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Articles RSS | April 9, 2010 - 12:30pm

Starting a business in Uganda

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If you have made up your mind to move to Uganda and your goal is to set up a business, you would do well to read Jonathan Gosier's experience as a foreign investor in 2008.

Another more recent resource is the 2010 World Bank rankings for the ease of doing business. The rankings are derived from a data set that covers 46 in Sub-Saharan Africa, 32 in Latin America and The Caribbean, 27 in Eastern Europe and Central Asia, 24 in East Asia and Pacific, 19 in the Middle East and North Africa and 8 in South Asia, as well as 27 OECD high-income economies as benchmarks.

Each country receives a rank in ten categories which cover everything from starting a business and employing workers to getting credit and paying taxes, to enforcing contracts and closing a business down. So, basically everything an entrepreneur might want to know about the essential business processes of an economy.

So How Did We Do?

The rankings place Uganda at 112 out of 183 countries, six places lower than a year ago. That puts Uganda behind Kenya (95) and Rwanda (67) but ahead of Tanzania (131). As you read through the report, you begin to see why we are so far down the list.

On average, opening a business in Uganda requires 18 separate procedures, double the regional average (Rwanda stands out with only 2 procedures). The list is astonishing:

  1. Reservation of a name at the Office of the Registrar (UGX 25,000)
  2. Pay fees at the bank (UGX 2000)
  3. Obtain 5 necessary forms from the Uganda Bookshop (UGX 5600)
  4. Sign the declaration of compliance before a Commissioner for Oaths (UGX 6000)
  5. Obtain requisition for bank pay-in slip and bank payment advice forms from the Uganda Registration Services Bureau (No cost)
  6. Make payment of registration fees at a given bank (No cost)
  7. File with the Registrar General (No cost)
  8. File with the local office of the Uganda Revenue Authority a personal inquiry form for each director, and a corporate preliminary inquiry form; receive a uniform tax
    identification number (TID) (No cost)
  9. Apply for corporate tax file number (No cost)
  10. Apply for VAT registration (No cost)
  11. An inspector from URA inspects the business premises (No cost)
  12. Apply-for-Pay-As-You-Earn-Tax (No cost)
  13. Obtain application forms for trading license (No cost)
  14. The licensing officer arranges an inspection of the premises and fills out an assessment form. (No cost)
  15. Pay the license fee at the bank. (No cost - bank fees apply)
  16. Pay the license fee at the bank. (No cost - bank fees apply)
  17. Obtain a trading license (UGX 206500)
  18. File a form with the National Social Security Fund (NSSF). (No cost)
  19. Make a company seal (UGX 225,000)

Clearly there is a lot of running around and paper-chasing required. The 25 days wait period is lower than the 45 day average in sub-Saharan Africa, but still longer than the 3 days in Rwanda or the 13 day average in the OECD.

Overall Uganda has made some improvements in hiring workers and paying taxes (the tax rate is 35.7% of profits with approximately 160 hours required to prepare and file returns) but we regressed on dealing with construction permits and the crucial area of getting credit.

Worse, there was only one positive reform in the year and that dealt with cross-border trade, which is unlikely to impact businesses that serve local markets.

What This Means for You

Forewarned is forearmed. Do your homework about the economy and the type of business you plan to operate and you are less likely to be discouraged by the inevitable frustrations.

You can download the complete report in PDF format from the Doing Business website.

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