Uganda risk report
Corruption constitutes a major challenge for businesses operating or planning to invest in Uganda. The police, the judiciary and procurement are areas where corruption risks are very high and under-the-table cash payments are expected. The core of Uganda's legal anti-corruption framework is the Anti-Corruption Act, the Penal Code, the Inspectorate of Government Act 2002, the Public Finance Management Act 2015 and the Leadership Code Act 2002 (LCA). The Penal Code provides instruments to deal with various corruption offenses including embezzlement, causing financial loss, abuse of office and fraud. The LCA is designed to increase transparency and to curb corruption among senior public officials; it also criminalizes attempted corruption, active and passive bribery, extortion, bribery of a foreign public official and abuse of office. Under the LCA, gifts or donations must be declared if they exceed five currency points in value. Corruption challenges are exacerbated by weak law enforcement, which fuels a culture of impunity. There is no distinction between a bribe and a facilitation payment under Ugandan law.
Judicial system Very high risk
There is a high risk of corruption in Uganda's judicial sector, in part due to political interference. About one in six companies indicate the court system is a major constraint to their ability to do business (ES 2013). Companies do not believe the judiciary is sufficiently independent (GCR 2016-2017), and bribes and irregular payments in return for favorable judicial decisions are common (GCR 2015-2016). Nearly half of Ugandans perceive the judiciary as corrupt and also nearly half of those who have come into contact with the courts in the past twelve months indicate having paid a bribe (GCB 2015). Bribery and political influence in the judiciary is mainly prevalent in the lower courts; the administration of justice is hampered by inadequate funding and staffing (BTI 2016). Ugandan courts generally uphold the sanctity of contracts, though judicial corruption and procedural delays caused by well-connected defendants pose a serious challenge; government agencies are at times reluctant to honor judicial remedies issued by the courts (ICS 2017). Foreign companies have complained that the legal process favors local companies (ICS 2017). Access to the court system is more difficult to obtain at the local level (BTI 2016). All commercial disputes must first go through a process of mediation to reduce the backlog in the court system (ICS 2017). The Center of Arbitration for Dispute Resolution (CADER) can assist in this process (ICS 2017). Enforcing a contract takes significantly less time and costs significantly less than the regional average (DB 2017).
Uganda is a signatory to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards and it is a member state of the International Centre for the Settlement of Investment Disputes (ICSID).
Chief Justice Bart Katureebe has acknowledged the extent of corruption in Ugandan society and the fact that it also infiltrates the judiciary. Katureebe indicated that in several cases, corrupt judicial officers have been found guilty by the courts, but were ultimately set free by the same corrupt system (The Ugandan Today, Apr. 2017).
Police Very high risk
Companies face a high risk of corruption when dealing with the Ugandan police. Corruption and impunity are pervasive in Uganda's police force (HRR 2016; BTI 2016). Companies report that they do not have sufficient trust in the reliability of the police services to protect them from crime and to enforce the law (GCR 2016-2017). Three in four Ugandans perceive the police to be corrupt (UBOS 2015). Over half of firms pay for private security and one in five firms indicate that crime, theft, and disorder are major constraints to their ability to do business (ES 2013). The police is among the country's most corrupt institutions, but members of the police rarely face investigations (BTI 2016). The mechanism for reporting police abuses and misconduct is generally ineffective (GI 2017).
Public services Very high risk
Corruption risks are very high in Uganda's public services sector. Corruption remains endemic and is an accepted means of getting by in Uganda (BTI 2016). Roughly a quarter of businesses report expecting to give gifts to public officials 'to get things done' and more than half expect to give gifts when getting an electric connection (ES 2013). Likewise, businesses report that bribery is very common in the process of obtaining public utilities (GCR 2015-2016). About two out of every five Ugandans reported paying a bribe in the preceding year (GCB 2015). Public services are more effectively provided in the center of the country (BTI 2016). Uganda's regulatory system is compliant with international standards, but bureaucratic hurdles impede its efficiency (ICS 2017). Recruiting personnel is driven more by personal and political preferences than qualifications or efficiency (BTI 2016). Uganda removed 5,500 'ghost workers' from its payroll in 2016 (Newsweek, Aug. 2016).
Starting a business takes almost twice as many steps as the regional average, but the total time required is in line with regional averages (DB 2017). Getting electricity takes six steps, which is in line with the regional average, while the necessary time it takes is only half the average of neighboring countries (DB 2017). The Uganda Investment Authority (UIA) is in charge of vetting applications, deals with complaints, and helps foreign investors obtain necessary permits.
Land administration Very high risk
Corruption risks in Uganda's land administration are high. Ugandan land laws are complex, the land registry is non-transparent and some foreign companies have encountered difficulties obtaining land (ICS 2017). Foreign investors may not own land; they can only lease it (ICS 2017). Foreign companies are supposed to share the same property rights as Ugandan companies, but in practice, well-connected individuals have been able to obtain land well below market rates (ICS 2017). There are reports of land disputes in Uganda, primarily due to legal inconsistencies and different local concepts of land ownership (BTI 2016). The Commission of Inquiry into Land Matters received 1,380 complaints in land dispute cases in the first two weeks after it commenced operations (All Africa, June 2017). The complaints include cases of land grabbing, extortion against land officers, forgery of titles, overlapping lands rights, bribery, and non-availability of land officials (All Africa, June 2017).
Companies may encounter corruption when dealing with Uganda's land authorities, as it takes ten procedures to register property which is nearly double the regional average (DB 2017).
Tax administration Very high risk
Companies face significant risks when dealing with Uganda's tax administration. Tax collection in Uganda is a major problem and lacks transparency, and some foreign investors have complained of tax rules being unclear and subject to change (ICS 2017). Companies indicate that bribes and irregular payments are common when making tax payments (GCR 2015-2016). Nearly half of Ugandan citizens believe tax officials are corrupt (GCB 2015). A number of foreign companies have had tax disputes with the Uganda Revenue Authority (URA) in recent years (ICS 2017). The URA has become more aggressive in collecting tax from compliant companies due to tax shortfalls from its small tax base (ICS 2017). Companies cite tax rates as the second most problematic issue for doing business in Uganda (GCR 2016-2017).
A medium-sized company makes an average of 31 tax payments and spends 195 hours per year managing the administrative burden of paying taxes in Uganda; this indicates paying taxes is easier in Uganda than in other Sub-Saharan African countries (DB 2017).
Customs administration Very high risk
There is a high risk of corruption when dealing with Uganda's customs authorities. Companies believe that the border administration in Uganda is non-transparent and that irregular payments during exporting and importing are common (GETR 2016). Border corruption was listed as a problematic factor for importers (GETR 2016). Companies indicate that the clearance process is inefficient (GETR 2016). The time and costs required for border compliance in Uganda are in line with the regional average (DB 2017).
Public procurement Very high risk
There is a very high risk of corruption in Uganda's public procurement sector, despite that adequate legal and institutional instruments are in place (BTI 2016). Companies report that government officials often favor well-connected companies and individuals when awarding contracts and perceive the diversion of public funds due to corruption to be very common (GCR 2016-2017). One in five companies indicate that they expect to give gifts in order to secure government contracts (ES 2013). Public procurement has been cited as the sector most vulnerable to corruption in Uganda; an estimate of 9.4 percent of total contract values is lost to corruption at the local and central government levels (ICS 2017). There has been criticism of the bidding process in some privatizations; observers have raised questions about the transparency of certain transactions, arguing that many of the most lucrative deals were made with politically connected individuals (ICS 2017). Open bidding is required for the provision of works exceeding UGX 500 in value for services and UGX 200 million for goods; projects with a lower value use a restricted bidding system, in which the government sends out direct invitations without openly advertising the tender (GI 2017). Knowledge of procurement rules among local public officials is often lacking; decisions are frequently driven by personal and political preferences rather than value-for-money considerations (BTI 2016). Foreign firms have complained of a lack of transparency in government procurement and possible collusion between competing business interests and government officials in tendering processes (ICS 2017). The criteria used to evaluate bids are not readily available to the public; the information provided in the bidding document are sometimes so general that it raises suspicions (GI 2017).
Several high-profile governmental tenders for infrastructure projects were suspended as a result of allegations of corruption in recent years, and investors complain of companies interested in procurement contracts providing 'under-the-table' cash payments directly to local agency offices (ICS 2017). A number of high-profile tender for infrastructure have been suspended in recent years after allegations emerged that, in the most severe cases, no formal procurement procedures were followed at all (GI 2017).
Companies are recommended to use a specialised public procurement due diligence tool to mitigate the corruption risks associated with public procurement in Uganda.
Natural resources High risk
There is a moderately high risk of corruption in Uganda's natural resources sector. There are concerns about transparency in Uganda's oil industry (BTI 2016). Financial records associated with natural resource projects are rarely available to the public; irregularities in these financial records have been found in the past (GI 2017). The flow of information concerning oil exploitation has been unsteady, leading many observers to worry that the process may not put Uganda on track to have the oil wealth benefit the entire country and serve the common good (BTI 2016). Campaigners have voiced concerns about Uganda possibly falling into a 'resource curse' as the exploitation of its oil reserves pick up steam (Reuters, Jan. 2017). Hefty bonuses were paid to government officials who deal with tax disputes with international oil firms (Reuters, Jan. 2017). The Ugandan government is currently not involved with the EITI standards for good governance in the natural resources sector, but it has indicated it plans to enact the standards once it develops its oil reserves (ICS 2017).
There are reports that Uganda's government mines department is highly corrupt; bribes to secure licenses is common, including in protected wildlife areas (The Globe and Mail, Jun. 2017). Uganda's President canceled a USD 175 million mining project after it emerged that a former minister pocketed a USD 1 million bribe from the Chinese company that was granted the license (Daily Monitor, Jun. 2017). The officials involved in granting the license are to be investigated (Daily Monitor, Jun. 2017). Mineral dealer Moses Kamunutu has alleged that he paid USD 10,000 to a third party to get a meeting with President Museveni, after which he circumvented a presidential ban on iron ore export, avoided paying taxes by exporting the minerals as samples, and dodged regulations to re-export Congolese minerals labeled as Ugandan (The Independent, Jul. 2017). Global Witness revealed that African Gold Refinery (AGR) allegedly processed in excess of USD 200 million worth of gold from Uganda while failing to disclose the origins of the gold (The Independent, Jul. 2017).
The Anti-Corruption Act (ACA) as amended, the Penal Code, the Inspectorate of Government Act, the Public Finance Management Act (PFMA), the Leadership Code Act (LCA) and the Public Prosecution and Disposal of Public Assets Act compose the core of Uganda's legal framework against corruption. The Penal Code provides instruments to deal with various corruption offenses, including embezzlement, causing financial loss, abuse of office and fraud. The LCA criminalizes attempted corruption, active and passive bribery, extortion, bribing a foreign public official, and abuse of office. Private sector bribery is covered under the ACA. The Code of Conduct and Ethics for Uganda Public Services lists standards of behavior for public officials. Under the Code, bribery is defined as any gratification with a value equal to or more than UGX 20,000 (USD 5) given to public officials by anyone with the intention to influence any current or future decisions. The LCA requires that a gift or donation to a leader must be declared to the inspector general if it exceeds five currency points in value, but the regulation is poorly enforced as leaders rarely declare received gifts or donations; The Leadership Code Act of 2016, which has not been signed into law yet, is intended to increase enforcement of the Act (All Africa, Jul. 2016). The PFMA establishes a single treasury account to make public expenditures more transparent and reduce the vulnerability to graft, among other measures. Unfortunately, amendments have already weakened the PFMA and the Act has not been fully implemented yet. The Whistleblowers Protection Act seeks to protect whistleblowers and to provide monetary rewards in return for reporting. Corruption challenges are exacerbated by weak law enforcement, which fuels a culture of impunity. There is no distinction between a bribe and a facilitation payment under Ugandan law (TI 2012). Uganda is a signatory to both the UN and AU conventions against corruption.
The constitution provides for the freedom of speech and of the press, but the government often restricts these rights (HRR 2016). Journalists face intimidation and harassment from state and non-state actors, often engendering self-censorship (FotP 2016). Uganda's media environment is generally open and critical, but media houses still struggle to keep good relations with the government as they depend on the government as the leading advertising clientele (BTI 2016). Due to escalating censorship and pressure from the government, journalists' ability to criticize the government is limited (BTI 2016). Bribery of journalists is widespread (FotP 2016).There are no reported restrictions on internet access, but the government is seeking to increase surveillance of internet and mobile communications in the light of an anti terrorism campaign (FitW 2016). Uganda's press is classified as 'partly free' (FotP 2016).
Freedom of association is guaranteed by Uganda's constitution but is often restricted in practice; nevertheless, civil society is vibrant (FitW 2016). The government continued to harass civil society groups that advocate for sensitive issues, such as combating corruption, transparency in the oil sector and LGBT rights (BTI 2016). Many of these groups receive a lot of their funding from abroad (BTI 2016).
- World Bank: Doing Business 2017.
- Global Integrity: Africa Integrity Indicators 2017.
- The Independent: "ANALYSIS: Messing with Uganda's Minerals", 17 July 2017.
- Daily Monitor: "President Cancels Shs600b Mining Project", 26 June 2017.
- The Globe and Mail: "Uganda's Mining Sector Stifled by Corruption: Rights Group", 5 June 2017.
- New Vision: "Police Arrests Kabalagala Narcotics Boss", 29 April 2017.
- Uganda Today: "Fighting Corruption in the Judiciary Requires Strong Will - Chief Justice", 1 April 2017.
- Reuters: "Oil Bonuses an Early Sign Uganda Suffering Resource "Curse", Saw Critics", 6 January 2017.
- World Economic Forum: Global Competitiveness Report 2016-2017.
- World Economic Forum: Global Enabling Trade Report 2016.
- Freedom House: Freedom in the World 2016.
- Freedom House: Freedom of the Press 2016.
- US Department of State: Investment Climate Statement 2016.
- US Department of State: Human Rights Practices Report 2016.
- Newsweek: "Uganda Wipes Out 5,500 Ghost Workers in Corruption Crackdown", 12 August 2016.
- All Africa: "Uganda: Don't Use Leadership Code to Hide Illicit Wealth", 25 July 2016.
- The Africa Report: "Uganda Activists Demand Action Against Corrupt Police Officers in Drugs Scandal", 4 January 2016.
- World Economic Forum: Global Competitiveness Report 2015-2016.
- Transparency International: Global Corruption Barometer 2015.
- UBOS: National Service Delivery Survey 2015.
- World Bank: Enterprise Surveys Uganda 2013.
- Transparency International: Protecting Businesses in Uganda against Corruption - User's Guide 2012.