INVESTMENT GUIDE 2016/2017

ALGERIA

BOTSWANA

ETHIOPIA

GUINEA

KENYA

MADAGASCAR

MALAWI

MAURITIUS

MOROCCO

MOZAMBIQUE

NIGERIA

RWANDA

SUDAN

TANZANIA

UGANDA

ZAMBIA ABOUT ALN

ALN is an alliance of independent top firms are committed to working together tier African law firms. It is the largest and to provide extensive coverage and on- only grouping of its kind in Africa, with the-ground experience. The network has close working relationships across its consistently been ranked Band 1 in the members and an established network of Leading Regional Law Firm Networks Best Friends across the continent. ALN’s category, by Chambers Global.

ALN IN UGANDA

ALN Member Firm: MMAKS Advocates

MMAKS Advocates has a strong foothold and client satisfaction. in the Ugandan legal industry and a MMAKS advises national and well-earned reputation in Corporate international businesses in banking and Commercial Law. As one of the and finance, real estate, mergers largest law firms in Uganda, MMAKS and acquisitions, capital markets, Advocates is committed to delivering employment and intellectual property. practical and quality legal services with International legal directories such professionalism and integrity. The firm as Chambers Global and IFLR 1000 adopts a proactive approach to high all regard the firm as a top tier firm. quality, timely and efficient legal services. Chambers Global 2016 ranks the firm MMAKS Advocates prides itself on its Band 1 in Uganda. policy of open communication, teamwork

“Investors in Uganda benefit from the government’s favourable trade and investment policies, which have greatly improved the business environment and encouraged investment.” – BMI View Uganda Operational Risk Report; April 2016

“The firm [MMAKS Advocates] does great commercial work.” – Chambers Global 2016 CONTENTS

OVERVIEW INDUSTRY SECTORS

AGRICULTURE 22 POLITICAL OVERVIEW 5 BANKING AND FINANCIAL SERVICES 22 ECONOMIC OVERVIEW 5 ENERGY 23 BILATERAL & MULTILATERAL TREATIES 6 MANUFACTURING 23 REGULATORY ENVIRONMENT 6 OIL AND GAS 23 TELECOMMUNICATIONS 25 TOURISM 25 INVESTMENT PROMOTION KEY DEVELOPMENTS INSTITUTES GOVERNING INVESTMENT PROMOTION 9 INVESTMENT INCENTIVES 9 ENERGY AND INFRASTRUCTURE 27 FINANCIAL SERVICES 27 NATURAL RESOURCES 28 TAX OTHER DEVELOPMENTS 29

INCOME TAX 11 CAPITAL GAINS TAX 11 WITHHOLDING TAX 11 OTHER TAX 12 STAMP DUTY ON A TRANSFER 12 TRANSFER PRICING & THIN CAPITALISATION 12 DOUBLE TAX TREATY WITH MAURITIUS 13

DOING BUSINESS

ACCOUNTING PRINCIPLES 15 INDUSTRIAL RELATIONS 15 REAL PROPERTY 16 COMPETITION 16 CONSUMER PROTECTION 16 EXCHANGE CONTROL 17 IMPORTS AND EXPORTS 17 LEGAL FORMS OF INCORPORATION 17 INTELLECTUAL PROPERTY 19 DISPUTE SETTLEMENT 20 OVERVIEW

POPULATION 39.032 Million (2015 World Bank Data)

GDP USD 26.37 Billion (2015 World Bank Data)

CAPITAL CITY Kampala

AREA 241, 038 km2

PRESIDENT CURRENCY DRIVES ON Yoweri Kaguta Museveni Uganda Shilling (UGX) The Left

GOVERNMENT LANGUAGES TOP LEVEL DOMAIN Unitary English and Swahili .ug

TIMEZONE CALLING CODE GMT + 3 +256

4 POLITICAL OVERVIEW

The Ugandan President is elected by institutions. The national legislature is universal suffrage every five years and Parliament and has the majority of its acts both as the Head of State and Head members elected by universal adult of Government. The President appoints suffrage, whilst the remainder represent a Vice-President and Prime Minister to special interest groups including youth, assist in the supervision of the cabinet. women, workers persons with disability The Vice-President deputises the and the army. Uganda held presidential President. The Prime Minister is the leader and parliamentary elections in February of the government business in Parliament 2016, returning the National Resistance and is responsible for coordinating and Movement led by H. E. Yoweri Kaguta implementing government policies across Museveni. ministries, departments and other public

ECONOMIC OVERVIEW

The Ugandan Government continues the National Vision of a transformed to adopt important policies to ensure Ugandan society from a peasant to economic rehabilitation and promote a modern and prosperous country rapid economic development, and within 30 years. Uganda Vision 2040 is Uganda has won acclaim for its conceptualised around strengthening the macroeconomic management in recent fundamentals of the economy to harness years. Uganda was the first country the abundant opportunities including oil to be eligible for the Heavily Indebted and gas, tourism, minerals, ICT business, Poor Countries (HIPC) initiative and had abundant labour force, geographical virtually all of its foreign debts cancelled location and trade, water resources, by the IMF, World Bank and major industrialisation and agriculture. donors. The economy is set to benefit from For the financial year 2014/2015, the the planned start of oil production. country recorded a 5 percent real GDP The Government recently signed a growth. For the financial year 2015/2016, memorandum of understanding with oil growth in GDP was projected at 5.8 companies on sustainable development percent, with growth in the agriculture, of the discovered petroleum resources forestry and fishing sectors combined in the Albertine Graben. The MoU projected at 2.3 percent, industrial sector provides a framework for achieving a at 5.5 percent and services at 5.7 percent. harmonised commercialisation plan for the development of the country’s oil Despite the slow rate at which it is and gas resources. The plan includes the growing, the agriculture sector (including use of petroleum for power generation, forestry and fishing) employs over 65.6 supply of crude oil to the refinery to be percent of the country’s workforce. In developed in Uganda by Government addition, the Government has developed and export of crude oil through an export a Uganda Vision 2040 to operationalise pipeline or any other viable options to

5 be developed by the oil companies. The in the country estimated at a range of 1.2 commercialisation plan is based on the to 1.7 billion barrels of crude oil. current discovered recoverable reserves

BILATERAL & MULTILATERAL TREATIES

Uganda is a member of, among with UAE, Seychelles and the East African others, the East African Community, Community are pending ratification. The the Common Market for Eastern and rate of tax generally under these treaties Southern Africa, the African, Caribbean is either 10 percent or 15 percent. The and Pacific Group of States, the World Uganda tax regime has an automatic tax Trade Organisation and the African relief system for income of a resident Union. person which is sourced outside Uganda and has also already suffered tax in that Uganda currently has double taxation other country. This ensures that the tax treaties with nine countries including individual is not subjected to further Denmark, India, Mauritius, Netherlands, taxation in Uganda on income that has Norway, South Africa, United Kingdom, already been taxed elsewhere. and Zambia. Double taxation treaties

REGULATORY ENVIRONMENT

Uganda generally provides an open to cost USD1.5 billion. climate for foreign investment. The 2015 Index of Economic Freedom ranks Parliament recently enacted amendments Uganda 9th out of 46 countries in sub- to the Financial Institutions Act 2004 that Saharan Africa with a score below the introduce Islamic banking, agency banking world average. Uganda has revised a and bancassurance among other reforms. range of laws and regulations to create The Government is also taking steps to greater government accountability, finally implement the Hire Purchase Act develop infrastructure, and build a more 2009. vibrant public sector. The Government has updated various laws, for example The Capital Markets Authority Act was the Mortgage Act, 2009, the Partnership recently amended in 2016 to broaden the Act, 2010, the Insolvency Act, 2011, the powers of the Capital Markets Authority Companies Act, 2012, the Capital Markets (“CMA”), to provide for the consolidation Authority (Amendment) Act, 2011, and of different licences, to introduce legislation on e-commerce, pensions and transaction specific licences and to create intellectual property. Parliament in 2015 the Capital Markets Tribunal to hear and enacted the Public Private Partnerships determine disciplinary action referred by Act 2015. The Kampala-Jinja Expressway CMA as well as appeals arising from the will be the first public private partnership decisions of CMA. road project in Uganda and is expected

6 Following the oil discoveries, the citizens and Ugandan companies i.e. Government revamped its sector clearing and forwarding, catering, hotel oversight with the passing of two accommodation etc. new laws including the Petroleum (Exploration, Development and Foreign investment is allowed in all Production) Act, 2013 which now sectors of the economy that are not effectively provides the framework national security related. Save as stated for the exploration and production of herein, companies may be 100 percent petroleum. Government also recently foreign-owned. In the oil and gas sector, enacted regulations on National Content. where goods and services required by a The National Content regulations licensee or contractor are not available require licenced oil and gas companies in Uganda, they must be provided by a to give preference to goods produced company which has entered into a joint and available in Uganda and services venture with a Ugandan Company, with rendered by Ugandan citizens and the Ugandan company holding at least companies, to give priority to Ugandan 48 percent of the share capital in the citizens in employment and ring fences joint venture. certain goods and services for Ugandan

7 INVESTMENT PROMOTION INSTITUTES GOVERNING INVESTMENT PROMOTION

The Uganda Investment Authority (UIA) achieve this by promoting Uganda as an was established under the Investment investment location, easing constraints on Code Act, (Cap 92) (the ICA) to investment through its one-stop service contribute to the economic development and encouraging inward investment by of Uganda by promoting and facilitating offering competitive incentives. private sector initiatives. It seeks to

INVESTMENT INCENTIVES

A foreign investor in Uganda is required plant, machinery, equipment, vehicles to obtain an investment licence from the or construction materials for an UIA. A foreign investor is defined under investment project; the ICA as a company in which more than • exemption from payment of 50 percent of the shares are held by a import duty on one motor vehicle person who is not a citizen of Uganda. In for personal uses, personal and practice, in order for a foreign investor to household effects which the person obtain an investment licence, they must owned and used outside the East demonstrate to the UIA that they intend African Partner State for at least to invest a minimum of USD 100,000 in twelve months. Such person must Uganda. The Second Schedule to the show that he is changing residence ICA contains the priority investment from a place outside the East African areas which include crop processing, fish Partner State to a place within the processing, tourism and mining. East African Partner State; and • incentives available generally for The benefits that can be enjoyed by the start-up businesses under custom holder of an investment certificate are as laws, the Income Tax Act (Cap 340) follows: (ITA) and the Value Added Tax Act (Cap 349). • concessional rates of import duty for an investor who is importing any

9 TAX INCOME TAX

Resident companies and businesses an average of at least 122 days during are taxed on worldwide income. Non- 3 consecutive tax years, or if that residents are taxed only on Uganda- individual is an employee or official of the source income. A company or similar Government of Uganda posted abroad corporate entity is resident in Uganda during that year of income. if it is incorporated or formed under Ugandan law; management and control Uganda’s corporate tax rate is 30 percent of its affairs are exercised in Uganda; or for resident companies and branches of the majority of its operations are carried foreign companies. The rate for mining out in Uganda during the year of income. companies ranges from 25 percent to 45 An individual is a tax resident if domiciled percent, depending on the chargeable in Uganda, spends at least 183 days in income. any 12-month period, or is present for

CAPITAL GAINS TAX

Residents and non-residents in respect in a private company). Those gains are of a Ugandan branch are liable to income included in gross income and treated tax on gains arising from disposal of as normal business income, subject to their assets (including a sale of shares income tax at the rate of 30 percent.

WITHHOLDING TAX

Withholding tax of 15 percent is imposed a. interest paid by a natural person; on every non-resident person who b. interest paid by a company to an derives any dividends, rent, natural associated company; resource payment, interest, royalties c. interest paid which is exempt from and management fees from sources in tax in the hands of the recipient; and Uganda. d. interest other than interest from governmental securities paid to a Withholding tax of 15 percent is imposed financial institution on a resident person deriving dividends and interest in Uganda. Withholding tax on interest payable to resident persons does not apply to:

11 OTHER TAX

Value-added tax (VAT) is chargeable on of unprocessed agricultural produce, taxable supplies of goods and services financial services and insurance services in Uganda and the import of certain (health insurance, micro-insurance, re- goods. The standard rate of VAT is 18 insurance and life insurance) are exempt percent. However, the supply of certain from VAT. goods and services including the supply

STAMP DUTY ON A TRANSFER

Stamp duty on any transfer is charged financial instruments and transactions, for at a rate of 1.5 percent of the total example, guarantees, loan agreements, value of the transfer. Stamp duty is also deeds of assignment and novation deeds. charged at nominal rates on a variety of

TRANSFER PRICING & THIN CAPITALISATION

The Income Tax (Transfer Pricing) foreign controlled resident companies. Regulations, 2011, apply to a controlled Thin capitalisation arises where a transaction if a person who is a party company, incorporated in Uganda is to the transaction is located in and is controlled by a non-resident person i.e. subject to tax in Uganda and the other the foreign controller and has a foreign person who is party to the transaction is debt to foreign equity ratio in excess of located in or outside Uganda. “Controlled 1.5:1 at any time during a year of income. Transaction” means a transaction In this case, a deduction is disallowed for between associates. The Regulations the interest paid by the company during require that transactions between that year on that part of the debt which associated persons be conducted exceeds the 1.5:1 ratio. This rule does not in accordance with the arm’s length apply to financial institutions. principle.

The Income Tax Act, (Cap 340) contains provisions on thin capitalisation of

12 DOUBLE TAX TREATY WITH MAURITIUS

Uganda has a double tax agreement benefit of an exemption from Ugandan (DTA) with Mauritius. Under the DTA, tax or reduction in the rate of Ugandan dividends, interest and royalties paid tax under a DTA between Uganda and to a person resident in Uganda by a another contracting state will not be Mauritian company are taxed at a rate of available to a person who receives the 10 percent. income in a capacity other than that of a beneficial owner, who does not have The Income Tax Act (Cap.340) however full and unrestricted ability to enjoy that denies a non-resident person from income and to determine its future uses enjoying DTA benefits where the and who does not possess economic underlying ownership of that non- substance in the country of residence. resident person is held 50 percent or more by individuals’ resident outside the The Income Tax (Amendment) Bill 2016 treaty country. was passed by the Parliament of Uganda on 14th April 2016 and is before the The Income Tax (Amendment) Bill President for assent before it comes into 2016 proposes to amend the Income law. Tax Act (Cap.340) to provide that the

13 DOING BUSINESS ACCOUNTING PRINCIPLES

Financial statements of companies must the International Financial Reporting be prepared annually. Uganda applies Standards.

INDUSTRIAL RELATIONS

Uganda’s Employment Act, 2006 Benefits Regulatory Authority Act, 2011 imposes certain obligations on was enacted to remove the monopoly of employers, ranging from payment NSSF as a national provident fund and of wages, permitted deductions and allow for licensed retirement benefits obligations arising out of specific labour schemes to operate and compete for laws. The Employment Act also details mandatory contributions in an open regulations regarding employment of market. children, discrimination, disciplinary proceedings, contract termination, A person, who is not a citizen of Uganda working hours, severance payment and intending to work in Uganda, is required leave. The Labour Unions Act, 2006, is under the Uganda Citizenship and intended to regulate the establishment, Immigration Control Act, (Cap 66) to registration and management of labour obtain a work entry permit, a certificate unions in Uganda. It implements the of permanent residence or special pass. constitutional right of employees to A special pass is issued while the entry organise themselves into a labour union. permit is being processed. The work The Act prohibits an employer from permit once issued is renewable upon interference with the employee’s right of expiry at a fee, with amounts varying association in such a trade union. depending on the nature of work.

The National Social Security Fund (NSSF) With effect from 1st July 2016, Act, (Cap 222) imposes an obligation on applications for immigration facilities employers to pay a standard monthly including special passes, work permits, contribution of 15 percent (10 percent visitors pass are now submitted online. being the employer’s contribution This has led to a quick turnaround time and 5 percent being the employee’s in the issuance of immigration facilities contribution) of the total wages of an and has done away with the delays employee to the NSSF. The pension’s that had become synonymous with the sector was liberalised in 2011 with the immigration office. passing of the Uganda Retirements

15 REAL PROPERTY

There are restrictions on the ownership of non-citizens; in the case of bodies where land in Uganda by non-Ugandan citizens, shares are not applicable, where the under the Constitution and the Land Act body’s decision making lies with non- (Cap 227) (LA). The LA prohibits non- citizens, a company in which the shares citizens from acquiring freehold land and are held in trust for non-citizens and a mailo land. They are, however, permitted company incorporated in Uganda whose to acquire leases not exceeding 99 years. articles of association do not contain The LA requires a lease obtained by a a provision restricting transfer or issue non-citizen for 3 years or more to be of shares to non-citizens. “Controlling registered under the provisions of the interest” means in the case of companies Registration of Titles Act (Cap 230). with shares, the majority shares are held by persons who are not citizens and in For the purposes of the LA, a “non- the case of companies without shares, a citizen” means a person who is not company in which decisions are arrived a citizen of Uganda); in the case of a at by the majority of members who are corporate body, a corporate body in not citizens. which the controlling interest lies with

COMPETITION

There is currently no general law regulating competition. This area is The East African Community Competition governed by contractual arrangements Act was passed in 2006 but is yet to be between the parties. The COMESA operationalized. It seeks to establish the Competition Regulations, 2004 East African Community Competition became operational in January 2013 Authority that will have powers to with the establishment of the COMESA scrutinize and approve mergers and Competition Commission. There is still acquisitions with cross-border effects uncertainty about the jurisdiction of the and deal with any other matters relating COMESA Competition Commission in to competition. Uganda.

CONSUMER PROTECTION

Uganda does not have national consumer have measures on consumer protection. protection legislation but there are The sectors with policies on consumer existing sectoral policies, legal and protection include communications, regulatory frameworks in place that electricity, dairy, pharmaceuticals, water, broadcasting, insurance and banking.

16 The Uganda National Bureau of public health and safeguard consumers Standards role is to formulate and from dangerous, counterfeit and promote the use of standards to protect substandard products.

EXCHANGE CONTROL

Foreign exchange repatriations from place). All payments in foreign currency Uganda are not restricted. The Governor to, or, from Uganda between residents of Bank of Uganda may, however, impose and non-residents or between residents such restrictions when he deems fit are required to be made through a bank. (there are no restrictions currently in

IMPORTS AND EXPORTS

There are restrictions on importation and elimination of customs duties and other exportation of a number of commodities charges on imports within the Customs in Uganda, for example animal breeds Union as well as the removal of non-tariff and genetic material, wildlife species barriers to trade among Partner States and specimens, importation of coffee and the establishment and maintenance into Uganda, petroleum and minerals. A of a common external tariff in respect person dealing in any of these products of all goods imported into the Partner shall not import or export without States from foreign countries. This has obtaining a licence from the prescribed seen growth in total intra-trade, total authority. The Protocol on EAC’s Customs intra EAC exports and imports, cross- Union commenced in Uganda in January border investment and foreign direct 2005. The Protocol provides for the investment.

LEGAL FORMS OF INCORPORATION

The principal forms of business an improvement from the previous rank arrangements in Uganda are the (public/ of 135 in 2015. On average, starting a private) limited liability company, joint business requires about 12 different venture, sole proprietorship, partnership, procedures. The table below provides trust and branch of a foreign company. a summary of the procedures and the The World Bank Group’s “Ease of associated completion time and cost for Doing Business Report 2016” ranks setting up a private limited company: Uganda 122nd out of 189 economies,

17 Estimated time to No. Procedure Cost (in UGX) complete (days) Reservation of a name at the 1 2 days 25000 Companies Registry

Included in 2 Pay fees at the bank 1 day previous procedure Obtain statutory forms from the Uganda Bookshop (i.e. particulars of directors and secretary (Form 5,600 (500-700 3 7), statement of nominal capital 1 day for each form) (Form A1), and notice of situation of registered office and registered postal address (Form A9)) Obtain assessment of the registration fees to be paid via the 4 1 day No charge Uganda Revenue Authority web portal bank payment Make payment of registration fees at Bank charges 5 1 day a given bank (2,000 – 2,500)

Payment is done 6 File with the Registrar of Companies 1 day under No. 5 Apply online to the Uganda Revenue Authority (URA)for a Tax Identification Number (“TIN”). Indicate the various tax heads you would wish to be registered under (for example PAYE) supported 7 by copies of the company 3 days No charge incorporation documents and the identity of the company’s tax contact who must already possess a TIN (this can be either a local resident director, an employee or a tax advisory firm) Obtain corporate Tax Identification 8 7 days No charge Number

Obtain VAT registration (where 9 7 days No charge necessary) An inspector from URA inspects the 10 business 1 day No charge premises Obtain application forms for trading 11 1 day No charge licence

18 Estimated time to No. Procedure Cost (in UGX) complete (days) See the following 12 Pay the licence fee at the bank 1 day procedure Obtain clearance from the Ministry 13 of Trade in case of companies 2 days No charge controlled by non-citizens License fees depend on the 14 Obtain the trading licence 1 day nature of business and its location File a form with the National Social Security Fund 15 No charge (NSSF) (if employing 5 or more 4 days persons) 250,000 – 16 Make a company seal 2 days 590,000

INTELLECTUAL PROPERTY

Uganda’s laws for the protection of literary, scientific and artistic intellectual intellectual property rights include works and their neighbouring rights. the Trademarks Act, 2010 (the TMA), The author of any work shall have the the Copyright and Neighbouring protection of the work, where work is Rights Act, 2006 (the CNRA) and original and is reduced to material form in the Industrial Property Act 2014 (the whatever method, irrespective of quality IPA). The authority for protection of of the work or the purpose for which it is intellectual property rights is the Uganda created. Registration Services Bureau headed by the Registrar General of Uganda. The IPA repealed the Patents Act (Cap.216) and provides for the grant, The TMA provides for the registration, registration and protection of patents, renewal and protection of trademarks utility models, industrial designs and in Uganda. The TMA repealed the technological innovations in Uganda. Trademarks Act, (Cap 217). The most significant change under the TMA is the Uganda is a signatory to various World possibility to register service marks. The Intellectual Property Organisation definition of sign or mark was expanded conventions, including the Paris to include, any word, symbol, slogan, Convention for Protection of Industrial logo, sound, smell, colour, brand label, Property, the Patent Cooperation Treaty name, signature, letter, numeral or any for protection of patents, and the WIPO combination of them. Convention to promote the protection of intellectual property throughout the The CNRA provides for the protection of world.

19 DISPUTE SETTLEMENT

The Arbitration and Conciliation Act Under the Investment Code Act (Cap (Cap 4) (ACA) provides for domestic 92), where negotiations for an amicable arbitration, international commercial settlement have failed to settle a dispute arbitration, enforcement of foreign between a foreign investor and the UIA arbitral awards and generally defines the or the Government, the dispute maybe law relating to conciliation of disputes in submitted to arbitration in accordance Uganda. Uganda is also a signatory to the with the following methods as may be New York Convention on the Recognition mutually agreed between the parties: and Enforcement of Foreign Arbitral Awards, 1958 (the Convention). Awards a. in accordance with the rules under this Convention are recognised and of procedure for arbitration of enforceable in Uganda upon registration the International Centre for the in the High Court of Uganda. Settlement of Investment Disputes; b. within the framework of any bilateral Under the ACA, parties are free to or multilateral agreement on determine the number of arbitrators. If investment protection to which the the parties fail to determine the number, Government and the country of which there shall be one arbitrator. An arbitrator the investor is a national are parties; may be appointed by the parties or by or the appointing authority. The appointing c. in accordance with any other authority under the ACA is the Centre for international machinery for the Arbitration and Dispute Resolution which settlement of investment disputes. facilitates the arbitration and mediation of commercial and other disputes.

20 INDUSTRY SECTORS AGRICULTURE

Despite their dwindling contributions to total exports in 2014. Exports of non- Uganda’s GDP, the agriculture, forestry traditional products, including apparel, and fishing sectors provide approximately hides, skins, vanilla, vegetables, fruits, 65.6 percent of employment in Uganda. cut flowers, and fish, are growing, while Uganda is Africa’s second-leading traditional exports such as cotton, tea, producer of coffee, which accounted and tobacco continue to be mainstays. for about 22 percent of the country’s

BANKING AND FINANCIAL SERVICES

Uganda’s small financial system is products. There are currently 21 non- dominated by banking, which is relatively life insurance firms, 32 insurance open to competition and subject to brokers and 17 loss assessors/adjusters minimal government influence. The in Uganda. There was an amendment banking sector is highly regulated by to the Insurance Act (Cap 213) in 2013 the Bank of Uganda. There are currently that prohibited the carrying out of life 25 licensed commercial banks with 566 insurance business and non-life insurance branches as of June 2016. A majority business as a composite company. This of the banks are foreign-owned, and has resulted in the licensing of 8 new account for about three-quarters of life insurance companies. The required total assets. Other financial institutions minimum paid up capital for insurance in Uganda are credit institutions, micro- companies carrying out life business was finance deposit taking institutions, forex increased to approximately USD 1,071,428 bureaus, money remitters, insurance (UGX 3 billion) while that of insurance companies, insurance brokers, leasing companies carrying out non-life business companies and development banks. was increased to approximately USD Bank lending to the private sector has 1,428,571 (UGX 4 billion). Consequently, gradually increased. Overall, the banking the IRA issues different licences specific sector is well capitalised and has no to either life of non-life business. serious non-performing loan problems. Access to financial services has expanded Capital markets are regulated by the across the country, and there is regulation Capital Markets Authority and remain in place for microfinance businesses. relatively small. Companies cross- listed from the Nairobi Stock Exchange The insurance sector supervised by the (Kenya), account for the bulk of the Uganda Insurance Regulatory Authority market capitalisation on the Uganda (IRA) remains small with limited market Securities Exchange penetration and uptake of insurance

22 ENERGY

Uganda has a total estimated electrical electricity generating capacity in the next potential of 5,300 MW (Hydro – 2,000 five years. MW, Mini-hydro – 200MW, Solar – 200 MW, Biomass – 1,650 MW, Geothermal The Government, through the Electricity – 450 MW and Peat – 800 MW). There Regulatory Authority (“ERA”), is has been an increase in the number of promoting small electricity projects as independent power producers and this part of the renewable energy framework has led to a 22 percent increase in hydro- under the GET FIT Uganda Project. The electric generation. GET FiT Uganda Project was launched in May 2013 and is designed to target A 250 megawatts power plant at Bujagali the key barriers confronting investors falls was commissioned in October 2012. looking at potential investments in small Currently, coverage has significantly renewable energy projects (1-20 MW) grown to 15 percent nationally and in in Uganda and thereby fast-track up rural areas stands at 7 percent. Electricity to 20 projects, representing up to 170 consumption per capita has grown from MW and 830 GWh/year. In 2015, 6 (six) 70 kilowatt-hour to 150 kilowatt-hour. GET FiT hydropower projects started Government hopes to have increased construction and the remaining projects consumption to 22 percent by 2022. A in are expected to commence by the end number of projects including the 600MW of 2016. Karuma HPP, 183 MW Isimba HPP and 600 MW Ayago HPP are aimed at ERA has published a list of sites which achieving this goal. The Government of are available for intending investors on its Uganda is also seeking investors for the website: www.era.org. construction of an additional 1,045 MW of

MANUFACTURING

Uganda’s manufacturing output has based processing, paper, textiles and also been expanding by more than 10 garments, pharmaceuticals, fabrication, percent annually over the last eight years. ceramics, glass, fertilisers, plastic/PVC, Opportunities exist in virtually all areas, assembly of electronic goods, hi-tech and ranging from beverages, leather, tobacco medical products.

OIL AND GAS

Although the hunt for oil in Uganda dates of oil in Uganda is underway. As at June back to the 1920s, the first commercial 2014, 89 deep wells had been drilled in discovery was made in 2006. Exploration the Albertine Graben region in Western

23 Uganda (on the Uganda-DRC border) The Government in February 2015 also and 72 of these wells encountered awarded the tender for the construction hydrocarbons in subsurface. 69 of the 89 of an oil refinery to a Russian consortium wells have been drilled by Tullow Oil Plc led by RT Global resources together with an 84 percent success rate against with partners Tatneft and VTB Capital. the global average of 25 percent. The Government in July 2016 however announced that it had halted negotiations The Government of Uganda currently with RT Global Resources owing to has 4 active Production Sharing a dispute over the final contract and Agreements (PSA’S) in respect of 4 was proceeding to invite the alternate licensed exploration areas, licensed to bidder, SK Engineering & Construction Tullow Uganda Limited, CNOOC Uganda for negotiations. The refinery is expected Limited and Total E&P (Uganda) B.V. The to cost USD 3 billion and is expected to Government also issued a production be completed in 2020 with a capacity of licence to CNOOC in 2013 and is 60,000 barrels per day. The Government currently considering applications for was debating whether to construct an production licences for over 8 discoveries oil pipeline through Kenya or Tanzania in the exploration areas operated by but recently announced its decision Tullow and another application over to construct an oil pipeline from the an exploration area operated by Total. oil fields in Western Uganda to the In 2013, the Government passed the Tanzanian port of Tanga, on the Indian Petroleum (Exploration, Development Ocean. The oil pipeline is expected to and Production) Act, 2013 to regulate cost USD 3.55 billion with the earliest upstream activities and Petroleum export of crude expected to be in 2020. (Refining, Conversion, Transmission and Midstream Storage) Act, 2013 to regulate The National Content regulations midstream activities. recently came into force and they require licenced oil and gas companies The Government, in February 2015, to give preference to goods produced announced the first open competitive and available in Uganda and services licencing round for six exploration blocks rendered by Ugandan citizens and in the Albertine Graben. 16 firms were companies, to give priority to Ugandan shortlisted in August 2015 to submit bids citizens in employment and ring fences and by the submission deadline of 26th certain goods and services for Ugandan February 2016, 7 firms had submitted citizens and Ugandan companies i.e. bids. 4 (four) firms have since been clearing and forwarding, catering, hotel shortlisted by the Government and have accommodation etc. been invited to negotiate PSA’s. The 4 (four) shortlisted firms are Armour The Government also recently granted Energy Limited of Australia, WalterSmith 5 (five) production licences to Tullow Petroman Oil Limited of Nigeria, Oranto Uganda Operations Pty Limited and 3 Petroleum International Ltd of Nigeria (three) production licences to Total E&P and Niger Delta Petroleum Resources Ltd Uganda B.V. of Nigeria.

24 TELECOMMUNICATIONS

After a moratorium on new mobile country. The Uganda Communications telephone operator licences was lifted Act, 2013, was passed in 2013 to by the Government, the telecom sector consolidate and harmonise the old laws has undergone a boom. There were governing the telecoms and electronic approximately 19.6 million telecom media sector, and to reconstitute one subscribers by the end of July 2016. This governing body for both sectors. has generated expanded coverage and telephone penetration throughout the There have also been key developments country and prompted new competition in the broadcasting industry such as the and lower prices. There are currently migration from analogue type television 8 telecommunications companies in broadcasting to digital broadcasting Uganda: MTN, Airtel, Africell, Uganda in June 2015. Digital broadcasting is Telecom, Smart Telecom, K2 Telecom, aimed at improving the consumers’ TV Smile Telecom and Vodafone. experience in terms of better sound and picture quality. It has been projected that The Government completed the laying of the use of digital broadcasting will free the fibre optic cable which cost USD 106 up space in the frequency spectrum that million. It is hoped that this will facilitate can be used to provide more TV channels e-Governance as well as provide access and others ICT services. to cheap internet access across the entire

TOURISM

Uganda’s tourist industry offers many infrastructure is underdeveloped, long-term opportunities, with a number although the number of visitors to the of unique tourist attractions. These country has increased sharply in the past include Lake Victoria (the source of decade and tourism is now ranked the the Nile), the Murchison Falls and the top foreign exchange earner for Uganda. Mountains of the Moon, along with a In February 2014, the Single Tourist number of national parks and wildlife Visa was introduced by the East African reserves hosting, among other fauna Community. It is now operational in and half the world’s mountain gorilla Kenya, Rwanda and Uganda. This will see population. Except for Kampala and a a significant reduction in the fees paid by few major towns, however, the hospitality tourists to the East African countries.

25 KEY DEVELOPMENTS ENERGY AND INFRASTRUCTURE

Uganda picks Tanzania route for oil pipeline

Uganda announced that it would build a project prompted Uganda to change its major pipeline to export its oil through mind. There are concerns about possible Tanzania. The 1,400 kilometre pipeline attacks by Somalia’s al-Shabab Islamists, will connect Uganda’s western region who have attacked targets close to near Hoima, where big oil reserves where the pipeline would have passed. have been discovered, with Tanzania’s The discovered oil reserves in Uganda are port of Tanga. The project is expected estimated at some 6.5 billion barrels, and to cost about USD 4 billion. The initial the country expects to start production plan was to route the pipeline through in 2018. France’s Total, China’s CNOOC Kenya, which has also recently struck oil, and the Anglo-Irish company, Tullow, hold but security concerns and cost of the most of the licences.

FINANCIAL SERVICES

MTN and Vodafone interconnect their mobile money services

This interconnect collaboration between M-Pesa customers in Kenya, Tanzania, the region’s two biggest mobile money Democratic Republic of Congo and operators, in 2015, will enable convenient Mozambique. The companies will also and affordable international remittances share best practices and work together between MTN Mobile Money customers to define the rules and standards of in Uganda, Rwanda and Zambia and mobile-based remittances in Africa.

Ugandans can now use Safaricom’s M-Pesa

Ugandan customers can now make partners and the large population of mobile money transactions with Kenyans, Kenyan students in Uganda, who depend following a deal between Safaricom on remittances from their parents or Ltd (Safaricom) and MTN Uganda. This guardians, also provides a large customer provides a reliable and affordable way base. The transactions’ infrastructure for businesses to transact across the two between the two networks has been countries and complements economic enabled by MFS Africa, which develops initiatives spearheaded by the East and distributes mobile financial solutions African Community Heads of State. to markets across Africa. Uganda is one of Kenya’s top trading

27 NATURAL RESOURCES

Uganda’s budding oil industry In 2015, Uganda signed a memorandum - Britain’s Tullow Oil, France’s Total and of understanding with three oil firms China’s CNOOC - will be shared between laying out a blueprint for the commercial a thermal power generation plant, a development of its oil fields. According to planned refinery and an export pipeline. the deal, crude produced by the three firms

Mining taxes eased in 2015 The Ugandan Government struck down now register for VAT during exploration a series of taxes that mining firms but they will now access plants and had long complained about. Formerly, machinery VAT-free. Mining companies Uganda charged Value Added Tax (VAT) have been complaining of the adverse at 18 percent and imposed a 15 percent impact of taxes to their cash-flows, withholding tax on payments for services during the early stages of their projects, provided in Uganda to mining companies when they are not even sure of a return by non-resident service providers. This on their investment. has been waived. Mining companies can

Uganda Government tightens rules on expatriates in the oil sector In a move meant to boost the participation work permit will not be renewed. The of more Ugandans in the oil and gas sector, rules also apply to all companies that the Uganda Government has set stringent seek to participate in the oil industry. rules on hiring expatriates. The new rules Oil companies will also be required to restrict international oil companies (IOCs) submit a Nationalization Plan that details from bringing into the country expatriates how Ugandans will gradually manage the to occupy positions that qualified sector, by taking strategic positions in the Ugandans can fill. All open positions will companies. The Petroleum (Exploration, have to be advertised locally first. In case Production and Development), Act 2013 there is no Ugandan qualified for the job, provides that a licensee should within one the Ministry of Internal Affairs will issue a year after the grant of a license, or every work permit to an expatriate for a specific after one year, submit to the authority for time frame, during which the company is the approval of the detailed programme expected to train Ugandans, such that by for recruitment and training of Ugandans. the time the work permit expires they are qualified to take up the job. An expatriate’s

28 OTHER DEVELOPMENTS

On 20 February 2016, the Electoral political energy is increasingly directed Commission of Uganda declared towards retaining power or to the President Yoweri Museveni the winner question of who will eventually succeed of the 2016 presidential polls. The President Museveni, at the expense of President won 60.8 percent of the votes, economic or fiscal policymaking. less than the 68 percent share he won in 2011, but still comfortably ahead of his In May 2015, Uganda and Russia signed nearest rival, Kizza Besigye, who scored the Uganda-Russia Intergovernmental 35.4 percent. According to the rating Commission on Economic, Scientific and agency, Fitch, the country’s election Technical Cooperation. The agreement results are neutral for its sovereign credit which was signed at the Ministry of rating, since they have not resulted in Foreign Affairs’ head office in Kampala, widespread disruption and fiscal and is expected to see the two countries economic policy continuity is likely. increase cooperation in the economic, However, the agency notes that risks social, water, environment and political could rise over time if the administration’s spheres.

SOURCES www.bbc.co.uk www.observer.ug www.cnbcafrica.com www.cnn.com www.businessdailyafrica.com www.reuters.com www.bloomberg.com www.newvision.co.ug

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