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The government is in the advanced stages of tabling the Competition Act regulations, David Bahati, the State Minister for Trade (Industry) has announced.

Bahati disclosed this during a heated plenary session on Thursday, April 18, 2024. He was responding to a litany of concerns that were raised by lawmakers bordering on unfair trade practices.

“We did pass a Competition Bill here which was assented to by the President in February (2024), and this Bill among other things will clarify the relationship between a manufacturer, wholesaler and retailer,” he explained.

“To do this, we need to do regulations. I want to inform the house that we are now in the process of making regulations to the Competition Act, and they will be ready within the next two months from now because we need to consult,” Bahati added.

The regulations will form the baseline of the operations of an independent commission envisaged under the law.

At the core, he contends that these much-awaited regulations will streamline business practices, believed to be the root cause of an ongoing trader’s strike.

Parliament during the plenary session. (Photo by Maria Wamala)

For three days now, business people have closed shops over what they are calling unresolved issues they have with the Government and the taxman, including the enforcement of the Electronic Fiscal Receipting System (EFRIS). 

EFRIS is a system that enables business operators to transact and manage the issuance of e-receipts and e-invoices in real-time.

Competitions Act

The law which was passed by Parliament on September 1, 2023, seeks to create a level playing field for participants in Uganda’s free market economy and protect consumer interests among others.

This is in line with Article 21 of the Protocol on the Establishment of the East African Customs (EAC) Union.

The provision mandates partner states to prohibit any practice that adversely affects free trade, including any agreement, undertaking or concerted practice which has, as its objective or effect, the prevention, restriction or distortion of competition within the bloc.

Fast forward, the Competition Act seeks to regulate joint ventures, acquisitions and mergers, which in Uganda’s case are usually vertical and horizontal.

Vertical mergers occur when two independent firms from different parts of the supply chain form a new legal entity under the banner of one corporate name.

On the other hand, horizontal mergers relate to the act where dominant companies or firms with a stable supply of resources amalgamate with competitors offering a similar service and serving the same customers under the guise of capturing the latter’s market share.

The law bars persons from striking deals, in respect of production, supply, distribution, acquisition or control of goods, or the provision of services, that are likely to hurt competition in the market.

The aforementioned agreements are in regard to enterprises or actions that directly or indirectly fix purchase or selling practices, limits or controls production, supply, markets, technical developments, investment, shares, or sources of production supply by territory type, size of customer or any other way or directly or indirectly results in bid rigging or collective tendering.

During a debate on the floor last year, Nathan Nandala Mafabi (Budadiri West, FDC) and Dr Patrick Mwesigwa Isingoma (Hoima East, Independent) contended that this will prevent competitors of multinational conglomerates from folding.

“I am a player in the fuel industry; Total Energies swallowed GAPCO, Agip and Esso. Recently Rubis swallowed Kobil, and earlier on Kobil had swallowed Delta. Nile Energy swallowed Gaz, and sometime back Vivo swallowed my company called Prime Petroleum,” Isingoma revealed.

Mafabi on the other hand added that his biggest fear is the Government entering business "wanting to make agreements that favour them. That is very dangerous, that is a matter we should deal with because the moment you allow the Government they will be the ones who will not pay taxes, but they want to compete with us who are paying taxes.”

Abuse of dominant positions

Also, the Competitions Act is poised to deter big companies from abusing their dominant position through practices like predatory pricing, which means the unrealistically lowering prices to edge out competitors and product tying.

The latter is when a company mandatorily sells a customer a product in addition to the purchase of another good.

Under the law, the commission shall be charged with probing companies which use their economic strength to act independently of their competitors and consumers to stifle or tilt the balance in their favour.

This shall be done by establishing whether the accused party enjoys a market share of 30%, its size and resources, the economic stature of their competitors, the dependence of consumers on the enterprise and the technical advantages it enjoys, among others.

Persons who conceal or falsify records in relation to the above subject, upon conviction are liable to a fine not exceeding 250 currency points (sh5million) or imprisonment not exceeding three years or both.

Bahati’s assurance followed concerns about the seemingly ‘toxic’ business atmosphere in the country, which lawmakers say is driving local businessmen downhill.

Speaker takes swipe at EFRIS

“Some people do not know what they are paying, and secondly, they do not know the tax they are paying. Then you want me to pay taxes, you also want me to buy a machine to install in my shop. A machine (EFRIS equipment) is sh2.5million,” Speaker Among illustrated.

“…or even there are places which have no network. Most of us have ‘kabiriti’ (feature phone), you’re telling me, I should have a smartphone. It is like telling Panadol (Peter Mugema) to pay using a smartphone,” she added.

Local businesses closing shop

As a consequence of over-taxation, shadow attorney general Wilfred Niwagaba said many locally owned businesses in Kikuubo are melting away at a terrific pace.

He warned that if this is not worked on, the country risks losing its economic standing in the region.

“When Rwanda closed borders with Uganda, it established its own Kikuubo in Rwanda, and most of the people who used to shop from Kikuubo were from Rwanda, Burundi, Congo have now resorted to others like Rwanda and Tanzania,” Niwagaba illustrated.

“You have had these foreigners, yes they are manufacturers, but they have their own wholesale shops who have opened retail shops, and they have had all this throughout the entire country, and our people are being driven out of business. Some of us who have been surviving on them as legal practitioners are also running out of business,” he elaborated.  

On various occasions, Niwagaba said that he has tried to link a group of local businessmen under the ‘Tussa Kimu’ umbrella with the trade minister to dissect this matter in vain.

“EFRIS wouldn’t have been a problem, but it is adding a cost onto their business. Most of these traders are P7 dropouts, S1, S2, but they are the ones who have been driving this economy,” he narrated.

The vice chairperson of the Public Accounts Committee (PAC/Central) Gorreth Namugga retorted that this mad dash for taxes has partly been accentuated by tax exemptions.

Tax exemptions

“Gold is tax exempt, it had an estimate of over sh451billion, we only got sh47billion. So I really implore URA to stop exempting areas where the Government can get money, big wigs don’t pay taxes. We found out that most of the big hotels in this country don’t pay taxes,” Namugga cited.

As a source of revenue, the Mawogola South MP urged the Government to fill vacant positions.

“You realise that the Government is staffed up to an average level of 56%. If we filled all those positions, youths would get employed and pay taxes in the form of Pay as You Earn (PAYE),” Namugga added.