The Competitiveness Framework

The mission of CICS is about “Mainstreaming competitiveness as a driver of growth and prosperity in Uganda”. This is to be realized though unleashing priority growth cluster; fostering competitive mindsets; increasing firm-level capabilities; strengthening the enabling environment and driving focused execution through ownership.

Unleashing Priority Growth Clusters

The focus under this goal was to build on the consensus on the role of growth clusters in Uganda’s national development agenda and drive strategy implementation, investment and growth in seven priority clusters which were: coffee, grains and pulses, horticulture, edible oils, fisheries, IT services/BPO and tourism. These had been identified in the strategy as having the highest growth potential. With the resources available, CICS II was able to identify and facilitate the registration of organizations/Associations under the three clusters: Tourism Cluster; Citrus Cluster; and IT services/BPO Cluster.

These are; Kigezi Tourism cluster platform, Teso Citrus cluster platform and BPO Association. CICS II undertook baseline studies for all the three clusters and sought partnerships with other key players to make pilots a success (like Kabale University which provided training for tour guides). Government, through the CICS Secretariat was able to mobilise resources internally and through development partners to support the implementation process. For instance, in 2014, the Competitiveness and Enterprise Development Project (CEDP) was launched. This is a $100million, five year project (2014-2018) that was designed to support implementation of CICS goals. Areas of results targeted are: Increase the number of titled by one million parcels (and increase of about 200%) and reduces the cost and time to register land by enhanced use of land information services; Increased number and quality of tourism products, employee and tourism arrivals and Increased exports for the seven (7) CICS priority agricultural clusters (coffee, grains and pulses, horticulture edible oils, fisheries) and two nonagricultural cluster (namely tourism and Information Communication Technology (ICT) Business Process Outsourcing (BPO). Land Administration Reform allocated/provided with US$ 54 million; Business Registration and Business Licensing Reforms US$ 10 million; Tourism Competitiveness Development US$25 million; Matching Grant Facility US$ 8 million and Project Implementation US$ 3 million over the five year period of the project. The project once complete expects to reduce the number of days needed to register land from 52 to 25 days; Increase international tourist arrivals from 900,000 to 1,500,000 people; reduce the cost of registering a business by 26%; Increase in exports of selected nontraditional products by 10%; and reduce the number of days to register a business from 35 to 5 days. The aBi Trust Fund was also established and currently fund the seven priority areas of CICS. Through the BPO Association, funds were also secured from the Netherland Trust Fund to support BPO development. These initiatives are expected to sustain the momentum for the clusters in the short term as they consider more sustainable approaches like those adopted by aBi trust fund such as creating a revolving fund that provide affordable credit/financing to farmers, and value adding firms in the identified sectors. The matching grant under CEDP also looks at financing the established businesses to scale up their operations and be able to support the out growers and other small suppliers along the value chain (backward and forward linkages).

Firm-level capabilities reinforcement

Putting the private sector in the driver’s seat of Ugandan growth agenda and provide adequate business development services to private sector firms especially micro and SMEs is the focus of this element and the envisaged interventions included;
a) Micro: Enterprise Uganda had been refining a ‘mass market’ BDS program for existing or would be micro-entrepreneurs. The five day product was targeted at classes of 1,000 people at a time (annual target of 24,000 beneficiaries). CICS II envisaged a role of accelerating this and similar programs by raising more funds to cover the subsidy for this program. CICS II also committed to securing funding to support the initiative of ICP to serve clusters of micro-entrepreneurs in the districts of Uganda.

b) Small: One of the longest running had been the UDS, a BDS cost-sharing program hosted at the PSFU that had been financed alternatively by DANIDA, the World Bank and the EU. The big issue that BUDS had at the time was the imminent end or closure of the funding cycle with no immediate successor program. CICS II was to step in and ensure there is continuity of the program.
c) Medium: This stage envisages the transitioning of BDS into a mainly market-driven delivery of services. The focus was to look at the “100 Top SMEs” program where the list is generated from Enterprise Uganda’s top performing SMEs and the awards done by KPMG. CICS II was to pursue the creation of the BDS market as a core part of the strategy. The intervention also required the shift direct delivery of BDS to SMEs to supporting the development of a self-sustaining private market for BDS. This transition was expected to be done through the following services and offerings;
d) Supply of BDS services: Build the capacity of BDS providers to transition to a purely direct model of BDS provision and begin a ‘train the trainers’ approach that establishes a robust BDS ‘cluster’ of firms that provide services across the spectrum of firm size and industries.
e) Support Incubation Offerings: Activities geared at early start-ups were to be prioritized as essential in building a strong private sector. Incubation services are a key to ensuring that these firms move on to being strong SMEs that can access the strong network of BDS services.
f) Coordinate BDS providers: CICSII strategy recognizes the increasing number of BDS providers in Uganda and their critical role in the development of SMEs but the services provided are yet to be standardized, and benchmarked against international best practices. CICSII therefore would come in to coordinating business development services to improve efficiency and delivery of their services. A national network of BDS providers was to be established to ensure that entrepreneurs across the country are benefiting from the same level of service.
g) Facilitate access to capital: Access to finance had been raised as one of the number one constraints to business and CICSII was to address itself to this challenge in order to support firm-level capabilities.
h) Initiate investment clubs: CISCII was expected to play a critical role supporting investment clubs that were largely based strongly on ties to family and/or friends and yet they offered an opportunity to pool funds specifically for investment opportunities. Interventions would aim at ensuring that they more formalized, being registered and having bank accounts.
i) Strengthen private equity/venture capital funds: These were envisaged to represent an alternative path for the evolution from investment clubs. Here, a professional class of investors exists to manage the funds. CICSII was to promote such funds as part o
f the sensitization programs.

Fostering Competitive Mindsets

The focus here was to ensure ownership of competitiveness at the highest level of Ugandan leadership and promoting pro-competitiveness attitudes in economic actors and general public. Mindset change was to be realized at the two levels; first, government, development partners, and civil society were expected to appreciate the role of business in prosperity creation and second, private sector had to embrace different beliefs and attitudes to create human and stakeholder value while generating profits. CICS II was to leverage reputable leaders as champions in the public and private sector for a successful competitiveness campaign. These champions were to be equipped with the right insights to deliver an appropriate message. Specific initiatives were to be developed to engage youth and a competitiveness campaign launched. The competitiveness campaign would have targeted interventions to connect with a wide cross section of Ugandans and help upgrade the national mindsets around competitiveness and this included engaging press and civil society, as well as the public sector and policy makers.

Strengthening the Enabling Environment

Under this component, CICS II worked with and coordinated URSB, URA and KCCA under a memorandum of understanding to implement reforms in business registration, licensing and transfer of property. Under this arrangement URSB created a single floor business registration service (one stop service center) on the 6th Floor of the building, a bank payment point is also operational on the same floor, online services are now being provided online by URSB like; forms and procedures, name search maybe done online and assessments for fees can be done on the URA website.

To harmonise collection of data at business entry, a single application form has been drafted to collect information that is required by key agencies URSB, URA and KCCA at the onset. KCCA introduced a one-page Trade License application form to improve trade order and this has made the process faster since it now takes a day for a business to get licensed. There are ongoing efforts to create a web portal and database that will enable key institutions such as URA, NSSF, KCCA, UMEME, NWSC and URSB to share information. KCCA has automated payments using e-cities as part of streamlining these processes. More work is on-going to ensure full computerization of the six (6) zonal land offices although challenges remain and these relate to valuation of properties as there is need to introduce a payment system at the Lands Ministry to make the process easy, faster and much cheaper. In order to drive the review process of the business licensing regime in Uganda, the business licensing reform committee was established in March 2011 and concluded its work in March 2012 with a report on findings of their work. The review covered 65 MDAs, 23 Local Government (09 municipalities and 14 districts). Licensing laws across 15 sectors, 87 laws and 174 regulations were reviewed. The report identified and recommended 766 licenses where 45 needed to be eliminated, 418 to be retained, 290 streamlines, 5 reclassified and 8 amalgamated into 4. The recommendations of the Business Licensing Reform Committee received mention in the National Budgets of FY 2012/13 and 2013/14. On 28th August 2013, Cabinet approved and authorised the implementation of the recommendations of the Business licensing Reform Committee Report with the directions that; (i) the First Parliamentary Counsel (FPC) repealed 41 licenses (ii) Authorisation to Hon. MoFPED to liaise with Ministries to generate principles to amend laws and regulations that are redundant and obsolete for submission to Cabinet. In January 2014, the Hon. Minister constituted the Business Licensing and Regulatory Reform Committee (BLRRC) to continue reforming the business environment. The main task of the Committee is to implement the Business Licensing Reforms as approved by Cabinet. By July 2014, the Business Licensing reform process had achieved a reduction of the regulatory burden on businesses through licenses by UGX 188.9 billion. The electronic licensing portal was established at URSB in June, 2013 to provide information on all licenses required for different businesses, this has reduced information related and search costs for businesses especially those upcountry multi-national corporations intending to establish businesses in Uganda; fees on the trading license has reduced by 25 percent and the days it takes to obtain a trading license have also reduced from 60 to 4 days. The establishment of URSB regional offices in Mbarara and Gulu has also enabled the registration of a business without travelling to Kampala although more regional offices are required for country wide coverage. Other regal reforms have also been carried out like: the elimination of three local Government licenses (the Annual Bicycle license, Cess on produce and the fishing license – by local Governments); Atomic Energy Regulations, the Uganda Communications Act, 2013 and The Petroleum Exploration and production Act, 2013 have either been amended or passed into laws. Some of the recommendations of the committee have been implemented like securing autonomy of URSB, enactment of Companies Act 1/2012, availing company registration form, procedures online and free, harmonizing application forms for business entry into one form to be used by all agencies of Government pending approval by Solicitor General, revised Companies fees for share capital up to UGX5 million, registration for corporate tax, VAT, PAYE combined, reduced time taken to register with NSSF to less than 20 minutes in Kampala and less than an hour upcountry, decreased the granting of trade licenses in Kampala and implemented the e-CITIE an electronic revenue management system which has reduced the number of days of to register a business in one day, lands office has been reorganized, land registration forms now available online. Online payments for stamp duty have been introduced, interface with Government valuer created, online declaration of stamp duty, decentralized stamp duty assessment and payment countrywide have also been introduced. Mortgage act and hire purchase act have been operationalized, chattels securities Act 2014 were enacted, Capital markets Authority bill was passed, Trade Secrets Protection Act, and Insolvency Act was also passed. E-Tax Mobile payment system was launched, introduced single TIN and rolled out an online tax services was introduced. The Customs processes for 33 out of the 34 border posts were automated, introduced online services that enable customs operations 24/7 among other reforms. These reforms are partly responsible for improvements in the doing business indicators like starting a business and getting a business license that currently take less than a 4 days. The evaluation however notes that a number of other recommendations on the law, license, and regulation reforms have not been implemented as fast as should have been. For instance, the establishment of an e-registry where all information on regulatory requirements and licenses can be found is yet to be operationalized. CICS should priorities these efforts in the next phase to complete the reform process and if it is to realize the intended impact of easing doing business and promoting the private sector in Uganda. There is likelihood that some recommendations like amendments in the different laws or licensing regime if not implemented on time may become irrelevant or obsolete in a fast paced and evolving global economic environment.

Table 1: Performance of Uganda over the years on the Doing Business Indicators

   Doing business    DB 2010    DB 2011    DB 2012    DB 2013    DB 2014    DB 2015    DB 2016
Starting a business 129 137 143 144 151 168 168
Dealing with construction permits 84 133 109 118 143 166 161
Getting electricity 129 127 178 172 167
Registering property 149 150 127 124 126 118 120
Getting credit 113 46 48 40 42 128 42
Protecting investors 132 132 133 139 115 98 99
Paying taxes 66 62 93 93 98 101 105
Trading across 145 148 158 159 164 126 128
Enforcing contracts 116 113 116 117 117 78 78
Closing business 53 56 63 69 79 106 104
Ease of doing business rank 112 122 123 120 132 135 122
Changes over the years - -9% -1% 2% -10% -2% 10%

Source: World Bank Doing Business Reports (2010-2016)