Category: Business

 

Uganda Airlines is facing corporate governance problems because the inaugural board of directors and managers lack experience, the Finance, Planning, and Economic Development Minister, Matia Kasaija has revealed.

The government revived the national carrier in 2019 to lower transport costs, boost tourism and business opportunities for Ugandans.

Uganda Airlines currently flies to 10 African destinations, including Nairobi, Bujumbura, Johannesburg, Mogadishu, and one international route- Dubai. According to the business plan, the airline was expected to fly to at least 20 destinations by end of this year, including London, Addis Ababa, Lusaka, Mumbai and Guangzhou, among others to connect Uganda to Europe, the Middle East, West Africa, and Asia.

Now, Kasaija says that the operations of the national carrier have been dogged by mismanagement and the impact of the COVID-19 pandemic on global travels, among other issues. He argues that the two rocky years of the national carrier have largely been as a result of the appointment of the board of directors and managers without experience in the aviation industry.

“Now, you know when you’re beginning something you make some mistakes. We made some mistakes. We put people first even before vetting them and they have messed up things, but we’re reshaping them…But we also don’t blame them much because they didn’t have much experience. So, we all plead guilty; me I plead guilty for sure, because we put in a board of people who we thought would do a good job,” he said.

He says the top management led by the second acting chief Executive Officer (CEO) Cornwell Muleya also messed up the airline because they were “silent” when things started going wrong; such as the directors interfering with management issues and trying to run the day-to-day activities of the airline.

“They were new people in the industry so they were bound to make mistakes. The only thing I can blame them for is that they waited until we discovered by ourselves the problem that was taking place. They should have told us about their problem earlier so that we see how to sort it out. Secondly, I can also excuse the management to some extent but also I would blame them for keeping quiet if they saw things not moving very well….Lack of experience is the biggest problem and lack of exposure on how to run an airline. You know it’s not like running a laundry company,” he argues.

Earlier on, the national carrier collapsed due to corruption and mismanagement, among other issues. The same issues seemed to have re-emerged in the revived airline resulting in the suspension of the board and some top managers. Gen Katumba justified the suspensions of the board to pave way for investigations.

Now, as joint shareholders in the airline, Kasaija says that both the Finance and Works ministries are “working round the clock” to put in place a competent board and iron out problems regarding human resources. 

“But Gen [Edward] Katumba [Works and transport minister] and I are securing that now. You know we’re the two shareholders. I want to assure you that give it another four or five months, that place will be back on track. We are going to do training and recruit extra manpower to ensure that our airline does not falter or collapse,” Mr Kasija assured.

 

 

Binance: Watchdog clamps down on cryptocurrency exchange - BBC News

There’s a new generation of investors in town: they’re young, they get their tips on YouTube, and they’re armed with apps that make the stock markets more accessible than ever before. From Nigeria to India, Gen Z are flocking to homegrown investment apps.

Dahunsi Oyedele, Nigerian investor, shares his experience.

“You can get started, run your account and start trading in less than 10 minutes. It’s the same thing with several other apps like that. So, they make it easier for you. And again, especially for crypto-currencies, you can easily transact, you can easily make transactions overseas. So instead of having to go to the bank, and then queueing, they say maybe you want a domiciliary account, instead of all that, just get a crypto-currency exchange, open it, start using USDT and you can send money anywhere.”

– About eNaira –

The country’s economic hub Lagos has long been known for its hustle and celebration of success, but the weakness of the naira currency has put extra pressure on youths to make cash as the cost of living has rocketed.

Nigerians have flocked to local apps such as Trove and Risevest which allow them to invest in US stocks, widely seen as a means of protecting wealth as the naira nightmare continues.

Oyedele, Nigerian investor (male, 23 years old, English):

“There isn’t much use for that in Nigeria (eNaira, Nigeria’s new digital currency) because a CBDC (central bank-backed digital currencies, ed.) has to work on internet infrastructure and in a country where just a little over half of the population has access to stable internet, then your CBDC isn’t going to be useful… “ Dahunsi further added.

Worldwide, the new arrivals are largely young. India’s Upstox, an online stock trading says more than 80 percent of its users are 35 or under, a figure matched by Nigeria’s Bamboo (83 percent).”

Trading apps have lowered the barriers to entry for youngsters in part by offering fractional trade.

A share in Amazon, for instance, is currently worth more than $3,000 — unaffordable for the average Gen Z or slightly older millennial. But a small fraction of that share might be within reach, particularly on an app that charges zero commission.

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The Uganda Revenue Authority (URA) has set up a mobile tax hub at Kikuubo, downtown Kampala, in a move aimed at bringing services closer to taxpayers and convincing the traders to formalize their businesses. 

According to the acting assistant commissioner for public and corporate affairs, Ian Rumanyika, the tax hub will last 15 days, engaging in door-to-door sensitization of traders, and registering new businesses for tax purposes. 

“Our officials are also equipping the traders with knowledge about their rights and obligations as taxpayers, as well as giving free tax advisory and hands-on support services on any tax-related challenges,” he said.

 He said the exercise is part of the Tax Payer Registration Expansion Program (TREP), which is being conducted with the Uganda Registration Services Bureau (URSB) and the Kampala Capital City Authority (KCCA).

 Rumanyika said the taxman has adopted a listening approach to the concerns of the public, and the business communities and is responding to their needs to enhance service delivery. 

He said formalization of the small and medium-sized enterprises (SMEs) is a good thing for the enterprises because it would also allow them to access none bank capital, such as private equity. 

He said informality is limiting firms from accessing equity capital, through private equity placements and selling shares on the stock market, leaving debt finance as the only available option.   

“The maturity of debt finance is often much shorter than the payback period of capital investments, meaning that SMEs have to devote a large share of their revenues to servicing their debt which often leads to the failure of the firm,” he said.

 According to the Uganda Bureau of Statistics (UBoS), the informal sector has grown over the last five years, crossing from 45% to approximately 51%.  

Rumanyika said the widespread informality is now contributing broadly to the underperformance of domestic revenue, which generally impedes the growth of the fiscal space.  

He said the informal sector remains largely hidden from existing regulations and yet it is highly commercial, with a great potential to turn around the country’s revenue fortunes.

Original story by Edward Kayiwa @ Newvision

Increase in commodity prices has pushed up inflation for the 12 months ended September 2021. 

According to Uganda Bureau of Statistics (Ubos) inflation rose to 2.2 per cent in September up from 1.9 per cent August. 
Ms Kaudha Aliziki Lubega, the Ubos head macroeconomic statistics, said yesterday the increase was mainly driven by the rise in the commodity prices such as food and non-alcoholic beverages, which rose to 2.9 per cent.

During the period, she said, furnishings household equipment and routine household inflation rose to 3 per cent while personal care, social protection and miscellaneous goods inflation rose by 2.9 per cent.

However, there were some decreases in the prices of the commodities under transport by 4.8 per cent while clothing and footwear declined by 1 per cent. 

Recreation, sport and culture inflation decreased by – 0.4 per cent. 

Ubos also indicated that national average retail prices of selected commodities over the last 12 months had registered mixed prices with some rising while others remained unchanged. 

Petrol per litre rose from average of Shs3,866 in September 2020 to Shs4,190 in September 2021, reflecting an 8.4 per cent increase.

Diesel a litre moved from Shs3485 to Shs3,764, representing an increase of 8 per cent while taxi fares – special hire fell from Shs25,000 in September 2020 and to Shs23,333 in August, 2021 before rising again to Shs25,000 in September 2021. 

A kilogramme of banana (matooke) rose from Shs595 in September to Shs694 in September 2021 while a kilograme of beans decreased from Shs3, 983 in September 2020 to Shs3,007 in September 2021. 

A kilogramme of maize flour dropped form Shs2,808 in September 2020 to Shs2,635 while a kilogramme of laundry soap increased from Sh3,415 in September 2020 to Shs3,610.    

Story by MARTIN LUTHER OKETCH

Government, through National Information and Technology Authority (NITA-U) has rolled out a $3.8m (Shs13.4b) automated digital platform that will integrate all government ICT systems.

Speaking at the launch in Kampala yesterday, Mr Collin Babirukamu the NITA-U director e-government services, said the platform known as UGhub, seeks to enable, secure and ease data  sharing across government systems in a sustainable manner.

The integration platform, he said, is a central point and has so far been distributed in 56 districts across the country, connecting more than 1,400 government offices.

“This UGhub is a channel for data sharing but, with encryption. Other government entities accessing information will have to secure people’s permission. Ugandans will be saved from the long queue when accessing government services as various government offices will be in communication using the platform, “Mr Babirukamu said.

Currently, there is no system to share citizen data. However, government had previously launched the e-government system, which sought to ease inter government communication and data sharing. 

The new platform, according to Mr Babirukamu, will also enable citizens to access government services without necessarily having physical contact.

Mr Julius Torach, the ICT Ministry commissioner, said government was committed in transforming of citizens’ lives through leveraging on technology.

He said there was urgency to develop the e-Government as citizens, given the long queues that have been witnessed at government offices including NIRA and passport offices. 

Story by Betty Ndagire

 

A bundle of laws reinforcing the country’s regulatory framework for the seamless execution of Uganda’s oil project will shortly be gazetted and tabled before Uganda’s Parliament for deliberation and enactment.

This follows the recent approval by Cabinet of the East Africa Crude Oil Pipeline (EACOP) Bill, 2021, the Income Tax (Amendment) Bill, 2021 and the Public Finance Management (Amendment) Bill, 2021.

The proposed changes in the law will streamline the country’s oil and gas legal regime, facilitating the effective implementation of the various project agreements that the Government of Uganda (GoU) and the International Oil Companies (IOCs) have concluded in the past couple of months. In the first of a series of articles, we highlight the proposed amendments in the Income Tax (Amendment) Bill, 2021(“the ITA”).

Breakthrough with negotiations

A major milestone for Uganda’s oil project was achieved in April 2021 when both the GoU and IOCs struck agreement on many outstanding issues that had been a subject of protracted disagreement.

The proposed amendments in the ITA record positions of compromise on income tax matters between the GoU and IOCs following the dramatic implosion of relationship between these two principal stakeholders in 2019.

Largely fuelled by lingering differences on several tax matters, the IOCs had temporarily ceased active oil project development activities until all these issues were conclusively resolved.

2017 Tax changes

The timing of payment of income taxes by the IOCs became a matter of contention when the Income Tax Act was amended in 2017. In line with this amendment, the IOCs would begin paying income taxes at the onset of oil production regardless of whether they were in a profitable position or not.

Though this law would fast-track government revenues, the IOCs considered the change unnecessary given the range of alternative fiscal tools at government disposal to maximise early oil revenues. In addition to traditional tax revenues, the government also earns royalties, bonuses and rental payments and a share of the crude oil produced from petroleum operations.

According to the IOCs, the early fiscal payments to the government as highlighted above were sufficient for government to raise enough revenues to meet its citizenry expectations without imposing onerous income tax impositions in the early project years that would delay the IOCs’ recoupment of sunk project costs.

Income taxes are ordinarily imposed on profits

Companies in other sectors are allowed a full deduction of their annual business costs in determining their income tax liability.

The IOCs contended that denying them full deduction of their annual business expenses as espoused by the 2017 amendment capping the same to their annual cost oil entitlement departed materially from the normal principles of income taxation and international benchmarks.

The IOCs were further concerned that unless revisited, the 2017 amendment would delay Uganda’s oil project final investment decision (“FID”) because front-loading income tax payments when the IOCs were not strictly in a profitable position just after incurring significant field development costs would stretch further the project payback period. The shorter the payback period, the more commercially viable a project is.

2021 ITA amendment

The text of the 2021 amendment to the ITA reiterates the position of the law in line with the 2017 amendment to the Income Tax Act. It however clarifies that the deductible costs for tax purposes for Contract Area, Contract Area 2 and Contract Area 3A would be capped to the annual cost oil entitlement for the IOCs in accordance with the respective applicable oil agreements (PSAs).

Contract Area 1, 2 and 3A are the oil blocks being jointly developed by Total, the China National Offshore Oil Corporation (CNOOC) and the Uganda National Oil Company (UNOC).

Whereas the proposed change in the law does not do away with the possibility of the IOCs paying income tax at the onset of oil production, it is understood that there will be reduced income tax burden on the IOCs in the early project years.

This is because it is speculated that both the GoU and IOCs agreed to relax the underlying cost recovery caps in the respective PSAs to arrive at a win-win position that would enable the project achieve the requisite investment hurdles marks to reach FID.

As requested by the IOCs, this revision in the law improves the commercial viability of Uganda’s oil project through accelerated project payback period and recoupment of sunk project costs.

Tax sweetener

To make amends for reduced income taxes in the early years of Uganda’s oil project as a result of the amendment in the law, the ITA further proposes to introduce a windfall tax that will see the government earn more tax revenues during periods of high crude oil prices.

The Income Tax (Amendment) Bill introduces a windfall tax to be charged where the international oil price is 75 per barrel or more on any day of a year of income. Windfall taxes in the extractive sector represent special taxes designed to capture part of the extra profits created when international prices of commodities soar.

Conclusion

The Income Tax (Amendment) Bill, 2021 records some of the several compromises reached between the IOCs and the GoU geared towards fast tracking Uganda’s oil production. The proposed changes in the Income Tax Act improve project economics, thereby enabling Uganda’s oil project reach FID.

Both the IOCs and GoU are commended for adopting a long-term view of Uganda’s oil project hence narrowing their several areas of disagreement to enable the project take off. Uganda’s oil project is not only going to be a game change for the country alone but the East African region as well.

Story by Denis Kakembo & Lilian Arinda

NSSF MD Richard Byarubaga presenting the results

NSSF MD Richard Byarubaga presenting the results

The National Social Security Fund (NSSF) recorded a 25 per cent increase in comprehensive income for FY 2020/2021 from Shs 1.472 trillion in 2019 to Shs 1.84 trillion despite the adverse effects of the COVID-19 pandemic on the economy.

While releasing the fund’s financial performance in Kampala on Thursday, the executive director of NSSF, Richard Byarugaba attributed the increase to growth in interest income largely attributed to the increased return on treasury bonds in the fixed income portfolio, dividend income and property sales.

He said the performance demonstrates the fund’s ability to withstand shocks occasioned by a stressed economy and an uncertain business environment in the era of COVID-19 pandemic.

“The socio-economic effects of the COVID-19 pandemic are still wreaking havoc on economies across the globe, and most businesses may take several years to shake off the effects of COVID-19. Nonetheless, our performance shows that the Fund is not only resilient but can absorb such shocks and continue its growth trajectory,” he said.

Results released by the fund also show that its assets under management increased by 17 per cent from Shs 13.3 trillion to Shs 15.5 trillion as of June 30, 2021, mainly driven by increased contributions and interest income despite an increase in Benefits paid out.

Member contributions also increased by 8 per cent from Shs 1.27 trillion in 2019 to Shs 1.37 trillion in FY 2020/2021 with this growth being attributed to the recovery of some employers that have benefited from the fund’s amnesty that was offered to businesses that were affected by the COVID-19 pandemic in the previous year.

The amount of money paid out to qualifying members also increased by 29 per cent from Shs 496.4 billion in 2019/2020 to Shs 642.3 billion in 2020/2021. This growth is attributed to an increase in number of claimants and the introduction of invalidity benefit payments for COVID-19 patients where Shs 2 billion were paid to 60 claimants under the COVID 19 benefits claim.

Byarugaba assured NSSF savers that the fund is committed to creating value over the long term while remaining dynamic enough to respond to members’ needs in the medium term especially with an enabling legal regime upon enactment of the NSSF Amendment Bill.

Speaking about the NSSF Amendment Bill, Byarugaba said that the fund is well-positioned to implement the new provisions once they become law.

“We have been preparing over the last one year when it became clearer that the bill would be passed. We have solutions for the changes on the horizon, for instance, mid-term benefits including mid-term access, expansion of coverage to include the informal sector, and expansion of the voluntary space. We have built a very dynamic institution that can adapt, embrace these changes and thrive,” he said.

He played down expectations of a very high-interest rate but said the fund will keep its promise to pay a competitive rate, higher than the 10-year average rate of inflation plus 2 percentage points.

“Our performance demonstrates that we are creating value for our members even in a very difficult economic environment and this value will be reflected in the return the minister of Finance, Planning & Economic Development will announce next week.”

The minister of Finance Matia Kasaija will announce the new interest rate on members’ savings at the Annual Members Meeting which will take place on 29th September 2021.

Story by jjingoernest1@gmail.com