LEATHER VALUE CHAIN INVESTMENT PROFILE

UGANDA LEATHER VALUE CHAIN INVESTMENT PROFILE UGANDA

2018 Basil Ajer AG EXECUTIVE DIRECTOR

FOREWORD

Information is arguably the most powerful tool available to individuals, companies and even countries to achieve their aspirations. However, on its own, information may not achieve much, unless it is used appropriately, which in turn can only be used appropriately, if packaged properly.

It is indeed my honour, on behalf of Uganda Investment Authority (UIA), to endorse this well packaged profile on Uganda’s Leather Sector. The information in the profile has been put together by SITA International Trade Centre with whom UIA has forged a very fruitful relationship in the area of building the capacity of Ugandan companies; especially SMEs and Women owned companies, to increase their productivity and competitiveness in trade with India.

UIA is Uganda’s investment promotion agency and works under the Ministry of Finance, Planning and Economic Development to provide investment information and facilitate investors to set up their businesses. UIA also provides aftercare services to ensure sustained investment growth.

Investment opportunities in Uganda are vast; ranging from value addition of natural resources, services to hi- technology. The main opportunities are in mineral beneficiation, manufacturing, tourism, ICT and agro processing, as well the nascent oil and gas sector. The other areas are detailed in this profile. Agro processing in Uganda is considered to be a major driver of economic growth because if its viability and ability to create jobs for the majorly young population. The National Development Plan II identifies leather as one of the sectors that can play a major role to achieving the goals of job creation, income generation and alleviation of poverty by 2040.

Uganda is among the highest exporters of hides and skins in Africa. Approximately 95% of processed hides and skins are being exported as semi-processed leather (wet blue). One the flip side, the country imports more than half of its processed leather needs. There is therefore profitable investment potential in the huge demand gap. For instance, footwear from Uganda can be exported at zero duty into the EAC market. Uganda is also eligible for the USA’s African Growth and Opportunity Act (AGOA), European Union’s Everything but Arms (EBA) and provides access to the Tripartite Free Trade Area of EAC, COMESA and SADC, where it is signatory.

Setting up business in Uganda has been made easy through UIA, which is a One Stop Centre for investors, both physically and online through the eBiz portal www.ebiz.go.ug.

Information is a powerful tool that informs investment decisions. It is my pleasure to now invite you to read this profile on Uganda’s leather sector. Your investment is truly our Business. UGANDA

LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER

4 ACKNOWLEDGEMENTS

This profile has been produced under the framework of the Supporting Indian Trade and Investment for Africa ( SITA ) project, funded by the Department for International Development, Government of the United Kingdom, and implemented by International Trade Centre. SITA is a South-South trade and investment project aimed at improving the competitiveness of select value chains and increasing investment in five East African countries through partnerships with institutions and businesses from India.

Special contributions to writing this report have been provided by:

Quality Assurance: International Trade Centre ( ITC ), Supporting Indian Trade and Investment for Africa ( SITA ) – T.C.A. Ranganathan, External Consultant; Jarmila Sarda, Investment Expert ( SITA ); Authors: Aristide Djimgou Tchakounte, Nicholas Mudungwe

Layout: Jesús Alés

Editor: Vanessa Finaughty

The views expressed in this report are those of the authors and do not represent the official position of International Trade Centre, Tanzania Investment Centre or the Government of the United Kingdom. The images used in this profile may not always accurately reflect the country context.

© International Trade Centre 2018

ITC encourages reprints and translations for wider dissemination. Short extracts may be freely reproduced, with due UGANDA

acknowledgement, using the suggestion citation. For more extensive reprints or translations, please contact ITC, using the online permission request form: http://www.intracen.org/Reproduction-Permission-Request/ LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER

5 Table of Contents

WHY UGANDA? 10 Labour and wage rates 40 Land availability 40 geographical overview 10 Land acquisition by foreigners 41 Political overview 11 1. Application 42 Economic and financial overview 12 2. Land allocation procedure 43 GLOBAL AND REGIONAL 3. Terms and conditions of land allocation 43 IMPORTANCE OF LEATHER 18 4. Important notes 44

Overview 20 USEFUL CONTACTS 45

UGANDAN LEATHER INDUSTRY 20 selected support agencies 45

Ugandan leather value chain: Overview and Some leather goods (shoes) manufacturers 47 investment opportunities 24 Financial institutions 47 Animal husbandry 24 Selected licences in Ugandan trade Slaughter slabs, slaughterhouses and manufacturing sector 50 and abattoirs 24 Tanning 26 REFERENCES 52 Leather footwear manufacturing 27 Leather goods manufacturing 28

Trade 30

TRADE AND INVESTMENT CLIMATE 30

Taxation 32

Investment incentives 34 Fiscal and financial incentives 34 Export incentives 35 Security of investment 36 UGANDA

Visas and work permits 37

Registration procedures for companies 38

Industrial utilities 39 Electricity 39 Water 39 LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER

6 List of Tables

TABLE 1: ANNUALIZED AVERAGE INTEREST RATES, 2012–2016 16

TABLE 2: ESTIMATED ANNUAL LOSSES OF UGANDAN LEATHER VALUE CHAIN 20 TABLE 3: RELATIONSHIP BETWEEN THE LEATHER VALUE CHAIN STRATEGY AND NATIONAL INDUSTRIAL POLICY 21 TABLE 4: RELATIONSHIP BETWEEN THE LEATHER VALUE CHAIN STRATEGY AND EXPORT STRATEGY 21 TABLE 5: LOSS ESTIMATION OF SLAUGHTER DEFECTS ON H&S IN THE REPUBLIC OF UGANDA 25

TABLE 6: SELECTED TANNERY CAPACITIES IN 2018 26

TABLE 7: INDIVIDUAL INCOME TAX FOR RESIDENTS (MONTHLY PAYE TAX RATES) 33

TABLE 8: INDIVIDUAL INCOME TAX FOR NON-RESIDENTS (MONTHLY PAYE TAX RATES) 33

TABLE 9: BUSINESS TAXES 33 TABLE 10: SELECTED TAX INCENTIVES AND EXEMPTIONS AVAILABLE TO INVESTORS IN THE REPUBLIC OF UGANDA 34

TABLE 11: OTHER TAX INCENTIVES 35

TABLE 12: EXPORT INCENTIVES 35

TABLE 13: SELECTED INCENTIVES FOR FREE ZONE INVESTORS 36

TABLE 14: SELECTED WORK PERMIT CLASSES AND THEIR RESPECTIVE REQUIREMENTS 37

TABLE 15: VISA AND WORK PERMIT FEES 37

TABLE 16: REGISTERING A NEW COMPANY IN THE REPUBLIC OF UGANDA 38 TABLE 17: ANNUAL AVERAGE WEIGHTED LARGE INDUSTRIAL TARIFFS (UGX*/KWH), 2012–2015 39

TABLE 18: NWSC TARIFF STRUCTURE 40

TABLE 19: LAND TENURE SYSTEM IN THE REPUBLIC OF UGANDA 40

INSTITUTION 45

CONTACT 45

ISSUING AUTHORITY 50

LICENCES 50 UGANDA

LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER

7 List of Figures

FIGURE 1: KEY MACROECONOMIC ASSUMPTIONS 12

FIGURE 2: TOTAL VALUE OF PRODUCTS EXPORTED BY THE REPUBLIC OF UGANDA (2002–2017) 13

FIGURE 3: MAIN IMPORTERS OF UGANDAN PRODUCTS IN 2017 13

FIGURE 4: DISTRIBUTION OF IMPORTING MARKETS FOR UGANDAN EXPORTS 14

FIGURE 5: TOTAL VALUE OF PRODUCTS IMPORTED BY THE REPUBLIC OF UGANDA (2002–2017) 15 FIGURE 6: MAIN SUPPLYING MARKETS FOR PRODUCTS IMPORTED BY THE REPUBLIC OF UGANDA IN 2017 15 FIGURE 7: DISTRIBUTION OF SUPPLYING MARKETS FOR PRODUCTS IMPORTED BY THE REPUBLIC OF UGANDA IN 2017 16

FIGURE 8: FDI INFLOW, THE REPUBLIC OF UGANDA (2002–2017) 17

FIGURE 9: STATUS OF FDI INFLOWS IN THE EAST AFRICAN COMMUNITY (EAC) (2018) 17

FIGURE 10: LEATHER VALUE CHAIN 18

FIGURE 11: PRODUCTION TREND OF HIDES AND SKINS IN AFRICA (2003–2014) 19

FIGURE 12: UGANDAN LEATHER EXPORTS (2010–2017) 22 FIGURE 14: IMPORTING MARKETS FOR UGANDAN RAW HIDES AND SKINS (OTHER THAN FURSKINS) AND LEATHER (2002–2017) 23

FIGURE 13: MAJOR AFRICAN EXPORTERS OF HIDES AND SKINS AND LEATHER (HS 41) 23

FIGURE 15: LIVESTOCK NUMBERS IN THE REPUBLIC OF UGANDA (2014–2016) 24

FIGURE 16: UGANDAN VALUE CHAIN MAP 25 FIGURE 17: SUPPLYING MARKETS FOR LEATHER FOOTWEAR (HS 6403) IMPORTED BY THE REPUBLIC OF UGANDA 27 FIGURE 18: SUPPLYING MARKETS FOR LEATHER ARTICLES (HS 42) IMPORTED BY THE REPUBLIC OF UGANDA 28

FIGURE 19: TRIPARTITE FREE TRADE AREA MAP 31

FIGURE 20: UGANDAN MULTILATERAL TRADE AGREEMENTS 32

FIGURE 21: INVESTMENT REGISTRATION AND FACILITATION FLOWCHART 39 UGANDA

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8 Abbreviations & Acronyms

BUBU Buy Uganda Build Uganda

CIBO Compendium of Investment and Business Opportunities

COMESA Common Market for Eastern and Southern Africa

EAC East African Community

FDI Foreign direct investment

GDP Gross domestic product

H&S Hides and skins

LVCS Leather Value Chain Strategy

PAYE Pay-as-you-earn

UBOS Uganda Bureau of Statistics

UFZA Uganda Free Zones Authority

UIA Uganda Investment Authority

URA Ugandan Revenue Authority

URSB Uganda Registration Services Bureau UGANDA

LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER

9 Why Uganda?

Key facts Capital: GEOGRAPHICAL OVERVIEW Area: 241 550.7 km2 Population: 37 673 800 (2017) Known as the Pearl of Africa, the Republic of 0–14 years: 46.7% (2017) Uganda is located in the heart of East Africa. It 15–64 years: 50.8% (2017) is bordered by the Republic of South Sudan in Active population: 19 103 900 (2017) the north, the Republic of Kenya in the east, the Democratic Republic of the Congo in the west, the Population growth: 3.2% (2017) United Republic of Tanzania in the south, and the Literacy rate: 72.2% (2014) Republic of Rwanda and the Republic of Burundi in Youth literacy rate (15–24 years): 83.6% (2012) the south-west. The Republic of Uganda’s position Urban population: 16.8% (2017) is advantageous to trade and investment due to GDP (nominal): $25.89 billion (2017) its direct access to a regional market of 170 million GDP growth: 3.96% (2017) potential customers (EAC Secretariat 2016 statistics). GDP per capita (nominal): $604.04 (2017) The land-linked country has rich soils, favourable FDI inflow: $541 million (2016) temperatures, plentiful rainfall and many lakes and Exports: $2 901 million (2017) rivers. The Republic of Uganda enjoys ample natural Imports: $5 595 million (2017) resources, with several organically grown crops and Exchange rate (per USD): UGX 3 764 (25.10.2018) significant deposits of more than 50 types of minerals, as well as recently found oil. Its diverse landscape Govt. expenditure: $4.86 billion (2016) encompasses the snow-capped Rwenzori Mountains Govt. revenue: $3.7 billion (2016) and immense Lake Victoria. The Republic of Uganda Foreign reserve: $3.034 billion (31 December 2016) shares Lake Victoria with the Republic of Kenya and Inflation rate: 5.5% (2016) the United Republic of Tanzania and Lakes Albert and Currency: Ugandan shilling (UGX) Edward with the Democratic Republic of the Congo Other major cities: Gulu, Lira, Jinja, Mbarara, Mbale (DRC). It comprises a territory of 241,550.7 km2, of English (official language), which 41,027.4 km2 are open water and swamps Language: Luganda (major) while 200,523.2 km2 are land (71.2% of the territory Christian 84.4%, Muslim 13.7%, Religion: consists of agricultural land and 14.5% of forests). other 1.6%, none 0.2% (2014 est.)

Sources: AfDB Statistical Yearbook, 2018; International Trade The temperatures vary greatly across the Centre, 2018; World Bank, 2018; CIA World Factbook, 2017. whole country (between 16°C and 31°C), depending on elevation and landscape. UGANDA

LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER

10 THE REPUBLIC OF UGANDA

POLITICAL OVERVIEW ƒƒStrategic location

The Republic of Uganda is a presidential republic ƒƒPeace and political stability where the president is both head of state and of government. Executive power is exercised by the ƒƒEconomic stability government. Legislative power is vested in both the government and the National Assembly. The system ƒƒConsistent implementation is based on a democratic parliamentary system with of liberal policies universal suffrage for all citizens over 18 years of age. ƒƒImportant growth in GDP performance Within its boundaries, the Republic of Uganda has multiple ethnic groups with a wide range of ƒƒInflation stability political systems and cultures. This made the establishment of a functioning political community ƒƒSpecific policies in place to improve difficult after independence was achieved in macroeconomic performance 1962. However, the government (in power since and investment flow 1986) has been credited with restoring stability and economic prosperity to the country. ƒƒInvestment incentives and guarantees

The Republic of Uganda held both its latest ƒƒLiberal foreign exchange regime presidential and parliamentary elections in February 2016, with the incumbent winning ƒƒRapid growth in domestic lending his 5th elected term in office. Museveni‘s National Resistance Movement (NRM) party also retained ƒƒImprovements in global competitiveness its majority in Parliament. This is likely to ensure policy continuity and support the passage of ƒƒTransformation into a middle- investor-friendly regulations in the short-term. income country

In 2017, the Republic of Uganda had an estimated ƒƒAccess to markets through population of 37,673,800, which is one of the membership of bilateral and youngest and most rapidly growing populations in multilateral trade agreements the world: 48% of Ugandans are younger than 14 years old and the fertility rate is among the world’s ƒƒCompetitive operations costs highest at 5.8 children per woman, which leads to a population growth of 3.2% per year. Youth literacy ƒƒVast availability of labour force rate is comparatively high at 83.6% (estimate from 2012). Currently, the ever-growing and English- ƒƒExceptionally rich array of natural speaking labour force comprises 19.4 million people. resources and wildlife UGANDA

Large parts of the population are concentrated in ƒƒWorld-renowned tourist attractions central and southern Uganda, particularly around Lake Victoria and Lake Albert. The urban population is relatively small at 16.8%, as many Ugandans live in the countryside. The Republic of Uganda, with its strategic location, abundant English-speaking labour force, open markets and plentiful resources, offers investors numerous opportunities. LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER

11 ECONOMIC AND FINANCIAL OVERVIEW to productivity losses in the agriculture sector (resulting from, among others, lack of market access, agricultural financing, weather vagaries Since 1987, the Ugandan Government has been and associated climatic changes) and the implementing reforms in an effort to achieve manufacturing sector (due to low market base, economic growth and development. The Republic inadequate infrastructure, low human resource of Uganda has been engaged in economic and low financial markets development, etc.). liberalization and privatization of public enterprises, However, the real GDP growth is expected to recognizing that private sector participation is vital average 6.3% in the medium term, supported by in the development process. These reforms were an increase in private investment, improvement consolidated into a development framework called in public investment management and efficient the Poverty Eradication Action Plan (PEAP). monetary policy. See Figure 1 for more details.

In the late 1980s, the Republic of Uganda was The Republic of Uganda continues to benefit one of the 1st Sub-Saharan African countries to from a monetary and fiscal policy stance get on board with liberalization and pro-market concentrated on containing the pressures of policies. As a result, real gross domestic product inflation, while safeguarding exchange rate (GDP) growth was approximately 7% per year and debt stability, thereby offering an enabling in the 1990s and 2000s. From 2006 onwards, macroeconomic environment for growth. GDP growth declined to an average of 5%. This decline was mainly driven by the Government of After reaching nearly 7% in the fiscal year 2015/16, Uganda’s large investments in infrastructure. the inflation rate decreased to 5.7% and 5.1%, for the headline inflation and the core inflation In 2017, GDP growth was recorded at 3.96% (4% respectively, in the fiscal year 2016/17. In the real GDP growth), falling from 9.3% in 2011. The medium-term, both variables are expected to slowdown in economic growth was attributed stabilize at approximately 5%. See Figure 1.

Figure 1: Key macroeconomic assumptions UGANDA

*Projected Source: Ugandan Ministry of Finance, Planning and Economic Development (MoFPED), December 2017. LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER

12 The country trade regime is liberalized, except in the last 15 years to reach $2.9 billion in 2017 as for a few import-licensing controls based on captured in Figure 2. As of 2017, the main importers environmental, health and security concerns. As of Ugandan products were all from the Global a result of this liberal trade policy, the country’s South. See Figure 3 and Figure 4 for details. total value of products exported increased sixfold

Figure 2: Total value of products exported by the Republic of Uganda (2002–2017)

Source: Trade Map (ITC), 2018.

Figure 3: Main importers of Ugandan products in 2017 UGANDA

Source: Trade Map (ITC), 2018. LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER

13 Figure 4: Distribution of importing markets for Ugandan exports

Source: Trade Map (ITC), 2018.

The Republic of Uganda’s growing involvement in international trade is also reflected in its imports. The country’s total value of products imported has also increased sixfold within the last 15 years. In 2017, overall Ugandan product imports amounted to $5.59 billion (as seen in Figure 5). For its imports, the Republic of Uganda’s main markets are also in the Global South. The two main supplying markets of Ugandan imports are the People’s Republic of China with imports worth $985 million and the Republic of India with $736 million, followed by the United Arab Emirates, the Republic of Kenya and Japan (see Figure 6 and Figure 7). UGANDA

LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER

14 Figure 5: Total value of products imported by the Republic of Uganda (2002–2017)

Source: Trade Map (ITC), 2018.

Figure 6: Main supplying markets for products imported by the Republic of Uganda in 2017 UGANDA

Source: Trade Map (ITC), 2018. LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER

15 Figure 7: Distribution of supplying markets for products imported by the Republic of Uganda in 2017

Source: Trade Map (ITC), 2018.

Table 1: Annualized average interest rates, 2012–2016 2012 2013 2014 2015 2016 The Republic of Uganda’s banking and financial Rediscount rate 22.0 14.8 14.2 17.4 18.9 sectors are growing in size and sophistication. In Bank rate to 23.0 15.8 15.2 18.4 19.9 2017, the country had a total of 25 commercial commercial banks banks, ranging from national, intraregional and Rate (CBR) 18.0 11.7 11.2 14.0 14.9 international banks, of which 84% were foreign- owned, and more than 300 non-bank financial Treasury Bills (monthly average discount factor) institutions. The (BoU) is one of 91 days 14.2 9.4 9.6 14.4 14.4 the most respected central banks in Sub-Saharan 182 days 15.4 11.5 11.2 15.6 15.1 Africa, as it has been successful in its pursuit of 364 days 14.7 11.6 11.3 15.6 14.9 open markets, a stable currency and a relatively Commercial banks (weighted average) low inflation rate. The sector is well capitalized, a) Ugandan shillings with all banks meeting the minimum requirements of $25 million. Domestic lending has been on Deposit rates (WARD) 3.3 2.9 3.1 3.2 4.2 an upward trend in the Republic of Uganda, Demand deposits 1.5 1.7 1.8 1.5 2.0 contributing immensely to economic performance. Savings deposits 3.2 2.9 2.7 3.3 3.5 An overview of the different interest rates for the Time deposits 16.8 12.1 10.8 12.8 13.2

UGANDA (7–12 months) period of 2012 to 2016 can be found in Table 1. Lending rates 26.2 23.2 21.6 22.6 23.9 b) Foreign currency Deposit rates (WARD) 1.2 1.4 1.4 1.3 1.3 Demand deposits 1.0 1.0 1.0 1.0 1.0 Savings deposits 1.6 1.7 1.6 1.5 1.6 Time fixed deposits 4.2 4.7 4.0 4.0 3.9 Lending rates 9.5 9.8 9.5 9.2 9.6 Interbank rates Overnight 15.6 7.7 8.8 11.5 11.7 7 days 19.1 11.5 11.1 15.1 15.4 LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER Overall 16.7 8.7 9.2 12.4 12.4 Source: Bank of Uganda, cited in Uganda Bureau of Statistics, 2017. 16 Robust economic growth and an increasing youth $700 million in 2017 (see Figure 8). The Republic population have catalysed foreign direct investment of Uganda, however, remains a major investment (FDI) inflow in the last few years and the Republic location within the East African countries, as seen of Uganda is among the top 10 FDI recipients in Figure 9. The main areas of foreign investment in Africa. Between 2012 and 2014, FDI inflow in are in manufacturing, telecommunications, financial the Republic of Uganda was consistently more services and real estate, agriculture, forestry than the $1 billion mark (mainly due to the newly and fish. Other areas of significant investment confirmed vast mineral resources and commercial were in power, oil, construction and mining. findings of oil) before dropping to approximately

Figure 8: FDI inflow, the Republic of Uganda (2002–2017)

Source: World Bank, 2018.

Figure 9: Status of FDI inflows in the East African Community (EAC) (2018) UGANDA

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17 Source: United Nations Conference on Trade and Development (UNCTAD), 2018. Global and regional importance of leather

Leather is one of the most widely traded commodities The leather industry value chain comprises four in the world. The leather industry plays a major broad stages (see Figure 10). During the 1st role in the global economy, with an estimated stage, raw hides and skins (H&S) are obtained. global trade value of approximately $100 billion In the 2nd stage, raw H&S are converted to semi- per year, which is greater than the combined processed (pickled and tanned). The 3rd stage value chain of meat, sugar, coffee and tea. The produces fully processed (finished) leather. In the leather industry has grown at a different pace 4th stage, leather products are manufactured, in different parts of the world, depending on the for example, footwear, garments, accessories general economic development of the country, such as watch straps, handbags and notepad geography and local government commitment. covers, and automotive or furniture upholstery.

Figure 10: Leather value chain

Source: Author’s Illustration based on World Bank, Economic Transformations Group, 2015. UGANDA

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18 The production of hides and skins can be considered The leather industry is a key strategic sector for mainly a by-product of the meat industry. The 2nd the socioeconomic and industrial development of and 3rd stages are the most capital intensive, while many African countries. It has a rich and renewable the 4th stage can be viewed as the most labour natural resource base in Africa’s large population intensive. This differentiation has an impact on of cattle, sheep and goats, which accounts for how related activities tend to spread globally. The nearly 20% of world share. The production of cattle spread in the availability of animals, capital, cheap hides, sheepskins and goatskins from African labour and different rules and regulations leads countries between 2003 and 2014 is presented in to an overall trade picture. In general, developing Figure 11. Overall, the figures reveal considerable countries benefit from cheap access to raw materials production growth in tens of thousands of pieces and lower labour cost, and are able to produce of cattle hides, sheepskins and goatskins. leather at lower cost than developed countries.

Figure 11: Production trend of hides and skins in Africa (2003–2014)

Source: Food and Agriculture Organization (FAO), 2018.

Looking at Figure 11, it is clear that the African leather industry has a potential supply of hides and skins that can make a transformative contribution to the continent’s economic and industrial development. The quality of hides and skins is, however, the primary restriction on the development of the African leather supply chain as a whole. Lower quality arises from poor husbandry practices, improper processing or both. Diversity of origin, non-uniformity of preservation methods, different water quality UGANDA

and climatic conditions, unavailability of standard chemicals and lack of modern technology throughout the leather value chain are further constraints to the development of the leather industry in Africa. With the appropriate amount of investment and the right institutional environment, the African leather industry’s potential can be fully attained. LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER

19 Ugandan leather industry

OVERVIEW 1. Facilitate the production of quality value-added leather and leather Approximately 21% and 11% of the African and the products for local and export markets; world livestock herd respectively comes from the Common Market for Eastern and Southern Africa 2. Facilitate resource mobilization (COMESA) region. Yet, the region contributes and policy support for leather to less than 3% of the global production of value chain growth; leather and leather products. The estimated loss resulting from this situation is valued at $4.5 billion 3. Promote cleaner and environmentally annually, since the region mostly exports hides sustainable production and skins instead of finished leather products. techniques and systems; and

For the Republic of Uganda specifically, more 4. Facilitate horizontal and vertical than 40% of the H&S produced in the country collaboration of chain was exported in raw form between 2008 and players and 2012 (during this period, the country produced other relevant on average 1.6 million hides and 4.7 million skins stakeholders. annually). The estimated loss in terms of forgone revenue (taxes, foreign currency earnings and jobs, etc.) and other indirect benefits resulting from the lack of value addition was estimated at $271.2 million per year as seen in Table 2.

Table 2: Estimated Annual Losses of Ugandan Leather Value Chain Potential Current Stage of Estimated Value-added earnings earnings processing loss (USD) factor (USD) (USD) Raw hides The LVCS 22 829 111 1 and skins was then Wet blue 45 658 222 41 530 085 4 128 137 2 times evaluated to Crust 68 487 333 684 873 67 802 460 3 times identify areas of common Finished 79 901 889 799 019 79 102 870 4 times leather interface with the national industrial Finished 273 949 332 2 739 493 271 209 839 12 times product and trade polices (export strategy). These Cumulative 271 209 839 loss policies are part of the Republic UGANDA

of Uganda’s development agenda, Vision 2040 Source: COMESA/Leather and Leather Products Institute (LLPI), 2015. (“A transformed Ugandan society from a peasant to a modern and prosperous country within 30 As seen in Table 2, the multiplier effect of processing years”), to promote, among others, the livestock H&S in the Republic of Uganda is three to four times and livestock products sector. The results of this more profitable and, in finished products, it is 12 times evaluation can be found in Table 3 and Table 4. more profitable. In recognition of this potential, the Ugandan Government developed the Leather Value Furthermore, the Uganda National Leather Chain Strategy (LVCS) with the following objectives: and Leather Products Policy (NLLPP) of 2015 identified leather and leather products as having a big role to play in achieving the goals of job creation, income generation and alleviation of poverty set by Vision 2040. LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER

20 Table 3: Relationship between the Leather Value Chain Strategy and National Industrial Policy LVCS objectives 1 2 3 4 Create a business-friendly environment for private sector-led industrialization in which industries will develop, improve productivity and the quality of products through, inter alia, x x creativity and innovation, and become more competitive in the global economy. Improve infrastructure development for effective and efficient industrialization programme. Encourage and foster innovation, entrepreneurship, adjustment and adoption of x best management practices in the quest for improved competitiveness. Create a framework that supports joint participation of the public and private sectors in the development of scientific and technological competencies for the production of more x and higher value-added goods and services for domestic consumption and export. Facilitate improved supply chain efficiency, and market-responsive product and brand development. x Encourage foreign direct investment in industry and industry related services. x Promote environmentally sustainable industrial development to reinforce x national goals of long-term growth and development. Support the growth and development of a skilled and productive labour force and ensure that a body of experienced entrepreneurs and trained x x managers are particularly focused on industrial development. Promote safe workplace practices in all industry subsectors. x Promote the participation of disadvantaged sections of society in industrial development activities. x Create support systems for sustainable micro and small industries development. x Source: COMESA/LLPI, 2015.

Table 4: Relationship between the Leather Value Chain Strategy and export strategy LVCS objectives Vision 2040 objectives 1 2 3 4 Development of domestic and international trade x Creating opportunities for equal participation in trade through entrepreneurial development, x giving priority to the socially and economically disadvantaged groups in society. Provision of an enabling environment with a view to developing and nurturing x a private sector that is capable of competing at global level. Targeted government interventions in specific sectors, if and as deemed necessary. x x Pursuit of bilateral, regional and multilateral trade initiatives. x Mitigating any adverse effects of practices by the country’s trading partners by invoking and implementing trade defence measures as and when x appropriate, considering multilateral disciplines in the area. Efficiency, and prudent resource mobilization and usage. x A coordinated approach to formulation and implementation of trade policy. x Placing greater emphasis on policy coherence, synergies and complementarities. x Nurturing and using a public-private partnership approach in the formulation, x implementation and monitoring of the National Trade Policy. UGANDA

Strengthen capacity to engage in and advocate for the Republic of Uganda’s interests in and during trade negotiations through improved organizational x coordination and leadership, including at preparatory stage. Be mindful of the negative social and economic effects that might come with trade x growth, and ensure that mitigating measures and policies are put in place. Supporting the country’s vision to industrialize by complementing the industrialization policy. x Source: COMESA/LLPI, 2015. LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER

21 Through the Ministry of Trade, Industry and Cooperatives, the Government of Uganda also formulated the Buy Uganda Build Uganda (BUBU) policy, which was approved by Cabinet in October 2014. The policy aims to promote the consumption of locally produced goods and services and increase the consumption of local products through public procurement and encouraging the private sector to consume locally originating products, thus increasing the participation of the locally established firms in domestic trade. The policy’s implementation strategy was finalized in June 2016 to chart a way to achieve the BUBU policy objectives. It spells out five broad strategic objectives, namely:

ƒƒTo take stock of the local producers and improve their capacity to supply

ƒƒEnhance the quality and competitiveness It is believed that the implementation of BUBU of local products and services is crucial for the country to attain middle- income status. It will enhance local product ƒƒIncrease efficiency and competitiveness, boost the growth of micro, participation of local producers small and medium-sized enterprises (MSMEs), in public sector procurement which form the biggest percentage of the private sector (90%), and consequently contribute ƒƒIncrease the visibility of local enormously to the country’s employment. products in local outlets Semi-processed leather is by far the most important ƒƒIncrease awareness about leather product exported by the Republic of Uganda, the BUBU policy comprising $53.12 million in 2017 (most of which was in the form of wet blue). The export of leather articles and leather footwear during the same year was comparatively small, at roughly $418,000 and $511,000 respectively, as seen in Figure 12.

Figure 12: Ugandan leather exports (2010–2017) UGANDA

LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER Source: Trade Map (ITC), 2018.

22 The Republic of Uganda is one of the stronger Jointly, those product categories add up to 96% of exporters in Africa. In 2017, it ranked 4th for the all exports of Ugandan H&S, with the former making export of H&S behind the Federal Democratic up 60% and the latter 36%. Leather articles exported Republic of Ethiopia (3rd), the Arab Republic of by the Republic of Uganda belong to either one of Egypt (2nd) and the Republic of South Africa two categories: 80% are trunks, suitcases and vanity (1st) (see Figure 13). For the export of leather cases, etc.; 20% are articles of apparel and clothing articles, the Republic of Uganda was in 13th accessories of leather or composition leather. Footwear place behind the Republic of Côte d’Ivoire products exported by the country are sports footwear (12th) and the Republic of Ghana (11th), and footwear partially or fully made of leather. while for footwear it ranked 11th in Africa. As of 2017, the main importing markets for The majority of the Republic of Uganda’s H&S Ugandan raw hides and skins are, in order of exports are tanned or crust H&S of bovine or importance, the Republic of Italy, the People’s equine animals, followed by tanned or crust Republic of China, the Swiss Confederation and H&S of goats, pigs, reptiles and other animals. the Republic of India, as seen in Figure 14.

Figure 13: Major African exporters of hides and skins and leather (HS 41)

Source: Trade Map (ITC), 2018.

Figure 14: Importing markets for Ugandan raw hides and skins (other than furskins) and leather (2002–2017) UGANDA

Source: Trade Map (ITC), 2018. LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER

23 UGANDAN LEATHER VALUE CHAIN: OVERVIEW AND INVESTMENT OPPORTUNITIES

ANIMAL HUSBANDRY

The Ugandan leather value chain has a very good resource base. The most up-to-date data on the Republic of Uganda’s livestock population is from the 2017 Statistical Abstract of the Uganda Bureau SLAUGHTER SLABS, SLAUGHTERHOUSES of Statistics (UBOS), which found that the country AND ABATTOIRS has an estimated 14.37 million cattle, 15.73 million goats, 4.31 million sheep, 4.04 million pigs and 46.29 million poultry (see Figure 15). Compared Poor animal welfare is not just unethical, it is also bad to the figures estimated during the 2008 National for business – it leads to poor-quality leather, which Livestock Census by UBOS, the cattle, goat, leads to poor profit. The availability of modern and sheep, pig and poultry population all increased well-functioning slaughterhouses is one of the main by approximately 2.97%, 3.22%, 1.1%, 0.84% and determinants of the quality of leather goods. With its 8.89% respectively. Considering off-take rates in the large livestock base and its growing meat production range of 12%–15% for cattle and 20%–30% for sheep (from 175,049 MT in 2009 to 197,019 in 2013), the and goats, the country has the potential to produce Republic of Uganda certainly has the potential to approximately 1.4 million cattle hides, 3.1 million develop. In the Ugandan leather value chain, H&S goat hides and 0.68 million sheep skins per annum. become important at the point of slaughter (see The Ugandan leather industry also has some non- Figure 16). They are usually sold to the owner of the conventional leather sources such as fish, ostrich and slaughterhouse, who then sells it to a trader, or they crocodile meant for the high-end leather market. are sold directly to H&S traders. Tanneries advance money to H&S traders as a mechanism of securing supplies in advance. This practice has amplified to the point that it has become a source of interest-free loan and has made H&S the most important source of liquidity, as they are bought before they are produced, unlike meat, which is only paid for when it is bought.

Figure 15: Livestock numbers in the Republic of Uganda (2014–2016) UGANDA

Source: Uganda Bureau of Statistics, 2017 LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER

24 Figure 16: Ugandan value chain map

Source: COMESA/LLPI, 2015.

The Republic of Uganda’s production of H&S is In addition to this, a joint report by COMESA and the dominated by scattered slaughters all over the Leather and Leather Products Institute (LLPI) identified country, ranging from household slaughters for flay cuts as another major source of slaughter defect. festivities to commercial slaughters by individual The same report estimated the gross losses incurred butchers and, slaughterhouses and abattoirs. due to the prevalence of pre-, peri- and post-slaughter The collection rate for hides and skins is still low, defects (see Table 5), also reflecting the potential since some hides and skins from some individual earnings of having well-functioning slaughterhouses. slaughters may be discarded due to pre-slaughter defect (M/s Management Innovations, 2015). Indeed, the country has a significant proportion Table 5: Loss estimation of slaughter defects of livestock reared in the pastoralist system. This on H&S in the Republic of Uganda contributes to a high incidence of pre-slaughter Potential earnings, Actual st defects, which are associated with diseases (e.g. Type of H&S if H&S are 1 grade earnings Loss lumpy skin and poxes, etc.), tick bites, scratches Bovine 10 170 000 5 989 000 4 181 000 Goat and and brand marks, among many others, as identified 7 680 000 5 019 600 2 660 400 by the stakeholders who participated in the Strategy sheep Total Formulation Consultation Workshop held on 10–11 17 850 000 11 008 600 6 841 400 April 2014 in Kampala, the Republic of Uganda. estimated loss Source: COMESA/LLPI, 2015.

According to the Uganda Investment Authority (UIA), there are more than 40 slaughterhouses and abattoirs UGANDA

and 800 slaughter slabs countrywide. Some of these include: Uganda Meat Industries – Kampala; City Abattoir – Kampala; and Top Cuts and Kalerwe Abattoirs. Altogether, these abattoirs slaughter an estimated 700 cattle and 150 goats daily. Investment into modern, efficient slaughterhouses using proper equipment, deploying good practices at all slaughter stages (pre, peri and post) and a skilled workforce would bring considerable improvements to the quality of raw material for further processing and bring immense value addition throughout the chain, especially if the number of middlemen between slaughter stages and tanneries is reduced. LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER

25 TANNING

There are 10 operational tanneries in the Republic of Uganda, two of which process a small proportion of their hides and skins to finished leather (see Table 6). According to the Uganda Leather Value Chain Strategy (2015–2025) by COMESA, the country has an installed tanning capacity of 1.08 million hides and 2 million skins per year and it is estimated that tanneries are operating at 60%–70% capacity range. The main reasons for the low usage are financial constraints and machine breakdowns.

Approximately 95% of processed hides and skins are being exported as semi-processed leather (wet blue), whereas crust and finished leather production is marginal.

Table 6: Selected tannery capacities in 2018 Annual turnover (USD)/ Tannery Contact Production number of employees Tel:+256 772 362324 / 2 000 hides and 10 Hoopoe Trading Ltd – +256 758 666695 000 skins per day Tel: +256 701-402213 / Jambo Tannery Uganda Ltd +256 772-402213 – 2 million/28 E-mail: [email protected] Tel: +256 704-574364 Jinja Leather Tanneries Ltd – 13 322/7 E-mail: [email protected] Tel: +256 434 121461 Leather Industries E-mail: [email protected] – 6.2 million/110 of Uganda Ltd Website: www.leather.ug Tel: +256 757 766766 9 million sq. ft. wet Leatherland 3 million/120 E-mail: umashankar@ blue per year leatherlandltd.com 480 000 sq. ft. vegetable Tel: +256 772 567511 / leather per year Loyal Small Scale Industries +256 759 567511 –/45 720 000 sq. ft. finished E-mail: [email protected] leather per year Tel: +256 704-539784 300 hides and 2 000 MSA Investor Ltd –/9 E-mail: [email protected] skins per day Tel: +256 756 170000 / Novelty Tannery Investment Ltd +256 781 471511 – –/70 E-mail: [email protected] UGANDA

Tel: +256 772 502921 3 000 hides and 10 SkyFat Tannery Co. Ltd E-mail: [email protected] –/150 000 skins per day E-mail: [email protected] Tel: +256 414-222027 / 2 000 hides and 10 SWT Tanners Ltd –/200 +256 772-786716 000 skins per day

Source: Supporting Indian Trade and Investment for Africa, 2018.

Investment into crust and finished leather units offers an attractive option for the growth of the country’s leather sector. LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER

26 LEATHER FOOTWEAR MANUFACTURING

According to the Uganda Leather and Allied Industries Association (ULAIA), there are six medium- sized footwear factories and more than 800 small- scale footwear entrepreneurs in the country.

Ugandan footwear demand is estimated at approximately 25 million pairs per year, whereas only about 1 million are produced in the country. The demand gap is filled with footwear imports from the People’s Republic of China, which increased its imports drastically in 2016. Indeed, until 2015, Chinese imports of leather footwear to the Republic of Uganda were five times as high as those from the 2nd largest importer, the Republic of India, and 12 times higher than the Republic of South Africa’s, the 3rd biggest importer. In 2016, the People’s Republic of China’s import of leather footwear to the Republic of Uganda rose drastically by 900% to $14 million and was almost 60 times as high as the Republic of India’s. The amount dropped to approximately 6 million in 2017, which is still well above the average import of the leather footwear of the past 10 years (before 2016, see Figure 17).

Figure 17: Supplying markets for leather footwear (HS 6403) imported by the Republic of Uganda UGANDA

Source: Trade Map (ITC), 2018.

This market gap between demand and supply of United States from certain sectors, including leather. an estimated 24 million pairs of footwear per year Furthermore, the European Union’s Everything But represents an attractive investment opportunity. Arms initiative enables the Republic of Uganda to Moreover, footwear from the Republic of Uganda export some goods to the European Union (EU) tax- can be exported at zero duty into the EAC market. free. Investors who decide to invest in the production EAC footwear imports were valued at $567 million of footwear or leather goods in the Republic of in 2016. The country is also eligible for the United Uganda will, therefore, gain an additional free market States of America’s African Growth and Opportunity access encompassing more than 1.4 billion people. Act (AGOA), which offers duty-free exports to the LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER

27 LEATHER GOODS MANUFACTURING leather purses taken from CIBO, showing the scale of investment, production volumes and The Ugandan Government strongly encourages profit margins. Please refer to CIBO, Volume 2 for the production of leather goods, notably leather analysis of other leather goods mentioned above. belts, leather purses and leather gloves. These three products were listed in the Compendium of The growing demand for leather products in the Investment and Business Opportunities (CIBO), Republic of Uganda is also seen in the rising import Volume 2, published by the Ugandan Investment figures of leather articles. Since 2010, the total Authority in collaboration with the Ugandan imports rose by approximately 163% and more Ministry of Foreign Affairs and the United Nations than 400% since 2001, with the main supplying Development Programme (UNDP). CIBO, Volume market being the People’s Republic of China, 2 presents business ideas with high growth followed by the United Arab Emirates, the Republic potential in the Republic of Uganda, giving insight of South Africa and the Republic of Kenya (in into the feasibility of their implementation. As an order of importance as of 2017; see Figure 18). example, Box 1 presents the business idea of

Figure 18: Supplying markets for leather articles (HS 42) imported by the Republic of Uganda

Source: Trade Map, ITC, 2018. and Agriculture Organization (FAO), 2018. UGANDA

LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER

28 Box 1: Leather purses business analysis in the Republic of Uganda (all amounts are in USD)

Estimated production capacity and annual revenue: Based on the economic, social and political environ- ment as well as the degree of raw material availability, a realistic assumption concerning the production capacity of leather purses in Uganda is estimated at 500 pieces per day. This corresponds to a potential annual production of 156,000 pieces of leather purses (based on an average of 26 working days per month) and a gross annual revenue of 546,000 (based on an estimated price of $3.5 per leather purse).

Capital investment requirements in USD

The following table gives a list of requirements (and their respective annual cost) needed for the production of leather purses in the Republic of Uganda, which involves activities like strap cutting, stitching and dying, as well as fasteners and punching zips.

Items Quantity Price/quantity Total cost per item Sewing machine 2 520 1 040 Leather turning machine 1 880 880 Strap cutting 1 944 944 Punching zips 1 630 630 Other equipment / / 520 Land 2 5 000 10 000 TOTAL INVESTMENT 14 014 Source: CIBO, Volume 2.

Most of these items (machinery and equipment) are available on the local market, specifically in the industrial area of Kampala for different leather tanneries for the procurement of raw material and along Road for the procurement of machinery. From experience, machinery for this particular product can also be imported, especially from the Republic of India or the People’s Republic of China.

Production/operating cost

The table below summarizes the cost involved in the production of leather purses. Calculations are based on averages estimated by the authors of CIBO.

Items Qty/day Price/qty Cost/month Total cost/year Turned leather 100 12 31 200 374 400 Dye 30 3 2 340 28 080 Threads 120 0.8 2 496 29 952 Subtotal direct cost 36 036 432 432 Administration expenses 542 6 500 Labour 2 250 27 000 Utilities and rents 1 350 16 200 Selling and distribution 300 3 600 UGANDA Miscellaneous (incl. depreciation) 292 2 500 Subtotal general cost 4 734 55 800 TOTAL COST 40 770 488 232

Profitability analysis

There is a market for leather purses both at a national and international level. The table below gives an overview of the estimated profitability, based on the above estimated figures.

Profitability item Amount/day Amount/month Amount/year Revenue 1 750 45 500 546 000 Production and operating cost 1 568 40 770 489 236 LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER Profit 182 4 730 56 765 29 Trade and investment climate

TRADE ƒƒEverything But Arms (EBA): This The Republic of Uganda’s strategic location, coupled is a European Union (EU) initiative with the stability the country has enjoyed over the past under which all imports to the EU 31 years, makes it a gateway for regional trade and from the least developed countries investments into East Africa. The Republic of Uganda (LDCs) are duty-free and quota-free, is a member of several trade arrangements and a with the exception of armaments. beneficiary to trade-enhancing schemes, including: ƒƒAfrican Continental Free Trade Area ƒƒWorld Trade Organization (WTO): (AfCFTA): This refers to the free trade Being a member of the WTO implies area agreement between 44 member that Ugandan products have access states of the African Union signed during to more than 90% of world markets at the 10th Ordinary Session of African most favoured nation (MFN) treatment. Union Heads of State summit held in Kigali in March 2018. The AfCFTA is ƒƒAfrican Growth and Opportunity Act now the largest free trade area since the (AGOA): This is a non-reciprocal creation of the World Trade Organization trade preference agreement offering (WTO). The aim of this agreement certain commodities from eligible is to create a continental market for Sub-Saharan African countries duty- products and services (a market of free access to the United States of approximately 1.2 billion people and America’s market. AGOA has been cumulated GDP of approximately renewed until September 2025. $3.4 trillion), with free movement of business partners and investment. This ƒƒTrade and Investment Framework is expected to promote intra-African Agreement (TIFA): Signed between trade, to support the regional and the United States of America and the continental integration of Africa, and to East African Community (EAC) in 2008. further develop the African economy’s This provides strategic frameworks manufacturing sector. The free trade and principles for dialogue on trade area agreement will become operational and investment issues between the after 22 countries have ratified it. In the United States of America and the meantime, it is still possible for countries other parties to the agreement. that did not sign the agreement to do so before it comes into force. ƒƒEconomic partnership agreements (EPAs): These are agreements Furthermore, the Republic of Uganda is also a between the European Union and member of the East African Community (EAC) and African, Caribbean and Pacific the Common Market for Eastern and Southern countries and regions (ACP) that Africa (COMESA). For EAC imports, the duty rate is aim to promote ACP–EU trade – and zero, whereas for COMESA imports, the duty rates UGANDA

ultimately contribute, through trade are in the range of 0%–1%. The following COMESA and investment, to sustainable countries have reduced Customs duty rates (0%) for development and poverty reduction. eligible products in order to fully participate in the free trade area: the Republic of Burundi, the Union ƒƒCotonou Partnership Agreement (CPA), of the Comoros, the Republic of Djibouti, the Arab also known as African Caribbean Republic of Egypt, the Republic of Kenya, Libya, the Pacific European Union (ACP- Republic of Madagascar, the Republic of Malawi, the EU) Partnership Agreement: This Republic of Mauritius, the Republic of Rwanda, the agreement established the Generalized Republic of the Sudan, the Republic of Zambia and System of Preferences (GSP) – a the Republic of Zimbabwe. See Figure 19 for more non-reciprocal preferential treatment understanding on the geographical distribution of granted to developing countries. countries within COMESA, EAC and Southern African Development Community (SADC) regional blocks. LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER

30 Figure 19: Tripartite Free Trade Area map

Source: UNCTAD cited in World Economic Forum, 2016. UGANDA

These multilateral trade agreements not only give the Republic of Uganda preferential access to a global market valued at approximately $36.9 trillion, but also to a network of more than 1.4 billion potential consumers. These figures are presented in detail in Figure 20. The recently signed African Continental Free Trade Area (AfCFTA) agreement adds to this already impressive statistic of the Republic of Uganda’s global market potential. LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER

31 Figure 20: Ugandan multilateral trade agreements

Source: Author’s calculation based on World Bank figures (2015/2016).

In addition to this, the Republic of Uganda has concluded bilateral investment treaties TAXATION (BITs) and bilateral taxation agreements (BTAs) with several countries: The Ugandan Revenue Authority (URA) is the government body mandated to assess, collect tax ƒƒBITs – BLEU (Belgium-Luxembourg revenue, administer and enforce laws on behalf of Economic Union), the People’s Republic the Ministry of Finance, Planning and Economic of China, the Republic of Cuba, the Development. With the aim to facilitate the tax Kingdom of Denmark, the Arab Republic collection for both the government and taxpayers, of Egypt, the State of Eritrea, the French the URA has introduced a new electronic tax system Republic, Germany, the Republic of (eTAX) to ease registration of taxpayers, filing of Italy, the Kingdom of the Netherlands, returns, assessments and payment of taxes. the Federal Republic of Nigeria, the Republic of South Africa, the Swiss The Integrated Tax Administrative System provides Confederation, the United Kingdom 24/7 online services to the taxpayer and the online of Great Britain and Northern Ireland, applications can be lodged from anywhere in the and the Republic of Zimbabwe; world as long as there is an internet connection. In case of approval, applicants receive a tax ƒƒBTAs – the Kingdom of Denmark, identification number (TIN) and a password, which UGANDA

the Republic of India, the Republic they can use to log onto the web portal and create of Italy, the Republic of Mauritius, their own account for any further transactions; the Kingdom of the Netherlands, the otherwise, a registration rejection note is issued via Kingdom of Norway, the Republic e-mail, with the reason(s) for rejection stated in the of South Africa, the Republic of mail. As a result, the registration process is less Zambia, and the United Kingdom of cumbersome, more flexible (able to amend changes, Great Britain and Northern Ireland. if needed) and faster. The URA also provides e-filing (for tax return) and e-payment services for taxpayers, which further facilitates the whole taxation process. LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER

32 According to Article 152 (i) of the Uganda The Ugandan tax system can be summarized within Constitution: “No tax shall be imposed except six main groups: individual and corporate income tax, under the authority of an Act of Parliament.” value-added tax on goods and services, import and Therefore, the Act Cap excise duties, stamp duties, pay-as-you-earn (PAYE) 196 was put in place to provide the administrative and rental tax. Table 7, Table 8 and Table 9 give an framework in which taxes under various Acts overview of the relevant tax rate for foreign investors, are collected, among others, Customs Tariff Act. notably individual income tax and business tax. Cap 337, Excise Tariff Act Cap 338, Income Tax Cap 340, and Value Added Tax Act Cap 349.

Table 7: Individual income tax for residents (monthly PAYE tax rates) Approximate Taxable income (in UGX) USD equivalent Tax rate ≥ 235 000 ≥ 61 0% > 235 000 ≤ 335 000 > 61 ≤ 87 10% of the amount by which the taxable income exceeds UGX 235 000 UGX 10 000 plus 20% of the amount by which > 335 000 ≤ 410 000 > 87 ≤ 107 the taxable income exceeds UGX 335 000 (a) UGX 25 000 plus 30% of the amount by which taxable income exceeds UGX 410 000 ≥ 410 000 ≥ 107 (b) If taxable income of an individual exceeds UGX 10 000 000, an additional 10% is charged on the amount by which taxable income exceeds UGX 10 000 000 Source: URA, 2015, 2017.

Table 8: Individual income tax for non-residents (monthly PAYE tax rates) Approximate Taxable income (in UGX) USD equivalent Tax rate ≥ 335 000 ≥ 87 10% 33 500 plus 20% of the amount by which > 335 000 ≤ 410 000 > 87 ≤ 107 the taxable income exceeds UGX 335 000 (a) UGX 48 500 plus 30% of the amount by which taxable income exceeds UGX 410 000 ≥ 410 000 ≥ 107 (b) If taxable income of an individual exceeds UGX 10 000 000, an additional 10% is charged on the amount by which taxable income exceeds UGX 10 000 000 Source: URA, 2015, 2017.

Table 9: Business taxes Category Resident Non-resident Exemptions Income tax holiday granted to industrial park or free zone developer as follows: Corporate tax* 30% 30% – 10-year holiday if capital is $200 million or more – 5-year holiday if capital is $30 million or, in the UGANDA case of a Ugandan citizen investor, $10 million Withholding tax 15% 15% on interest Withholding tax 15% 15% on dividends** Withholding tax on 6% 6% imported goods 18% is the standard rate VAT 18% 18% Some types of supplies of goods and services are zero rated or exempt * 25%–45% for mining companies ** 10% if the payer is listed on the Ugandan Stock Exchange Source: URA, 2015, 2017. LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER

33 INVESTMENT INCENTIVES

The Republic of Uganda has an investment incentive package that provides generous capital allowance for medium- and long-term investors in priority areas whose projects involve significant investment in plant and machinery and other costs. Among others, the Republic of Uganda offers generous provisions for VAT deferments, deductions, exemptions and capital depreciation allowances. This explains why investors pay no or minimal tax during the 1st five years of their investment. Table 10, Table 11, Table 12 and Table 13 give detailed information on the various investment incentives in the Republic of Uganda.

FISCAL AND FINANCIAL INCENTIVES

Table 10: Selected tax incentives and exemptions available to investors in the Republic of Uganda Type of incentive Description of benefits and conditions for or exemption Who qualifies granting deduction or exemption • Debentures issued by the company outside the Republic A resident company paying of Uganda for raising a loan outside the country Exemption of tax on debentures outside the • Debentures were widely issued for the purpose of international payments Republic of Uganda raising funds for use by the company in a business carried on in the Republic of Uganda Private employers and • 2% of income tax payable is allowed as a deduction for Tax deduction for employers companies that employ income tax purposes if 5% of the company’s employees of persons with disabilities persons with disabilities on full-time basis are persons with disabilities Employers who train permanent • 100% training expenditure on training or tertiary education Training expenditure residents employed allowed as a deduction for income tax purposes A person who has incurred capital UGANDA expenditure on the construction Industrial building allowance of an industrial building and the • 5% of the cost of construction of the industrial building building is used by the person in the production of income • 40% for computers and data-handling equipment Depreciation allowances • 35% for automobiles; buses and minibuses (< A person who places depreciable (capital investment 30 passengers); goods vehicles (< 7 tons) assets (listed) in service allowances) • 30% for buses (> 30 passengers); goods vehicles (> 7 tons) • 20% for rail cars An investor whose income is exceeded by the total • The amount of excess ‘assessed loss’ is carried forward and Carry forward losses amount of deductions allowed allowed as a deduction in the following year of income for any year of income

Source: URA, 2017. LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER

34 Table 11: Other tax incentives Category Incentives • The incentives covered in this category are capital allowances and expenses, which are deductible once from the company’s income. • 50% initial allowances on plant and machinery located in Kampala, Entebbe, , Jinja and Njeru • 75% outside Kampala, Entebbe, Namanve, Jinja and Njeru Capital allowances • 25% p.a. start-up costs spread over the 1st four years and expenses • 100% scientific research expenditure • 100% training expenditure • 100% mineral exploration and exploitation expenditure • 20% initial allowance on new industrial buildings (including tourism facilities like hotels and lodges) • Depreciable assets specified in four classes under declining balance method: • Class 1: 40% on computers and data-handling equipment • Class 2: 35% on automobiles, construction and earth-moving equipment Deductible annual allowances • Class 3: 30% on buses, goods vehicles, tractors, trailers, plant and machinery for farming, manufacturing and mining • Class 4: 20% for railroad cars, locomotives, vessels, office furniture and fixtures, etc. • 5% on industrial buildings, hotels and hospitals (using the straight-line method) • 5% new commercial buildings (constructed after 1 July 2000) (using the straight-line method) Other annual depreciation • 20%: Farming – general farm works declining balance depreciation allowances • 20% for horticulture (horticultural plant and construction of greenhouses) straight-line depreciation

Sources: International Trade Centre, 2018; Fortune of Africa 2013.

EXPORT INCENTIVES

Table 12: Export incentives Type of incentive Description of benefits and conditions for granting deduction or exemption • Proof of export • Customs refunds all or part of any import duty paid on material inputs imported to produce for export Duty drawback or used in a manner or for a purpose prescribed as a condition for granting duty drawback. Duty may be refunded on raw materials imported and used on the goods locally produced for export. • Manufacturer must have licensed under Section 160 of the East African Community Customs Management Act (EACCM) by applying for a Customs licence to hold and use imported raw materials Manufacturing intended for manufacture for export in secured places without payment of taxes. It makes available Under Bond working capital that would have been tied up through paying duties immediately after importation. • The annual licence fee for a bonded factory is $1 500 per calendar year or on pro rata basis if issued within a calendar year. • 90% remission on sugar for industrial use imported by manufacturers. • 100% remission on: UGANDA • Inputs for the manufacture of exercise books and other essential goods Duty remission • Stranded wire used in manufacture of tyres schemes • Treads for cold retreading used in the retreading of tyres • Packaging materials for use in the manufacture of goods for export • Raw materials for use in manufacture of aluminium cans for the dairy industry • Uganda Free Zone Authority was set up for promoting exports in the free zone area (the Republic of Kenya, the Republic of Rwanda, the United Republic of Tanzania, the Republic Export processing of Burundi and the Republic of Uganda), with increasing commodity processing from trading in the free zone raw materials to finished goods and exporting outside East Africa as their primary activity. • Manufacturing is strictly for export purposes.

Source: URA, 2017. LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER

35 Free zones The free zones are administered by the Uganda Free Zones Authority (UFZA), an authority established by The free zones are a result of the Free Zone an Act of Parliament in April 2014. The UFZA issues Act of 2014, which was set up with the aim of three types of licences, namely the developer’s creating an enabling environment to enhance the licence (for investors interested in infrastructure development of export-oriented manufacturing in development), the operator’s licence (for business all sectors of the economy. The aim is to establish enterprises in the service or manufacturing sector) 10 free trade zones by 2020. This is expected and the manager’s licence (for business enterprises to diversify the Republic of Uganda’s economic willing to undertake the management of a free base, attract investment, generate employment, zone). The application fee for a developer’s licence increase foreign exchange earnings, enhance and an operator’s licence is $250 each, and the technology transfer and create backward linkages. annual licence payment is $5,000 and $1,000 for a developer’s licence and an operator’s licence respectively. The investment incentives for free zone investors are summarized in Table 13.

Table 13: Selected incentives for free zone investors Fiscal incentives Non-fiscal incentives • Exemption from taxes and duties on all export processing zone imported inputs that are for exclusive use in the • Well-planned zoning and clustering of the business development and production output of the business activities in free zones, resulting in economies of scale enterprise (raw materials, machinery and spare parts) • Availability of warehouses • Unrestricted remittance of profit after tax • On-site Customs inspection of buildings, premises, vehicles, • Tax holiday for 10 years on exportation of vessels and aircrafts entering and leaving the free zone finished consumer and capital goods • Free land (based on availability) for development of free zones • Exemption from tax on income from agroprocessing • Timely turnaround period in securing business registration • Exemption from capital gains tax on plant and machinery used • Enhanced technology uptake in the free zones for five years and one day upon disposal • Timely turnaround period for processing work permits for expatriates • Exemption from all taxes, levies and rates • Business facilitation and aftercare services in the on exports from the free zones acquisition of secondary licences, permits and • Exemption on personal income of a person offering technical approvals from other government agencies assistance under a technical assistance agreement • Timely processing of secondary licences for applicants • VAT exemption on selected services and supplies • Serviced physical infrastructure facilities and • A deduction of 50% off the cost base of the property is buildings within the public free zones allowed on eligible property put into service for the 1st time outside a radius of 50 km from the boundaries of Kampala Sources: UFZA, 2016; Tralac, 2016.

SECURITY OF INVESTMENT

The Republic of Uganda is a signatory to and ƒƒConvention on the Recognition member of several international investment and Enforcement of Foreign guarantees and agreements. Some of these include: Arbitral Award (CREFAA); and UGANDA

ƒƒMultilateral Investment Guarantee ƒƒIslamic Corporation for the Insurance Agency (MIGA), which provides of Investment and Export Credit (ICIEC). guarantee against non-commercial risks; In addition to this, there is a clear mechanism ƒƒInternational Centre for Settlement of of dispute settlement involving businesses, the Investment Disputes (ICSID), which is government and private investors. For disputes a channel for settling disputes between that cannot be solved through the national foreign investors and host governments; court, settlement via bilateral or multilateral agreements, or any other international machinery agreed upon by both parties is also possible. LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER

36 VISAS AND WORK PERMITS

All foreign nationals intending to work in the Republic of Uganda must ensure that they have a relevant work permit. For all classes of work permit, the applicants should prepare a fill entry/ work permit form, photocopies of passport and two passport-sized photos. The table below summarizes the other requirements for selected classes of work permits and their respective fees are presented in Table 14 and Table 15.

Table 14: Selected work permit classes and their respective requirements Classes Requirements • Cover letter from company • Proof of landownership or land title Class B: Issued to prospective • Uganda Investment Authority licence investors in agribusiness • Support letter from the Ministry of Agriculture and animal husbandry • Recommendation from local councils and resident district commissioner’s office • Work plan or feasibility study of the project undertaken • Security bond and Interpol letter from home country • Cover letter from company • Uganda Investment Authority licence (where applicable) Class D: Issued to persons • Articles and Memorandum of Association wishing to do business or trade • Company’s bank statement, certificate of incorporation, income in the Republic of Uganda tax clearance and trading licence, and security bonds • Bank of Uganda certificate of remittance of $100 000 • Letter of good conduct from home country or Interpol in country of origin • Cover letter from company Class E: Issued to persons intending • Investment licence, trading licence and security bond to invest in the manufacturing • Articles, memorandum and certificate of incorporation sector in the Republic of Uganda • Bank statement and income tax clearance • Letter of good conduct from home country or Interpol in country of origin Class G2: Issued to persons • Cover letter from employer or company wishing to work for gain or not • Appointment letter in the Republic of Uganda • Academic qualifications NB: Applicants under this category • Evidence that the organization failed to fill the vacancy from the local labour market can only enter the Republic • Articles, memorandum and certificate of incorporation of Uganda after granting and • Bank statement and income tax clearance payment of work permits

Source: Directorate of Citizenship and Immigration, 2018.

Table 15: Visa and work permit fees Item Fees • Single entry visa – $50 • Multiple entry visa: UGANDA

Visas • 6–12 months – $100 • 24 months – $150 • 36 months – $200 • $800 pre-payment for all classes without top-up fees 6-month work permit • Exception: • Additional $450 top-up fees for Class D only (business) Work permits for classes: 12-month work permit • $1 500 pre-payment + $1 000 top-up fees for all classes B (agriculture) • $1 500 pre-payment + $2 500 top-up fees for all classes D (business) 24-month work permit • Exception: E (manufacturing) • Class D (business) – $1 500 pre-payment + $3 500 top-up fees G (expatriate employment) • $1 500 pre-payment + $3 500 top-up fees for all classes 36-month work permit • Exception: • Class D (business) – $1 500 pre-payment + $6 000 top-up fees LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER Source: Directorate of Citizenship and Immigration, 2018. 37 REGISTRATION PROCEDURES UIA assists foreign investors with obtaining industrial FOR COMPANIES land and work permits for foreign staff. The principal steps from company registration to investment implementation are summarized in Figure 21. Business registration in the Republic of Uganda is done by the Uganda Registration Services Bureau There is no minimum capital requirement for (URSB). The bureau is mandated by the URSB Act to the establishment of a company in the Republic carry out all registrations required under the relevant of Uganda. Stamp duty of 0.5% is paid on the law. Before setting up a business in the Republic nominal value of the company’s share capital. of Uganda, foreign investors must also obtain an The total cost for registering a company in the investment licence from the Uganda Investment Republic of Uganda is approximately UGX 165,000, Authority (UIA). The licence is free of charge and excluding stamp duty, and it takes four working foreign investors can benefit from the UIA assistance days on average. Table 16 summarizes the steps and established network of contacts. Furthermore, the to register a company in the Republic of Uganda.

Table 16: Registering a new company in the Republic of Uganda Steps (responsible institutions) Fees Requirements Company name UGX 22 000 bank charges inclusive Company name assessment forms reservation (URSB) Annual payment varies according to category of subscription: • Certified name reservation form Membership subscription* • Silver – UGX 260 000 • Business case (Ugandan National Chamber • (approximately S$67) • Passport copy of one of the of Commerce and Industry) • Gold – UGX 510 000 • (approximately $133) company’s directors • Associate – UGX 1 100 000 • (approximately $286) Registration fee • – UGX 20 000 • Stamp duty • Company books • – 0.5% of the share capital • Memorandum of Agreement Registration to obtain a Certificate • Stamp duty on Memorandum • Articles of Association of Incorporation (URSB) and Articles of Association • Declaration of companies using • – UGX 35 000 forms A1, A2, A3, A9 and form 7 • Filing fees for A2 forms • Company resolution • – UGX 25 000 • Filing fees for A3, A9 and 7 forms • – UGX 20 000 • Free of charge Registration for tax identification • Application can be completed online • Personal inquiry form for each director number TIN (URA) at https://www.ura.go.ug/ • Necessary for companies with a threshold of more than UGX 50 Registration for value- 000 000 (approximately $13 000) • Free of charge added tax, VAT (URA) • Statement of nominal capital form with information of share capital, UGANDA

number, class and value of shares • No fixed fees. Amount charged • Memorandum of Association depend on the nature of the business • Article of Association Registration for trading licence and grade. The assessment is • Form 7 (municipal authority) done by the respective municipal • Certificate of Incorporation authorities (e.g. Kampala Capital • Lease or tenancy agreement City Authority for Kampala) Registration with the National Free of charge Social Security Fund (NSSF)

* Optional Sources: URSB, 2018; Ayazika, 2017. LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER

38 Figure 21: Investment registration and facilitation flowchart

Company registration

Local project site

Acquisition of regulatory licences

Environment impact assessment

Acquisition of investment licence

Implementation of investment

Aftercare services

Source: Author’s illustration based on UIA, 2015.

All the steps in Figure 21 can be done at Table 17: Annual average weighted large industrial the Uganda Investment Authority (UIA), tariffs (UGX*/kWh), 2012–2015 which has been transformed into a one- Plant name 2012 2013 2014 2015 stop centre (OSC) for investors. 312.8 312.8 308.5 336.5 WENRECO 420 426.8 467.7 526.9 INDUSTRIAL UTILITIES FERDSULT 328.2 341.6 329.2 316.8

* $1 approximately corresponds to UGX 3 764 (25 October 2018) Source: Electricity Regulatory Authority cited in UBOS, 2017. ELECTRICITY UGANDA

The Republic of Uganda’s national electricity utility WATER company is known as UMEME. It is the largest energy distributor in the country, distributing 97% of all The National Water and Sewerage Corporation electricity used in the country. According to the report (NWSC) is the main water provider in the Republic “Making Power Affordable for Africa and Viable for of Uganda. It is a public utility company 100% Utilities” compiled by the World Bank, the Republic owned by the Government of Uganda. NWSC’s tariff of Uganda has the most efficient power utilities in structure as of July 2018 can be seen in Table 18. Sub-Saharan Africa when it comes to operational and capital expenditures. There are two other energy distributors in the Republic of Uganda, WENRECO and FERDSULT. An overview of these companies’ tariffs for large industries is presented in Table 17. CHAIN INVESTMENT PROFILE VALUE LEATHER 39 Table 18: NWSC tariff structure Customer category Tariff excl. VAT for 2018/2019 Price per 20 litre jerrycan Public standpipe 1 060 25 Domestic 3 400 80 Institution or government 3 441 81 Commercial < 500 m3/month 4 220 99 Commercial < 500–1 4 220 99 500 m3/month Commercial > 1 500 m3/month 3 373 79 Source: National Water and Sewerage Corporation (NWSC), 2018.

LABOUR AND WAGE RATES

The Employment Act of 2006 regulates the payment the 1995 Constitution, the 1998 Land Act, the of wages to all classes of workers. The Act requires 2010 Land Amendment Act and the 2013 Uganda an employer to make timely payment of remuneration National Land Policy. The legal framework recognizes to employees, which varies depending on the customary, freehold, mailo and leasehold tenure, type and duration of contract (AfricaPay, 2018). which differ in terms of rights over land use and ownership. More details are found in Table 19. According to the Employment Act of 2006, wages should be paid in legal tender to the worker at the workplace or with the prior written consent of the worker. The law does not usually permit Table 19: Land tenure system in the Republic of Uganda in-kind payment of wages. The payment should Land tenure be done by bank cheque, postal order, money system Description order or direct payment to the worker’s bank • This system provides for communal account. However, the Ugandan Government ownership and use of land. • The majority of Ugandans hold may make regulations in this regard after land under this tenure form. consultation with the Labour Advisory Board. • Land ownership and use is regulated Customary by local customs and tradition. tenure The minimum wage of UGX 6,000 was last updated • There are, therefore, huge differences between the customary tenure system due to the diversity of ethnic in 1984 and has not been revised thereafter. This was groups, having their own customs and traditions. still part of the Minimum Wages Advisory Boards and • Customary tenure is considered to be inferior Wages Councils Act of 1964. However, in the current to other forms of registered property rights. Employment Act of 2006, there is no mention of a • It is regarded as the most favoured tenure type minimum wage rate. Indeed, the Republic of Uganda as reported by the national land policy. • This system allows the owner to hold registered Freehold tenure has no minimum wage. There has been attempt by land in perpetuity or for a period of time. parliament to pass a new minimum wage bill, but • The holder is provided with full this has been unsuccessful to date. Remuneration is power of ownership of land. negotiated along the prevailing labour market rates for • It combines customary and freehold tenure systems. unskilled, semi-skilled, skilled and professional labour. It is a customary form of freehold tenure system. • It is the holding of registered land in perpetuity and UGANDA it makes a distinction between the ownership of the Mailo tenure land and the right of use by a legally recognized LAND AVAILABILITY occupant. So, any decision in regard to land management requires the approval of both the The Ugandan legal and institutional framework as owner and the legally recognized occupant. well as geographical patterns of land ownership • This form of tenure can be created by contract and tenure systems have been heavily influenced Leasehold between a landowner and a tenant. tenure • Can be obtained from any tenure system by the country’s history. Throughout the years, whether customary, freehold or mailo. there were several laws and policies that affected Source: Vorlaufer et al., 2017. land governance in the Republic of Uganda and the main ones affecting the contemporary land governance in the Republic of Uganda comprise LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER

40 LAND ACQUISITION BY FOREIGNERS An investor can acquire land from a private individual, on a willing buyer–willing seller arrangement. Another Non-citizens can acquire land only through the possibility will be to lease land held by a government leasehold tenure system and this is for a period agency legally empowered to hold land on behalf of up to 99 years (with an automatic renewable Ugandan citizens. An example of such a government clause if agreed), as specified in Article 41 of agency is the Ugandan Investment Authority (UIA). the 1998 Land Act. With non-citizens, the 1998 With the aim to facilitate investor access to land, the Land Act refers to either a person not of Ugandan 1991 Investment Code authorized the UIA to acquire nationality or a corporate body in which the and hold land property. Box 2 summarizes the controlling interests lies with non-citizens. steps to follow when buying land in the Republic of Uganda and Box 3 gives a general overview of land allocation guidelines as approved by the UIA board.

Box 2: Procedure for buying land in the Republic of Uganda

ƒƒIdentify and decide on the piece of land to be purchased.

ƒƒIdentify the owner or registered proprietor of the piece of land.

ƒƒChoose a local legal representative (lawyer), who will assist you throughout the whole procedure.

ƒƒWith the help of the lawyer, search for the land title in the Land Registry Office in order to examine the authenticity of the property.

ƒƒHire a professional surveyor to verify the land size. This can take from one to more than 10 days, depending on the size, vegetation cover, location and topography, etc.

ƒƒAfter agreeing on the terms of offer, both parties can draft the sale agreement. Make sure that all the clauses of the sales agreement and their implication are well understood by you and your lawyer.

ƒƒSubmit the property transfer forms to the Land Registry Office for approval.

ƒƒApply for the valuation of land using the valuation form. This form is issued by the land offices to fix the stamp duty payable.

ƒƒPay the stamp duty, which is a tax levied on land transactions for registration and transfer purposes. UGANDA

ƒƒIn summary, the following documents need to be available in order to successfully register transfer of ownership: the original title deed, original stamp duty assessment forms and receipt, transfer documents (properly stamped), original paid-up land rents receipt and clearance certificate, stamp duty valuation report, original land rate clearance certificate, consent to transfer and application for registration.

ƒƒThe buyer is advised to pay the total balance on the purchase price only after receiving the completed documents from the seller.

Sources: Ecoland Property Services Uganda, 2017; Okumu, 2016. LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER

41 Box 3: Selected guidelines for allocation of investment land by Uganda Investment Authority

1. APPLICATION

1(a) An application for investment land shall be on Form UIA 2, which must give:

1. A detailed project proposal showing the project business activity and the main products or services to be produced on the land applied for.

2. The proposed total amount of investment in US dollars.

3. Documented evidence of the Investor’s ability to raise funds to implement the project.

4. Expected project impact on the economy in terms of job creation, capital investment, and turnover and export revenue where applicable, as well as other benefits to the community.

5. The amount and nature of land (amount of acreage) that shall be required for the project, including the necessary infrastructure facilities.

6. Evidence of the investor’s track record in terms of experience in implementing similar or related investment projects in the past.

7. The anticipated implementation period for the project (with key monthly milestones or activities articulated).

8. The anticipated impact of the project on the environment and whether an environmental impact assessment shall be necessary.

1(b) The application for Investment land shall be accompanied by:

1. The Memorandum and Articles of Association of the investing company or entity.

2. A copy of the certificate of registration or certification of incorporation.

3. The company’s investment licence issued by UIA.

4. A business plan articulating in detail items in subsection 1(a) above.

5. Preliminary architectural layout of the proposed facilities (giving details of proposed land use). UGANDA

6. For clarity, submission of documentary evidence of financial capacity to fully use the land shall be mandatory.

Source: UIA, 2015. LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER

42 Box 3

2. LAND ALLOCATION PROCEDURE

1. Application on Form UIA 2 for land by an investor company submitted to UIA offices along with all required attachments as in 1(b) above.

2. Evaluation of the application by an evaluation committee comprising the executive director and at least three heads of divisions of UIA (a maximum of 10 working days).

3. Consideration of the application by the relevant subcommittee of the UIA board (a maximum of 3 months).

4. Consideration and final allocation of land by the UIA board (a maximum of 2 weeks).

5. Lease offers shall be valid for strictly 14 days, within which written acceptance of the offer must be given to UIA (effective a maximum of one week after board approval).

6. Submission of the draft lease agreement to the solicitor general for clearance.

7. Legal documentation (signing of lease agreement with UIA subject to approved terms and conditions and processing of leasehold certificate of title) (one month, including solicitor general approvals).

3. TERMS AND CONDITIONS OF LAND ALLOCATION

Land shall be allocated to investors on the following conditions:

1. Only entities recognized under the Companies Act of Uganda and qualifying government agencies for purposes of doing business or similar activities shall be eligible for UIA land allocation.

2. An initial lease offer of five years, within which the investor would have undertaken substantial development on the land. This term to be extended to a full term of 49 years (or as may be determined by the UIA board) upon satisfactory development of allocated land.

3. Those allocated investment land shall pay a premium and ground rent, as shall be determined by the UIA board (see notes in 5(a) below), unless the land is subsidized in line with the government policy on prioritized investment sectors. UGANDA

4. (a) Investors are allocated fully subsidized land to provide a performance security in the form of a bank or insurance bond equivalent to 10% of the value of the leased land valid for 18 months, within which period the conditions in subsection (iv b) below should have been achieved.

4. (b) Within 18 months from the date of allocation, the investor should have started development of the land in terms of approved building plans, approved EIA and commenced physical construction. Failing this, the lease shall automatically lapse and land shall revert back to UIA and the performance bond will be cashed and the proceeds forfeited to the state.

Source: UIA, 2015. LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER

43 Box 3: Selected guidelines for allocation of investment land by Uganda Investment Authority

5. The investor company allocated UIA investment land shall not change its shareholders for the 1st five years without the written approval of the authority.

6. Priority will be given to the priority sectors as guided by government’s priority listing of investments.

4. IMPORTANT NOTES

a) Payments for leased land

Payments for leased investment land shall be as follows or as amended by UIA board from time to time:

1. Ground rent to enable UIA to manage the land shall be $10 per acre per annum for Greater Kampala Area and $5 per acre per annum for other parks in the country.

2. The total payable lease premium as shall be indicated in the lease agreement shall be payable in the following installments:

ƒƒ 1st installment of 10% of the total payable lease premium prior to signing of the lease agreement

ƒƒ 2nd installment of 30% of the total payable lease premium within six months from the date of signing the lease agreement

ƒƒ 3rd installment of 30% of the total payable lease premium within 18 months from the date of signing the lease agreement

ƒƒ 4th and last installment of 30% of the total payable lease premium within 36 months from the date of signing the lease agreement

1. The payments in (i) and (ii) above shall be independent of obligations on UIA or the Government of Uganda, such as development of infrastructure, etc.

2. Failure to pay on time shall attract an interest equivalent to the Bank of Uganda interbank lending rate payable to UIA and shall render the lease agreement subject to revocation at the exclusive discretion of UIA board.

3. No payment to UIA in respect of the allocated or leased land UGANDA

shall be refundable under any circumstances.

b) Dispute resolution

All disputes arising from and related to allocation of investment land by UIA and interpretation and implementation of lease agreements shall be governed by the laws of the Republic of Uganda.

Source: UIA, 2015. LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER

44 Useful contacts

SELECTED SUPPORT AGENCIES

Institution Contact Plot 75 Jinja Road P.O. Box 7165/7191 Directorate of Citizenship Kampala, Uganda and Immigration Control Tel: + 256 414 595945 Fax: +256 414 348707 Market Street, Royal Complex Building, 3rd Floor , Kampala City Trader’s Opp. Platinum House, Kampala, Uganda Association (KACITA) Tel: +256 313 200401/2200400 P.O. Box 7048, Kampala 2A/B Apollo Kaggwa Road Ministry of Foreign Affairs Tel: +256 414 345661, +256 414 257525 E-mail: [email protected] Website: http://www.mofa.go.ug Plot 17/19/21 Jinja Road, NEMA House P.O. Box 22255, Kampala National Environmental Tel: +256 414 251064 Management Authority Fax: +256 414 257521 E-mail: [email protected] Website: http://www.nema.go.ug/ Plot 43 Nakasero Road P.O. Box 7683, Kampala, Uganda Private Sector Foundation Uganda Tel: +256 312 263850/261850 E-mail: [email protected] and [email protected] Website: http://www.psfuganda.org Plot 42A Mukabya Road P.O. Box 34644, Kampala, Uganda Tel: +256 412 87938/87958 Uganda Cleaner Production Centre Fax: +256 412 87940/86767 E-mail: [email protected] Website: http://www.ucpc.co.ug 2nd Floor, UEDCL Tower P.O. Box 5045, Kampala, Uganda Tel: +256 414 230250/230233 Uganda Export Promotion Board Fax: +256 414 259779 UGANDA E-mail: [email protected] Website: http://www.ugandaexports.go.ug/en/ 6th Floor, Communications House Plot 1 Colville Street P.O. Box 37578, Kampala Uganda Free Zones Authority Tel: +256 417 722600 E-mail: [email protected] Website: http://freezones.go.ug/ LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER

45 Institution Contact Plot 424 Mukabya Road P.O. Box 7086, Kampala Industrial Area Uganda Industrial Research Tel: +256 414 286245 Institute (UIRI) Fax: +256 414 286695 E-mail: [email protected] Website: http://www.uiri.org TWED Plaza, Plot 22B Lumumba Avenue Tel: +256 414 301000 Ugandan Investment Authority [email protected] Website: http://www.ugandainvest.go.ug Lugogo Show Ground Uganda Leather and Allied Tel: +256 414 222551/+256 702 583260 Industries Association (ULAIA) Mr. Ssekandi A. Hakim Fax: +256 414 222201 E-mail: [email protected] Tel: +256 414 221034/287615/2 Uganda Manufacturers Association E-mail: [email protected] Website: http://www.uma.or.ug Plot 2-12, Bypass Link, Industrial & Business Park, Kyaliwajala Road, Kampala P.O. Box 6329, Kampala Tel.: +256 414 505995, +256 414 222369 Uganda National Bureau +256 800133133 of Standards Toll free +256 800133133 Fax: +256 414 286123 E-mail: [email protected] Plot 1A, Kiira Road. , Kampala, Uganda Tel: +256 753 503035 Uganda National Chamber of Fax: +256 414 230310/312 266324 Commerce and Industry E-mail: [email protected] Website: http://www.chamberuganda.com Plot 5 George Street, Georgian House P.O. Box 6848, Kampala, Uganda Uganda Registration Services Bureau Tel: +256 414 233219 Fax: +256 414 250712 E-mail: [email protected] Plot M193/M194, Nakawa Industrial Area P.O. Box 7279, Kampala, Uganda Uganda Revenue Authority Tel: +256 417 440000 E-mail: [email protected] UGANDA

LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER

46 SOME LEATHER GOODS (SHOES) MANUFACTURERS

94A 5th Street, Industrial Area, Kampala P.O. Box 422, Kampala Tel: +256 393 261342, +256 414 235440/414 233517 Bata Shoe Co. of Uganda Ltd Fax: +256 414 341380 E-mail: [email protected] Website: https://bata.co.ug/ Plot 1059 Kawesa Road, Foot Protection Services (U) Ltd P.O. Box 14659, Kampala Mr. Nyeko George Tel: +256 77 672 357 Fax: +256 71 417 983 Plot No. 6, Ripon Road People’s Footwear and P.O. Box 487, Kampala General Enterprises Tel: +256 434-120501 6th Street Industrial Area P.O. Box 1307, Kampala Training and Common Tel: +256 414 348476 Facility Centre, Uganda Fax: +256 414 345598 E-mail: [email protected] Plot 104-106 5th Street, Industrial Area P.O. Box 3883, Kampala Uganda Shoe Co. Ltd Tel: +256 414 259192 Fax: +256 414 251880

FINANCIAL INSTITUTIONS

Plot 4 Pilkington Rd, Colline House, Kampala P.O. Box 21091, Kampala Tel: +256 200 516600 ABC Capital Bank Limited Fax: +256 414 258310 E-mail: [email protected] Website: www.abccapitalbank.co.ug Plot 45, Jinja Road, Bank of Africa House P.O. Box 2750, Kampala Bank of Africa – Uganda Limited Tel: +256 414 302001, +256 800 100140, +256 414 302111 E-mail: [email protected] Website: https://boauganda.com/index.php Plot 18, Kampala Road P.O. Box 7197, Kampala Tel: +256 414 233680, +256 414 345196 UGANDA

Bank of Baroda Fax: +256 414 230781 E-mail: [email protected], [email protected] Website: https://www.bankofbaroda.ug/ Plot 13, Picfare House P.O. Box 7332, Kampala Tel: +256 313 400437, +256 414 341880 E-mail: [email protected] Website: http://www.boiuganda.co.ug/english/home_uga.aspx LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER

47 Plot 2/4 Hannington Road, Kampala P.O. Box 7101, Kampala Barclays Bank of Uganda Tel: +256 312 218348, +256 800 222333 E-mail: [email protected] Website: https://www.ug.barclaysafrica.com/personal/ 30 Kampala Road, Kampala P.O. Box 7052, Kampala Cairo International Bank Tel: +256 414 342776, +256 414 230137, +256 414 230141 E-mail: [email protected] Website: http://cairointernationalbank.co.ug/ , Plot 44-46 Kampala Road and Plot 2 Burton Street P.O. Box 1892, Kampala Tel: +256 317 202315, +256 800 200555, +256 417 202002 E-mail: [email protected] Website: http://www.centenarybank.co.ug/ 4 Ternan Avenue, Centre Court, Nakasero, Kampala P.O. Box 7505, Kampala Tel: +256 414 305500, +256 312 305500 Fax: +256 413 40624 Website: https://www.citigroup.com/citi/about/ countries-and-jurisdictions/uganda.html 10 Kafu Road, Nakasero, Kampala P.O. Box 74827, Kampala Commercial Bank of Africa Tel: +256 417 335700, +256 312 188400 E-mail: [email protected] Website: http://cbagroup.com/uganda/ 26 Kyadondo Road, Nakasero, Kampala P.O. Box 70, Kampala DFCU Bank Tel: +256 312 300152, +256 312 300200, +256 414 351000 E-mail: [email protected] Website: https://www.dfcugroup.com/ DTB Centre Plot 17/19, Kampala P.O. Box 7155, Kampala Diamond Trust Bank Tel: +256 314 387387, +256 800 242242, +256 314 387000 E-mail: [email protected] Website: https://dtbu.dtbafrica.com/ P.O. Box 7368, Kampala Tel: +256 417 700231, +256 41 700232 Uganda Fax: +256 312 266079 E-mail: [email protected] Website: https://www.ecobank.com/ug/personal-banking/countries 34 Kampala Road, Church House, Kampala UGANDA P.O. Box 10184, Kampala Equity Bank Uganda Limited Tel: +256 772 290000, +256 772 291000, +256 772 292000 E-mail: [email protected] Website: https://ug.equitybankgroup.com 6 Hannington Road, Kampala P.O. Box 36206, Kampala Uganda (Imperial Bank) Tel: +256 312 320400, +256 755 654654 E-mail: [email protected] Website: https://www.eximbank-ug.com/ LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER

48 Road, Kampala P.O. Box 6972, Kampala Tel: +256 414 341275, +256 751 932900, +256 776 932900 E-mail: [email protected] Website: https://www.financetrust.co.ug 56 Kira Road, Kampala Central Region P.O. Box 7323, Kampala Guaranty Trust Bank Tel: +256 200 710500, +256 703 718500 E-mail: [email protected] Website: https://www.gtbank.co.ug/ Plot 2–4, Wampewo Avenue, Kampala P.O. Box 1539, Kampala Tel: +256 414 259651/2, +256 702 010905 Fax: +256 414 341429 E-mail: [email protected] Website: https://www.housingfinance.co.ug 100 Kampala Road, Kampala P.O. Box 7399, Kampala KCB Bank Uganda Limited Tel: +256 200 508220, +256 417 118200, +256 417 118280 E-mail: [email protected] Website: https://ug.kcbgroup.com/ P.O. Box 28707, Kampala Tel: +256 312 388100, +256 312 388155 NC Bank Uganda Limited E-mail: [email protected] Website: https://www.nc-bank.com/ Plot 6/6A Kampala Road P.O. Box 3072, Kampala Tel: +256 417 719228, +256 701 144551, +256 800 144551 Fax: +256 414 348039 E-mail: [email protected] Website: https://www.orient-bank.com/ 17 Hannington Road, Creased Towers, Kampala P.O. Box 7131, Kampala Stanbic Bank Uganda Limited Tel: +256 800 250250, +312 264494, +256 312 224600 E-mail: [email protected] Website: www.stanbicbank.co.ug 5 Speke Road, Kampala, Uganda P.O. Box 7111, Kampala Standard Chartered Bank Uganda Tel: +256 200 524100, +256 313 294100 E-mail: [email protected] Website: https://www.sc.com/ug/ Plot 27, Kampala Road, Kampala UGANDA

P.O. Box 9485/7292, Kampala Tel: +256 414 313100 Limited Fax: +256 312 264494 E-mail: [email protected] and [email protected] Website: https://www.trobank.com/ Plot 22 Jinja Road, Kampala P.O. Box 7396, Kampala United Bank for Africa Tel: +256 417 715100, +256 800 100030 (Uganda) Limited E-mail: [email protected] Website: https://www.ubagroup.com/countries/ug LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER

49 SELECTED LICENCES IN UGANDAN TRADE AND MANUFACTURING SECTOR

Issuing authority Licences Industrial Licensing Board • Industrial licence • External Trade Act Cap 88 • Grant of exclusive licence • Hire purchase licence and off licence • Ship and train licence • Certificate of origin Ministry of Trade, Industry and Cooperatives • Import and export licence • Approval of construction • Certificate of exemption • Certificate of registration of a workplace • Notification of use of mechanical power Registrar of Cooperative Societies • Certificate of registration • Investment of funds approval • Primary society registration Uganda Cooperative Alliance Ltd • Probationary society registration • Registering amendment of by-laws • Registration of charges • Levy on designated exports Uganda Export Promotion Board • Membership registration certificate • Preferential certificate of origin • Certificate of approval to externalize funds • Certificate of incentives • Investment licence Uganda Investment Authority • Registration of agreement for the transfer of foreign technology or expertise • Entry permit • Permit for distinctive mark to complying commodities • Quality mark • Standard mark certificate • Patent registration • Registration of a company incorporated outside the Republic of Uganda Uganda National Bureau of Standards • Registration of a prospectus • Registration of charges • Registration of resolutions • Trademark registration • User licence • Utility certificate • Authorization to export goods for outward processing • Boarding station permit • Bonded warehouse or manufacture under bond licence • Certificate of clearance Uganda Revenue Authority • Customs agency Licence • Transit goods licence – licence for vehicles conveying goods under Customs control • Warehouse licence

UGANDA Source: CIBO, Volume 1.

LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER

50 UGANDA

LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER

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53 SITA project implemented by: SITA project funded by: