On April 2, 2021 Artiste and Pan African investor Aliaune Damala Badara Thiam, mostly known as Akon arrived in Uganda to engage Uganda’s chief investment promoter President Yoweri Museveni with among others plans to establish a futuristic Pan-African smart city in Uganda.
What followed was a frenzy of pessimism underlined with a cancel culture narrative that seems to stick – that the government babysits foreign investors at the expense of domestic investors! This is not based on any iota of truth.
The most cited incentive is the proposed public land allocation to Akon (One Square Mile) to establish a city that is expected to drive the imagination for the future of cities, creating jobs and stimulating enterprise.
I haven’t looked at the feasibility and design, but the idea is imaginative, appealing, agile and potentially transformative.
Land allocation for investment is not a giveaway but rather a necessary and strategic incentive to stimulate and grow investment in the Country.
I must state that the government of Uganda, through the Uganda Investment Authority has and continues to offer serviced land in industrial parks and agricultural lands to domestic investors.
For example, recently, one and half square miles of land in Masindi was allocated to Kazire Health Products, a local investor to expand operations.
Kazire Health products already employs in excess of 2000 direct employees.
The most competed for land for industrial purposes is the Kampala Industrial and Business Park (2,200 acres), and here Uganda Investment Authority has allocated over 60 percent of the land to domestic investors.
It is therefore hard to fathom, where this “Government favours foreign investors” narrative comes from! Lets now deep-dive into some other perks of incentives government offers to local investors;
The Investment Code Act of 2019(amended) clause 12 articulates some of the incentives operationalised through a raft of regulations and schedules.
1. The minimum capital requirement for a foreign investor to get an investment licence and an investment certificate and qualify for incentives, he or she must deliver a capital investment of USD 250,000. For a local investor, the minimum capital requirement is USD 50,000.
2. There is a 10 year tax exemption on income derived by an investor in an industrial park and outside industrial park who invests in agro processing, manufacture of medical appliances etc and use at least 70% of local raw materials and employs 70% of Ugandans/East Afvricans who must take up 70% of the wage bill. To qualify for this incentive, USD 10 million is the minimum required investment for foreing investors and USD 300,000 for local investors – and USD 150,000 if the local investment is up-country.
3. There is also a 10 year tax exemption on income derived from renting or leasing facilities established in industrial parks or free zones. To qualify for this incentive, the minimum capital investment for foreign investors is USD 50 million and for local investors it is USD 10 million.
4. Local Investors whose income is derived from exportation of finished consumer and capital goods qualify for 10 year income tax exemption if 80% of their production is exported to markets beyond the East African Community.
5. Local Investors involved in agro-processing qualify for a one year income tax exemption. Import duty on plant and machinery for agro-processing is also exempt. All inputs for manufacturing in agro processing are duty free (zero rated).
6. Domestic investors qualify for 100% deductible allowances on cost of training Ugandans and cost of research into new technologies. i.e when paying taxes (filing returns), this cost is deducted.
7. Raw materials not available in Uganda for input into manufacturing are duty free.
8. Value added tax on accommodation in hotels and tourist lodges upcountry is now zero rated (free). For Kampala and 50km radius, this incentive is up to 1st July of 2021.
9. Uganda Investment Authority retains a dedicated department focused on supporting small scale and medium enterprises (pairing them up with big local and foreign investors, providing space in industrial parks etc).
The foregoing incentives are central to operationalising the National Development Plan III goal of increasing household incomes and improving the quality of life of Ugandans.
Uganda Investment Authority is laser focused on pursuing sustainable industrialisation for inclusive growth, employment and sustainable wealth creation. Uganda remains the strategic place for investors who seek to pursue the triple bottom line of People, Profit and Planet.
Morrison Rwakakamba
CEO, Agency for Transformation and Member of the Board, Uganda Investment Authority
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