Challenges doing business in Uganda
Uganda’s infrastructure, particularly its systems of roads, rail, electricity and water is relatively poor. However, in recent years the government has committed relatively large funds to their development in preparation both for the East African Common market and the production of oil.
Cost of Energy
Both the cost and availability of electricity remains a challenge. Over 80% of the country does not have access to grid electricity. Measures to reduce this are underway with the construction of new hydro-electric dams and power stations.
Lack of affordable financing is another impediment to business. Loans are generally short-term with interest rates ranging from 15-24%. In addition to high rates, little liquidity exists for loans over three years.
The sale of counterfeit goods smuggled into Uganda is a real challenge to legitimate companies. The sophistication of counterfeits is growing and public awareness is not strong. In addition, enforcement authorities are ill equipped to fight this.
Getting Paid – Terms of Payment
Credit is an important feature of the market. All the common forms of arranging payment are in use in Uganda. The most common payment cycle is 90 or 120 days. Extended credit terms for large items of capital equipment are often critical to the success of a project. The best method of payment is a confirmed irrevocable letter of credit drawn on a reputable bank. In case of payment with order beware of cheque scams.
It is advisable to quote amounts in Uganda Shillings so as to avoid losses that may occur through exchange rate fluctuations. Nevertheless, providing quotes in dollars for foreign products is also used.
Payment and accounting systems are more advanced in the financial sector and in large businesses.
Lists of local lawyers and chartered accountants are available on request from UKTI Uganda The principal types of business enterprises in Uganda are:
- Registered Companies (Private and Public)
- Branch offices of companies registered outside Uganda
- Sole Proprietorships
Companies are registered as limited liability companies as in 1 and 2 above, and regulated by the Companies Act. Uganda’s legal system is based on English law and practice. A wide range of legal services are locally available.
Considerable investments continue to be made throughout Uganda especially in infrastructure and energy. The road networks are being upgraded and expanded to improve connections between major centres while tenders for the port and rail system have been issued so as to expand trade capacity. Privatisation of various institutions has also been ongoing.
In Uganda, retailers normally receive payment for consumer goods in cash. However, exporters of capital goods or other equipment, machinery and services normally seek payment through wire transfers. Ugandans may attempt to pay by cheque, but increasing cheque fraud makes this a highly risky proposition.
The banking system
The banking system has steadily improved and is stable and well capitalised. The system includes the Bank of Uganda, 25 commercial banks and many micro deposit institutions and development banks.
Foreign exchange controls
There are no foreign exchange controls affecting legitimate trade.
Multilateral institutions active in Uganda include the International Monetary Fund (IMF), the World Bank, the African Development Bank as well as several European institutions. Major development projects in health, education, agriculture and infrastructure are financed by bilateral donors and/or international organisations.