1

A

Global Country Study Report

On

Uganda with Special Reference to Study of Packaged Food Industry

College Code: 770

College Name: Shri Jaysukhlala Vadhar Institute of Management Studies (JVIMS)

Master of Business Administration

Year: 2013

Guided by: Nirav Vyas

Guide‘s email address: nvyas659@gmail.com

Designation of guide: Assistant Professor

2

Table of Content

Sr No Topic Page No

1 Executive Summary 4

2 Acknowledgement 6

Part I- Work Done in Sem III

3 Introduction to Uganda 8

4 Ecological Environment 16

5 Demographic profile and social environment 21

6 General Economic overview 29

7 Overview of Trade and Commerce 35

8 Overview of different economic sector 45

9 PESTEL Analysis of Uganda 52

10 Political Environment 64

11 Investment opportunities for entreprenuers of

Gujarat in Uganda

74

12 Present Trade relations of Uganda with India &

Overview of Financial Market

84

Part II- Work Done in Sem IV

13 Introduction & overview of Packaged Food

Industry

95

14 Structure, Activities, Processes of Packaged Food

Industry in India

107

15 Comparative position of Packaged Food Industry in

India

126

16 Potential for exports to Uganda from India 130

17 PESTLE on Packaged food industry of Uganda 136

18 Present position and trend of business 142

19 Future business opportunities in Uganda 153

20 Policies and Norms of export & import in Uganda 165

21 Policies and Norms of export & import in India 174

22 Present Trade Barriers 183

23 Conclusion 190

24 Bibliography 192

3

4

Executive Summary

Uganda, the country which has been in existence since very long but still not very well known to

most part of the world. The country is still looked as a ―third world country‖ and when it comes

to business opportunities world-wide, then absolutely no one or very less entrepreneurs show real

interest in Uganda. This is very orthodox and conventional way of looking towards any country

for business.

Uganda is ranked among the 20 top fastest development economies of the world and is the 4th

fastest developing economy of Africa. It is situated in Western Africa and is improving and

strengthening its economical and urbanization position slowly but very steadily.

This project is an attempt to explore the country as a market place and to position a specific

Indian industry to do business with it and also it is an attempt to find out opportunities for

Gujarati Enterprises to position themselves in that country as entrepreneurs.

The first part of the project enlightens on factors like the overview of economy, demography,

topography, prevailing industries and their contribution to GDP of Uganda. In the last section of

the first part of the project we have tried to find out certain business in which the Indian

enterprises can really look into for business

The second part of the project enlightens the opportunities of doing business and positioning a

particular Indian industry in Uganda. The industry that we have selected is dehydrated spices

industry. This part enlists the current scenario of this industry in India, its export potential, its

acceptability and demand in Uganda, the current trade barriers, norms and policies of export of

spices in India as well as norms of imports of spices in Uganda and finally the business

opportunities.

5

Today is the era of globalization. Every country is interested into doing business with the other

countries. Everyone looks for the untapped resources lying with the underdeveloped countries.

So as a result the new employment, entrepreneurship opportunities are getting emerged in these

countries.

But doing trade with different countries is not an easy task. One needs to understand its various

environments like cultural, political, natural, and economical and so on. It becomes quite

important to analyze and make proper conclusion of what will be profitable in various countries

because if this is not done it might lead to a terrible failure of business. So as a manager it would

be prime duty to check for the various environments in the country in which business has to be

conducted.

Uganda has been a country which is targeted by Indian entrepreneurs for doing business since

almost more than 100 years. Indians especially Gujarati entrepreneurs have explored great

business opportunities in Uganda.

This project work is an attempt to explore the horizons and opportunities for positioning of

―Packaged Food‖ Industry in Uganda and count its feasibility.

6

Acknowledgement

We are very grateful first of all to Gujarat Technological University for giving such a project

work to us as a full credit subject. This indeed expands our horizons and gives us a feeling that

our management course is not just restricted to traditional and conventional studies but it

includes such kind of work which can be called as contribution from us towards the economy of

India. We express our deepest and sincere gratitude towards our institute, JVIMS- Jamnagar, for

being fully supportive and giving us all the access and facilities that we needed to complete this

Herculean task.

We are finally very thankful to Dr. K J. Thankachan,- Director, JVIMS and Dr. Ajay D. Shah-

Dy. Director, JVIMS for being patient and very kind to us, supporting us, correcting our errors

and mistakes and also being there always as a information point whereby we could get all the

needed information which was difficult for us to collect for completing this project.

7

Chapter 1.1

Introduction To Country

8

Uganda, country in East Africa, officially known ―Republic of Uganda‖ is a surrounded

by land. The name Uganda comes from the Buganda kingdom, which encompasses a large

portion of the south of the country including the capital Kampala. The people of Uganda were

hunter-gatherers until 1,700 to 2,300 years ago. Uganda became independent on 9octomber 1962

History & Country Details

First it was a Colonial Uganda. Then it became early independent Uganda. Then Uganda ruled

under Idi Amin Dada. The period between 1986-2000 is known as post liberation war.

Capital : - Kampala

Official languages : - English, Swahili

Government : - Presidential republic

President : - Yoweri Museveni

Population : - 24,227,297(2002 census) , 35,873,253(2012 estimate)

Currency : - Ugandan shilling

9

Uganda’s National Symbols

The flag of Uganda was adopted in 1962. The black color identifies Uganda as a black

nation of Africa. The red shows Uganda's brotherhood with the rest of Africa and the world. The

coat of arms of Uganda reflects the identity, aspirations and economic activity of Uganda. The

sun represents the abundant sunshine found in Uganda.The Crested Crane is the official bird of

Uganda. In its plumage, it contains the three colors of Uganda.

Current Government

Yoweri Kaguta Museveni, the president of Uganda is both head of state and head of

government. Museveni will be serving Uganda for another 4 years, with the next elections

anticipated to be held in 2016.Uganda is perceived as very corrupt country by Transparency

International. Uganda is rated 2.4 on a scale from 0 to 10.

Geographical Environment

Uganda deceit almost completely within the Nile basin. The eastern edge of Uganda is

exhausted by the Turkwel River. Southern Uganda is wetter with rain throughout the year.

Though landlocked, Uganda contains many large lakes: Lake Victoria, Lake Kyoga, Lake Albert,

Lake Edward, and Lake George

District counties and kingdoms

Uganda is spread across four administrative regions: Northern, Eastern, Central and

Western. Uganda is divided into districts. Each district is divided into sub-districts, counties,

sub-counties parishes and villages

10

Tourism

Tourism in Uganda is paying attention on Uganda's landscape and wildlife. Uganda has a

very various culture, landscape, flora, and fauna. By the late 1980s, Uganda's political climate

had stabilized and conditions were suitable for reinvestment in Uganda's tourist industry.

Game viewing is the most popular tourist activity in Uganda. Uganda is the third country

where it is possible to visit mountain gorillas. Uganda's prime tourist attractions are Mountain

gorillas.

Major Religions

The Anglican Church of Uganda has the second largest number of followers. The after

that most reported religion of Uganda is Islam. The northern and Western Nile regions are

Catholic and eastern Uganda has the highest percentage of Muslims. There were about 80,000

Indians in Uganda, Forty years ago. The church of Uganda is a part of the Anglican Communion.

Currently the Church of Uganda comprises 34 dioceses, each headed by a bishop.

Health sector

As a developing country, health indicators in Uganda are far behind than the rest of the

world. It was stated that life expectancy at birth in Uganda is around 49 years. Child mortality

rate is 14 %. It was stated in 2002 census that total expenditure as a percentage of GDP was

7.4%.

Education Sector

One of the common factors in Uganda is illiteracy. Uganda has mutually private and

public universities. The largest university in Uganda is Makerere University, which was located

outside of Kampala. The recognized universities in Uganda are into 3 parts:-Government

Universities, Religious-Affiliated Universities, Private Secular Universities

11

Cuisine

Uganda Waragi is one of the common alcoholic beverages in Uganda. Main dishes are

usually made up of groundnuts, beans or meat. The starch usually comes from ugali or matoke in

the South, or an ugali made from millet in the North. Cassava, yam and African sweet potato are

also eaten. The more rich take in white potato and rice in their diets. Soybeans were considered

as a healthy food and are also used especially for breakfast. Chapatti is also component of

Ugandan cuisine.

Banking Sector

The Bank of Uganda (BOU) is the Central Bank of the Republic of Uganda. It was

established in 1966 by act of parliament. BOU is 100% owned by the Government of Uganda,

but is not a government department. Emmanuel Tumusiime Mutebile is the governor of Bank of

Uganda.

Media

Uganda today has a vivacious media industry. There are a number of news papers today

in Uganda. The New Vision is Uganda‘s one of the oldest news paper. The Monitor is Uganda's

leading independent newspaper. These two papers lead the print section of media in Uganda.

Fishing Industry

Fishing is an essential economic activity in Uganda. Lakes, rivers, and swamps wrap

about 20 percent of Uganda's land surface. The government supported several programs to

enlarge fish production and processing. In 1987 a government-sponsored Integrated Fisheries

Development Project recognized a boat construction and repair workshop at Jinja; a processing

plant, several fish collecting centers, and fish marketing centers in several areas of Uganda. Later

than the government established the Sino-Uganda Fisheries Joint Venture Company to take

advantage of fishing opportunities in Lake Victoria

12

Foreign Relations

Uganda is bordered by land and depends on foreign imports for most of its consumer

goods and energy requirements. (1)Israel:-Uganda‘s relations with Israel remain fearfully

stressed due to the 1976 capturing of a French airliner hijacked by the Palestinian Liberation

Organization in an airport in the now-famous city.(2)Kenya:-From 1961 to 1965 the two states,

along with Tanzania, were integrated in the East African Common Services Organization, a

common market with a loose federal structure.

Human Rights

Uganda experiences difficulties in the achievement of international standards of human

rights for all citizens. These difficulties consist of the provision of proper sanitation facilities,

internal displacement and development of adequate infrastructure. As per the Relief Web

sponsored Humanitarian Profile – 2012 Uganda is making considerable developments in this

area.

Languages

Uganda is a multilingual country. Forty of its on hand original languages drop into three

main families - Bantu, Nilotic, and Central Sudanic. English and Swahili are official languages.

There is also a Ugandan Sign Language.

Music

Ugandan music is as different as the traditions of its people. The country is habitat to over

30 different cultural groups and tribes. The Baganda was the most prominent tribe in the country

so they dominated the culture and music of Uganda over the last two centuries. However, the

other tribes have their own music styles. Generally two types:-Traditional and Popular Music.

13

Terrorism

Terrorism in Uganda is mainly located in the north where the Lord's Resistance Army has

attacked villages and compulsorily inscripted children into the organization since 1988.

Somalia's Al Shabbab has also dramatic attacks in the country because Uganda support to the

African Union's AMISOM.In 2002 Anti- Terrorism Act was come out.

Protected Areas

Following are the areas which are protected in Uganda. It includes national park, wildlife

reserve, Controlled Hunting Area, Community Wildlife Management Area, Wildlife Sanctuary,

Ramsar Site.

Ugandan Sheiling

The shilling is the currency of Uganda. Officially, the shilling is divided into 100 cents

but no subdivisions have been issued since the revaluation of the shilling in 1987.Banknotes are

1000, 2000, 5000, 10,000, 20,000, 50,000 shillings.

Ugandan Security Exchange

The Uganda Securities Exchange (USE) is the major stock exchange of Uganda. The

USE is operated under the authority of Uganda's Capital Markets Authority, which in roll reports

to the Bank of Uganda, Uganda's central bank. It was Founded:- June 1997. Headquarters are

in Kampala, Uganda.17 companies are listed in the market listening.

Defence Force

The Uganda People‘s Defence Force (UPDF) is the armed forces of Uganda. After

Uganda achieved independence in October 1962, British officers retained all high-level armed

commands. Defence Minister is Dr. Cryspus Kiyon. A Service branch includes Land Forces, Air

Wing, and Paramilitary Forces.

14

Water Supply

The Ugandan water supply and sanitation sector has made impressive progress in urban

areas since the mid-1990s. Sector reforms in the period 1998-2003 included the

commercialization and rejuvenation of the National Water and Sewerage Corporation (NWSC)

operating in cities and larger towns, as well as devolution and private sector involvement in

small towns. Responsibility for policy setting is given to Ministry of Water and Environment.

15

Chapter 1.2

Ecological Environment

16

Ecology

Ecology is the study of a group of biota, including the interactions with a biotic factors such as

soils, water and meteorological factors.

Marine Ecology

Marine Ecology, a sub-discipline of Ecology, is an integrative science focused on research and

judgment of the biotic and a biotic components and processes of Earth's aquatic and marine

environments.

Microbiomial Ecology

Microbial ecology is part of discipline of ecology focused on microbes (i.e. bacteria, viruses,

some algae and protozoa, and prions), their life cycles, niches and habitats.

Climate

Uganda's atmosphere is tropical. This means it is usually rainy (particularly throughout the

months of March to May, September to November), while the remaining months (December to

February, June to August) comprise Uganda's two dry seasons. Elevation is a major influence on

Uganda's climate. The range is one of only a handful of uplifts on the continent to harbor

remnant glaciers, the others being the Rift volcanoes of Mount Kilimanjaro and Mount Kenya.

17

Geology and Tropology

The two migrant settlements are located in different ecological units. Rhino Camp is

Situated entirely in the graben. The altitude varies in that area between 600 and 800

Meters. On either side of the split, the altitude rises sharply to over 900 meters on the

East and to 1100 meters on the West.

Soils

Rhino Camp naturally has Ferrisols and Vertisols. IRD has thus analyzed 72 soil samples from

Rhino Camp and Adjumani. Such soil analyses are vital in the context of refugee settlements.

They should be conducted before settlements are set up.

Vegetation

This category itself includes many vegetational formations with a more or less developed tree

cover. Within the category plant associations are separated: Butyrospermum savanna,

Combretum savanna, mixed savanna, and dry Acacia savanna.

Mountains

The Ruwenzori Mountains (often called the Mountains of the Moon) form about eighty

kilometers of the border between Uganda and Zaire. The highest peaks of Mount Stanley, in the

Ruwenzori‘s, are snowcapped. Primary among these are Margherita (5,113 meters) and

Alexandra (5,094 meters). Beyond south, the northernmost of the Mufumbiro volcanoes reach

4,132 meters on Mount Muhavura; 3,648 meters on Mount Mgahinga; and 3,477 meters on

Mount Sabinio, which marks the border with Rwanda and Zaire.

18

Rivers and lakes

It includes Lake Victoria, the largest lake in the Africa and second largest lake in the world. It

dominates the southeastern of the nation. Lake Victoria fills through Victoria Nile, the shallow

Lake Kyoga, and the spectacular Murchison. The Katonga River flows westward from Lake

Vitoria to Lake George. Other major river includes the Achwa River.

Forestry

Forests are one of the most important biomes on earth. They provide a large range of ―ecosystem

services,‖ from watershed protection and carbon assimilation to renewable energy and timber

production.

19

Environmental Issues

Deforestation:-

Deforestation is the removal of a forest or place of trees where the land is thereafter converted to

a non-forest use. Deforestation occurs for many reasons: trees are cut down to be used or sold as

fuel or timber, while cleared land is used as ground for livestock, plantations of commodities,

and settlements.

Overgrazing:-

Overgrazing occurs when plants are uncovered to exhaustive grazing for absolute periods of

time, or without sufficient recovery periods .Overgrazing is also seen as a cause of the spread of

insidious kind of non-native plants and of weeds.

Soil Erosion:-

Erosion is the process by which soil and rock are removed from the Earth's surface by natural

processes such as wind or water flow, and then elated and deposited in other locations.

Water Hyacinth:-

Water hyacinth is a free-floating perennial native to tropical and sub-tropical. With broad, thick,

glossy, ovate leaves, water hyacinth may rise above the surface of the water as much as 1 meter

in height.

20

Chapter 1.3

DEMOGRAPHIC PROFILE

AND SOCIAL

ENVIRONMENT

21

Preliminary

Uganda is one of the poorest countries in the world. Republic country Uganda is landlocked

country in East Africa. The earliest human inhabitants in Uganda were hunter-gathers. Uganda

gained independence from Britain in 1962, maintaining its Commonwealth membership. In

1967, a new constitution proclaimed Uganda a republic and abolished the traditional kingdoms.

Amin's reign was ended after the Uganda-Tanzania War in 1979 in which Tanzanian forces aided

by Ugandan exiles invaded Uganda. Conflict in northern Uganda has killed thousands and

displaced millions.

Language:

Uganda is home to many different ethnic groups, none of whom forms a majority of the

population. English became the official language of Uganda after independence. The local

language of Uganda is Luganda spoken by ganda people while, southeastern and southwestern

parts of Ugandan people‘s language is the Lusoga and Runyankore-Rukiga. Swahili was spoken

by throughout eastern and central East Africa and it is the second official national language in

2005.

Population:

Uganda‘s population has grown from 4.8 million people in 1950 to 24.3 million in 2002. The

current estimated population of Uganda is 35 million. Uganda has the second highest total

fertility rate in the world, at 6.65 children born/woman (2012 estimates).

The population of Uganda is to be increased by 130 million by 2050, nearly fivefold increase.

The main reason of less population in Uganda is government‘s lack of commitment to family

planning. Women in Uganda have an average of 6.9 children, compared with a global average of

2.7 and an African average of 5.1. There is higher infant mortality, higher death rates lower

population growth rates. With an average GDP per capita of US$332 in 1998, Uganda is one of

the poorest countries in the world.

22

Income:

Uganda is one of the poorest nations in the world, with 37.7 percent of the population living on

less than $1.25 a day. Despite making enormous progress in reducing the countrywide poverty

incidence from 56 percent of the population in 1992 to 31 per cent in 2005, poverty remains

deep-rooted in the country‘s rural areas, which are home to more than 85 per cent of Ugandans.

Age:

Birth rate: The average birth rate of Uganda is 47.38 from every 1000 babies born.

Death rate: The average death rate of Uganda is 11.54 from every 1000 population.

Infant mortality rate of Uganda is displayed below of male and female respectively in every 1000

population.

Religion:

Religious affiliation:

Religion Percentage

Roman Catholic 44,6 - 49,6%;

Protestant 28,7- 39,2%;

Sunnî Muslim 6,6 -10,5%;

other (Animist) 15,1%

Age Structure Population(%)

Below 15 Years 48.40%

15-65 years 49.10%

Above 65 years 2.50%

23

Uganda is a predominantly Christian country with a significant (about 12%) Muslim minority.

According to census of 2002, 84 % of Uganda‘s population is of Christians. About 41.9%

adherents followed Roman Catholic Church, while 35.9% followed Anglican Church of Uganda.

The next most reported religion of Uganda is Islam, with 12% of Muslims. Muslims are highest

in Iganga, eastern part of Uganda. See also Bahá'í Faith in Uganda.

Forty years ago, there were about 80,000 Indians in Uganda.

Education:

Illiteracy is common in Uganda, particularly amongst females. Uganda has both private and

public universities. The largest university in Uganda is Makerere University, located outside of

Kampala. There are three tier in education i.e. primary education, secondary education and post-

secondary education.

Health:

As a developing country, health indicators in Uganda insulate behind the rest of the world.

Uganda was often suffered by the outbreak of the HIV/AIDS epidemic in East Africa. Uganda

Virus Research Institute (UVRI) is home to Uganda, measured one of the most advanced viral

research facilities in East Africa. The 2006 Uganda Demographic Health Survey indicates that

roughly 6,000 women die each year due to pregnancy-related complications.

24

SOCIAL ENVIRONMENT

Components of the social environment include built infrastructure; industrial and occupational

structure; labor markets; social and economic processes; wealth; social, human, and health

services; power relations; government; race relations; social inequality; cultural practices; the

arts; religious institutions and practices; and beliefs about place and community. Uganda is one

of the poorest districts in country and population density is also one of the highest in Uganda.

Life expectancy at birth in Uganda is approximately 49 years. Life and death, it seems, are

approached a bit differently in Uganda.

Attitudes:

The most of the Ugandan people is rely on agriculture. An ever-increasing population and land

scarcity have forced the migration of male labor, in turn often leaving wives and their children to

support themselves on the available family land. In Africa when person die it does not make

them wide difference as they are saying that ―this is Africa-people die‖. Life and death, it seems,

are approached a bit differently in Uganda.

Values:

There is a certain structure religion gives to Ugandan‘s lives. At the birth of a child or death of a

loved one, they turn to some sort of faith more often than not. When oaths are sworn in courts of

law, it is a holy book on which they swear to remain truthful. And when politicians promise to

stand for by the earthly laws they create, they raise a hand and address a god somewhere. There

are prayer breakfasts, the prayer of god's name in such places as national anthems and currencies,

and also prayers at the start of government meetings and functions.

25

Infrastructure of Uganda:

Though still relatively young, Uganda's rising financial sector is vibrant and well supported by

banking, legal, accounting and insurance support services. The quality and cost of living in

Kampala and other major towns in the country compares constructively with what investors may

hope to find elsewhere in Africa.

Uganda: Economic and Social Inequality:

Economic and social inequality mixes and matches to complicate the picture. But a lot of social

inequality is unnecessary, particularly when it takes the poor form of arrogance. In a third world

country like Uganda, inequality gets extended to its limits. At the rich end, we see individuals

with amazing pretentious spending power that would turn heads even in the richer first world

nations. At the poor end, of course, there is widespread, unremitting, grinding poverty.

Gender Equality:

Uganda is classed as a low-income country as per the World Bank. In 2011 Uganda ratified the

Protocol to the African Charter on Human and Peoples‘ Rights on the Rights of Women in

Africa. Domestic violence has wide social acceptance, even by women. Rape is very common in

Uganda, and enforcement of existing laws is sporadic. There is no proof to suggest that Uganda

is a country of concern in relation to missing women.

There is no proof to suggest that Uganda is a country of concern in relation to missing women.

There appears to be an active and engaged women‘s rights movement in Uganda, working

particularly on issues relating to violence against women, as well as pushing for legislative

changes to protect women‘s rights. Women appear to have the same rights to vote and stand for

election as men in Uganda.

26

Local religion:

Social function of religion is helping people cope with negative aspects of life pain, suffering,

and defeat by providing an explanation of their causes. Religious beliefs and practices also serve

political aims, especially by bolstering the authority of temporal rulers and at other times by

allowing new leaders to mobilize political opposition and implement political change.

Uganda’s Culture and Traditions:

Uganda has a very strong culture heritage. Many regions in Uganda have kingdoms including

Buganda, Busoga, Bunyoro and Toro. The famous things in Uganda are Uganda Drum, Kasubi

Tombs, The Sezibwa falls and Namugongo Shrine. The Drum being the common instrument in

Africa, also dominates Uganda in symbolism to African culture. It is a place worth visiting while

in Uganda. This Uganda martyrs‘ shrine is a very vital attraction in Uganda‘s history.

Poverty in Uganda:

About 96 per cent of those beyond the poverty line live in rural areas. According to the poor, the

quality of natural resources is declining soil fertility and productivity of land, depletion of fish

stocks, wetland violation end recovery and pollution of water resources.

The human consequences of degraded natural resources include starvation, bad health and

increased absence from educations due to more time spent collecting water and firewood. All of

this contributes to make transition out of poverty more difficult, especially for women

27

Labour Condition of Uganda:

Particulars Men Women

Planting 15% 85%

Weeding 15% 85%

Land Preparation 45% 55%

Food Processing 2% 98%

Decision to Market 70% 30%

According to a 2000 IFAD study under the Gender Strengthening Programme for Eastern and

Southern Africa, agriculture is the main source of income for rural households in Uganda. It is

also the main occupation of women. Nationwide, 72% of all employed women and 90% of all

rural women work in agriculture.

Social Welfare of Uganda:

Housing was an important symbol of development in Uganda under the NRM government.

Makerere Institute of Social Research also publishes frequent reports by international researchers

in Uganda.

Two compilations of essays assessing Uganda's social and political development in the 1980s are

Uganda Now, edited by H. Hansen and M. Twaddle, and Conflict Resolution in Uganda, edited

by K. Rupesinghe. Numerous works by N. Kasfir have also contributed an understanding of

Uganda's political environment. Works by B. Langlands survey Uganda's social and physical

geography.

28

Chapter 1.4

General Economic

Overview of Uganda

29

Museveni proclaimed the national economic orientation to be toward private enterprise rather

than socialist government control. Many government policies were aimed at restoring the

confidence of the private sector. In the absence of private initiatives, however, the government

took over many abandoned or formerly expropriated companies and formed new parastatal

enterprises.

Tourism of Uganda

In the year 1960, Uganda had a successful tourist industry with 100,000 visitors each year.

Tourism was the fourth largest earner of foreign exchange. The tourist industry ended in the year

1970 because of political irregularity but in the year 1980, circumstances were appropriate for re-

investment in Uganda's tourist industry as political climate stabilized.

Labor in Uganda

The Labour force; total in Uganda was last reported at 13.43 million in 2010, according to a

World Bank report published in 2012. Average monthly income of Uganda was (UGX 306,200)

in urban area and (UGX 142,700) in rural area in the year 2005-06 which increased to (UGX

660,000) in urban area and (UGX 222,660) in rural area.

Uganda's Minimum Wage is the lowest that the worker being officially paid for his work.

Uganda's minimum wage is 6,000 Ugandan shillings per month for all workers.

30

Agribusiness of Uganda

Uganda is among leading producers of coffee and bananas. Uganda also produces many things

such as cotton, tea, tobacco, sugar etc.

Coffee

Uganda's mainly vital cash crop was coffee throughout the year 1980. The government expected

that farmers planted roughly 191,700 hectares of Robusta coffee; majority of this was in

southeastern and about 33,000 hectares of Arabica coffee in high-altitude areas of southeastern

and southwestern in Uganda.

Several coffee farmers refined cacao plants on land already producing Robusta coffee. Cocoa

production declined from 1970s to 1980s and market situation downcast worldwide investors

from presenting it as a probable counterbalance to Uganda's trust on coffee exports. However,

the management constantly seeks ways to recover the production because locally produced cocoa

was of high quality. Production stayed stumpy in the late 1980s that rose from 1,000 tons in 1986

to only 5,000 tons in 1989.

Cotton

In the year 1950, the second most important traditional cash crop in Uganda was cotton, which

contributed 25% of total agricultural exports. Government officials were gloomy about

refreshing this industry in the near future as this figure had declined to 3%, in the late 1970s.

Moreover, it provided an additional means of diversifying the nation in the late 1980s. The

government consequently initiated an urgent situation for cotton production program, tractors,

which provided extension services and other inputs for cotton farmers. At the same time, the

cotton price was rose from USh32 to USh80 for a kilogram of grade A cotton and from USh18 to

USh42 for Grade B cotton by the government in 1989.

Tea

Uganda was able to develop some of the world's best quality tea due to favorable climate and

good soil. Several tea farmers also reduced production because of economic upheaval and

31

warfare. Tea production later increased from 1,700 tons of tea produced in the year 1981 to

5,600 tons in the year 1985.

Fishing of Uganda

Fish products are the leading foreign exchange earner for Uganda in the non-traditional exports

category with export revenues amounting to USD 127.7 million in 2010. Uganda‘s fish is a

delicacy in Europe and has recently penetrated the US market.

Forestry in Uganda

There is a huge opportunities in forestation and reforestation especially of medicinal trees and

plants, soft wood plantations for timber, pulp & poles. Uganda possesses abundant potential in

areas like timber processing for export.

Infrastructure

With less than 10% of the mainstream capacity of 2,700 megawatts of power exploited, Uganda

has the potential to be a major supplier of hydroelectric power to the entire East African region.

However, in sectors like transport & logistics and energy Uganda still require further investment.

Manufacturing

Uganda‘s manufacturing sector has grown steadily over the last five years at an estimated

average of 7.7% annually. Opportunities exist in virtually all areas ranging from beverages,

leather, tobacco based processing, paper, textiles and garments, pharmaceuticals, fabrication,

ceramics, glass, fertilizers, plastic / PVC, assembly of electronic goods, hi-tech and medical

products.

32

Mining

Uganda has large under-exploited mineral deposits of gold, oil, high grade tin, tungsten/wolfram,

salt, beryllium, cobalt, kaolin, iron-ore, glass sand, vermiculite and phosphates (fertilizer). A

discovery of petroleum wells in the Lake Albert region has enhanced the sector‘s joie de vivre.

There are also significant quantities of clay and gypsum.

Financial Services

Opportunities for investment exist for international multinational banking groups particularly

promoting new or innovative financial products (i.e. Mortgage finance, venture capital, merchant

banking and leasing finance) and micro finance saving institutions, which propose to operate in

rural areas. Insurance, in particular, is still a relatively young sector and offers several

opportunities for investment.

Investment

Uganda has a rapidly growing liberalised economy and a favourable investment climate. The

government of Uganda provides the basic physical infrastructure and legal policy for private

investment to grow. The government is further privatising parastatals and revising regulations to

promote foreign investments. The law permits 100 per cent ownership of investments and, with

very few exceptions, investors can invest in any economic activity.

Mineral resources of Uganda

There is wide variety of minerals found in Uganda, which includes:

METALLIC MINERALS:- copper, cobalt, nickel, gold, chromium, platinum, lead,

zinc, iron, tin, manganese etc.

INDUSTRIAL MINERIALS: carbonate rocks, phosphates, feldspars, kaolin, salt,

silica sand, gypsum.

33

Evaluation of Economic Overview based on certain factors:

GDP - Purchasing Power Parity GDP- Real Growth Rate

GDP- Composition by Sector Population below Poverty Line

Labour Force

Household Income or Consumption

Distribution of Family Income

Gini index

Budget Taxes and other Revenues

Investment (Gross Fixed)

Public Debt

Inflation Rate (Consumer Prices)

Central Bank Discount Rate

Commercial Bank Prime Lending Rate

Stock of Narrow Money

Stock of Money

Stock of Quasi Money

Stock of Broad Money

Stock of Domestic Credit

Market value of Publicly Traded Shares

Agriculture

Industries

Imports-Export

Industrial production growth rate

Current Account Balance

Reserves of foreign exchange and gold

Exchange rates

34

Chapter 1.5

Overview of Trade and

Commerce

35

The Uganda National Chamber of Commerce and Industry is a vibrant organization focused on

enhancing business opportunity. We are dedicated to ensuring our members take advantage of

business opportunities locally, regionally and internationally. The Chamber is over 80 years old

as a nation wide umbrella organisation for the private sector.

The Uganda National Chamber of commerce and Industry (UNCCI) was set up in 1933. It is the

oldest and largest nation-wide umbrella organization of the private sector in Uganda. UNCCI

was formed as a private sector body and has grown to become a vibrant and credible business

association, owned by members from the Ugandan business community. It was formally

registered in 1978 as a company limited by guarantee without share capital.

It is this diversity that makes UNCCI the preeminent business association dedicated to advancing

commerce and industry relations between Uganda and the International business community.

VISION OF THE UGANDA

To be the leading private sector body for the business community in Uganda, providing members

with an influential local, regional and global network for business growth.

MISSION OF THE UGANDA

To strengthen the private sector in Uganda, through emphasis of trade promotion, industrial

development, effective advocacy for sustainable economic policies, and a conducive climate for

economic development.

CORE VALUES OF THE UGANDA

To achieve the above corporate goals, UNCCI requires values that shall define behavior and

performance of employees within UNCCI, every day and everywhere.

36

SERVICES PROVIDED BY UNCCI

• Lobbying and Advocacy

• Maintain structured forms of dialogue to promote public-private partnerships

• Disseminate up-to-date Business Information and Opportunities

• Issuing certificates of Origin

• Business Advisory Services

• Support vocational skills development

• Customized statistical reports

• Facilitate Joint venture and Business matchmaking

• Facilitate inward and outward trade and investment missions

• Provide a platform for Networking for our members

• Arbitration of Business Disputes

• Support young entrepreneurs through the Young Achievers Awards

PARTNERS OF THE UGANDA

The International Chamber of Commerce (ICC)

• The Association of East African Chambers of Commerce Industry and Agriculture

(AEACCIA) and the East African Business Council

• The Islamic Chambers of Commerce and Industry (ICCI),

37

The Research conducted is very important for the current economy of Uganda is lacking behind

the nationalized in one or other manner. The basic motive to carry out the research is to measure

the population is estimated at approximately 25.5million with an annual growth rate of

3.7percent. It is also measures the life expectancy and the populations is likely to reach 50million

people in 25-30 years there life expectancy is 46 years and then more than that like about 55

percent of the population are under 18 years of the age it is found during the research that the

population of Uganda is the fastest growing in comparison of the East African Community,

comprising of Kenya, Tanzania and Uganda. In that there is also approximately 87 percent of the

population live in rural area so that it would also implement to reach the standard of all the

nationalized industry who are traded.

Economy there is also implementing the mainstay of the economy and the country is well

endowed with diverse agricultural resources, as well as mineral resources, such as coppers,

cobalt, limestone, copper ,iron-ore, gold and tungsten. Uganda also produce many things in a

huge quantities like tea, coffee, maize, and also oil seeds. Yearly or in a rainy seasons the growth

rate is depended upon that seasons. The yearly data are available through the research upon the

growth how rain are come if poor and sporadic rain then low growth rate was recorded. In that

Agriculture‘s share in GDP has also declined steadily in recent years, accounting for about 38.5

percent of GDP in 2003/2004 and 37.0 percent in 2004/2005.

An implementing at which they can reach to the working standard of all the nationalized industry

who are traded Manufacturing on the other hand accounted for approximately 8 percent of GDP

with an average annual growth rate of 5.7 percent in 2003/2004. The post and telecommunication

sector is a fast growing sector accounting for 36 percent of GDP in 2004/2005. Although the

country has large deposits of a number of minerals, the contribution of mining and quarrying to

GDP is small. The country‘s mineral potentials have not been fully assessed and explored.

The manufacturing sector comprises of industries producing processed food, beverages, non-

metallic minerals, wood and wood products, chemical products, leather and footwear, textiles,

38

wearing apparels, etc. the over all manufacturing sectors are compared by the level of producing

the products or a growth rate of the country.

The manufacturing sector achieved a growth rate of about 96 percent and there prices are

influenced by external factors and also under the triggers unfavorable terms of trade. In Uganda

country there is also such produces are export like coffee, cotton, tea and tobacco. In that Coffee

and Tea both are export in a huge quantities also a beans of coffee are also export in a huge

quantities. In Uganda such products are produced in large quantities. The country has taken

some major initiatives to reduce raw material commodity exports. In 1992 for example, 96

percent of such commodities were exported compared to 79 percent in 2002/200318. In recent

years, both foreign and domestic investments have been attracted to agro-processing.

Nevertheless, unfavorable trade balance is still being experienced. In 2002, the highest trade

deficit amounting to US$ 606.1 million was recorded. The main reasons were the poor terms of

trade, a narrow export production base and heavy reliance on the export of unprocessed produce

The manufacturing sector achieved a growth rate of about 3.7 percent in 2000/2003 with

significant increase in production of textiles, clothing and footwear, paper and printing,

chemicals and other chemical products. Production continued to increase in 2003/2004 with an

estimated growth rate of 5.7 percent. The increase in production was mainly due to strong

growth in textiles, beverages and basic metals. The paper and printing sub-sector recorded

negative growth rates. Employment in the manufacturing sector also increased quite significantly

in the year 2000, slowed down in 2001 but recovered in 2002 as a result of increases in

employment in the food processing industry and in industries producing cement and bricks. In

2004, employment continued to increase quite significantly.

Total goods were estimated by that much of things in that tea, cotton, foods, textiles, all are

export. In that the total commodity exports increased by 27 percent to US$ 647 million. The

increase in commodity exports was a result of the strong growth in most of the commodity

export categories. The volume of maize, tobacco, fish, hides and skins all increased in

2003/2004. The export volumes of coffee and cobalt declined at a time when high prices were

recorded. Nevertheless, commodities such as tea, cotton and cut flowers registered increases in

both volumes of production and export earnings.

39

Total exports of goods were estimated at US$ 647.2 million in 2003/2004 accounting for

approximately 9.7 percent of GDP. However, total imports also rose by about 17 percent to

US$1,321.4 million in the same period. Oil imports also increased by about 3.5 percent in

2003/2004, as did non-oil imports which increased by about 19.3 percent to US$1,021.4 million.

The trade deficit in 2003/2004 increased to approximately US$ 674.2 million - some US$ 51.2

million more than 2002/2003.

Tea production, mostly is s grown mainly in the Southern and Eastern parts of the country. Both

Robusta and Arabia varieties is one of the major crops in Uganda‘s are produced. on the other

hand, has increased steadily since 1999 with an increase of about 48 percent during a five-year

period - 1999-2003. Many small scale farmers are turning to tea cultivation and large tea estates

have improved their management structures resulting in increased output. Export earnings from

tea has increased quite significantly since 1994/1995 reaching a peak of US$ 39.3 million in

2003/2004.

In the early 1990s, tobacco production was extremely low. A major break through in production

was experienced in 1997/1998. Since then, tobacco production has increased steadily. In

2002/2003 for example, production increased by about 52 percent of its 2000/2001 levels.

Several reasons for the increases have been put forward but it is now generally acknowledged

that the main reason was the abolition of the old corporative system and the liberalisation of the

tobacco industry. However, in 2003/2004, there was a slight decline of about 1.8 percent in

production. Export earnings also declined in 2003/2004 to approximately US$ 36.0 million

compared to about US$ 44 million in 2002/2003.

Uganda produces large quantities of a variety of fruits and vegetables, including pineapples,

mangoes, passion fruit, maize, beans, tomatoes, etc. Fishery is also a thriving activity and fish

processing into fillet and other fish meat are produced for the domestic, regional and

international market.

Production in the food-processing sub-sector has been increasing since the year 2000, although

declines in production were registered in early 2003 and mid 2004. However, the sub-sector

40

grew by about 88 percent in 2003. The main food processing units are those producing coffee,

tea, fish, vanilla, maize, meat and meat products, dairy products, vegetable oils, etc

This industrial sub-sector is one of the fastest growing industrial sub-sectors in Uganda. It has

been characterised with strong growth since 1999 estimated at a rate of approximately 5 percent

annually. The tobacco industry has a very high capacity utilisation level. In 2004, this sub-sector

grew by approximately 12.1 percent

Imports into the beverage and tobacco sub-sector increased in 2003/2004. Exports, of beverages

and tobacco products continued to increase since 1999, although a slight decrease of about 3.7

percent was experienced in 2003 as a result of a fall in tobacco exports. The main trading

partners were Kenya and the Netherlands for exports. Imports were mostly from Kenya and

South Africa.

This industrial sub-sector relies on both domestic and foreign sources for its raw material inputs.

Production has been rather unstable over the years. Between 1998 and 1999, there was a sharp

increase in production to be followed by three years of decline 1991-200119. In 2003, however,

there was an increase in production, with a growth rate estimated at 14.4 percent. Textiles and

garments accounted for a substantial part of the increases in production. In 2004 the textile,

clothing and footwear sub-sector experienced a production increase of 28.7 percent as a result of

increase in the demand for ginned cotton, textile and garments.

Employment, which was more or less stable between 1998 and 1999 began to increase in 2000

with a sharp increase in 2001. The increase in employment was short lived and in 2002, the

employment numbers fell drastically as a result of the reduction in the number of people

employed in the textile finishing enterprises. The increasing growth trends in production were

reflected in the employment figures, which also increased significantly in 2004.

Exports from the textiles, clothing and footwear sub-sector increased between 2002 and 2003

after a period of decline in 2001. The increasing trend continued into 2004. Export earnings more

than doubled in 2004 to about US$ 62.5 million. Textiles accounted for a substantial part of the

15.4 percent increase in export for 2003 and in 2004 with corded and combed textiles as the

41

important trading products. The clothing and footwear industrial units did not perform well. In

fact, large quantities of clothing and footwear were imported, between 2001-2003 and in 2004.

In this sub-sector, there are a number of small-scale processing industrial units producing

primarily for the domestic market. The main products are cartons, boxes, paper bags, and printed

items. A substantial amount of imported pulp and chemicals are used by the industrial units.

Production fell between 2001/2002 with definite signs of increase by mid 2002. The increasing

trend of production continued in 2004 with an increase of approximately 22.5 percent over the

2003 production levels. Paper production, per se, declined as imported paper dominated the

domestic market.

International Trade Trends were not so favourable. Imports rose steadily, thus frustrating any

efforts to produce some of the imported items locally. Exports, on the other hand, which were

very negligible prior to 2002, increased by about 13 percent in 2003 and about 80 percent of its

2000 levels in 2004.

Production in this sub-sector increased gradually from 1998 right up to early 2000. However,

between 2000/2001 there was a slight decline in production of about 4.5 percent20. Since then

however, production has increased gradually with short period of decline in any one-production

year. In 2004, a decline of about 5.8 percent of production levels was reported. With the

exception of foam production, all output levels of all other products were lower than expected.

However, the pharmaceutical industries and industries producing plastics all registered

remarkable increases in production levels for 2004.

The non-metallic minerals industry consists of large production units producing cement and

small and medium enterprises producing lime (from limestone) to be used in agriculture,

construction, leather and paint production. Between 1998-2002, the non-metallic minerals

industrial sub-sector showed very strong growth of approximately 11 percent per annum. During

that same period, Uganda was seriously implementing its reconstruction and development

programme21. Production however, declined in 2002 but increased considerably in 2004 by an

impressive growth rate of 20.2 percent. The expansion of construction and building material

industries in 2004 resulted in similar increases in employment.

42

The high demand for construction and building materials encouraged further imports into the

sub-sector. The country usually imports much more into this sub-sector than it exports from it.

Exports over the years were relatively stable and extremely low when compared to imports. In

2004, imports comprising mainly of cement and related products increased by about 10 percent.

The manufactured products in this sub-sector include all those products that cannot be accurately

classified in the above-mentioned sub-sectors. Examples are motorcars and motor vehicles,

transmission parts, electrical products, etc. Production in this sub-sector which, was normally

low in the 1980s right up to the year 2000, began to increase in 2001. In 2004, the high demand

for plastic and electrical products accounted for a substantial percentage of the increased

production level estimated at 29.2 percent.

The private sector is expected to play an important role in the economic development and

industrialisation of Uganda. The private sector in Uganda, however, covers not only the ‗large‘

and medium enterprises, but micro and small enterprises as well. Most of the micro and small

enterprises are operating in the informal sector. They are known to utilise more domestic raw

materials, labour and other inputs more intensively than the ‗large‘ or medium enterprises in the

country. The indigenous entrepreneurs in Uganda are mainly interested in micro and small

enterprises which are labour intensive and require less sophisticated technologies, as well as low

investments, unskilled and semi-skilled labour. Micro and small enterprises‘ contribution to

production and employment in Uganda is therefore quite significant.

Micro and small enterprises are to be found in every district of the country and in the capital

Kampala. They vary from small rural enterprises to small urban enterprises employing 1-10

employees, in most cases, and 10 or more employees. The Ministry of Finance, Planning and

Economic Development in Uganda has defined micro and small enterprises as follows:

Micro enterprises are those enterprises that are usually owned by a sole operator for income

generating purposes. ―They are business undertakings employing less than five people of the

family members. The value of assets, excluding land, buildings and working capital is below 2.5

million Uganda Shillings; the annual turnover is below 10 million Uganda Shillings which is the

threshold for business related tax‖.

43

―Small enterprises are enterprises employing a maximum of 50 people in terms of value of assets

excluding land and building and working capital is less than 50 million Uganda Shillings; annual

income turnover is between 10- 50 million Uganda Shillings24. These enterprises are formally

registered and operate fully the whole year and are managed by educated/skilled/trained

managers.

It is estimated that there are more than 800,000 micro and small enterprises (MSEs) in

Uganda, employing about 1.5 million workers25. It is also estimated that micro and small

enterprises account for about 20 percent of the GDP. An annual growth rate of about 20 percent

is also recorded for MSEs in Uganda. It should be noted that not all of the 800,000 MSEs are in

industry or industry related activities. A good number of them are in trade, both wholesale and

retail, hotels, bars and related services. The Uganda Bureau of statistics conducted an MSME

survey in 2001/2002highlighting the number of business.

44

Chapter 1.6

Overview of Different

Economic Sector of

Uganda

45

Contribution of different sector in GDP of Uganda

(2012)

Agriculture - 22%

Service sector -53%

Industry sector -25%

Uganda is agriculture base economy and 80% of the people are employed in agriculture activity

although contribution of agriculture in GDP is less compare to other sector of the country,

service sector is contributing more to the GDP, 53% contribution is coming from service sector

and 22% agriculture contributing to GDP, industry sector‘s contribution is 25% in GDP.

GDP of Uganda:

22%

54%

24%

SECTOR CONTRIBUTION

Agriculture Service Industry

46

Real GDP measures overall performance of country. GDP of the Uganda decreased to 3.2% from

6.7% in 2011. Decreased in GDP was caused by high global oil and commodity prices, power

shortages, exchange rate volatility, weak external demand, high level of inflation.

Purchasing Power Parity of Uganda:

PPP is obtained by dividing the country‘s gross domestic product, adjusted by purchasing power

parity, by the total population. The gross domestic product per capita in Uganda was last

reported at 1354 USD in 2011.

Agriculture Sector

Agriculture is a key sector for food security and wealth creation. Uganda's favorable soil

conditions and climate have contributed to the country's agricultural success Food Crops,

Forestry, and Fishing. The sector accounts for 48 percent of exports revenue and provides a

significant proportion of the raw materials for industry and employs 73 percent of the population.

The government of Uganda and banks are given credit to local farmer.

Agriculture’s contribution in GDP:

Particular 2011-2012 2011/2010 2010/2009

Sector growth 3% 0.7% 2.4%

Cash crops(coffee, cotton, tea) 16.2% -6.5% -1.1%

Food crops 1% 0.7% 2.7%

Live stocks 3% 3% 3%

Forestry 3.6% 2.8% 2.9%

Fishing 2% 1.8% 2.6%

47

SERVICE SECTOR

Contribution of service sector in GDP of Uganda is remarkably high; it contributes 53% in GDP.

Service sector includes many services emerged in economy of Uganda but service sector growth

is decreased to 3.1% in 2011/12 from 8.4% in 2010/11. Service sector include,

Service sector of Uganda include following services

• WholeSale And Retail Trade

• Hotels And Restaurant

• Transport And Communication

• Road Rail And Water Transport

• Air Transport

• Post And Tele Communication

• Financial Service

• Education

• Real Estate Service

• Tourism

Wholesale and retail trade:

Because of exchange rate fluctuation and high interest rate, wholesale and retail trade sector is

declined by 0.7% in 2011/12. The wholesale trade sector rendering services incidental to the sale

of mercantile.

Transportation and communication:

Transportation and communication sector is growing at 8.9% in 2011/12 as compared to 14.1%

in 2010/11. The telecommunication sector shows the strong growth of 15% in 2011/12 and is

mainly attributed to strong performance in cellular subscription.

48

Industry Sector

Water Supply :

Uganda made spectacular progress in water supply and sanitation sector after the

commercialization and modernization of National Water and Sewerage Corporation.

But still 40 % of population had no access to an improved water source and 57% had no

improved sanitation. The (PEAP)Poverty Eradication Action Plan estimates that from 2001 to

2015, about US$1.4 billion, or US$92 million per year, are needed to increase water supply

coverage up to 95%.

Mining :

Uganda‘s mineral potential has been increasing substantially due to huge efforts made in

improving mining. Minerals like gold, tantalite, copper and cobalt are found in Uganda. The

government has induced $42 million in restructuring and development of the mineral sector

which will generate revenue of sh145 billion in future.

Construction:

Various Government policies have been developed to enhance the Construction sector by

weeding out bogus constructors who were responsible for collapsing of buildings and weaker

road constructions. Uganda‘s Building sector is growing rapidly. Although growth in the

industry has resulted from a number of factors, the high population growth of 3.2 per cent has

played a major role in its progress.

Electricity :

There is a huge shortage of electricity supply in Uganda currently. Its main power generation is

through hydro power plant which is 380 MW latest. About 97% of Uganda's population does not

have access to electricity. Due to the lack of power supply the GDP of Uganda is also adversely

affected. Within 20 years from now the countrymust generate an additional 1700MW to meet its

demand capacity. To achieve this, more than $3.5 billion will have to be sourced for the energy

sector

49

Manufacturing industry :

The manufacturing industry comprises of industries producing textiles, leather, footwear,

chemicals, wooden products, no-metallic minerals, beverages, processed food etc. By 2003/2004

this industry grew with a growth rate of 5.7 percent. This growth was mainly due to growth in

textiles, beverages and basic metals. But since last five years all sectors in this industry has

recorded trade deficit. Imports were 13 percent, on account petroleum oils, of total

manufacturing whereas exports were 48 percent which included coffee and fish products.

Food Processing Industry :

Uganda produces large quantities of a variety of fruits and vegetables, including pineapples,

mangoes, passion fruit, maize, beans, tomatoes, etc. Fishery is also a huge industry and fish

processing into fillet and other fish meat are produced on large scale. Production in the food-

processing sub-sector increased since the year 2000, although declines in production were

registered in early 2003 and mid 2004. However, the sub-sector grew by about 88 percent in

2003.

Paper And Printing Industry :

There are number of small scale industries producing mainly cartons, boxes, paper bags, and

printed items for the domestic market. Paper production declined as imported paper dominated

the domestic market.

Other Manufacturing :

Other products like production of Motorcars and Motor vehicles, transmission parts, electrical

products etc. are included in this sector. Since 2004, the high demand for plastic and electrical

products accounted for a substantial percentage of the increased production level estimated at

29.2 percent.

Leather And Leather Products :

Uganda has 5.7 million cattle, over 4.2 million goats and 1.3 million sheep whose hides and

skins when slaughtered provide huge amount of raw material for leather industries. The leather

being produced in Uganda is of high quality and the texture of the leather is also considered to be

very good. Hence nearly 90 percent of the leather produced in the country is exported.

Metallurgical Industries :

50

The metallurgical industry in Uganda is not well developed. It comprises of steel rolling mills,

metal and metal working industries such as galvanizing plants producing roofing and fencing

materials, foundries, forging and machine shops and the manufacture of domestic appliances,

spare parts, equipment and tools. The metallurgical sector is faced with a number of problems

including inadequate raw materials and inaccessibility to raw materials located in the interior of

the country.

Engineering Industries :

In Uganda, the engineering industries include industries producing transport equipment,

agricultural equipment; machinery used in the textiles industries in the metal working industries

and in the electric and electrical equipment industries. The types of technology selected for most

of the industries are highly dependent on the importation of certain inputs, as the raw materials

expected from the metallurgical industries are not always available. As a result, engineering

industries in Uganda tend to produce well below installed manufacturing capacity.

Non-Metallic Industries :

For Uganda the development of non-metallic industries, in particular, the building material

industry is the powerful catalyst for economic development. In Uganda the existence of cement

and ceramic production facilities has made it possible for it to initiate nationwide building

schemes including housing. The main non-metallic industries are also capital intensive and the

ability of industries to compete would depend on the technological process selected and the

quality of the products. Uganda is competitive in a few non-metallic mineral products.

Real Estate

The real estate sector in Uganda has seen Property developers who have recently entered the

market and have innovatively teamed up with a number of local and international banks present

in Uganda to extend mortgage services to a number of Ugandans. Companies like the

Government owned National Housing and Construction Corporation and Private Property

Developers like Akright Projects, Kensington Real Estate Company, Turipati Developments,

Pearl Real Estate Developers and Jomayi Property Consultants have worked out schemes

through which middle income earners can access loans for the purchase of real estate through

banks.

51

Chapter 1.7

PESTEL analysis

52

There are many factors in the environment that will affect the decisions of the

government of any country. Tax changes, new laws, trade barriers, demographic

change and government policy changes are all examples of macro change. The

stability and structure of a country‘s government gives a basis for interpreting

future changes in the region‘s political environment. Following are the detailed of

the PESTEL analysis.

The stability and structure of a country‘s government gives a basis for interpreting

future changes in the region‘s political environment. Policy at the local or federal

level can differ dramatically. Learn the decision makers that are relevant to your

venture, subsidies available in your industry, and time lines necessary for

processing requests. The conventional long form of country name is Republic of

Uganda and the type of government in Uganda is Republic. The name of capital is

Kampala. Uganda got independent on 9 October 1962 from the UK. For most

countries, this entry gives the date that sovereignty was achieved and from which

nation, empire, or trusteeship. For the other countries, the date given may not

represent "independence" in the strict sense, but rather some significant nationhood

event such as the traditional founding date or the date of unification, federation,

confederation, establishment, fundamental change in the form of government, or

state succession. Elections include the nature of election process or accession to

power, date of the last election, and date of the next election. The Chief of state,

President Lt. Gen. Yoweri Kaguta MUSEVENI (since seizing power on 26 January

1986); Vice President Edward SSEKANDI (since 24 May 2011) the president is

both chief of state and head of government. And the Head of government was

President Lt. Gen. Yoweri Kaguta MUSEVENI (since seizing power on 26 January

1986); Prime Minister Amama MBABAZI (since 24 May 2011); the prime

minister assists the president in the supervision of the cabinet. President reelected

by popular vote for a five-year term; election last held on 18 February 2011 (next

53

to be held in 2016). The Election results was Lt. Gen. Yoweri Kaguta MUSEVENI

elected president; percent of vote - Lt. Gen. Yoweri Kaguta MUSEVENI 68.4%,

Kizza BESIGYE 26.0%, other 5.6%. The main political party and leaders of

Uganda are Conservative Party or CP [Ken LUKYAMUZI]; Democratic Party or

DP [Norbert MAO]; Forum for Democratic Change or FDC [Kizza BESIGYE];

Inter-Party Co-operation or IPC (a coalition of opposition groups); Justice Forum

or JEEMA [Asuman BASALIRWA]; National Resistance Movement or NRM

[Yoweri MUSEVENI]; Peoples Progressive Party or PPP [Bidandi SSALI];

Ugandan People's Congress or UPC [Olara OTUNNU]. The National anthem of

Uganda is‖Oh Uganda, Land of Beauty!”

Agriculture is the most important sector of the economy, employing over 80% of

the work force. Coffee accounts for the bulk of export revenues. Uganda has never

conducted a national minerals survey. GDP of agriculture sector is 22%, GDP of

Industry sector is 25.4% and GDP of Service sector is 52.6% in Uganda. Labor

force in Industry is 5% and labor force in services is 13% in Uganda. There is an

Unemployment rate NA% in Uganda. Lowest 10% of the house holds income or

consumption in Uganda was 2.4% and highest 10% the house hold income or

consumption in Uganda was 36.1% in the year of 2009. The inflation rate of

Uganda was 14% in the year of 31 December 2010 and 9.65% in the year of 31

December 2009 on the consumer price. The prime lending rate of commercial bank

was 20.5% in the year of 2011 and 20.17% in the year of 2010. In the year of

2008, the stock of money was $1.483 billion and in the year of 2007, was $1.347

billion. The market value of publicly traded share was $116.3 million in the year

of 2006. The agriculture products of Uganda are coffee, tea, cotton, tobacco,

cassava (tapioca), potatoes, corn, millet, pulses, cut flowers; beef, goat meat, milk,

poultry. These are the main industrial products like Sugar, brewing, tobacco, cotton

54

textiles, cement and steel in Uganda. The growth rate of industrial product was 2%

in the year of 2011. The export in 2011 was $2.582 billion and the export in 2010

was $2.164 billion.

The export commodity includes coffee, fish and fish products, tea, cotton, flowers,

horticultural products, and gold. The import of Uganda was $4.771 billion in 2011

year and $4.264 billion in 2010 year. The exchange rates of Ugandan shillings

(UGX) per US dollar were 2,567.1 in 2011 and 2,178 in 2010.

Understanding the social dynamics of the region that you decide to enter will

enable you to more efficiently communicate with the native people, target markets,

build a labour force and successfully manage teams. Your knowledge of the social

aspects and cross-cultural communications is paramount in small gatherings where

certain dignitaries and diplomats may be asked to attend. The total population of

Uganda is 35,873,253 in the year 2012. The age structure of Uganda for 0-14

years is 49.9% (male 8,692,239/female 8,564,571) and the age structure of

Uganda for 15-64 years is 48.1% (male 8,383,548/female 8,255,473). The

population rate of Uganda was 3.582% in the year of 2011. The birth rate was

47.38 births per 1,000 populations in the year of 2011. The death rate was 11.54

deaths per 1,000 populations in the year of 2011. Total infant mortality rate was

61.22 deaths per 1,000 live births, for male it was 64.78 deaths per 1,000 live

births and for female it was 57.56 deaths per 1,000 live births in the year of 2011.

The official languages are English and Swahili of Uganda. These are the main

religion like Roman Catholic 41.9%, Protestant 42% (Anglican 35.9%, Pentecostal

4.6%, Seventh- Day Adventist 1.5%), Muslim 12.1%, other 3.1%, none 0.9%

(2002 census) of Uganda. The literacy rate is 66.8% of the total population can

read and write in Uganda. The government of Uganda was spending 8.2% of GDP

for health expenditures in the year of 2009.

55

The level of technological advancement in a region can positively or negatively

affect the opportunities available for a business. The proliferation of mobile

technology, wireless internet, access to electricity, internet access and

transportation networks all influence the ease of doing business. The numbers of

telephone users were 327,100 in the year of 2009 in Uganda. The numbers of

mobile users were 12.828 million in the year of 2009 in Uganda. The telephone

system includes Domestic intercity traffic by wire, microwave radio relay, and

radiotelephone communication stations, fixed and mobile-cellular systems for

short-range traffic; mobile cellular teledensity about 40 per 100 persons in 2010.

International country code – 256, satellite earth stations - 1 Intelsat (Atlantic

Ocean) and 1 Inmarsat, analog links to Kenya and Tanzania. Arabsat means Arab

Satellite Communications Organization (Riyadh, Saudi Arabia) CB means citizen's

band mobile radio communications. Central American Microwave System a

trunk microwave radio relay system that links the countries of Central America and

Mexico with each other. Comsat means Communications Satellite Corporation

(US). DSN means Defense Switched Network (formerly Automatic Voice

Network or Autovon); basic general-purpose, switched voice network of the

Defense Communications System (US Department of Defense). Eutelsat means

European Telecommunications Satellite Organization (Paris). HF means high

frequency; any radio frequency in the 3,000- to 30,000-kHz range. Inmarsat

means International Maritime Satellite Organization (London); provider of global

mobile satellite communications for commercial, distress, and safety applications

at sea, in the air, and on land. Intelsat means International Telecommunications

Satellite Organization (Washington, DC). Intersputnik means International

Organization of Space Communications (Moscow); first established in the former

Soviet Union and the East European countries, it is now marketing its services

worldwide with earth stations in North America, Africa, and East Asia. NMT

56

means Nordic Mobile Telephone; an analog cellular telephone system that was

developed jointly by the national telecommunications authorities of the Nordic

countries (Denmark, Finland, Iceland, Norway, and Sweden). SAFE means South

African Far East Cable.

Satellite communication system consisting of two or more earth stations and at

least one satellite that provide long distance transmission of voice, data, and

television; the system usually serves as a trunk connection between telephone

exchanges; if the earth stations are in the same country, it is a domestic system.

Submarine cable designed for service under water. TAT means Trans-Atlantic

Telephone; any of a number of high-capacity submarine coaxial telephone cables

linking Europe with North America. Telefax is facsimile service between

subscriber stations via the public switched telephone network or the international

Datel network. Telex is a communication service involving teletypewriters

connected by wire through automatic exchanges. Trunk network is a network of

switching centers, connected by multichannel trunk lines. UHF means ultra high

frequency; any radio frequency in the 300- to 3,000-MHz range. VHF means very

high frequency; any radio frequency in the 30- to 300-MHz range. The broadcast

media of Uganda includes Public broadcaster, Uganda Broadcasting Corporation

(UBC), operates radio and TV networks; Uganda first began licensing privately-

owned stations in the 1990s; by 2007 there were nearly 150 radio and 35 TV

stations, mostly based in and around Kampala; transmissions of multiple

international broadcasters are available in Kampala (2007). The internet country

code of Uganda is UG. The internet host was 33,082 in 2010 this entry lists the

number of Internet hosts available within a country. The numbers of internet users

were 3.2 million in the year of 2009.

57

Environmental analysis involves aggregating and analyzing weather patterns and

climate cycles. In the wake of the heated discussion about global warming,

environmental analysis has been brought to the forefront of the media, a place it

usually only occupies in times of disaster, like the tsunami in South East Asia or

the Haitian Earthquake. Environments vary drastically in different areas of the

globe depending on the biome or ecosystem of the region. While not a

comprehensive list, some examples are tundra, forests, deserts, grasslands, and

wetlands. The location of Uganda situated near East-Central Africa, west of

Kenya, east of the Democratic Republic of the Congo. The land area includes

197,100 sq km, the water area includes 43,938 sq km and total area of Uganda is

241,038 sq km. The total land boundary of Uganda is 2,698 km. The border

countries of Uganda are Democratic Republic of the Congo 765 km, Kenya 933

km, Rwanda 169 km, South Sudan 435 km and Tanzania 396 km. Copper, cobalt,

hydropower, limestone, salt, arable land and gold these all are the natural resources

of Uganda. From the total land, 21.57% Arable land is use; in this land 8.92%

Permanent crops are grown and others are 69.51% Uganda made a international

agreements for environment with Biodiversity, Climate Change, Climate Change-

Kyoto Protocol, Desertification, Endangered Species, Hazardous Wastes, Law of

the Sea, Marine Life Conservation, Ozone Layer Protection, Wetlands.

Legal environments change between the district, city, state/province and national

levels. Complexities within certain industries can have a strong influence on the

ease of doing business, complicating administrative, financial, and regulatory

processes, among others. The constitution of Uganda includes the dates of

adoption, revisions, and major amendments. It was amended in 2005 the

amendments in 2005 removed presidential term limits and legalized multiparty

political system. The legal system of Uganda is mixed legal system of English

common law and customary law. International law organization participation of

58

Uganda includes information on a country's acceptance of jurisdiction of the

International Court of Justice (ICJ) and of the International Criminal Court (ICCt);

55 countries have accepted ICJ jurisdiction with reservations and 11 have accepted

ICJ jurisdiction without reservations; 114 countries have accepted ICCt

jurisdiction. The judicial branch contains the name(s) of the highest court(s) and a

brief description of the selection process for members. The Court of Appeal

(judges are appointed by the president and approved by the legislature); High

Court (judges are appointed by the president).

SWOT Analysis

SWOT Analysis is the most renowned tool for audit and analysis of the overall

strategic position of the country and its environment. Its key purpose is to identify

the strategies that will create a firm specific business model that will best align

country‘s resources and capabilities to the requirements of the environment in

which the firm operates.

STRENGTH

Strengths are the qualities that enable us to accomplish the organization‘s mission.

These are the basis on which continued success can be made and

continued/sustained. Strengths can be either tangible or intangible. These are what

you are well-versed in or what you have expertise in, the traits and qualities your

employees possess (individually and as a team) and the distinct features that give

your organization its consistency. Strengths are the beneficial aspects of the

organization or the capabilities of an organization, which includes human

competencies, process capabilities, financial resources, products and services,

59

customer goodwill and brand loyalty. Examples of organizational strengths are

huge financial resources, broad product line, no debt, committed employees, etc.

Low employment rigidity.

Low costs for purchasing farm land.

Organized producer groups hence organized collection systems.

Potential of high production (climate, soil fertility, existing skilled government

technocrats).

Government acknowledgement of the importance of the tourism sector.

Rich cultural heritage and diversity.

Rich natural resource base – mountain gorillas, ornithological destination

with more than 1,000 species recorded.

Positive shift of trade competitiveness in recent years.

Easy availability of local component inputs.

Ease of sourcing local raw material.

Ease of finding workers with a good command of the official language.

Good availability of technical workers.

WEAKNESS

Weaknesses are the qualities that prevent us from accomplishing our mission and

achieving our full potential. These weaknesses deteriorate influences on the

organizational success and growth. Weaknesses are the factors which do not meet

the standards we feel they should meet. Weaknesses in an organization may be

depreciating machinery, insufficient research and development facilities, narrow

product range, poor decision-making, etc. Weaknesses are controllable. They must

be minimized and eliminated. For instance - to overcome obsolete machinery, new

machinery can be purchased. Other examples of organizational weaknesses are

60

huge debts, high employee turnover, complex decision making process, narrow

product range, large wastage of raw materials, etc.

Decreased trade competiveness.

Low productivity of milk in North and Eastern Uganda (lack of organized

groups, lack milk collection centres).

Inefficient information flow e.g. market information, regulatory.

Scarce vacancy for industrial building and sites.

High cost of finance.

Poor infrastructure.

Weak country rating.

Business starts up procedures are numerous.

High electricity usage charges.

Poor airline connectivity.

Low marketing spends, advertising.

Limited facilitation of regulatory and enforcing agencies.

OPPORTUNITIES

Opportunities are presented by the environment within which our organization

operates. These arise when an organization can take benefit of conditions in its

environment to plan and execute strategies that enable it to become more

profitable. Organizations can gain competitive advantage by making use of

opportunities. Organization should be careful and recognize the opportunities and

grasp them whenever they arise. Selecting the targets that will best serve the clients

while getting desired results is a difficult task. Opportunities may arise from

market, competition, industry/government and technology. Increasing demand for

61

telecommunications accompanied by deregulation is a great opportunity for new

firms to enter telecom sector and compete with existing firms for revenue.

An opportunity also exits in serving the goods and services to regional

market. Taking advantage of Uganda’s strategic central location in East

and South Africa.

Competitive tourism investment climate.

Improve infrastructure and facility development

The great opportunity of expansion tourism product diversification e.g.

conference tourism

Technology- modern facilities for competitiveness.

Export Market availability mainly in milk product, services, manufacturing

goods and agriculture products deficient neighbouring countries (DRC, Burundi,

Kenya, Rwanda, Tanzania and Southern Sudan).

Improve marketing and advertising field for become a global competitor.

THREATS

Threats arise when conditions in external environment jeopardize the reliability

and profitability of the organization‘s business. They compound the vulnerability

when they relate to the weaknesses. Threats are uncontrollable. When a threat

comes, the stability and survival can be at stake. Examples of threats are - unrest

among employees; ever changing technology; increasing competition leading to

excess capacity, price wars and reducing industry profits; etc.

Uganda does not have a good reputation for intellectual property protections

therefore; foreign companies may be averse to trusting secure financial and

corporate data to firms located there.

62

Threats of competition from country like Ethiopia, Tanzania, Zambia, Ghana

and Kenya have growing and vibrant vegetables, fruits and floriculture

industry.

Major threats of textile industry in Uganda are the mass inflow of

second hand clothes, a large amount of coming from USA.

Internal and regional wars.

63

Chapter 1.8

Political Environment

64

Uganda was, in effect, governed from a gathering of military base spread across the country,

where battalion commanders, acting like local warlords, represented the coercive arm of the

government. The Ugandan General Service Unit (GSU), an intelligence agency formed by the

preceding government, was disbanded and replaced by the Ugandan State Research Bureau

(SRB). In 1966, well prior to the Amin era, northerners in the army had beaten and harassed

soldiers from the south. Amin came to rely on Nubians and on earlier Anyanya rebels from

southern Sudan.

The army, which had been gradually stretched under Obote, was stretched thrice further under

Amin. Amin always remembered the basis of his power. Early in 1972, he upturned foreign

policy — by no means a major issue for Amin — to make safe monetary and military support

from Muammar Gaddafi of Libya. Amin debarred the remaining Israeli advisers, to whom he

was much owing a favor, and became anti-Israel. East Germany helped to build Amin's

underground police. In August 1972, Amin disqualified almost all of Uganda's 80,000 Asians

and detained their belongings. Uganda's export crops were sold by government parastatals, but

the majority of the foreign money they earned went for purchasing imports for the armed forces

The fall of Idi Amin, the UNLF and Obote II

In April 1979, a joint force of Ugandan exiles, under the umbrella of Uganda National Liberation

Army (UNLF), and the Tanzania Peoples Defense Force (TPDF) overthrew Amin's rule.

It brought together a dissimilar group of Ugandan organizations and individuals with a general

goal of ousting the Amin rule. The first UNLF government was led by Prof. Yusuf Lule as

President and though well liked only lasted 68 days.

65

President Lule was followed by President Godfrey Binaisa, and then Paulo Muwanga

whochaired the ruling Military Commission which prepared the December 1980 general

elections. For a second time, Obote became President of Uganda.

Current Political Position of Uganda

Uganda is a presidential republic, in which the President of Uganda is both head of state and

head of government; there is a multi-party system. Executive power is exercised by the

government. Legislative power is vested in both the government and the National Assembly. In

the non-party "Movement" system instituted by the current president Yoweri Museveni, political

parties persistent to exist but could not campaign in elections or field candidates directly

(although electoral candidates could belong to political parties). The Supreme Court of Uganda

ruled that the election was marred by coercion, violence, voter disenfranchisement, and other

irregularities.

Judicial System of Uganda

The Government of the Republic of Uganda is a Democracy made up of three arms:

The Executive – comprising of president, vice president, prime minister, cabinet.

The Legislative – parliament.

The Judiciary - Magistrates' Courts, High Court, Court of Appeals (Constitutional Court),

Supreme Court.

Authority & Power of Local Government in Uganda

The scheme of Local Government in Uganda is based on the District as a Unit under which there

are junior Local Governments and Administrative Unit Councils. Selected Local Government

66

Councils which are accountable to the people are made up of persons directly selected to

represent electoral areas, persons with disabilities, the youth and women councilors forming one

third of the council. The Local Government Council is the principal political power in its area of

authority.

The Local Government Act, 1997 gives effect to the decentralization of functions, powers, and

services to all levels of Local Government to develop good governance and democratic

participation in and control of decision-making by the people. The law also provides revenue,

political and administrative set up of Local Governments as well as election of Local Councils.

The powers which are assigned to the Local Governments include powers of making local policy

and amendable delivery of services; formulation of development plans based on locally

determined priorities; receive, raise, manage and allocate revenue through approval and

execution of own budgets; alter or create new boundaries; appoint statutory commissions, boards

and committees for personnel, land, procurement and accountability; as well as establish or

abolish offices in Public Service of a District or Urban Council.

The central Government is responsible for national affairs and services; formulation of national

policies and national standards and monitoring the implementation of national polices and

services to ensure compliance with standards and regulations.

Overview the Local Government Association

STRATEGIC OBJECTIVES

1.To support a strong ULGA uniting and representing the interests of members and providing

them with efficient and effective services

2.Trusted Local Governments performing their mandated functions in an accountable and

transparent manner

67

Every District and Lower Local Government Council is entitled to become a member of the

Association upon passing a council resolution, adopting the constitution and payment of

membership and subscription fees.

STRUCTURE AND MANAGEMENT

The Association is able to achieve its objectives through a number of organs. These include: the

Annual General Meeting, the Executive Committee, the Ethics and Accountability Committee

and the National Secretariat.

Uganda's National Development Plan

DFID Uganda commissioned a civil society organization, SPW, to lead and classify a two-day

national youth consultation at the application of the National Planning Authority in June 2009.

Problems addressed:

The discussion was designed to deal with the lack of youth input and participation in the

development of Uganda‘s Five-Year National Development Plan (2009 to 2014), particularly

concerning the key issues affecting young people, such as unemployment, education, health and

poverty.

Objectives

•To ensure young people across Uganda have the opportunity to learn about and feed into the

NDP process;

68

•To provide an opportunity for face-to-face discussion between young people and decision-

makers; so decision-makers can better understand the barriers to employment and prosperity

facing young people across Uganda;

Youth as partners

Fifty-two young people (provided that national representation for Uganda‘s districts and youth-

led organizations), were recruited from youth NGOs, student associations and youth disability

groups. This group discussed the key thematic areas of the NDP and formulated

recommendations for the government.

Process

•National newspaper advertisement attracting help via SMS;

•Four groups formed strategies in the key areas of education, employment, health and

population, and gender and social development;

•Two young people presented the recommendations to the National Planning Authority and

Ministry of Children and Youth;

•Consultation outcomes disseminated across all key ministries and decision- makers in Uganda.

Results

•Government considering follow-up regional consultations, and youth participation in M&E of

the plan.

•World Bank Uganda seeking young people to participate in Country Assistance Strategy (2010).

69

Political View on Foreign Investment

Strong financial growth, open markets, and plentiful natural resources provide good

opportunities for knowledgeable investors in Uganda, though significant challenges such as poor

infrastructure, high energy and production costs, and corruption can make Uganda a difficult

investment climate. The Government of Uganda practices sound macroeconomic management,

and is revising a range of laws and regulations to improve government liability, open markets,

develop infrastructure, and build a more attractive environment for foreign Direct investment.

Uganda‘s prospective for larger amounts of Foreign Direct Investment (FDI), is tempered by

weak infrastructure, insufficient electricity and high energy costs, the lack of skilled workforce,

political interference, and high levels of corruption. With an installed total capacity of just 415

megawatts , Uganda's electricity network reaches only 10% of the population, and load shedding

across the country is common. A two-lane highway from Kenya remains the primary route for

80% of Uganda's trade and election-related violence in Kenya in 2007-2008 virtually halt

imports into Uganda for more than two months, causing a close impale in commodity prices.

Uganda has increased public sector investment in roads, telecoms, and energy and is actively

seeking private sector partners to overcome these deficits.

Corruption and government interference in the private sector are regional. In commercial

disputes, Government agencies and politically-connected insiders may ignore court rulings

against them, leaving foreign investors with no official means of recourse. A recent tax dispute

over the sale of oil rights has held up oil production in Uganda for over a year and has led some

investors to question the government‘s commitment to contract divineness.

Uganda's social services systems are lagging behind the demand generated by economic

expansion and population growth. Uganda's population growth rate is 3.2 % per year, which is

one of the highest in the world and Uganda's current population of 31 million is expected to

triple in the next 30 years. While creating potential markets for products, the country's

70

population growth is already increasing the burden on social services, infrastructure, and land

resources.

Openness to, and Restrictions Upon, Foreign Investment

Uganda is open to foreign investment and provides attractive incentives for medium and long-

term foreign investors. The Heritage Foundation's 2010 Index of Economic Freedom ranked

Uganda's economy 76 of 179 countries, and as the fifth freest economy of 46 countries in sub-

Saharan Africa based on the ease of doing business, openness to trade, property rights, and fiscal

and monetary policy.

Since coming to power in 1986, President Yoweri Museveni established relative political

stability and economic growth. He encourages foreign businesses to set up operations in Uganda,

particularly in value-added manufacturing and agro-processing. In 2001, Uganda created the

Uganda Investment Authority (UIA) to assist foreign and domestic investors. Once adopted, this

code will turn the Uganda Investment Authority into a one-stop shop for investors by granting

the UIA new powers to obtain secondary permit for investor operations, allocate government

resources for investment, and provide government incentives for rural investment.

Uganda now offers investment incentives and is implementing reforms to ease business

transactions. Uganda Investment Authority is implementing a plan to construct industrial parks

in the country's largest population centers. The government is financing the project with $27

million World Bank loan and $10 million budget allocation. The first park is located eight miles

east of Kampala in Namanve, with electricity, mess systems, roads, and telecommunications

infrastructure jointly funded by the World Bank and the government. According to Uganda

Investment Authority , Uganda attracts many investors from the Middle East and Asia. Firms

from traditional investor countries such as Kenya, South Africa and the United Kingdom (UK)

also obtained licenses. According to the UIA, India was the largest foreign investor in 2010 with

47 future projects worth $173 million. Firms invested primarily in the manufacturing, finance,

agriculture, and mining sectors. In total, Uganda Investment Authority granted licenses to 323

projects worth $1.67 billion in 2010. U.S. foreign investment in Uganda remains relatively small.

71

In 2010, Uganda Investment Authority approved six new U.S. investments worth $2.2 million,

making the U.S. the 22nd largest investor in Uganda.

Ugandan policies, laws, and regulations are generally positive towards foreign investors, though

revised legislation is needed. Uganda is revising more than 20 commercial and insolvency laws

to reduce managerial delays and the cost of doing business. This includes plans to revise the

Companies Law, update and speed up insolvency procedures, toughen intellectual property rights

protections, expand and clarify provisions on mortgages, inform commercial contract law, and

modernize provisions for e-commerce and electronic signatures. A draft Companies Bill,

pending in Parliament since 2009, is designed to replace the outdated Companies Act, which

remains the legal basis for the regulation of companies in Uganda. Under both the current and

draft law, foreign investors may form 100% foreign-owned limited or unlimited legal

responsibility companies and majority or minority joint ventures with Ugandan partners without

restrictions. Licensing from Uganda Investment Authority requires a promise to invest over

$100,000 over three years. Most foreign investors establish themselves as limited liability

companies. Ugandan law also permits foreign investors to obtain domestic enterprises or

establish Greenfield ventures. Ugandan courts generally support the purity of contracts, though

judicial fraud and technical delays caused by well-connected defendants are a serious challenge.

At times, Ugandan government agencies are unenthusiastic to honor legal remedies issued by the

courts. Courts apply the principles of English common law. In recent years, the Uganda Revenue

Authority has better its efficiency, boosted simplicity, and increased tax fulfillment. Part of this

success is due to an internal reorganization, though the Uganda Revenue Authority has also

grown more aggressive in collection by targeting large, often foreign-owned businesses. Despite

these improvements, the Uganda Revenue Authority is still visible as a damage institution.

Transparency International‘s 2010 East African incentive Index listed the Uganda Revenue

Authority as the 4th most corrupt institution in East Africa and the most corrupt institution in

Uganda. The Uganda Revenue Authority has offices throughout Uganda to provide restricted

points of contact to address taxpayer concerns. Trade entities are taxed at 30%, though mining

companies are taxed at rates between 25% and 45%.

The asset Code allows foreign contribution in any industrial sector except those touching on

national security or requiring the possession of land. The Investment Code also allows licensing

72

authorities to impose performance obligations on foreign investors to which nationals are not

subject. While the Code does not specify these obligations, Uganda Investment Authority

imposes requirements based on the size of asset, staff training, limited employment, local

procurement and environmental protection.

In 2006, the World Bank provided $70 million recognition for the Private Sector

Competitiveness Project. This program improves Uganda‘s basic infrastructure for business

expansion. The funds are distributed through the Private Sector Foundation (PSF) – a private

businees support group founded with funds from the United States Agency for International

Development (USAID) – to do up the entire land registry system. listed for completion in 2012,

the project also aims to update Uganda's business registration service, hold up the Uganda Law

Foreign investors in Uganda should be attentive that projects that could shock the environment.

The responsibility for Environmental impact Assesments applies to both local and foreign

investors. Uganda's require of sufficient electricity supply and poor road infrastructure are major

impediments for investors as road blockages, load shedding, and unforeseen power outages

generate unexpected costs for all businesses. Uganda currently has just 415 MW of operational

electricity capacity, removal some 90% of Ugandans with no entry to electricity. Uganda is

ongoing its obligation to invest in roads, with plans to spend $483 million in 2010-2011. The

telecom sector is booming after the Government Of Uganda lifted a suspension on new mobile

telephone operative licenses. Further, Uganda is investing $117 million on a national fiber-optic

network to take benefit of the arrival of marine fiber-optic cables in East Africa.

73

Chapter 1.9

Investment Opportunities

for Entrepreneurs of

Gujarat and in Uganda

74

Uganda is not stranger for investment and it has attracted the highest levels of foreign direct

investment in the East Africa Community region over the past five years. In 2010 only, Uganda

attracted FDI of up to US$ 848 million because of several reasons which included a predictable

investment environment, a fully liberalised economy, good market access, a strong natural

resource base and a commitment to the private sector by the government. Strategic location at the

heart of Africa that guarantees ready access to regional markets

Uganda attracted FDI of up to US$ 848 million because of several reasons

1. Predictable Environment

2. Fully Liberalized Country

3. Market Access

4. Natural Resource Base

5. Government Commitment to Private Sector

6. Security to investors

Uganda's economy remains small, with a gross domestic product (GDP) of about $16 billion in

2009 ($490 per capita), and 31% of the population living on less than $1 per day. It is also highly

dependent on foreign aid. Direct budgetary assistance from donor governments made up 31% of

the Ugandan budget in the 2009/2010 fiscal year and commitments for 2010/2011 were 24%,

though this number has decreased from above 50% earlier in the decade. This shows an

opportunity for Gujart Entrepreneurs to invest in different sectors of Ugadna.

Uganda also provides investment incentives to attract investment from foreign. The uniform tax

rate is 30%, initial allowance on plant and machinery 50-75%, scientific research expenses 100%

and depreciation on Plant at 20-40%. It also provides the export incentives like ten year tax

holiday and stamp duty exemption.

Uganda also provide certain incentive for export promotion such as Duty exemption on plant and

machinery and other inputs, Stamp duty exemption, Duty draws back – a refund of all or part of

any duty paid on materials, inputs imported to produce for export, Withholding tax exemptions

75

on plant & machinery, scholastic materials, human & animal drugs and raw materials.,Ten year

tax holiday, Duty remission scheme for exporters involved in value addition.

In Uganda foreign investment is regulated by Uganda Investment Authority and it a autonomous

body to boost national economic growth and development. Its objectives are Attract value adding

investment that brings technology, skills & jobs, Contribute to the image of Uganda as a leading

African Investment destination, and support to Small and Medium Scale businesses.

The procedure to invest in Uganda is easy. Foreign investors can apply for loans from the local

banking sector. A number of financial support initiatives exist to support investors in given

sectors. UIA can advise potential investors on the how and where to access existing financing

options for their planned investments.

Foreign investors require a minimum of US$100,000 in planned investment in order to secure an

investment license from the Uganda Investment Authority, whereas for local investors, the

minimum planned investment requirement is US$50,000.

Uganda's economy remains small, with a gross domestic product (GDP) of about $16 billion in

2009 ($490 per capita), and 31% of the population living on less than $1 per day. It is also highly

dependent on foreign aid. Direct budgetary assistance from donor governments made up 31% of

the Ugandan budget in the 2009/2010 fiscal year and commitments for 2010/2011 were 24%,

though this number has decreased from above 50% earlier in the decade.

76

Prominent Sectors to Invest in Uganda

Agribusiness

Uganda is one of the leading producers of coffee and bananas. It is also a major producer of tea,

cotton (including organic cotton), tobacco, cereals, oilseeds (simsim, soya, sunflower, etc), fresh

and preserved fruit, vegetables and nuts, essential oils, orchids, flowers and sericulture (silk).

Fisheries

Uganda‘s fish processing sector has expanded vastly in present years and current export earnings

for the year 2006 were close to US$146 million. Large fresh water expanses are home to a wide

variety of fish products.

Forestry

Uganda has over 4.9 million hectares of rich forest plants. Uganda possesses plentiful

opportunity in areas like timber processing for export, manufacture of high quality

furniture/wood products and various packaging materials.

Manufacturing

Uganda‘s manufacturing output has been increasing by more than 10% annually over the last

eight years. Opportunities are available in virtually all areas such as beverages, leather, tobacco

based processing, paper,

Mining

Uganda has large under-exploited mineral deposits of gold, oil, high grade tin, tungsten/wolfram,

salt, beryllium, cobalt, kaolin, iron-ore, glass sand, vermiculite and phosphates (fertilizer). A

discovery of petroleum wells in the Lake Albert region has enhanced the energy sector.

77

Infrastructure

Uganda has made hard efforts to develop the current infrastructure of the country but still there is

a lot more opportunity. Particularly, transport & logistics and energy sectors still require

additional investment. With less than 10% of the normal capacity of 2,700 megawatts of power

generated.

Financial Services

The country also has opportunities for investment exist for international multinational banking

groups particularly promoting new or innovative financial products and also micro finance

saving institutions, which propose to operate in rural areas. Insurance, in particular, is still a

relatively young sector and offers several opportunities for investment.

Tourism

The distinctive attraction of Uganda as a tourist destination is due to the variety of its game stock

and its unspoiled beauty. Within a relatively limited space of just over 240,000 square

kilometres, Uganda offers an interesting contrast ranging from the wide East African plains and

expansive savanna grasslands to the thich mountain rain forests and snow peaked mountains in

the south western parts of the country.

Education

Uganda runs high quality courses at a comparatively cheaper cost than other education

destinations and is dedicated to making investment in the country‘s knowledge hub, a unique

experience and a win-win situation for both investors and students.

Information Communication Technology

Uganda‘s Information and Communication Technology (ICT) sector is one of the most attractive

sectors within the region. This attractive partnership largely depends upon the good legal and

regulatory frameworks. The supportive investment climate therein has shown many opportunities

in ICT innovation services leading to maximum utilization of the current youthful human

resource base which is suitable for the ICT work.

78

Printing and Publishing

In the printing and publishing sub-sector, opportunities exist for the printing of textbooks for

schools. Currently, imports 90% of Uganda‘s textbook requirement So, Investment opportunities

exist in the various type of printing including flexography, screen printing, off-set printing and

digital printing.

79

Opportunity for Gujarat Entrepreneurs in Uganda

Dairy Sector

The dairy sector is one of the sectors that had been under government control for some time with

the Uganda Dairy Corporation (UDC) dominating most of the buying of milk from farmers. The

liberalization of the diary industry in the mid 1990s broke the monopoly of the Diary

Corporation and opened up opportunities for private investment. Subsequently, the proportion of

the national milk production that is processed before marketing has increased to an estimated

283,800 liters per day in 2007 where currently, 13 companies are involved in processing.

The current activities in dairy sector are

1. Milk production

2. Dairy Processing and marketing

According to Dairy Development Authority, it is estimated that 70% (i.e. 1.05 billion liters) of

the milk produced is marketed commercially and the other 30% is consumed on the farm. There

are two marketing channels for milk: informal and formal marketing channels. 80-90% of the

marketed milk is sold through the informal marketing channel as raw milk.

In urban areas, the per capita consumption is higher and estimated at 48 liters per year per

person, while in rural it is estimated at 22 liters per year per person. The K-2 survey indicates

that consumption in the Central Region (including Kampala) is highest with 91 liters per year;

Western region is the second highest in the Country averaging 51.7 liters per person per year.

Consumption is lowest in the North at 15.6 liters per year due to limited supply. Overall milk

consumption is growing at an average rate estimated at 8% per annum.

The entrepreneurs of Gujarat are having opportunity in dairy sector at Uganda. The dairy sector

of the Uganda has high production potential. There exist a good regulatory frame work and

strengthen dairy association.

80

Pharmaceutical Sector

Uganda is a land locked country with a total area of 241,551 km.. The total population (mid-

2009) was estimated at 30.7 million. From which 15.65 million or 51 per cent were female, with

23.8 million (87 per cent) living in rural areas. The census also showed that the population of

Uganda is getting progressively younger, with the proportion of children under 18 years having

increased from 51 per cent in 1969 to 56 per cent in 2002. In contrast, the proportion of elderly

persons (60 years and above) have decreased from 5.9 per cent in 1969 to 4.6 per cent in 2002.

Uganda has a total of 11 licensed local pharmaceutical manufacturers, 477 registered pharmacies

and over 4,370 chemist shops.8 As of 2006, the country had 114 hospitals, 60 of which were

public, 46 private not for profit or FBO, and eight private. The National Medical Stores (NMS)

are responsible for the procurement, storage and distribution of medicines and health supplies for

the public sector, while the private sector is served through a chain of wholesale and/or retail

pharmacies, chemist shops, and private clinics.

According to the Uganda Pharmaceutical Manufacturers Association (UPMA), Uganda‘s

pharmaceutical market has an estimated value of US$ 276 million, out of which 90 per cent of

the medicines are imported. They are imported mainly from India and China, and the remaining

10 per cent produced by local manufacturers. The imported medicines and health supplies

account for 5.4 per cent of Uganda‘s total imports.

With a population currently estimated at around 31 million and an annual average population

growth rate of 3.2 per cent, Uganda will have an estimated population of more than 36 million by

2015. This represents a prominent market segment for local manufacturers. Moreover, the total

East African Countires population will be just over 127 million and with that of the Common

Market for Eastern and Southern Africa (COMESA) results in more than 450 million potential

pharmaceutical consumers in 20 countries. This high need of import of Medicines shows an

opportunity for the entrepreneurs of Gujarat to produce Human Liquid formulationsHuman

81

vaccines, Human Parenteral Drugs, Manufacturing of Diagnostic material and equipment,

Manufacture of Medical Equipment

Energy Sector

Uganda‘s overall national development objectives are fast economic growth, through increased

productivity and improved agricultural and industrial production. Biomass as a source of

generating electricity at small scale has not been explored in the African region except in South

Africa [Dasappa, 2007]. A centralized plant that generates biogas from organic wastes will help

manage the ever increasing organic waste in the country. Feasibility studies have been carried

out in many areas along the various rivers in Uganda to estimate the capacity of the sites under

review. The studies depict potential Micro Hydro power Sites.

Investment opportunities exist for developing renewable energy sources to provide electricity.

The potential for private sector participation in the provision of these services is quite significant

in both rural and urban electrification. And there is a large potential market for micro

hydropower and solar energy in Uganda and the region which can help the household electricity

consumption.

Opportunities also abound in the manufacture and marketing of charcoal briquettes. The

briquettes are best for the institutional markets, because they can directly replace wood without

changes made to the stoves. Schools, restaurants, hospitals, etc are potential markets and future

opportunities will be there especially if the Government and local authorities decide to further

impose the restriction on cutting down trees.

The proposed investment opportunities in the Energy sector include dedicating resources in one

or a combination of the following:

1. Design, construction, sales and service support of biomass plants

2. Assembly and Marketing of solar units in Uganda

3. Manufacture and Marketing of Charcoal Briquettes

4. Acquisition, Installation & Services of Micro Hydro Dams in Uganda.

82

Mining Sector

Interest in Uganda‘s mineral potential has been increasing substantially since the country has

made efforts to improve its mining and investment code. The mining industry in Uganda reached

a peak in the 1950's when mining accounted for up to 30% of the country's exports. Revenues

from mining increased 48% between 1995 and 1997. Uganda mineral potential remains untested

due to very little exploration to date - the country has the potential to host gold, tantalite, copper

and cobalt potential.

The mining industry in Uganda reached peak levels in the 1950‘s and 1960‘s when the sector

accounted for up to 30% of Uganda‘s export earnings. However, political and economic

instability experienced in the country in the 1970‘s and the recent global economic slowdown led

the sector to decline drastically. Currently, the energy sector‘s contribution to total GDP, at

current prices, was the lowest in (Financial Year) FY2009/2010 with a share of only 0.3 percent.

It should be noted therefore that the decline is not a result of resource depletion but rather due to

the bad governance at one time but recently due to poor world prices of cobalt and copper,

among others.

The competitive factors are as follows:

Strategic location

General investment incentives

Other incentives

Availability of skills

The Government of Uganda has identified the development of the country‘s mineral resources as

a major economic priority and has in place an extensive plan to bring this to fruition. Investment

in mineral exploration is projected to increase from the current US$3 million to over US$50

million annually over the next five years.

83

Chapter 1.10

Present trade relation of

Uganda with

India/Gujarat import

export

&

Overview of financial

market of Uganda

84

Exports made by Uganda to India :

There are various products that are exported by Uganda. Some of these may be tea,

coffee, spices, electronic equipments, sugar, iron and steel, glass and glass ware, vehicles, cereal,

flour, milk preparations and products, matches, lead, pharmaceutical products etc.

Exports made by India to Uganda:

Similar to the exports there are various imports made by Uganda. Some of the imports

done by Uganda are mineral fuels, oils, distillation products, nuclear reactors, boilers, machinery,

rubber and articles, plastics and articles thereto, paper and paperboard, articles of pulp, etc.

Bilateral trade and investment:

With reference to the year 2010-11 and year 2009-2010 it has been found that the

bilateral trade has increased from US $ 220.31 million to US $ 306.44 million that is there is an

increase of 30.09. India is the second largest foreign direct investment in Uganda in 2011.

There is a fluctuating trend seen in the exports from year 2006-07 to 2010-11. However,

India‘s export has been continuously increasing. Similar to the exports there has been a

fluctuating trend in the imports also.

Uganda trade :

The country has sufficient copper, gold, and oil deposits. Coffee is the main export made

by Uganda. There has been an economic growth continuously and this may be economic reforms

in the past and efficient management during low periods.

The countries that Uganda trade :

The countries to which Uganda exports are Sudan, Kenya, Switzerland, Rwanda, UAE,

Demographic republic of Congo, UK, Netherland, Germany.While Uganda import partners are

UAE, Kenya, India, China, South Africa, Japan.

85

Financial markets:

Under the financial markets comes the money market and capital market. The money

market is for short term instruments and the capital market is for long term instruments. The

money market includes t-bills, commercial papers, certificate of deposits, repo market. In the

capital market come the primary market and the secondary market. Further in primary market

comes the initial public offering and private placements and in the secondary market comes the

stock exchanges for further trading in the all ready traded securities.

CAPITAL MARKET

In the Uganda capital market the real competition has not occurred between the public

and private issuers. The bond market has been tapped by two institutions namely East African

Development Bank and Eastern Southern Africa Trade and Development Bank with a share of

25.78% and 23.68% respectively. The main role of this CMA is to alternative means for raising

the long term finance. The government is also encouraging the development of this capital

market for promoting sustainable growth, for mobilizing savings, increases the availability of the

funds for the investment purpose.

Capital market deals with company shares, bonds of the government, private companies,

debentures, commercial papers and notes. These financial products are termed as securities and

are traded on stock exchange. The stock exchange that is operating in Uganda is the Uganda

Securities Exchange. Capital markets enhance the inflow of international capital when

international investors participate in debt and equity instruments.

86

CAPITAL MARKET AUTHORITY (CMA)

The Capital Market Authority (CMA) was established in the year 1996. It was formed

under the Capital Market Authority Act. It is body which is responsible for promoting,

developing and regulating the capital market industry in Uganda. The main objective of this

market is to have market efficiency along with protection of the interest of the investors.

CMA is working for protecting the interest of the investors by setting the rules and

regulations for the issue of any shares and debt instrument moreover before the listing is granted

in the exchange. It critically examines the prospectus and the memorandum of the companies

before listing. It also see to it that the company discloses all the material and core information

including the risk factor also.

The functions of the CMA are:

The development of the capital market for longer term investment in productive

enterprise.

Create, maintain and regulate the market in which the securities can be issued and traded

in fair, orderly, and efficient manner.

The protection of the interest of the investors.

The operation of a compensation fund.

This CMA is governed by the board of directors. This board deals with the important

aspects such as legal, policy and compliance, finance, research and development, audit, etc. the

rules and regulations of this CMA are covering the prospectus, stock exchange, conduct of

business, accounting and financial requirements, licencing of market operators etc. The CMA

licensing policy considers the following three criteria:

Investor protection

Financial viability

Potential to develop the security market.

87

The Capital Market Authority has approved Uganda Securities Market as the only stock

market established in the year 1997. In the Uganda Stock Exchange the method of open outcry

system has been adopted for trading.

In the area of regional cooperation the significant progress has been made due to East

African Member State Securities Regulatory Authorities (EASRA). This brings together the

securities regulators and stock exchanges in Kenya, Uganda, and Tanzania. To have awareness in

the securities the CMA has developed the mass education programs whose main aim is to have

all Ugandans benefit from participation in the capital market. An investor compensation fund has

been developed by CMA in order to grant compensation to all those investors who has suffered

loss due to failure of licensed broker or dealer to meet his contractual obligations.

PRIMARY MARKET

For issuing prospectus in Uganda there are various content require in the prospectus.

1. A caution statement

2. The purpose of the issue

3. Statements on legal status and affairs of the issuer

4. Rights of shareholders

5. Directors and employees

6. Financial statements

7. Accountant‘s report

8. Loan / debt profile

9. Information on bankers

10. Company policy on dividends and future developments

11. Professional advisor details

12. Risk factors

88

SECONDARY MARKET

Uganda stock exchange (USE)

Use was developed Uganda merchant finance & stockbroker association ltd. (UMFSA) ,

which is founded in 1996 by five banks. Now USE is owned by the licensed brokerage company

in the country and licensed by the CMA to operate as approved stock exchange and perform self

regulatory functions in its operation.

In USE open outcry system is also used. The USE rules & regulation is approved by the

CMA and published in May 1997, it is provide a professionally set –up for allowing trade in fair

and efficient security market. The USE was get licensed to run their services as an approved

stock exchange in June 1997by the capital market authority (CMA) of Uganda.

CHRONOLOGICAL HISTORY OF THE EXCHANGE

1997:- USE get the license as approved stock authority of Uganda in June 1997.

2002:- the first financial institute of USE is bank of Baroda Uganda (BOBU) is listing on USE

on 14th

November 2002.

2005:- The listing of the 8 year East African Development Bank (EADB) Bond in December 2005

2009:- equity bank ltd. Is cross listed on USE on18th June2009.

2011:-CENTUM investment ltd. was cross listed on USW on10th February 2011.

89

FUNCTION OF USE

1) USE easily mobilizes the saving of investor.

2) They access the finance to new & small industries.

3) USE can easily create liquidity through acquiring & selling shares.

4) USE facilitates equity finance as oppose to debt finance.

5) They also provide price discovery to the company through open market operation.

THE CAPITAL MARKETS INDUSTRY

The current state of Uganda‘s financial markets can be described as an emerging market,

which is at an early stage of development. Due to establishment of CMA & USE it is now easier

to facilitate a vibrant secondary market for issued securities.

MARKET INFORMATION ABOUT USE

TRADING HOURS

Official working hours of Monday to Friday is 8-30 a.m. to 5-30 p.m. it stays close on

every national holidays. Trading is start on 10am to 12 noon.

TRADING SYSTEM

In the USE two type of trading system is there

Over –the –counter (OTC) & security central depository (SCD)system.

90

TRADABLE SECURITIES

In the USE both primary & secondary market‘s securities are traded, like, Preference

share, corporate bonds, equity shares, commercial paper, treasury bills, government bonds.

USE OPERATIONS

Trading – T

Delivery – T+3

Settlement –T+5

LIST OF EQUITY SECURITIES

On the USE there are several company‘s shares are traded like,

ALSI,,BOBU, BATU, DFCU,JHL ,NVL,EABL, KA, UCV, SBU, NIC, CENT, KCB, EBL,

NMG, USE LCI.

91

THE STOCK MARKET

In 1994 Bank of Uganda developed the Capital Markets Development Committee

(CMDC), which was comprised of stakeholders of capital market from financial markets,

industry and government.

The CMDC made provision for the licensing of the Uganda Securities Exchange. There

are a total of 10 listed companies and one company which will soon be privatized. It is expected

that the trading platform will be automated and integrated with the other African Stock

exchanges, facilitated by the passage of the Securities Central Depository Bill. The Central

Depository System (CDS) will automate the current manual market into an electronic one where

share certificates will be 'deposited' in book entry form (like a bank account) into the system to

ease the transfer and ownership of shares and each entry will be given a CDS Account.

The different companies that are listed on the stock market are Bank of Baroda, DFCU

Limited, New Version Ltd., Stanbic Bank, Uganda Clays Ltd., Kenya Airways etc. With regards

to the tax structure the mining companies are charged with 25%–45%, depending upon the

profitability of the mine. Uganda has fully liberalized the foreign-exchange market, allowing the

free transfer of foreign exchange to and from the country. Tax slabs for individuals range

between 0% and 30%, depending upon their annual income.

92

MONEY MARKET

After 1987 Uganda‘s monetary and financial sector has gone through major changes as

government adapted free market reforms. Two of the most important reforms were the

devaluation of the Uganda shilling (USh) and the liberalization of the exchange rate system.

Money market instrument

Government Securities

Uganda‘s securities market includes trade in Treasury bills and Treasury Bonds. These

are the following market for treasury bills and treasury bonds.

The Treasury Bill primary market

The Treasury Bill secondary market

The Treasury Bond primary market

The Treasury Bond secondary market

The primary function of the securities market is to support monetary policy

implementation by providing an instrument of liquidity management.

Central Depository System (CDS)

To counteract the safety concerns regarding the bearer treasury bill certificates, the Bank

introduced the electronic registry of investors in government securities called the book‐entry

Central Depository System or CDS in 1999. The CDS solved problems of transferring ownership

of securities, but introduced new problems

The Treasury Bond Market

Treasury Bonds are auctioned every 28 days. The bonds support monetary policy

implementation by improving liquidity management and promoting market development. These

93

securities also assist in providing a framework for pricing of securities in the secondary market.

Bonds have also provided an additional saving instrument and have deepened the capital market.

The Repurchase Agreements (Repo) Market

Repo market was mainly introducing intra auction liquidity variation. The vertical repo

market shows the repo transactions occurring between primary dealer commercial banks and the

central bank.

This market was introduced in 2002 by the Bank of Uganda as a mechanism to deal with

Managing liquidity in the banking system.

Non Central Bank Bond Issues

Currently, there are 4 corporate bond issues and traded on the Ugandan Stock Exchange.

Private sector issuers comprise of banks and telecommunication companies.

94

Chapter 2.1

INTRODUCTION AND OVERVIEW OF

THE PACKAGED FOOD INDUSTRY OF

UGANDA

95

Today is the era of globalization. Every country is interested into doing business with the other

countries. Everyone looks for the untapped resources lying with the underdeveloped countries.

So as a result the new employment, entrepreneurship opportunities are getting emerged in these

countries.

But doing trade with different countries is not an easy task. One needs to understand its various

environments like cultural, political, natural, and economical and so on. It becomes quite

important to analyze and make proper conclusion of what will be profitable in various countries

because if this is not done it might lead to a terrible failure of business. So as a manager it would

be prime duty to check for the various environments in the country in which business has to be

conducted.

As a part of MBA program the global study report helps to understand the environment of one

country.

Uganda

Uganda officially the Republic of Uganda, is a landlocked country in East Africa. The southern

part of the country includes a substantial portion of Lake Victoria, shared with Kenya and

Tanzania.

Uganda takes its name from the Buganda kingdom, which encompasses a large portion of the

south of the country including the capital Kampala. The people of Uganda were hunter-gatherers

until 1,700 to 2,300 years ago, when Bantu-speaking populations migrated to the southern parts

of the country. Uganda gained independence from Britain on 9 October 1962. The current

President of Uganda is Yoweri Kaguta Museveni.Uganda gained its independence on October

9th 1962. Dr. Milton Apollo Obote, leader of the Uganda People's Congress (UPC) became the

first Prime Minister and head of the government.

Uganda was declared a Republic. This culminated in the 24th May 1966 attacking of Kabaka's

palace by the Uganda army under the authority of General Idi Amin but on the commands of

Obote. In a move to the left, Uganda became a one-party-state. The Ugandan economy was

distressed by Amin's policies, with the removal of Asians, the nationalization of businesses and

industry, and the development of the public sector.

96

Milton Obote's rule had terrorized, stressed, and grief-stricken people during Uganda's

independence from Great Britain in 1962 to early 1971. By January 1971, Milton Obote, then

President of Uganda, was prepared to rid himself of the possible danger posed by Idi Amin.

Uganda was, in effect, governed from a gathering of military base spread across the country,

where battalion commanders, acting like local warlords, represented the coercive arm of the

government. The Ugandan General Service Unit (GSU), an intelligence agency formed by the

preceding government, was disbanded and replaced by the Ugandan State Research Bureau

(SRB). Amin always remembered the basis of his power. East Germany helped to build Amin's

underground police. In August 1972, Amin disqualified almost all of Uganda's 80,000 Asians

and detained their belongings. Uganda's export crops were sold by government parastatals, but

the majority of the foreign money they earned went for purchasing imports for the armed forces.

Government

Amin's government, conducted by often unpredictable personal public statement, continued on.

Amin accused Nyerere of waging war against Uganda, and, hoping to divert concentration from

his in-house troubles and rally Uganda against the foreign opponent, Amin invaded Tanzanian

territory and officially annexed a section across the Kagera River boundary on November 1,

1978.

In April 1979, a joint force of Ugandan exiles, under the umbrella of Uganda National Liberation

Army (UNLF), and the Tanzania Peoples Defense Force (TPDF) overthrew Amin's rule.

For a second time, Obote became President of Uganda.

The Military Junta of Generals Bazilio and Tito Okello replaced Obote II's government. Yoweri

Kaguta Museveni was under oath in as the President of the Republic of Uganda. To enable this

task, political parties were perched and Uganda was governed by an all-inclusive Movement

system.

97

Current Political Position of Uganda

Uganda is a presidential republic, in which the President of Uganda is both head of state and

head of government; there is a multi-party system. Executive power is exercised by the

government. Legislative power is vested in both the government and the National Assembly. The

Supreme Court of Uganda ruled that the election was marred by coercion, violence, voter

disenfranchisement, and other irregularities.

Economy of Uganda

The Bank of Uganda is the Central bank of Uganda and handles monetary policy along with the

printing of the Ugandan shilling.

For decades, Uganda's economy suffered from devastating economic policies and instability,

leaving Uganda as one of the world's poorest countries. The country has commenced economic

reforms and growth has been robust. In 2008, Uganda recorded 7% growth despite the global

downturn and regional instability.

Uganda has substantial natural resources, including fertile soils, regular rainfall, and sizable

mineral deposits of copper and cobalt. Since 1986, the government (with the support of foreign

countries and international agencies) has acted to rehabilitate an economy devastated during the

regime of Idi Amin and the subsequent civil war. Between 1990 and 2001, the economy grew

because of continued investment in the rehabilitation of infrastructure, improved incentives for

production and exports, reduced inflation and gradually improved domestic security. In 2000,

Uganda was included in the Heavily Indebted Poor Countries (HIPC) debt relief initiative worth

$1.3 billion and Paris Club debt relief worth $145 million. Growth for 2001–2002 was solid

despite continued decline in the price of coffee, Uganda's principal export. This has highlighted

the importance of avoiding jobless growth and is part of the rising awareness in development

circles of the need for equitable growth not just in Uganda, but across the developing world.

With the Uganda securities exchanges established in 1996, several equities have been listed. The

Government has used the stock market as an avenue for privatization. All Government treasury

issues are listed on the securities exchange. The Capital Markets Authority has licensed 18

brokers, asset managers and investment advisors including names like: African Alliance

98

Investment Bank, Baroda Capital Markets Uganda Limited, Crane Financial Services Uganda

Limited, Crested Stocks and Securities Limited, Dyer & Blair Investment Bank, Equity Stock

Brokers Uganda Limited, Renaissance Capital Investment Bank and UAP Financial Services

Limited. Uganda traditionally depends on Kenya for access to the Indian Ocean port of

Mombasa. Uganda is a member of the East African Community and a potential member of the

planned East African Federation.

International Trade policy of Uganda

The main import commodities include chemical products, clothing, machinery metal & metal

products, various petroleum products and pharmaceuticals.

The Bank of Uganda administers exchange control on behalf of the Minister of Finance and

private sector importers may purchase foreign exchange in the inter-bank market or in foreign

exchange burcaus to pay for imports without restriction.

Uganda utilises the "Harmonised System" of customs tariffs. As of 2005, Uganda's main trading

partners have been Kenya, Belgium, the Netherlands, France, Germany, United Arab Emirates,

South Africa, India, China, United Kingdom and the United States.

SWOT Analysis of Uganda

A. Strengths:

Fertile soils: Uganda‘s soils are reputed to be extremely fertile and capable of supporting most

crops especially if rains in the main growing areas are steady. Therefore even without use of

chemical fertilisers, sorghum production can thrive.

Guaranteed market: For non-food sorghum there is a guaranteed market at a reasonable price by

Nile Breweries Ltd. for its contracted farmers. This should provide some prospects for continued

production albeit for a market that is limited and dependent on the breweries plans over which

the farmers have little say.

Political Stability and favourable business environment: For the past 20 years or so, the country

has experienced a remarkable level of political stability and favourable economic policies which

99

have engendered steady growth in the economy and confidence in the country‟s nascent private

sector. This augurs well for the continued expansion in production and also in regional and

international trade in sorghum.

B. Weaknesses

An unclear agricultural policy: Although the GOU has been implementing private sector friendly

policies, its specific policy on agriculture remains unclear. There are no known incentives for

farmers to increase production and no attempts to ensure they receive an economic return for

their efforts. This results in wildly fluctuating prices and exploitation by unscrupulous traders

and middlemen. These phenomena can be a disincentive to expand production. Moreover, many

smallholders do not own their land outright and cannot use it to secure production credits from

banks. Although a new land law has been passed recently that would confer some rights to

tenants on land, there is still opposition to the law by land owners and its effective

implementation is in the balance.

Low level technologies: Uganda continues to produce sorghum using mostly low level

technologies. Further, because agricultural chemicals are expensive, they are not used enough by

smallholders. This low technology leads to low yields, high losses to pests and disease and to

poor post-harvest handling.

Poor marketing and transport infrastructure: When commodity marketing was liberalised in the

1990s, an inexperienced and poorly resourced private sector stepped in to try and cope. These

new entrants into the sector (excepting the Nile Breweries Ltd. and its contract farmers) have yet

to establish the kind of infrastructure that would encourage efficient marketing. There are no

adequate on-farm stores, and there are no rural warehouses. The road net work especially off the

main central government maintained highways are in a bad state and render produce that more

costly.

100

C. Opportunities

Deepening regional integration: The countries of the EAC are moving toward the establishment

of a common market thus creating a market of over 100 million consumers. Uganda is well

placed to supply this market with beer made out of sorghum thus providing opportunities for

expansion in the production of the crop.

Other breweries emulating Nile Breweries Ltd.: Uganda has two other breweries that could in the

short term emulate Nile Breweries Ltd and manufacture a lower market beer using sorghum. In

that case, there are prospects for more farmers in the eastern part of the country and elsewhere

being contracted to produce sorghum for that purpose.

D. Threats

Discontinuation of production of low market beer by Nile Breweries Ltd.: Uganda has a history

of failed brands in the beer industry. Both the big breweries have in the past introduced new

brands that did not survive for long on the market. If that should happen to these new ventures,

the production of sorghum will suffer.

Production based in drought prone districts: Although rainfall in Uganda is generally abundant

and stable, nevertheless some areas have recently been prone to long periods of drought. The

main sorghum growing districts in eastern Uganda are among such areas that have experienced

periods of drought in recent years.

Scepticism about the EAC: Some people in the private sector in Uganda and in Tanzania are

reportedly not as enthusiastic about deepening EAC integration as the political leadership. They

have been calling for a slow down in that process. If these voices succeed in persuading their

respective leaderships to slow down then one of the positive attributes of Uganda as an

investment destination will be jeopardised and opportunities to expand production of sorghum

and beer will be less.

101

Major Industries in Uganda

Industry is very restricted in Uganda. The most important sectors are the manufacture of light

consumer goods, the processing of agricultural products (such as coffee curing), and textiles, and

the production of beverages, electricity, and cement. The production of beer in Uganda has

increased spectacularly in recent years, increasing from 215,000 hectoliters in 1988 to 896,000 in

1997. A key block to the development of Uganda's industrial and commercial sector is bribery.

Due to improved domestic security, market reform, and tax breaks, Uganda's manufacturing

sector is rising. This disparity indicates a serious problem with Uganda's economy because, in

order to carry on the present rate of import of manufactured goods, the government is indebted to

borrow ever greater amounts of money from foreign donors which makes the country

increasingly indebted.

The following are the sectors of Uganda:

1. Manufacturing

2. Infrastructure

3. Printing and Publishing

4. Building, Construction and Civil Engineering Industry

5. Computers and Communications Industry

6. Electrical Power Industry

7. Financial Services Industry

8. Food, Beverages and Tobacco Industry

9. Health Services Industry

10. Mining Industry

11. Oil and Gas Industry

12. Trading Industry

102

Introduction To The Sector:

Despite Uganda's abundance of natural resources; incidents of food scarcity and famine still

persist in parts of tile country. While a national food crisis may not be imminent, food insecurity

and famine have existed, in various parts of Uganda partly due to insurgencies, natural disasters,

adverse weather phenomena El-Nino and adequate policy interventions.

The Ministry of Agriculture and other international bodies, both government and non-

Governmental, charged with the responsibilities of ensuring food security, sufficiency and

Surplus are yet to come out with a coordinated and coherent strategy for increased and

Sustainable food production. Moreover, contemporary emphasis on private sector-led economic

development implies a leading role for (lie private sector in agricultural modernization.

mechanization and commercialization. Through the development of Uganda‘s Grain Belt for

food security, sufficiency and surplus predicated on tile urgent need on agricultural revolution,

Divinity Union would be a key actor in Uganda's economic policy with its similar strategy for

coffee rehabilitation.

GRAIN BEST PRIORITY

As part of Salim Saleh's commitment to help disadvantaged and marginalised groups, Divinity

Union Limited will initially target Northern Uganda and parts of Luwero Triangle as a priority,

to be followed by other parts of the country. Hence this preliminary proposal for the

development of the Uganda Grain Belt will be initiated along, the northern axis, comprising of

Nebbi, Gulu, Kitgum through Masindi to Luwero districts. This is justified by available grain

production output - both potential and actual.

In the production strategy, modernization and large-scale commercial farming in conjunction

with smallholder agriculture will, be put in place and the following grains will be a priority:

maize (corn), rice, sorghum, and related oil seeds and pulses such as sunflower, beans and

soybeans. Divinity Union Limited would thus invest in grain production simultaneous with

clearing, drying, bulk - storage, processing and marketing in order to sustain the local as well as

regional market.

103

SWOT ANALYSIS OF THE SECTOR:

STRENGTHS:

1. Agriculture product as raw material: Uganda produces plenty of fruit and vegetables. For

producing packaged food, potato is the raw material which is highly produced there only so it

gives rise to increase in potato demand and cultivation for that will increase.

2. Employment will be generated so solution for poverty will be reduced. Traditionally

marginalized groups like women youth can actively participate in producing packaged food.

3. Life style of Ugandan people is developing now so use of packaged food, taking lunch or

dinner at restaurant has increase which will give boom to packaged food industry.

4. Uganda is best for Tourism so our target customers will not only be Ugandan people but

also foreigners also.

5. Indigenous knowledge: the sector has been in existence since time immemorial and hence

there is rich indigenous knowledge and skill that can be easily developed through training.

6. Capital investment: Packaged food can be prepared on a small scale and hence the start-

up capital requirement is generally low.

WEAKNESS:

1. Export: Ugandan people are doing export of agriculture product so high export will make

the raw material for packaged food makes costly.

2. Cost of equipment: For the production of packaged food, certain technology is required

which is costlier.

3. Cost of Packaging: The product like Samosa, chips, etc, requires good packaging which

creates cost for packaging.

4. Inadequate Financing: Financing is the core part for each and every business and like that

with packaged food industry. It also require finance which is not easy to get.

104

5. Infrastructure development: Lack of physical resources like access to containers and

packaging materials, roads, transport and communication is also a hindrance to sector

development.

OPPORTUNITY:

1. New Entrants: The threat of new entrants is fairly high at the production level because of

the low technology requirements, and low investment capital requirement.

2. Wide Acceptance: The packaged foods are widely accepted product so there is an

opportunity of wide acceptance over the country.

3. Poverty alleviation: With appropriate training, people can derive livelihoods from

packaged food towards helping themselves out of poverty. The industry is a significant source of

income for rural people especially those with few financial resources.

4. International market: Global demand for packaged food is rising because of people‘s

perception and demand for time consuming and fast food products.

5. Market development: There is scope for increasing product quality and diversity. The

experts and projects could be assisted towards making their interventions much more effective.

THREAT:

1. Taxes: High prohibitive taxes imposed on the imported processing and packaging

equipment/ materials is a huge setback towards private sector involvement and investment in

apiculture in Uganda.

2. Environmental Issues: As packaged food require use of plastic material for packing and

other wastage which create environment pollution.

3. Easy Entrance: Packaged food industry is low capital incentive and less costly so there is

a chance of increasing competition.

4. Substitute Threat: If there is entrance of any health conscious product in the market

which may create threat to packaged food industry.

105

Major Packaged foods in Uganda

1. 500g Roasted Robusta Coffee Beans

2. 250g Arabica Coffee Powder Roasted And Ground Coffee Gold

3. 50g Coffee Roasted And Ground Powder

4. 50g Tin Star Cafe Premium In Powder Form

5. Flavoured Matooke (Banana) Crisps

6. Flavoured Potato Crinkle Cut Crisps

7. Flavoured Potato Stix

8. Kruncher Potatoes Crisps Food

9. Kruncher Matoke Crisps Food

10. Kruncher Casava Crisps Food

11. Non GMO White Corn/Maize

12. Green Robusta And Arabica Coffee Beans

13. 2g Instant Star Cafe Powder In Sacket

14. 100g Instant Star Coffee Powder In Tin

15. 20g Coffee In Foil Paper

16. 250g Instant Star Cafe Coffee Powder

17. 100g Instant Star Cafe Coffee Powder

18. Dry Packed Tea Leaves

19. 500g Arabica Coffee Beans

20. Chicken Feet

106

Chapter 2.2

Structure, activities, processes of the

packaged food business in India

107

Structure

India‘s food packaged food industry contributes 6.3% to the GDP by Employing over 1.6 million

people and 16% to exports and 6 per cent of total industrial speculation. Food retail accounts for

26 per cent of India‘s GDP and is growing at a compounded annual growth rate of 7-8 per cent.

At in attendance, the food packaged segment holds a 32% share of India‘s booming food

industry. Exports of packaged food have grown at over 190% between 2002-03 and 2006-07,

increasing from $6.98 billion in 2002-03 to $20.51 billion in 2006-07. FDI inflows in the food

sector have been high and according to estimates, they are likely to touch $325 million by 2009.

The market size for packaged foods is pegged at $102 billion, with the potential to grow by 10%

to $330 billion by 2015. India, with the second prevalent arable land area, is one of the key food

producers in the world. The Indian packaged food industry ranks 5th in size in the country. It

ranks 1st in the world in production of cereals and milk, 2nd in production of fruits, 3rd in

vegetable production, 7th largest producer of fish in the world, rank 2nd in inland fish

production and is among the top five producers of rice, wheat, groundnuts, tea, coffee, tobacco,

spices, sugar, and oilseeds. It is the 2nd major exporter of rice and 5th largest exporter of wheat

in the world.

The country produces over 500 million tones of agricultural, horticultural and dairy produce

annually, thus making it one of the world's largest food producers. However, the country‘s food

processing industry is in a nascent stage. Only around 2% of fruits and vegetables are processed,

and the figure stands at 15 % for milk, 26% for marine, 6% for poultry and 20% for buffalo

meat, as against 60-70% of the overall food production in developed countries. Milk and milk

products contribute to nearly 17% of the country‘s total expenditure on food. India has 53% of

world‘s buffalo, 23% of sheep and 842 million poultry (6th largest in the world) India is a largely

unused domestic market of over one billion consumers of whom 300 million consume processed

and packaged foods while an additional 200 million are expected to shift to processed food

utilization by 2010. Moreover, the packaged food industry has been declared as important sector

in India.

108

In 2007-08, food grain production in India had registered a 4.6 per cent increase with 227.32

million tones as against 217.28 million tons in 2006-07, according to estimates by the agriculture

ministry. The output of coarse cereals in 2007-08 was 39.67 million tones, 17 per cent higher

than the 33.92 million tons in the previous fiscal. The total output of oilseeds is estimated to have

risen to a record 28.2 million tones, about 16 per cent higher than the 24.29 million tons in 2006-

07. The production of pulses has risen to 15.19 million tones, registering a year-on year growth

of 7 per cent, and moving a new high. In the Financial Year '08, Indian food processing industry

logged an remarkable growth rate of 18%. India currently produces about 50 million tones of

fruit (about 9% of the world's production) and about 90 million tones of vegetables (11% of the

world's production).

The earnings of the total food market is just about Rs.250, 000 crores (US $ 69.4 billion) out of

which value-added food products include Rs.80, 000 crores (US $ 22.2 billion).

Sector-wise Breakup:

Snacks and Confectionery

The Indian market for snack food is estimated to be a market worth US$ 3 billion. The controlled

sector of the snack food market is growing at 15% to 20% per year while the growth rate of the

US$ 1.56 billion unorganized sector is 7% to 8 %.

Dairy and Proboscis

Indian dairy sector has US$ 62.67 billion current market size. And it has been growing at of 5

% per year. The dairy exports in 2007-08 rose to US$ 210.50 million against US$ 113.57 million

in the equivalent period, in the last economic The market of neutraceuticals and probiotics has

earned revenues of over US$ 185 million in 2007 and is projected to touch an estimated US$

1,161 million in 2012.

Beverages

All the drinks (Alcoholic, non-alcoholic, carbonated, fruit based and health drinks) The market

for carbonated drinks in India is worth US$ 1.5 billion even as the juice and juice-based drinks

market accounts for US$ 0.25 billion. Growing at a rate of 25 %, the fruit-drinks category is one

109

of the fastest growing in the beverages market. The market for wine in India is also growing at

over 25 % per year. The state of Maharashtra recorded an impressive 59.84 % growth of wine

Production.

Marine Food

Indian seafood exports rose to US$ 1.55 billion during 2007-08. Frozen shrimp accounted for 52

% of total marine exports at US$ 980 million follow by frozen fish at US$ 326 million.

Poultry and Processed Meat: The country's poultry market is expected to grow at 12% to 15%

per Year. At the same time, fuel by a thriving retail sector, the market for packaged meat is also

growing at an estimated 15% to 20% per year.

Retail Landscape

In India the food and grocery market is currently valued at US$ 236 billion and is the 6th largest

in the world. Food and grocery retail contribute to 70 % of the total retail sales. According to

industry estimates, the segment is growing at a rate of 104 % and is expected to grow to US$ 482

billion by 2020. 99% of this part is unorganized, and therefore, there is massive scope for growth

forth organized sector.

Activities

Packaged foods industry value chain

PRIMARY ACTIVITIES

Inbound logistics

Operations (production)

Outbound logistics

110

Marketing and sales (demand)

Services (maintenance)

SUPPORT ACTIVITIES

Administrative infrastructure management

Human resource management

Technology (R&D)

Procurement

PRIMARY ACTIVITIES

Inbound logistics

111

Inputs are (according to the way they are dealt with): severely perishable raw materials and not

strictly perishable raw materials.

Strictly perishable goods. he hardest to manage are strictly perishable goods (dairy,

fisheries, meats), which have very short transport times. Even if suppliers are

concentrated in few regions, the receipt of goods is composite because deliveries take

place all over the day

Not strictly perishable goods. For not strictly perishable goods delivery time is easier to

deal with, but cannot be neglected as well: if product lasts 1 month firms cannot have

enough money to waste one week for the travel.

On a macro scale, suppliers for different kind of products are resolute in few regions. Therefore

production amenities are built in their proximity in order to manage better inbound operations.

Transversal activities. A way to cut costs is to use 3PL (third parties logistics): they are

companies whose business is to deliver goods from one point to another. Since they have scale,

112

they can exploit economies of scale (for example they can avoid backhaul or increase load

factor) and offer lower prices. In this way costs are also kept under control.

To keep quality certification of the goods through the whole farmers-customers chain,

traceability programs are enacted. Raw materials incoming factories have to be supervised to

preserve data about their origin.

Inbound logistics are important for margins creations in the way they influence operations.

Operations (production)

The operations perform in food processing plants are:

Cleaning the food

Cooking the food

Packaging the food

The most pertinent issues for this activity are:

competence in processes

Hygiene of the factory

Water, energy and greenhouse gas emission

Wastes production

Efficiency in processes. To improve the way operations are perform, food companies are

investing in new processes and technologies such as:

numerous temperature monitoring

inspections

113

global positioning system

RFID

These upgrades of the factory involve positively the quality of the product and (especially the

first two) help keep the factory unpolluted

Hygiene of the factories. In addition to the above mention, to assure hygiene, protocols such as

Hazard Analysis and Critical Control Point (HACCP) are enacted. Firms regularly carry out in-

depth audits in order to get better quality standards

High standards within the factory have to be sustained by safe products delivered from producers

(see later in procurement)

Water, energy and greenhouse gas emission To run a plant, energy necessary is high and in many

areas not much consistent. Firms that implemented another ways of having electricity (for

example using wind or solar power) have improvement over competition in terms of money

saved and quality of service. To deal with water usage, companies implement Wastewater

Reduction Program and built Waste Water Treatment Plants. Greenhouse emissions are not

directly accounted as a cost, but many companies reduce them in order to get better their image.

Transversal activities. Product quality is essential for food companies. Individual customers

mind much about product quality in food and are not keen to trade it off for lower price. To

assurance a high level of service, firms must pay cautious attention to all the operations steps.

For the above mentioned reason, operations are important for the making of margins.

Outbound logistics

Management issues are the equal for inbound logistics. If warehouses are used, the network is a

little more concentrated, but travel distance is much larger. Using 3PL is a good option for

outbound operations as well.

114

Marketing and sales (demand)

Marketing and sales are analyzed through 4 major aspects:

Product

Price

Place

Promotion

Product

Product is not important in terms of margin formation because products are not much

differentiating one another.

Price

Producers have some authority on price if they force manufacturer suggested retail price (MSRP)

over retailers, but in packaged food this is not a extensive practice.

On the other hand, if prices are set by retailers, producers risk losing brand equity if the price is

too low or trailing market share if the price is too high

Place

Retailers have high bargain power concerning positioning of products (place on the shelves,

banners to advertise products, etc). This aspect is very important to ―convince‖ customers, so

food packagers can give up some limits to assure retailers support them regarding place.

Promotion

Promotion is very imperative in terms of brand building because of the low products

differentiation in the industry. Advertising is where firms have the most influence on.

Marketing is important for margin creation chiefly regarding promotion and then regarding

place.

115

Services (maintenance)

This activity is not very applicable for margin creation. The only kind of after sales service

comes from product recalls, which are not very recurrent

SUPPORT ACTIVITIES

Administrative infrastructure management

The most vital activity of this kind is related to the integration of new businesses (and ultimately

the separation of the ones that has to be divested).

M&As are very risky because different cultures not always integrate well; for this reason it is key

to margin creation an excellent functioning of the infrastructure.

Human resource management

This activity is not relevant for margin design

Technology

Still if R&D expenditures are low, technology is important to organize distant locations. The

system has to be regular and reliable on the sites spread all over the world in order to cut wastes

and to coordinate logistics and operation (especially for perishable goods) in order to diminish

the wastes.

Strategies to proffer high quality need a strong IT infrastructure: for example to promise raw

materials quality, traceability programmes need constant exchange of data for the goods

processed from one activity to the following.

116

Procurement

Procurement is significant in terms of sustainable producers: in an industry like this with a severe

contact with customers and their constant scrutiny on quality and practices, low price is not the

only feature to look for when choosing suppliers. Probing for price only brings the risk of future

standing damages because supply chain is not sustainable: raw materials like palm oil have to be

delivered by certified farmers (responsible sourcing).

in addition products deliver by suppliers have to meet minimum hygiene standards in order to

facilitate operations (some contaminated raw materials means trash the whole freight, with the

consequent cost for the firm) and offer soaring standards to final customers.

Procurement often promotes instructions for suppliers in order to improve their practices

(Agricultural Practices, Storage Practices, etc)

Procurement department has to force these standards above suppliers to improve margins.

117

Business structure

Dry snacks

Raw material procurement

process

channel of distrubution

domsetic sales export

Japan, Singapore, Thailand, Malaysia and Korea

Dairy product

Raw material procurement

process

channel of distrubution

domsetic sales export

Nepal

Singapour

USA

Australia

saudi arabia

Structure of Packaged food in India

118

Dry snacks

1. Raw material procurement

Dry food ingredients come in many different forms, but are normally either milled to a final

Size or created to be a certain size via a process such as spray drying. Bread loaf volumes are

affected by the size and shape of flour. Ingredient for dry foods is Noodles, potatoes, Garlic,

Garam masala power etc.

2. Process

Any process solutions transform the efficiency of particulate processing operations across a

diverse range of industrial sectors. The common factor is that timely, automated particle size

analysis is the key to:

Greater product consistency.

Lower variables costs.

Higher equipment utilization.

Automated process control.

The basic operation of noodles wheat flour is the main ingredient for making Asian noodles. The

dough is compress between set of two rolls to form a dough sheet. The sheeted dough is then

slitting to produce noodles. The noodles are now ready for sale. Or are further processes to

prolong shelf life, to modify eating characteristics or to facilitate preparation by the consumer. In

the preparation of instant fried dry food, the steaming process causes the starch to swell and

gelatinize. The addition of alkaline salts (kan sui, a mixture of sodium and potassium carbonates)

on some Chinese type noodles gives them a yellow colour and a firmer, more elastic texture.

119

Flow diagram of dry foods process

Mixing

sheeting and compounding

sheeting, slitting and waving

Drying noodles

Length sizing of dry noodle

Packing

120

3. Channels of distribution

There is a large divide between urban and rural consumers in India. Urban residents

consumed 76.7% of all packaged food in 2009, while rural residents consumed just over

23.6%. Basically there are two channels for distribution which are given below:

Domestic sales

export

Domestic sale

Packaged food sales in India increased 16% in 2008, reaching US $15 billion in value terms;

however, in 2009 sales grew only 14.4% to a total of US $17 billion. In 2009, the Indian food

sector experienced constant increases in the price of food products. However, for 2010 to date,

the food market has seen a steady drop in the prices of essential commodities. Products

highlighting health, such as energy bars and drinks, digestive biscuits, and healthier edible oils

have grown in popularity, as have private label products.

Based on current data, the top five fastest-growing sub-sectors from 2005 to 2009 are: soup, with

a CAGR of 21.6%; ice cream, with a CAGR of 21.2%; noodles, with a CAGR of 19.4%; ready-

meals, with a CAGR of 17.3%; and confectionery, with a CAGR of 15.6%. For 2009, soup sales

equalled US$24.2 million, ice cream sales totalled US$416 million, noodle sales reached

US$377.4 million, ready-meal sales equalled US$14.4 million, and confectionery sales reached

US$1,203.3 million. Urbanization has become a major trend in India and this has increased

demand for this segment, as people become accustomed to faster-paced lifestyles and have less

time for traditional Indian home-cooked meals. Packaged food, therefore, is replacing loose

staples in the Indian diet.

India's rise in income has turned it into one of the largest consumer markets in the world. Food is

the biggest consumption category in India, and accounts for 31% of the average consumer's

budget. The exception is Delhi, where consumers spend 37% of their monthly budget on food.

121

By 2013, Indian consumers are expected to spend almost US$357 billion on food. The Indian

food industry is expected to reach US$258 billion by 2015.

East and Northeast India are the least developed areas of the country. Most of these consumers

are highly price-sensitive, and the least likely to purchase packaged food. North India is the most

populated and prosperous region. Consumers are well aware of fashions, trendy foods and

brands. South India is also a well-developed region, but most consumers are conservative about

shifting to packaged food and prefer traditional foods.

The end of 2009 saw Wal-Mart initiating a development program with 65 farmers in Punjab,

which could be the precursor to contract farming in the country. These farmers currently supply

16 vegetables to the company's stores on a daily basis.To curb losses of agricultural food items

from farm-to-table, the Indian Government has taken steps in 2010 to improve the food

processing industry, strengthen the post-harvest infrastructure and fill the gaps in the supply

chain.

Expand: Description

Source: Euromonitor International NOTE: 2010 data estimate

122

India Top 5 Packaged Food Category Leaders by Value—US $Billions in 2009

Item Value Variance from 2008

Nutrition Staples 11.82 +1.48

Dairy 6.57 +0.95

Impulse and Indulgent 4.42 +0.59

Bakery 3.21 +0.34

Oils and fats 2.5 +0.23

Source: Packaged Food, Euro monitor International

123

India Packaged Food Company Market Share - % breakdown 2005-2009

2005 2006 2007 2008 2009

Gujarat Co-

operative Milk

Marketing

Federation Ltd

6.5 7.3 7.7 8 8

National Dairy

Development

Board

3.5 3.8 4.2 4.6 4.9

Nestlé SA 4.5 4.7 4.8 4.9 4.8

Britannia

Industries Ltd 4.7 4.6 4.6 4.6 4.4

Parle Products

Pvt Ltd 4.7 4.4 4.2 4.2 4.2

Cadbury

Schweppes Plc 0 0 0 2.7 3

Karnataka

Cooperative

Milk Producers

Federation Ltd

2.2 2.4 2.7 3 2.9

GlaxoSmithKline

Plc 2.9 2.9 2.8 2.6 2.6

Ruchi Group 2.5 2.4 2.4 2.4 2.4

Tamil Nadu

Cooperative

Milk Producers

Federation Ltd

1.8 2 2.2 2.3 2.3

ITC Group 0.9 1.2 1.7 2 1.9

PepsiCo Inc. 1.8 1.9 1.8 1.7 1.8

Adani Wilmar 1.92 1.7 1.6 1.5 1.5

124

Source: Packaged Food in India, Euro monitor International

Exports From India

Value in Rs. Lacs Quantity in MT

2011-12

Sr No. Country Qty Value

1 U Arab Emts 4,036.00 9,365.00

2 Nepal 12,003.00 3,503.00

3 Singapore 3,063.00 2,597.00

4 Oman 673.00 1,777.00

5 Egypt A Rp 807.00 1,636.00

6 Australia 759.00 1,570.00

7 Saudi Arab 466.00 1,159.00

8 U S A 525.00 1,111.00

9 Qatar 455.00 1,066.00

10 Kuwait 408.00 942.00

Page Total 23,195.00 24,726.00

Ltd

Andhra Pradesh

Dairy

Development

Cooperative

Federation Ltd

1.6 1.5 1.6 1.6 1.5

Marico Ltd. 1.6 1.6 1.5 1.3 1.3

Unilever Group 1.1 1.1 1.3 1.3 1.3

Perfetti Van

Melle Group 1 1.1 1.2 1 1.1

125

Chapter 2.3

COMPARATIVE POSITION OF THE

PACKAGED FOOD INDUSTRY OF INDIA

126

COMPETITIVE LANDSCAPE

Indian brands are set to continue leading ready meals during 2012. The key brands in the

category are MTR, Kitchens of India, Haldiram‘s, Al Kabeer, Sumeru and Kohinoor. MTR is

set to maintain its leading position in canned/preserved ready meals with a value share of 52%,

followed by ITC with a value share of 27% and Kohinoor Foods Ltd with a value share of 8%.

In frozen ready meals, meanwhile, Al Kabeer Exports Pvt Ltd is expected to maintain its

leadership in 2012 with a value share of 31%, while Innovative Foods Ltd is set to retain its

second leading position with a value share of 23%.

PROSPECTS

Ready meals are expected to continue recording strong growth during the forecast period,

increasing in constant value at a projected CAGR of 9%. The key factors which have so far

contributed to the strong growth recorded in ready meals during the review period included the

rapid development of modern chained grocery retail outlets, the rising number of working

Indians who now have less time to spend on preparing meals from scratch at home, which has

significantly boosted the popularity of packaged food items which offer the convenience of

being able to prepare delicious vegetarian and non-vegetarian dishes in just a few minutes.

Growing at a compound annual growth rate (CAGR) of about 15 to 20% annually, Indian

packaged food industry is likely to touch $30 billion by 2015 from the current level of $15

billion including snacks food, ready-to-eat food, healthy and functional food, said

ASSOCHAM today.

127

Main categories of packaged food

The main categories of packaged food are bakery products, canned/dried processed food, frozen

processed food, meal replacement products and condiments. Some emerging new categories in

this segment are processed dairy products, frozen ready-to-eat foods, diet snacks, processed meat

and probiotic drinks. Some key players in this industry are Hindustan Unilever (tea, instant

coffee, biscuits, pulses, and instant beverages), Nestle (instant coffee, milk and milk products,

ready-to-eat foods), PepsiCo (aerated drinks, fruit juices, cereals, snacks) and Haldirams (sweets,

nankeen‘s, syrups, crushes etc.

The growth in the economy, coupled with a strong desire among consumers to maintain a healthy

lifestyle and the growing awareness of functional ingredients such as herbs, minerals, vitamins,

omega fatty acids and probiotics is driving the functional foods and beverages market, highlight

the paper.

Mr. D S Rawat, Secretary General, ASSOCHAM said that the food ingredients market is also

increasing with a rapid growth rate, as consumers increasingly demand bigger, bolder tastes,

foods that are healthy, and ingredients that are natural or sustainable.

Mr. Rawat further said that consumers are becoming more sophisticated and want more upscale

flavors and ingredients. The Indian food processing market is one of the largest in terms of

production, consumption, and export and import prospects.

The paper also points out that there is a large divide between urban and rural consumers in India.

Urban residents consumed 78% of all packaged food in 2011, while rural residents consumed

just over 22%.

India Sales of Packaged Food by Region in 2011

East and Northeast 21%

North 38%

South 28%

West 36%

128

Key drivers for packaged food market in India are:

• Changing demographics: Youth is driving the consumption of the packaged food such as

ready meals, packaged soups, etc.

• Increase in income: Rise in disposable income has increased the affordability of buying

packaged food

• Urbanization: Urbanization has led to increase in nuclear families and also led to more

and more women moving out for work

• Growth in organized retail: The penetration of organized retail is expected to 15% by

2016.

• Improvement in packaging: Advancement and development of variety of packaging has

led to increase in shelf life and also satisfying various needs of customers.

• Increase in freezer facilities: Cold storage / freezer space plays an important part in

growth of packaged food. Freezer space in India is expected to grow at a CAGR of 16% during

2008-14 which is expected to plan an important part in growth of packaged food storage.

Opportunities in packaged food market

• Focus on health:

• Ready to eat segment will increase

• Private labels

• Customized products

• Demand of Non-vegetarian packaged food

• Ready-to-eat foods market in India to reach Rs 2900 Cr by 2015. Tata Strategic

recommends focusing on affordability, acceptability and availability of ready-to-eat foods.

129

CHAPTER 2.4

Potential for Export from India/Gujarat

market to Uganda

130

Uganda has a great demand for packed foods. India can turn out to be a leading exporter for

packed foods to Uganda. Packed food include ,Baked goods, Cookies, Crackers (and other

savoury biscuits), Breakfast cereals, Cakes Chips/corn snacks/nuts, sugar Confectionery , Dairy

(and other fat spreads), Dips and spreads, Export/wholesale/catering trade, Frozen foods, Hot

food brands, Horseradish, Ice cream and chilled dessert, Jam, honey (and other spreads),

Pickles, vinegar, sauces, 'Ready meals, Seafood, Soft drinks, Soup and noodles,, Tinned

pulses, beans, vegetable and fruits, Miscellaneous

There is a deficit for Sugar and sugar confectionary products in Uganda. So our main focus is on

exporting sugar and sugar confectionary item to Uganda. Various Sugar Confectionary items

have a great demand in Uganda.

We would be exporting various products like:

. Cookies

Cookies have a great demand in Uganda locals. A possible, locally available, ingredient that can

be used in cookie production is the addition of peanut meal. Peanuts are high in protein and fat,

and, therefore, in combination with carbohydrate ingredients can make cookies a nutritionally

balanced food.

An extension of the study of household cookie consumption is the possibility of utilizing cookies

as a source of protein for children and population at large by adding groundnut meal as an

ingredient. The results are useful for policymakers because the improvement of school children

nutrition is possible using domestically supplied ingredients.

. Sugar and sugar confectionery

Various sugar confectionary like stated below are exported and have great demand in Uganda:

• Caramels

Derived from a mixture of sucrose, glucose syrup, and milk products. The mixture does not

crystallize, thus remains tacky.

131

• Chocolates

Bite-sized confectioneries generally made with chocolate.

• Divinity

A nougat-like confectionery based on egg whites with chopped nuts.

• Dodol

A toffee-like food delicacy popular in Indonesia, Malaysia, and the Philippines

• Dragée

Sugar-coated almonds and other types of sugar panned candy.

• Fondant

Prepared from a warm mixture of glucose syrup and sucrose, which is partially crystallized. The

fineness of the crystallites results in a creamy texture.

• Fudge

Made by boiling milk and sugar to the soft-ball stage. In the US, it tends to be chocolate-

flavored.

• Halvah

Confectionery based on tahini, a paste made from ground sesame seeds.

• Hard sweets

Based on sugars cooked to the hard-crack stage. Examples include suckers (known as boiled

sweets in British English), lollipops, jawbreakers (or gobstoppers), lemon drops, peppermint

drops and disks, candy canes, rock candy, etc. Also included are types often mixed with nuts

such as brittle. Others contain flavorings including coffee such as Kopiko.

• Ice cream

Frozen, flavoured cream, often containing small pieces of chocolate, fruits and/or nuts.

132

• Jelly candies

Including those based on sugar and starch, pectin, gum, or gelatin such as Turkish delight

(lokum), jelly beans, gumdrops, jujubes, gummies, etc.

• Liquorice

Containing extract of the liquorice root. Chewier and more resilient than gum/gelatin candies,

but still designed for swallowing. For example, Liquorice allsorts. Has a similar taste to star

anise.

• Marshmallow

"Peeps" (a trade name), circus peanuts, fluffy puff, etc.

• Marzipan

An almond-based confection, doughy in consistency, served in several different ways.

• Mithai

A generic term for confectionery in India, typically made from dairy products and/or some form

of flour. Sugar or molases are used as sweeteners.

• Tablet

A crumbly milk-based soft and hard candy, based on sugars cooked to the soft-ball stage. Comes

in several forms, such as wafers and heart shapes. Not to be confused with tableting, a method of

candy production.

• Taffy or chews

A candy that is folded many times above 50 °C, incorporating air bubbles thus reducing its

density and making it opaque

. Jam and honey

One thing we know for sure from visitors to Uganda is that the Pineapples of Uganda are simply

the best they had ever tasted anywhere. Pineapples may have originated in Paraguay but they

133

were perfected in Uganda – the Pearl of Africa. There is nothing like the aroma of a freshly cut

Ugandan Golden Pineapple, the fruit is filled with juice, the center so soft that you can even eat

it. It is simply an amazing and yet simple fruit dessert after most any meal, a delight to your

palate. So pineapple Jam has the biggest demand in Uganda.

. Cereals

Clextral was indeed the pioneer for using the twin screw extrusion technology to produce first

crispy flat bread (crackers) and extended its use to breakfast cereals, snacks and other cereal

based products like croutons. Breakfast Cereals are of great demand in Uganda.

. Drinks and Refreshments

Below are some of the drinks one will find having great demand in Uganda:

• Bottled Water

• Soft Drinks

• Juices

• Beer

• Wine

• Liquor

. Milk Products

Uganda produces a variety of milk products. A substantial amount of milk and milk products is

also imported indicating that the domestic production is not sufficient to meet market demands.

134

Out of all the above mentioned items past export data of India suggest that there has been a great

demand of sugar and sugar confectionary items in Uganda. Even though sugar confectionaries

are produced in Uganda, they have a deficit as compared to the demand for it. Hence Sugar

confectionaries is a great export opportunity looking at the rising demand for it in Uganda.

Hence our main focus in this project has been exploring opportunities for exporting sugar

confectionaries to Uganda from India.

Business in Uganda:

Uganda is the most conducive business destination in East Africa, according to a survey report

released by the East African Business Council.The report shows that Uganda is the best country

to invest in the region with 55 points followed by Rwanda and Kenya with 45 points each.Most

business people interviewed think getting a business permit in Ugandans simpler than in other

EAC member countries, and that Uganda‘s communications is more efficient than her peers. The

report commends the government of Uganda for many efforts creating a more conducive

business environment but warns that a lot still needs to be done to encourage more investors into

Uganda.

Uganda is blessed with a good climate all year round. The produce from this country is

considered to be of a quality higher than most. Most exports however are in raw bulky materials

like coffee, tea, cotton, maize (corn) and fish, which are more cumbersome to transport and have

lower value than their finished products. There is therefore a need to move from the exportation

of raw produce to products with added value. Products with added value come with more

stringent standards since most of them are ready to eat, requiring no further processing. Uganda‘s

food safety system therefore comes into question. Failing to meet the requirements of

prospective trade partners (in this case the US) from the very beginning would result in the

failure to develop trade partnerships. In section I a brief comparison of the food safety systems in

the US and Uganda shall be covered. Section II will highlight the advantages and disadvantages

of these systems while section III will focus on the benefits of having harmonised systems.

135

CHAPTER 2.5

PESTLE ANALYSIS ON PACKAGED

FOOD INDUSTRY OF UGANDA

136

POLITICAL ANALYSIS

Uganda was one of a few African countries with a thriving industrial sector prior to

independence. There were small and medium industries, as well as large-scale industries. With

the establishment of the Uganda Development Corporation (UDC) in 1952, industry was

accorded priority in the country‘s development efforts. The UDC was charged with the

responsibility of promoting the establishment of industries, including joint ventures, of

negotiating finance and attracting direct foreign investment, as well as promoting the

establishment of industrial research institutions and related support services.\

The food processing, beverage and tobacco industries, accounted for approximately 45 percent of

employment in the manufacturing sector. Textiles, leather and footwear industries, as well as the

wood and wood products industry accounted for 16 percent of employment in the manufacturing

sector.

Uganda was one of a few African countries with a thriving industrial sector prior to

independence. There were small and medium industries, as well as large-scale industries. With

the establishment of the Uganda Development Corporation (UDC) in 1952, industry was

accorded priority in the country‘s development efforts. The approved policy measures aimed

specifically at foreign investments. Some of the products such as sugar were also exported to

neighbouring countries.

The food processing, beverage and tobacco industries, accounted for approximately 45 percent of

employment in the manufacturing sector. Textiles, leather and footwear industries, as well as the

wood and wood products industry accounted for 16 percent of employment in the manufacturing

sector.

The ultimate objective was to improve the efficiency and performance of industrial enterprises

through, inter alia, the privatisation of public enterprises, strengthening industry support

institutions such as the National Bureau of Standards and the Export Promotion Council,

establishing capacities for the creation of industrial designs, etc. Although it is acknowledged

those firms compete and not countries, the role of government is crucial for industrial

development and competitiveness. In Uganda, the Government, in particular the Ministry of

Finance, Planning and Economic Development, has been responsible for defining macro-

137

economic policies, poverty eradication plans and competitiveness strategies in consultation with

other ministries and institutions - both public and private.

ECONOMIC ANALYSIS

These include interest rates, taxation changes, economic growth, inflation and exchange rates.

Inflation may provoke higher wage demands from employees and raise cost. Higher national

income growth may boost demand for a firm's products.

Uganda‘s population is estimated at approximately 25.5 million with an annual growth rate of

3.7 percent. Uganda produces large quantities of a variety of food crops including tea, coffee,

maize and oil seeds. The post and telecommunication sector is a fast growing sector accounting

for 36 percent of GDP in 2004/2005. In the 1960s, considerable efforts were make to diversify

the economy through the establishment of basic industries producing such goods as textiles, tea,

sugar, beverages, edible oil, wood, paper and paper products, iron and steel, non metallic and

metallic products, etc. Although some of the industries utilised local agricultural resources, most

of them were excessively dependent on imported raw materials and other factor inputs. Industry

contributed as much as 12 percent to GDP, and Regrettably, the country‘s import substitutions

industries were unable to generate the high level of employment envisaged and did not

adequately integrate the agricultural sector. The export promotion industries that were

established had some drawbacks as most of the factor inputs were imported.

The industries were capital intensive and the country did not have the requisite human resource

capabilities to efficiently and effectively operate and maintain the industrial plants and

machinery. Industry was in a deplorable state by 1980.

Although manufacturing now accounts for about 10 percent of GDP, industrial development in

Uganda is, however, faced with, inter alia, the following constraints.

Inappropriate policies for increased competitiveness and sustainable industrial development

(similarly, assistance is being provided by UNIDO in analysing competitiveness and in defining

appropriate policies for sustainable industrial development.

138

In 2005, the Ministry of Tourism, Trade and Industry in cooperation with the Ministry of

Finance, Planning and Economic Development, the Public Service Commission, the organised

private sector and UNIDO organised a consultative forum/training workshop for high level

decision makers, aimed at strengthening competitiveness for governance and economic

management in Uganda.

Inadequate technologies for the processing of agricultural and mineral products.

Lack of entrepreneurship development and SME support institutions;

Inadequate industrial institutional support services for the development of a competitive

industrial sector.

Limited scope for forward and backward integration of industries and of industry in

relation to other sectors, in particular, the agriculture – industry linkage, which is currently

extremely narrow.

Inadequate skilled industrial human resources, including entrepreneurial capabilities,

managerial capabilities, industrial planners, engineers, technologists, technicians, etc.

Weak technological capacities and capabilities, including information and

communication technological capacities and corresponding capabilities.

The food processing industry is characterised by relatively small economies of scale, low

to medium capacity utilisation, high labour productivity and relatively low capital investments.

There are a number of problems and constraints impeding the development of the food

processing industries.

Inadequate raw materials.

Lack of research and development facilities which offer opportunities for raw materials

testing and improvements in process technology and product quality.

139

Poor and indiscriminate location of industrial plants with wide ranging problems relating

to the collection of raw materials and the marketing and distribution of finished products.

High cost of production, poor quality products and high prices.

The survey reveals that 25 percent of enterprises in the food processing industrial sub-sector plan

to expand existing capacities within twelve months; another 10 percent would expand production

capacity within 1-3 years. Twenty percent of food-processing industries indicate that expansion

of capacities could be between 3-5 years. These figures are encouraging as they represent

renewed interest in the food processing industrial sub-sector.

SOCIAL ANALYSIS

Changes in social trends can impact on the demand for a firm's products and the availability and

willingness of individuals to work.

The Elderly:

As people age, they often encounter difficulty in getting various food packages open. Food

suppliers want the elderly to be able to open their food with ease, but they can't make packaging

too easy to open, either. Many times, elderly people who consistently struggle with opening their

food packaging are in need of more assistance than they are currently receiving.

Children:

Food is, of course, safe to eat; unlike medicines and cleaning agents, it's usually not an issue for

a small child to open up food packaging and eat the contents within. Also, strong packaging is

necessary for many types of food, in order to keep it from going bad.

Theft:

Thieves often attempt to circumvent store security systems by slipping food out of its packaging;

this is why packaging has to be reasonably hard to open.

140

Litter:

One of the most significant social issues surrounding food packaging is litter. It must be noted,

however, that packaging suppliers aren't the ones who strew litter about; consumers are

responsible for properly disposing of their used packaging. Between recycling efforts and

increasing awareness about saving the planet, litter due to packaging is likely to decrease as time

goes by.

Serving Size:

Packaging suppliers are increasingly addressing this trend in an effort to keep food and other

products from being wasted.

TECHNOLOGICAL ANALYSIS

New technologies create new products and new processes. Technology can reduce costs,

improve quality and lead to innovation. These developments can benefit consumers as well as

the organizations providing the products.

Packaging machines:

A choice of packaging machinery includes technical capabilities, labour requirements, worker

safety, maintainability, serviceability, reliability, ability to integrate into the packaging line,

capital cost, floor space, flexibility (change-over, materials, etc.), energy usage, quality of

outgoing packages, qualifications (for food, pharmaceuticals, etc.), throughput, efficiency,

productivity, ergonomics, etc. Packaging machines may be of the following general types:

Blister, Skin and Vacuum Packaging Machines

Cartooning machines

Case and Tray Forming, Packing, Unpacking, Closing and Sealing Machines

Check weighing machines

Filling Machines: handling liquid and powdered products

141

CHAPTER 2. 6

PRESENT POSITION AND TREND OF

BUSINESS

142

The Research conducted is very important for the current economy of Uganda is lacking behind

the nationalized in one or other manner. The basic motive to carry out the research is to measure

the population is estimated at approximately 25.5million with an annual growth rate of

3.7percent. It is also measures the life expectancy and the populations is likely to reach 50million

people in 25-30 years there life expectancy is 46 years and then more than that like about 55

percent of the population are under 18 years of the age it is found during the research that the

population of Uganda is the fastest growing in comparison of the East African Community,

comprising of Kenya, Tanzania and Uganda. In that there is also approximately 87 percent of the

population live in rural area so that it would also implement to reach the standard of all the

nationalized industry who are traded.

Economy there is also implementing the mainstay of the economy and the country is well

endowed with diverse agricultural resources, as well as mineral resources, such as coppers,

cobalt, limestone, copper ,iron-ore, gold and tungsten. Uganda also produce many things in a

huge quantities like tea, coffee, maize, and also oil seeds. Yearly or in a rainy seasons the growth

rate is depended upon that seasons. The yearly data are available through the research upon the

growth how rain are come if poor and sporadic rain then low growth rate was recorded. In that

Agriculture‘s share in GDP has also declined steadily in recent years, accounting for about 38.5

percent of GDP in 2003/2004 and 37.0 percent in 2004/2005.

An implementing at which they can reach to the working standard of all the nationalized industry

who are traded Manufacturing on the other hand accounted for approximately 8 percent of GDP

with an average annual growth rate of 5.7 percent in 2003/2004. The post and telecommunication

sector is a fast growing sector accounting for 36 percent of GDP in 2004/2005. Although the

country has large deposits of a number of minerals, the contribution of mining and quarrying to

GDP is small. The country‘s mineral potentials have not been fully assessed and explored.

The manufacturing sector comprises of industries producing processed food, beverages, non-

metallic minerals, wood and wood products, chemical products, leather and footwear, textiles,

wearing apparels, etc. the over all manufacturing sectors are compared by the level of producing

the products or a growth rate of the country.

143

The manufacturing sector achieved a growth rate of about 96 percent and there prices are

influenced by external factors and also under the triggers unfavorable terms of trade. In Uganda

country there is also such produces are export like coffee, cotton, tea and tobacco. In that Coffee

and Tea both are export in a huge quantities also a beans of coffee are also export in a huge

quantities. In Uganda such products are produced in large quantities. The country has taken

some major initiatives to reduce raw material commodity exports. In 1992 for example, 96

percent of such commodities were exported compared to 79 percent in 2002/200318. In recent

years, both foreign and domestic investments have been attracted to agro-processing.

Nevertheless, unfavorable trade balance is still being experienced. In 2002, the highest trade

deficit amounting to US$ 606.1 million was recorded. The main reasons were the poor terms of

trade, a narrow export production base and heavy reliance on the export of unprocessed produce

The manufacturing sector achieved a growth rate of about 3.7 percent in 2000/2003 with

significant increase in production of textiles, clothing and footwear, paper and printing,

chemicals and other chemical products. Production continued to increase in 2003/2004 with an

estimated growth rate of 5.7 percent. The increase in production was mainly due to strong

growth in textiles, beverages and basic metals. The paper and printing sub-sector recorded

negative growth rates. Employment in the manufacturing sector also increased quite significantly

in the year 2000, slowed down in 2001 but recovered in 2002 as a result of increases in

employment in the food processing industry and in industries producing cement and bricks. In

2004, employment continued to increase quite significantly.

Total goods were estimated by that much of things in that tea, cotton, foods, textiles, all are

export. In that the total commodity exports increased by 27 percent to US$ 647 million. The

increase in commodity exports was a result of the strong growth in most of the commodity

export categories. The volume of maize, tobacco, fish, hides and skins all increased in

2003/2004. The export volumes of coffee and cobalt declined at a time when high prices were

recorded. Nevertheless, commodities such as tea, cotton and cut flowers registered increases in

both volumes of production and export earnings.

Total exports of goods were estimated at US$ 647.2 million in 2003/2004 accounting for

approximately 9.7 percent of GDP. However, total imports also rose by about 17 percent to

US$1,321.4 million in the same period. Oil imports also increased by about 3.5 percent in

144

2003/2004, as did non-oil imports which increased by about 19.3 percent to US$1,021.4 million.

The trade deficit in 2003/2004 increased to approximately US$ 674.2 million - some US$ 51.2

million more than 2002/2003.

Tea production, mostly is s grown mainly in the Southern and Eastern parts of the country. Both

Robusta and Arabia varieties is one of the major crops in Uganda‘s are produced. on the other

hand, has increased steadily since 1999 with an increase of about 48 percent during a five-year

period - 1999-2003. Many small scale farmers are turning to tea cultivation and large tea estates

have improved their management structures resulting in increased output. Export earnings from

tea has increased quite significantly since 1994/1995 reaching a peak of US$ 39.3 million in

2003/2004.

In the early 1990s, tobacco production was extremely low. A major break through in production

was experienced in 1997/1998. Since then, tobacco production has increased steadily. In

2002/2003 for example, production increased by about 52 percent of its 2000/2001 levels.

Several reasons for the increases have been put forward but it is now generally acknowledged

that the main reason was the abolition of the old corporative system and the liberalisation of the

tobacco industry. However, in 2003/2004, there was a slight decline of about 1.8 percent in

production. Export earnings also declined in 2003/2004 to approximately US$ 36.0 million

compared to about US$ 44 million in 2002/2003.Uganda produces large quantities of a variety of

fruits and vegetables, including pineapples, mangoes, passion fruit, maize, beans, tomatoes, etc.

Fishery is also a thriving activity and fish processing into fillet and other fish meat are produced

for the domestic, regional and international market.

Production in the food-processing sub-sector has been increasing since the year 2000, although

declines in production were registered in early 2003 and mid 2004. However, the sub-sector

grew by about 88 percent in 2003. The main food processing units are those producing coffee,

tea, fish, vanilla, maize, meat and meat products, dairy products, vegetable oils, etc

This industrial sub-sector is one of the fastest growing industrial sub-sectors in Uganda. It has

been characterised with strong growth since 1999 estimated at a rate of approximately 5 percent

annually. The tobacco industry has a very high capacity utilisation level. In 2004, this sub-sector

grew by approximately 12.1 percent

145

Imports into the beverage and tobacco sub-sector increased in 2003/2004. Exports, of beverages

and tobacco products continued to increase since 1999, although a slight decrease of about 3.7

percent was experienced in 2003 as a result of a fall in tobacco exports. The main trading

partners were Kenya and the Netherlands for exports. Imports were mostly from Kenya and

South Africa.

This industrial sub-sector relies on both domestic and foreign sources for its raw material inputs.

Production has been rather unstable over the years. Between 1998 and 1999, there was a sharp

increase in production to be followed by three years of decline 1991-200119. In 2003, however,

there was an increase in production, with a growth rate estimated at 14.4 percent. Textiles and

garments accounted for a substantial part of the increases in production. In 2004 the textile,

clothing and footwear sub-sector experienced a production increase of 28.7 percent as a result of

increase in the demand for ginned cotton, textile and garments.

Employment, which was more or less stable between 1998 and 1999 began to increase in 2000

with a sharp increase in 2001. The increase in employment was short lived and in 2002, the

employment numbers fell drastically as a result of the reduction in the number of people

employed in the textile finishing enterprises. The increasing growth trends in production were

reflected in the employment figures, which also increased significantly in 2004.

Exports from the textiles, clothing and footwear sub-sector increased between 2002 and 2003

after a period of decline in 2001. The increasing trend continued into 2004. Export earnings more

than doubled in 2004 to about US$ 62.5 million. Textiles accounted for a substantial part of the

15.4 percent increase in export for 2003 and in 2004 with corded and combed textiles as the

important trading products. The clothing and footwear industrial units did not perform well. In

fact, large quantities of clothing and footwear were imported, between 2001-2003 and in 2004.

In this sub-sector, there are a number of small-scale processing industrial units producing

primarily for the domestic market. The main products are cartons, boxes, paper bags, and printed

items. A substantial amount of imported pulp and chemicals are used by the industrial units.

Production fell between 2001/2002 with definite signs of increase by mid 2002. The increasing

trend of production continued in 2004 with an increase of approximately 22.5 percent over the

146

2003 production levels. Paper production, per se, declined as imported paper dominated the

domestic market.

International Trade Trends were not so favourable. Imports rose steadily, thus frustrating any

efforts to produce some of the imported items locally. Exports, on the other hand, which were

very negligible prior to 2002, increased by about 13 percent in 2003 and about 80 percent of its

2000 levels in 2004.

Production in this sub-sector increased gradually from 1998 right up to early 2000. However,

between 2000/2001 there was a slight decline in production of about 4.5 percent20. Since then

however, production has increased gradually with short period of decline in any one-production

year. In 2004, a decline of about 5.8 percent of production levels was reported. With the

exception of foam production, all output levels of all other products were lower than expected.

However, the pharmaceutical industries and industries producing plastics all registered

remarkable increases in production levels for 2004.

The non-metallic minerals industry consists of large production units producing cement and

small and medium enterprises producing lime (from limestone) to be used in agriculture,

construction, leather and paint production. Between 1998-2002, the non-metallic minerals

industrial sub-sector showed very strong growth of approximately 11 percent per annum. During

that same period, Uganda was seriously implementing its reconstruction and development

programme21. Production however, declined in 2002 but increased considerably in 2004 by an

impressive growth rate of 20.2 percent. The expansion of construction and building material

industries in 2004 resulted in similar increases in employment.

The high demand for construction and building materials encouraged further imports into the

sub-sector. The country usually imports much more into this sub-sector than it exports from it.

Exports over the years were relatively stable and extremely low when compared to imports. In

2004, imports comprising mainly of cement and related products increased by about 10 percent.

The manufactured products in this sub-sector include all those products that cannot be accurately

classified in the above-mentioned sub-sectors. Examples are motorcars and motor vehicles,

transmission parts, electrical products, etc. Production in this sub-sector which, was normally

low in the 1980s right up to the year 2000, began to increase in 2001. In 2004, the high demand

147

for plastic and electrical products accounted for a substantial percentage of the increased

production level estimated at 29.2 percent.

The private sector is expected to play an important role in the economic development and

industrialisation of Uganda. The private sector in Uganda, however, covers not only the ‗large‘

and medium enterprises, but micro and small enterprises as well. Most of the micro and small

enterprises are operating in the informal sector. They are known to utilise more domestic raw

materials, labour and other inputs more intensively than the ‗large‘ or medium enterprises in the

country. The indigenous entrepreneurs in Uganda are mainly interested in micro and small

enterprises which are labour intensive and require less sophisticated technologies, as well as low

investments, unskilled and semi-skilled labour. Micro and small enterprises‘ contribution to

production and employment in Uganda is therefore quite significant.

Micro and small enterprises are to be found in every district of the country and in the capital

Kampala. They vary from small rural enterprises to small urban enterprises employing 1-10

employees, in most cases, and 10 or more employees. The Ministry of Finance, Planning and

Economic Development in Uganda has defined micro and small enterprises as follows:

Micro enterprises are those enterprises that are usually owned by a sole operator for

income generating purposes. ―They are business undertakings employing less than five people of

the family members. The value of assets, excluding land, buildings and working capital is below

2.5 million Uganda Shillings; the annual turnover is below 10 million Uganda Shillings which is

the threshold for business related tax‖.

―Small enterprises are enterprises employing a maximum of 50 people in terms of value

of assets excluding land and building and working capital is less than 50 million Uganda

Shillings; annual income turnover is between 10- 50 million Uganda Shillings24. These

enterprises are formally registered and operate fully the whole year and are managed by

educated/skilled/trained managers.

It is estimated that there are more than 800,000 micro and small enterprises (MSEs) in Uganda,

employing about 1.5 million workers25. It is also estimated that micro and small enterprises

account for about 20 percent of the GDP. An annual growth rate of about 20 percent is also

148

recorded for MSEs in Uganda. It should be noted that not all of the 800,000 MSEs are in industry

or industry related activities.

HERE IN THE PACKAGED FOOD INDUSTRY FOR THE EXPORT AND IMPORT IN

INDIA WE HAVE FOUND THAT

India is the world‘s second largest producer of food next to China, and has the potential of being

the biggest with the food and agricultural sector. The food processing industry is one of the

largest industries in India-it is ranked fifth in terms of production, consumption, export and

expected growth. The food industry is on a high as Indians continue to have a feast. Fuelled by

what can be termed as a perfect ingredient for any industry - large disposable incomes - the food

sector has been witnessing a marked change in consumption patterns, especially in terms of food.

A large part of this shift in consumption is driven by the processed food market, which accounts

for 32 per cent of the total food market. It accounts for US$ 29.4 billion, in a total estimated

market of US$ 91.66 billion.

• The Indian packaging industry, growing at an annual rate of more than 15 per cent, is

valued at $ 15.6 billion (inr 85,000 corer).

• In the next five years, the sector is expected to triple to around $ 60 bn.

• The net profit of the packaging industry spurted 104.5 percent during q3 fy08, against a

growth of 29.5 percent in the December '06 quarter.

• The large growing middle class, liberalization and organized retail sector are the catalysts

to growth in packaging.

• More than 80 percent of the total packaging in India constitutes rigid packaging. the

remaining 20 percent comprises flexible packaging.

• There are about 600-700 packaging machinery manufacturers, 95percent of which are in

the small and medium sector located all over India.

• Indian packaging machinery imports are $ 125 million.

• The import (customs) duty for packaging machinery is 25.58 percent for 2007-08.

149

Export trend

India‘s trade in various segments in the Food Processing Sector has seen a good growth driven

by the Mango Pulp, Dried and Preserved vegetables, Pickles and Chutney in F&V, Buffalo Meat

in the Meat and Poultry, Basmati Rice in Grains and Shrimp in the Fisheries segments. India‘s

exports, as is the case globally, are to the proximate geographies led by South Asia at 34 percent

and USA & Canada a poor 1 percent of total exports

Poor quality and grading mechanisms for raw material leading to loss of consistency in variety of

raw material High level of wastage across the value chain Presence of too many intermediaries

implying a high cost of raw material High costs of packaging Low technology equipment and

knowledge High costs and poor quality of distribution Stringent Food Safety and Traceability

norms from importing (developed) countries

Fruits and vegetables export

Exports of fruits and vegetables with are the growing day by day with good revenue generation

of the food and more popular with the all over the world .people are now dependante on this type

of packaged food because of the job and working schedule and easy availability of the product

with the affordable cost

Geography wise export

The prominent export products are Fruit pulp & juices, Canned F&V, Jams, Squashes,

Dehydrated vegetables, Frozen pulps and vegetables, Frozen dried fruits, Vegetable curries,

Pickles and chutneys, Mushroom products etc

Fisheries

The basic tenet on which the sea food industry is presently working is that there is no demand for

value added products in the domestic market as consumers prefer fresh fish. Also, the

infrastructure for handling, distribution and storage is not well developed in the domestic market

and hence the segment focuses heavily on exports.

150

Packaged food details

Here in packaged food industry graph shows the increment year to year has been in a progress so

people are now days more pereffered to eat packaged food because in working time its hard to

prepare food so they are use to purchase this food starting from 2005 up to 2013 it is shown in

graph there is a booming market are available for the indai and with other country also.

Challenges and apportunities

The future of the Indian farmer depends on the success of the food industry as India's prosperity

is predominantly linked to the growth of incomes in the agrarian sector of the economy.

Increasing liberalization of the economy has tried to lift the protection that the food and

agriculture sector once enjoyed in the country. This has exposed the sector both to the

opportunities and challenges of the global food economy.

The market forces are compelling the Indian agriculture producers to increase the quality of their

farm produce while continuing to maintain their cost competitiveness in order to be able to

compete effectively in the global food market. Even in the domestic market, rising per capita

incomes and changing demographic profile of the population has ensured the growing demand

for processed and convenience foods. Increasing consumer awareness about health and

hygiene has shifted the focus of the market to "safe" foods. The Indian food-processing

sector is undergoing a veritable revolution - all the way from the plate to the plough.

Indian food processing industry has seen significant growth and changes over the past few years,

driven by changing trends in markets, consumer segments and regulations. These trends, such as

changing demographics, growing population and rapid urbanization are expected to continue in

the future and, therefore, will shape the demand for value added products and thus for food

processing industry in India. The Government of India‘s focus towards food processing industry

as a priority sector is expected to ensure policies to support investment in this sector and attract

more FDI. India, having access to vast pool of natural resources and growing technical

knowledge base, has strong comparative advantages over other nations in this industry. The food

processing sector in India is clearly an attractive sector for investment and offers significant

growth potential to investors.

151

Segmentation of different sectors in food processing industry:

Sectors Products

Diary Whole Milk Powder, Skimmed milk powder, Condensed milk,

Ice cream, Butter and Ghee, Cheese

Fruits & Vegetables Beverages, Juices, Concentrates, Pulps, Slices, Frozen &

Dehydrated products, Potato Wafers/Chips, etc

Grains & Cereals Flour, Bakeries, Starch Glucose, Cornflakes, Malted Foods,

Vermicelli, Beer and Malt extracts, Grain based Alcohol

Fisheries Frozen & Canned products mainly in fresh form

Meat & Poultry Frozen and packed - mainly in fresh form, Egg Powder

Consumer Foods Snack food, Namkeens, Biscuits, Ready to eat food, Alcoholic

Source: Ministry of food processing India, Annual Report 2004

Food processing units in organized sector

Flour mills 516

Fish processing units 568(+ 482 cold storage units)

Fruits and vegetables processing units 5,293

Meat processing units 171

Sweetened and aerated water units 656

Milk product units 266

Sugar mills 429

Solvent extract units 725

Rice mills 139,208

Modernized rice mills 35,088 Source: Ministry of food processing India, Annual Report 2004

152

CHAPTER 2. 7

FUTURE BUSINESS OPPORTUNITIES IN

UGANDA

153

Doing Business measures the ease of starting a business in an economy by recording all

procedures officially required or commonly done in practice by an entrepreneur to start up and

formally operate an industrial or commercial business—as well as the time and cost required to

complete these procedures. It also records the paid-in minimum capital that companies must

deposit before registration (or within 3 months).

According to data collected by Doing Business, starting a business there requires 15 procedures,

takes 33 days, costs 76.7% of income per capita.

Agricultural processing is growing and there are investment opportunities in processing and

packaging coffee, edible oils, tropical fruits, fruit juices and nontraditional crops. Sales

opportunities exist for food processing equipment, storage facilities, chemicals and additives,

preservatives, canning, bottling and other packaging equipment and related materials.

Steps to start a business in Uganda

Investors must have and its name registered(Duration: 2-14 days)

Investors can obtain investment license (optional) (Duration: 3-5 days )

Investors may have to obtain sector specific secondary licences

Access to Utilities (with Telephone Uganda Telecom Ltd., Uganda Electricity Board,

National Water and Sewerage Corporation)

Tax registration (Duration: 2-3 days)

INFRASTRUCTURE AND UTILITIES :

Power supply and energy

Telecommunication

Water, sewerage and health services

Road transport

Air transport

Railways

Waterways and access to sea ports

154

Despite poor facilities of Infrastructure Uganda has made significant progress in others, namely

power supply and telecommunications. The development of the infrastructure reflects the

development of Uganda as a whole.

TAXATION IN UGANDA

DIRECT TAXES

Corporate and income tax

Rental Income Tax

Withholding Tax

INDIRECT TAXES

FOOD PROCESS IN UGANDA

The role of commercial food processing in the economies of Uganda Food processing for the

market is carried out by enterprises in the formal, visible sector, and also by a large number of

small and micro-enterprises which do not feature in the statistics. In terms of contribution to the

overall GDP, the significance of food processing in the formal sector is relatively small.

However both countries are largely agrarian, with manufacturing in its infancy, contributing only

around 15%to GDP. Nearly a quarter of all registered enterprises are engaged in food processing,

providing employment to around 20% of people working in the manufacturing sector.

Characteristics of enterprises in the sector Only a few enterprises in the formal sector can be

referred to as large-scale: they include the breweries and soft drink manufacturers, and a few of

the large parastatals such as flour and oil mills which have (so far) survived the changing role of

the state.

A total of around 1000 small- and medium-scale enterprises (SMEs)are registered in Tanzania;

in Uganda the number comes to approximately 1700. These figures can surely be no more than

an indication, as many are not registered.

155

MARKET OVERVIEW

Strong macroeconomic management and general political stability have helped this fast-growing

country of 31 million improve its business environment over the past decade. However, high

levels of corruption, poor infrastructure, a shortage of human capital and a dearth of affordable

financing remain significant hurdles for businesses in all sectors.

In general, Uganda's economy remains small, with a gross domestic product (GDP) of $12.3

billion in 2007 ($400 per capita), and 31% of the population living on less than $1 per day.

Uganda‘s private sector has expanded significantly in recent years, and Uganda's GDP, trade,

and foreign direct investment have all increased.

GDP rose by more than 6% on average for the last decade and rose 7% in the 2008/2009

fiscal year. Forecasted growth in 2009-2010 is 6%.

Trade rose to $2.4 billion in the 2007-2008 fiscal year, up from $2 billion in 2006-2007.

Major investments were made in mobile phone communications, petroleum exploration,

banking, construction, agro-processing and manufacturing.

In recent years, the Ugandan government has worked to pass and implement a range of laws and

regulations to create greater government accountability, open markets, and build a more

attractive environment for trade and investment. Uganda hopes to pass more than 20 commercial

laws in 2010 to strengthen intellectual property rights, and clarify laws on mortgages, e-

commerce, and electronic signatures.

Uganda‘s major trading partners are its regional neighbours, including Kenya, the Democratic

Republic of Congo (DRC), and southern Sudan. The European Union, the United Arab Emirates,

South Africa, India and China follow behind Uganda's regional partners.

156

MARKETS FOR PACKAGED FOODS IN UGANDA

In the light of trade liberalization, market orientation is playing a crucial role in the economic

success of farmers and entrepreneurs. Market orientation may be expressed by the level of

market knowledge, market skill and commercial attitude of the decision- makers in the business.

In this chapter, the demand for processed foods and the existing supplies in Tanzania and

Uganda are presented.

Demand for processed food products

From the experience of the consultants, it is helpful to categorize the market into consumer

groups:

Well-off urban population (plus the small number of wealthy rural people).

People in cities and rural towns with average incomes.

People living in rural areas with low-to-average incomes.

Tourists and expatriates.

Restaurants and snack bars.

Other food processing companies.

There are categories like Snack foods, Bakery Products, Confectionaries etc…

Issues/Problems faced by Small-Scale Food Processing Enterprises

Problems can be divided in two categories- External and Internal

Examples of external problems include:

Government policies towards small enterprises.

Availability and cost of finance from commercial lenders.

Availability of equipment, packaging materials, essential ingredients and maintenance

services.

Competition from imported products.

157

Internal problems include:

Selection of inappropriate technologies.

Government policies towards small enterprises

The business registration, regulatory and reporting environment in Uganda is one of the worst in

the whole of Africa and, more than any other factor, has driven the bulk of small- and medium-

scale enterprises (SMEs) to operate in the informal sector. The Uganda Investor showed that

procedures for registration and licensing in Uganda amount to four or five times the number of

documents and forms needed to complete the process, compared with other African nations.

From the viewpoint of the entrepreneur, there is no coherent and perceivable support coming

from government institutions. The degree to which entrepreneurs are organized in Uganda is

very low: there are no manufacturing associations that effectively lobby government on issues

that are of importance and interest to small and medium entrepreneurs.

HOW TO INVEST IN UGANDA?

The principal types of business enterprises in Uganda are:

Registered Companies (Private and Public)

Branch offices of companies registered outside Uganda

Partnerships

Sole Proprietorships

Co-operatives

158

MARKET CHALLENGES

The barriers to doing business in Uganda include high levels of corruption, poor infrastructure, a

lack of access to affordable loan financing, low levels of human capacity, and inefficient

government services. A lack of government policies and regulatory consistency toward

investment further impedes business predictability and efficiency.

Uganda's infrastructure, particularly its systems of roads, rail, electricity, and water, is poor. An

estimated 80% of Ugandans receive no electricity at all and load shedding in Kampala remains

common.

MARKET OPPORTUNITIES

Firms interested in exporting goods to Uganda have also been able to take advantage of its

location in the heart of East Africa. With new stability in southern Sudan, and demand increasing

in the DRC and Rwanda, Uganda has seen its regional trade growing strongly.

Uganda's traditional agricultural exports continue to represent opportunities. Coffee, tea and

cotton, Uganda's largest exports by value, have increased substantially in quantity and dollar

value over the past several years.

MARKET ENTRY STRATEGY

ENTRY AND EXIT

Screening, registration and authorization

Incorporation and related requirements

Establishing a company of limited liability

Exit

159

This can be done by using following:

(a) Direct Export

(b) Using an agent or distributor

(c) Establishing an office

(d) Franchising

(e) Direct Marketing

(f) Joint Ventures / Licensing

(g) Selling to Government

Other Start up Considerations

Distribution and Sales Channels

Selling Factors / Techniques

Electronic Commerce

Pricing

Sales Service / Customer Support

Protecting Intellectual Property

Due Diligence

COMPETITION AND PRICE POLICIES

Uganda takes a liberal stance with respect to competition and price-setting. Open competition is

generally encouraged and market forces allowed to determine who enters or exits any given

business and what prices are charged. There are virtually no Government monopolies, and the

Government does not interfere directly with the prices of commercial goods or services.

Availability and choice of equipment, maintenance services and packaging Materials

Local manufacture and import of processing equipment

Technical maintenance

160

PERFORMANCE REQUIREMENTS

Foreign investors may be subject to a number of performance obligations which are not imposed

on national investors. These obligations may include requirements as to investment size, staff

training and localization, local procurement and environmental protection.

Local-content requirements

Technology-transfer requirements

Environment-related requirements

Expatriate employees

PREPARING TO EXPORT TO UGANDA

In the first instance, most companies do business in Uganda through an agent or distributor, as an

initial step to establishment. Regular visits to the market are important, especially during the

early phases to establish links and networks. Companies wanting to enter the Ugandan market

are advised to research the market prior to engaging in business so as to understand the

opportunities and competitiveness of the market for their products and services.

Trade Regulations and Standards

Import Tariffs:

Trade Barriers:

Import requirements and documentation:

Temporary Entry:

Labeling and Marking Requirements:

Responding to Tenders

161

Documentation

Companies need a number of documents to set up in Uganda, including: Certificate of

registration; Company PIN Number; VAT Number. UKTI Uganda can advise on this. It is also

essential to obtain/issue receipts and invoices whenever transacting to avoid potential disputes.

Getting your Goods to the Market

Being a landlocked country, the main options for getting goods to Uganda are road, airfreight

and to a limited extent rail. There are a number of clearing and forwarding agents in Uganda.

The exhibitor profile under the Packaged foods & Beverages category includes :

Coffee

Energy Drinks

Fruit Beverages

Mineral Water

Ready to Eat Food

Soft and Aerated Drinks

Soups, Sauces, Fats & Cocoa Products

Sweets, Snacks & Savories

Tea

SMALL-SCALE FOOD PROCESSING IN UGANDA

ECONOMIES

The importance of food processing in developing agrarian economies Agricultural produce, such

as cereals, tubers and oilseeds, is generally not palatable immediately after harvest. Tubers, fruits

and vegetables may be processed to extend their shelf-life; cereals are milled; and oilseeds are

pressed to ease household-based food preparation. Some produce is fermented or mixed with

other ingredients to improve palatability or turn it into an inviting snack. Market demand for

162

processed foods has developed in all cultures and societies as division of labour progresses and

people specializing in particular skills have increasing levels of disposable income. Today a wide

spectrum of food processing enterprises can be found in Africa, ranging from very small

entrepreneurs extracting oil in laborious, manual operations, through small expeller mills

providing services to customers and also selling some oil, up to large-scale enterprises

processing food for national and international markets.

OPPORTUNITIES IN UGANDA

Uganda‘s traditional agricultural exports continue to present opportunities. Coffee, tea and

cotton, Uganda‘s largest exports have increased both by quantity and value over the past several

years. Nontraditional goods such as fish, flowers and vanilla now account for significant shares

of Uganda‘s Exports. Uganda‘s agricultural potential and untapped mineral resources have also

attracted foreign investment.

The banking industry has also seen strong growth recently. Financial services are becoming more

efficient with the presence of major banks and an increasing number of new commercial banks.

Opportunity in food sector :

Agricultural processing is growing and there are investment opportunities in processing and

packaging coffee, edible oils, tropical fruits, fruit juices and nontraditional crops. Sales

opportunities exist for food processing equipment, storage facilities, chemicals and additives,

preservatives, canning, bottling and other packaging equipment and related materials.

163

PRIVATIZATION, LIMITATION AND EXCLUSION

Privatization

The Government is either divesting completely from the commercial sector or liberalizing it to

let private-sector operators compete on an equal footing. Foreign direct investment is basically

permitted in all industries. In some, however, investors may not be entitled to investment

incentives.

General rules and regulations governing private sector mergers and acquisitions have not been

formulated. Acquisitions of Government companies are regulated by the Public Enterprise

Reform and Divestiture Statute. In practice, the mode of privatization depends on the public

enterprise involved. Foreign as well as local investors may participate in the privatization process

without discrimination.

Regional or zonal restrictions

Regional or zonal restrictions do not exist. Investors are free to invest in any part of the country.

They are, however, required to observe environmental laws and not construct factories in

protected areas. Some special incentives do exist for investors operating in up-country locations.

164

CHAPTER 2. 8

POLICIES AND NORMS OF UGANDA

FOR IMPORT/EXPORT TO INDIA

INCLUDING LICENSING, PERMISSION,

TAXATION

165

Import restrictions of Uganda

• 200 cigarettes or 50 cigars or 100 cigarillos or 500g of tobacco, 1L of spirits, 2L of

lighter alcohol beverages, Non-commercial amount of gifts and other items for personal use are

import free.

• Narcotics , Pornography, Counterfeit items, Cultural artifacts and other objects of cultural

importance, Henna, Palm tree and any products thereof, Explosive material are prohibited in

Uganda.

• Live animals, endangered species, Medication, Hunting weapons are restricted.

The country ranks 118 in terms of total import volumes. Uganda‘s import partners are: UAE ,

Kenya ,India, China ,South Africa , Japan .

Export restrictions of Uganda

• Narcotics, Pornography, Counterfeit items, Cultural artifacts and other objects of cultural

importance, Henna, Palm tree and any products thereof, Explosive material are restricted.

• Foreign currency – up to the amount, endangered species are restricted in Uganda.

• The country ranks 121 in terms of total export volumes Uganda‘s Export Partners are:

Sudan ,Kenya, Switzerland ,Rwanda ,UAE ,Democratic Republic of Congo ,UK ,Netherlands ,

Germany

Top Food Products Imported By Uganda:-

Wheat , Cane Sugar , Food Preparations , Palm Oil , Grain Sorghum , Natural Vegetable Fats &

Oils , Non Crude Oil , Rice , Malt , Cereal Grouts , Pasta , Yeasts , Wine , Seeds , Prepared

Vegetables are top food products.

166

Top Products Exported By Uganda:-

It basically includes Traditional Export and Nontraditional Export..Traditional Exports include

Coffee, Cotton, Tea, Tobacco. Nontraditional Exports include Maize, Beans and other Legumes,

Fish and Fish products, Cattle hides, Sesame seeds, Soya beans, Soap, Electric Current, Cocoa

beans, Cobalt, Hoes and hand tools, Pepper, Vanilla ,Live animals, Fruits, Groundnuts, Bananas,

Roses and Cut flowers, Ginger, Gold and gold compounds.

Food Imports in Uganda:-

Food Imports in Uganda is continuously decreasing since 2002.In 2002 Uganda‗s import is

16.21%. In 2010 it is 12.41 %.

Food Export Trade:-

On the basis of quantity Beans & other Legumes is the first in the Uganda‘s Exports. Maize and

Tea are also the major items in Uganda‘s Exports. Vanilla and Ground Nuts have least share in

export.

Safety and Quality Problems with Country’s Exports:-

High moisture content especially for grains , Contaminants especially sprayed chemicals, drug

residues and foreign matter; most exports are not grade are the major problems.

Food Import Trade:

On the basis of Quantity Maize is the first in the Uganda‘s import. Soya Beans/ Flour, Citrus

Fruits also have major share in exports. Pineapples, Mussels/ Scallops have least share.

Safety and Quality Problems with Country’s Imports:-

The problem includes Sub-standard goods, Expired products; Risk importing diseased products

e.g. BSE; Risk importing genetically modified products especially beans, meats and maize.

167

Food Legislation:-

It includes following Food Laws. (1) Public Health Act, (2) Draft Food Law, (3) Ugandan

Bureau of Standard Act.

Implementing Authorities:-

It includes following implementing authorities ( 1) Ministry Of Health , ( 2) Ministry Of Local

Government, ( 3) Ministry Of Trade and Industry.

Coordinating Committee:-

It includes following coordinating committee. ( 1) National Bureau for Food Standards,( 2)

National Food Standards and CODEX standards.

Currency Import Regulations:-

Unlimited Foreign Currency is allowed. Local currency (Uganda Shilling-UGX) is prohibited.

Currency Export Regulations:-

Foreign currencies are limited up to the amount imported. Local currency (Uganda Shilling-

UGX) is prohibited.

Measures Directly Affecting Imports:-

Following measures are directly affecting;

• Business registration, customs procedures, and valuation

• Tariffs

• Other duties and charges( Including VAT, Excise Tariff , Import license Commission,

Withholding Act)

168

Measures Directly Affecting Exports:-

Following measures are directly affecting;

• Procedures

• Export taxes and charges

• Export finance, insurance, and guarantees

• Export promotion and marketing assistance

Modes of Import Export:-

Road, Rail , Water , Air Transport can be used for export import in Uganda.

Certificate for Import – Export:-

PVoC (Pre-Export Verification of Conformity):-

Uganda National Bureau of Standards set Pre- Export Verification of Conformity Programme on

June 9; 2010.It required that goods imported into Uganda shall be accompanied by PVoC

Certificate. The primary objectives of the program are to develop the safety and quality of

products, as well as to ease clearance procedures, promote fair competition and fight against

counterfeiting of goods. Bureau VERITAS has been mandated by UNBS for the implementation

of the program and for the issuance of the required certificate. It has 3 step procedures.(1)

Request for verification, (2) Routes to compliance, (3) PVoC certificate.

(SONCAP) Standards Organization of Nigeria Conformity Assessment Programme :-

The Standards Organization of Nigeria (SON) has implemented a harsh set of guidelines for

exports to Nigeria called the Standards Organization of Nigeria Conformity Assessment

Programme (SONCAP). In January 2013, the Standards Organization of Nigeria (SON)

officially released a new SONCAP process with a completely revised conformity assessment

structure. The requirements for SONCAP include:

169

• Every batch of imported goods which contains regulated products must be accompanied

by a Certificate of Conformity issued by an Independent Accredited Firm, such as Intertek, and a

SONCAP Certificate issued by SON.

• The Certificate of Conformity (CoC) is required to obtain a SONCAP Certificate from

SON.

• The Certificate of Conformity (CoC) confirms that the products comply with the relevant

Nigerian technical regulations and approved international/regional/national standards.

• SONCAP Certificate (SC) is a compulsory document used by the Nigerian Customs

Services for clearance of goods going to Nigeria.

• The authorities in Nigeria may take random samples from imported consignments to

verify compliance.

• The SONCAP Certificate is required to ensure smooth Customs clearance of shipments

arriving in Nigeria.

• SONCAP covers all products except those regulated by the National Agency for Food

and Drug Administration and Control (NAFDAC).

Export Procedures:-

It has 4 steps i.e. Document Preparation, Custom Clearance and Technical Control, Ports and

Terminal Handling, Inland Transportation and Handling.

Export Documents:-

It includes Bill Of Lading, Certificate of Origin, Commercial invoice; Customs export

declaration, Terminal handling receipts, Transit documents.

170

Import Procedures:-

It has 4 steps i.e. Document Preparation, Custom Clearance and Technical Control, Ports and

Terminal Handling, Inland Transportation.

Import Documents:-

It includes Bill Of Lading, Cargo release order, Commercial invoice; Customs export

declaration, Insurance certificate, packing list, Terminal handling receipts.

Export Regimes:-

Four Operational Export Regimes are used in the automated export system, namely:

• EX1 - Permanent Direct Exports. These are mainly local produce and attract no taxes.

• EX2 –Temporary Export/ Re-export. Goods going out for repair or otherwise but coming

back.

• EX3 – Permanent Re-Export. These are normally personal effect.

• EX8 –Bonded Exports / Re exports. These are basically manufactured Goods.

Import Regimes:-

Uganda has basically four import regimes.

• IM4 – Direct Import for Home Use.

• IM5 – Temporary Import

• IM6 – Re Import

• IM7 – Customs Warehousing.

171

Import Inspection and Clearance Scheme:-

The Import Inspection & Clearance regulation is enclosed in a statutory instrument signed by the

Minister of Trade, Industry and Cooperatives on 21st October, 2002. Quality inspection is done

by UNBS at the entry point during the customs verification exercise. The Scheme has following

objectives:- (1) Protecting the public against substandard products that can put in danger public

health, safety and the environment.(2)Prohibiting the entry of counterfeit products.(3)Protecting

the local manufactures against unfair competition from imported products.(4) Establishing the

quality import inspection regime.

Following category of products is included in this legislation:-

• Food and Related Products.

• Soft Drinks, bottled water and imitation Drinks.

• Building and construction Products.

• Electrical, Mechanical, Chemical Products.

Export Promotion Incentives and Facilities:-

These are the incentives:-

• Manufacturing Under Bond.

• Duty exemption on Plant and Machinery and other inputs.

• Stamp Duty Exemption.

• Duty Draw back – a refund of all or part of any duty paid on materials, input imported to

produce for export.

• Withholding tax exemptions on plant & machinery, human and animal drugs and raw

materials.

• Ten Year Tax holiday.

• Duty remission scheme for exporters involved in value addition.

172

Taxation Policy:-

Uganda's principal taxes are income tax both on individuals and companies, Value Added Tax,

customs, and excise duty levied by the Central Government through the Uganda Revenue

Authority and Graduated Tax and land rates, which are levied by local authorities.

(1) Personal Income Tax:-

Income tax is payable by individuals. It is calculated on the individual's net assessable income

after making allowance for deductible expenses. The sources of assessable income for

individuals include employment, business and property.

Different tax rates apply depending on whether the individual is a resident or non- resident of

Uganda for tax purposes.

(2) Withholding Taxes:-

Withholding tax is a method of collecting income tax. .withholding tax is payable by every

person who imports goods into the country at a rate of 6% based on the Customs Value unless

the person is exempted from withholding tax.

( 3) Corporate Tax:-

A corporate tax is levied on companies, partnerships and sole proprietorships. Any income

arising out of any trade, profession, vocation or adventure in the nature of trade is taxable under

special rules applicable to business entities. The income of all companies accruing or derived

from Uganda is taxable. The standard rate of corporate income tax in Uganda is 30%.

( 4) Value Added Tax (VAT):-

VAT is a consumer expenditure tax. VAT registration for individuals and firms with business

sales turnover of above the Shs 50,000,000 VAT threshold must register with URA for

VAT.VAT on exports is Zero-rated. The standard rate of VAT in Uganda is 18 %.

173

CHAPTER 2.9

POLICIES AND NORMS OF INDIA FOR

IMPORT/EXPORT TO UGANDA

INCLUDING LICENSING, PERMISSION,

TAXATION

174

How to get export license?

An export license is a document issued by the appropriate licensing agency after which an

exporter is allowed to transport his product in a foreign market. The license is only issued after a

careful review of the facts surrounding the given export transaction. Export license depends on

the nature of goods to be transported as well as the destination port.

To determine whether a license is needed to export a particular commercial product or service,

an exporter must first classify the item by identifying what is called ITC (HS) Classifications.

Export license are only issued for the goods mentioned in the Schedule 2 of ITC (HS)

Classifications of Export and Import items. A proper application can be submitted to the Director

General of Foreign Trade (DGFT).

For every first time exporter, it is necessary to get registered with the DGFT (Director General of

Foreign Trade), Ministry of Commerce, Government of India. DGFT provide exporter a unique

IEC Number. IEC Number is a ten digits code required for the purpose of export as well as

import. No exporter is allowed to export his good abroad without IEC number.

Various food laws applicable to food and related products in India

• The Standards of Weights and Measures Act, 1976

• Agriculture Produce (Grading & Marking) Act (Ministry of Rural Development)

• Essential Commodities Act, 1955 (Ministry of Food & Consumer Affairs).

• Fruit Products Order (FPO), 1995:

• Meat Food Products Order, 1973 (MFPO):

• Milk and Milk Products Order, 1992:

• The Food Safety and Standards Act, 2006

Indian Foreign Trade Policy

175

Exim Policy or Foreign Trade Policy is a set of guidelines and instructions established by the

DGFT in matters related to the import and export of goods in India. The Foreign Trade Policy of

India is guided by the Export Import in known as in short EXIM Policy of the Indian

Government and is regulated by the Foreign Trade Development and Regulation Act, 1992.

DGFT (Directorate General of Foreign Trade) is the main governing body in matters related to

Exim Policy. The main objective of the Foreign Trade (Development and Regulation) Act is to

provide the development and regulation of foreign trade by facilitating imports into, and

augmenting exports from India.

Legal Framework of Foreign Trade Policy

(1) Foreign Trade (Development & Regulation) Act, 1992: Development and regulation of

foreign trade by facilitating imports and augmenting exports.

(2) Foreign Trade (Regulation) Rules 1993: Enables the Director General of Foreign Trade to

issue Special Licences to persons whose Importer Exporter Code Numbers have been suspended

or cancelled.

(3) Export-Import Policy : The Foreign Trade Policy (FTP) 2009-2014, incorporating

provisions relating to export and import of goods and services, shall come into force with effect

from 27th August, 2009 and shall remain in force upto 31st March, 2014 unless otherwise

specified. All exports and imports upto 26th August 2009 shall be accordingly governed by the

FTP 2004-2009.

(4) ITC (HS) Schedules - Indian Trade Classification (Harmonized System) - ITC (HS)

schedules on policies with respect to various product lines (whether these can be imported freely

or are subject to some policy conditions) can be referred from.

176

• Prohibited Items: refers to products which are prohibited for export or import to / from a

particular country.

• Channelised Items(STE): are those items which can be imported or exported only by

State (Govt.) Trading Enterprises.

• Restricted Items: For most of the items falling under this category, import or export is

allowed only after obtaining a License / Permit from the DGFT.

• Free Items [OGL (Open General License) Items]: These are items which can be freely

imported or exported without any restriction.

HS Codes / Chapters of Food Products (at 2 digit level)

HS Code/Chapter 04 Dairy pro-duce; birds‘ eggs; natural honey; edible products of animal

origin, not elsewhere specified or in-cluded

HS Code/Chapter 07 Edible vegetables and certain roots and tubers

HS Code/Chapter 08 Edible fruit and nuts; peel of citrus fruit or melons

HS Code/Chapter 17 Sugars and sugar confectionery

HS Code/Chapter 16 Preparations of meat, of fish or of crustaceans, molluscs or other aquatic

invertebrates

HS Code/Chapter 18 Cocoa and cocoa preparations

HS Code/Chapter 19 Prepara-tions of cereals, flour, starch or milk; pastry cooks‘ products

HS Code/Chapter 20 Preparations of vegetables, fruit, nuts or other parts of plants

177

Promotional Measures in FTP

There are various promotional measures under Foreign Trade Policy and other schemes operated

under Ministry of Commerce through various Export Promotion Councils. These are summarized

as follows. Some of the promotional schemes announced under the Foreign Trade Policy and

administered either by the office of the DGFT or the Department of Commerce is:

1. Vishesh Krishi and Gram Udyog Yojana [VKGUY]

2. Focus Market Scheme [FMS]

3. Focus Product Scheme [FPS]

4. Market Linked Focus Products Scrip [MLFPS]

5. Status Holders

Grievance Redressal Committee

A Grievance Committee headed by DGFT in Headquarters and by the Joint DGFTs For any

decisions relating to non-statutory matters of Foreign Trade Policy which have caused grievances

to the exporters/importers are also considered by another grievance redressal mechanism, i.e

Grievance Redressal Committee headed by an Additional Secretary in the Department of

Commerce An opportunity for a personal hearing with GRC is also available.

Special Economic Zone

India was one of the first in Asia to recognize the effectiveness of the Export Processing Zone

(EPZ) model in promoting exports. The main objectives of the SEZ Act are generation of

additional economic activity, promotion of exports of goods and services, promotion of

investment from domestic and foreign sources, creation of employment opportunities,

development of infrastructure facilities.

178

The developer submits the proposal for establishment of SEZ to the concerned State

Government. The State Government has to forward the proposal with its recommendation within

45 days from the date of receipt of such proposal to the Board of Approval. The applicant also

has the option to submit the proposal directly to the Board of Approval.

Major Incentives to units in SEZ

The incentives and facilities offered to the units in SEZs for attracting investments into the SEZs,

including foreign investment are as under:-

Duty free import/domestic procurement of goods for development, operation and

maintenance of SEZ units.

100% Income Tax exemption on export income for SEZ units under Section 10AA of the

Income Tax Act for first 5 years, 50% for next 5 years thereafter and 50% of the ploughed back

export profit for next 5 years

Exemption from minimum alternate tax under section 115JB of the Income Tax Act

External commercial borrowing by SEZ units upto US $ 500 million in a year without

any maturity restriction through recognized banking channels.

Exemption from Central Sales Tax

Exemption from Service Tax

Single window clearance for Central and State level approvals

Free Trade Agreement

179

In recent years, India‘s international trade policy has been increasingly moving away from

WTO‘s multilateral framework towards Free Trade Agreements (FTAs).Foreign trade agreement

covers.

1. FTAs are trade (and investment) agreements between two countries (or blocs) which aim

to give each other access to each others‘ markets.

2. FTAs can cover trade in goods (such as agricultural or industrial products) or trade in

services (such as banking, construction, trading etc) by;

3. Lowering or removing border protection measures such as border taxes on exports and

imports, on goods trade;

4. Changing/ creating other barriers such as standards and processes, rules of origin, trade

facilitation and dispute settlement.

5. FTAs can also cover other areas such as intellectual property rights (IPRs), investment,

government procurement and competition policy.

Trade Agreement Between The Governments Of India & Uganda

The Government of India and the Government of Uganda shall do their best to increase the

volume of trade between the two countries, in particular with regard to the goods and

commodities mentioned in lists ‗A‘ and ‗B‘ annexed hereto, which form an integral part of this

Agreement.

List ‗A‘ designates the exports of Uganda.

List ‗B‘ designates the exports of India.

List A designates the exports of Uganda ( Packaged food product)

o Biscuits

o Groundnuts, groundnut oil, groundnut oil cake

180

o Cassava, flour and chips

o Food waste and prepared animal feeds

o Fruits (bananas, pineapples, mangoes etc.)

o Dairy products

List B designates the exports of India

o Spices, including pepper; provisions and oilman‘s stores.

o Cane Jaggery

o Sugar Preserved fruits, juices, pickles and chutneys

o Confectionery and biscuits.

o Agricultural Products

o Hydrogenated oils, i.e. ‗Vanaspati‘ or vegetable ghee.

o Vegetable oils and oilseeds, essential oils

Taxation Policies on Import

Under the Customs Tariff Act 1975, the MFN tariff is based on the standard rate, which is a

statutory duty. In addition to the standard rate, importers are required to pay an additional duty

("countervailing duty") and a special additional duty instead of local taxes. The "effective" tariff

may be lower because of general or industrial-use-based exemptions. India's tariff is announced

in the annual Budget at the end of February each year.

The additional customs duty (AD) is aimed at removing or reducing what the Government

considers a pro-import bias resulting from the application of central excise duties to domestically

manufactured goods, in accordance with India's trade legislation.

181

Taxation Policies on Export

Export taxes are used as a policy instrument to, inter alia, ensure domestic supply of raw

materials for higher value-added industries, promote further processing of natural resources,

ensure an "adequate" domestic price, and preserve natural resources. Export taxes are sometimes

used with other measures to attain short-term goals. An export cess is collected for the

development of a specific industry; it is consequently levied on certain exports for the

development of that industry.

Special Economic Zones (SEZ): SEZs may be set up by the central or state governments or by

private developers (including foreigners) as joint ventures with the State or fully private Firms

established in an SEZ benefit from several incentives subject to generating net foreign exchange

earnings within five years of operation. SEZ units are exempt from various taxes, including

income tax, central sales tax, minimum alternate tax, dividend distribution tax, service tax, and

from a series of state taxes (i.e. sales tax, stamp duty, and electricity duty).

Export Oriented Units (EOUs): The EOUs Scheme, introduced in early 1981, complements the

SEZ scheme. EOUs are regulated by the Foreign Trade Policy. The main objectives of the EOU

Scheme are to increase exports and foreign exchange revenues, promote the transfer of latest

technologies, stimulate direct foreign investment, and generate employment. EOUs are similar to

EPZs but may be located anywhere in the country.

182

CHAPTER 2.10

PRESENT TRADE BARRIERS

183

Trade Barrier:

Trade barriers are measures that governments or public authorities introduce that prevent or

restrict overseas trade and investment.

Tariff:

A Tariff is either a tax on imports or exports (an international trade tariff), or a list of prices for

such things as rail service, bus routes, and electrical usage (electrical tariff, etc.).

• Tariff of Uganda:

The average tariff of Uganda is 14% which is 3% more than the average for all tariffs and

customs.

Foods, beverages and tobacco face a mean tariff of 22.6348%, which is 5% more than the

average for all Tariffs and Customs.

(Source: Uganda 2011 Tariff Schedule, 2011 WTO data)

• Non Tariff Barrier:

Non-tariff barriers to trade (NTBs) are trade barriers that restrict imports but are not in the usual

form of a tariff. Types of Non-Tariff Barrier:

1. Licenses:

PVoC:

Exporter requires a Certificate of Conformity for products regulated under the Uganda Pre-

Export Verification of Conformity to Standards Programme (PVoC).

To assure its consumers of the safety and quality of imported goods, the Government of Uganda

through the Uganda National Bureau of Standards has re-instated from 3rd December 2012 a

series of guidelines known as a Pre-Export Verification of Conformity to Standards Programme

184

(PVoC). Every consignment of regulated products exported to Uganda requires a Certificate of

Conformity.

Intertek is authorised by the Government of Uganda to issue the Certificates of Conformity. The

CoC is a mandatory document for Customs Clearance in Uganda; consignments arriving at

Ugandan Ports without this document will be denied entry into the country.

Physical inspection prior to shipment and Pre-Shipment Inspection for Export is required.

(Source: Uganda National Bureau of Standards)

2. Standards:

There are around 142 standards related to food industry that exporter has to follow at the time of

export to Uganda.

3. Ways for Export to Uganda:

There are mainly two ways; goods can be exported to Uganda. In this case, if exporter sent goods

via ship it would take very long time to reach Uganda so, it is not good option for exporter to

sent goods via sea and if exporter send goods via sea, he has to take some precautionary measure

for packaged food.

4. Cost:

Cost for exporting packaged food to uganda for Air is Rs. 350 /Kg for every 100 Kg. goods.

While cost for packaged food export to Uganda via Water or shipment is US $ 1200-1300 for

every 25 tonne or 20 foot container.

Cost to export Uganda is very high which is one of the biggest barrier for exporter.

185

5. Registration process:

Registration process for export to Uganda is very cumbersome and exporter has to follow it

compulsory otherwise exporter can not send its goods commercially. Exporter can send goods

via courier but it will be non-commercial and not commercial purpose which is illegal.

Registration process:

i. Licence from Import-Export Code (IEC)

ii. Pan card of Company based on Business Identification (BIN)

iii. Bank Authorized Dealer Code Letter

6. Import Deposit:

Deposit interest rate (%) in Uganda

The Deposit interest rate (%) in Uganda was last reported at 7.69 in 2010. Deposit interest rate is

the rate paid by commercial or similar banks for demand, time, or savings deposits. This page

includes a historical data chart, news and forecasts for Deposit interest rate (%) in Uganda.

Advance import deposits help countries control their currency values.

7. Foreign Trade Restriction:

Foreign trade restriction can be classified as Prohibited Goods and Restricted Goods.

Classes of Export Trade Control

A. Prohibited Goods: The prohibited items are not permitted to be exported.

B. Restricted Goods: The restricted items can be permitted for export under licence.

In 2006, ‗Dal‘ is baned to export from India. Much of India‘s Dal was being exported and prices

were skyrocketing within India, so the government issued a temporary ban on Dal export till

December 2006.

Government extends ban on export of pulses till Mar 31, 2014

186

The government extended the ban on export of pulses by one more year, but allowed outbound

shipments of kabuli chana, organic pulses and lentils with some riders.

8. Procedure for Export:

Export from India required special document depending upon the type of product and destination

to be exported. Shipping Bill/ Bill of Export is the main document required by the Customs

Authority for allowing shipment.

9. Competitors:

For export of packaged food in Uganda, there are so many local players as well as other

exporters of food products in Uganda. The players are Agro Food Industry, Kings Industries ltd.

And others are EDC, VI DI MADA, Hadoto Foods Ltd. And many others are players exporting

or manufacturing packaged food to Uganda.

10. Problems in trade with Uganda:

The biggest limitation with Uganda is cost of transporting goods. Another challenge is the slow

implementation of the member states‘ commitments to eliminate tariff and non tariff barriers.

The common nontariff barriers still prevailing within the two blocs include the major

impediments of cumbersome customs documentation and clearance procedures, border controls,

transportation and transit traffic regulations, visa requirements and corruption. The railway and

road networks linking Uganda to its regional partner states remain in poor condition.

11. Uganda's trade deficit rose by 14% in June:

Uganda Balance of Trade

Uganda recorded a trade deficit of 233.30 USD Million in December of 2012. Balance of Trade

in Uganda is reported by the Bank of Uganda. Uganda has a systemic trade deficit as a result of

the country‘s dependence on fuel imports. As trade deficit increase, the one reason for that may

be increase in imports and decrease or low exports. So, government of Uganda might try to

reduce imports which are biggest barrier to trade with Uganda.

(Source: www.Tradingeconomics.com / Bank of Uganda)

187

12. Subsidy:

The most important explicit subsidies administered through the Central Government budget are

food and fertilizer subsidies, and until recently, export subsidies. E.g., food subsidies accounted

for about 70% of total Central explicit subsidies in 1974-75. Since then, its relative share fell

steadily reaching its lowest of 20.15% in 1990-91.

Subsidy issues in India is that subsidies like food subsidies have a predominant urban bias.

13. Cost of Packaging: The product like Samosa, chips, etc, requires good packaging which

creates cost for packaging. Packaging material for Snack Food:

For the packaging of snack food different types of packing material is required which is vary

with types of food. Certain food requires only flexible plastics packaging while certain product

require composite containers like potato chips. Other cost for packaging includes Machinability,

physical strength and printability.

14. Export:

Exports refer to selling goods and services produced in the home country to other markets. High

export of agriculture products create high cost for selling in domestic market. If prices of product

at domestic market (Uganda) increase this will increase cost of production in Uganda.

There are so many agriculture products that Uganda is exporting to another country. Products

like bananas, alppe bananas, plantains (matooke), pineapples, avocados, passion fruits, mangoes,

jack fruits, pawpaw, and sugarcane and vegetables like okra, dudhi, onion, mushrooms,

tomatoes, asparagus, potatoes, Asian vegetables.

15. Ugandan Food and Culture:

The link between food production in Uganda and culture

Some cultural practices can directly or indirectly influence the food security of a given society as

culture prescribes the interactions between people, between people and land, and between people

and food.

188

Other ethnic groups also hold particular foods in high regard. Although some cultural practices

have had negative effects on food and nutritional security, other customs and indigenous

knowledge systems and practices provide opportunities for improving food and nutritional

security.

16. Infrastructure Development:

Lack of physical resources like access to containers and packaging materials, roads, transport

and communication is also a hindrance to sector development. In African countries, lack of

physical resources and information infrastructure is common. According to a feasibility study

done by Deloitte, Uganda's infrastructure funding deficit is currently estimated at $15 billion,

with projected financing needs for the next five years amounting to $20 billion compared to

committed funds of only $5 billion.

17. Uganda Can Earn an Extra $2.5 Billion by Removing Trade Barriers

Kampala, February 14, 2013 -Uganda can earn an additional $2.5 billion from non-traditional

trading partners in the region and close the trade deficit in the next five years if it removes trade

barriers with neighbours, the World Bank announced today. Over the same periods, the rate of

growth of manufacturing sector decelerated from 9.8 percent to 6.1 percent. The rate of growth

of the previously booming construction sector also declined from 9.6 percent to below 7.4

percent between these two periods.

18. Environmental Issue:

As packaged food require use of plastic material for packing and other wastage which create

environment pollution. Seal integrity: to ensure protection against environmental conditions and

to provide a long shelf-life, the seal integrity of the pack of the goods must be good enough to

prevent leakage and / or prevent entry of the air or moisture through the seal areas.

189

CONCLUSION

190

It is difficult to give a final conclusion to such an exploratory and open report. However, we can

conclude by saying that India has been a very well known and major exporter as far as spices are

concerned. During the medieval ages also, India was the sole major supplier of spices across the

world and is continuing with the same tradition.

Dehydrated spices are in demand by a lot of countries and even those who themselves are very

good in agricultural sector. This industry is also developing at a rapid growth rate in Gujarat too

and a country like Uganda where the dehydrated spices are in demand, it could be a great

opportunity for the spices exporters of Gujarat.

Uganda as a country is a little closed and unchecked by most of the Indian business houses and

also the industry which we have selected is also not the most favourite industry for exports in

Gujarat so we can conclude by saying that, new medium and small sized entrepreneurs can really

look in to this as a lucrative business.

191

Bibliography

1. www.everyculture.com

2. www.pleasetakemeto.com

3. www.marketresearch.com

4. www.shahispices.com

5. www.trademap.org

6. www.doingbusiness.org

7. www.omaninfo.com

8. Evans, G., Newnham, J., Dictionary of International Relations; Penguin Books, 1998

9. Filanlyason, J., Zakher M., The GATT and the regulation of Trade Barriers: Regime

Dynamic and Functions; International Organization, Vol. 35, No. 4, 1981

10. Frieden, J., Lake, D., International political economy: perspectives on global power and

wealth, London: Routledge, 1995

11. Roorbach, G., Tariffs and Trade Barriers in Relation to International Trade; Proceedings

of the Academy of Political Science, Vol. 15, No 2, 1993

12. Yu, Zhihao, A model of Substitution of Non-Tariff Barriers for Tariffs; The Canadian

Journal of Economics, Vol. 33, No. 4, 2000

14. www.cbo-uganda.org

16. www.muscatdaily.com

17. www.mea.gov.in