Uganda is a strategic central trade hub for the East African Community (EAC). For example, the country has managed to present itself as a link necessary to leverage trading benefits in the resurgent lucrative markets in the Democratic Republic of Congo, Burundi, Rwanda and the Southern Sudan. The Customs Union protocol came into force in 2005 and by 2007 the total intra –EAC trade had increased by 22% from USD 1342.6 million to USD 1,973.2 million. The Common Market protocol will be operational from 1st July 2010 with yet more fortunes for trade. The foregoing protocols mean that trading gets freer with myriad barriers mitigated. Specifically the Common Market means that a single economic space with in which business and labour moves and operate so as to stimulate greater productive efficiency, increased employment and intra and extra regional trade is created. It also means that Uganda will have to compete with the rest of East Africa in labour markets, commodity markets, finance markets, and above all- the market opportunity presented by 140 million people in the 5 EAC countries. What is obvious is that a well organized and technologically astute country will realize gains and possibly swallow economies of others. Is Uganda ready to take advantage of opportunities presented by the Integration? Is Uganda’s business environment competitive?
According to a 2010 World Bank doing Business Report, Uganda is ranked 129th out of 183 economies in the World! Economies are ranked on their ease of doing business, from 1 – 183, with first place being the best. A high ranking on the ease of doing business index means the regulatory environment is conducive to the operation of business. This index averages the country's percentile rankings, made up of a variety of indicators, giving equal weight. Globally, Lee Kuan Yew’s Singapore ranks 1st with Mauritius leading the pack in sub-Saharan Africa. The case of Uganda as 129th is intriguing and curious! Today I will look at why Uganda got the tail in rakings.
Look, it takes six administrative procedures to acquire a construction permit! First one is required to submit project relevant documents( like building plans and site maps), obtaining all necessary clearances (e.g. certificates, permits, licences), completing all required notifications, receiving all necessary inspections and obtaining utility connections (e.g. electricity, water and sewerage) – on the ease of dealing with construction permits, Uganda ranks 84th! This in acceptable, Uganda should move first to conduct a detailed mapping exercise to pinpoint blockages and barriers in construction permit administration procedures. Why should Kampala city council have only 3 building inspectors for the entire 5 Divisions and only one senior architect? Uganda National Chamber of Commerce and Industry inquiry shows the few available inspectors lack transportation equipment to carry out inspection in the field. They only rely on drawings and information provided by architects to decide which projects are accepted or rejected! The foregoing explains the rampant collapsing buildings in the city!
To improve our doing business rankings as a country, the cost and time to connect to utilities must be reduced. In Kampala, it for example takes 54 days and 2,000,000 Uganda Shillings to connect to electricity! It takes 14 days and 255,000 to connect to water. I really think that Electricity Regulatory Authority should outsource electrical inspections and certification in order to increase its efficiency. Registering property in Uganda is also a nightmare. Uganda ranks 149th out of 183 countries. Look, for example, to register property transfer, an entrepreneur in Uganda first has to arrange for a government official to inspect the property and assess its value. Then the entrepreneur has to complete an assessment form to pay the stamp duty at a bank and then another assessment to pay property registration fees. This is an exceedingly cumbersome and costly unnecessary process which encourages informal transactions and underreporting of property values. The government must adopt a new age approach that charges fixed fees based on the property size with an affordable maximum ceiling independent of the property value.
Finally, accessing affordable credit for business in Uganda remains a major hindrance to doing business. Uganda is ranked 113 out 183 ranked countries. Collateral registry needs to be revamped in order to facilitate lenders in moving movable collateral to secure loans. Uganda needs to ratify and codify the Chattels Securities bill in order to expand collateral possibilities other than land is the process of securing loans. Interest rates should also be checked by the Central bank, especially for business and agricultural loans. According to 2010 global competitive index, lending rates in Uganda range between 18% -23%, while in Kenya they can be as low as 8% - 10%. In Uganda, taxes on financial services further aggravate the problem. They include 1% stamp duty on all processed loans, a 15% withholding tax payable to bank funds sourced externally and 0.5% stamp duty on the values of valuation reports. The foregoing presents a million dollar question. How are Uganda’s businesses going to compete with other countries in the region that are offering better incentives? The government and the private sector must continue honest dialogues and engagements in order to come up with enduring solutions.
Chief Executive Officer
Uganda National Chamber of Commerce and Industry