ABOUT ALN

ALN IN UGANDA

ALN is an alliance of independent top tier African law firms. It is the largest and only grouping of its kind in Africa, with close working relationships across its members and an established network of Best Friends across the continent. ALN’s

firms are committed to working together to provide extensive coverage and on-the-ground experience. The network has consistently been ranked Band 1 in the Leading Regional Law Firm Networks category, by Chambers Global.

MMAKS Advocates has a strong foothold in the Ugandan legal industry and a well-earned reputation in Corporate and Commercial Law. As one of the largest law firms in Uganda, MMAKS Advocates is committed to delivering practical and quality legal services with professionalism and integrity. The firm adopts a proactive approach to high quality, timely and efficient legal services. MMAKS Advocates prides itself on its policy of open communication, teamwork

ALN Member Firm: MMAKS Advocates

and client satisfaction.MMAKS advises national and international businesses in banking and finance, real estate, mergers and acquisitions, capital markets, employment and intellectual property.International legal directories such as Chambers Global and IFLR 1000 all regard the firm as a top tier firm. Chambers Global 2016 ranks the firm Band 1 in Uganda.

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

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

CONTENTSOVERVIEW

POLITICAL OVERVIEW 5

ECONOMIC OVERVIEW 5

BILATERAL & MULTILATERAL TREATIES 6

REGULATORY ENVIRONMENT 6

INVESTMENT PROMOTION

INSTITUTES GOVERNING INVESTMENT PROMOTION 9

INVESTMENT INCENTIVES 9

TAX

INCOME TAX 11

CAPITAL GAINS TAX 11

WITHHOLDING TAX 11

OTHER TAX 12

STAMP DUTY ON A TRANSFER 12

TRANSFER PRICING & THIN CAPITALISATION 12

DOUBLE TAX TREATY WITH MAURITIUS 13

DOING BUSINESS

ACCOUNTING PRINCIPLES 15

INDUSTRIAL RELATIONS 15

REAL PROPERTY 16

COMPETITION 16

CONSUMER PROTECTION 16

EXCHANGE CONTROL 17

IMPORTS AND EXPORTS 17

LEGAL FORMS OF INCORPORATION 17

INTELLECTUAL PROPERTY 19

DISPUTE SETTLEMENT 20

INDUSTRY SECTORS

AGRICULTURE 22

BANKING AND FINANCIAL SERVICES 22

ENERGY 23

MANUFACTURING 23

OIL AND GAS 23

TELECOMMUNICATIONS 25

TOURISM 25

KEY DEVELOPMENTS

ENERGY AND INFRASTRUCTURE 27

FINANCIAL SERVICES 27

NATURAL RESOURCES 28

OTHER DEVELOPMENTS 29

4

241, 038 km2AREA

KampalaCAPITAL CITY

39.032 Million(2015 World Bank Data)

POPULATION

The LeftDRIVES ON

.ugTOP LEVEL DOMAIN

English and SwahiliLANGUAGES

USD 26.37 Billion(2015 World Bank Data)

GDP

Uganda Shilling (UGX)CURRENCY

Yoweri Kaguta MuseveniPRESIDENT

UnitaryGOVERNMENT

+256CALLING CODE

GMT + 3TIMEZONE

OVERVIEW

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POLITICAL OVERVIEW

The Ugandan President is elected by universal suffrage every five years and acts both as the Head of State and Head of Government. The President appoints a Vice-President and Prime Minister to assist in the supervision of the cabinet. The Vice-President deputises the President. The Prime Minister is the leader of the government business in Parliament and is responsible for coordinating and implementing government policies across ministries, departments and other public

institutions. The national legislature is Parliament and has the majority of its members elected by universal adult suffrage, whilst the remainder represent special interest groups including youth, women, workers persons with disability and the army. Uganda held presidential and parliamentary elections in February 2016, returning the National Resistance Movement led by H. E. Yoweri Kaguta Museveni.

ECONOMIC OVERVIEW

The Ugandan Government continues to adopt important policies to ensure economic rehabilitation and promote rapid economic development, and Uganda has won acclaim for its macroeconomic management in recent years. Uganda was the first country to be eligible for the Heavily Indebted Poor Countries (HIPC) initiative and had virtually all of its foreign debts cancelled by the IMF, World Bank and major donors.

For the financial year 2014/2015, the country recorded a 5 percent real GDP growth. For the financial year 2015/2016, growth in GDP was projected at 5.8 percent, with growth in the agriculture, forestry and fishing sectors combined projected at 2.3 percent, industrial sector at 5.5 percent and services at 5.7 percent.

Despite the slow rate at which it is growing, the agriculture sector (including forestry and fishing) employs over 65.6 percent of the country’s workforce. In addition, the Government has developed a Uganda Vision 2040 to operationalise

the National Vision of a transformed Ugandan society from a peasant to a modern and prosperous country within 30 years. Uganda Vision 2040 is conceptualised around strengthening the fundamentals of the economy to harness the abundant opportunities including oil and gas, tourism, minerals, ICT business, abundant labour force, geographical location and trade, water resources, industrialisation and agriculture.

The economy is set to benefit from the planned start of oil production. The Government recently signed a memorandum of understanding with oil companies on sustainable development of the discovered petroleum resources in the Albertine Graben. The MoU provides a framework for achieving a harmonised commercialisation plan for the development of the country’s oil and gas resources. The plan includes the use of petroleum for power generation, supply of crude oil to the refinery to be developed in Uganda by Government and export of crude oil through an export pipeline or any other viable options to

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BILATERAL & MULTILATERAL TREATIES

Uganda is a member of, among others, the East African Community, the Common Market for Eastern and Southern Africa, the African, Caribbean and Pacific Group of States, the World Trade Organisation and the African Union.

Uganda currently has double taxation tax treaties with nine countries including Denmark, India, Mauritius, Netherlands, Norway, South Africa, United Kingdom, and Zambia. Double taxation treaties

with UAE, Seychelles and the East African Community are pending ratification. The rate of tax generally under these treaties is either 10 percent or 15 percent. The Uganda tax regime has an automatic tax relief system for income of a resident person which is sourced outside Uganda and has also already suffered tax in that other country. This ensures that the individual is not subjected to further taxation in Uganda on income that has already been taxed elsewhere.

be developed by the oil companies. The commercialisation plan is based on the current discovered recoverable reserves

in the country estimated at a range of 1.2 to 1.7 billion barrels of crude oil.

Uganda generally provides an open climate for foreign investment. The 2015 Index of Economic Freedom ranks Uganda 9th out of 46 countries in sub-Saharan Africa with a score below the world average. Uganda has revised a range of laws and regulations to create greater government accountability, develop infrastructure, and build a more vibrant public sector. The Government has updated various laws, for example the Mortgage Act, 2009, the Partnership Act, 2010, the Insolvency Act, 2011, the Companies Act, 2012, the Capital Markets Authority (Amendment) Act, 2011, and legislation on e-commerce, pensions and intellectual property. Parliament in 2015 enacted the Public Private Partnerships Act 2015. The Kampala-Jinja Expressway will be the first public private partnership road project in Uganda and is expected

to cost USD1.5 billion.

Parliament recently enacted amendments to the Financial Institutions Act 2004 that introduce Islamic banking, agency banking and bancassurance among other reforms. The Government is also taking steps to finally implement the Hire Purchase Act 2009.

The Capital Markets Authority Act was recently amended in 2016 to broaden the powers of the Capital Markets Authority (“CMA”), to provide for the consolidation of different licences, to introduce transaction specific licences and to create the Capital Markets Tribunal to hear and determine disciplinary action referred by CMA as well as appeals arising from the decisions of CMA.

REGULATORY ENVIRONMENT

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Following the oil discoveries, the Government revamped its sector oversight with the passing of two new laws including the Petroleum (Exploration, Development and Production) Act, 2013 which now effectively provides the framework for the exploration and production of petroleum. Government also recently enacted regulations on National Content. The National Content regulations require licenced oil and gas companies to give preference to goods produced and available in Uganda and services rendered by Ugandan citizens and companies, to give priority to Ugandan citizens in employment and ring fences certain goods and services for Ugandan

citizens and Ugandan companies i.e. clearing and forwarding, catering, hotel accommodation etc.

Foreign investment is allowed in all sectors of the economy that are not national security related. Save as stated herein, companies may be 100 percent foreign-owned. In the oil and gas sector, where goods and services required by a licensee or contractor are not available in Uganda, they must be provided by a company which has entered into a joint venture with a Ugandan Company, with the Ugandan company holding at least 48 percent of the share capital in the joint venture.

INVESTMENT PROMOTION

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The Uganda Investment Authority (UIA) was established under the Investment Code Act, (Cap 92) (the ICA) to contribute to the economic development of Uganda by promoting and facilitating private sector initiatives. It seeks to

achieve this by promoting Uganda as an investment location, easing constraints on investment through its one-stop service and encouraging inward investment by offering competitive incentives.

INSTITUTES GOVERNING INVESTMENT PROMOTION

INVESTMENT INCENTIVES

A foreign investor in Uganda is required to obtain an investment licence from the UIA. A foreign investor is defined under the ICA as a company in which more than 50 percent of the shares are held by a person who is not a citizen of Uganda. In practice, in order for a foreign investor to obtain an investment licence, they must demonstrate to the UIA that they intend to invest a minimum of USD 100,000 in Uganda. The Second Schedule to the ICA contains the priority investment areas which include crop processing, fish processing, tourism and mining.

The benefits that can be enjoyed by the holder of an investment certificate are as follows:

• concessional rates of import duty for an investor who is importing any

plant, machinery, equipment, vehicles or construction materials for an investment project;

• exemption from payment of import duty on one motor vehicle for personal uses, personal and household effects which the person owned and used outside the East African Partner State for at least twelve months. Such person must show that he is changing residence from a place outside the East African Partner State to a place within the East African Partner State; and

• incentives available generally for start-up businesses under custom laws, the Income Tax Act (Cap 340) (ITA) and the Value Added Tax Act (Cap 349).

TAX

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INCOME TAX

Resident companies and businesses are taxed on worldwide income. Non-residents are taxed only on Uganda-source income. A company or similar corporate entity is resident in Uganda if it is incorporated or formed under Ugandan law; management and control of its affairs are exercised in Uganda; or the majority of its operations are carried out in Uganda during the year of income. An individual is a tax resident if domiciled in Uganda, spends at least 183 days in any 12-month period, or is present for

an average of at least 122 days during 3 consecutive tax years, or if that individual is an employee or official of the Government of Uganda posted abroad during that year of income.

Uganda’s corporate tax rate is 30 percent for resident companies and branches of foreign companies. The rate for mining companies ranges from 25 percent to 45 percent, depending on the chargeable income.

CAPITAL GAINS TAX

Residents and non-residents in respect of a Ugandan branch are liable to income tax on gains arising from disposal of their assets (including a sale of shares

in a private company). Those gains are included in gross income and treated as normal business income, subject to income tax at the rate of 30 percent.

WITHHOLDING TAX

Withholding tax of 15 percent is imposed on every non-resident person who derives any dividends, rent, natural resource payment, interest, royalties and management fees from sources in Uganda.

Withholding tax of 15 percent is imposed on a resident person deriving dividends and interest in Uganda. Withholding tax on interest payable to resident persons does not apply to:

a. interest paid by a natural person; b. interest paid by a company to an

associated company; c. interest paid which is exempt from

tax in the hands of the recipient; and d. interest other than interest from

governmental securities paid to a financial institution

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OTHER TAX

Value-added tax (VAT) is chargeable on taxable supplies of goods and services in Uganda and the import of certain goods. The standard rate of VAT is 18 percent. However, the supply of certain goods and services including the supply

of unprocessed agricultural produce, financial services and insurance services (health insurance, micro-insurance, re-insurance and life insurance) are exempt from VAT.

STAMP DUTY ON A TRANSFER

Stamp duty on any transfer is charged at a rate of 1.5 percent of the total value of the transfer. Stamp duty is also charged at nominal rates on a variety of

financial instruments and transactions, for example, guarantees, loan agreements, deeds of assignment and novation deeds.

TRANSFER PRICING & THIN CAPITALISATION

The Income Tax (Transfer Pricing) Regulations, 2011, apply to a controlled transaction if a person who is a party to the transaction is located in and is subject to tax in Uganda and the other person who is party to the transaction is located in or outside Uganda. “Controlled Transaction” means a transaction between associates. The Regulations require that transactions between associated persons be conducted in accordance with the arm’s length principle.

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

foreign controlled resident companies. Thin capitalisation arises where a company, incorporated in Uganda is controlled by a non-resident person i.e. the foreign controller and has a foreign debt to foreign equity ratio in excess of 1.5:1 at any time during a year of income. In this case, a deduction is disallowed for the interest paid by the company during that year on that part of the debt which exceeds the 1.5:1 ratio. This rule does not apply to financial institutions.

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DOUBLE TAX TREATY WITH MAURITIUS

Uganda has a double tax agreement (DTA) with Mauritius. Under the DTA, dividends, interest and royalties paid to a person resident in Uganda by a Mauritian company are taxed at a rate of 10 percent. The Income Tax Act (Cap.340) however denies a non-resident person from enjoying DTA benefits where the underlying ownership of that non-resident person is held 50 percent or more by individuals’ resident outside the treaty country.

The Income Tax (Amendment) Bill 2016 proposes to amend the Income Tax Act (Cap.340) to provide that the

benefit of an exemption from Ugandan tax or reduction in the rate of Ugandan tax under a DTA between Uganda and another contracting state will not be available to a person who receives the income in a capacity other than that of a beneficial owner, who does not have full and unrestricted ability to enjoy that income and to determine its future uses and who does not possess economic substance in the country of residence.

The Income Tax (Amendment) Bill 2016 was passed by the Parliament of Uganda on 14th April 2016 and is before the President for assent before it comes into law.

DOING BUSINESS

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ACCOUNTING PRINCIPLES

INDUSTRIAL RELATIONS

Uganda’s Employment Act, 2006 imposes certain obligations on employers, ranging from payment of wages, permitted deductions and obligations arising out of specific labour laws. The Employment Act also details regulations regarding employment of children, discrimination, disciplinary proceedings, contract termination, working hours, severance payment and leave. The Labour Unions Act, 2006, is intended to regulate the establishment, registration and management of labour unions in Uganda. It implements the constitutional right of employees to organise themselves into a labour union. The Act prohibits an employer from interference with the employee’s right of association in such a trade union.

The National Social Security Fund (NSSF) Act, (Cap 222) imposes an obligation on employers to pay a standard monthly contribution of 15 percent (10 percent being the employer’s contribution and 5 percent being the employee’s contribution) of the total wages of an employee to the NSSF. The pension’s sector was liberalised in 2011 with the passing of the Uganda Retirements

Financial statements of companies must be prepared annually. Uganda applies

the International Financial Reporting Standards.

Benefits Regulatory Authority Act, 2011 was enacted to remove the monopoly of NSSF as a national provident fund and allow for licensed retirement benefits schemes to operate and compete for mandatory contributions in an open market.

A person, who is not a citizen of Uganda intending to work in Uganda, is required under the Uganda Citizenship and Immigration Control Act, (Cap 66) to obtain a work entry permit, a certificate of permanent residence or special pass. A special pass is issued while the entry permit is being processed. The work permit once issued is renewable upon expiry at a fee, with amounts varying depending on the nature of work.

With effect from 1st July 2016, applications for immigration facilities including special passes, work permits, visitors pass are now submitted online. This has led to a quick turnaround time in the issuance of immigration facilities and has done away with the delays that had become synonymous with the immigration office.

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REAL PROPERTY

There are restrictions on the ownership of land in Uganda by non-Ugandan citizens, under the Constitution and the Land Act (Cap 227) (LA). The LA prohibits non-citizens from acquiring freehold land and mailo land. They are, however, permitted to acquire leases not exceeding 99 years. The LA requires a lease obtained by a non-citizen for 3 years or more to be registered under the provisions of the Registration of Titles Act (Cap 230).

For the purposes of the LA, a “non-citizen” means a person who is not a citizen of Uganda); in the case of a corporate body, a corporate body in which the controlling interest lies with

non-citizens; in the case of bodies where shares are not applicable, where the body’s decision making lies with non-citizens, a company in which the shares are held in trust for non-citizens and a company incorporated in Uganda whose articles of association do not contain a provision restricting transfer or issue of shares to non-citizens. “Controlling interest” means in the case of companies with shares, the majority shares are held by persons who are not citizens and in the case of companies without shares, a company in which decisions are arrived at by the majority of members who are not citizens.

COMPETITION

There is currently no general law regulating competition. This area is governed by contractual arrangements between the parties. The COMESA Competition Regulations, 2004 became operational in January 2013 with the establishment of the COMESA Competition Commission. There is still uncertainty about the jurisdiction of the COMESA Competition Commission in Uganda.

The East African Community Competition Act was passed in 2006 but is yet to be operationalized. It seeks to establish the East African Community Competition Authority that will have powers to scrutinize and approve mergers and acquisitions with cross-border effects and deal with any other matters relating to competition.

CONSUMER PROTECTION

Uganda does not have national consumer protection legislation but there are existing sectoral policies, legal and regulatory frameworks in place that

have measures on consumer protection. The sectors with policies on consumer protection include communications, electricity, dairy, pharmaceuticals, water, broadcasting, insurance and banking.

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The Uganda National Bureau of Standards role is to formulate and promote the use of standards to protect

public health and safeguard consumers from dangerous, counterfeit and substandard products.

LEGAL FORMS OF INCORPORATION

EXCHANGE CONTROL

IMPORTS AND EXPORTS

Foreign exchange repatriations from Uganda are not restricted. The Governor of Bank of Uganda may, however, impose such restrictions when he deems fit (there are no restrictions currently in

There are restrictions on importation and exportation of a number of commodities in Uganda, for example animal breeds and genetic material, wildlife species and specimens, importation of coffee into Uganda, petroleum and minerals. A person dealing in any of these products shall not import or export without obtaining a licence from the prescribed authority. The Protocol on EAC’s Customs Union commenced in Uganda in January 2005. The Protocol provides for the

place). All payments in foreign currency to, or, from Uganda between residents and non-residents or between residents are required to be made through a bank.

elimination of customs duties and other charges on imports within the Customs Union as well as the removal of non-tariff barriers to trade among Partner States and the establishment and maintenance of a common external tariff in respect of all goods imported into the Partner States from foreign countries. This has seen growth in total intra-trade, total intra EAC exports and imports, cross-border investment and foreign direct investment.

The principal forms of business arrangements in Uganda are the (public/private) limited liability company, joint venture, sole proprietorship, partnership, trust and branch of a foreign company. The World Bank Group’s “Ease of Doing Business Report 2016” ranks Uganda 122nd out of 189 economies,

an improvement from the previous rank of 135 in 2015. On average, starting a business requires about 12 different procedures. The table below provides a summary of the procedures and the associated completion time and cost for setting up a private limited company:

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No. ProcedureEstimated time to complete (days)

Cost (in UGX)

1Reservation of a name at the Companies Registry

2 days 25000

2 Pay fees at the bank 1 dayIncluded in previous procedure

3

Obtain statutory forms from the Uganda Bookshop (i.e. particulars of directors and secretary (Form 7), statement of nominal capital (Form A1), and notice of situation of registered office and registered postal address (Form A9))

1 day5,600 (500-700 for each form)

4

Obtain assessment of the registration fees to be paid via the Uganda Revenue Authority web portal bank payment

1 day No charge

5Make payment of registration fees at a given bank

1 dayBank charges (2,000 – 2,500)

6 File with the Registrar of Companies 1 dayPayment is done under No. 5

7

Apply online to the Uganda Revenue Authority (URA)for a Tax Identification Number (“TIN”).Indicate the various tax heads you would wish to be registered under (for example PAYE) supported by copies of the company incorporation documents and the identity of the company’s tax contact who must already possess a TIN (this can be either a local resident director, an employee or a tax advisory firm)

3 days No charge

8Obtain corporate Tax Identification Number

7 days No charge

9Obtain VAT registration (where necessary)

7 days No charge

10An inspector from URA inspects the businesspremises

1 day No charge

11Obtain application forms for trading licence

1 day No charge

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No. ProcedureEstimated time to complete (days)

Cost (in UGX)

12 Pay the licence fee at the bank 1 daySee the following procedure

13Obtain clearance from the Ministry of Trade in case of companies controlled by non-citizens

2 days No charge

14 Obtain the trading licence 1 day

License fees depend on the nature of business and its location

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File a form with the National Social Security Fund(NSSF) (if employing 5 or more persons)

4 daysNo charge

16 Make a company seal 2 days250,000 – 590,000

INTELLECTUAL PROPERTY

Uganda’s laws for the protection of intellectual property rights include the Trademarks Act, 2010 (the TMA), the Copyright and Neighbouring Rights Act, 2006 (the CNRA) and the Industrial Property Act 2014 (the IPA). The authority for protection of intellectual property rights is the Uganda Registration Services Bureau headed by the Registrar General of Uganda.

The TMA provides for the registration, renewal and protection of trademarks in Uganda. The TMA repealed the Trademarks Act, (Cap 217). The most significant change under the TMA is the possibility to register service marks. The definition of sign or mark was expanded to include, any word, symbol, slogan, logo, sound, smell, colour, brand label, name, signature, letter, numeral or any combination of them.

The CNRA provides for the protection of

literary, scientific and artistic intellectual works and their neighbouring rights. The author of any work shall have the protection of the work, where work is original and is reduced to material form in whatever method, irrespective of quality of the work or the purpose for which it is created.

The IPA repealed the Patents Act (Cap.216) and provides for the grant, registration and protection of patents, utility models, industrial designs and technological innovations in Uganda.

Uganda is a signatory to various World Intellectual Property Organisation conventions, including the Paris Convention for Protection of Industrial Property, the Patent Cooperation Treaty for protection of patents, and the WIPO Convention to promote the protection of intellectual property throughout the world.

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DISPUTE SETTLEMENT

The Arbitration and Conciliation Act (Cap 4) (ACA) provides for domestic arbitration, international commercial arbitration, enforcement of foreign arbitral awards and generally defines the law relating to conciliation of disputes in Uganda. Uganda is also a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 (the Convention). Awards under this Convention are recognised and enforceable in Uganda upon registration in the High Court of Uganda.

Under the ACA, parties are free to determine the number of arbitrators. If the parties fail to determine the number, there shall be one arbitrator. An arbitrator may be appointed by the parties or by the appointing authority. The appointing authority under the ACA is the Centre for Arbitration and Dispute Resolution which facilitates the arbitration and mediation of commercial and other disputes.

Under the Investment Code Act (Cap 92), where negotiations for an amicable settlement have failed to settle a dispute between a foreign investor and the UIA or the Government, the dispute maybe submitted to arbitration in accordance with the following methods as may be mutually agreed between the parties:

a. in accordance with the rules of procedure for arbitration of the International Centre for the Settlement of Investment Disputes;

b. within the framework of any bilateral or multilateral agreement on investment protection to which the Government and the country of which the investor is a national are parties; or

c. in accordance with any other international machinery for the settlement of investment disputes.

INDUSTRY SECTORS

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AGRICULTURE

Despite their dwindling contributions to Uganda’s GDP, the agriculture, forestry and fishing sectors provide approximately 65.6 percent of employment in Uganda. Uganda is Africa’s second-leading producer of coffee, which accounted for about 22 percent of the country’s

total exports in 2014. Exports of non-traditional products, including apparel, hides, skins, vanilla, vegetables, fruits, cut flowers, and fish, are growing, while traditional exports such as cotton, tea, and tobacco continue to be mainstays.

BANKING AND FINANCIAL SERVICES

Uganda’s small financial system is dominated by banking, which is relatively open to competition and subject to minimal government influence. The banking sector is highly regulated by the Bank of Uganda. There are currently 25 licensed commercial banks with 566 branches as of June 2016. A majority of the banks are foreign-owned, and account for about three-quarters of total assets. Other financial institutions in Uganda are credit institutions, micro-finance deposit taking institutions, forex bureaus, money remitters, insurance companies, insurance brokers, leasing companies and development banks. Bank lending to the private sector has gradually increased. Overall, the banking sector is well capitalised and has no serious non-performing loan problems. Access to financial services has expanded across the country, and there is regulation in place for microfinance businesses.

The insurance sector supervised by the Uganda Insurance Regulatory Authority (IRA) remains small with limited market penetration and uptake of insurance

products. There are currently 21 non-life insurance firms, 32 insurance brokers and 17 loss assessors/adjusters in Uganda. There was an amendment to the Insurance Act (Cap 213) in 2013 that prohibited the carrying out of life insurance business and non-life insurance business as a composite company. This has resulted in the licensing of 8 new life insurance companies. The required minimum paid up capital for insurance companies carrying out life business was increased to approximately USD 1,071,428 (UGX 3 billion) while that of insurance companies carrying out non-life business was increased to approximately USD 1,428,571 (UGX 4 billion). Consequently, the IRA issues different licences specific to either life of non-life business.

Capital markets are regulated by the Capital Markets Authority and remain relatively small. Companies cross-listed from the Nairobi Stock Exchange (Kenya), account for the bulk of the market capitalisation on the Uganda Securities Exchange

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ENERGY

Uganda has a total estimated electrical potential of 5,300 MW (Hydro – 2,000 MW, Mini-hydro – 200MW, Solar – 200 MW, Biomass – 1,650 MW, Geothermal – 450 MW and Peat – 800 MW). There has been an increase in the number of independent power producers and this has led to a 22 percent increase in hydro-electric generation.

A 250 megawatts power plant at Bujagali falls was commissioned in October 2012. Currently, coverage has significantly grown to 15 percent nationally and in rural areas stands at 7 percent. Electricity consumption per capita has grown from 70 kilowatt-hour to 150 kilowatt-hour. Government hopes to have increased consumption to 22 percent by 2022. A number of projects including the 600MW Karuma HPP, 183 MW Isimba HPP and 600 MW Ayago HPP are aimed at achieving this goal. The Government of Uganda is also seeking investors for the construction of an additional 1,045 MW of

electricity generating capacity in the next five years.

The Government, through the Electricity Regulatory Authority (“ERA”), is promoting small electricity projects as part of the renewable energy framework under the GET FIT Uganda Project. The GET FiT Uganda Project was launched in May 2013 and is designed to target the key barriers confronting investors looking at potential investments in small renewable energy projects (1-20 MW) in Uganda and thereby fast-track up to 20 projects, representing up to 170 MW and 830 GWh/year. In 2015, 6 (six) GET FiT hydropower projects started construction and the remaining projects in are expected to commence by the end of 2016.

ERA has published a list of sites which are available for intending investors on its website: www.era.org.

MANUFACTURING

Uganda’s manufacturing output has also been expanding by more than 10 percent annually over the last eight years. Opportunities exist in virtually all areas, ranging from beverages, leather, tobacco

based processing, paper, textiles and garments, pharmaceuticals, fabrication, ceramics, glass, fertilisers, plastic/PVC, assembly of electronic goods, hi-tech and medical products.

OIL AND GAS

Although the hunt for oil in Uganda dates back to the 1920s, the first commercial discovery was made in 2006. Exploration

of oil in Uganda is underway. As at June 2014, 89 deep wells had been drilled in the Albertine Graben region in Western

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Uganda (on the Uganda-DRC border) and 72 of these wells encountered hydrocarbons in subsurface. 69 of the 89 wells have been drilled by Tullow Oil Plc with an 84 percent success rate against the global average of 25 percent.

The Government of Uganda currently has 4 active Production Sharing Agreements (PSA’S) in respect of 4 licensed exploration areas, licensed to Tullow Uganda Limited, CNOOC Uganda Limited and Total E&P (Uganda) B.V. The Government also issued a production licence to CNOOC in 2013 and is currently considering applications for production licences for over 8 discoveries in the exploration areas operated by Tullow and another application over an exploration area operated by Total. In 2013, the Government passed the Petroleum (Exploration, Development and Production) Act, 2013 to regulate upstream activities and Petroleum (Refining, Conversion, Transmission and Midstream Storage) Act, 2013 to regulate midstream activities.

The Government, in February 2015, announced the first open competitive licencing round for six exploration blocks in the Albertine Graben. 16 firms were shortlisted in August 2015 to submit bids and by the submission deadline of 26th February 2016, 7 firms had submitted bids. 4 (four) firms have since been shortlisted by the Government and have been invited to negotiate PSA’s. The 4 (four) shortlisted firms are Armour Energy Limited of Australia, WalterSmith Petroman Oil Limited of Nigeria, Oranto Petroleum International Ltd of Nigeria and Niger Delta Petroleum Resources Ltd of Nigeria.

The Government in February 2015 also awarded the tender for the construction of an oil refinery to a Russian consortium led by RT Global resources together with partners Tatneft and VTB Capital. The Government in July 2016 however announced that it had halted negotiations with RT Global Resources owing to a dispute over the final contract and was proceeding to invite the alternate bidder, SK Engineering & Construction for negotiations. The refinery is expected to cost USD 3 billion and is expected to be completed in 2020 with a capacity of 60,000 barrels per day. The Government was debating whether to construct an oil pipeline through Kenya or Tanzania but recently announced its decision to construct an oil pipeline from the oil fields in Western Uganda to the Tanzanian port of Tanga, on the Indian Ocean. The oil pipeline is expected to cost USD 3.55 billion with the earliest export of crude expected to be in 2020.

The National Content regulations recently came into force and they require licenced oil and gas companies to give preference to goods produced and available in Uganda and services rendered by Ugandan citizens and companies, to give priority to Ugandan citizens in employment and ring fences certain goods and services for Ugandan citizens and Ugandan companies i.e. clearing and forwarding, catering, hotel accommodation etc.

The Government also recently granted 5 (five) production licences to Tullow Uganda Operations Pty Limited and 3 (three) production licences to Total E&P Uganda B.V.

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TELECOMMUNICATIONS

After a moratorium on new mobile telephone operator licences was lifted by the Government, the telecom sector has undergone a boom. There were approximately 19.6 million telecom subscribers by the end of July 2016. This has generated expanded coverage and telephone penetration throughout the country and prompted new competition and lower prices. There are currently 8 telecommunications companies in Uganda: MTN, Airtel, Africell, Uganda Telecom, Smart Telecom, K2 Telecom, Smile Telecom and Vodafone.

The Government completed the laying of the fibre optic cable which cost USD 106 million. It is hoped that this will facilitate e-Governance as well as provide access to cheap internet access across the entire

country. The Uganda Communications Act, 2013, was passed in 2013 to consolidate and harmonise the old laws governing the telecoms and electronic media sector, and to reconstitute one governing body for both sectors.

There have also been key developments in the broadcasting industry such as the migration from analogue type television broadcasting to digital broadcasting in June 2015. Digital broadcasting is aimed at improving the consumers’ TV experience in terms of better sound and picture quality. It has been projected that the use of digital broadcasting will free up space in the frequency spectrum that can be used to provide more TV channels and others ICT services.

TOURISM

Uganda’s tourist industry offers many long-term opportunities, with a number of unique tourist attractions. These include Lake Victoria (the source of the Nile), the Murchison Falls and the Mountains of the Moon, along with a number of national parks and wildlife reserves hosting, among other fauna and half the world’s mountain gorilla population. Except for Kampala and a few major towns, however, the hospitality

infrastructure is underdeveloped, although the number of visitors to the country has increased sharply in the past decade and tourism is now ranked the top foreign exchange earner for Uganda. In February 2014, the Single Tourist Visa was introduced by the East African Community. It is now operational in Kenya, Rwanda and Uganda. This will see a significant reduction in the fees paid by tourists to the East African countries.

KEY DEVELOPMENTS

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ENERGY AND INFRASTRUCTURE

Uganda picks Tanzania route for oil pipeline

Uganda announced that it would build a major pipeline to export its oil through Tanzania. The 1,400 kilometre pipeline will connect Uganda’s western region near Hoima, where big oil reserves have been discovered, with Tanzania’s port of Tanga. The project is expected to cost about USD 4 billion. The initial plan was to route the pipeline through Kenya, which has also recently struck oil, but security concerns and cost of the

project prompted Uganda to change its mind. There are concerns about possible attacks by Somalia’s al-Shabab Islamists, who have attacked targets close to where the pipeline would have passed. The discovered oil reserves in Uganda are estimated at some 6.5 billion barrels, and the country expects to start production in 2018. France’s Total, China’s CNOOC and the Anglo-Irish company, Tullow, hold most of the licences.

FINANCIAL SERVICES

This interconnect collaboration between the region’s two biggest mobile money operators, in 2015, will enable convenient and affordable international remittances between MTN Mobile Money customers in Uganda, Rwanda and Zambia and

M-Pesa customers in Kenya, Tanzania, Democratic Republic of Congo and Mozambique. The companies will also share best practices and work together to define the rules and standards of mobile-based remittances in Africa.

MTN and Vodafone interconnect their mobile money services

Ugandans can now use Safaricom’s M-Pesa

Ugandan customers can now make mobile money transactions with Kenyans, following a deal between Safaricom Ltd (Safaricom) and MTN Uganda. This provides a reliable and affordable way for businesses to transact across the two countries and complements economic initiatives spearheaded by the East African Community Heads of State. Uganda is one of Kenya’s top trading

partners and the large population of Kenyan students in Uganda, who depend on remittances from their parents or guardians, also provides a large customer base. The transactions’ infrastructure between the two networks has been enabled by MFS Africa, which develops and distributes mobile financial solutions to markets across Africa.

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NATURAL RESOURCES

Uganda’s budding oil industry

Mining taxes eased in 2015

In 2015, Uganda signed a memorandum of understanding with three oil firms laying out a blueprint for the commercial development of its oil fields. According to the deal, crude produced by the three firms

The Ugandan Government struck down a series of taxes that mining firms had long complained about. Formerly, Uganda charged Value Added Tax (VAT) at 18 percent and imposed a 15 percent withholding tax on payments for services provided in Uganda to mining companies by non-resident service providers. This has been waived. Mining companies can

- Britain’s Tullow Oil, France’s Total and China’s CNOOC - will be shared between a thermal power generation plant, a planned refinery and an export pipeline.

now register for VAT during exploration but they will now access plants and machinery VAT-free. Mining companies have been complaining of the adverse impact of taxes to their cash-flows, during the early stages of their projects, when they are not even sure of a return on their investment.

Uganda Government tightens rules on expatriates in the oil

sectorIn a move meant to boost the participation of more Ugandans in the oil and gas sector, the Uganda Government has set stringent rules on hiring expatriates. The new rules restrict international oil companies (IOCs) from bringing into the country expatriates to occupy positions that qualified Ugandans can fill. All open positions will have to be advertised locally first. In case there is no Ugandan qualified for the job, the Ministry of Internal Affairs will issue a work permit to an expatriate for a specific time frame, during which the company is expected to train Ugandans, such that by the time the work permit expires they are qualified to take up the job. An expatriate’s

work permit will not be renewed. The rules also apply to all companies that seek to participate in the oil industry. Oil companies will also be required to submit a Nationalization Plan that details how Ugandans will gradually manage the sector, by taking strategic positions in the companies. The Petroleum (Exploration, Production and Development), Act 2013 provides that a licensee should within one year after the grant of a license, or every after one year, submit to the authority for the approval of the detailed programme for recruitment and training of Ugandans.

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OTHER DEVELOPMENTS

On 20 February 2016, the Electoral Commission of Uganda declared President Yoweri Museveni the winner of the 2016 presidential polls. The President won 60.8 percent of the votes, less than the 68 percent share he won in 2011, but still comfortably ahead of his nearest rival, Kizza Besigye, who scored 35.4 percent. According to the rating agency, Fitch, the country’s election results are neutral for its sovereign credit rating, since they have not resulted in widespread disruption and fiscal and economic policy continuity is likely. However, the agency notes that risks could rise over time if the administration’s

political energy is increasingly directed towards retaining power or to the question of who will eventually succeed President Museveni, at the expense of economic or fiscal policymaking.

In May 2015, Uganda and Russia signed the Uganda-Russia Intergovernmental Commission on Economic, Scientific and Technical Cooperation. The agreement which was signed at the Ministry of Foreign Affairs’ head office in Kampala, is expected to see the two countries increase cooperation in the economic, social, water, environment and political spheres.

SOURCESwww.bbc.co.ukwww.cnbcafrica.comwww.businessdailyafrica.comwww.bloomberg.com

www.observer.ugwww.cnn.comwww.reuters.comwww.newvision.co.ug

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