Electricity Costs, Agriculture Taxes Threaten SMEs' Growth

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cure geneva; font-size: small; line-height: 150%;”>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 doing business environment in Mityana and Mubende. Participants also highlighted the importance of responsive leaders at the district level in tackling impediments to business.

Transport and Electricity and their sway on business were not under looked. On the issue of loans, Steven Kabagambe, The Head of Membership at the Uganda National Chamber of Commerce and Industry argued 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 what they called regressive taxation on agriculture.

The tax on agricultural inputs was seen by farmers as a contest against the development of agriculture. The farmers were furious with budget claiming that the government invests peanuts 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 percent compared to acceptable range of 2-5 percent is bad news for the business.

He went ahead to say that transport is accounting for up-to 45 percent of total cost. This needs to be reduced to a maximum of 10 percent. Kampala alone the distribution is about 10 percent and recommended is about 4 percent maximum. Agriculture inputs in industry are about 15-25 percent should not be beyond 7.5 percent. 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 percent of total cost of doing business in Uganda.

In the dialogue with the business owners, 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.

ATUKWASE GIDEON NSHAMBIRE is a Research Associate at the Agency for Transformation,,

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