Reducing the cost of doing business

By Gideon Atukwase Nshambire

Annually, the World Bank releases the ease of doing business report for over 185 countries globally based on their performances across 10 indicators. Establishing an economy’s aggregate ranking on the ease of doing business compared to other economies and to the regional average which is useful for policy making.

According to the World Bank’s Doing Business 2014 report, Uganda ranks 132 out of 183 economies in the world and 3rd out of the five East African. Uganda has dropped six positions lower than the 2011 position, reflecting a steady decline in the global investor  confidence ranking in the past four years.

Agency for Transformation (AfT) in partnership with Uganda National Chamber of commerce and Industry (USSIA) and Uganda Small Scale Industries Association supported by USAID/Governance, Accountability and Performance (GAPP) conducted a community district-level dialogue on taxation, budget and cost of doing business.

The farmers and the business fraternity of Mityana and Mubende graced the dialogue in large numbers and hard their take on how best the government and other prayers in the sector can help them achieve the best practices of doing business.

The dialogue deliberated issues ranging from production of goods/services, loans and their repercussions on production, taxation and its implication on business not forgetting the budget and its protagonist in doing business. Transport and Electricity and their sway on business were not under looked.

On the issue of loans, Steven Kabagambe of USSIA cultivated that loans should be for improving business and not for starting business, otherwise the business will collapse.

Regarding the budget, the farmers were utterly opposed to the hint on agriculture taxation. The tax on agriculture produce and input was seen by farmers as a contest against the development of agriculture. The farmers were furious with budget claiming that the government invests pi-nuts in the sector and now wants to “milk a cow they did not feed,” one of the farmers lamented.

Ogwal Moses GOLI, Director Policy and Advocacy Private Sector Foundation Uganda informed the business guild that the high cost composition of Energy as part of the overall productions costs ranging from 10-45% compared to acceptable range of 2-5% is bad news for the business. He went ahead to say that transport is accounting for up-to 45% of total cost.

This needs to be reduced to a maximum of 10%. Kampala alone the distribution is about 10% and recommended is about 4% maximum. Agriculture inputs in industry are about 15-25% should not be beyond 7.5%. Access to the sea is 129-135 USD/ MT reduce to about 40-45 USD/ MT.

The people in Mityana and Mubende had no soft words for UMEME which they bladed as “the biggest enemy of business”. The people in the area fill that the government has not done enough to solve the problem of the high cost of electricity and yet it is the engine of industrialization.

The people made it clear that it is very hard for them to compete on the international market due the high cost of doing business most of which is embedded in the $16 per KWH not forgetting the high cost of transport which Ogwal Moses said account for up-to  45% of total cost of doing business in Uganda.

In the dialogue with the people, we came to appreciate the need for innovativeness regarding enhanced cost of doing business. In that regard, we find it important that the government and stake holders mark that people are provided with information concerning new mechanisms of reducing the cost of doing business. The transport costs can also be condensed to the desirable rate more so the electricity companies should be well regulated by the government to ensure that affordable power is provided to the people. Bank of Uganda should also be vigilant in its control of commercial institutions so that affordable loans can be availed to the masses for businesses to flourish.

The writer is a Research Associate at the Agency for Transformation