What is the single biggest legislative change on the horizon in the next 18 months?

Notable legislative changes that are commercial in nature on the horizon in the next 18 months are likely to occur in the following sectors:

  • The banking and financial services sector

    The regulator, the Bank of Uganda (BOU), proposed increments to the minimum paid-up capital of commercial banks and other credit institutions. For commercial banks, BOU is proposing to increase the paid-up capital from UGX25 billion (approximately USD6.94 million) to UGX150 billion (approximately USD41.7 million). Currently, the BOU is still conducting stakeholder engagements on these proposals ahead of a formal legislative instrument codifying the increments.

  • The power sector

    The Electricity (Amendment) Bill, 2021 proposes to amend the current Electricity Act, 1999 by authorising the regulator, the Electricity Regulatory Authority (ERA) to permit a generation license holder to supply electricity in bulk directly to a final consumer. If passed into law, this will be a significant change because the electricity transmission space is fully government-owned, and government operated by the sole system operator of national grid and sole off-taker for on-grid electricity generation – Uganda Electricity Transmission Company Limited (UETCL). The legislative change is therefore expected to open up the electricity transmission sub-sector to private players and investors.

    Notably also, the government is considering abolishing the concept of mailo land tenure under Article 237(2) (c) of the Constitution of the Republic of Uganda, 1995. Mailo is a special type of land ownership system that is unique to the central region of Uganda, and which gives the landowner ownership for a permanent duration. A unique feature of mailo is that it permits the creation of a legal interest owned by the registered proprietor and an equitable interest owned by a tenant by occupancy. According to the government, this is a key source of conflicts on mailo land that needs to be addressed by the proposed legislative change.

What impact, in terms of foreign investment (or doing business), will this legislative change have?

A notable impact of the abolition of dual ownership of land under the mailo tenure is the expected reduction in the need for a dual layer of compensation for critical land-intensive projects and investments in the central region of Uganda.

What is the current investment appetite in the region? Do you see this changing in 2022?

The current investment appetite in Uganda is still positive. This is largely because Uganda’s economy is fully liberalised and there are generally no industry-wide restrictions that apply to foreign direct investments. This favourable policy position means that investors enjoy free entry into the market subject to compliance with any applicable sector-specific licensing and permitting requirements.

We do not see this policy changing in 2022 for the priority investment sectors such as energy, oil, and gas, building and construction, information communications and technology (ICT), pharmaceuticals and agriculture value addition.

Where do you see the key areas of growth or opportunity for businesses operating in your country?

Uganda is largely an agrarian economy in which agriculture occupies a dominant position and is a key priority investment area for the government. A notable area of growth or opportunity is in agriculture value addition. The key aspects of agriculture value addition include the manufacture of agricultural inputs like fertilisers and pesticides, the supply of agricultural machinery, the establishment of cold storage facilities and the production of packing materials.

Investors may also take advantage of notable investment opportunities in the form of public-private partnerships in the commercial production of agricultural products. For larger, more sophisticated and capital-intensive investments, additional opportunities exist in manufacturing, mineral processing, and mineral value addition. The services sectors including health, education, and finance are also viable investment areas.

Which sectors have been most affected by COVID-19 and what have businesses in those sectors done to cope with these changes or potentially benefit from new opportunities?

Contact-sensitive businesses in tourism, hotels, travel and tour agencies, bars and restaurants were generally the most affected sectors. Due to social distancing rules and travel restrictions to people travelling to, and out of Uganda, the income streams of these businesses were depleted following the disruption in their supply chains and reduction in the demand from critical market segments.

To cope with these challenges, some businesses – particularly those with existing loan and debt obligations – took advantage of the credit relief measures introduced by the Bank of Uganda. Among other objectives, these measures were intended to mitigate the adverse effects of COVID-19 and facilitate the financial intermediation process during the pandemic. The measures included repayment holidays, loan tenor extensions and other forms of debt restructuring. Critical to note is that the measures (which have since expired) did not eliminate the debtors’ obligation to repay borrowed funds.

Additional measures taken by other businesses on a case-by-case basis included the renegotiation of payment terms with suppliers and to some extent, landlords, a scale-back on non-critical expenses, operations and temporary closure of redundant production lines to preserve cashflows. For those businesses with robust business contingency plans, their operations were sustained by sufficient cash buffer reserves.

What is the most relevant regional or pan-African economic trend that you expect to see in the next 18 months?

The most relevant regional or pan-African economic trend in the next 18 months will be the increased reliance on digitisation tools and information technology systems for the recording, reproduction and distribution of information. Digitisation is gradually replacing the current analogue systems such as broadcast television, radio, video, and cassettes that are still used in some parts of the region and across the continent.

With increased digitisation, private businesses and public entities are relying on less bulky transaction paperwork, the use of social media applications for virtual interactions, the use of electronic signatures to authenticate documents and the execution of e-contracts by clicking on website icons indicating acceptance to applicable terms and conditions. The demand for the purchase and delivery of goods and services through online platforms has also increased.

It’s important to note the enactment of the National Payment Systems Act, 2020 (NPSA), in part this is recognition of the growing digitisation trend in Uganda. The major focus of the NPSA is the mainstream electronic money and payment systems that are now common in Uganda. The NPSA is expected to streamline the regulation of the use of alternative payment channels through advanced financial technology to provide financial services to consumers and businesses (otherwise, known as fintechs) that are gradually taking root in Africa.

In terms of the legal services market, what growth are you seeing on the horizon in the next 18 months?

To analyse the growth trends in the legal services market, consideration must be given to the impact of the shift from traditional forms of doing business to information system-based transactions. The current trends in the legal services will largely be informed by the nature of the legal risks, regulatory compliance and legal disputes that will arise from the increased reliance on electronic and virtual interactions due to the impact of COVID-19.

In this context, information technology and e-commerce business advisory practice areas are likely to experience gradual growth in the next 18 months. Similarly, clients are increasingly seeking assistance in niche legal practice areas like information technology and e-commerce. However, mainstream practice areas like litigation, corporate and commercial, risk and compliance advisory continue to occupy a dominant position among leading Ugandan law firms.

What do you expect the general business mood to be in your country in the next 18 months?

The general business mood in-country in the next 18 months will be a mix of cautious and hopeful, partly due to the impact that COVID-19 has had on the general way of life and doing business.

As to whether the business mood will shift from cautious and hopeful to investing heavily in the next 18 months is debatable. Ultimately, investors will have to make an informed decision before deciding to invest based on an objective assessment of the business climate. Critical factors to consider include the available investment and growth opportunities, the trends in government spending and policies in priority investment areas and the economic outlook of Uganda in key investment sectors.