual businesses become more efficient, through the provision of BDS at affordable costs, Provide well researched market information, opportunities and challenges in export markets among others. Specifically, to benefit from SME’s’ contribution to National Development, the Government ought to consider the following suggestions;

Focus on SME’s’ financing; create a revolving fund, and work on Improving access to long •term financing through establishment of an institution to intermediate development finances (e.g. BOU Credit lines):Develop the capital markets and follow up on loan performances•Capacity Building for SME’s through access to BDS Support innovation and Accelerated •technology TransferSupport to Business Start-Up and Improvement•Improving enforcement of business contracts•Streamline institutional support for SMEs•Develop and implement SME targeted incentives•Expedite enactment of the MSME Policy to ensure Corporate Governance•

4.8 ICT for Development and Business Process OutsourcingFollowing the role of ICT in promoting business competitiveness today, the business community appreciates Government’s commitment to foster Private Sector growth through a number of ICT interventions including; establishment of the National Information Technology Authority (NITA-U), business information centres in the districts of Busia, Iganga, Lira, Kamwenge, Mityana and Rukungiri; plus the plan to conclude the interconnectivity of the entire country by laying over 1500km of optical fibre



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to link most major towns in the country. Also, the business Process Outsourcing (BPO) skills training programme was launched by the new ICT Ministry. Enabling laws; cyber laws; electronic transactions, computer misuse and electronic signatures were also passed by the Government of Uganda. The BPO Strategy and the BPO Incentives Guidelines are also under way/ in the offing under the guidance of NITA-U.

It should however be noted that challenges such as; skills to embrace ICT, access, affordability and more so ability to use are still salient features hindering effective research and adoption of ICTs in Ugandan businesses. With regard to skills, it’s important to note that fortunately, both the Private and Public Sectors recognize the need for more training on how to use ICT and how to develop and maintain it. In terms of capacity to pay for ICT, the Ugandan business community is highly constrained by the high cost and erratic Power supply plus the high costs of telecommunication services. Training institutions should therefore tailor their existing ICT-infrastructure and software development related courses to match the growing 1needs of business enterprises, which are increasingly undertaking automated processes and providing a base for service outsourcing. This would eventually attract more firms to Uganda and ensure that Uganda-based firms are not overly reliant on foreign firms for Business Process Outsourcing (BPO). Uganda is strategically positioned to provide BPO services to other countries (such as USA, UK, China, Canada, among others) and this immense (export) potential could be tapped into. For Uganda to further develop the ICT and BPO industry and benefit, the following recommendations should be adhered to;

Expedite the completion of linking Uganda to the world through the fibre optic cables as the •backbone for Uganda and connect to the Marine fibre optic cable already at Mombasa with the view of lowering the cost of international transmission of data.Improve affordability of Telecom and ICT services in Uganda through VAT tax exemption•Develop basic ICT literacy amongst the wider population in Uganda/nationally •Integrate the clusters initiatives concept in the Government Strategy in order to enhance Private •Sector CompetitivenessExpedite operationalisation of the ICT Policy for sector guidance•

4.9 Legal and regulatory frameworksReduction of the regulatory burden on businesses is essential to reducing the cost of doing business in Uganda. Uganda’s elevated business costs are further exacerbated by; many procedures and time taken to register and start a business, difficulty in getting and retaining a sustainable electricity and energy level, enforcing contracts, among others. These plus other indicators render local businesses less competitive in the region and in the global market. The need for an enabling business environment to boost investment growth cannot therefore be over-emphasized especially in light of the growing competition for potential investments in the region. The Government of Uganda must hence force give priority consideration to the competitiveness and growth barriers in its distribution of development resources if indeed Uganda is to remain a private sector led economy. Uganda retained its third position (of 123) in the region after Rwanda and Kenya. Uganda tops other countries with respect to resolving insolvency. A graphical illustration for a better analysis is as below in Figure;




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Source; the Doing Business Report, World Bank, 2012

From the figure above as shown, Uganda performed well in registering property (moving + 28 points)17. However, Uganda is at the bottom of the pack with respect to starting a business and protecting investors. This therefore calls for more work on the other indicators to improve its overall rankings. These include; trading across Borders, Starting a Business, Protecting Investors, Getting Electricity and Registering Property, among others as in the figure above. The following recommendations should be considered for Uganda to become more competitive in the region for the business community to thrive;

Fast track efforts to expedite enactment of key commercial laws including; Company Bill, • Insolvency Act, Investment Code and Free zones BillFast truck the ongoing comprehensive Business Licensing Reform work• Expedite business registration reforms/ improvements in registration process, this is to increase • efficiency, and reduce the number of days and costs incurred to register a business.Ride on the reforms done by URA and other Border agencies• Increase funding to the URSB to ensure that her capacity is strengthened• Establish an independent intellectual Property enforcement Unit in Police•

4.10 Enactment of Priority Commercial BillsIn doing business, it is important to have clear laws and regulations in place to ensure smooth transitions. In September 2006, the Presidential Investors Roundtable (PIRT) prioritized 17 commercial bills. Some of the bills have been enacted into law. However, progress has been limited. There are about 12 steps that are involved in the process that begins with initiation of a bill to its operationalisation. On average, it is taking three (3) to eight (8) years to go through the 12 steps. Some of the delays are caused by lack of champions to follow through the processes (e.g. the Chattels Securities Bill) or need for resources for consultation processes and study tours to benchmark the provisions of the bills (e.g. the companies bill). In all cases there is need for a pro active approach to reduce the burdens to business. For example, enactment of the Companies bill will help reduce the cost of business registration and improve our ranking within the Doing Business report of the World Bank where Uganda stands at 143rd position out of 183 economies. Similarly the three (3) Cyber Laws and the insolvency law need to be operationalised.

An action plan to fast track the enactment of the Companies, Insolvency, Capital Markets, Investment Code (amendment), the Chattels Securities, Anti-Counterfeiting Goods, the UNBS Act Amendment Bill, the Pensions Bill and the PPP Bills should be developed and a fund should be set aside for this process.17 The Doing Business Report, World Bank 2012, details could be viewed in section 3, 3.3



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4.11 Implementation of agreed policy actions The Government of Uganda (GoU) has liberalized its approach to management of the economy and has increasingly mandated the Private Sector and committed to support it to be the driver/engine of economic growth. As part of this agenda, a number of policy dialogue platforms18 have been established to ensure active participation of the private sector in influencing policy decisions and in the annual allocation of public resources. Every year, Private Sector Foundation Uganda (PSFU) engages GoU to present policy issues for due consideration in the preparation of the national budget to ensure that priority is given to activities that target the improvement of the business/investment climate in Uganda. This engagement has yielded positive results in the sense that it has re-focused the prioritization of national resources towards sectors that enhance business operations and growth key among which is infrastructure development19. The challenge however remains with ensuring that the agreed actions are executed within the set time frame. For example, the response rate of GoU to the private sector proposals submitted to the Ministry of Finance, Planning and Economic Development (MoFPED) in financial year 2010/11 was 78.8% however; the implementation rate by the time of this analysis stood at 57.8 % for crosscutting issues.

PSFU in February 2012 initiated a review exercise of the 2010/11 GoU national budget priorities with the objective of ascertaining the magnitude of implementation of agreed actions with respect to the proposals that were adopted by Government. The assumption made by PSFU is that if there has been a significant shift in Government’s response to the private sector proposals for policy reform over the past five years, it is then possible to achieve even better results on the implementation side. The purpose of this analysis therefore was to identify gaps in the implementation process of agreed priorities for financial year 2010/11 and propose ways of improving the execution pace through the PSFU advocacy process.

The level of Implementation;As highlighted above, Government agreed to a tune of over 78% of the main issues prioritised by the Private Sector for considerations by Government. The Private Sector considers an issue solved when the outputs delivered actually achieves the desired outcome and leads to the actual reduction of costs of doing business and improves competitiveness of the Private Sector. For example when Government agrees to enact a law to curb counterfeits, it will only be concluded when the law is in place and the benefits related to curbing counterfeits has been achieved. However when this is still in process, even if the has advanced highly, it may not be able to help the private sector to become competitive. It is in this context that the private sector examines and appreciates the level of implementation of the agreed policy. The table below provides an illustration:

18 Some of these include: the PSFU Quarterly meetings with the President; the Presidential Investor’s Round Table �PIRT�; the annual dialogue meeting held between PSFU and MoFPED to present private sector proposals to the national budget.19 Poor infrastructure �physical and soft� is the top driver of the high cost of doing business. Others include; insufficient skills for the existing labour business market; lack of access to affordable business finance; legal and regulatory barriers among others.




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Summary of Findings – Analysis of 2010 & 2011 Policy Proposals Vs Implementation by GoU

CATEGORY OF POLICY ISSUE (S) RESPONSE RATE (%)

IMPLEMENTATION RATE (%)

Cross Cutting IssuesA.

Transport•Energy•Labour productivity•Access & Cost of business finance•Legal & regulatory environment•Public Private Partnerships•Environment & Natural Resources Management• 1 MSME development•Budget Discipline•

78.8

22.16.76.57.514.73.26.75.75.7

58.7

113.1119.476.966.747.662.559.752.652.6

Sector Specific IssuesB. *

Agriculture/Agribusiness – General Policy Issues(i) Coffee •Cotton •Sugar •Apiculture•Flower •Livestock •Diary •Leather •Tea•Fish•Construction•Pharmaceutical Industry•Beer Industry•

Services(ii)

Telecommunications•Banking•Insurance•Arts & Crafts•Beauty Industry•Tourism•ICT and Business Processing Outsourcing•

Regional Integration(iii) Women in Private Sector Development(iv)

17.614.340NilNilNilNil8.3Nil9.220Nil100

Nil500.210027.876.5

24.2Nil

* The sector specific issues vary from year to another and thus make it difficult to assess the response rate by Government. The

consultant however, reviewed the issues raised in the period under review and was able to make deductions with respect to implementation of agreed actions as per the proposals raised in both policy documents.

The analysis above is derived from a matrix resulting from a study report on the analysis of implementation of Government’s report to Private sector proposals for Policy reforms for period 2010-2011 carried out in January 2012.

Further analysis of the implementation reveals the following;Implementation progress of actions is skewed towards the cross cutting sectors particularly: i. Infrastructure development (transport, energy and natural resources); increasing access to affordable business finance as well as; legal and regulatory reforms.Priority focus for GoU execution is linked to the top drivers of the high cost of doing business in ii. Uganda that is, poor transport infrastructure, insufficient energy to facilitate business operations, legal and regulatory barriers, and inadequate access to cost-effective business finance.



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There has been limited focus on other cross cutting areas that are also critical for business growth and iii. sustainability for example, the proposals on enhancing labour productivity.The implementation pace is not proportionate to the need by the private sector and may therefore iv. minimise growth of businesses and the ability to attract more investments to Uganda. For example, there was a resolution to pass 21 commercial laws in the 8th Parliament, which were targeted to enhance service delivery by the commercial courts and in improving the legal and regulatory environment for businesses to thrive. However, only 4 of these laws have been enacted to-date and while there was special attention given to these laws by the new Parliament, the proposals are yet to be fully internalised by the new committee members and may thus cause further delays. Over 50% of the policy issues were still reflected in the pending section, which poses a major question v. on the effectiveness of the follow up mechanism at PSFU during the implementation of GoU activities that respond to the proposals made by the private sector. There appear not to be no dedicated champions in the various Government Ministries, Departments vi. and Agencies (MDA’s) responsible for execution that are tasked to follow through the agreed actions or better still to pay attention to those activities that directly affect the private sector in a positive way. The monitoring department in the Ministry of finance has mainly concerned themselves with the absorption of the funds allocated to a Government department both at central and local Government. The approach may need to change to ensure tangible results.The mechanism which the Private Sector may be following up issues of their interest need to be vii. improved so as to make sure the relevant Government agencies and department to what is expected of them in timely manner. This process should be motivated by the quest of the Private Sector to ensure that what has been agreed upon is actually implemented.

There is a growing lack of cohesive working of the Government. There is also a lot of suspicion among the various arms of Government and in the process decisions being taken is not generally business friendly. This may be partly because of lack of appreciation of the impact the unfavourable business climate has on the economy and the country. . It may be prudent to have a dialogue with the government including the legislature with the aim of improving the appreciation of the business environment to the country. This may help Government decision makers not making decision which affect business while at the same time ensuring that they take action on issues which will improve business climate. This could be done without compromising the oversight role for example of Parliament.

One of the major challenges of improving investment climate is institutional changes and re-alignment to foster business approach. The lack of implementation of agreed policy actions is still a challenge to private Sector development as Government is not effectively intervening directly to stimulate Private Sector development. The weak institutions have not effectively dealt with the issue of bad governance (corruption) which affects the pace of development. Furthermore, decentralization has been implanted faster than the rate at which the units /districts can ably support their existence thus increasing the cost of public administration at central Government.In light of the above, we recommend that Government quickly considers the following interventions;

The Ministry of Finance, Planning and Economic Development should intensify monitoring • and insist on proper and tangible results and outcomes other than financial absorption of the Government.Establish the Prime Ministers Private Sector Forum which should meet quarterly to create more • pressure on the Government to implement agreed Policy Actions affecting Private Sector. This could follow the Presidential Investors Round Table approach but need to be broader involving the wider Private SectorChallenge Government to entrust certain projects to Private Sector for Implementation. The areas • related with Business Development and Private Sector Development could be targeted.




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5.0 SECTOR SPECIFIC GROWTH CHALLENGES

5.1 The Agricultural SectorWhile there has been many strategies aimed at supporting production, productivity and employment creation in agriculture over the last 10 years, the sector recorded negative growth for the first half of the last decade and also improved the contribution of Agriculture to GDP, the structure and service delivery to the farming communities must change, to include improved agriculture financing, post-harvest handling (over 65% of our agricultural produce is lost at post-harvest), water for production, storage capacities and produce marketing. Indeed much has been done about each of these challenges through the PMA and now DSIP, but not in a structured manner as to help farmers benefit from the interventions. Production, Value addition, marketing and employment creation all revolve around the agricultural sector particularly for Uganda where 80% of our population are in the rural areas and involved in farm and off-farm activities. Focus must therefore be made to re-direct more resources towards agriculture with due guidance from DSIP and CAADP to which Uganda is signatory.

Despite general agreement that the production in agriculture has not reduced but instead increased it was noted that it was not increasing to a level that would help the industry take advantage of the increased demand from within the country , the region and internationally. Apart from increasing the incomes it would also contribute to stabilizing the Macro Economic parameters like inflation and exchange rate. This is against the increasing funding in agricultural sector under NAADS and other auxiliary support to agriculture like roads, agricultural credit etc. The principle of producing the right Quality, Quantity in a Timely manner is not being achieved. The possible reason is that all interventions (Government, development partners, Private Sector) appear thin, scattered and not well coordinated and involving all stake holders ( farmers/ farmer groups, leaders in the market/ major outlets, banks, insurance, researchers, inputs suppliers, seed/ semen/ fingerlings multipliers, ministry, local government etc).

The major issues raised in the Agricultural sector which tend to lead to limited production and productivity include; Rudimental productions tools /methods; limited access to credit for production, postharvest handling, processing, and marketing, pests and disease such as Banana/ coffee wilt, counterfeits especially in agricultural inputs, no or limited research and development capacity, expensive costs of production and delivery to the market, lack of reliable market, lack of advisory services and limited government envelope to support agriculture and more so no effective regulations policies in place to guide effective Research, production, processing and marketing of agriculture. It is however noted that there are opportunities through good examples where production systems already which could be improved and some of them include- Mainly traditional crops like Tea, Tobacco, Sugar and of recent Rice which are market led with an elaborate value chain support system. Also various stakeholders appear willing to be able to make positive contribution and more importantly Government has the NAADS program which could be used to spur the sector and lastly the demand for agricultural products seem set to benefit from increased local, regional and International demand.

Opportunity for Rural Development:Given that over 80% of our population still leaves in rural areas, agricultural related activities stand the chance to improve the lives of the majority of Ugandans through rural industrialization and development. Most rural areas tend to have good road net work and there is the rural electrification program going on. It is therefore important to provide incentives which will lead to industrialization of rural areas. A value chain system of development which emphasizes a lead driver in form of industry to support the development of the chain with support of other stakeholders could be a preferred action. Good examples already exist for example BAT in West Nile, Britania Ltd, Sugar factories as well as Dairy and Rice farms. The Fruit factory due for establishment in Soroti is one other example and we could build on these and various other small scale industries to develop the sector-based value chains. To make a difference in a more businesslike manner, and improve productivity, the following is proposed;



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5.1.1 Re-streamline the NAADS program/Value Chain approachGiven the resource constraints, NAADS program should be made to act as a stimulant and an anchor for other stakeholders to make meaningful and sustainable contribution to agricultural production. There may be need to choose few products which would ensure food security and also increase earning to all those involved in the value chain with emphasis on either earning foreign exchange or at least saving it. With a good strategy developed for each sector or product which involves the assurances of market, through a market leader, with the support of associations, major service provider like insurance would come in and play a vital role since they agree that they could be willing to insure farmers in larger groups, this would certainly make the banks remove the risk notion associated with agriculture and could attract their interests to provide lower cheaper credit. The market would guide the research of the product seedlings, which could easily be multiplied by farmer groups while ensuring quality, then through groups productions they could be improved by improving the production methods and quality control which in-turn improves marketing and also creates opportunity for small scale to medium processing opportunity. With time the sector will support itself and will be being driven by motivation from the returns. Specialized banks may then develop at that stage and so will advisory services for payment be meaningful. Every player will then play their rightful core role and allow competition and innovation to be the driving force of the industry. The Government needs to help kick start this and eventually withdraw and remain in regulation and support research. Government may start with possible quick wins in sugar where out growers are supported with factories providing the critical role of providing the market. This may address the sugar problems and also boost the energy sector. Another is the coffee sector where the stakeholder could play a significant role. There is also need to invest in Value Addition and quality improvement to enhance competitiveness in the regional markets.

5.1.2 Access to Credit for Agricultural Production Despite the existence of the Agricultural Credit Facility of UGX 30 billion allocated in fiscal year 2009/10 by the GoU, there is still limited financing for agricultural activities. In order to increase production, there’s urgent need for accessible crop finance. The ACF was intended more for commercial purposes; hence the lower farmers (who contribute/produce for the market) cannot easily access it. There is therefore an urgent need for a special window to be created to facilitate production as well to such smaller farmers. Clear fund management measures ought to be put in place than create new banks in form of special bank for agriculture. The GoU should also offer special support to such farmers and wave taxes from farm equipments such as tractors spares. For efficiency, there’s need to involve micro credits and insurance players in the current ACF. Following the current interest rates, the business community urges GoU through the Central Bank to consider key productive sectors and treat them at different rates, in order not to stifle credit for production. Agriculture would be one of the sectors to be considered under this arrangement, given the role it plays in Uganda’s Economy. This support will be more successful if an organized production system has been established and production is commercial in practice.

5.1.3 Policies and Regulation:After liberalization process, business practices in the sector are not contributing positively to agricultural development. Appropriate policies need to be put in place to guide the research, production and marketing of various products. These policies are more urgently required in the traditional, large and seemingly profitable sectors like, coffee, sugar, fish, tea etc. The policy should help answer lots of the challenges like research, disease/ quality control, marketing, inputs supply. This could take into consideration possible synergies with the Private Sector. The policies should lead to laws and the laws should be implemented based on a clear framework. Some of the quick ones are could include Coffee research and seedling distribution policy. Can special research facility be established? Sustainable production especially where stocks can be depleted like in the fish sector, laws against immature fish should be strengthened with an efficient framework to implement it.

5.1.4 Storage Facilities: Despite the fact that World Food Programme is conditioned to purchase at least 10% of its food from LDC small holder farmers, Ugandan farmers can only meet 2% of this target and this is attributed to use




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of rudimentary methods, loss of up to 70% through the entire production chain, only 30% of the produce is utilised. Framers incur over 50% losses in post harvest handling; they should access facilities in groups for example maize millers among others.

5.1.5 Promotion:Promoting agriculture needs to start with a bang! It appears to be bigger than NAADS, MAAIF, among others. It may take little resources but could result into significant returns if well planned and meticulously implemented. The country could be led by the Presidency and supported with Ministers, local government officials; Members of Parliament and Private Sector for a production retreat for about 2 weeks in the villages and do all activities which will deliberately support agriculture so that production is initiated at grass root level. This could be built on other support measures and such action may be the beginning of increased production.

5.1.6 Incentives for rural industrialization: In-order for the Private Sector to integrate more and lead value chain development, incentives need to be provided to enable them set up in rural areas and avoid congesting in major urban centres. Incentives like tax credits and rebates can be established to support and encourage rural industrialisation. This should be for all investors irrespective of the sectors they choose to invest since this would encourage new investment and support expansion of old ones. This should realise rural development, reduce congestion and provide for satellite cities across the country.

5.1.7 Agric-farm inputs and equipment:Most farmers in Uganda are small holders (less than 10 acres) and it is not economically viable for them to acquire tractors. Moreover, hiring firms are taxed at 18% VAT making it more expensive for farmers to use tractors. This amounts to taxing farmers, for ploughing services, making it even more difficult to produce. While Government has waived taxes on tractors, it still taxes the use of these tractors. This does not help the farmer. For mechanization to be promoted, the use of tractors is a sure way of increasing production by expanding the area put under crops which cannot be over-emphasized. It should be noted that currently Private tractor owners charge between Ugx 100,000-500,000 to plough an acre20. Definitely very few ordinary farmers can afford this. A major Government intervention in this regard is desirable. Support to the seed sector; currently there is a serious shortage of seeds, (beans, maize, rice, etc) planting and stocking materials. The Government needs to support the seed sector for productivity to increase. Water for production; the need to supplement rain water in Agricultural production activities is increasingly becoming apparent as the effects of climate change intensify. More funding should therefore be put in water harvesting technologies and irrigation.

5.1.8 Land for Commercial Agriculture: Land for large scale agriculture remains scarce and yet 50% of arable land in EAC is in Uganda. It is therefore important to make available land for large scale production. This measure will enable Uganda feed regional markets. It may therefore be helpful for Uganda Government as option one to purchase land from willing sellers and make it available for large scale producers. Another option is where a private foreign investor is willing to lease land from a local Ugandan, government should mediate this, possibly through UIA so that the lease is with Government rather than individual. Investor confidence is higher with Government compared to individuals.

5.1.9 Enforcement and regulation of standards:In-order for Uganda to become competitive improvement of standards will be key to operate in the local, regional and international market. It is therefore important for the regulations to be streamlined, support the companies and businesses to enforce them. This enforcement includes the local authorities, the UNBS, The Ministry of Health and Agriculture so that the sanitary and phytosanitary standards (SPS) in Uganda are internationally acceptable.

20 Areas of emphasis in the 2012/13 National Budget, Uganda National Farmers Federation, 2012



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As noted in the above, the Agricultural sector is currently getting substantial support from both the government and its development partners. The challenge therefore is ensuring that the farmers receive the appropriate assistance to enable them reap bigger outcomes and improve their welfare. Availing appropriate agricultural finance; maintenance of feeder/access roads; availing market and market access information would significantly enhance the lives of rural farmers and in the long-run reduce rural poverty.

5.2 SPECIFIC AGRICULTURAL SUBSECTOR CONCERNS:

5.2.1 The Horticultural Sector The outlook for the Horticultural sector in Uganda may have not actually taken on all the five areas of horticulture with landscape horticulture still under developed. But quickly looking at the thriving sub sectors of floriculture (flowers), olericulture (vegetables) and pomology (fruits), horticultural exports have grown to be one of the country’s best non-traditional export earners. But how under-utilized is this sector and what can be done to harness the potential of a sector that brought Kenya up to 76billion Kshs in 2010? Uganda produces large quantities of a variety of fruits and vegetables, but less than 10% under goes post-harvest processing. The sector presents greater opportunity for investment in horticultural products for local markets. The Horticultural Sector Export market was estimated at USD 30 Million in 2002 and this was expected to grow to USD 100 Million by 2012. Export growth of processed Horticultural exports is constrained by Production rather than Market Factors. Products which have growth potential are; Plant Cuttings, Chilli, Passion Fruit-concentrate, Okra, Baby Vegetables, Vanilla, Sun-dried tropical fruit and Papain from Papaya, among others. In 2008, export earnings from horticulture amounted to more than US $ 760 million compared to over US $ 200 million in 2000. Below is an illustration of the trend of horticultural exports from 2000 to 2008. The Figure below illustrates the great un exploited potential with a trend showing an upward Export movement hence more forex in Uganda.

Source: UBOS Data base, 2010

In addition, the sector faces an array of factors impeding the export of value added exports right from timely delivery, grading, packaging, good quality produce, poor market infrastructure, few agro processing plants, little marketing credit, improper pricing, lack of uniform grading and standardization of weights and measures; inadequate and poor dissemination of market information, poor post-harvest handling, low and declining productivity. Delay to give work permits to horticulture expatriates at the immigration department should not also be over emphasized as a factor hindering growth of the Sector in Uganda21. 21 To get a work permit for a technical expatriate, one has to wait for more than six months and more.




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These experts should train Ugandan local staff who will eventually take over these positions22. Without the requisite technical expertise in production, the quality of flowers is compromised and this makes the industry uncompetitive. (The industry has special technical expertise some of which is not readily available in Uganda)23.

The outlook for the horticultural sector globally may be a grim one considering the European debt crisis – the EU being a major trade partner, the likelihood of natural disasters like the volcanic ash that brought flights to a halt and dealt a blow to the sector among other circumstances. However, there are opportunities in diversifying the target markets as well as widening the export product lines with innovative and breakthrough ideas. The sector may also learn and replicate some of the adaptable strategies that have made the Kenyan horticultural sector a model in the continent and with these strategies look forward to harnessing a potential great earner for the country in horticulture.

The growth of the horticultural sector would require Government and Private sector investments in modern production units; private and public investment in training and research; and public sector investment in facilitating services at the airport, roads among other infrastructural facilities. The horticulture subsector has surely over the years developed the potential to significantly contribute towards the growth of Uganda’s export trade. However the subsector has challenges in meeting international standards and this can be helped by benchmarking or adapting our quality assurance systems to the Global GAP

certification system24. One of the most important attributes of a product of value in the horticultural sector is it’s adherence to health and safety standards set in place within the target market. It is therefore important that activities such as the setting of Global Good Agricultural Practices Standards by developing National Interpretation Guidelines, defining certification systems, streamlining laboratory services and monitoring, and enforcement of standards should be prioritized if the sector is to progress. The following interventions are therefore recommended by the Government for the Sector to benefit further the Country;

There is need for funding so as to train and recruit technical & production managers to address •this gap especially when new flower varieties are being introduced.give work permits to horticulture expatriates at the immigration department •Put a fund in place to invest in Modern Production Units•Invest more in Training and Research •Public Investment in facilitating Services at the Airport, Roads among other Infrastructural •Facilitiesadapting our quality assurance systems to the Global GAP certification system to ensure •international Standards are met

5.2.2 The Coffee Sector When it comes to exports from Uganda, the first commodity that comes to mind is coffee and sure it has over the years come to earn the country a great deal in profits as a major and principal export commodity. Uganda is the second largest coffee producer in Africa and seventh globally. It is estimated that 500, 000 households distributed over two-thirds of the country depend on Coffee as an important source of income. Historically, the sector has been Uganda’s largest generator of export revenues. For instance, the coffee

22 Skills & knowledge in Floriculture is still at its infancy in the flower industry; Kenya and the Netherland are the main source of these expatriates given their wealth of training and experience in flower growing

23 Experts if allowed can only stay for a short period because they receive short term entry permits 3-4 months and have to travel back. This increases the costs that company incurs in tickets, entry/pass permits and other related costs.

24 In comparison with Kenya being one of the stronger players in the horticulture subsector in the East African Region, data from the Global GAP secretariat shows that Uganda has only 6 Global GAP certified producers, compared to Kenya with over 390. This makes Ugandan products less competitive on the international market.



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subsector has continued to play a dominant role in the Ugandan economy, providing gainful employment to over 1.3 m households and a major source of foreign exchange earnings accounting for around 25%. Government has continued to implement production and productivity enhancement programmes (i.e. Coffee production Campaign25, Quality improvement and Value addition throughout the supply chain). The Coffee production campaign puts emphasis on Research, Extension, inputs and credit; and farmer organizations; it therefore aims at restoring annual exportable coffee production to a 4.5 m 60-kilo bags (270,000 tonnes) mark by 201526. Figure 5 below shows annual coffee export performance per type; arabica and robusta for financial years 2006/07, 2007/08 and 2008/09. While there was a 30% recovery in the volume of arabica from 497,105 bags in 2007/08 to 647,831 bags in 2008/09, the robusta performance went down by 11% largely from 2.71 m bags to 2.14 m bags on the account of bad weather, which was characterized by a prolonged dry spell. However, farmers that adopted good agricultural practices; shade tree, mulching, water and soil conservation were less affected by the drought.

In addition to the climatic factors as in the above, the Coffee Sector is still faced with challenges of ensuring quality, food safety plus traceability of coffee in the whole value chain; these affect productivity of the industry. Other challenges limiting the performance of the sector include but not limited to; absence of a national Coffee Policy to guide and regulate its operations, inadequate resource capacity at UCDA to engage in biological research and production plus the lack of sustainable resources to fund dedicated research on Coffee disease. To further alleviate these barriers to the growth of the sector, the Coffee Industry players recommend the following Quick Government interventions;

Expedite formulation of the Coffee Policy and include farmer concerns to effectively •guide operations of the sector and lead into growth. The policy should address the quality improvement and increase in out put

Put in place sustainable funding mechanisms for the Coffee research Centre in Kituuza, •develop technologies to avert climate change and Coffee wilt disease

Provide funds to replicate the Coffee Wilt resistant variety seed varieties and supply to all •farmers better quality farm in puts

Provide support towards strengthening the Coffee farmers i.e. a percentage from the cess levied •on Coffee exports need to be channelled in this direction.

Review the UCDA statute and the NARO Act. Through UCDA, more resources would be made •available to enhance capacity and research to enhance productivity and enforce best practices for better out puts.

5.2.3 Tea As the third largest foreign exchange earner in Uganda’s agricultural sector, the tea industry employs over 58,000 people and earns the country over USD 90 million from export sales27. This contributes greatly to reduction in poverty levels and a drop in rural urban migration and the associated evils, given that the employed people are mainly rural based. Despite the attributes of the sector as highlighted here, little has been done to support and promote tea productivity in terms of research, local consumption, or even putting in place a tea development policy to guide the sector. It should be noted that ever since the collapse of the EAC in the late 1977; there has been no meaningful tea research in Uganda. The Uganda Tea Association therefore requests Government through MAAIF that tea research should be urgently revived in the country. This can easily be done by handing over Rwebitaba Tea Research Station in Kyenjojo to the Private Sector. This is because useful information regarding tea and its development come from research by the industry players themselves.

25 The Coffee Production Campaign has a Steering Committee comprising of; UCDA, COREC, NAADS, NUCAFE, UCTF, UNADA, ASPS-Danida, EDE consulting & Café Africa which over sees its implementation.

26 Coffee Development Authority Annual Reports; 2008/0927 Sub sector profiles, Private Sector Foundation Uganda, 2009




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Local tea consumption: Currently, Uganda’s local tea consumption is very low, about 5% or less. Solely relying on foreign market is risky as this can lead to immediate collapse of the industry in case there is a blockade to the international market. The Cess on produce28, in which tea growers in Kyenjojo district are required to pay one shilling per Kg of green leaf produced, would be more of a multiple tax hence affecting the competitiveness of Uganda’s tea on the international market. Tea Policy: The above issues coupled with lack of a national Tea policy to guide the sector, Uganda risks losing the contribution of one of the key export earner products. The Private Sector therefore recommends the following for Government intervention;

Re-instate Rwebitaba research station as a specialized tea research station on a Public Private •Partnership basis

Put in place a deliberate Government policy to promote local tea consumption e.g. removing •VAT on locally sold tea. For example in Tanzania, removal of VAT on locally sold tea resulted into an increase in consumption of tea from 2% to 9% in just a period of two years.

Remove Cess on produce especially export commodities, particularly, the cess tax of one •shilling per a kilogram of green leaf proposed by Kyenjojo district.

Formulate a national tea policy to guide the growth and activities of the sector•

5.2.4 The Sugar SectorThe year 2011 was full of challenges for the Uganda Sugar Industry and East Africa at large. The year started with a build up of sugar stocks at all the 3 main factories followed by a severe shortage of sugar countrywide from June to November and again huge stock balances in December as we closed the year. Sugar production in the country dropped by 27,605 tonnes (9%) in 2011, the lowest in 3 years. The performance of the previous year was a growth of 3% which was lower than 20% increase each year in 2008 and 2009. The main reason for the contraction was the general harsh weather experienced at the end of 2010 and early months of the 2011. Additionally, there were accidental cane fires at Kinyara that destroyed over 3,000 hectares and caused a loss of approximately 30,000 tonnes of sugar. The production forecast for the coming year, 2012, has been adjusted against 2011 performance to more modest levels.

Collectively the sugar industry is one of the largest providers of employment in the country providing both direct and indirect employment, which pertinently is all carried out in the rural areas, thus supporting Government’s economical development programme in a practical manner; over ten thousand out grower farmers and more than 35,000 people are directly engaged in the sugar industry from field to factory gate. Using the usual multiplier norm for dependants, the industry is actually supporting well over 250,000 people. And taking account of the service and manufacturing sectors many more people are earning their livelihood in retail sales; in making beverages in coffee shops, restaurants and hotels or by manufacturing products which contain sugar. The sugar sector continues to be one of the largest tax payers in Uganda, after the big four consisting of Fuel, Communications, Breweries and Banking sectors, which apart from providing taxes, are not necessarily large employers. The sugar sector is the largest organized agriculture sector in the country and is based on sustainable development activities. The industry is a fairly carbon neutral one apart from land preparation, cane transport and delivering the finished product to market. There is a continual improvement in energy efficiency, water consumption and recycling of waste products. Furthermore the industry is producing electricity for captive consumption and export to the national grid.

28 Article 19 �2� of the Constitution; Kyenjojo Ordinance number 3 of 2004



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The 2012 estimate is to produce 338,875 tonnes of sugar.

Uganda Sugar Production Actual 2002 to 2011 (2012 estimated)

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

Calendar Year

Suga

r Pro

duce

d to

nnes

OthersSCOULKinyaraKakira

Others - - - - - 5,000 5,000 5,000 5,000 10,000 15,800

SCOUL 32,795 35,579 46,819 44,137 38,178 37,520 42,062 48,334 50,430 38,006 45,000

Kinyara 57,900 53,799 65,137 61,299 60,201 58,062 67,053 76,139 90,477 88,725 121,000

Kakira 75,268 87,296 84,160 88,292 93,182 96,786 124,210 157,914 151,110 132,679 157,075

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Est

Source: USCTA Data base, 2012

Uganda will need to produce more sugar in the future as the economy and population expand. The GDP (purchase power parity) of Uganda is growing at 3% per annum and per capita sugar consumption is projected to grow from the current 10.6 in 2011 to 13.8 in 2020. The population is growing by 3.65% per annum and it is projected that Uganda will have about 47 million by 2020. These factors will raise the sugar consumption to around 655,000 tonnes while production will have grown by about 40% to 535,000 tonnes.

Uganda - Sugar Production, Consumption and Population (Actual and Forecast)(Sources URA, UBOS and USCTA)

0

100

200

300

400

500

600

700

1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Year

'000

Tonn

es S

ugar

0

10

20

30

40

50

60

70

80Po

pula

tion

mill

ion

Sugar ProductionSugar ConsumptionPopulation





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At the end of 2010, USCTA members received the National Sugar Policy with a lot of excitement following months of dialogue between all stakeholders. Last year, amid severe sugar cane shortage, there was a rather passive attitude of Government on jaggery mills and small factories that enticed farmers to divert cane. These two events put the National Sugar Policy to test with mixed results. The former was a positive indication that the National Sugar Policy can be strictly adhered to but the latter indicated very disappointing results. USCTA will continue to encourage Government to implement the policy in whole.

One aspect of the National Sugar Policy is to help regulate where new sugar mills can be established. The industry had requested sugar zones with a radius of 35 km in order to control the growing number of applications for the establishment of sugar mills in close proximity to existing sugar mills. The policy however has granted a smaller zone radius of 25 km, this in effect means that two sugar mills should not be closer than 50 km to each other. The purpose of the zoning policy is to safeguard food security, protect the environment and provide opportunity for existing millers to expand their operations for economies of scale in order to supply the nation with affordable sugar.

Also recognized in the policy document is the need that sugar cane out grower farmers deserve more support from Government service organizations, such as NAADS and NARO who support farmers producing other crops with clean seed and extension services. Farmers generally need to be able to access cheaper finance and to access improved land title procedures if they are to join the ranks of the middle classes. The volume of sugar cane produced by the out grower farmers and purchased by the millers has quadrupled in the last 10 years. The turnover has increased by 8 times in the same period from UGX 9.6 billion to over UGX 100 billion in the out grower areas surrounding the 3 mills.

Sugar Cane Purchses from Outgrower Farmers

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2,000,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Tonn

es of

Can

e Pu

rcha

sed f

rom

Outg

rowe

rs

0

20

40

60

80

100

120

Farm

er R

even

ue U

GX B

illion

Cane purchased from SCOUL OutgrowersCane purchased from Kinyara OutgrowersCane purchased from Kakira Outgrower FarmersFarmer Revenue UGX billion


The Sugar industry continues to be very supportive of Government policies and initiatives and continues to meet and interact on a regular basis with URA, UNBS and Ministry officials to foster this relationship. Indeed with the current energy crisis the sugar industry is playing a crucial role in reducing dependence on UMEME power by installing steam turbo-alternators which both produces and frees up power for the national grid. Kakira Sugar Limited commissioned their new generating plant in December 2007 and is currently exporting 14 MW of power to the national grid however; the company is planning to increase Power generation to 50 MW with most of the additional power being for transmission to the national grid. In effect, Kakira will be supplying a total of 32 MW of power to UMEME. The implementation and development of the power project will be achieved by installing a new 160TPH, 67 bar boiler and a 30 MW condensing turbo-alternator. Kinyara that had connected 4 MW recently added another 5 MW in 2011. SCOUL in the meantime are energy self sufficient and are also in the process of planning for grid



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power export in the next two to three years. In fact the 3 main sugar mills are power self sufficient, thus freeing up a further 15 MW of UMEME power for other consumers. The sugar industry is in a position to contribute significantly to the Ugandan economy by producing electricity for grid supply using modern high-pressure bagasse cogeneration. This requires a significant investment in new equipment. Sugar industry cogeneration projects can be quickly implemented in a period of 2 years as compared to 5-7 years for hydro projects. Moreover, bagasse cogeneration diversifies the electricity supply mix by using bio-mass as fuel and reduces Uganda's dependence on hydro-power.

The price of sugar sold on the world market are distorted and do not reflect the true cost of production and recently there has been an unprecedented and rapid decrease in the world sugar price to US$570 per tonne. A global production – consumption deficit aggravated by various input subsidies of one kind or another have created this distortion. Uganda and indeed East Africa will never be the lowest cost producers of sugar. Geography and climate put paid to that. Nonetheless the East African sugar industry is so important economically and politically to the region that it must have safe guard measures in place. However these measures are being threatened by the Kenyan treatment of COMESA sugar.

Currently, world sugar price are falling, as production outstrips consumption thus COMESA sugar will become freely available for the Kenyan market. This is the time when it is doubtful whether the whole of the East African sugar industry will be able to survive full liberalisation of the market if the international sugar prices fall to unrealistic levels. To complicate matters further as far as sugar trade is concerned; there is a new development to create a tripartite free trade area between COMESA, EAC, and SADC. The first Tripartite Summit of the Heads of State of the Governments of these three trading blocks was held in Uganda on 22nd October 2008. A decision was taken to expeditiously establish a free trade area (FTA), with the ultimate goal of establishing a customs union. There is no doubt the ultimate objective is an African Economic Community. In 2011, Africa consumed 25% more sugar than it produced and this provided the Uganda sugar industry some comfort.

The sugar industry has welcomed Government policy on renewable energy and is enthusiastic to participate in developing bio fuels or ethanol production from molasses. This is an environmentally friendly fuel that can be mixed with petrol and reduce by as much as 10% the foreign exchange component of the cost of petrol. However, Government is required to take the initiative and obtain commitment from the fuel companies to mix this clean fuel additive, and to be clear on a pricing policy before any large investment commitment can be made to construct costly distillation columns.




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USCTA respectfully recommends: the following to be included in the 2012 National Budget, that: -

Government to carefully review treatment of COMESA sugar entering Kenya as the current •lifting of their restrictions for duty free sugar quota and residual duty levels will have serious consequences for the EA sugar industry.The sugar policy should be implemented to encourage growth in the sugar sector for the benefit of •all stake holders.Government to enforce sugar milling zones. So that no two new mills are closer than 70 km apart. •(Zone radius 35 km).Encourage Jaggery millers to operate in separate zones, similar to zoning provisions made for other •crops.Register jaggery millers for VAT as in the past.•Government to assist with infrastructural improvements in the sugar cane outgrower areas, •especially with improvement of the road network by attracting and allocating donor funds for sugarcane feeder road improvement.Government to support Outgrower farmers with improved research services, access to cheaper •loans and subsidy on fertilizer and on quality seed cane.Government is urged to increase the Renewable Energy Feed-In Tariff for bagasse cogeneration in •order to provide a reasonable return on the extra capital investment.Government to enlist the support of fuel companies to commit to purchasing anhydrous ethanol.•Government to give recognition to the role that USCTA plays in steering the sugar industry and for •undertaking the legal obligations of the International Sugar Organisation.

5.2.5 Flower The flower industry commends the government for the proposed tax holidays for companies engaged in export of finished consumer products. This 10 year tax holiday as an incentive was passed in June 2008, though no clear guidelines for exemption were developed. The lack of guidelines acts as a delay to implementation hence limiting efforts to attract new investors in the industry and discourages expansion plans for the existing investors. Therefore, the flower sector which has not attracted new investors in the last 10 years requires a more appropriate special package that would attract investors to rural, upland areas where temperatures are cooler and labour more affordable. The high airfreight charges also continue to dominate the cost structure of the flower sector in Uganda rendering the industry less competitive in the EAC region. Government’s attempt to address this problem through corporate tax exemption of International aircraft carriers does not address the issue of airfreight charges incurred by flower exporters. The sector has become uncompetitive in the market given the depressed demand and the increased cost of production and marketing. Lack of branding, high fuel and electricity costs continue to make Uganda less attractive to flower investments. These unless addressed, will continue to minimize the potential of the flower business, which would otherwise enhance rural incomes particularly in areas with conducive environment for flower farming. The Flower Industry therefore through PSFU urges the Government to;

Finalize the transfer and hand over of ownership of the Cold Storage facility at Entebbe from •CAA to Fresh handling. This will enable the industry lower costs, renovate and expand the facility for an effective cold chain management system to handle growing volumes.

Remove levy on aviation fuel, and other levies by CAA in order to reduce costs by at least •USD 40 cents on airfreight costs or a compensation package for the industry to cover for loss of profits in order to make the industry more competitive in the region

Put in place an accreditation body in order to reduce the high costs of certification and ensure •phyto-sanitary standards

Ensure sufficient Infrastructure Support - i.e. avail un-encumbered land on leasehold as well as •other utilities such as, good roads



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5.2.6 Apiculture Apiculture is one of the oldest agricultural practices in Uganda. Initially, the practice was elementary though the trends have changed over the years. Bee keeping in Uganda is mainly a small holder farm activity (small scale basis) Honey is the major apicultural product in Uganda, followed by beeswax and propolis; other bee products include royal jelly and bee Venom. Bee brood and pollen are currently not yet extracted in commercial quantities in Uganda today.-clearly this shows that though with much potential, apiculture is under exploited and currently the Uganda market is under supplied up to 25%29. There are about 750,000 beehives in Uganda, 65.5% of which are colonized and producing an estimated 2,600 tonnes of honey annually, this represents 0.52% of the production potential of 500,000 metric tones per annum30. There is increasing demand for honey domestically and at EAC/COMESA level as an ingredient for herbal medicine, pharmaceuticals and cosmetic industries. Globally, honey market is well established and highly competitive, for Uganda to effectively compete in this market, honey exporters should offer consistent supply of large volumes at good prices. Uganda’s export opportunity greatly lies in supplying niche markets such as fair trade and organic certified honeys, where there are premiums of 10-30% above the conventional honey price. The export markets for honey include Kenya, Rwanda, DR Condo, Sudan, United Arab Emirates, Oman, Saudi Arabia, USA, Switzerland and the United Kingdom. Though with a lot of potential, the apiculture sector is still grappling with many challenges ranging from lack of a policy to guide the sector, inadequate extension services to the bee farmers in the rural areas mainly due to lack of entomologists at local levels, poor information flow to limited access to appropriate beekeeping equipment among others. Therefore, to exploit the potential and seize the available market opportunities, the Private Sector urges Government to;

Quickly fast track the enactment of the National Apicultural Policy to guide the development of •the sector as a viable and sustainable income source for the poorBuild capacity of district entomology officers who would otherwise give technical advise and •promote apiculture to enhance productionExpedite the formulation processes of the national residue monitoring plan (NRMP) through •MAAIF. This if executed would benefit one million two hundred beekeepers directly.Increase the Capacity of the UNBS to be able to give S and Q marks to processor companies •which meet the relevant requirements Establish the most effective and efficient technology, to enhance research capacity on hive •technologiesProvide support to the national apex body TUNADO •

5.2.7 Cotton The textile sub-sector in Uganda has a lot of potential to contribute to National development through employment and foreign exchange earnings. Presently, the cotton sub sector supports the livelihood of 2.5 Million Ugandans across the value chain (from growing to milling). Over 90% of cotton is exported raw out of Uganda onto the global market where prices continue to fluctuate from time to time based on levels of production globally. The current cotton season has registered the record prices ever since the American War if Independence that saw prices move from about US Cents 70 to US Cents 230 per pound. The low milling capacity in Uganda results from a combination of factors as articulated in the 2008 National Textile Policy. These include: absence of a level playing field relative to international competition due to heavy subsidies extended to textile millers in especially Asia that artificially makes textile imports from Asia very competitive, lack of development finance to upgrade milling technology given that commercial banks consider textile manufacturing business very risky and lack of a cotton buffer stock to mitigate working capital challenges during off-season times among others. At a production level, the Cotton Development Organization has articulated in her Five Years Development the need to establish a Cotton Development Fund as the case is in Tanzania, The financing of this fund would be contributory by private sector and Government could only invest one-time seed capital for its take-off. Once established, the Fund would avail a sustainable revenue base to all cotton extension services,

29 UEPB reports �2008�, as reported in the Daily Monitor, Tuesday, September 28th, page 26, 201030 National Livestock Census, Uganda National Bureau of Statistics Reports, 2008




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price stabilization support for farmers and all necessary production and post harvest support to farmers to permanently stop the current trend of being dependent on the consolidated fund. Figure 6 below illustrates the erratic cotton production pattern for the last financial years; 1999/00 to 2009/10 as low as 70, 303 bales of cotton production. The yet to be published production figures for 2010/11 have shown a rebound in production with production in excess of 130,000 bales. Figure 5.3: Cotton Production for the season; 1999/00-2009/10

Source: Cotton Development Organization report to the International Cotton Advisory Committee (ICAC), 2010

As can be seen from the figure above, zoning led the sector on a sustainable growth path, especially in FY’s 2003/04 and 2004/05 when production rose to maximum. However this was short lived following short supplies resulting from reduced farm gate prices to the cotton farmers. Years that followed saw the unregulated introduction of organic cotton growing that completely watered down the earlier gains.To boost production and exploit the potential of the Cotton Industry, Government has put in place new incentives as spelt out in the National Textile Policy of November, 2008. In view of the above, the Private Sector recommends the following sector interventions;

Expeditious implementation of the National Textile Policy of November, 2008, for incentives to be •accessed by the targeted investors and improve production.Continued duty remission of 0% for textile raw materials •Establish a Cotton Development Fund, managed by a trust and funded by Cotton levies; provide •financial support to mini ginneries to empower farmers to sell lint cottonEstablish and implement a technology fund to facilitate investment in vertical integration;•Prioritize mechanization and provide subsidies to Cotton Farmers so as to enhance large scale •production

5.2.8 The Fish Sector; The fishing sector has been important to the Ugandan economy as a foreign exchange earner in the second place. With the liberalization of the economy and the establishment of a conducive investment environment in the fishing sector, the country experienced an increase in the fish volumes particularly for export. The European Union accounted for 75% of the export market for Ugandan fish. With the increase in the number of fish exports and the increase in the local demand for fish coupled with the inadequate regulation of fishing activities, the volumes caught began to spiral downwards. The figure below shows the trends in fish catch from the period 1996 to 2009. The catch of fish reached its peak in 2004 and started declining. The sector experienced negative growth rate until 2007 when the signs of positive



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growth rate were observed again as seen on the trend curve in the figure below.

Fish catch trend and the growth rate (1996 - 2009)

Source: UBOS Statistical abstracts and NPA (2010)Lake Victoria provides the largest share of the fresh water catch by over 60% followed by lakes Kyoga, Albert, Edward and George respectively. The annual catch from Lake Victoria is about (223,100 metric tons) while other lakes such as Kyoga and Albert contribute 16% (60,000 MT) and 15% (56,000 MT) respectively (Uganda Investment Authority, 2009). About 700,000 people depend on the sector for their employment and over 2.9 million people derive their livelihood from fishing and other activities related to the sector. Over exploitation of the fishing water bodies saw the fish catch decline mainly due to unsustainable fishing methods, poor regulation of fishing activities and the low capacity of the Beach Management Units (BMUs) in fisheries management among others. The figure below shows the trends in production levels of the different water bodies. Lakes Albert and Kyoga have experienced rather constant levels of fish production since most of the exported fish comes from Lake Victoria.

Fish production trends by lake body from 2003 to 2009

Source: UBOS Statistical abstracts and NPA (2010)

Among the numerous fish species, the Nile perch and Tilapia remain the most important, making up 46% and 38% of the total catch respectively. The sector depends on natural water bodies, which account for about 18% of Uganda’s total surface area. In 2007, the total amount of fish catch was 374,300 metric tons,




62

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an increase from 367,200 metric tons in 2006.

As a result of too much exportation, fish stocks from Lake Victoria have significantly reduced; hence forth more than 3 factories have closed in the last 3 years. Studies however show that the local market has potential to consume more than 300,000 tonnes of Fish but currently local supply is not even 100,000 tonnes. The Opportunity this presents is Aquaculture and fish value addition for both local and export market. Value added products include; dried fish, smoked fish, maritime vacuum parked fish, among others. As one of the major activities of economic potential to Uganda, the fisheries industry has witnessed illegal fishing, nearly causing extinction of the fish resources. Besides Coffee, Fish had, over the years, emerged as Uganda’s second major non-agricultural foreign exchange earner. The export trends are shown in the figure below. As already mentioned, fishing activities have been hampered by the continued depletion of fish stocks from the lakes as a result of over fishing and use of illegal fishing gears that end up catching immature fish. It should however be noted that regional market for fish is gradually rising with the return of peace in southern Sudan and Eastern Congo and the export earnings range between US$ 15 to 30 million annually. At the regional level, Kenya, Sudan, DR Congo and Rwanda are the major importers of Uganda’s fish products.

Quantity of fish exports (thousand tonnes), 2002-2009

Source: UBOS and MAAIF (2008) There is a continued decline in fish exports recorded from annual export returns. The annual exports of Nile perch declined from 39,201 to 31,681 tonnes in 2005 and 2007 respectively. As a result of this, the export earnings from fisheries reduced from US$ 143 million in 2005 to US$ 125 million in 2007. Exports for 2008 were 24,965 tones fetching 124.4 million dollars. Trends for 2009 and 2010 may still show decline unless strict controls on use of illegal fishing gear and control of fishing effort are enforced on all lakes.



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Poor transport infrastructure also limits the growth of the sector. For instance, locally, transportation of the available fish stocks to the market is affected by the bad roads and poor water transport systems. i.e; currently, there is only 1 ferry vying Nakiwogo (Entebbe) and Lutoboka (Kalangala) route daily. This ferry is small for the amount of cargo both fish and other merchandize. Fish worth over ugx30bn crosses from Kalangala on this ferry to the mainland weekly. The other route is Bukakata (Masaka) and Kalangala. These two ferries are small for the many fish trucks thus forcing others to delay, or other fishers to use boats. This brings about time wastage and compromises quality as high post harvest losses are registered due to delays. To reduce the losses and regain foreign exchange from the Fish Sector therefore, the Government of Uganda should;

Encouraging fish farming as a means of supplementing the deteriorating fish stocks in the •natural water bodies

Strengthen the maritime Policy by providing more equipment to strengthen the policing role to •avoid illegal fishing that has more than caused depletion of the fish stock since the 90’s to date

Improve infrastructure such as roads in addition to water transport for quick truck movements. •Key roads include but not limited to Kasensero road – Rakai, Bukakata road – Masaka, Katosi road, Kiyindi road, Senyi, among others

Undertake pragmatic stocking of viable water bodies; such as Valley Dams, small lakes and •extensive open swamps for Fish to breed and grow –Aquaculture promotion

Allocate USD 600,000 as a commitment to support the regional “save the Nile Perch” •programme intended to increase the size of the Nile perch catch

Support the sector through the UFPEA’s Task Force to train and sensitize fishing communities to •adopt hygiene in handling practices to meet international standards/EU

Fund the Quality Assurance Unit of MAAIF in Charge of the Value Chain of Fish in order to •improve on Uganda’s Fish Exports

Remove the import duty on fish nets to make them cheaper.•

5.2.9 The Live Stock IndustryThe livestock sector is one of Uganda’s important sectors contributing about US $ 290 million to total GDP in 2008-09 up from US $ 210 million in 2007-08. It constitutes 17 percent of the agricultural GDP and is a source of livelihood to about 4.5 million people in the country31. Livestock/poultry numbers increased between 2008 and 2009. These increments were attributed to the steady efforts to control animal diseases and improvement in the livestock production systems as a result of routine livestock extension interventions. More particularly, livestock numbers by type increased by 342, 103, 373, 96 and 1,123 thousands for cattle, sheep, goats, pigs and poultry respectively in 2008-09 compared to the previous year of 2007. The trends can be seen in the figure below.

31 Uganda Investment Authority website, 2010




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Livestock numbers from the year 2002 to 2009

Source: Uganda Bureau of Statistics and MAAIF (2010)

5.2.10 The Leather, Hides and Skin SectorOpportunities in the Leather, Hides and Skin Sector lie in construction of Modern slaughter houses, tanning of high value skins and production of foot wear. Uganda’s tanning industry is relatively immature and foot ware business is currently dominated by one large manufacturer. Investors enjoy locally sourced raw materials, of which the surplus is exported. Raw hides and skins are smuggled out of Uganda into Rwanda and DR Congo then re-exported as transit cargo since Rwanda and DR Congo don’t have export levies, this had denied the many tanneries the much needed raw materials of hides and skins. It should be noted that the sector faces other issues such as the VAT charged on chemicals and parts used in the

hides and skins tanning process. The raw materials aren’t readily available locally yet claiming the VAT refund takes long, and such capital should have been used to source raw materials locally. More and more investors have invested in tanneries in Uganda but there will be no work or raw materials if the hides and skins are being smuggled to Rwanda and DR Congo and then brought back to Uganda as transit cargo for export. Uganda also risks losing more jobs and revenue due to the smuggling of raw hides and skins to Rwanda and DR Congo. The following interventions ought to be considered by the Government of Uganda for the sector to reap big;

Establish controls at abattoirs to monitor the movement of raw hides and skins stocks, so that •these hides and skins can go direct to the many tanneries now available.

Ask all EAC states to mutually implement the same export levy on the exports of raw hides and •skins so as to deter smuggling and disguised transit shipment from states where the duty isn’t in place (Rwanda and Burundi) to Mombasa for export.

Invest more in Value Addition for high returns on finished and semi-finished products, i.e. for •every $ 1 worth of raw hides exported there is a $ 3 worth when processed to finished leather and $ 12 worth when processed to finished product

Waive the VAT on raw materials like chemicals because it takes long to process yet this money •can be used as capital to buy more hides and skins

5.2.11 The Beef SectorThe production of beef has been influenced by increase in livestock numbers as well as the local and regional demand for beef products. There is some appreciable level of meat processing into products like sausages whose demand has been on the rise. The Figure below shows the incremental levels of production for the last 4 years where an upward trend of about 169,950 metric tons in 2009 from 2008 level is observed which was a 2.9% increase.



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Beef production trend in metric tonnes from 2006 to 2009

Source: UBOS and MAAIF (2008)

With lots of potential, growth and development of the beef industry is hampered by factors such as; lack of a national animal data base, neglected ranching schemes, insufficient Water and water dams for the animals, animal diseases, lack of a modern abattoir that can comply with export standards, which would also serve as a link between farmers and the market within the meat industry. The Private Sector dealing in the beef industry therefore urges Government to consider the following Interventions quickly;

Construct a standard export abattoir to promote export of beef and beef related products•

Invest in more water dams for the animals, and in animal diseases•

Avail long-term credit facility to support investment in ranching for increased beef production •to ensure adequate capacity for the growing market demand for Uganda’s Beef

5.2.12 The Dairy SectorUganda has experienced a steady increase in milk production levels since 2006 as observed in the figure below. The production of milk in the year 2009 was estimated to be at 694 million litres, and this accounted for a 3.1% increase from the production levels of 2008. The increase can be attributed to the increase in livestock numbers as well as the local and regional demand for milk and its products. Factors like population growth and the increase in purchasing power have created high demand. The expanding number of collection centres in the milk producing areas and the increase of its shelf life by processing it into other products has promoted production. Some milk processing companies have begun exporting milk products as well.




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Milk production trend (million litres) 2005 – 2009

Source: UBOS and MAAIF (2010)

The high duty rate of 120% on poly-layered plastics for dairy products with the exception of milk pouches makes milk more costly and therefore less consumed in Uganda. Currently, processors packing milk and yogurt elsewhere enjoy and use plastic pouches with duty-free privileges. However, processors packing cheese in similar poly-layered but clear plastic pouches do not, making Uganda’s dairy products, such as cheese and Milk, more expensive and uncompetitive than Kenya’s dairy imports into Uganda. It should also be noted that there is an Import duty imposed on Milk Powder hence there is a very high rate of illegal and extensive smuggling of powdered milk into Uganda. For instance, over 70% of the Ugandan market is illegally supplied through smuggling due to tax evasion. Therefore, the desired development of the dairy industry is hampered by the illegal trade plus the very high technology and skills needed to make powder milk. The milk powder produced locally isn’t sufficient in terms of quantity and quality i.e. since this sector is faced by heavy smuggling, it deters the would be investors who would engage in milk processing which would reduce wastage during bumper stocks of dairy products32. Other challenges include; VAT charged on Cream, un fair competition, plus general higher costs of doing business. For the sector to thrive therefore, the business sector in Uganda recommends the following Government interventions;

Remove the 120% duty charged on poly-layered plastics for the packaging of all the dairy •products.Zero-rate VAT imposed on milk cream products•Reduce the Import duty on processed milk powder from 60% to 25% to curb smuggling•

5.2.13 The Rice SectorEAC Production: EAC rice farmers have been increasing area harvested in response to historically-high domestic rice prices, resulting from the establishment of the EAC 75 percent ad-valorem tariff in 2005 and recently-high world rice prices. The increasing production represented in the tables here below results mostly from increasing area harvested, even while yields over the 2009-2013 series remain relatively stable.

The relevant figures of Paddy production, Equivalent Rice Production and Imports of rice for the EAC based on the most recent information reported by FAO and CountrySTAT are furnished. The FAO information has been updated only till 2010 and the indicative 2011-2013 figures based on the trend and as projected by FAS-USDA studies and reports based on unpublished country data update currently under consideration.

It must be noted that import data includes quantities imported both within the EAC region and from outside the EAC region. It is also pertinent to note that as for the import data for Uganda, the imports of rice from Asian countries into Uganda has now been replaced and taken over by Tanzania.32 Uganda’s Total Milk Production per annum is estimated at 1.3 Billion Liters, Platform for Action, PSFU, 2011Uganda’s Total Milk Production per annum is estimated at 1.3 Billion Liters, Platform for Action, PSFU, 2011



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EAC* Rice Production Statistics

YearArea

Harvested (Ha)

Production Paddy

Equivalent (MT)

Production Milled

Equivalent (MT)

Yield/Ha (MT)

Consumption Paddy

Equivalent (MT)

Consumption Milled

Equivalent (MT)

Imports (MT)

Exports (MT)

2001 389,090 542,380 361,767 1.39 1,458,830 973,040 350,760 7,473

2002 684,223 1,763,594 1,176,317 2.58 1,437,205 958,616 270,956 9,978

2003 744,688 856,269 571,131 1.15 1,696,970 1,131,879 441,715 14,741

2004 751,120 1,450,338 967,375 1.93 1,833,133 1,216,023 489,937 9,640

2005 853,752 1,513,508 1,009,510 1.77 1,901,785 1,268,490 368,379 25,601

2006 804,410 1,588,714 1,059,672 1.98 2,018,658 1,346,445 415,024 29,536

2007 729,443 1,684,100 1,123,295 2.31 1,969,937 1,313,948 375,364 45,756

2008 849,856 1,702,570 1,135,614 2.00 2,206,897 1,472,000 375,518 32,207

2009 1,102,770 1,771,475 1,181,574 1.61 2,419,790 1,614,000 413,645 41,898

2010 1,337,056 1,517,741 1,012,333 1.14 2,343,328 1,563,000 395,314 32,156

2011 1,665,000 1,615,000 1,077,205 0.97 2,407,796 1,606,000 465,624 38,721

2012 1,687,000 2,035,000 1,357,345 1.21 2,616,192 1,745,000 408,000 15,000

2013 1,706,000 2,065,000 1,377,355 1.21 2,631,184 1,755,000 425,000 15,000

*Includes Kenya, Tanzania, Uganda, Rwanda and Burundi – All data including trade Data for all tables in this report are obtained from FAO, Country STAT & Revenue Departments where available through 2011 and otherwise estimated and forecast by FAS/USDA

It must be noted that 72% of the imports into the EAC is by Kenya.

Uganda ProductionSince the introduction of the EAC CET of 75% on rice in 2004/2005, Ugandan rice growing area and production has significantly increased. The area has increased by more than 50% and production has nearly doubled. With continued growth, the area is expected to increase to 155,000 ha and production to nearly 300,000 MT by 2013.

The rice cultivation, production, import and export statistics* for Uganda are furnished as a table below.

YearArea

Harvested (Ha)

Production Paddy

Equivalent (MT)

Production Milled

Equivalent (MT)

Paddy Yield/Ha

(MT)

Consumption Paddy

Equivalent (MT)

Consumption Milled

Equivalent (MT)

Imports (MT)

Exports** (MT)

2001 76,000 114,000 76,038 1.50 132,591 88,438 44,420 8942002 80,000 120,000 80,040 1.50 168,680 112,509 43,192 7652003 86,000 132,000 88,044 1.53 187,207 124,867 47,924 3,4102004 93,000 121,000 80,707 1.30 186,427 124,347 63,899 7,0762005 102,000 153,000 102,051 1.50 213,235 142,228 48,337 15,1852006 113,000 154,071 102,765 1.36 187,593 125,125 33,523 24,2662007 119,000 162,083 108,109 1.36 216,246 144,236 41,992 24,9332008 128,000 177,857 118,631 1.39 248,876 166,000 30,223 25,3512009 138,000 205,765 137,245 1.49 268,366 179,000 35,738 38,4412010 140,000 218,111 145,480 1.56 265,367 177,000 42.314 32,156 2011 145,000 233,000 155,411 1.61 278,861 186,000 58,624 38,721 2012 150,000 240,000 160,080 1.60 289,355 193,000 40,000 5,000 2013 155,000 250,000 166,750 1.61 292,354 195,000 40,000 5,000

*Published 2001-2010 Data from FAO & Country STAT, Imports/Exports from URA & USDA FAS estimate and forecast for 2011/13**Export & Import Data are based on URA data from 2001-2011 and includes Re-Exports as well. Figures for 2012/13 are projections for only exports.




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Any reduction in import tariffs comes with negatives and obvious potential benefits for agricultural exporters whose access to markets is improved. However, it must be noted that improved market access for some countries means that agricultural producers in importing countries that are reducing their trade barriers face increased competition from imports in general and from sudden import surges in particular. For many developing countries, particularly those at earlier stages of development, the agriculture sector is the mainstay of employment, income generation, food security and development. In such countries, often characterized by traditional agricultural systems and underdeveloped markets, the agriculture sector may be unable to withstand increased import competition and, as a result, domestic agricultural production, rural incomes and food security would be vulnerable and development efforts compromised.

The positive impact of the EAC CET on rice implemented in 2005 emphasises the importance and need for rationalising the tariff structure across the EAC. The consequences of disparity in the tariff on imports of rice will no doubt be deleterious on the fledgling/developing, domestic rice production and processing sectors in Uganda and in EAC. It also highlights the case for sustaining the current level of import duty on rice and thereby contributing towards the development of a valuable, export-oriented sector that can make an important contribution to supplying rice requirements of neighbouring countries, and to meeting government objectives for poverty alleviation and the modernisation of agriculture (In Uganda more than a million families involved in the rice cultivation and production sector would benefit together with about 350 rural rice mills).

The Government of Uganda proposes to double the production of rice through: - expansion of area under production; increasing the number of smallholder and large scale farmers involved in rice production; increasing productivity; and improving post-harvest handling. To ensure that this happens, strong public private partnerships are to be developed, with private sector taking lead in developing core nucleus farms, organizing out-grower producers, and improving quality and market linkages. The vision of success of such an intervention is in realising an additional 200,000 MT of milled rice worth about US$130 million per annum by 2015.

In line with the above goal, the Government of Uganda’s overall strategy is to achieve the planned increase in rice production through:-

Public Private Partnerships with private sector enterprises engaged in large scale rice production and •processing; and Increasing production and productivity under small holder rice schemes and developing market •linkages and the value chain.

As part of the above strategy, the Government of Uganda in partnership with the Private Sector and funding from the Islamic Development Bank is developing a PPP (Public Private Partnership) in two locations in Bugiri and Iganga districts of Eastern Uganda, based around the Kibimba and Naigombwa areas respectively.

In support of such private sector initiatives and developments, the government role is to set policies, remove barriers, put in place an appropriate regulatory framework and provide supporting infrastructure. Public sector support for the sector as a ‘priority’ sector for development can also be demonstrated via the ‘Outgrower programme’ for upland rice farmers33. Several Rice initiatives supported by NGO’s

(USAID – IDEA/APEP, ASPS, JICA, Ssasakwa Global 2000, etc), FAO, NAADS, TILDA Uganda Limited, The Upland Rice project etc are perceived to have succeeded in creating considerable enthusiasm among the farming community because rice is a better (higher) margin crop than other cereal crops. These programmes have also been responsible for introducing, multiplying and popularising potential high yielding, drought tolerant NERICA34 varieties from Africa Rice Center (WARDA)35. 33 Supported by the Rockefeller Foundation, US AID and New Rice for Africa �NERICA�34 New Rice for Africa35 Africa Rice Center �Formerly WARDA - West Africa Rice Development Association�



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With the bi-modal rainfall pattern in Uganda and the favourable climate and soil conditions for rice cultivation, Uganda has the capability and capacity to, not only produce and meet its domestic demand for rice, but also has the potential to contribute towards meeting regional demands for rice. For example, the combined import requirement for rice in Uganda, Kenya, Tanzania, Rwanda and Burundi in 2010 was 395,314 MT of milled rice, valued at (import level) US $183 million – equal to about 608,175 MT of paddy rice. It must be noted that of this total import of 395,314 MT, 72% or 283,000 MT comprises of import by Kenya.

Considering the rainfall pattern and weather in Uganda, we can certainly achieve this requirement in production including the increase in demand over the next five years by maintaining the current growth in area under rice, interventions planned through Public Private Partnerships in Eastern Uganda and an increase in productivity through popularization of good quality seeds of both upland and lowland NERICA.

ChallengesLow productivity per hectare;•Water stress due to unreliable rainfall and lack of irrigation infrastructure, yet much water is needed •for rice production;Soil fertility decline in many parts of Uganda;•Marketing: Uganda’s rice is in growing demand locally and in the neighbouring countries (mainly •Kenya, Southern Sudan, Eastern Congo, Rwanda and Burundi), however there is challenge in maintaining a competitive price to make it economically viable for farmers to compete with imports from Asia;Farm labour: Rice production is labour intensive; however availability of labour during the critical •growing season is a challenge;Poor post harvest handling and processing thus low quality of rice; and •Poor quality seed, lack of use/availability of fertilisers and agrochemicals and on-farm technologies •in the face of the need for high yields and improved quality of rice.Continuous exception of CET on Rice in Kenya has been leading to leakage of export into Uganda and •it is increasingly beginning to have impact as rice production increases. The predictability challenge resulting from the stay of CET is beginning to crop in for investment planning in the Rice sector.

The CET of 75% needs to be maintained in Uganda and in the region. Should Kenya, which is •now the largest importer and supplier in the region continue to stay application then it may be prudent for Uganda to charge rice from Kenya at 75% which corresponds to the EAC CET rate.Support Irrigation infrastructure to ensure availability of water during the cropping season;•Improve Land consolidation, design and management to ensure sustainable rice production for the •present and future needs;Support Research on improved rice varieties, seed multiplication and development of sustainable •farm technologies. This may be done on a PPP basis;Support Dissemination of quality seed and technologies;•Empower the Private Sector on mechanisation for production and processing to ensure timely •farm activities and quality; Support Market sourcing and stability , partly through the EAC -CET to ensure that the high ROI •in rice production are maintained; andModel PPP’s to expand on rice cultivation and processing in Eastern Uganda and spread to •Northern Uganda which is rapidly taking up this production process with the peace ushered in the region.




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5.3 THE MANUFACTURING SECTOR

Uganda’s Manufacturing output has been expanding by more than 10% annually over the last 8years. Opportunities in the manufacturing sector exist in areas virtually ranging from; Food processing and beverages, leather, Textile, Paper, Textiles and garments, Fertilizers, Pharmaceuticals, Oil Exploration and Extraction, Fabrication, Ceramics, e.t.c. With lots of potential for investment as alluded to, the sector’s growth and development however is hampered by factors including; erratic and high energy tariffs, lack of affordable business finance, high transportation costs, including to the Sea, legal and regulatory frameworks, low labour productivity and skills, regional integration challenges, among others.

5.3.1 Foods and Beverages SectorThis sub-sector includes Coffee, Tea, Soft drinks, Water and Alcoholic Beverages. The demand for beverages is growing as witnessed by the current upward trend in the manufacture of these products indicating increasing opportunities in the manufacture of beverages for both local and foreign markets. However, it should be noted that this sector’s growth is hampered by many factors including; Taxation where for instance currently the sector faces Excise duty charges of 10% and 13% on Water and Juices respectively. The beer industry is of the view that any increases in the current excise duty are likely to drive lower income consumers back into consumption of un regulated, informal alcoholic beverages, thereby reducing consumption of clear beer and branded spirits, and effectively narrowing the tax base from alcohol. For Uganda to harness the potential from the Foods and beverages sector therefore, the Private Sector proposals the following interventions;

Gradually reduce the excise duty on soft drinks from 13% to 10% in 2012 and a further gradual •reduction to 0% in the next three years.Gradually reduce the Excise duty on Water from 10% to 5% in 2012 and gradually to 0% •Completely remove the excise duty on juice from 13% in 2012 to 0% so as to promote the •agricultural production of fruits & also help reduce / end the bumper harvest wastages currently in place.Harmonize the Excise duty of Water, Soda and Juices as in the EAC region•The EAC meaning of local content for industrial in-puts/raw materials should apply to raw •materials grown only within a Partner State. Introduce tax stamps for spirits & wines to fight tax evasion. •Maintain a no change to the current ad valorem rates of excise on beer, i.e. 60% for malt beer •(beer made from predominantly imported barley malt), 40% for beer from locally grown and malted barley, and 20% for non-malt beer (beer made from 75% local raw materials).Establish incentives to encourage alcohol companies to undertake noble but expensive agro-•processing investments in rural areas.

5.3.2 The Plastics and Packaging SectorUganda’s demand for Plastic far exceeds the local supply in terms of quantity as well as variety. Opportunities here are in specialized plastic products, plastic mold manufacture and a wide range of PVC products. On the other hand, the packaging industry is a very strategic sub sector as it provides marketing and distribution support to all industries. It includes all forms of printed paper and packaging, woods, foil and glass. More than 50% of the domestic packaging requirements are imported. Investment opportunities exist in production of glass containers, tin-cans, corrugated cases, cartons, flexible packages, plastic packaging, high quality labels, printing as well as on package printing. To seize these and more existing opportunities in this sector, challenges such as the prohibition of the importation, local manufacture, sale or use of plastic bags and sacks as in the Finance Act, 2009 should be reversed. Behavioural change through strict anti-littering laws and regulations should instead be encouraged, such as those the Kampala Capital City Authority has started enforcing. This is because isolated implementation in only Uganda relative to an EAC overall ban of polythene / carrier bags manufacture cannot be effective as plastics would still enter Uganda from other EAC countries since there is free movement of goods. The business



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community dealing in the local manufacture, importation, sale and use of plastic bags and sacks through the advocacy body of the Private Sector, PSFU therefore urges the government of Uganda to;

Lift the ban and instead effectively and efficiently implement the waste management & disposal •policy in Uganda.Ensure that all polythene / carrier bags manufacturers & importers have a recycling plant to •recycle any related waste material that’s generated in their vicinity A countervailing tax should be imposed on imported goods to avail a well levelled playfield•Value Added Tax on packaging materials should be standard rated.•

5.3.3 The Iron and Steel Industry A number of factors also impede developments in the iron & Steel sector. The challenges also limit the competitiveness and ability to growth in the Industry. Among other concerns, the industry is faced with higher costs of production in terms of Raw Material and high transportation costs. For instance Roofings limited has invested more than US$ 8million to set up a hi-tech modern plant for galvanizing wire in the KIBP at Namanve, as first phase of the US$ 120 million in the new infant plant, Roofings Rolling Mills. So far it has reached a production capacity of 1,000 MT per month since March 2010, of which 500 MT is for Uganda and the rest is exported to the region36. The challenge here however is of high transport costs, i.e. having already paid for transportation of raw materials from Mombasa to Kampala (approximately 110$/ton), to re-export to Kenya and Tanzania would be extra costs of transportation, making the product uncompetitive. More heavy investments of more than US$ 10 million and installation of a cut-to-length line/slitting for cutting and slitting mild steel plates of thickness up to 6mm and widths up to 2m. For improved competiveness in the region and reduced pressure of prices on construction materials in Uganda, the business community in the iron and Steel Industry recommends the following for Government intervention;

Reconsider the energy support to the steel sector as mega consumers so that their tariff is •lower than the rest of the consumers.Impose a 10% duty in the 2012/13 and move to 2012/13 on galvanized wire imported from •outside the region as production in the region increases, i.e. HS code 7217.20.00. (This is currently zero rated under the CET of the EAC Customs Union).As production of Galvanised coils peaks production in 2012/13, consider and impose the •EAC CET. In the meantime an exception be sought of implementing CET for one year.Impose a duty of 10% on cut plates HS code 7208.40.00 7208.51.00, 7208.52,00, •7208.53.00, 7208.54.00, whose current duty is zero.

5.3.4 The Pharmaceuticals SectorThere are various opportunities in Uganda in the manufacture of drugs, medical equipment and accessories as well as processing of herbal medicine. Unfortunately, Uganda produces only 5% of the Pharmaceuticals it requires; this means therefore that 95% of these are imports. The Global demand for natural ingredients is increasing with herbal medicines and cosmetics recording high returns. The country has a rich bio-diversity with commercially viable plants and trees such as Aloes and Shea butter that would enhance her capacity to locally manufacture and produce more pharmaceuticals if supported by the Government. Currently, the manufacturers are faced with a number of challenges including Erratic and high cost of energy, high duty/tax rates on spare parts, among others which limits and hinders continuous production & manufacturing of these products. The sector if supported, would serve as one of the major good source of revenue for the Ugandan Government. Therefore, for local firms to compete favourably in the region, the Private Sector recommends the following Government interventions;

36 The product has so far been exported to Kenya, Tanzania, Rwanda, Burundi and Southern Sudan




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Provide Tax exemption on industrial parts &machinery to all manufacturers & industrialists in •this sector.Create a level playing field by reintroducing a 10% duty on all finished pharmaceutical imports •to Uganda since 95% of the pharmaceuticals are imported into Uganda. Heavily Subsidise the Pharmaceutical dealers as compared to their counterparts in India and •China to ensure Uganda competes favourably in this sectorHeavily Invest in Energy to ensure constant flow to enable production continuity •

5.4 THE TOURISM SECTOR

The tourism sector is a fast growing contributor to the national economy, investment, both direct foreign as well as domestic, and employment, particularly in rural areas where few other jobs are available, but also in urban centres. It contributes nearly 25% of Uganda’s total exports earnings. The hospitality sub-sector alone employs an estimated 57,000 people country wide with the related transport sector accounting for another 16,000 jobs. This totals over 70,000 employees or 16% of the total employed workforce. Secondary and tertiary employment in other sectors providing support services and supplies to the tourism sector add further to this share.

Uganda has enormous tourism potential that provides great opportunities which when harnessed can foster growth and economic development. Uganda is blessed with nature and has diverse nature based attractions such as Mountain Guerrillas, over 1060 bird species, tree climbing lions, the World’s third deepest lake and tropical forests. It lies at the equator and has tropical climate with moderate temperatures throughout the year. It is in Uganda where the East African savannah meets the West African jungle. The country is also endowed with diverse heritage and cultural treasures that attract both foreign and domestic visitors. The archaeological treasures, the long monarchical leadership, the living culture and the history are tourism products that Uganda can exploit. In addition, the country has a reputation of being Africa’s friendliest country that stems from the tradition of hospitality common to its diverse population. This potential can enable Uganda to have diverse tourism product mix. There are great opportunities for bird watching, water spot, guerrilla tracking, mountain climbing, faith based tourism, chimpanzee watching, nature guided walks, community walks, butterfly viewing, viewing golden patas monkeys, cultural and heritage sites viewing, and white water rafting. If this sector is well positioned it will contribute to provision of employment and generate vast revenue at a low cost to the environment. Development and growth of the Ugandan Tourism Sector is however hampered by the following factors which need quick redress.

5.4.1 Hospitality and Tourism Training Institute of ExcellenceUganda lacks a training institute of excellence that would provide the tourism industry with highly skilled manpower required to ensure quality services. Therefore, establishing an institute of Excellence under a PPP arrangement in partnership with an international renowned institute will ensure sustainability and value in the sector. The sector requires more man power training which should start right from secondary schools and this can be achieved through private sector strategizing industrial training programmes. Specific training needs for the Hotel and Tourism sector should be identified so that Government is encouraged to support existing institutions for instance by exempting equipments to be used in training e.g. kitchen equipments washing machines. Government can further support the sector through providing scholarships to students in the private tertiary institutions. All the hoteliers currently providing services should be trained and equipped with skills to manage the industry.

5.4.2 Infrastructure developmentThis includes roads, electricity and ICT backbone linkage to the tourism sites. The tourism linkage roads that total 4,100kms are in a deplorable state. This requires UGX 164 billion for reconstruction, but



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can be phased out in 3 years. For instance all the critical access roads to the tourist attractions/ national parks should be refurbished to attract more tourists to these destinations. They include; Katungulu – Ishasha, Kabale-Kanungu-Butogota-Buhoma, Kampala-Masindi-Paraa (work in progress), Kitgum-Orom-Kanenga (to Kidepo national park), Kabale to Lake Bunyonyi among others. The Kigezi Tourism Cluster with over 650kms of roads has the south western tourism circuit and contributes over 80% of Uganda’s revenues from tourism. It includes the Bwindi and Mghinga Guerrilla Parks and Ishasha of Queen Elizabeth Park famous for its climbing lions. This region ought to be prioritized for rehabilitation. The Government of Uganda should also extend Power to Ishash, Bwindi and Mgahinga in the western part of Uganda with lots of tourism sites, art and crafts, plus other attractions.

5.4.3 Marketing Uganda’s Tourism PotentialUganda spent about $300,000 on marketing in 2010/11 and receives an estimate of $600 million in revenue. Tanzania spent about $10 million in the same year and received $3.2 bn in revenue. Uganda received about 786,000 tourists, but only 40,000 actually visited the gazetted tourist sites. Efforts to increase this figure to 100,000 in the next 3 years will include increasing resources of marketing to $2 million per annum and. This will increase revenues by $200m for the 100,000 tourists who will visit the various sites. Forecasts from the UN World Tourism Organisation for the next 10 years indicate that although Africa has great potential for tourism, growth in tourism in other continents will outstrip that for Africa. Much of the current tourism in Africa is concentrated in Egypt, South Africa, Kenya and Tanzania. It is important to note that the Governments of Kenya and Tanzania allocate substantially higher levels of resources for tourism promotion for example; Kenya has invested £ 30 million in branding the nation37

5.4.4 Institutional weaknessesThe new Ministry of Tourism Wildlife and Heritage is underfunded and has no particular office premises. Also, UWA has no substantive Board and most of its top managers are in acting capacity. This leads to a lot of inefficiencies and failure to make major decisions. Hotels should also be categorized and graded according to the level of services they provide e.g. five star and there is need to strengthen capacity through the Public Private Partnership.

5.4.5 Domestic TourismUganda’s domestic tourism is negligible due to low sensitisation and lack of affordable facilities at these destinations. The concessions to these parks especially Queen Elizabeth and Murchison Falls do not allow for other developers to invest such facilities. Domestic tourism should be well articulated among the local consumers before the sector widens its scope of operations to international level. It should be noted that the high prevailing interest currently at 30% charged on both new and existing loans acquired, this has paralyzed new investment ventures in the sector. There is therefore need to create a fund / credit facility for tour operators to borrow at low interest rates to purchase Tourism vehicles (modified) so as to compete favorably within the EAC region38. To revitalize the sector and realize incomes from this promising sector, the Ugandan Government should consider the following recommendations as raised by the sector dealers / players;

37 Sector branding increases a country’s competitiveness thus the reason for launching ‘Magical Kenya’ – Kenya’s national brand abroad. 38 According to the Association of Uganda tour Operators, a modified tourism vehicle costs approximately $60,000




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Support the skills development of the sector by enhancing the capacity of the tourism institute •in Jinja and also support Private Sector institutions in carrying out this functionDevelop a branding and marketing drive for Uganda’s Image with a view of improving the •tourism sector. This can be done on a PPP basis.Encourage domestic tourism as a first step to promoting tourism in the country•Increase funds to UTB and tag it to the activities which will effectively develop, adapt and •promote Ugandan TourismUpgrade roads supporting the tourism industry expeditiously, more attention ought to be on the •key Tourism roads in the circuit2

Under a PPP approach, Government should consider buying shares in Air Uganda and gets the •airline fly the National flagSupport UWA to create a buffer between wild animals and local farmers in the short run and •also help farmers bordering parks to develop tourism products so that they can diversify their economic activities to tourism related activitiesFully implement the Tourism Act with priority focus on improving competitiveness of the •sector, also fast track the implementation of the Tourism Sector Policy to guide its operations and fully realize its potential.Create a fund / facility for tour operators to borrow at low interest rates to purchase •Tourism vehicles (modified) so as to compete favorably within the EAC region

5.5 THE SERVICES SECTOR

5.5.1 The Insurance Sector The insurance industry in Uganda is still under-developed though with potential to make valuable contribution to the national GDP. However, this sector is faced with the challenge of bringing Ugandans to appreciate insurance policies and be encouraged to subscribe for long-term benefits. The sector is also faced with a number of challenges that impede its growth and which require quick Government interventions. Below are some of the sector–specific concerns:-

Micro Insurance/Agricultural1.1.1.1 Insurance The above products are vital for low income and majority of the Uganda populace. Though Micro Insurance is provided for in the 2011 Insurance Amendment Act, Regulations to guide provision of micro insurance are yet to be set in place. Government has on several occasions castigated insurers for not providing Agricultural insurance, but it has not set in place the necessary infrastructure and requisite support. There is limited capacity amongst Insurers to provide such insurance and the distribution costs are high thereby rendering the products uneconomical. It is recommended that incentives (such as tax rebates, catastrophic reinsurance pools, premium subsidies, etc) be put in place to encourage insurers venture in products that serve the majority. We recommend that such incentives should be incorporated in the broader Agricultural Policy. It is evident that there is no reliable weather data in the economy. There are currently less than 20 robust weather stations in the country. Consequently, insurers cannot provide weather index insurance, which would largely address agricultural risks. We recommend that Government heavily invest in the Meteorology Department to set up robust weather stations throughout the country to enable it provide reliable weather data that would consequently lead to development of weather index insurance.

Bank Assurance1.1.1.2 The2011 Insurance Amendment Act provided for bank assurance, which allows banks to distribute insurance products. However, the Financial Institutions Act (FIA) prohibits banks from selling insurance services. Amendment of the FIA should be fast tracked to allow banks sell insurance services

COMESA Insurance Schemes1.1.1.3 The Schemes are presently managed by the National Insurance Company Limited (NICL) as the Government designated national bureau. We have expressed the importance of having a neutral bureau.



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The Ministry of Trade requested the Insurance Regulatory Authority (IRA) to formulate Regulations to transfer the schemes to a neutral party and we are yet to be advised on the process. For reasons of business fairness as well prompt handling of claims, it is imperative that it is considered to have the schemes transferred to an umbrella entity representative of all insurance companies, subject to providing regular reports to the Industry Regulator. The industry has vouched for Uganda Insurers Association as the only representative body suited to handle the Schemes as the case in Malawi and Zimbabwe.

Motor Third Party Insurance1.1.1.4 The current Motor Third Party Act provides for a statutory bodily injury limit of only shs.1, 000,000/= without cover for property damage. It also excludes insurance of vehicles owned by the Government of Uganda. The provision in the Act that provides for “uninsured vehicles, hit and run accidents” stands suspended. We note that not that not only is cover inadequate, it also leaves a big number of victims outside scope of cover. It is also not in line with other statutes in the region which provide for higher limits of coverage and wider scope of coverage, including property damage.

Local insurance of domestic risks.1.1.1.5 There is concern on the enforcement of section 3(2) Insurance Act [Cap. 213] mandating local risks to be locally insured, except where such capacity is not available subject to approval by Insurance Regulatory Authority. There is need to protect and grow the domestic insurance industry and the economy, and therefore relevant legal enforcement mechanisms should be provided in the law. Such modifications shall enable in boosting the local industry in terms of insurance penetration with the retention of premium and building of local capacity in the insurance industry as well. Conversely, these will definitely lead to improved underwriting and further create greater scope to tailor products to the needs of unique clients. In economies such as Kenya where this is strictly enforced, growth has also been seen in the tax base which has significantly contributed to the development of Kenya’s economy. It is also important to note the recent discovery of Oil, and domestic insurance should be compulsorily protected by law. This move will substantially develop the Ugandan insurance industry, and further contribute to reduction of costs (administrative and otherwise) which cumulate with foreign insurance. The industry has taken steps to train its personnel and also create an oil insurance syndicate to address capacity concerns. The local content provision must include insurance services, and be enforced. In Economies like Angola where local content for insurance of oil risks is legislated, the capacity and contribution of the insurance sector to GDP is paramount.

Marine Insurance on Imports1.1.1.6 The Insurance Act requires that all imports be insured locally but this provision has been difficult to enforce because goods are imported on CIF basis. The effect of this is that the country loses a lot of foreign exchange, Uganda goods remain uninsured once they are landed at Mombasa or Dar es Salaam, loss of government revenue that would have accrued from the premium payable including stamp duty and corporate on insurance companies and brokers.

Workers Compensation Insurance1.1.1.7 There has been consistent delay in formulating regulations to operationalise the Workers Compensation Act 2000. As result, many employers, including Government have not insured their workers, as per provisions of the Act. By not insuring the civil servants, Government has set a bad precedent. This makes it hard for its department to enforce the Act, when the author of the Act is the principal defaulter. In addition the insurance industry should be involved in the consultative process on the above regulations. The industry Regulator should also be involved to ensure that workers are protected with the provision of insurance by their respective employers. The enactment of regulations to operationalise the Workers Compensation Act should be expedited. It is also our proposal that the Act is enforced by ensuring that the mandatory provisions of Section 18 of the Workers Compensation Act is enforced by provision for; purchase of insurance stickers and certificates of insurance, display of certificates at the employer’s premises, inspection of certificates and policies and criminal penalties in cases of contravention. It is further proposed that the sales are managed by the Uganda Insurance Association (UIA). Strict compliance requirements shall provide safety control nets at work places, including a better health environment.




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Requirement for Trading Licences1.1.1.8 The Trade Licensing Act (Cap. 101) provides an exemption in respect to businesses for which a separate operating licence is required under any written law. This applies to insurance companies that are licensed by Insurance Regulatory Authority by virtue of Section 32 Insurance Act (Cap. 213). In the circumstances, insurance companies are not required to obtain municipal trading licences. However, most local governments compel insurance companies and Insurance Brokers to buy local trading licences for insurance company branches/ Agency offices. The Ministry of Local Government should prevail over local governments to recognize the annual license issued under the Insurance Act.

Insurance Bonds 1.1.1.9 Government, in securing performance of their contractors, require the provision of insurance bonds or bank guarantees. PPDA has directed on the acceptable format of the bonds (that is first demand bonds) which is not supported by available reinsurance treaties. This will render insurers unable to issue the bonds, and contractors will be forced to secure guarantees from banks. Bank guarantees are not only expensive for contractors but also impact on capacity to perform. It will also render local contractors incapable of competing for government contracts.

Insurance of Government Assets1.1.1.10 It is peculiar that there is no specific statutory provision on compulsory insurance of all government assets. Insurance would significantly reduce the government’s current risk exposure and provide a more transparent and fair settlement mode of claims. Insurance also avails contingent funding and provides certainty on financial exposure. With Government’s competing priorities, the burden in cases of accidents is easily passed on to an insurer. This also adds a level of value to the assets of Government. Further fraudulent claims are minimized, following the strict scrutiny and investigative procedures claims are submitted to by insurers.

Imposition of VAT charges/Withholding Tax on Commission 1.1.1.11 VAT charges imposed upon other insurance related costs such as actuary, risk assessment and valuation plus delayed or non- provision of proper and/or conclusive accident reports, impede equitable and prompt settlement of claims as it denies/delays justice to the poor. In 2006, Government introduced a 6% service charge on commission of insurance brokers and agents. However, the administration of the policy was given to a few licensed insurers and collecting agents, this had created unfair competition for unlisted insurers. The threshold of UGX 1,000,000/= from which the tax applies cannot be easily determined thus encourages non-compliance.

Provide Incentives (including tax rebates, catastrophic reinsurance pools, premium subsidies, •etc) to enable development of micro and Agriculture insurance products

Enforcement of importation of goods into Uganda on C&F basis- Insurance should therefore •be taken locally, and the Marine Insurance Certificate should be made one of the required documents necessary for URA to clear all imports from outside EAC region

Exempt Insurance and auxiliary services from VAT and Withholding Tax•

Expedite the enactment of regulations to operationalize the Workers Compensation Act and •review the Motor Third Party Legislation to bring it in line with regional and international standards

The Ministry of Local Government should prevail over Local Governments to recognize the •annual license issued under the Insurance Act {Trade Licensing Act (Cap. 101)}

Ensure that the format of Insurance bonds (as a conditional bond) is accommodated for •Government contracts to avoid stifling business in the economy



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5.5.2 The Banking SectorThere is currently little access to favourably rated credit lines of low interest for Uganda’s business community especially manufacturers and industrialists. This limits availability of more credit to the Private Sector. Traders and entrepreneurs are therefore getting less and less interested in carrying out investments in the manufacturing and industrialisation sector that otherwise has lots of potential to employ far many more Ugandans. There is therefore need for new credit lines which should force the local commercial banks to review their credit access rates and terms due to fear of competition hence losing business. Uganda’s monetary authority should be mindful of the hardships Ugandans are facing because of the way monetary policy is being conducted. Interest rates are simply too high and not supportive enough of the productive sectors39. There is need for continued dialogue between the Bank of Uganda and MoFPED to ensure that the latter invests sufficiently in boosting supply to leverage the conduct of monetary policy. Bank of Uganda application of demand management policies to check the increase of imports (a depreciating exchange rate) fails to realize that the demand the BoU is worried about is very narrow in terms of geographical and population coverage-located mainly in Kampala; it’s important that BoU should manage the entire economy of Uganda and not the Kampala economy, while leaving the rest of the Economy, especially the rural economy, to die away.

Commercial banking was the main contributor to the financial sector. By the end of 2010/11, the share of financial services contributed 3.2% of the country’s GDP. Commercial bank services are among the growing activities in the country and financial intermediation services indirectly measured (the difference between interest, income received and interests paid by commercial banks) grew by 69.1% and 27.0% in 2009/10 and 2010/11 respectively.

Uganda has implemented financial sector reforms since 1991 and has laid the foundation for a market based financial system. These reforms have been supported by the introduction of new policy and legal frameworks aimed at addressing weaknesses in key financial institutions. Financial market development has entailed the need to address issues regarding technology, infrastructure and regulation. Addressing these in Uganda has facilitated the growth of basic short term markets with highly liquid and less risky financial instruments such as inter-bank loans and treasury bills. Further, long term and private financial needs have been partially met with the establishment of Capital Markets Authority.

Access to banking services has been increasing with these reforms. The number of commercial banks increased after the review of legal framework for commercial banking and MDI’s. Commercial banks increased between 2006 and 2010 from 15 to 23. The number of branches increased from 3001 in 2008 and 393 in 2010. ATM’s had increased to 598 in 2010. There has also been increased innovation of financial products and services, upgrading of MDI’s to commercial banks, increased implementation of savings, credit and cooperative company (SACCO) programmes, as well as point of sale products, mobile and internet banking services, and agent banking to provide branchless banking services through outlets and agents.

With the enactment of Financial Institutions ACT (FIA, 2004), implementation of regulations has ensued since 2005. Other notable developments implemented since 2005 in an effort to modernize the financial sector include; the National Electronic Switch system, which has so far linked up ATMs of at least 4commercial banks. In addition, the Credit Reference Bureau regulations were enacted in August 2005, and this CRB is operational. The Anti=money laundering act and guidelines are in place popularized and implemented in line with international resolutions on laundering money.

Total assets of commercial banks were valued at 11,296billion in 2010 and these increased from 2,700 billion in 2006 (Net Foreign Assets of Commercial banks were an equivalent of Shs. 439.4 billion, while net domestic assets were Shs. 2,260.6 billion). Increased Private Sector Credit continued to contribute to growth in these assets. Private Sector credit facilitates the growth of the economy in all sectors in the order of trade and other services to manufacturing and agriculture. There has been corresponding growth 39 Putting Peoples’ Incomes at the centre of managing Macroeconomic policies in Uganda; inclusive growth and production of tradables, Lawrence Bategeka & Dorothy Nampewo, EPRC, 2012




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in sectors where credit has been provided over the past.

The capital Markets Act as amended in 2011 provides a legal framework for regulating capital markets in the country, and the Capital Markets Authority. The country has experienced increase in investor confidence as reflected in the increase in the volume of shares traded in recent years. Uganda Stock Exchange Market capitalization stood at 12trillion by end of 2010/11 and the five trading days is in harmony with the rest of the countries in the East African Community Common Market. The other arrangement in line with the EAC Common Market is the promotion of the issuance of regional corporate bonds in the community.

The Insurance (Amendment) Act, 2011 provides a legal framework for the industry to thrive and provides among others for re-insurance and regulation of micro and Health insurance. The country has experienced growth in consumer awareness and there has been introduction of new products as well as rebranding of old ones to cope with the growing economy. By end of 2010, there were 22lincenced insurance Companies. Uganda’s insurance market penetration and density though on the increase remains low as compared to the rest of the East African Community, particularly Kenya and Tanzania.

Even with these developments, financial access still remains low given that by 2009, only 28% of Ugandans were formerly served, while 42% were informally served and 39% excluded from these services. This poses a serious challenge to access finance for development, particularly access to affordable long term finance. There continues to be insufficient financial services infrastructure across the country, limited number of bank branches and poor access to rural financial services. There is a low saving culture and the availability of long term funds for development finance is limited. There are also high costs of financing due to the nominal lending interest rates. On the demand side, the level of credit worthiness and enterprise management capacity contribute to the high cost of credit. On the supply side, there are still high intermediate costs, including the costs of monitoring and enforcement of loan contracts. These factors affect access to financial services yet there are market and institutional failures all of which need to be addressed.

In order to develop the financial sector, considerations will have to be made in regard to short and long term market exchanges, the level of monetization of the economy and the generation of sufficient savings. In the past, Uganda Government and other institutions have taken steps to accelerate the development of markets for financial and non-financial services by promoting innovation in products and delivery mechanisms and by building institutional capacity. However even with this support, the SME’s have to do more themselves in order to overcome some of the challenges they face. So in order to address the limitations in availability of long term finance for business enterprises, the pension sector is looked at as a source of remedy and legal framework for the necessary reform of the sector is already in place aimed at ensuring efficiency and greater accountability for workers’ savings. The policy to guide the liberalization of the pension sector was adopted in 2009 while the process of enacting the necessary legislation is on-going to provide alternative financing of domestic investment.

A further challenge in the delivery of financial services in the country is the delivery of effective oversight services and supervision over the informal institutions which operate under varied laws such as the Company Law, 1961, the Money Lenders, Act, 1952, and the cooperative societies Act, cap 112 of 1991. The other challenge the country faces is the inability of many SACCOs to meet corporate governance and audit standards as required to protect mobilized savings. The Private Sector therefore urges the Government to consider the following interventions;



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Put in Place programmes that reduce informal activities in the Sector, Strengthen Collateral •registration and promote PPP’s in favour of rural financial transformationImplement reforms in the Pension sector as a way of mobilizing local development funding, in •order to increase availability of long term development finance for SME’sBuild capacity and strengthen Anti money laundering institutions in the sector in order to adhere •to internationally acceptable financial governance standards including enhanced financial sector supervisionEnhance capacity of institutions regulating and participating in activities of the sector with •the view to increasing capital flows as well as client confidence/promote capital market developmentsPromote research in financial development aimed at accelerating, deepening and broadening the •sectorIdentify, sign ratify and domesticate international protocols related to financial sector, •governance with the view to making Uganda a regional centre of Excellence in Financial transacting and investmentDevelop and promote insurance programmes with a view to increasing appreciation and •participation at all levelsGovernment should increase the 30 billion shillings offered to 50 billion shillings.•A specific line with more favorable credit terms should be established •Select and empower special sectors such as manufacturing, Agriculture, Health, Education •among others for mainstreaming.Governments should identify international lines of low interest & favorable credit from •countries such as China, Middle East, among othersMainstream benefits from the UDB and EADB to ensure fairness.•

5.5.3 The Real Estates Sector The Real Estates Industry is exponentially growing and of a great contribution to National GPD plus employment levels. Uganda is experiencing substantial housing demand particularly in the urban areas of the country, i.e. there is a growing demand of over 300,000 Units for housing, indicating that there is need for more development to meet future demands and also consider the lower classes as compared to the middle and upper classes. It’s important however to note that the Government is working towards creating better conditions to meet the growing housing demand. This is for instance through development and putting in place land policies plus legal and regulatory frame works to allow the Private Sector to participate fully in meeting these demands. The real Estates Industry is more sophisticated in Uganda as compared to other EAC partner States for instance, Rwanda’s Real Estates Sector in its infancy has already developed some beginning standards for appraisal and has a number of companies that meet western standards of operation. There are a number of new associations in formation that are being designed to help meet the Mortgage finance, real estate brokerage, and property management needs of Uganda.

The Real Estate Markets in Uganda are sufficiently advanced for them to significantly benefit from interventions that will help streamline and make the markets more efficient. There is substantial housing demand that will require a concerted effort on behalf of the Government to help develop the supply of usable, available land that can be purchased in a transparent manner. The private Sector brokerage, Valuers and development community has a number of strong players, but lacks the best practices and depth to meet the demands of the market. Also, the number of practitioners is insufficient to sustain ongoing training and the executive support required for allowing associations to be self-sustaining. To tap into this growing potential, the Private Sector practioners in the sector through the Association of Real Estates Agents (AREA), therefore propose the following Government interventions;




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Review Land legislations to speed up land transactions and finish computerizing the Land •registry. Also streamline the land policies, develop zoning, building code legislationEstablish the overall Real Estate legislation that will address the key players which include; Real •Estate agents/managers, real estate developers and mortgage institutionsDevelop a regional real estates training centre which would attract brokerage and valuer •associations from surrounding countries such as Kenya and RwandaExpedite the passage of the mortgage law and viability of the credit reference bureau to ensure •availability of descent housing to a wider segment of the Ugandan PopulationEncourage the National Social Security Fund (NSSF) to invest more heavily in the housing •Sector and take steps to increase the efficiency of the NSSF and protect Ugandans’ retirement packagesDevelop mechanisms that will encourage more commercial banks and other formal financial •sector institutions to begin mortgage lending which would increase competition in the real estates sector at the same time may reduce interest rates



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6.0 REGIONAL INTEGRATION CONCERNS

Uganda is a member of the world trading regime under the WTO where trade liberalisation is advocated. However, this trading system can easily disadvantage weaker and less competitive countries like Uganda against countries like USA, China, European Union countries etc. Regional Economic Communities and Economic Partnerships have emerged mainly to cushion the effects of World Trading Regime. These Economic Agreements act as not building blocks world trading system but also as a training group before fully implementing them. Uganda therefore chose and correctly, to Join the various Regional Economic Communities and a Partnership agreement with EU. The EAC is currently the main REC for Uganda on which other Integration process are modelled or based on. Regional Integration have offered the biggest Market opportunities for Ugandan Private Sector, however, because of the supply side constraint Uganda’s has not benefited as much as it would have wanted. Some of the concerns are highlighted as follows:

6.1 The East African Community 6.1.1 Infrastructure challengesThese remain the greatest challenges to competitiveness. Energy, Transport (Ports, Rail, Roads, waterways) are key to improvement of competitiveness of the private sector and EAC envisaged that cooperating this areas would improve the ability of the Partner States to collaborate and build the necessary Infrastructure; the various master plans in Energy, Roads, and Railway have not been implemented. There is therefore need for EAC Partner States to prioritise this and reduce the cost of doing business in the region.

6.1.2 NTB’s are escalatingEven in the last years platform this issue was highlighted. The Barriers have not successfully been removed despite the existence of Monitoring Mechanism for Non-Tariff Barriers. Despite the recent move by the Council of Ministers to remove the barriers they still fall short possibly because of national rather than regional interest. It may therefore require a measure which will compel Partner States to act and act faster than they do currently.

6.1.3 Standards Quality Metrology Testing InfrastructureThe standards are actually a special NTB which continues to exist. EASC has approved about 1200 EA Standards against the widely traded product standards in excess of 5000. This is bound to create challenges in terms of quality basis for Trade in the region. More standards need to be harmonised. The standards need not only be harmonised but also training of the Private Sector to attained and maintain these standards are critical6.1.4 Multiple memberships disadvantaging UgandaThough this was noted way back in 2002 as a challenge in EAC integration Process, mitigation measures agreed was to negotiate trade arrangements as a block is yet to be fully implemented. Tanzania continues to be in SADC FTA while Kenya, Rwanda, Burundi are in the COMESA FTA. Uganda though a member of COMESA is not yet a member of FTA. The implications for this are that Ugandan Private Sector remains the most disadvantaged in the circumstance. Full implementation of the CET in some products like Paper and Metal products raw material disadvantage Uganda. This is worsened by members’ states which practise tax rebate systems for raw material for what is traded with partner states. Uganda has therefore to negotiate with Partner Sates a trade regime which would temporally not lead the Private Sector to be disadvantaged. This should be done in this period before the implementation of the FTA of EAC/COMESA/SADC.

6.1.5 Single Customs Territory implementationRecently EAC summit directed that the principle of collecting and assessing taxes be implemented as a step towards a single Customs Territory. This was based on the report of a consultants report. Ugandan Private Sector has examined this and concludes that, just like other landlocked Partner States of Rwanda and Burundi, the Private Sector in Uganda will be left worse off if implemented the way it is. The Private




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sector believes that for goods to circulate freely a lot has to be done as preconditions for implementing the SCT. Private Sector in Uganda welcomes the recognition by the Summit that there must be pre-conditions to be fulfilled. The private sector would therefore what to be part of this process given that it is the one which will be affected by this policy.

6.1.6 The East African Monetary Union (EAMU) negotiationsAgain just like last year the private sector is concerned with the ambitions the Partner States have of implementing the Monetary Union as early as 2013. The Private Sector consultation process with Partner States in this on-going negotiations process has not been robust enough to facilitate the Private Sector to provide meaningful input. The whole process seem to be dominated by the Central Banks and Ministries responsible for Finance and major preconditions, especially those that relate to an effectively operating Common Market has not received the attention it requires as the negotiations progresses. The fact that the Principle of Variable Geometry is not expected to be used cast more worry to expected date of implementation of the Monetary Union. Other preconditions which relate to the Macro Economic convergences also cast lots of doubts in the preparedness of the Partner States to attempt unifying their economies. The Challenges of the Euro Zone has not helped this. The process therefore requires more discussions and generation of confidence and then also consensus.

6.2 Southern Sudan Threat of warThis is a more recent threat to peace in the region. An escalation of war in South Sudan may cause a spill over to Uganda in terms of insecurity, especially to northern Uganda. It may also affect the business relationship the two countries have been enjoying. Either way the Private Sector in both countries will be affected negatively. All has to be down to stop they tense situation from degenerating into a war.

6.3 FTA-EAC/ COMESA/SADCAs already alluded to, this FTA is expected to partly cure the challenges the EAC Partner States have of belonging to more than one economic territory. The negotiations have just begun in January 2012 and are expected to take 36months. The Private Sector welcomes this but would like the issue of the RoO to be examined carefully in such a manner that the current RoO in EAC is not adversely altered. The sensitive list under the EAC Regime has to be examined carefully so as not to alter them even for trading among FTA MEMBERS at least in the short run.

6.3.1 COMESA FTAIt is important for Uganda to move progressively in the integration process. Before the Tripartite FTA we need to move into the COMESA FTA. This will make Ugandan Private Sector not lose out in the gains of COMESA FTA as already highlighted earlier.

6.4 The Economic Partnership Agreements Since 2009 when the EPA was expected to be operational, EAC is enjoying market access into the EU based on the initiated FEBA of 2008. The EU has emphasized that the EPA needs to be signed to guarantee market access. Despite the fact that Uganda can benefit from the EBA it is important to secure a firm agreement which in the circumstance EPA does offer. EU may not offer access after 2012 if no signing takes place. For the Private Sector which depends on predictability, European firms would like to be certain that the market access will be offered to sign agreement which last beyond 31st December 2012. Even to sign new ones which begin January 1st 2013 may be difficult. It therefore important the predictable situations exist. The following Interventions should therefore be considered;



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Infrastructure need to be mainstreamed in the EAC agenda and implementation driven by the •summit. Dedicated investment mechanism is put in place for specific infrastructure. Energy & Transport Infrastructure need to be prioritised. NTB’s mechanism should have sanctions so as to deter inaction from Partner States•Support for UNBS- SQMT. A special project led by Government need to be put in place to •quickly build capacity of UNBS so as to support private sector become more competitive and also unlock some barriers experienced by the Private Sector.Southern Sudan conflict with Sudan needs to be quickly diffused to ensure that the region •does not degenerate into war and not only destabilise Uganda in the North but disrupt business already taking place between Uganda and South SudanSupport the process of Sudan joining EAC to established a formalised trading system with •Southern SudanSpeed up negotiations on the FTA. Uganda needs to be allowed to carry out remedial actions •where they disadvantaged. Government needs to negotiate this.Join the COMESA FTA•Special care need to be taken on negotiations of EAMU to avoids similar challenges like in the •Euro Zone challenges.Speed up and finalize negotiation under EPA. Ensure we implement and remove supply side •constrained a elaborated in the various recommendations.Involve the Private Sector in the High Level Task force for the SCT discussions.•Implement the recommendation here proposed in the document so as to remove the supply side •constraint which intern will make Ugandan more competitive and that will further lead Uganda to participate effectively and gain from all the integration process and economic partnership




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7.0 CONCLUSION

With its dynamism and its track record of stability, Uganda is now a land of opportunities that ought to be seized by investors. The Private Sector in Uganda through the umbrella body, the Private Sector Foundation therefore urges Government to ensure implementation of the above recommendations, but also ensure effective and active participation of the Private Sector. There should also be improved communication from the Government to the stakeholders at any given time. The general perception today is that the stakeholder issues are not regarded as relevant. It can also be read clearly that there should be more Government engagement with key Private Sector actors in order to agree and prioritise issues of public service delivery that affect Private Sector development. Other concerns of reducing the costs of doing business in Uganda hence enhance her competitiveness should also be re-prioritized to ensure growth and development and complete tap into the emerging markets within and without Uganda.To ensure poverty reduction through local and foreign investments as a priority, there is need for Government to continue working on the unfavorable business environment which otherwise continues to minimize this objective. Also, of great importance is that the National Budget ought to focus more on supporting Private Sector Investments, reducing costs of doing business, value addition to farm produce among others to enhance access to ready markets for their exports.

For the Private Sector to surely be an engine of Economic growth in Uganda, key growth challenges as highlighted in the above with more focus on implementation of agreed upon Policy Actions by Government; Transport & Energy Infrastructure; practical skills for National development, affordable business finance; regulatory barriers due to weak public institutions that support Private Sector growth; public procurement procedures; Tax policy plus trade and non trade barriers arising from the EAC regional integration must be addressed by Government.

Following the constraints above, the Private Sector through PSFU continues to propose recommendations for Policy reform and Government intervention. This Policy document highlights therefore the recommendations among which including; interventions with regard to infrastructural development particularly transport and Energy, improving the business/regulatory/investment climate, increasing access to affordable business finance especially for Agri-businesses, widening tax base to reduce the burden on complaint tax payers, plus prudent management of public resources to ensure that planned actions are implemented.



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8.0 ANNEXES

8.1 ANNEX 1: UGANDA’S COMPARATIVE PERFORMANCE ON THE GLOBAL COMPETITIVENESS INDEX, 2011/2012

Indicator/Country Uganda Burundi Kenya Rwanda Tanzania Mauritius S.Africa

GCI Rank 2012/2012 121 140 102 70 120 54 50

Basic Requirements

Institutions 98 139 114 21 85 40 46

Infrastructure 128 136 103 101 130 54 62

Macro- Economic Environment

127 123 117 61 129 79 55

Health & Primary Education 122 126 118 112 113 55 131

Efficiency Enhancers

Higher education and Training

125 140 94 119 131 68 73

Goods market efficiency 105 141 80 48 112 28 32

Labor market efficiency 26 77 37 8 73 67 95

Financial Market Development

66 141 26 54 85 42 4

Technology Readiness 111 142 98 109 126 61 76

Market size 89 141 77 129 82 110 25

Innovation Driven

Innovation 115 141 59 84 104 44 38

Business sophistication 90 138 52 56 73 89 41

Source:data extracted from Global Competitiveness Report 2011/12 available at http: //gcr.weforum.org/gcr2011/




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8.2 STATUS AND REMARKS OF THE OUTSTANDING COMMERCIAL BILLS

The table below provides a summary of the status of prioritized Bills as of April 2012

BILL LEAD MINISTRY STATUS REMARKS

Category A: Bills that have been Operationalized

Audit Act 20081. Office of the Auditor General The Act commenced and is now operational

Need to create awareness/ sensitization of the provisions

Copy rights and 2. Neighboring Rights Act 2006

Ministry of Justice and Constitutional Affairs

The Act commenced and is now operational


Trade Secrets 3. Protection Act 2009

Ministry of Trade, Industry and Cooperatives



Contract Act, 4. 2010




Mortgage Act 5. 2009

Ministry of Lands, Housing and Urban Development (MLHUD)

The Act commenced and regulations were signed is now operational


Trademarks Act, 6. 2010




The Computer 7. Misuse Act 2011

Ministry of Information and Communication Technology



Hire Purchase 8. Act, 2009




Category B: Bills Enacted and now awaiting Drafting and approval of regulations

The Electronic 9. signatures Bill 2008


Draft regulations in place. Ministry of ICT and NITA-U

Need for consultations on the draft regulations

Submit the regulations to Minister

The Electronic 10. Transactions Bill, 2008


Draft regulations in place. Ministry of ICT and NITA-U

Need for consultations on the draft regulations

Submit regulations to Minister



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Partnership Act, 11. 2010


Regulations drafted by ULRC and sent to Minister

Awaiting signature from the Minister Publication in the gazette

Need to fast track the process

Insolvency Act, 12. 2011


Enacted in 2011

ULRC drafted regulations and sent them to the minister

Need for consultations

Signing by the Minster and publication

The retirement 13. Benefits Authority Bill, 2011

Ministry of Finance, Planning and Economic Development

Was enacted in 2011 Needs regulations Create awareness

Insurance 14. Amendment Bill


Enacted but may need an assessment of the effect of the new amendments to the existing regulations.

Fast track the assessment required

Companies Act, 15. 2012


Was passed by parliament on 22nd March 2012, and awaiting presidential assent.

Fast track the process of preparing Assent copies

ULRC is preparing and drafting regulations

Capital Market 16. Authority (Amendment Act No. 12 of 2011


Bill was passed by parliament on 29th March, 2011,

published in the gazette on 8th July, 2011, as Act No. 12 of 2011Lacks regulations

Fast track the regulations for it to be operationalized

Category C: Bills that are before Parliament

Industrial 17. Property Bill


The Bill was saved by the 8th Parliament, it is now before the LPAC awaiting second reading

Fast track the process with LPAC committee of Parliament

Accountants Bill, 18. 2010


Published in the gazette awaiting presentation to parliament

Fast track the process to have the Bill presented for the first reading

Geographical 19. Indications Bill 2008


The Bill is before LPAC committee and first hearing was in march 2012

Fast track the process with the LPAC Committee of Parliament




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Chattels 20. Securities Bill, 2009

Ministry of Justice and Constitutional Affairs (MJCA)

The Bill is before the LPAC committee of Parliament awaiting second reading.

Fast track the process

Submit comments and proposals from stakeholders and drafting committee to the LPAC.

Anti 21. Counterfeiting Goods Bill No. 22, 2010

Ministry of Trade, Industry and Cooperatives (MTIC)

Saved by the 8th Parliament

Before the Trade Committee of Parliament

The Ministry to fast track with the trade committee.

Uganda National 22. Bureau of Standards (Amendment) Bill No. 10, 2010


Before the Trade Committee of Parliament

The Ministry is to fast track with the trade committee.

Plant Variety Bill, 23. 2010

Ministry of Agriculture, Animal Industry and Fisheries (MAAIF)

Before the Agriculture Committee of Parliament


Anti money 24. Laundering Bill

Ministry of Finance, Planning and Economic Development (MFPED)

Saved by Parliament and is now before the Finance committee


Category D: Bills that are before Cabinet

The Free Zones 25. Bill 2010


FPC incorporated the cabinet decisions to empower UIA’s Board to coordinate, Monitor and supervise the implementation of the Bill in collaboration with URA. The Bill was forwarded to MFPED

MFPED needs to fast track the process and have the Bill resubmitted to Cabinet

Investment Code 26. Bill, 2010


FPC incorporated the Cabinet decisions relating to Free zones.The Bill was forwarded to MFPED

MFPED needs to fast track the process and have the Bill resubmitted to Cabinet

Category E: Bills to be submitted to Cabinet

Public Private 27. Partnership Bill, 2010


Before Cabinet Fast track the process to have the Bill presented to cabinet



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Sale of Goods 28. and Supply of services Bill, 2008

Ministry of Trade, Industry and Cooperatives.

Bill was drafted by FPC on basis of Cabinet Minute No.59 (CT2008). More stakeholder Consultations are required before it can be submitted to FPC to incorporate the amendments.

Need for consultations on the bill.

Finalize the drafting and submit it to cabinet for approval

Competition Bill 29. 2007


Principles were approved by cabinet

The Ministry of Trade is still carry out stakeholder consultations before sending it to FPC to file the draft.

Fast track the process and have the Bill presented to cabinet

Consumer 30. Protection Bill

Ministry of Trade, Industry and Cooperatives.

Principles were presented to Cabinet. Cabinet queried the principles and referred them back to the ministry.

The promoting Ministry should fast track the process.




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M A R C H , 2 0 1 2 .

8.3 CONSULTED PRIVATE SECTOR STAKEHOLDERS1 Name Organisation2 Abaine Everist Teacher Boma P/S Mbra3 Abimamya Albert AREA-Uganda4 Acidri Elimulelu URA Customs5 Addah Asiimwe Small Scale Trader6 Adilu Daniel Tororo Cement Ltd7 Adite Rose UAP Insurance 8 Admungu Joseph Business Man9 Agaba Stephen Intelligence Officer 10 Agnes Mugisha 11 Aharimeisa Phiona Fresh foods 12 Aharimpisa P Agriculture produce13 Ainamani Precious Trader 14 Ainebyona Clives TUNADO15 Ainembabazi Sheillah Trader 16 Akampurira Prossy Trader 17 Akatekit Harriet Clearing Agent 18 Akimeng Abu E.A Investments19 Akiror Margret Clearing Agent 20 Akol Rose Clearing Agent 21 Akwale Regina Multex Agency22 Akwii Evelyn DTI23 Alex Besigwa UMA24V Alex Mukama Master Links (U) Ltd25 Ali Ibra Business man26 Alungat Carolyne Southern Enterprises27 Amaku Rawlings Maracha Furniture28 Amosias Ayebazibwe Red Pepper (Press)29 Anant Pramar Sigma Knitting Industries Ltd30 Anatole Batabale Busoga Forestry Company31 Anayo Betty ATGWU-COORD32 Anderu Doreen NAWOU33 Andrew Munyaga J&P General Clearing & Forwarding 34 Ann Kyoheirwe URA Customs35 Arinaitwe Godfrey Arigodie farm Supply36 Arinaitwe Goretti Business Man 37 Arinda Agatha Business Woman38 Arinda Juliet Trader 39 Arinitwe Moreen Claering Firm40 Aruhaire Joweria 41 Asiimwe Bbala Kargo Int. Ltd 42 Asiimwe Carolyn Clearing Agent 43 Asiimwe Harriet Clearing Agent 44 Asimwe precious Katuna Traders’Association45 ASP. Agaba Stephen UganDA Police Mutukula Station

46 Atabong Joyce Across Africa Clearing & Fowarding 47 Athieno Marion Women Business Organisation48 Atim Lillian Clearing Agent 49 Atim Winnie Eden Nkumba University 50 Atuhairwe D.K Baguma Sharphine Gen Hardware51 Augustine Mwendya UNFFE52 Ayamba Mechet Trader 53 Ayebazibwe Pedison MUST(HURAPHRIM PROJECT)54 Ayello John micheal Clearing Firm55 Ayesiga J. Bosco Farmer 56 Ayo Akuraph Deborah Clearing Agent 57 Ayo Geoffrey Ojok Malaba Town Council58 Ayub Manafa Poverty Eradication SACCO59 Babalanda Ian Driver60 Bagabo Moses RUR61 Baguma A Multex Agency 62 Baguma Chris Freedom-Uganda63 Baguma Geoffrey Farm Support LTD64 Baguma Richard 65 Bahati Kenneth NIC66 Balamaga Geofrrey Uganda Revenue Authority 67 Balibali Isaac BusiuFarmers Ass68 Balyebuka Valentine Eastern Dairies 69 Baraza Barbra UTSAV I nvestments Ltd70 Begumisa Richard Police Katuna 71 Betty Namwagala UCTF72 Bharat M.D Farm Agro Ltd73 Bikarwomuhangi Silvia Trader 74 Birungi Gloria Forever Living Products75 Biryomumaisho Wilson Business Man 76 Biseki Jennifer Forever Living Products77 Bisikwa Robina Trader – Mbale78 Bitungire Alex Trader 79 Bugazana Suleiman District Agricultural Officer80 Busingye Janina Katuna Traders’Association81 Buteme Annett Namutenula Mbale Town 82 Bwambale Johnson Farming 83 Bwanika Sadat Technician computer Repair85 Bwire George Stanbic Bank (U) Ltd86 Byamukama Denis Line Agency (U) Ltd 87 Byamukama Simpson Peer Educator 88 Byaruhanga Rogers Katuna Traders’Association89 Byayi Asuman ICT Support Uganda90 Byensi Layton 91 Charles Kuondo Clearing & forwarding92 Chemonges Daniel Mbarara (I.B.C)93 Christian Kabigumira Trader 94 Coetzee Peet Shoprite95 Dan Muhumuza Shumuk Group



M A R C H , 2 0 1 2 .

96 Danny Gotto ICT Cluster /WOPA97 Danny Ngecha Maisha-Bora Canada 98 David J Baguma Association of Microfinance Institutions Uganda99 David Wetaka Home of Farmers Ltd100 Daya Godfrey JESBS101 Deborah Kaddu Sserwadda Icon Women & Young Peoples’ leadership Acad-emy102 Delo Godfrey Cargo Supplies Ltd103 Dennis Ssenkungu Tour guide104 Diana Apio BATU105 Diriisa Rwakana Business Man106 Dona Sava USSIA107 Dorothy Salira Namunsi Mixed Farm 108 Douglas Opio Federation of Uganda Employers109 Dr Kasiisi Nbadifa110 Dr. Ben Kiwanuka Uganda Health Care Federation111 Dr. Stephene Birungi Farm Support Ltd112 E.F Ntanda UCFA113 Ebusu Micheal Emma Eco fresh Organic Fruits Ltd 114 Edenyu Martin .C Busiu Butwella115 Edson Bahendwa Spedag Interfreight116 Edwin Kwesiga Quality Chemical Industries Ltd117 Ejakait Andrew Leather Industries of Uganda Ltd118 Ekode James Peter Councilor MTC 119 Elijah Omagor Nile Breweries Ltd120 Elutu Francis Freze Electronics121 Emeje John B Claering Agent 122 Emeje K Robert Clearing & Forwarding 123 Emkon Patrick Agent 124 Emmanuel Mwebe ULAIA125 Emmanuel Santos OulaUCIFA -Malaba126 Emoi Isaac Glory Agencies127 Emolot D Matoda (U) Ltd 128 Emusugut Deo Malaba T.C129 Eng. Tumushabe J.P MAPEA130 Enoch Masaba Layal Small Scale Industries 131 Epaluna Joseph MUNCBTA132 Esamai Henry Gloria Guest House133 Etteku Micheal Clearing Agent 134 Etudi PAUL Agility Logistics135 Etyang Peter National Insurance 136 Etyang Steven POA Inter137 Eunice Wekesa Wes knit sweaters 138 F.X Mubuuke UNABCEC139 Faustine Odeke The New Vision140 Ferdinard Kamya Delloitte Uganda Ltd141 Fred Turyakira Mbarara (New vision)142 Galiwango Zubair Clearing Agent

143 Ganafa Eddie Contact Graphics Ltd144 Gawau John William Paradise Fish Farmers Group -Soroti 145 Geoffrey Bulayi Uganda National Association of Private Hospitals (UNAPH)146 GIMWALI Robert Home Health Education Service147 Gloria Tumwesigye Uganda Tour operators148 Gutti Yahaya Open Gate FM149 Hajjat A.K Sebyala Energizing solutions Ltd150 Hajjat Siyama Wabulo –Mbale151 Harriet N barasa Green Pasture Services 152 Hassan B Business Man153 Hawa Ibrahim 154 Hilda Rukandema Rwizi Millers155 Ian Clarke Uganda Health Care Federation156 ILIAWO HARRIET Clearing Agent 157 Immaculate Nyafwono ATGWU-COORD158 Iputo Faustine Malaba Town Council159 Ishak Lukenge UCTF160 Isiko Titus Micro Business Mentors161 Isiret Charles UAP Insurance (U) Ltd 162 Ismail Sekandi UHOA163 Ismail Ssekandi UHOA164 Ivan Kyayonka Shell (U)165 James Zziwa BOATNET166 JB.Matsilo Julius KY Self Help Project167 Jjemba O 168 Joanita Lwanga Uganda Health Care 149 Federation169 John M Jinja Nile Resort170 Jokusegye Clementine Trader 171 Joseph Kirumila Business Man172 Joseph Ndiho Kiiza Uganda Leasing Association173 Joseph Waludieba W Dove Logistics 174 Josephine Akia NOGAMU175 Judith Amusolo Clearing Agent 176 Julian Semukutu BLTIM Pharmaceuticals177 Juma A 178 Juma Webale Bukikolo Youth Crae Association179 Justine Muhenyo Bufukhula Y.F.G180 Kaato H Masaba Alex Ramah Agro Inputs181 Kaawa John 182 Kabale Rogers BODA-BODA Association183 Kabalega BartholomewFarmer 184 Kaboggoza John P.K Zulayka Projects185 Kabuye Rapheal Business Man186 Kafeero John Metal Fabrication187 Kakala Kigai Veterans Organisation189 Kakayi Fatuma Farmer 190 Kakayi Olivia Mbale Town




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191 Kakuru Glet Bitariho Holy Innicents children’s Hospital192 Kalema Robert Associated Scale Co.193 Kalule Ibra UMA194 Kalulu Miriam Liana Accomodation 195 Kamaranzi Anitah Kenfreight (U) Ltd 196 Kamugisha Daniel Business Man197 Kamugisha Florence Saloon 198 Kanganyi U Trader199 Kankiriho Lawrence Kagango Sacco200 Kankunda Mary MUST(HURAPHRIM PROJECT)201 Kansiime Quirino Bukanga ss/ Triple N HS202Kantu Steven Maddu Farmers Cooperative Society 203 Kanwagi Tadeo Broker204 Kanyange Jenipher Trader 205 Karamuzi Godfrey ADDCU Rushere206 Karimpa Carolyn 207 Kariyo N Baker Bishop Stuart Core PTC208 Karyarugokwe Ruth KBTG/KATUNA209 Kasifa Kakayi Rice Growers 210 Kassim Omar UCIFA211 Kasujja Gracius Jinka Enterprises212 Kasujja Henry Business Man213 Katende Nathan FM &Sons United Stores 214 Katenya Milley Mbale Town215 Katumba Fred Trader216 Katushabe Francis Clearing Agent 217 Kawala Sarah Agent NIc Ltd218 Kazimiri Horace Business Man 219 Kebirungi Grace Nyamarima Farm220 Kemigisha Gloria Small Scale Trader221 Kenneth Barungi Kikira Sugar Ltd 222 Kenneth BARUNGI Kakira Sugar Ltd223 Khaintsa Florence Tugeze Women Group- Hand Craft Firm224 Kibuule Deo Padek Companies 225 Kigoye Dan Pius BOATNET226 Kimono Zaina Nothern Farmers Associtiation227 Kiragu Justar EADB228 Kissa Betty Eastern Diary229 Kitaa Jane Mbale 230 Kitenda Z Zac Stat231 Kituyi Constance African Craft Point232 Kiwalabye Geoffrey Broker233 Kiwanuka Stephene Jinka Enterprises Ltd 234 Kiwumbire Muzamiru Market Street235 Kizza Waswa Epitome Ent236 Knyomozi Viola Katuna237 Kulu Idambi J.B Public Relations Association of Uganda

238 Kyagulanyi David Uganda Chamber of mines & Petroleum239 Kyamuhangi Annet Trader 240 Kyarimpa Peace Small Scale Trader241 Kyasiimire Merinah All-In-One(ladies shop)242 Kyasimiire Penlope Clearing Agent 243 Kyasimire Roset Mbarara244 Kyensi Patience Sells Agricultural Produce 245 Kyeyune Jovan URA_Mbarara246 Kyoheirwe Glorius Trader 247 Kyomugisha Gloria General Merchadise248 Kyomugisha Judith Business Woman249 Kyomuhendo Elinah Trader 250 Kyomuhendo Mercy Trader 251 Kyomuhendo Mildred Business Woman252 Kyomuhendo Shamim Business Woman253 Kyomuhendo Sikora Business Woman254 Kyomukama Scovia Trader 255 Latimer Mukasa PSFU256 Lawrence Wasukira Elgon Zone Millers 257 Loni Criel Icila UCIFA258 Lorna Wando Namunya259 Loyce Lidongo Eastern Diary260 Lucille Isingoma ACCA261 Lukoma Sulait Trader 262 Lukyamuzi Ttimothy Kombi Tours 263 Luyima Bosco UNBS264 Luyimbazi Ronald Clearing Agent 265 Lydia Trader 266 Mafabi Twahiru Wniale Geheme Investments267 Majanja Martin UGOCERT268 Makambila Miloton Namazoko269 Makhali Jethro Wipolo Cargo270 Manafa Muhamad ENEUBA/ TUNADO271 Manana Dam BUBUFA272 Manzi George 273 Marahi Ponsiano Paluk Agencies274 Maria Mondi OMU -Traders 275 Masaba Edward 276 Masaba Yahaya N Elgon WIDOWS & ORPHANS Association 277 Masaba Yahaya N Elgon WIDOWS & ORPHANS Association 278 Masambu Ibrahim C.F.G279 Maseleko Johnrich Computer Consult 280 Mashemererwe Bright Hotel Sereme281 Mashomero Jolly Katuna Traders’Association282 Masiga Anthony Glory Agencies283 Matovu Simple Trader284 Matsakha G Steven Mbale Town



M A R C H , 2 0 1 2 .

283 Mazerere Felix Banadala Progressive Farmers Association284 Mazinga Hamid Business Man285 Mbabazi Lillian Small Scale Trader286 Mbirimu Michash MMV287 MBYEMEIRE F Sells Agricultural Produce 288 Miriam Magala Uganda Insurers’ Association289 Miriam Moro Nile Computers DTI290 Miss Maggie Daisy 291 Mitala Jimmy URA292 Mivule Expedito Bamivule& brothers293 Mnanana Dam BBFA294 Mooya Moses Kabisi Agro inputs 295 Moses Kalule KACITA296 Mpagi Joseph Mutukula Prisons 297 Mr. Eronda Joseph Coordinator,Jinja District Farm-ers’ Association298 Mrs. Harriet Ssali UFA299 Mrs. Sonia Mwesigye UNAPH300 Ms. Parmar Sigma Knitting Industries Ltd301 Msaba Edward Manafa Tubana302 Mubiru Wilberforce Uganda Sugarcane Technologist Association303 Mufumbiro Paul Agricultural Officer304 Muganga Eddie Jinja 305 Mugogoto Richard Tukole tukulakulane farmers Group 306 Mugoya W Gilbert Manjiya Veterans Association307 Mugura Daniel UCCCU308 Muhamudu Tawakal Clearing Agent 309 Muhangi Humphry LABE Uganda310 Muhanizi Samuel UNRA Kotido311 Muheirwe Annah Porter312 Muhumuza Nicholas Business Man 313 Mujobi David Mbale 314 Mujuni Geoffrey Clearing Agent 315 Mukama Douglas Craft Shop316 Mukasa Florence FM &Sons United317 Mulati Elly Robert Busiu Bitwela Framers’ Associa-tion318 Mulindwa Alex Business Man319 Mulumba Kezaala Jinja Municipal Council320 Mulyanti Mbale 321 Munbya Naay Clearing & forwarding322 Munezerao Alice Clearing Agent 323 Muruma Olivah Business Woman324 Musa K Muwanga NOGAMU325 Mushabe Eddy Mbarara326 Mushabe Muzawalu Tenderer327 Musigire Abbey MABCO Internationa Fish Farming

328 Musiimenta Loy Business Institute329 Musimbi Rogers ADP330 Musimenta Ruth Alice General Merchadise331 Musisi Joseph Chairman for Traders 332 Mutingi Stephen 333 Mutonyi Bilah BUBUFA334 Mutonyi Z Billah Mbaga Kolani335 Mutyaba Musa NUCAFE LTD336 Muwenge Beatrice Tugeze Women Group-Hand Craft Firm337 Muyanbi Loy Women Business Organisation338 Mwebaze K Polycarp ISO339 Mweiine Beba Bitter Tike Metal Fabrication340 Mwikirize Adan Business Woman341 Mwima Ismail Mbale Garage United SACCO342 Nabongo Sula Haki Investments 343 Nabumba Racheal Epitome Clearing Agency 344 Nabushawo Rukia Magezi Bugaga Women Slum Dwellers345 Nabwana Beatrice Wambette Enterprises 346 Nabwire Kezia Karen EASSI-East African Sub-regional Support Initiative for the advancement of Women 347 Nahumenya Henry Business Man 348 NAJJEMBA PRISCILLA UMA349 Nakalyango Faustine Sells Agricultural Produce 350 Nakalyango Ivy Irene Uganda Chamber of mines & petroleum351 Nakanwagi Betty Councilor 352 Nakasita A Busiu Butwela353 Nakato Doreen Klub 3 Investments Ltd 354 Nakawala Lillian Federation of Uganda Emplo355 Nakigudde Jamilah Clearing Agent 356 Nakijali Micheal NKL357 Nakuya Monicha Agent Lincolyn 358 Namae Scolah Magezi Bugaga Women Slum Dwellers359 Nampijja Jane Nyajakoni Women360 Namukasa Evelyn. K Mbale 316 Nangobi Racheal ZAC Stationers362 Nanoka Jackson Self Employed 363 Nanoka Jackson Busiu, Mbale364 Nanzala Rose Food processor- Bugema365 Naomi Manana Magezi Bugaga Women Slum Dwellers366 Napokol Godfrey Free ways367 Napokoli Milton BUBUFA368 Nassolo Magdalene Mbale 369 Natala K. Nathan Farmer- Wambewo370 Natukunda Joy




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371 Natweta David Clearing Agent 372 Nazma Abbasi Alam Group Ltd373 Ndugwa.C Hadijah USSIA V.C374 Ndyanabo Margaret Jesse Nursery School375 Nebye Kenneth 376 Nekesa Rose Food processing377 Nelson Ofwono Tullow Oil Uganda378 Nkata Abdu Business Man379 Nkirirehi Lillian Clearing Agent 380 Nkurikiye Deborah Clearing Agent 381 Nsaiga Godfrey Clearing Agent 382 Nshabohurira Jacenta Trader 383 Ntabazi 384 Nturinze Cate Trader 385 Nyapidi Fred DHL Global386 Nyebirweki Eve Agriculture produce387 Obedi Kitongo Buwandele MG388 Ochengit John UCIFA -Malaba389 Ochieng Gabriel Atlas Cargo Systems 390 Ochow Peter Stephene Clearing Agent 391 Ochwo George Stephen Centre for research accountacy and management consult392 Odala Stephen Coffee Buyer393 Odoi John Agent 394 Odoi Robert Clearing Agent 395 Odoki Alberi M. Speedy396 Ofwono Moses Farmer 397 Ogera Abubaker E SDV Transami398 Ojore Moses Clearing Firm399 Okada Paul Norman Customs Clearing Agent 400 Okecho Orisa Spedag Interfreight401 Okei Charles Kachumbala ACE402 Okello Gloria UCA403 Okello Joshua 404 Okello Lazarus Clearing Agent 405 Okello William Picfare Ind Ltd 406 Okiror Grace AUPWAE407 Okitwi Simon Clearing Agent 408 Okongo Charles Business Man409 Okonyo C 410 Okorwait Ben O Clearing & forwarding411 Okoth Thomas Jupiter F412 Okumu Wilberforce Excel Insurance Co. Ltd 413 Okwaras James Fred Claering Agent 414 Okwaras Sam Etyang Wage Freight (U) Ltd 415 Okware Francis POTS C&F Ltd 416 Olivia Wahonyayo Bugwere Market417 Omachari John Paul Customs Clearing Agent 418 Omachuku Agustine Nimara Super Market419 Omalla Joseph Clearing Agent

420 Omoti Mathias 421 Ongura Denis Classic &CF422 Onyai Isaac Apecu Mbarara Diagonistic Lab423 Onyai P charles UCIFA -Malaba424 Onyait Paul Clearing Firm425 Onyami PATRICK 426 Onyango Luke Clearing Agent 427 Onzi Bronc P ANTEK428 Opio Levi Papa Amol Fish Farmers 429 Orishaba Gloria Trader 430 Orishaba Sharon 431 Orone Albert Soroti Garmets Ltd432 Orutigo Patel Business man 433 Osia P Trader 434 Osibat Ernest Cosmo Freight 435 Otaisong Goerge Customs Clearing Agent 436 Otango Richard Danks Carriers437 Othin David Loyal Small Scale Industries Ltd 438 Otim Willy Mall Maracha Funiture Center439 Otuba Kenneth Crested Cargo International440 Owaga John Clearing Agent 441 Pade Emoi John Daks Couriers Ltd442 Peter Emmanuel Rukyema Business Man443 Polly K Arinanye Business Woman444 Richard M President’s Office445 Richard Okoth Livercot Impex Ltd 446 Robert Obongo Customs 447 Robert Odida Department of Housing Kampala448 Ronald Kamulegeya Stanbic Bank (U) Ltd449 Ronnie K President’s Office450 Rosemary Mutyabule Enterprise Uganda451 Ruhwaba Yonah Trader452 Rutegaya Johnson Rushere453 Rwamaluzo Self Employed454 Rwashana Fred UGISTO455 Sabano Samali Malaba 456 Sabde Raphael Kisembo Spedag Interfreight457 Sabili Muhammad Manafi Saw Mill & Furniture Mart458 Sajjabi Charles Business Man459 Sam K Watasa UCPA460 Sam Sentongo UACE/M&E Associates Ltd461 Samanya John Coffee Buyer462 Samula K Peter Business Man463 Sanyu Mary Business Woman464 Sanyuke Jukius 3K Investments Ltd 465 Sarah Wamukota Busiu Butwella466 Sarn Patel Jinja Clays Investment 467 Sayuni Geraldine Agriculture produce468 Sebishoma Charles Clearing Agent



M A R C H , 2 0 1 2 .

469 Seela Veronica Creative Investments Ltd470 Seera Rehema Bududa Moslem Women 471 Semukutu Abigail BLTIM Pharmaceuticals472 Sentiba Gordon Astor Finance PLC473 Senyonga Emmanuel Mbadisof Mbarara474 Sewabumba Wasswa Mutukula Coffee Producers & Brokers Association 475 Shabahurira Rhonah 476 Sheillah B Nyanzi Airtel Uganda Ltd477 Shirley Kongai AREA-Uganda478 Silvio Abiria United world Wide Forwarders479 Siyama Wabulo SIDE VIEW 480 Solomon Muyita BAT Uganda481 Sowedi N Wanaba ENEUBA482 Ssali Gofrey UMA483 Ssebiranda Moses United Engineers & Traders Association484 Ssekandi Raymond Banadda Master Links Uganda485 Ssekubulwa Cyprian HORTEXA486 Ssentiba Gordon Astor Finance PLC487 Ssenyondo James 488 Ssenyonga Yasin Customs Clearing Agent 489 Ssenyonjo Armstrong National Media Houses Activities490 Sseremba Micheal Trader491 Sserunkuma Bruno NACAU492 Sserwanga Samuel Clearing Agent 493 Steven Nimusiima Livestock Traders ass494 Stuart John Mwesigwa Roofings ltd495 Sulayiti Kamoga Metal Fabrication496 Teriyeitu Apollo Apex Inveco Ltd 497 Tibyasa William M UFPEA498 Tindibale Asumani Butimbwa Tubaana Farmers Association 499 Tomusange Rehema Magezi Bugaga Women Slum Dwellers500 Toto Eseza Cargo Trust501 Tracy Hathorn UMPCU, Meat Producers501 Tubihemukama Julius Business Man 503 Tugume Warren Katuna MAAPS Project 504 Tukahirwa Business Woman505 Tukamuhambwa Richard Police Katuna 506 Tukamushaba Olivia Farmer 507 Tumwikirize Mercy Trader

508 Turyaramya Moses Mbadifa509 Turyasingura Wiinie Trader 510 Turyomuragyendo Kibeji Studio511 Tusasibwe Ronald Business Man 512 Tusasiirwe Molly Kagango Sacco513 Tusiime Jerry Parth International 514 Tusingire Prudence Sells Agricultural Produce 515 Twesigomwe Dismus Line Agency (U) Ltd 516 Twesigye Simon URA Customs517 Twinomuhangi Deo Aprocel518 Twinomujuni Christine Business Woman519 Twinomujuni Henry Business Man 520 Waako Fred Bangek Techno E521 Waboga Halima Treasure Link Tech Services522 Wagaba Elly kaKiika Technical523 Waiswa Ismeal Coco Kimchi Fram In Africa524 Wajika Moses Lwabusano Urban Farmers’ Association-Mbale525 Wakata Besweli BUCDA526 Wakhozo Wilson Resilient H.S527 Wakida Stephene Uganda Printers Association528 Walimbwa Irene Charene Enterprises529 Walter A Ogwal Grofin (U) Ltd530 Walusimbi Mpanga G. UCSI531 Wamakau Walter Business man 532 Wamala Richard Gadp Agencies533 Wambedde Daniel Pont Uganda534 Wambedde Janet Pont Uganda535 Wamukota Joseph Clearing & forwarding536 Wanambwa Musa Wanaba Elgon Interiors & Consultancy Co. Ltd 537 Wanda Eric Francis Namatasale Farmers Association538 Wanda Simon Clearing & forwarding539 Wandeka Josephine Mbale main market540 Waniale Muhammadi Magezi Bugaga Women Slum Dwellers541 Wantege Annet Councilor 542 Watiira Patrick B Bududa ACE543 Watika Moses Lwabusano Framers’ Association544 Watsakula Stephene Wazaku General General Agri Cultural Supply & Construction Ltd 545 Yahaya Lwakana Tenderer546 Zaina Muyombo Gilbert Zayam Farm547 Ziraba Aggrey Excel Construction Ltd




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M A R C H , 2 0 1 2 .

8.4 PSFU MEMBERS PER SECTOR AS OF MARCH 2012

MEMBER NAME CATEGORY

A AgricultureAgricultural council of uganda CorporateNational agricultural advisory services CorporateIcemark africa ltd CorporateFarm support limited CorporateUganda coffee trade federation (uctf) OrdinaryUganda co-operative alliance OrdinaryUganda crane creameries cooperative union OrdinaryUganda fish processors & exporters’ association (ufpea) OrdinaryUganda national farmers’ federation (unff OrdinaryUganda national vanilla association (unva) OrdinaryUganda organic certification ltd OrdinaryAgro-genetic technologies ltd. (agt) AssociateAssociation of uganda professional women in agriculture & environment (aupwae)

Associate

Horticultural exporters’ association of uganda (hotexa) AssociateNational organic agricultural movement of uganda (nogamu) AssociateNational small holder business center AssociateNational union of coffee agribusinesses and farm enterprises (nucafe) AssociatePoultry development association of uganda AssociateUganda beef producers association (ubpa) AssociateUganda cocoa association AssociateUganda commercial farmers’ association ltd (ucfa) AssociateUganda dairy processors association (udpa) AssociateUganda floricultural association (ufa) AssociateUganda flower exporters’ association (ufea) AssociateUganda forest industries development association AssociateUganda national agro-input dealers’ association (unada) AssociateUganda oil seed producers and processors association AssociateUganda tea association AssociateThe uganda national apiculture development organisation AssociateUganda tropical plants association AssociateMaddu farmers co-operative society ltd AssociateCrop life uganda AssociateUganda seed trade association AssociateUganda meat producers cooperative union AssociateEntebbe livestock marketing cooperative society limited Associate

B Engineering, ict& energyNational housing & construction company ltd CorporateBujagali energy ltd CorporateUganda association of consulting engineers AssociateUganda national association of building and civil engineering contractors AssociateUganda renewable energy association AssociateUnited engineers and traders association AssociateAssociation of real estate agents –uganda Associate



M A R C H , 2 0 1 2 .


Zain uganda CorporateSimba group of companies CorporateBroad band company ltd CorporateOrange telecom ltd CorporateSmile communications uganda limited CorporateInformation and communication technology association AssociateUganda ict outsourcing services association AssociateIct – cluster association initiative. AssociateGreen computers Corporate

Ict consults limited AssociateC. Banking and finance

Bank of africa uganda CorporateBarclays bank of uganda ltd CorporateBank of baroda CorporateDfcu bank CorporateEast african development bank CorporateStandard chartered bank Corporate

Stanbic bank uganda limited CorporateGrofin uganda CorporateCiti bank CorporateAfrican alliance CorporateDiamond trust bank CorporateAstor finance plc ltd CorporateCentenary bank CorporateInvestment management association of uganda OrdinaryAssociation of microfinance institutions of uganda OrdinaryUganda association of insurance brokers Ordinary

Uganda bankers’ association (uba) OrdinaryUganda finance trust (uft) OrdinaryUganda insurers association OrdinaryUganda leasing association OrdinaryUganda securities exchange limited (use) Ordinary

Capital market authority AssociateThe association of uganda securities brokers dealers Associate

D. ManufacturingBritish american tobacco uganda (b.a.t.u) CorporateNile breweries ltd. Corporate

Roofings ltd Corporate

Southern range nyanza ltd CorporateUganda breweries ltd CorporateUnilever uganda limited CorporateShumuk group of companies Corporate




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M A R C H , 2 0 1 2 .


Kakira sugar works ltd CorporateCentury bottling company ltd CorporateQuality chemicals CorporateMultiple industries limited Corporate

Uganda manufacturers’ association (uma) OrdinaryNorthern uganda manufacturers association AssociateThe carpenters and joinery association ltd AssociateUganda leather and allied industries association ltd. AssociateUganda printers’ association (upa) Associate

Uganda small scale industries association (ussia) AssociateUganda baati CorporateRoofings rollings mill Corporate

E. Extractive industries/mining, oil and gasAlpha oil CorporateUganda chamber of mines and petroleum OrdinaryTullow uganda operations pty limited Corporate Uganda quarries operators’ association (uqoa) Associate

F. Skills, health, education and professional organisationsChartered institute of purchasing and supply (cips) AssociateEnterprise uganda CorporateFederation of uganda employers AssociateKaizen institute africa CorporateUganda national association of smmes organizations OrdinaryInstitute of corporate governance of uganda Ordinary

The association of chartered certified accoutants (acca) OrdinaryThe institute of certified public accountants of uganda OrdinaryAssociation of management consultants in uganda AssociateUganda gatsby trust AssociateLiteracy and adult basic education AssociateMubs entrepreneurship centre AssociatePublic relations association of uganda AssociateUganda association of private vocational institutions AssociateUganda law society (uls) AssociateUganda micro-entrepreneurs’ association (umea) AssociateUganda national marketers forum AssociateUganda private midwives association AssociateUganda veterinary association AssociateManagement training & advisory centre (mtac) AssociateInstitute of chartered secretaries &administrators AssociateUganda informal sector transformation organization AssociateLucky family business AssociateInnovation systems and cluster programs AssociateTechno serve Associate



M A R C H , 2 0 1 2 .


Uganda national association of private hospitals OrdinaryTeso private sector promotion centres (tesops) OrdinaryKamuli community development foundation AssociateKibaale district private sector development organization AssociateNational association of women organizations in uganda AssociateUganda media women’s association Associate

Uganda export promotion board (uepb) AssociateUganda investment authority (uia) AssociateUganda national bureau of standards (unbs) Associate

Uganda health care federation AssociateIcon women & young peoples’ leadership academy AssociateInstitute of procurement professionals of uganda AssociateUganda pest control association AssociateUganda journalists association Associate

G. Tourism, trade and commerceNational arts and crafts association of uganda OrdinaryUganda tourism association OrdinaryAssociation of ugandan tour operators OrdinaryUganda hotel owners association AssociateUganda theatrical artises association AssociateShoprite checkers (u) ltd CorporateUganda motor industry association OrdinaryBeauty operators association and training network AssociateKampala city traders association AssociateUganda importers, exporters & traders association AssociateUganda service exporters association AssociateNational outdoor contractors advertising association Ordinary

Chemiphar (u) ltd AssociateUganda consumers’ protection association AssociateFresh handling ltd AssociateUganda clearing & forwarding agents’ association (ucifa) OrdinaryAssociation of courier companies of uganda AssociateProcurement & Logistic management association (palma) AssociateUganda Freight Forwarders’ association (UFFA) AssociateUganda co-operative transport union ltd (UCTU) AssociateCoronet group ltd AssociateUganda enterprise network AssociateBuganda tourism centre Associate




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