Ugandan UK Convention
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Convention 2017

12/10/2017

Session: What do UK exporters need to know about entering Uganda market?

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Written by: wmutenza
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Panel Discussion: Priority Sector Business Investment Opportunities: infrastructure, Renewable Energy, Mining & Minerals, Infrastructure, finance, Transport and logistics, Construction, Manufacturing.

 

Moderator:  Ade Daramy, Chairman, The African Foundation for Development

Panellists: Hon. Isaac Musumba, Minister of State for Urban Development, Hon. Esther Mbulakubuza Mbayo, Minister of the Presidency, Hon. Nakate Lillian Segujja (MP), Samuel Kirubi, Managing Director (Equity Bank (U) Ltd, Hon. Nzoghu William Musabe (MP), Shadow Min for Works and Transport, Michael Mugabi, Executive Director, Housing Finance Bank, Fred Opolot, Member, Investment Authority Board.

Hon Isaac Musumb,a the minister of state for Urban Development thanked the speaker of the parliament of Uganda and distinguished participants. He highlighted the new thinking from the strategic planning in the ministry which is tasked to address issues of urbanisa-tion, urban renewal, land ownership and land use as well as infrastructure development including the creation of satellite cities.

The minister invited all people to partner with the government initiatives such as the process of zon-ing and gazetting areas in the proximity of Kampala city which are in the 1000+ acres and yet to be habited.

The other initiative noted was the mitigation measure to avoid slum development and unplanned set-tlements, decongest Kampala, and de-escalate the problems faced by the city.
The convention was further informed that land owners will retain land ownership, with government, exercising the legal mandate to undertake physical planning determine land use, gazette areas, and then have them marketed to people who have the means. As a consequence, approved infrastruc-tures will be developed.

To implement the above, the government would enter into an M.O.U with land owners, and agree on the value that would be offset from the final price whenever the land is be disposed-off. To this end, government has identified 4 areas to start with; for example, the Madhvani Group land in Kajjansi in Nakigalala, the late Mulwana’s farm in Nsimbe which covers over five square miles, there is also land in Kizira Njovu, an island in Mukono to mention but a few.
The ministry will be publishing all this in the National gazette and there will be an opportunity to present it to parliament for its involvement. This is intended t to ensure that the government has people to invest at various levels to make Kampala and Uganda a better place to live in.

 

Honourable Nakatte Lillian Segujja, speaking from the “Wealth creation” perspective in line with the theme of the 7th Uganda Convention UK, assured the audience that they were all in attendance to partner for wealth creation. She noted that due to population growth, the housing sector in Uganda has a deficit of 2 million housing units, and that this continues to grow by 300,000 units per year. Fur-ther, that according to NHCC, by 2020, the housing requirement in Kampala will be at 750,791 units, other towns 1,092,318 units, rural areas 8,482,889 units and nationally 10,325,990 units.

Therefore, the MP affirmed that housing is a virgin area, and urged interested investors to come into the country because the underpinning infrastructure is available; Roads and power. Similarly, govern-ment is committed to establishing an enabling environment for budding investors.

The construction industry produces various high demands for inputs in constructions in the country. Currently the Chinese contractors are looking for cement to the extent of importing cement and strik-ing deals with the new upcoming Tororo cement for over 1,000 metric tonnes…”

She argued people to come into the country to set up factories to supply such raw materials. Contrac-tors have been importing steel for heavy projects because Ugandans don’t have the standards. Local powerful contractors have gone out of business because they did not get the support of partnerships or joint ventures to strengthen their businesses for example Zzimwe and Mukalazi both local powerful contractors went out of business. She argued people to come and set up construction for low cost housing. Uganda has one of the cheapest, educated labour force ready to work.

Infrastructure in Uganda has improved through various procurements by the government. The stand-ard gauge railway is coming up, equipment has been put aside for all districts to improve roads even at the furthest ends they are accessible. The Government is also trying to revive the National airline through the civil amendment bill.

“…All this is to ensure that people get access to the markets like COMESA. There are Public, Private Partnerships projects available also try to reduce the borrowing rate. For example, there are opportu-nities for the marine projects in Kalangala island…”.

Hon Nakatte Ssegujja concluded by assuring attendants government commitment to creating an ena-bling environment to ensure that the country develops through job creation to reduce on the current unemployment rate.

 

Samuel Kirubi, Managing Director (Equity Bank (U) Ltd.

In his submission, Samuel Kirubi sought to assure potential investors in Uganda of a warm welcome. To argument his presentation, he cited major transformations and developments within the finance, and banking sector in Uganda and the wider East Africa. For example, there are reputable banks with balance sheets that are able to handle the kind of infrastructure projects that are presented to the audience. These include: roads, oil and gas to name but two. “…right now banks are heavily capitalised and can provide financing support in excess of £100 Million for investments in Uganda and the wider East African community.”

Equity bank operates in Uganda, Tanzania, Congo, Kenya, South Sudan and Rwanda. It has total assets of up to £5 Billion. This means its capacity to finance huge infrastructural projects is enormous. Budding investors can serve all these countries in excess of 150 (population) Million from a base in Uganda. There is a balance sheet that is able to sustain investors; the group
While considering the financial / banking value chain, Mr Kirubi highlighted opportunities within the financial inclusion segment. This, he noted offers opportunities ranging from support to investors from agro processing to the lowest head.

“… the law passed in Uganda enables banks to conduct agency banking. This allows financial inclusion in the whole of the country. Therefore, if one is to set industries in Uganda, they are able to have an infrastructure that can collect receivables from any rural village. For example, there are over 20 Million people with smart phones which is a huge value chain to be able to collect cash flows and receivables online in an automated system. The whole of Uganda is now almost covered with a financial infrastructure…”
In terms of affordability, Equity Bank makes it easy to open up an account in the retail section with minimal requirements. For example, there is no minimum balance; no ledger fees and no monthly charges consequently people operate on a transactional basis. That means that anybody investing with products that can reach over 3 Million consumers, can operate via a dedicated Equity’s banking platform. Not to mention ease of facilitating international money transfers through WorldRemit.
Further, Equity bank has connected consumers along the financial / banking value chain. Typically, over a billion US dollars’ remittances to Uganda can be run very smoothly even via the phone apps to pay bills and so on.

 

Hon. Nzoghu William Musabe, Shadow Minister for Works and Transport.

The minister premised his presentation on the fact that for Uganda to have developed infrastructure, government must collect sufficient tax revenue and use it appropriately. And that it is by way of taxation that government can fund commitments like roads, development of water transport, mining and energy to mention but a few. “…what is critical is that Uganda should show commitment that when the Ugandan diaspora remits its hard earned money, it is utilised appropriately. Economies like the UK, USA and China have developed because tax collected is fully utilised to develop agreed priority sectors.

In addition, the minister lamented the poor quality of engineering works on especially roads. “…roads have been constructed from Kampala to Kisoro, Kampala to Malaba, Kampala to Gulu and other places. However, we need to understand that the value and the life span of infrastructure is linked to the quality of engineering works for instance, roads meant to last 20 years, start developing potholes after 5 years…” Therefore, we appeal to the Ugandan diaspora to support government with skills transfer – insights from your exposure and expertise. Good infrastructure will attract investment. For instance, Kasese has immense opportunities like Katwe salt. This is capable of supplying the whole great lakes region because currently there is no other salt processing factory in the region…”.

Tourism is another untapped opportunity. The Honourable speaker of parliament has guided the government to commit monies towards the development of tourism roads in Rwenzori, Elgon and Karamoja areas. Investors can therefore get to the bottom line of how Uganda investment could be developed through the Tourism industry.
Also, there remains untapped potential on water bodies in the country. Imagine sailing on Lake Victoria from Kalangala to Kenya or Tanzania. So investments in construction of quality boats to sail these shorter routes is a viable investment proposition. Because of the undeveloped water transport sector, time is wasted using the only two available options: air transport and road transport through Kenya to Tanzania!

The Ministry of works took the lion’s share of more than 3.5 trillion Uganda Shillings in the financial year 2017- 2018. However, it is not enough because the amount of kilometres in roads and railway covered in the country is still very limited. Because of that limitation, produce from rural areas is untapped – remains unprocessed and therefore, not readily exportable. If only Uganda could have a fair network of infrastructure because tarmac roads are restricted to urban areas. Unlike in developed countries like UK and USA where it is the wealthier who invest in agriculture, in Uganda typically, it is the poor people who invest in agriculture. Therefore, during rainy seasons, it is difficult for these people to get their produce to the market due to poor road infrastructure.

 

Michael Mugabi, Executive Director, Housing Finance Bank, said that, Housing Finance bank has been in existence over the last 50 years primarily doing mortgages. As a building society it then moved to consolidate its position in the housing and rural estate space. The bank has therefore the expertise and vast experience in the provision of mortgage and financing to enable Ugandans and other people interested in investing in Uganda to acquire, construct and do housing in Uganda.

Real estate is a sustainable worthy business because it gives stable returns. The country has one of the fastest growing populations which is also backed by a recent study by a Harvard professor which puts Uganda and India as one of the fastest growing economies. For India it is for innova-tion and technology and for Uganda it is leveraging on its growing population. This shows a mar-ket gap to tap into. There is the housing deficit where there has been intervention by individual developers. There is also a hike of developers coming in to the country to provide affordable solu-tions to costs of construction. There is a huge multiply-effect down the value-chain that the Hous-ing Finance bank is ready to tap in together with individuals who are keen to invest. He called upon members in the Diaspora to partner with the bank beyond relationship management. There are new regulations that have made the environment fertile investment in this sector, the Mortgage law has been streamlined, and there is the new act, Agency banking and bank assurances.

As a bank, Housing Finance can make tailor made solutions. He called upon the diaspora to request any solution because the bank is ready to design anything for them. It is a local institution which means that decision making is done by Ugandans. The bank is ready to design products ready to suit individual needs and financial aspiration. There is 100% financing! This is very attractive to Dias-poras because they have very good income streams where a £100 saving per week can service a mortgage back home as well as other financial solutions and banking products. For those looking at mortgages from a commercial perspective the bank is ready to partner together to provide housing and also part fund the purchasers so that individual incomes are not held back. The bank works to-gether to find buyers to be able to raise the capital.

Uganda will always be home for all of us hence real estate would be a really good form of invest-ment therefore the bank is ready to support and work together to make it easy for anyone inter-ested in investing.

 

Fred Opolot, Fred Opolot, Member, Investment Authority Board of Uganda chose to deviate from the topic. He first and foremost applauded members of the Diaspora for investing and attracting investors in Ugan-da. This defines the role of Ugandans not just an exclusive activity of the Uganda Investment Authori-ty. The UK is among the 5 direct sources of investment in Uganda. Although the pace of investment has slowed down possibly due to the global financial constraints, the role of FDI in the creation of em-ployment and income generation for Uganda cannot be over emphasised.

The last private sector survey taken a few years ago revealed that a sample of 607 foreign companies had employed 71, 364 people by 2014 out of which domestic employees were 95% compared to the 5% of the foreign employees. This consequently demystifies the assertion that foreigners come into the country to take majority of the jobs. Certainly the survey indicates that more and more Ugandans are employed because of the FDIs. Most of the contributions arise from: mining, real estate, manufac-turing and financial services.

There are still a lot of challenges in the provision of financial services mainly the cost of borrowing. This is something that as country has gone round in circles to try and find a solution which seems extremely elusive. The Investment Authority recently organised a venture capitalist conference where specifical-ly small medium enterprises were invited. Their question was, yes you want us to develop industries and invest but the cost of borrowing is 22%! This a challenge that expose an investment opportunity in affordable capital to the country. There are huge gaps to be filled, he added!

UIA as an institution has varied activities like; providing investment information, licensing investment, assists in securing secondary approval, assist joint ventures and hand holds investors through bureau-cratical bottlenecks as well as assisting in the acquisition of land for industrial and commercial agricul-tural investments. There is a difference between supporting people to acquire land through a willing buyer and a willing seller and helping in getting land from the gazetted industrial parks that are availa-ble all over the country.

Quoting Lord Popat who highlighted Uganda’s abysmal performance in the ranking of ease of doing business which he decried to be a fact. Surveys indicate that Uganda ranks 115 out of 190 countries globally. It is therefore the responsibility of UIA to ensure that the ranking improves drastically improv-ing the physical and electronic one stop centres. The provision of all the necessary services for a new investor such as:

  • The Uganda registration services bureau that is responsible for company incorporation and registration.
  • Uganda Revenue Authority for accessing TIN (Tax Identification numbers) numbers.
  • The Directorate of Citizenships and migration services for issuing work permits.
  • NEEMA: for environmental assessment.
  • The Uganda Bureau of Standards.

Therefore, UIA is housing all those organisations under One Stop Centre. The introduction of electron-ic One Stop Centre will allow foreign investors to go through processes at the comfort of their own homes so that they do not have to travel to Uganda for their applications. The service will be up and running within the next 2 months, he assured.

Uganda has 22 industrial parks and 4 regional sciences and technology innovation and engineering parks of which only 3 are fully functional: The Kampala Industrial park in Namanve, Bweyogerere and Luzira parks. Within this context UIA aims to create 4777 acres of service industrial land all over the country in Soroti, Mbale, Masaka and Mbarara therefore calling upon investors to diversify and move away from Kampala and take advantage of the whole country.

There are challenges that UIA faces particularly the inadequate funding for such parks because when an investor comes, they need space with water, power and internet operation where they can start right away. Unfortunately, UIA does not have resources and funding at the moment but it is an area of opportunity for one to come in and help government develop. The incentives are currently in disarray; the government is looking at the investment code to be streamlined.

 

Hon. Esther Mbulakubuza, Mbayo, Hon. Esther Mbulakubuza Mbayo, Minister of the Presidency whose ministry cuts across all other ministries which means that the success of such ministries is the success of the presidency. She begun by highlighting a few issues in the energy sector where the government of Uganda is de-termined to improve the sector by reducing power tariffs from 11 cents to 5 cents. This is being done through the ongoing construction of the three dams namely; Bujagali, Karuma and Insimba dams. When this is done there will be a possible reduction of tariffs. With this investment the gov-ernment expects that small and large scale industries will operate at a minimal cost as far as elec-tricity is concerned.

The government of Uganda has procured road equipment from Japan for all districts. This is aimed at improving access roads in all the parts of the country. There has been commendable improve-ment in acquisition of lands and titles in the Ministry of lands which has been done through re-vamping the land offices and building the MSOs in various regions. To date, Uganda has moved from manual record keeping to automated systems. This is aimed improving acquisition and record accessing. Many Ugandans living in the Diaspora have frequently complained about this process.

The current ongoing Dual citizenship process will continue with the registration. Many Ugandans have left Uganda on different conditions where some have been told to first denounce their Ugandan Citizenship in order to acquire the new ones but the government is saying “please come back and get your Ugandan citizenship”.

There is also a process of acquiring National Identity cards that is going on. Officials from Uganda were meant to attend however it was not possible. They will be informed that Diasporas and in-vestors are waiting. “Things will be done in the right way”. She assured attendants.
Tourism has drastically improved where Uganda was the second best in Africa this year. She called upon everyone to come to Uganda and enjoy the atmosphere, the good environment and the beautiful nature of the country.

Uganda has come a long way; it has registered commendable steps in development. But amidst that, there are also challenges like: corruption! She guaranteed attendants that the government of Uganda is committed to fighting corruption. It takes quite a long time to build systems; it is there-fore unfair to compare the systems of Uganda to systems of developed countries. Uganda is on the rise and is improving. She called upon all Ugandans wherever they are to think and dream about the motherland!





 

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