The lack of awareness among exporters has limited entry and investments into free zones, a study has revealed.
An internal survey carried out in 2021 by the Uganda Free Zones Authority (UFZA) covered up to 200 exporters registered by the Uganda Export Promotions Board.
The study recommended that UFZA strengthens its sensitisation by undertaking more publicity activities so as to attract high-value investments and provide expeditiously solutions to challenges faced by investors.
The survey also recommended that the Government introduce free zones, and institutional legal and regulatory reforms and lower the cost of doing business as this will foster production hence laying a foundation for exportation.
According to the survey, 76% of the exporters listed lack of information about free zones as the major reason why they are not operating under the scheme.
Additionally, 42% cited lack of fully built public free zones while 37.2% named the high cost of establishing free zones as the main reasons for operating under the scheme.
To establish a free zone, one must pay a one-off application fee of $250 (about sh950,000) and a 5-year license fee of $5,000 (about sh18.8m).
The establishment of free zones is one of the initiatives Uganda is undertaking to grow its exports. However, at least 80% of what is produced in gazetted free zones must be exported.
To increase production, entities operating in free zones are allocated perks such as tax exemptions when importing machinery.
According to the statistics, UFZA has issued 31 free zones licenses, the majority of which are in agriculture and agro-processing since 2014 when the agency was incorporated.
The actual capital investment of the developers from free zones for the period of June to December 2021 stood at $302.9m with 9,816 actual jobs created.
The cumulative export earnings in free zones between quarter 1 and 2 of this year stood at $35.85m.
These majorly constituted of cut flowers, wheat flour, processed tobacco and sandalwood essential oils.
The increase in investments was a result of expanded capital investments in the Free Zones, and the increase in jobs was a result of the construction works in the Free Zones.
Despite this, the information gap has held back the adoption of the free zones schemes as ‘those who know UFZA say it is just a government agency mandated to promote trade’.
On the other hand, 76% of the surveyed exporters said they would consider investing in free zones, but they would need a discussion on opportunities of investing in free zones.