Doing Business in Africa: Uganda

Doing Business in Africa: Uganda

In this AFKInsider series, we explore the regulatory conditions that an entrepreneur is likely to face when setting up a business in sub-Saharan Africa. AFKI presents Doing Business in Africa: Uganda.

Doing Business in Africa: Uganda

Bordered by Kenya, South Sudan, the Democratic Republic of the Congo, Rwanda, and Tanzania, Uganda is a landlocked country in East Africa that was ruled by the British from 1894 until 1962 as a protectorate.

While the economic consequences of British colonialism were largely the same in Uganda when compared to other parts of British East Africa, status as a protectorate gave Uganda a degree of self-government and local autonomy that was lacking elsewhere in much of British Africa.  This status had important ramifications as it kept intact traditional lines of chiefly authority that remain important to this day.

During the colonial era, however, it allowed the politically important Baganda ethnic group that dominated the southern part of the country to fill key administrative positions and to take advantage economic opportunities as they arose under British rule.Given these advantages the Ugandan elite led by the ethnic Baganda were much slower than other subject peoples in the rest of colonial Africa to demand independence.

However, pushed by the British who were winding down their official empire, Ugandans began to organize politically in order to prepare for independence as a unitary state after briefly flirting with transforming into a federal state with a highly autonomous Buganda as one of its constituent parts.

Independence in 1962 kept unresolved the role of central versus local and tribal power, however, and in a series of political crises Uganda’s first attempt at democracy was replaced in fits and starts by an increasingly autocratic central government.

In 1966 Prime Minister Milton Obote suspended the constitution and assumed nearly all government power into his own person. A year later, in 1967, a new constitution was promulgated that abolished Uganda’s traditional kingdoms and declared the country a highly-centralized republic with a quasi-socialist governing philosophy imported by the Obote regime from neighboring Tanzania.

Needless to say this created a great deal of dissatisfaction and unrest and  in 1971 Obote found himself the target of a military coup led by his onetime army ally, Idi Amin.

Amin, well-known today as one of Africa’s most brutal dictators, instituted a personalistic dictatorship and a cult of personality that allowed him to rule Uganda as a near absolute monarch for eight years between 1971 and 1979.

While in power Amin targeted the Acholi and Langi ethnic groups, expelled the country’s 80,000 Indians, and in general made ruin and death state policy in a way akin to the worst of the old Roman emperors.

After slaughtering 100,000 to 300,000 of his own people, Amin’s obsession with the threat posed by the exiled president Obote, whom he deposed in 1971 and who fled to neighboring Tanzania, led Amin to invade and annex part of that country in late 1978.  This, of course, was a step too far and a victorious Tanzanian army forced Amin to flee to Saudi Arabia in 1979.

Upon Amin’s ouster fraudulent elections carried out by the victors led to Obote returning to power between 1981 and 1986. During this time he was opposed by former ally Yoweri Museveni, who led a successful guerrilla war against the government, leading to Museveni taking power in January of 1986.

After a ten-year reconstruction period in which stability and economic growth took root elections were held and Museveni, once a rebel commander, was returned to power as the elected leader of his country.

Since then and despite claims of election tampering by his defeated opponents, Museveni has more or less ruled as an elected strongman ever since who now rules in much the same way that neighboring Kenya’s Daniel Arap Moi did – e.g. through patronage, thorough control of the party system, and, increasingly in later years, via more authoritarian practices.

Ease of Doing Business

So how does all this influence business conditions? According to the World Bank, Uganda currently ranks 122nd out of 183 countries on its Ease of Doing Business Index – a measure created by the Bank to gauge the degree to which commercial enterprises encounter regulatory hurdles, legal threats to property, and the time and money spent on things such as registering a business, ensuring right of title to property, and acquiring licenses.

By way of comparison, the United States ranks 4th on ease of doing business, right after Singapore, Hong Kong, and New Zealand.

What does this ranking mean? Take, for instance, the Bank’s measure of how easy it is to start a business, which is depicted in Figure 1 below. From the figure one can see that the Bank defines business-creation costs as consisting of the time and money outlays involved in the series of legal steps necessary for the entrepreneur must take in order to legally establish an in-country firm. Using this framework, the Bank then tasks researchers to go through this process in order to establish in-country averages.

When this metric is applied to Uganda, the Bank finds that Uganda ranks 137th out of 183 in ease of starting a business, making Uganda one of the more difficult places on Earth to start a legal commercial enterprise. To start a business in Uganda one has to complete 18 bureaucratic procedures that take a total of 25 days at a total cost of about $432, with no minimum capital requirement imposed by the government for the start-up.

Figure 1:

How the World Bank Measures Ease of Starting a Business

Fig 1 Ease of Business Graphic WB

Using similar metrics for other aspects of business operations, the Bank has ranked Uganda in a number of other areas. To obtain a construction permit, for instance, Uganda does marginally better and is ranked 133rd out of 183 as it takes the completion of 18 procedures, which takes on average 171 days at a cost of nearly $1,287. While not insurmountable for many Westerners, it is nonetheless a steep proposition for most citizens of Uganda.

Continuing in its assessment, the World Bank has determined that in order to obtain and register property, Uganda does much worse as it ranks 150th out of, again, 183 countries measured.

To register property in Uganda, the Bank finds, it takes the completion of 13 bureaucratic procedures that takes, on average, 77 days and costs 3.2-percent of the property’s financial value in fees and other costs to complete.  This makes Uganda a moderately a fairly place in which to register property.