William Kituuka Kiwanuka
BUSINESS COMMUNITY UNHAPPY WITH HIGH COSTS OF DOING BUSINESS IN UGANDA
Patrick Bitature
The business communities have expressed concern on the high cost of doing business in Uganda. Speaking at the Presidential round table, the chairman Uganda investment Authority, Patrick Bitatule said they are faced with a number of challenges such as the cost of registering the business infrastructure, electricity bills, water among others.
He says although Uganda has implemented some reforms on the same, there was need for more to be done to reduce the cost of doing business in Uganda.
To this president Yoweri Museveni responded by promising to improve the business atmosphere in the next five years that will include construction of more transport routes leading to Sudan and working on the railway transport.
He also promised that his government will improve power supply in the country when Bujagali dam and kruma falls dam are completed.
Ultimate Media
DOING BUSINESS IN UGANDA. WHICH CONSTRAINTS?
As we move into the post election period, we must now turn our focus to how we are going to navigate the arduous channels of doing business in Uganda over the next five years.
Many Ugandans spend a lot of their time politicking or complaining. While they are complaining, there is a growing number of locals who have realized that this is the environment in which we have to live. As a result, they have turned their attention to doing business and indeed quite a number of these practical minded local investors are beginning to do very well for themselves. Be it in real estate, hospitality, trade and commerce, there is emerging a class of Ugandans, unaided by the state, who have taken the bull by their horns. What are they doing right in order to succeed?
Constraints to doing business?
There have been several studies on constraints to doing business in Uganda. They all report the usual suspects. Poor infrastructure, high cost of money, lack of access to information, lack of skills, poor legal and regulatory environment, blah,blah, blah! Ask the World Bank or any other officious body and they will give you a list of these constraints. That ‘ the reliability and affordability of electricity supply, state of the roads and coverage of communication services continue to pose challenges to SMEs in Uganda’re The World Competitiveness Report 2007.Consider:
That ‘despite improvements over the past years, the adequacy of electric power supply continues to be a problem, for example, enterprises suffered 39 days without power in 2003and anecdotal evidence suggests that this number may not have improved in the recent past’.
That according to the African Economic Outlook reportand based on information from the Ministry of Works, the quality of the national roads in Uganda is rated as follows: just 20% are rated “good”, 62% are “fair” and 18% are “poor. That by the end of 2007, Uganda had more than 4.7 million mobile telephone subscribers according to the Uganda Communications Commission (UCC). Fixed lines increased from 137,000 to 190,000 and the tele-density is at 16.5%16. Despite this, the use of the internet and personal computers - also indicators of technological readiness – is still low and costly in part because of the few internet service providers, the low literacy rate and limited availability of electricity.
That the ‘the cost of finance is prohibitive. Locally owned firms tend to have less access than foreign-owned and that firms lack sufficient collateral/securities and information’. And so the story goes (see box 1).
But despite this received wisdom from bureaucrats and academia; the facts on the ground appear to show that business is thriving and many entrepreneurs have learnt ‘to fly without perching’. So what are they doing differently in order to achieve the success that they are achieving?
Constraints to doing business in Uganda: a litany of excuses?
Infrastructure (electricity, roads and communication)
Access to appropriate technology
Skills and education of workforce
Access to financing
Access to business information and markets
Access to land
Management skills
Legal and regulatory framework
An enabling environment
Uganda has been experiencing a reasonable degree of stability over the last 20 years or so, especially in the south of the country. If you look closely at the successful business operators today, you will find that they have been doing business over the last 20 or so years, and they kept to business.
Recall that BMK used to import spares on Jinja road, having grown out of a small business in Ndeeba and Bwaise. KarimHirji used to sell ‘joolas’ along Luwum Street and SudhirRuparelia used to vend ‘soft drinks’. There are a lot of other successful entrepreneurs who have grown to be multi millionaires in true dollar terms, but they didn’t happen over night. They worked hard, invested, increased the number of business lines and prospered. Omar Mandela sold spares along Ben Kiwanuka, Godfrey Lule (Ntake) had a small bakery in Najjjanakumbi, and so on.
If you look in the public sector there are also people who didn’t complain. They did their bit and caused a lot of structural changes. WaswaBalunywa and his ‘young proteges’ introduced private programmes in Makerere. The Professors who used to wear bathroom slippers to class turned against them and proclaimed ‘Look! They don’t have PhDs! Universities are not run like that. Blahblahblah!” Soon all of Makerere was running private programmes including stealing some of whatBalunywa had pioneered. Makerere would never be the same again. Others complained, from the comfort of Europe and America, thateducation standards had fallen in Uganda. TumusiimeMutebile reformed Finance and moved on to Bank of Uganda. A series of serious minded commissioner generals and their lieutenants reformed the Uganda Revenue Authority and tax collection will never be the same.
The truth is that the successful entrepreneurs who are changing this country didn’t look at the constraints, they rode the wave to success and they have prospered. Over time, their garden has flourished because they stuck to the chase. The rest of us, well – there was a ‘disenabling’ environment. This negative attitude and politicking has negatively affected our attitude to success and many of us didn’t succeed, or will not succeed in this life!
A sea of opportunities…
Because Uganda was an awakening giant, there were a myriad opportunities for those who dared. Today, there still are if you can see the forest for the trees. In those days gone by you needed Resistance (now local) Council approval to get a fixed phone line or water connection or electricity. You needed an authority letter to get foreign exchange or passport. The government liberalized these things and well, today we have telecom and electrification millionaires. There were opportunities galore. In trade, finance, agriculture and industry. Aha…Mukwano was also selling ‘joolas’ along Luwum Street in the 1980’s. Today I am sure very few of the people who used to frequent his shop could even get to see him. He is semi retired and lives in the benign region of Tooro. These opportunities haven’t gone away. The population has grown two and half times and the regional markets of South Sudan and Congo are just opening up. Just you wait until the oil boom starts! For those of you who are still politicking, sorry, the train left the station 20 years ago but you can still jump on. Uganda is a land of opportunities and you don’t have to piggyback on the NRM government, or any other government for that matter, especially if you don’t like politics!
The era of Big Society is here!
It doesn’t matter if you go east or west. Communism is dead. Period. China is up and running, India is on the move and Russia is thick with billionaires. The only thing that will matter tomorrow is whether one is a threat to business interests or not. This is the era of Big Society if you don’t know it. First espoused by the conservatives in the UK in 2010, Big Society may be the next big thing. The aim is “to create a climate that empowers local people and communities, building a big society that will ‘take power away from politicians and give it to people’It is an an impressive attempt to reframe the role of government and unleash entrepreneurial spirit.
This new ideological order means that the future belongs to those who take the bit in their mouth and do something about their situation. The winds blowing from North Africa portend the dearth of dictatorship, and the era of the entrepreneurial society. The era of Big society means that governments must become more transparent. There will be more people power, and more devolutionism. So who shall we blame for constraints to business? It is time to be positive, forget who is in charge at the national level and what they are not doing, and take a hold of your destiny.
WHAT ONE HAS TO OVERCOME TO START A NEW FIRM IN UGANDA
Listed below is a detailed summary of the bureaucratic and legal hurdles an entrepreneur must overcome in order to incorporate and register a new firm, along with their associated time and set-up costs. It examines the procedures, time and cost involved in launching a commercial or industrial firm with up to 50 employees and start-up capital of 10 times the economy's per-capita gross national income (GNI).
The information appearing on this page was collected as part of the Doing Business project, which measures and compares regulations relevant to the life cycle of a small- to medium-sized domestic business in 183 economies. The most recent round of data collection for the project was completed in June 2010.
Standardized Company
Legal Form: Private Limited Company
City: Kampala
About This Topic
To see indicator data for all economies, see the Starting a Business page. To see how economies rank, see the Rankings page.
No. Procedure Time to Complete Associated Costs
1 Reservation of a name at the Office of the Registrar
To reserve a company name, the founder files a company name reservation request at the Office of the Registrar. A clerk conducts an automated search and forwards the application to a staff lawyer. The Registrar reviews the application and, if the application is approved, returns it with the assessment, which the founder takes to the bank. Upon paying the fee ( USH 10,000 for name search & USH 15,000 for name reservation), the founder receives a receipt that is used to complete the name reservation.
2 days USH 25,000
2 Pay fees at the bank
All nontax payments to government agencies must be made at a bank.
1 day included in previous procedure
3 Obtain five necessary forms from the Uganda Bookshop
The fees for the required incorporation forms are as follows:
- Statement of nominal capital: UGX 500.
- Declaration of compliance with the requirements of the Companies Act: UGX 500.
- Particulars of directors and secretaries: UGX 700.
- Consent to act as director of company: UGX 500.
- Notice of situation of the registered office and the registered post address: UGX 500.
1 day USH 5,600 (USH 500-700 for each form, 5 forms for incorporation, and 3 for tax registration)
4 Sign the declaration of compliance before a Commissioner for Oaths
Form A2, Declaration of compliance with the requirements of the Companies Act, must be commissioned (signed and sealed) before a commissioner for oaths, who is an advocate. The other documents can be witnessed by any other reputable person because they are not an oath. The fees range from UGX 2,000 to UGX 10,000.
1 day USH 2,000 -10,000
5 Obtain requisition for bank pay-in slip and bank payment advice forms from the Uganda Registration Services Bureau
Computerized processes reduced the time frame for paying government levies, such as fees for licenses and certificates. The process requires only 30 minutes, down from 4 working days.
1 day no charge
6 Make payment of registration fees at a given bank
Registration receipts are obtained from the bank where the fees were paid (within 30–40 minutes). Previously, the founder would pay the fee at the bank and then wait for 3 days to pick up the receipts from the Ministry of Justice.
1 day no charge
7 File with the Registrar General
Registration is administrative process through the creation of the Uganda Registration Services Bureau, which is autonomous from the Ministry of Justice and handles all business registration–related issues.
Fee schedule for company registration:
- Registration fees: UGX 100,000
- Stamp duty: 0.5 % of shared capital.
- Stamp duty on Articles of Association: UGX 35,000 ( flat fee). Registration fees depend on the amount of share capital. They increase as the share capital increases. For instance, the fee for share capital UGX 5 million is UGX 160,000, and for share capital 10 million, UGX 186,000. Registration fees for a company whose share capital does not exceed UGX 40,000 has been increased to UGX 100,000.
1 day see comments
8 File with the local office of the Uganda Revenue Authority a personal inquiry form for each director, and a corporate preliminary inquiry form; receive a uniform tax identification number (TID)
3 days no charge
9 Apply for corporate tax file number
1 day no charge
10 Apply for VAT registration
The current threshold for VAT is only for businesses with annual returns of UGX 50 million and above. However, if a company’s quarterly returns amount to USH 12.5 million and above, it should register for VAT. Only registered income tax payers may apply for VAT. An inspector from the Uganda Revenue Authority must inspect the business premises before a VAT certificate is issued.
1 day no charge
11 An inspector from URA inspects the business premises
1 day no charge
12 Apply for PAYE
The pay-as-you-earn (PAYE) tax is paid by the employee but collected by the employer. This tax comes into effect later, upon the company becoming operational. Rates are applied depending on the employee’s yearly income; for instance, Employees earning below 1,560,000 do not pay PAYE, 10% is taxed on incomes exceeding UGX 1.56 million but not exceeding UGX 2,820,000. The amount increases as the income increases.
1 day no charge
13 Obtain application forms for trading license
For ease of distribution of trading licenses, a decentralized system has been set up in which the 5 companies were appointed to collect dues on behalf of Kampala City Council (KCC) for each of the city’s five administrative divisions. Currently, the services of these companies have been suspended as the city council is conducting assessment to decide on the adequate license fees before contracting the companies again.
1 day no charge
14 The licensing officer arranges an inspection of the premises and fills out an assessment form.
The trading license is a general business license required for all companies, including service companies. The issuing authority is the municipal authority in the jurisdiction where the business premises are situated. A trading license can be obtained almost instantly, if the necessary documents on the nature of the intended business activities are available and the amount is assessed by the municipality or city council. Standard forms must be completed and submitted with the memorandum and articles of association and the certificate of incorporation.
1 day no charge
15 Pay the license fee at the bank.
The founder must pay the relevant license fee at the bank, as follows:
- Opening office: UGX 156,500.
- Carrying out retail business: UGX 206,500.
- Carrying out wholesale business: UGX 366,500.
1 day see the following procedure
16 Obtain the trading license
If it is deemed necessary, the municipal inspectors (health and building) reserve the right to revoke and cancel the trading license.
1 day USH 400,000
17 File a form with the National Social Security Fund (NSSF).
The National Social Security Fund (NSSF) is governed by the revised laws of Uganda, the National Social Security Fund Act Cap 222. The NSSF is a compulsory saving scheme that covers all employees in the private sector, including nongovernmental organizations and parastatal bodies that are not covered by the government pension scheme. Under the Act, every employer must register the company with the NSSF when it has 5 or more employees and all employees ages 16–35 as NSSF members. This procedure takes 1–7 days. Registration forms for NSSF can now be downloaded from the NSSF website.
4 days no charge
18 Make a company seal
A company seal is mandatory.
interesting info
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