Investment Climate in Uganda

Investment in Uganda
The government of Uganda provides the necessary legal policy and physical infrastructure for private investment to flourish. The government has privatised most of the parastatals and revised regulations to promote foreign investments. The law permits 100 per cent ownership of investments and with very few exceptions, investors can invest in any economic activity.

Since 1986, the government has pursued a series of stabilization and pro-market structural reforms that resulted in the macroeconomic stability leading to the high growth since 1986 to date. Real gross domestic product (GDP) growth averaged 7% per year in the 1990s and the 2000s, placing Uganda among the 15 fastest growing economies in the World. However, the volatile global economy, the local population pressures and other challenges have   over the past decade a slowed the gross domestic product (GDP) resulting a growth rate of 4.6% in FY 2015/16 down from 5% in FY2014/15. The growing sectors include agriculture grew by 3.2% up from 2.3%. , service sector by 6.6% from 4.5% and the construction sector by 5.7% from 2.7% that were registered in 2014/15.  Growth is however expected to pick up to 5.8% in FY2016/17 mainly driven by a scale up in public infrastructure spending and a rebound in private sector activity following the general election. Private sector investment is expected to receive a boost as the monetary policy stance normalizes and FDI inflows linked to the planned issuance of oil production licenses come on board. In the medium term, growth is expected to average 6.2% per annum owing to the impact of public investment projects. The stimulatory impact of new public investment projects will begin to have a large impact on growth from FY2017/18, when the economy is expected to surpass its medium-term objective of at least 6.2 % real growth per annum (Budget 2016/17). The Uganda’s economy in real terms has expanded to Sh55.7 trillion in the 2015/16, up from Sh53.2 trillion that was registered in the previous financial year 2014/15. The annual average inflation rate stood at 5.5% for calendar year 2015/16. In order to consolidate and accelerate the growth the government approved the Comprehensive National Development Planning Framework policy (CNDPF) which provides for the development of a 30 year Vision to be implemented through: three 10-year plans; six 5-year National Development Plans (NDPs); Sector Investment Plans (SIPs); Local Government Development Plans (LGDPs), Annual work plans and Budgets.

The National Vision statement, “A Transformed Ugandan Society from a Peasant to a Modern and Prosperous Country within 30 years”, has been formulated and implementation is under way. Uganda through   Vision 2040 desires    to change from a predominantly low income to a competitive upper middle income country within 30 years with a per capita income of USD 9,500. Uganda is expected to achieve the upper middle income status through strengthening the fundamentals of the economy including infrastructure, Science, Technology, Engineering and Innovation (STEI); land use and management; urbanisation; human resource; peace, security and defence in order to exploit the opportunities in the areas of oil and gas, tourism, minerals, ICT business, abundant labour force, geographical location and trade, water resources, industrialisation, and agriculture.

Urbanisation rate

According Uganda Bureaux of Statistics (UBOS), Uganda’s urban population has increased rapidly from less than 1 million in 1980 to 6.4 million persons in 2014, indicating a more than six fold increase and estimated to be 6.8 million by mid 2016 .The percentage of Uganda’s population living in urban areas increased from 15.77% in 2014 to 16.1% in 2015.  For the country to achieve faster socio-economic transformation there is need to raise the level of urbanization. Uganda’s urbanisation rate stands at 5.43 % per annum an indication that Uganda is moving towards a market economy.  According to UN World Urbanisation Trends 2014, 54% of the world population reside in urban areas. Therefore Uganda’s level of urbanization is still very low when compared to the global trends. Kampala Capital City is 100 per cent urban with a population of 1.5million   and is followed by Wakiso Municipality with a population of 0.366 million (UBOS 2014). The day time population of Kampala exceeds 2.5 million people during the major holiday seasons. Kampala Capital City rapid population growth of 5.6% per annum has impacted on the population structure of the city. The growth rate is largely influenced by rural-urban migration resulting in increased demand for employment, land for housing, social services and infrastructure that have stimulated spatial urban development and industrialization. The urban planning process has not achieved its intended purpose because of the continued political interference, conflicting land use policies, uncoordinated instructions between urban authorities and Ministry of Local Government.  It is important to note that government has taken steps to rectify what has gone wrong in Urban Development but positive results will take time to be seen.

Corruption

Uganda is number 139 least corrupt nation out of 175 countries, according to the 2015 Corruption Perceptions Index reported by Transparency International. This is a slight improved from previous year’s rank of 143.

Security

The country is generally peaceful and there are no serious security concerns to investors in Uganda.

Uganda credit rating

Moody’s has changed outlook on Uganda’s B1 rating to negative from stable. The key drivers for the negative outlook including the following:

  • Deteriorating fiscal and debt metrics, driven by high capital spending and rising debt-servicing expenditures;
  • A continued weakening in Uganda’s external payments position, as evidenced by the large depreciation in the Ugandan shilling; and
  • The expected increase in inflation and reduced growth prospects, potentially diminishing a key source of historical support to sovereign credit quality.

Attitude toward Foreign Direct Investment

Uganda has an open attitude towards foreign investment and provides tax incentives and other facilitations to foreign investors.  In ease of doing business (DB) ranking by World Bank Uganda got the following scores

The Uganda Registration Service Bureau (RSB) recently computerized its company registry, reducing the time and number of steps required to start a business.  URA has overtime improved its efficiency, boosted transparency, and increased tax compliance.

Assistance to foreign investors

Uganda investment Authority (UIA) provides a ‘one stop centre’ to serve both foreign and local investors. UIA is responsible for promotion of investment, marketing investment opportunities; promoting packaged investment projects and providing information to potential investors to enable them make more informed business investment decisions.   In addition UAI provides advice to government on the implementation of appropriate policies conducive for investment promotion and growth.

Restrictions on Foreign investment

Foreign investors could form wholly foreign-owned limited or unlimited liability companies or could form majority or minority joint ventures with Ugandan partners without restrictions. Foreign investors can also transact business through a subsidiary or a foreign branch registered in Uganda. All sectors of the economy are open for foreign investment subject to the security interests of the state.

Remittance Policies

Uganda has open capital accounts and there are no restrictions on capital transfers in and out of Uganda. Investors can easily obtain foreign exchange and make transfers at commercial banks without approval from Bank of Uganda to repatriate profits and dividends, and to make payments for imports and services.

Taxation Treaties

Uganda has the taxation treaties with the following countries;

  • Zambia
  • Mauritius
  • India
  • Netherlands
  • United Kingdom.

Settlement of disputes

Uganda has an adequate legal commercial court system for resolving of commercial disputes and the legal system also provides for mandatory mediation of commercial disputes. The commercial court engages regularly with the private sector through its Court Users Committee in order to listen to their concerns.

Pursuant to the Reciprocal Enforcement of Judgment Act, judgments of foreign courts are accepted and enforced by Ugandan courts where those foreign courts accept and enforce the judgments of Ugandan courts.

Bankruptcy

Uganda has a   bankruptcy act which entitles creditors to petition court for a Receiving Order that paves the way for the appointment of an Official Receiver who manages the debtor’s property and assets for purposes of paying off creditors.

International Arbitration

Uganda is a party to both the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID) and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.

Investment Incentives

Uganda’s investment incentive package 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.  Uganda therefore offers generous provisions for VAT deferments, deductions, exemptions and capital depreciation allowances. This results in investors paying no or minimal tax during the first 5 years of their investment.

Property rights     

Property rights are guaranteed by law and compulsory acquisition of private property by the state is prohibited by law except when in the public interest, authorized by law, and accompanied by prompt, fair and adequate compensation which can be legally challenged by the owner.

Intellectual Property Rights

The Ugandan law protects intellectual property rights but the system for preventing piracy and counterfeit distribution is weak.

Information on Investment in Uganda

The key information on investment in Uganda is organised as follows

Uganda Vision 2040
Investment Incentives in Uganda
Investment Policy
Investment Climate
Land in Uganda
Tax Climate
Investment Facilitation
Facilitating Organisations
Business Environment
Taxation Treaties in Uganda
Economy of Uganda
Corruption in Uganda
Intellectual Property Rights
International Arbitration
Remittance Policies
Settlement of disputes
Uganda credit rating
Uganda Property rights
Urbanisation rate in Uganda
Attitude toward Foreign Direct Investment

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