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Working with the Textile Industry in Uganda
Political and Economic Environment Uganda's political and economic development in the past 20 years has been remarkable. The country has risen from the ruinous regimes to become one of the most dynamic economies in sub-Saharan Africa (SSA). The Government of President Yoweri Museveni has made it clear that it regards the private sector as the chief agent in the recovery process. The legal and institutional framework has been appropriately adapted and foreign investment has been made welcome. The country is clearly positioned to become one of the most attractive business locations in eastern and southern Africa, with guaranteed stability, thereby providing investors with a high degree of certainty for their future planning.
Inflation is under control and has been maintained below 10% per annum for the last several years. Most economic activities are fully liberalized and open to foreign investment. There are no restrictions to 100% foreign ownership of investments and no barriers to remittance of dividends. Uganda's shilling is fully convertible and has remained stable over the last years. The foreign exchange market is now wholly liberalized following a move by government to liberalize capital account transactions. Uganda is now one of about only five countries in the whole of Africa that have no restrictions on capital amount transfers. Within Africa and the merging markets, Uganda enjoys a high status with donors and lenders. Cotton was introduced in Uganda in 1903 as a cash crop, and since that time the country became one of the major cotton growers in Africa. On account of its comparative advantage in terms of agronomic and climatic 40 conditions, Uganda today grows some of the best cottons in the world. Indeed Ugandan cotton is highly rated for its good quality. Uganda produces the long-staple BPA (Bukalasa Pedigree Abler), which is grown almost organically, with minimal application of pesticides and herbicides. BPA is a fine fibre of medium to long staple length. Total production is estimated at 120,000 bales annually. The Cotton Development Organisation (CDO) estimates that 8 percent of the Ugandan population (52,000) in the cotton-growing areas are involved in cotton production. The value of cotton exports has increased correspondingly from $12 million in 1993/94 to between $20 million and $40 million annually thereafter, making the cotton sector a major player in Uganda's economy.
Since 1994, the cotton sub-sector has been liberalised. All activities—right from primary production to export—are now wholly in the hands of the private sector. The new environment has brought about new dynamics, such as (a) increased participation of the private sector, (b) improved farm gate prices and increased farmers' share in the world market prices, (c) increased ginning capacity (d) improved cotton quality, (e) improved average seed cotton yield, and (f) lucrative markets for Ugandan cotton. It is worth noting, however, that 90 percent of Uganda's cotton exports are in bales of raw cotton (lint) and not yarn or textiles. Furthermore, the opportunities available in external markets, such as the United States under AGOA, have not been fully realized. This implies that the investment potential in this especially in the export market has not yet been exploited. Uganda is one of the 35 African countries that will benefit from the preferential access to the US market under AGOA. Under this arrangement, Uganda will export textiles, apparel and other products to the American market. All this opens interesting opportunities for investors. Export Transport Infrastructure Road Transport Air Transport Railways Rail freight charges for the Kampala-Mombasa section are the equivalent of $40/tonne compared with $64/tonne by road. Less than 10% of domestic freight and 30% of external trade freight is carried by rail. Coffee is the main export commodity handled by the URC, followed by cotton, timber, tea, tobacco and food grains. The volume of traffic handled by the URC has increased significantly, from 549,499 tonnes in 1997 to 856,335 in 2001, reflecting an increase of 55.8%. Ugandan labor is plentiful, generally well educated, English-speaking and easily trainable. There is no shortage of unskilled workers. Because there is no legislated minimum pay, wages are generally low by international standards. An employer must contribute an amount equal to 10 percent of an employee's gross salary to the National Social Security Fund (NSSF). A further 5 percent must be deducted from the employee's salary. The NSSF is a provident fund managed by the Government on behalf of the workers. Uganda does not have a history of labour disputes and industrial actions. Moreover, investors perceive the existing labour regulations as being no significant obstacle. Disputes are settled through the Labour Inspectorate and the Industrial Court.
Uganda has one of the best education systems in Africa, with reasonably well-developed schools, colleges and universities. The education system provides for seven years of primary school, five years of secondary school education, and three to five years of university education. The literacy rate and enrollment ratios at the primary school level are above the sub-Saharan African average. University intake has increased considerably, with Makerere University (the largest and oldest state university) taking the lead. Special investment allowances (100 percent write-offs) are given to investors for training local staff. Government funding is also heavily biased towards technical education (training for industry). |
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More about Uganda Information on this page courtesy of the Uganda Investment Authority. To learn more about the business environment of Uganda, read An Investment Guide to Uganda: Opportunities and Conditions, published by the United Nations and the International Chamber of Commerce.
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