Investing in Uganda: Gov’t Checks Bottlenecks, Pushes Business Formalization Online to Boost Economy with FDIs

Uganda has moved the complete process of registering a company online, as the country looks to reduce the need for physical meetings between government bureaucrats and entrepreneurs.  

Adopted during the complete lockdown that Uganda witnessed between March and June 2020, so that the government could control the spread of Covid-19, the use of online platforms to incorporate businesses and secure licenses is according to officials, expected to reduce further the cost of registering a business for entrepreneurs.

Sheila Karungi Mugyenzi, the Director of Investment Promotion and Development at Uganda Investment Authority says the provision of most services online has lowered the financial and time cost of setting up a business.

But for entrepreneurs in need of services, the provision for an online system could help in cutting out corruption tendencies.

Henry, a Ugandan businessman who preferred to give only one of his names says that the tendency by bureaucrats has been to delay the processes necessary for one to operate a business so that an entrepreneur is then forced to give a bribe, without ever being asked for one.

“They don’t even need to solicit for the bribe. Through a combination of time-wasting, general delays and no clear indication of when you will be served, one is slowly conditioned to pick a struggle. Pay the bribe to get a service or wait indefinitely,” says Henry who had just paid a bribe of Ugsh600, 000 ($161) for a national identity card number.

For Ugandans, the national identity card number has many uses including registering for a tax identification number and for opening or owning a bank account.

 

Evelyn Anite state minister for investment (centre) at the commissioning of a building that will host the one-stop centre for all government agencies that facilitate business incorporation (C) UBFC

Patricia Opoka, the Manager of Documentation and Registration at the Uganda Registration Services Bureau, however, says that the issue of delaying service for no good reason, which is one way of determining corrupt tendencies will no longer be a problem for those incorporating companies.

Ms. Opoka says that with the decision to put everything online, managers like her can find out from their teams the reason for delaying registration of a business.

The Uganda Registration Services Bureau (URSB) is, according to Ms. Mugyenzi, the starting point for anyone interested in operating a formal business.  

Ms. Mugyenzi adds that while URSB has its own officers, entrepreneurs also have the option of accessing these services at UIA which hosts 15 government agencies involved in the facilitation of investment in Uganda.

Services available at UIA include incorporation of a company, receipt of a business license, tax registration and for those entrepreneurs that have land titles in need of authentication, this too can be done at the investment authority or even at URSB.

“It now takes only about 4 hours for an investor to incorporate their company online through the eBiz portal and only two days or less for the issuance of an investment license if all documentation is in order,” says Mugyenzi.

Mr. Opoka the Manager of Documentation and Registration at URSB says that for one to incorporate a company they start by reserving a business name. This can be done physically at the URSB offices in Kampala and other satellite cities in different parts of Uganda or on their website www.ursb.go.ug.

For small businesses that have in the past remained informal, URSB has now created an opportunity for formalization through the provision of just registering a business name.

“Registration of the business name is for small operations for let's say me selling a few handbags,” says Opoka.

To register a business name, an entrepreneur first does a search to find out if the name is not already in use.  Once the name is found to be free, Ms. Opoka says, the business owner can reserve the name and then start the process of registering for which an entrepreneur is expected to pay Ugsh24, 000 ($6,4). Since the registration must be paid for through the bank, there is an additional bank charge.  

For those interested in incorporating a company, Ms. Opoka says the process also starts with a name search. While searching for a name is free, reservation of a company name costs Ugsh20,000 ($5,4) but the entrepreneur only pays after the name is approved. At the point of paying for a reservation, an entrepreneur is expected to attach documents.  

“For the reservation of a company name, an entrepreneur pays Ugsh20,000 ($5.4), but this is done once you find that the name is free,” she says.

Payment for reservation of a name is followed by the provision of other documents which include the company memoranda and articles of association, statement of nominal capital and the registration form. On the registration form, Ms. Opoka says the entrepreneur attaches passport-sized photographs and an identity card.

For Ugandans, the acceptable forms of identification include the national identity card, passport, driving permit or the national social security fund card. For foreigners, only passports are accepted as a form of identification in this process.

“For refugees, they use the refugee card,” says Opoka.

To speed up the process of registering a business, Ms. Opoka says URSB has provided templates of memoranda and articles of association. To complete the process of registration, company owners must pay fees depending on the amount of share capital.

The fees according to officials at URSB can be assessed and paid online. URSB has provided on their website different options including one where entrepreneurs can pay online using different bank card options or mobile money.

Ms. Opoka adds that anyone can register a local company including non-Ugandans. Foreign companies are on the other hand registered as branches of existing companies that already exist in other jurisdictions outside of Uganda.

Once incorporation is complete, an entrepreneur is expected to go for tax registration at the Uganda Revenue Authority and then lastly, get an investment license. While an investment license is not obligatory for Ugandans, foreigners must get one to operate a business.

Ms. Mugyenzi advises entrepreneurs including Ugandans to get a license from UIA as it can be useful in the acquisition of land, capital from the banks and tax incentives from relevant government agencies.

For an entrepreneur to get an investment license, they are required to have US$50,000 if they are Ugandan and US$250,000 for non-Ugandans. Foreign traders do not require a license but must have access to US$100,000 to operate legally in Uganda.