 UGANDA
COMMERCIAL GUIDE. |
Source: US Embassy in Uganda. February, 1998.
I . EXECUTIVE SUMMARY
II. ECONOMIC TRENDS AND OUTLOOK
III. POLITICAL ENVIRONMENT
IV. MARKETING U.S. PRODUCTS AND SERVICES
V. LEADING SECTORS FOR U.S. EXPORTS AND INVESTMENT
VI . TRADE REGULATIONS AND STANDARDS
VI I . INVESTMENT CLIMATE
| I . EXECUTIVE SUMMARY |
This Country Commercial Guide (CCG) presents a comprehensive look
at Uganda’s commercial environment, using economic, political and market analysis.
The CCGs were established by recommendation of the Trade Promotion Coordinating Committee
(TPCC), a multi-agency task force, to consolidate various reporting documents prepared for
the U.S. business community. CCGs are prepared annually at U.S. Embassies through the
combined efforts of several U.S. Government agencies.
Uganda boasts a rapidly growing economy with generally low, stable rates of inflation.
While the market is small and average income is low, Uganda is currently considered to be
a major success story in Sub-Saharan Africa. Uganda has taken major strides to liberalize
the economy, maintain low inflation and allow the economy to grow, which it has done at
high rates since 1987. GDP growth, which averaged over eight percent in the three previous
years, was five percent in 1996/97. The Government of Uganda (GOU) is privatizing
parastatals, revising regulations to promote foreign investment and following IMF
guidelines to restructure the economy. Major efforts are underway to restructure several
commercial banks and strengthen Uganda’s financial system. International donors
provide significant assistance toward maintaining the economy.
Ugandan attitudes toward the U.S. are favorable, as are business attitudes generally.
However, Uganda has traditionally traded with nearby countries and with Europe, especially
the United Kingdom. Imports from Japan are increasing, indicating an openness to new
trading partners. American manufacturers wishing to export to Uganda face a situation
where buyers are comfortable with familiar trading partners and are concerned about the
ability of American manufacturers to provide parts and service. Given transportation
costs, Ugandans also believe U.S. products will be too expensive. The best prospects for
U.S. investment in Uganda are in the following sectors: agriculture, food processing,
livestock, tourism, infrastructure, transportation, mining, and telecommunications.
The barriers to doing business in Uganda include problems with financing, corruption,
transportation costs, poor infrastructure, and the fact that the economy is emerging from a history of government intervention and
significant government mismanagement. Roadblocks particular to American companies are
Uganda’s traditional links to East Africa and the United Kingdom, and the fact that
most development projects are funded by outside donors who often link their money to
purchases from companies based in their own country.
Country Commercial Guides are available for U.S. exporters from the National Trade Data
Bank’s CD-ROM or via the Internet. Please contact STAT-USA at 1-800-STAT-USA for more
information. Country Commercial Guides can be accessed via the World Wide Web at
HTTP://WWW.STAT-USA.GOV and HTTP://WWW.STATE.GOV. They can also be ordered in hard copy or
on diskette from the National Technical Information Service (NTIS) at 1-800-553-NTIS.
| II. ECONOMIC TRENDS AND OUTLOOK |
 Major Trends and Outlook |
The economy of Uganda has shown a steady recovery since 1987 when the Government of
Uganda put into place an Economic Recovery Program Plan with assistance from the World
Bank and the IMF. As a result of the GOU’s commitment to reforms, Uganda’s
annual Gross Domestic Product (GDP) growth averaged six percent during fiscal years
1986-1994 and eight percent in 1995 and 1996. This past year’s lower GDP growth rate
of five percent is attributed to poor performance in the agriculture sector due to bad
weather. GDP growth is expected to be five to seven percent in the coming year. The growth
occurred across the economy, including fourteen percent in manufacturing. Mining,
transport, communications and construction sectors also grew. The result of this strong
economic growth is that the Ugandan economy almost doubled in size in the past ten years.
Uganda remains, however, one of the poorest countries in the world, with low per capita
income and high rural poverty which has not been significantly dented despite good growth
figures. The country is favored with a good climate and fertile soil, but the economic
mismanagement which accompanied the civil war in the 1970’s and early 1980’s debilitated the country. The economic programs
followed by the GOU during the past ten years have put Uganda on the right track, but it
is still a long way from providing a high standard of living for its people. Access to
health and sanitation services is poor, and large numbers of Ugandans suffer from
malnutrition, although there is little famine. Public expenditure on economic and social
services such as primary health and education, and agricultural research is low, although
these areas are getting an increasing share of the national budget. International donors
make up for some of this .with extensive programs in these areas.
Inflation, which ran at 240 percent in 1987 and 42 percent in mid-1992, was 11.8
percent for fiscal year 1996/97 and 5.4 percent the previous year. While the target rate
of inflation is five percent, shortages of food pushed producer prices higher during the
past year. The exchange rate is very stable. With continued stability in the government
and its continued commitment to economic discipline, prospects for continued high growth
and low inflation are excellent.
| Principal Growth Sectors |
Agricultural production represents a considerable proportion of Uganda’s GDP and
generates over 90 percent of export earnings. There is significant potential for
substantial increases in agricultural production in a wide variety of areas, including
non-traditional exports such as flowers, vanilla, silk and other specialty items as well
as cotton.
Hydroelectric power generation is also a principal growth sector. Uganda’s
shortage of electricity is increasing monthly. Uganda currently exports electricity to
nearby countries, and this market will likely expand. On the supply side, there is one
hydroelectric plant being expanded and improved and another in the planning stage. The
Nile River offers great potential for hydroelectric power generation.
The GOU is also putting emphasis on construction and maintenance of truck and feeder
roads. Uganda’s rural feeder roads cover about 13,000 miles but maintenance continues
to be a major problem.
| Government Role in the Economy |
The Government of Uganda is actively liberalizing the economy. The GOU’s budget
priorities for FY 1997/98 are primary education, local elections, defense and roads.
Foreign exchange, based on a market determined exchange rate, can be freely purchased.
Many public enterprises have been privatized or are scheduled for privatization.
Loss-making parastatals are being liquidated, enterprises which could be managed better by
private companies are being divested, and other parastatals are being restructured.
| Balance of Payment Situation |
Uganda’s balance of payments position remained strong in 1996/97; investment
income inflows, non-coffee exports, and coffee productions all registered increases over
the previous year. This performance has enabled the Bank of Uganda (BOU) to strengthen its
foreign reserves to the equivalent of 4.7 months of imports. At the end of April 1997, the
foreign exchange reserves of the Bank of Uganda had reached US$ 564.1 million. The BOU has
hired professional fund managers to improve the effectiveness of reserve management.
| Infrastructure Situation |
Roads are in disrepair but are being improved. The GOU and international donors have
begun major programs to pave or improve roads in Kampala and throughout the country.
Telephone service has improved. However, most Ugandans still do not have a telephone.
Pay phones are increasing in number. Two companies, one a U.S. firm named StarCom, are
bringing cellular and mobile trunk radios to Uganda. Uganda Post and Telecommunications
Corporation’s (UPTC) long distance service is expensive. However, the GOV has
eliminated UPTC’s monopoly and private operators are beginning to offer certain types
of long distance service under license. The GOU plans to sell both UPTC and a second
operators licence in 1997; this should improve telecommunications in Uganda both in terms
of quality and price.
There are a number of airfields in Uganda, but apart from Entebbe International
Airport, they are served only by charter or private airplanes. The Kampala-Nairobi rail
link transports the bulk of goods shipped by railroad. Rail-ferry service on Lake Victoria
connects Uganda with Tanzania. Most goods reach Kampala from Kenya by trucks on
all-weather tarmac roads.
Uganda’s electricity deficit increases monthly. Load-shedding and power surges are
common and can cause computers and other business equipment to have problems.
| III. Political Enviroment |
| Nature of the Bilateral Relationship With the United States |
The United States and Uganda enjoy excellent bilateral relations. The United States has
supported Uganda’s democratization process and human rights reforms as well as its
economic reforms and efforts to privatize state industries.
| Major Political Issues Affecting Business Climate |
The main political issues which affect the business climate in Uganda are insecurity in
sections of the northern and southwestern parts of the country, corruption in some
institutions and organizations, land tenure issues, and the pace of democratic reform. The
land tenure problem results from the multiplicity of traditional and legal systems over
the past hundred years. Uganda’s new Constitution recognizes several types of land
tenure including customary ownership, freehold, mailo (a traditional system in the kingdom
of Buganda) and leasehold. Competing claims to land can result in protracted court cases.
| Brief Synopsis of Political System. Schedule for Elections and Orientation of Major
Political Parties |
Uganda promulgated a new Constitution in October 1995 and held a presidential election in May 1996, followed
by parliamentary elections in June. The 1995 Constitution provided for a strong executive president, to
be elected every five years, but with significant requirements for Parliamentary approval
of presidential actions. The Parliament includes 214 directly elected representatives from
geographical constituencies and special indirectly elected seats for representatives of
women (39), youth (5), disabled (5), labor (3), and the Army (10). Under the transitional
provisions of the new Constitution, the assertedly non-party "movement" system
of government, including explicit restrictions on the activities of political parties,
will continue for five years, with a referendum in the fourth year (2000) to determine
whether Uganda will adopt a multiparty system of government.
| IV. MARKETING U.S. PRODUCTS AND SERVICES |
| Distribution and Sales Channels |
Products are generally distributed through small distributors, who then sell products
to smaller shopkeepers.
| Use of Agents/Distributors: Finding a Partner |
The Ugandan National Chamber of Commerce and Industry has listings of local agents and
distributors. The Uganda Manufacturers Association maintains a reading room and often
fields inquiries from agents and distributors or companies looking for outside partners
but does not maintain a formal network. See Appendix C for contact information on these
two organizations. The Commercial Section at the U.S. Embassy can also be of assistance in
this area. Nonetheless, it would be difficult to choose an agent or distributor without
visiting Uganda, seeing the situation, and then interviewing prospective people.
| Franchising |
There are few franchises operating in Uganda; no U.S. food company or retailer has
opened establishments in Uganda to date.
Caltex, the U.S. based gas company, and the other fuel companies, however, do offer
their service stations on a franchise basis.
| Direct Marketing |
Most foreign products are marketed through a local company with experience/expertise in
the respective area.
| Joint Ventures/Licensjng |
There are no restrictions on foreign investors forming joint ventures with local
investors.
| Steps to Establishing an Office |
The Uganda Investment Authority (UIA) is the GOU’s organization which handles
registration and licensing. The UIA can assist foreign companies wishing to establish an
office by providing advice on registry, licensing, immigration, tax, and customs matters,
and sub-licenses and permits.
The UIA has not lived up to its promise, however, and investors have complained about a
variety of impediments to establishing an office. Offices which meet reasonable standards
are rare. Industrial space is very limited and much of it is in areas where roads are poor
and flooding is a problem. Once the office or industrial space is located, costs can be
prohibitive. Local lessors generally want six months rent in cash before renting a
property. Connecting telephones and electricity is frequently a problem because past
tenants have left an outstanding bill. A local partner may be able to ease some of these
difficulties.
| Selling Factors/Technigues |
Products are marketed through advertising in newspapers and on radio and television.
These are new selling techniques for Uganda, and they appear to be very popular and
successful. For example, Coke and Pepsi have run successful promotions with contests based on collecting bottle caps or finding bottle caps with special symbols.
| Advertising and Trade Promotion |
There are several advertizing agencies in Kampala, including Media Consultants Ltd., a
McCann-Erickson affiliate. Mike Daugherty, an American citizen, is the Managing Director;
tel: 256-41-231-212 and fax: 256-41-236-042.
| Major newspapers and business journals |
The New Vision, P.O. Box 9815, Kampala, tel: 256-41-235-209 and fax: 256-41-235-843
The Monitor, P.O. Box 12141, Kampala, tel: 256-41-236-939 and fax: 256-41-232-369
| Radio and television stations |
Radio Uganda, P.O. Box 7142, Kampala, tel: 256-41-257-257 Radio Sanyu, P.O. Box 30961,
Kampala, tel: 256-41-285-494 Capital Radio, P.O. Box 7638, Kampala, tel: 256-41-235-092
Uganda TV, P.O. Box 7142, Kampala, tel: 256-41-245-376 CableSat TV, P.O. Box 7502,
Kampala, tel: 256-41-257-952 Sanyu TV, P.O. Box 30961, Kampala, tel: 256-41-234-256
| Pricing Product |
Pricing is based on what the market will bear, tempered by the nearby Nairobi, Kenya
marketplace. Generally, European and North American goods and services are quite
expensive, and there is little local competition to moderate prices. For any large scale
equipment or services, the competition is with large European and Asian companies.
| | Sales Service/Customer Support |
Customer support can be a major issue for American products being sold in Uganda. Due
to the distance between Uganda and the U.S., Ugandan customers suspect that better and cheaper support will be provided by firms
from nearby countries or traditional trading partners in Europe. U.S. manufacturers need
to adequately demonstrate that they can supply spare parts and also service their
products.
| Selling to the Government |
Most government purchases are made through tendering. The Central Tender Board controls
tendering, and advertises in the newspapers and by sending invitations to organizations in
Kampala. SWIPCO, a U.S. based company, is responsible for auditing all procurements of
$50,000.00 and above by GOU ministries and parastatals.
| Protecting Your Product from IPR Infringement |
The Investment Code of 1991 makes provisions for foreign exchange remittances with
respect to transfer of foreign technologies. In order to benefit from this, investors must
have registered agreements with the Uganda Investment Authority regarding the transfer of
technology.
Under Section 32 of the Patents Statute of 1991, the Registrar of Patents awards
patents for an initial period of 15 years, with a possible five year extension if a
request is made one month before expiry of the original term.
Bootlegging of cassettes and videos is common, and any visitor to Kampala has the
opportunity to purchase recent music and movies for a minimal price. U.S. firms marketing
goods which can be copied easily with relatively low technology should be aware that
bootlegging of their product is a possibility.
| Need for a Local Attorney |
The UIA is supposed to be able to handle many functions which might otherwise require
an attorney. Nevertheless, local attorneys are useful, available and are aware of changing
regulations. A list of attorneys is available from the Consular Section at the U.S.
Embassy.
| V. LEADING SECTORS FOR U.S. EXPORTS AND INVESTMENT |
| Best Prospects for Non-Agricultural Goods and Services |
Infrastructure: Roads, railways, air transport, telecommunication and electricity are
under increasing stress, yet Uganda’s continued economic success depends on the
improvement of its infrastructure. Many of the projects in these areas are funded by
multilateral donors. For example, the GOU and donors have agreed to invest heavily in road
construction, upgrades and maintenance over the next ten years. UPTC will be privatized,
and a second operators license offered in 1997. The Nile River offers good investment
opportunities for hydroelectric projects.
Mining: Uganda is endowed with a great diversity of geological formations and
structures. While mining used to contribute 30 percent of Uganda’s foreign exchange
earnings in the 1960s, it now contributes a negligible amount. Many minerals and metals
can be found in Uganda including: copper, cobalt, gold, tin, tungsten, and oil.
Exploration, research and development, and eventual mining are good investment
opportunities.
Tourism: Although the current security situation in Uganda has led to decreased tourist
arrivals, Uganda’s tourism industry is re-emerging on the world market. The national
parks and other tourist sites are quite accessible. Lodges and hotels formerly owned by
the Ugandan Government have been divested to give an increased variety and quality of
accommodation capable of receiving larger numbers at reasonable prices. Organized tours
and boat cruises on the Nile River, Lake Victoria and Lake Albert are good investment
opportunities.
| Best Prospects for Agricultural Products |
Uganda’s agricultural. land is considered among the best in Africa, with two
seasons of good rainfall and low temperature variability. Agriculture accounts for a large
percentage of GDP and an even larger percentage of export earnings. Agricultural
production and processing will remain the main stay of Uganda’s economy for the
foreseeable future. The country produces a wide range of food, most of which is grown
organically. Some of the bottlenecks to the expansion of agricultural investment include
the lack of high quality packaging capabilities, storage facilities, high freight costs,
lack of feeder roads in rural areas, and untrained manpower. Nonetheless, the following
offer good investment opportunities:
Traditional crops such as coffee, cotton, tea and tobacco: rehabilitation and
production of these once large exports/foreign exchange earners is ongoing.
Fruit and vegetable processing: particularly for canning pineapple and producing frozen
or pulps or juice concentrates from various tropical fruits, including passion fruit,
mango, pineapple and papaya.
Edible oil production: Uganda’s current needs for edible oil are being met by
imports. Production of oil seed crops has been established on a small scale but could be
readily increased.
Staple food crops processing: staple food crops grown in Uganda include plantains,
millet, sorghum, maize, beans, cassava, sweet potatoes, groundnuts (peanuts), rice, wheat
and Irish potatoes.
Flowers: roses and carnations are currently grown in Uganda and exported to Europe.
Given Uganda’s climate, both seeded annuals and perennials are highly recommended for
commercial development.
Fisheries: roughly 20 percent of Uganda is covered by water. Nile perch and Nile
tilapia are in abundance. River and lake fishing, fish farming and fish processing are
possibilities.
The Government of the United States acknowledges the contribution that outward foreign
direct investment makes to the U.S. economy. U.S. foreign direct investment is
increasingly viewed as a complement or even a necessary component of trade. For example,
roughly 60 percent of U.S. exports are sold by American firms that have operations
abroad.-. Recognizing the benefits that U.S. outward investment brings to the U.S.
economy, the government of the United States undertakes initiatives, such as Overseas
Private Investment Corporation (OPIC) programs, investment treaty negotiations and
business facilitation programs, that support U.S. investors.
| VI . TRADE REGULATIONS AND STANDARDS |
| Trade Barriers. including Tariffs. Non-Ta rs and Import Taxes |
In order to reduce costs and increase competitiveness, all 30 percent import duties
were recently reduced to 20 percent. Excise surcharges have been unified at 10 percent.
Further reductions are planned during the next two years.
Import bans will be phased out over the next two years starting with beer, soda and
batteries in April 1998 and cigarettes in April 1999. Small reductions in fuel duties were
introduced in an attempt to reduce costs for producers and transporters. The GOU has
promised to lower these rates further in the next three years.
| Customs Valuation |
Uganda follows the Harmonized System (HS) of categorizing goods. All imported goods are
subject to a Societe General du Surveillance (SGS) pre-shipment inspection in the country
of origin. The SGS pre-shipment inspection covers:
Verification of the quantity and quality of imported goods to ensure conformity with
contractual specifications
Price comparison to ensure that the price of imported goods corresponds to the prevailing
export market price of comparable goods
Verification of the customs classification code and evaluation of the dutiable value of
imported goods according to Uganda Customs Regulations.
The GOU is attempting to improve the Customs Administration by installing an
internationally recognized computerized documentation system and a new pre-shipment
inspection threshold of $2000.00. In July 1998, Uganda will adopt the GATT definition of
value in place of the Brussels definition, in order to comply with WTO requirements.
| Import Licenses |
Import certificates, which are non-good-specific, are required and have a validity of 6
months. The certificates take the place of import licenses.
As of August 1, 1993, Form E (Declaration of Imports), can be processed by commercial
banks and foreign exchange bureaus. All importers are required to complete Form E.
| Export Controls |
Items which cannot be exported without prior authorization by the Ministry of Trade and
Industry include:
Waste and scrap of ferrous cast iron
Wood charcoal
Timber from any wood trees grown in Uganda whether sawn, unsawn, hewn or machined (but not
any other articles manufactured from such wood)
Coffee husks
Fresh unprocessed fish
Game trophies
| Import/export Documentation |
The following supplementary documents may be required by the Uganda Revenue Authority
at the entry point whenever the following goods are imported:
Human and animal drug medications: Verified pro-forma invoices from the Pharmacy Board
Firearms: Firearms Certificate
Live animals (domestic and wild): Health Certificate
Wild endangered species: Approval Authority
Secondhand clothing: Fumigation Certificate
Explosives: Approval Authority
Seeds and plants: Phytosanitary Certificate
The following supplementary documents will be required at the Customs exit whenever the
following goods are exported:
Fish: Health Certificate and Trading License for fish
Minerals: Permit to export minerals and Mineral Dealer’s License
Fresh/dry fruit, vegetables and produce: Phytosanitary Health Certificate
Game Trophies: Permit to export game trophies and wild animals
Hides and skins: Export Buyers License, Export Certificate for hides and skins, Veterinary
Health Certificate
| Temporary Entry |
Many products are shipped through Uganda on their way to eastern Zaire and Rwanda. The
Customs Administration has recently reduced the time allowed for goods to transit Uganda
to 21 days.
| Labeling. Marking Requirements |
The following infornation must be clearly marked on imports and exports:
importer/exporter name, consignee, flight/vehicle details, place of discharge, number of
packages, container identity, description of goods, air way bill number/bill of lading,
and country of origin/destination.
Prohibited Imports The following items cannot be imported into Uganda: Pornographic
Materials Used motor vehicle tires
Imports banned under international agreements to which Uganda is signatory
Standards Importers/exports should contact the Customs Administration for specific
information on standards.
| Free Trade Zones/Warehouses |
There are no free trade zones in Uganda. There are bonded warehouses.
| Special Import Provisions |
Specific questions regarding import regulations should be directed to the Customs
Administration.
| Membership in Free Trade Arrangements |
Uganda is a member of Preferential Trade Area (PTA) for East and Southern African
States, the Common Market for East and Southern Africa (COMESA) and the Africa-wide Abuja
Agreement. Duties and tariffs for countries in these groups, including South Africa, are
significantly lower than duties for non-members. Also, Uganda, Kenya and Tanzania have
formed the East African Cooperation (EAC) Secretariat
| VI I . INVESTMENT CLIMATE |
| Openness to Foreign Investment |
Uganda’s attitude towards foreign direct investment is highly positive. The
Government of Uganda, and in particular President Museveni, is working diligently to
increase foreign investment in the country. Foreign investors may form 100% foreign-owned
companies and majority or minority joint ventures with local investors with no
restrictions. Acquisition, takeovers and greenfield investments are permitted.
The Uganda Investment Authority screens potential foreign investors to determine the
level of incentives for which the investment will qualify. The UIA is both pro-foreign
investment and pro-private sector, with representatives from the private sector dominating
its Board of Directors.
| Right to Private Ownership and Establishment |
Foreign and domestic private entities have the right to own property and other
businesses and may dispose of them at will. However, Ugandan law does stipulate that
foreigners may not own land for agricultural purposes. This law is currently under review.
Most investors in agricultural production erect a plant to process goods, but use
out-growers.
| Protection of Property Rights |
The President and other senior government officials have repeatedly and publicly
reaffirmed that private property will never again be arbitrarily expropriated. The GOU is
currently returning land expropriated in the past under the Return of Asian Properties
Act. The UIA has not encountered problems with protection of property rights.
| Foreign Trade Zones/Free Ports |
There are no free ports or foreign trade zones in Uganda at this time.
| Performance Requirements |
There are no performance requirements once the investment has been made. Foreign owned
companies are eligible for the same incentives as Ugandan owned companies, though the
capital requirements for foreign-owned companies is higher.
Depending on the size of the investment, incentives include tax holidays, duty free
import of capital goods, and privileges for foreigners such as the duty free import of
household goods and a personally-owned vehicle. Smaller investors receive smaller
incentives.
| Transparency of the Regulatory System |
Although copyrights to copy, translate, distribute and publicly communicate material,
trademarks, and trade secrets are protected according to Ugandan law, enforcement of these
provisions is uneven.
Generally, Ugandan commercial laws, e.g., company and partnership law, were inherited
from the British. Therefore, the rights and obligations of Ugandan partnerships are
similar to those defined in the original English colonial statutes. Efforts are being made
to update regulations and laws governing banking and financial institutions, the stock
market, and the buying and selling of securities.
To encourage competition, the big marketing boards that dominated the agricultural
landscape have been replaced by authorities and commissions with the power to write
regulations.
| Corruption |
Corruption in Uganda has penetrated all levels of society. Public intolerance of
corruption is growing, fueled by press reporting and parliamentary investigations.
President Museveni has pledged that GOU institutions will root out corruption, but to date
only limited progress has been made. |
