28 Jul 2016

CAN FOREIGNERS ENGAGE IN RETAIL BUSINESS IN UGANDA?

CAN FOREIGNERS ENGAGE IN RETAIL BUSINESS IN UGANDA?

GOOD NEWS FOR UGANDAN RETAILERS

The President recently made a statement referring the phenomenon of foreigners operating retail trade businesses in Uganda as an “importation of importers” and saying it has worsened poverty levels.

Kampala City Traders Association has been pursuing this matter for some time requesting for the government to enforce limitations on the nature of business foreigners can engage in, in order to secure some sort of space for Ugandans.

The President explained that foreigners engaging in retail trade business is one of the reasons for increasing unemployment.

The relevant government ministry was instructed to ensure that foreigner businesses are limited to manufacturing and construction with retailing left for Ugandans “or possibly, the other African immigrants as well.”

WHAT DOES THE LAW SAY?

The Investment Code Act is the law that provides for foreign investors who wish to do business in Uganda. An analysis of this law exposes the loopholes in the law, essentially making it easy for non-Ugandans to engage in almost every type of business except a few categories which we name in the analysis what follows.

FOREIGNERS ARE PROHIBITED FROM CERTAIN BUSINESSES

Section 10(1) of the Investment Code ACt says a foreigner is not supposed to carry on business unless it is in accordance with the Code.

This Section later goes on to prohibit foreign investors from carrying out the following businesses.

1. crop production
2. animal production
3. acquiring land for the purpose of crop production or animal production.

However, related to this, the foreigners are allowed to:

1. provide material and other assistance to Ugandan farmers in crop and animal production
2. lease land for purposes of manufacturing or carrying out the activities in the Second and Third Schedules of the Act.

FOREIGN INVESTORS ENGAGING IN TRADE

The same Act states that a foreign investor who intends to engage in trade only does not need to comply with the provisions of Section 10(1) *meaning they do not need an investment license* but must:
1. Incorporate a company
2. Deposit USD 100,000 or its equivalent in Uganda shillings at Bank of Uganda to be used in setting up the business.
3. Acquire a certificate of remittance from the Bank of Uganda
4. Apply in writing to the immigration department with the certificate of remittance attached along with other relevant documents and information after which the immigration department may issue an entry permit to the foreign investor.
5. After acquiring this permit, the foreign investor is supposed to obtain a trade permit

WAYS FORWARD

With the provisions reflected upon above, it is clear that the current laws relating to foreign investors do not inhibit foreign investors from engaging in retail trade in Uganda. It would appear to us that the only way to change the policy relating to foreign investors engaging in retail trade, an amendment of this law may be require.

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