Uganda’s investment climate continues to present both important opportunities and major challenges for U.S. investors. With a market economy, ideal climate, ample arable land, young and largely English-speaking population, and at least 1.4 billion barrels of recoverable oil, Uganda offers numerous opportunities for investors. Uganda’s gross domestic product (GDP) grew by 6.5 percent in fiscal year (FY) 2018/2019. The International Monetary Fund (IMF) had projected 5.5 – 6 percent growth in FY 2019/2020, though the combined impact of the COVID-19 pandemic and related restrictions, the current locust infestation, and the negative economic effects associated with Uganda’s impending elections are likely to reduce this figure. Uganda maintains a liberal trade and foreign exchange regime. Foreign direct investment (FDI) surged by a whopping 80 percent to USD 1.75 billion in FY 2018/2019, driven by the construction and manufacturing sub-sectors. Uganda’s power, agricultural, construction, infrastructure, technology, and healthcare sectors present important opportunities for U.S. business and investment.
President Yoweri Museveni and government officials vocally welcome foreign investment in Uganda. However, the government’s actions sometimes do not support its rhetoric. Closing political space, poor economic management, endemic corruption, growing sovereign debt, weak rule of law, and the government’s failure to invest adequately in the health and education sectors all create risks for investors. U.S. firms may also find themselves competing with third country firms that cut costs and win contracts by disregarding environmental regulations and labor rights, dodging taxes, and bribing officials. Shortages of skilled labor and a complicated land tenure system also impede investment.
An uncertain mid-to-long-range political environment also increases risk to foreign businesses and investors. Domestic political tensions have increased in the run-up to the 2021 elections as 34-year incumbent President Museveni faces new challengers and a disenfranchised youth demographic that comprises 77 percent of the population.
On the legislative front, in a move aimed ostensibly at reducing the repatriation of hard currency profits, in October 2019, the government approved the Communications Licensing Framework which imposed a 20 percent mandatory stock listing requirement on mobile telecommunication service providers. The same framework also requires telecommunication infrastructure companies to sell 20 percent of their equity to Ugandan citizens.
|TI Corruption Perception Index||2019||137 of 180||https://www.transparency.org/cpi2019|
|World Bank’s Doing Business Report||2020||116 of 190||https://www.doingbusiness.org/en/data/
|Global Innovation Index||2019||102 of 129||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country ($M USD, historical stock positions)||2017||USD 42 million||https://apps.bea.gov/international/
|World Bank GNI per capita||2018||USD 620||https://data.worldbank.org/indicator/
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
The Ugandan government and authorities vocally welcome FDI, and the country’s free market economy, liberal financial system, and more than 40 million-person consumer market attract investors. However, rampant corruption, weak rule of law, and an increasingly aggressive Uganda Revenue Authority create a challenging business environment.
The 2019 Investment Code Act (ICA) established both benefits and challenges to FDI. It abolished restrictions on technology transfer and repatriation of funds by foreign investors, and established new incentives (e.g., tax waivers) for investment. However, the ICA also set a minimum value of USD 250,000 for FDI and a yet-to-be-specified minimum value for portfolio investment. Additionally, the ICA authorized the Government of Uganda (GOU) to alter these thresholds at any time, thereby creating potential uncertainty for investors. Under the ICA, investment licenses carry specific performance conditions varying by sector, such as requiring investors to permit the Uganda Investment Authority (UIA) to monitor operations, or to employ or train Ugandan citizens, or use Ugandan goods and services to the greatest extent possible. Further, the ICA empowers the GOU to revoke investment licenses of entities that “tarnish the good repute of Uganda as an attractive base for investment.” The government has yet to revoke any investor license on this ground.
In October 2019, the GOU passed the Communications Licensing Framework (CLF) which requires telecommunication (telecom) companies to list 20 percent of their equity on the Uganda Securities Exchange (USE), with the aim of increasing local ownership and reducing the repatriation of profits. Additionally, the CLF requires communication infrastructure companies to sell 20 percent of their equity to citizens of Uganda. However, no company has yet implemented these requirements, and in the first “test case,” the GOU exempted a telecom infrastructure company from the required equity sale.
The Uganda Investment Authority (UIA) facilitates investment by granting licenses to foreign investors, as well as promoting, facilitating, and supervising investments. It provides a “one-stop” shop online where investors can apply for a license, pay fees, register businesses, apply for land titles, and apply for tax identification numbers. In practice, investors may also need to liaise with other authorities to complete legal requirements. The UIA also triages complaints from foreign investors. The UIA’s website ( ) and the Business in Development Network Guide to Uganda ( ) provide information on the laws and reporting requirements for foreign investors. In practice, investors often ultimately end up bypassing the UIA after experiencing bureaucratic delays and corruption. For larger investments, companies have reported that political support from a high-ranking Ugandan official is a prerequisite.
President Museveni hosts an annual investors’ roundtable to consult a select group of foreign and local investors on increasing investment, occasionally including U.S. investors. Every Ugandan embassy has a trade and investment desk charged with advertising investment opportunities in the country.
Limits on Foreign Control and Right to Private Ownership and Establishment
Except for land, foreigners have the right to own property, establish businesses, and make investments. Ugandan law permits foreign investors to acquire domestic enterprises and to establish green field investments. The Companies Act of 2010 permits the registration of companies incorporated outside of Uganda.
Foreigners seeking to invest in the oil and gas sector must register with the Petroleum Authority of Uganda (PAU) to be added to its National Supplier Database. More information on this process is available on the Embassy’s website (select – Registering a U.S. Firm on the National Supplier Database): https://ug.usembassy.gov/business/commercial-opportunities/
The Petroleum Exploration and Development Act and the Petroleum Refining, Conversion, Transmission, and Midstream Storage Act require companies in the oil sector to prioritize using local goods and labor when possible, and give the Minister of Energy and Mineral Development (MEMD) the authority to determine the extent of local content requirements in the sector.
All investors must obtain an investment license from the UIA. The UIA evaluates investment proposals based on a number of criteria, including potential for generation of new earnings; savings of foreign exchange; the utilization of local materials, supplies, and services; the creation of employment opportunities in Uganda; the introduction of advanced technology or upgrading of indigenous technology; and the contribution to locally or regionally balanced socioeconomic development.
Other Investment Policy Reviews
The UIA one-stop shop website assists in registering businesses and investments. In practice, investors and businesses may need to liaise with multiple authorities to set up shop, and the UIA lacks the capacity to play a robust business facilitation role. According to the 2020 World Bank Doing Business report, business registration takes an average of 25 days.
Prospective investors can also register online and apply for an investment license at . The UIA also assists with the establishment of local subsidiaries of foreign firms by assisting in registration with the Uganda Registration Services Bureau (URSB) ( ). New businesses are required to obtain a Tax Identification Number from the Uganda Revenue Authority (URA), which they can do online ( ) or through the UIA. Businesses must also secure a trade license from the municipality or local government in the area in which they intend to operate. Investors in specialized sectors such as finance, telecoms, and petroleum often need an additional permit from the relevant ministry in coordination with the UIA.
Under the Uganda Free Zones Act of 2014, the government continues to establish free trade zones for foreign investors seeking to produce goods for export and domestic use. Such investors receive a range of benefits including tax rebates on imported inputs and exported products. An investor seeking a free zone license may lodge an application with the Uganda Free Zones Authority ( ).
The GOU does not promote or incentivize outward investment, nor restrict domestic investors from investing abroad.
3. Legal Regime
Transparency of the Regulatory System
On paper, Uganda’s legal and regulatory systems are generally transparent and non-discriminatory, and comply with international norms. In practice, bureaucratic hurdles and corruption significantly impact all investors, but with disproportionate effect on foreigners learning to navigate a parallel informal system. While Ugandan law requires open and transparent competition on government project tenders, U.S. investors have alleged that endemic corruption means that competitors not subject to the Foreign Corrupt Practices Act, or similar legislation, often pay bribes to win awards.
Ugandan law allows the banking, insurance, and media sectors to establish self-regulatory processes through private associations. The government continues to regulate these sectors, however, and the self-regulatory practices generally do not discriminate against foreign investors.
Potential investors must be aware of local, national, and supra-national regulatory requirements in Uganda. For example, EAC rules on free movement of goods and services would affect an investor planning to export to the regional market. Similarly, regulations issued by local governments regarding operational hours or the location of factories would only affect an investor’s decision at the local level. Foreign investors should liaise with relevant ministries to understand regulations in the proposed sector for investment.
Uganda’s accounting procedures are broadly transparent and consistent with international norms, though full implementation remains a challenge. Publicly listed companies must comply with accounting procedures consistent with the International Auditing and Assurance Standards Board.
Governmental agencies making regulations typically engage in only limited public consultation. Draft bills similarly are subject to limited public consultation and review. Local media typically cover public comment only on more controversial bills. Although the government publishes laws and regulations in full in the Uganda Gazette, the gazette is not available online and can only be accessed through purchase of hard copies at the Uganda Printing and Publishing Corporation offices. The Uganda Legal Information Institute also publishes all enacted laws on its website ( ).
Uganda’s court system and Inspector General of Government are responsible for ensuring the government adheres to its administrative processes, however, anecdotal reports suggest that corruption significantly undermines the judiciary’s oversight role.
In June 2019, Members of Parliament passed the Landlord and Tenants Bill that seeks to regulate the relationship between landlords and tenants. For foreign investors, the bill imposes a restriction against charging tenants rental fees in foreign currency, caps increment on rental charges to no more than 10 percent annually, and provides tenants with significantly more rights. President Museveni has yet to sign the bill into law. If signed into law, this bill could undermine investment in the real estate sector by giving disproportionate rights to tenants (commercial and residential) over property owners. The GOU has struggled to fully implement regulatory reforms announced in prior years.
Generally, there is legal redress to review regulatory mechanisms through the courts, and the process is made public.
Uganda’s legislative process includes public consultations, and, as needed, subject matter expert presentations before parliament; however, not all comments received by regulators are made publicly available and parliament’s decisions tend to be primarily politically driven. Formal scientific analyses of the potential impact of a pending regulation are seldom conducted.
Public finances are generally transparent and budget documents are available online. The government annually publishes the Annual Debt Statistical Bulletin, which contains the country’s debt obligations including status of public debt, cost of debt servicing, and liabilities. However, the government’s significant use of supplementary and classified budget accounts undermines parliamentary and public oversight of public finances.
International Regulatory Considerations
Per treaty, Uganda’s regulatory systems must conform to the below supranational regulatory systems. In practice, domestication of supranational legislation remains imperfect: -African, Caribbean, and Pacific Group of States (ACP)
- African, Caribbean, and Pacific Group of States (ACP)
- African Union (AU)
- Common Market for Eastern and Southern Africa (COMESA)
- Commonwealth of Nations
- East African Community (EAC)
Uganda, through the Uganda National Bureau of Standards (UNBS) is a member of ISO, Codex Alimentarius and International Organization of Legal Metrology (OIML), and Afrinet. Uganda applies European Union directives and standards, but with modifications.
Uganda is a member of the WTO and notifies the WTO Committee on Technical Barriers to Trade (TBT) of all draft technical regulations through the Ugandan Ministry of Trade’s National TBT Coordination Committee.
Legal System and Judicial Independence
Uganda’s legal system is based on English Common Law. The courts are responsible for enforcing contracts. Litigants must first submit commercial disputes for mediation either within the court system or to the government-run Center of Arbitration for Dispute Resolution (CADER). Uganda does not have a singular commercial law; multiple statutes touch on commercial and contractual law. A specialized commercial court decides commercial disputes. Approximately 80 percent of commercial disputes are resolved through mediation. Litigants may appeal commercial court decisions and regulatory and enforcement actions through the regular national court system.
While in theory independent, in practice there are credible reports that the executive may attempt to influence the courts in high-profile cases. More importantly for most investors, endemic corruption and significant backlogs hamper the judiciary’s impartiality and efficacy.
Laws and Regulations on Foreign Direct Investment
Competition and Anti-Trust Laws
Uganda does not have any specialized laws or institutions dedicated to competition-related concerns, although commercial courts occasionally handle disputes with competition elements. There was no significant competition related dispute handled by the courts in 2019.
Expropriation and Compensation
The constitution guarantees the right to property for all persons, domestic and foreign. It also prohibits the expropriation of property, except when in the “national interest” as eminent domain and preceded by compensation to the owner at fair market value. The GOU’s new policy requiring telecommunication companies to list or sell 20 percent of their equity is what some are calling a form of indirect expropriation. Particularly considering that the few Ugandans who could afford to purchase this equity are likely to be closely associated with the government.
In 1972, then President Idi Amin expropriated assets owned by ethnic Asians (Indians). The expropriation was extrajudicial and was ordered by presidential decree. The government did not allow judicial challenge to the expropriations, nor offer any compensation to the owners. The GOU has since returned the vast majority of the properties to the original owners or their representatives. There have not been any expropriations since, and government projects are often significantly delayed by judicial disputes over compensation for property the GOU seeks to expropriate under eminent domain.
ICSID Convention and New York Convention
Uganda is a party to both the ICSID Convention and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards. The 2000 Domestic Arbitration and Conciliation Act incorporates the 1958 New York Convention.
Investor-State Dispute Settlement
Pursuant to the Arbitration and Conciliation Act, the courts and government in theory accept binding arbitration with foreign investors and between private parties. In practice, the overall challenges of the judiciary are likely to impede full enforcement. Uganda has not been involved in any official investment disputes with a U.S person in the last ten years; however, U.S. firms do complain about serious corruption in the award of government tenders.
Ugandan courts recognize and enforce foreign arbitral awards, including those issued against the government. The country is a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Additionally, the Arbitration and Conciliation Act creates a framework for the recognition and enforcement of foreign arbitral awards, including those against the government.
Uganda has not had any experience of extrajudicial action against foreign investors. However, in 1972, the government of then President Idi Amin extra judicially expropriated property owned by ethnic Asians.
International Commercial Arbitration and Foreign Courts
Ugandan law provides for arbitration and mediation of civil disputes. The legal framework on arbitration includes the Arbitration and Conciliation Act and Commercial Court Division Mediation Rules. Litigants must first submit all civil disputes to mediation before a court-appointed mediator. CADER is a statutory institution that facilitates the mediation and operates based on the UNCITRAL Arbitration rules. However, unrecorded private arbitration is the most effective investment dispute resolution mechanism in Uganda.
The Foreign Judgments Reciprocal Enforcement Act enables the recognition and enforcement of judgments and awards made by foreign courts.
There is no evidence that Ugandan courts favor state owned enterprises when arbitrating or settling disputes. However, court decisions are often influenced by corruption or high-level government officials.
The Bankruptcy Act of 1931, the Insolvency Act of 2011, as well as the Insolvency Regulations of 2013 generally align Uganda’s legal framework on insolvency with international standards. The 2020 World Bank Doing Business Report ranked Uganda 99 out of 190 countries for resolving insolvency. On average, Uganda recovers USD 0.39 per dollar, well above the sub-Saharan average of USD 0.20. Bankruptcy is not criminalized.
6. Financial Sector
Capital Markets and Portfolio Investment
The government generally welcomes foreign portfolio investment and has put in place a legal and institutional framework to manage such investments. The Capital Markets Authority (CMA) licenses brokers and dealers and oversees the Uganda Securities Exchange (USE), which is now trading the stock of 18 companies. Liquidity remains constrained to enter and exit sizeable positions on the USE. Capital markets are open to foreign investors and there are no restrictions for foreign investors to open a bank account in Uganda. However, the government imposes a 15 percent withholding tax on interest and dividends. Foreign-owned companies may trade on the stock exchange, subject to some share issuance requirements. The government respects IMF Article VIII and refrains from restricting payments and transfers for current international transactions.
Credit is available from commercial banks on market terms and foreign investors can access credit. However, the high yields on GOU-issued (risk-free) securities pushes up interest rates on commercial loans, undermining the private sector’s access to affordable credit.
Money and Banking System
Formal banking participation remains low, with only 20 percent of Ugandans having access to bank accounts, many via their membership in formal savings groups. However, only about five million Ugandans have bank accounts, while more than 24 million use mobile money to conduct basic financial transactions. Uganda’s banking and financial sector is generally healthy, though non-performing loans remain a problem. According to the Bank of Uganda’s 2019 Financial Stability Report, Uganda’s non-performing loan rate stood at 3.8 percent at the end of June 2019. Uganda has 26 commercial banks with the top six controlling at least 60 percent of the banking sector’s total assets, valued at USD 8.6 billion. The Bank of Uganda regulates the banking sector, and foreign banks may establish branches in the country. In February, the Financial Action Taskforce added Uganda to its “Grey List” due to the country’s insufficient implementation of its anti-money laundering and countering financing of terrorism policies. As a result, Uganda’s correspondent banking relationships will face increased oversight, increasing transaction costs, and potentially jeopardizing some correspondent banking relationships. Uganda does not restrict foreigners’ ability to establish a bank account.
Foreign Exchange and Remittances
Uganda keeps open capital accounts, and there are no restrictions on capital transfers in and out of Uganda. If, however, an investor benefited from tax incentives on the original investment, he or she will need to seek a “certificate of approval to “externalize” the funds. Investors may convert funds associated with any form of investment into any world currency. The Ugandan shilling (UGX) trades on a market-based floating exchange rate.
There are no restrictions for foreign investors on remittances to and from Uganda.
Sovereign Wealth Funds
In 2015, the government established the Uganda Petroleum Fund (PF) to receive and manage all government revenues from the oil and gas sector. By law, the government must spend a portion of proceeds from the fund on oil-related infrastructure, with parliament appropriating the remainder of revenues through the normal budget procedure. At the end of 2019, the PF had a balance of USD 20 million. The 2019 Auditor General’s report concluded that the absence of a policy regarding the management of the PF has led to inefficient and ineffective spending and investment decisions. In 2019, the GOU established the Petroleum Investment Advisory Committee (Committee) to oversee the investment of PF funds, however, the Committee did not pass the proposed Petroleum Investment Reserve Policy (Policy), which aimed to establish the investment guidelines. In the absence of the Policy, PF funds continue to be allocated to the national budget.
7. State-Owned Enterprises
Uganda has thirty State Owned Enterprises (SOEs). However, the GOU does not publish a list of its SOEs, and the public is unable to access detailed information on SOE ownership, total assets, total net income, or number of people employed. While there is insufficient information to assess the SOEs’ adherence to the OECD Guidelines of Corporate Governance, the GOU’s 2019 Office of Auditor General report noted corporate governance issues in some SOEs. SOEs do not get special financing terms and are subject to hard budget constraints. According to the Ugandan Revenue Authority Act, they have the same tax burden as the private sector. According to the Land Act, private enterprises have the same access to land as SOEs. One notable exception is the Uganda National Oil company (UNOC), which receives proprietary exploration data on new oil discoveries in Uganda. UNOC can then sell this information to the highest bidder in the private sector to generate income for its operations.
The government privatized many SOEs in the 1990s. Uganda does not currently have a privatization program.
8. Responsible Business Conduct
Awareness of responsible business conduct varies greatly among corporate actors in Uganda. No organizations formally monitor compliance with Corporate Social Responsibility (CSR) standards. CSR is not a requirement for an investor to obtain an investment license and CSR programs are voluntary. While government officials make statements encouraging CSR, there is no formal government program to monitor, require, or encourage CSR. In practice, endemic corruption often enables companies to engage in harmful or illegal practices with impunity. Regulations on human and labor rights, and consumer and environmental protection, are seldom and inconsistently enforced. Several non-governmental organizations attempt to hold companies accountable for poor behavior through “name-and-shame” campaigns, usually with limited success.
Uganda’s capacity and political will to regulate the mineral trade across its borders remain weak. Credible organizations allege that Uganda’s gold refining sector, led by the African Gold Refinery (AGR), relies on conflict minerals illicitly imported from neighboring countries, especially from the eastern Democratic Republic of the Congo. While Uganda has no significant gold reserves, in FY 2018/2019, gold became the country’s largest export, totaling USD 1.06 billion.
Due to Uganda’s rampant corruption and culture of unaccountability, the GOU does not adequately enforce domestic laws related to human rights, labor rights, consumer protection, environmental protections, or other laws intended to protect individuals from adverse business impacts. According to UN Panel of Experts reports, AGR, Uganda’s largest refinery, does not adhere to OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas, and there is no indication the GOU is urging it to do so. Uganda announced in January 2019 that it would join the Extractive Industry Transparency Initiative, however, is still in the process of fulfilling the requirements to become a member. Uganda has also not formally adopted the Voluntary Principles on Security and Human Rights.
Uganda has generally adequate laws to combat corruption, and an interlocking web of anti-corruption institutions. The Public Procurement and Disposal of Public Assets Authority Act’s Code of Ethical Standards (Code) requires bidders and contractors to disclose any possible conflict of interest when applying for government contracts. However, endemic corruption remains a serious problem and a major obstacle to investment. Transparency International ranked Uganda 137 out of 180 countries in its 2019 Corruption Perception Index. While anti-corruption laws extend to family members of officials and political parties, in practice many well-connected individuals enjoy de facto impunity for corrupt acts and are rarely prosecuted in court.
The government does not require companies to adopt specific internal procedures to detect and prevent bribery of government officials. Larger private companies implement internal control policies; however, with 80 percent of the workforce in the informal sector, much of the private sector operates without such systems. While Uganda has signed and ratified the UN Anticorruption Convention, it is not yet party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions and does not protect non–governmental organizations investigating corruption. Some corruption watchdog organizations allege government harassment.
U.S. firms consistently identify corruption as a major hurdle to business and investment. Corruption in government procurement processes remains particularly problematic for foreign companies seeking to bid on GOU contracts.
Resources to Report Corruption
Contacts at government agency or agencies are responsible for combating corruption:
Justice Irene Mulyagonja
Inspector General of Government
Inspectorate of Government
Jubilee Insurance Centre, Plot 14, Parliament Avenue, Kampala
Public Procurement and Disposal of Public Assets Authority (PPDA)
UEDCL Towers Plot 39 Nakasero Road
P.O. Box 3925, Kampala Uganda
Contact at “watchdog” organization:
Anti-Corruption Coalition Uganda
10. Political and Security Environment
Uganda has experienced periodic political violence associated with elections and other political activities. Security services routinely use excessive force to stop peaceful protests and demonstrations. There are no prominent examples in the past ten years of such violence leading to significant damage of projects or installations. There has been an uptick in crime over the past several years, and political tensions are likely to increase in the run up to 2021 general elections.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
* Source for Host Country Data: Uganda Bureau of Statistics Statistical Abstract 2019
|Direct Investment from/in Counterpart Economy Data|
|From Top Five Sources/To Top Five Destinations (US Dollars, Millions)|
|Inward Direct Investment||Outward Direct Investment|
|Total Inward||$9,294||100%||No Data Available|
|“0” reflects amounts rounded to +/- USD 500,000.|
Table 4: Sources of Portfolio Investment
Data not available.
14. Contact for More Information
Economic and Commercial Officer
U.S. Embassy Kampala, Ggaba Road, Kampala
+256 (0) 414-306-240 (office)