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Land allocations to investors vital for devt

By Vision Reporter

Added 21st August 2006 03:00 AM

The recent land allocations in Kampala (UBC land at Nakasero, Shimoni Primary and Teacher Training College land at Shimoni, CMI land on Yusuf Lule Road, and Kitante Primary School land) that have been done under the directive of the President, legally through the Uganda Land Commission, have caused

The recent land allocations in Kampala (UBC land at Nakasero, Shimoni Primary and Teacher Training College land at Shimoni, CMI land on Yusuf Lule Road, and Kitante Primary School land) that have been done under the directive of the President, legally through the Uganda Land Commission, have caused

By Maggie Kigozi

The recent land allocations in Kampala (UBC land at Nakasero, Shimoni Primary and Teacher Training College land at Shimoni, CMI land on Yusuf Lule Road, and Kitante Primary School land) that have been done under the directive of the President, legally through the Uganda Land Commission, have caused concern among the public. There seems to be a growing ‘fear’ that Uganda Investment Authority (UIA) is selling the whole country to foreigners! I assure the public that this is far from true. It is my hope and belief that these fears will soon be history when the economy and people of Uganda start reaping the benefits of these investments as the country moves towards modernisation and industrialisation. As more factories come up and the need for facilities in the service industry i.e. hotels, schools, hospitals, and accommodation, among others, increases, a change in the way we use our land is inevitable. A lot of land is idle or under utilised and yet it can be used to benefit more people than it is currently.

What has been or what is UIA’s role in this? Part of our mandate, as the government agency in charge of investment promotion, is the facilitation of investment to ensure that project ideas are implemented with minimal hassle. In order to implement their projects, a good number of industrial projects need land to set up production units. In our facilitator role, we do allocate them land that has been allocated to us by the Government of Uganda (GoU). The allocating arm of government is the Uganda Land Commission (ULC). I know that the question on most people’s minds is how is land for investment acquired? It is acquired in three ways:

- Public land under ULC is leased directly to investors by ULC e.g. the Shimoni land. There is also land given to UIA by ULC under freehold tenure to be leased to investors on long term basis e.g Namanve, Luzira, and Kiryandongo. The objective of UIA holding the land is to fast track development.

- Public land held by District Land Boards (DLBs), which is leased to investors by the DLBs e.g Jinja land to BIDCO, and Katakwi land to New Forest Company.

- Private Land – UIA has over the years built a land databank of privately-owned land for investment purposes. UIA’s role in this is to identify the land requirements of the investors and match them with the existing offers from the private land owners e.g Kaweri Coffee project in Mubende. Sometimes the GoU purchases private land which it later leases to investors either through the ULC as was the case of BIDCO land in Kalangala, or through UIA, as was the case in the Tomil Poultry Project in Kasangati, land in Sembabule, and Bunyoro Cooperatives’s land in Masindi under CMG.

It should be noted that certainly not all the investments licensed by UIA require land. I am happy to report that to date, the UIA has licensed 3,258 projects, which have created a total planned employment of 281,817 jobs. An investment monitoring survey carried out in 2003 indicated that the conversion rate of these investments is about 60-65%, this means about 60-65% of the planned investment was already on the ground.

In addition to land availability, an attractive incentive package is vital in creating an enabling investment climate. The investment allowance scheme, which is Uganda’s current incentive package, provides for capital recovery terms especially for those projects which incorporate substantial investments in plant and machinery, as well as buildings. How does the scheme work? The scheme is divided into three categories:

- Capital allowances/expenses which are deductible once from the Company’s income, when it is paying the 30% corporate tax on profits in the first year the company receives income. For example if one buys machinery worth $20,000 and the project is located in Kampala, the machinery is depreciated by 50% and the machine now becomes worth $10,000. This value is deducted from the company’s taxable income in the first year. The machinery is depreciated by 75% if the company is located up country. This has been done to encourage investment all over Uganda to enhance balanced industrial development;

- Deductible annual allowances on depreciable assets under the declining balance method i.e computers, automobiles and construction equipment, buses and goods vehicles, and rail road cars, office fixtures, etc from ranging from 40%, 35%, 30% to 20%;

- Other annual depreciation allowances like 5% on industrial buildings, hotels, and hospitals.

GoU is currently reviewing the legal and policy framework for investment with the view to further improve the investment climate. The Investment Code Act 1991 is being amended to accommodate development of Industrial Parks and Free Ports in Uganda. Discussions are also ongoing with Ministry of Finance, Planning and Economic Development, through the Presidential Investor Round Table (PIRT) initiative. The PIRT is an advisory body of national and international corporate leaders, chaired by President Museveni, that advises the President and government on issues that can enhance the business operating conditions in the country to attract new investors into potential growth sectors and transform Uganda’s economy. UIA is the Secretariat of this World Bank funded initiative.

The PIRT consists of five working groups in the areas of Regulatory Environment, Infrastructure, Education ICT, and Agribusiness. Members of the groups are largely drawn from the private sector with support from government departments and autonomous units such as UIA, PSFU, CDO, Enterprise Uganda, etc. The relevant Ministers receive the recommendations from the working groups and give directives on the necessary policy changes. The last Presidential Investors’ Roundtable (PIRT) meeting in November 2005 noted that the high cost of doing business was partly a result of inefficient public private sector interface, and partly a result of an inappropriate legal framework. It was also noted that tremendous improvements could be achieved in the investment climate by the passage of several enabling laws that were due for debate in Parliament. So far some of the major successes that have been achieved from intervention issues raised are:

- A new Ministry of ICT was granted and a substantive Minister appointed;

- Efforts to implement the one-stop centre at UIA are underway and the Team Uganda concept that entails a closer working relationship with key government departments/agencies is fully operational;

- Concrete steps have been taken to reactivate the lending function of Uganda Development Bank by appointing a new board of directors. Government shall further recapitalise the bank after cleaning its balance sheet, thereby increasing access to loanable funds by investors;

- Corruption by public officials has also been made a major issue of discussion at major fora and government has demonstrated greater commitment to addressing it;

- On infrastructure, government has recently launched a new ferry to Kalangala Island and concluded the consessioning of the railways with a private company, among others.

Government in partnership with the private sector has come a long way from the early 1990s to date to create the current enabling business environment. Granted there are a few challenges like the severe power shortages, some bureaucracy which may cause unnecessary delays in implementing projects, and the not so favourable transport infrastructure, which push up the cost of doing business, but the intervention efforts I have tried to highlight above, will improve the business operating conditions in the country. In the meantime, UIA is committed to continue making a significant and measurable contribution to the sustainable development in Uganda by promoting growth in private investment.

Land allocations to investors vital for devt

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