Manufacturers in Industrial parks are set to receive power at 5 Us Cents per KwH in six months.
This was revealed by the newly appointed Minister of Energy and Mineral Development, Hon. Dr. Ruth Nankabirwa during her inaugural meeting with the Uganda Manufacturers Association held on the 3rd August 2021 at the UMA head office.
According to the Hon. Ruth Nankabirwa, the 5US cents, as directed by H.E Yoweri Museveni, will be realized through connecting power from the government generation plants directly to the industrial parks.
"We have successfully amended the electricity act of 1999 to provide for the purchase of power straight from the generation to manufacturers to reduce the end-user tariff for manufacturers starting with those in the proximity of the transmission infrastructure," she said.
High power tariffs in Uganda have been a topical subject and the UMA has been at the forefront of lobbying the Government for lower electricity tariffs rates of at least 5 US cents per KWH. With a lower tariff, the manufacturing sector which consumes about 70% of the electricity in Uganda will be able to favorably compete regionally and internationally.
Mr. Deo Kayemba, the Vice-chairman of the UMA, while giving his speech, commended the government initiative to invest in power generation. This move, according to him, will enable further reduction in the cost of power to support economic activities as envisaged under NDP III through agro industrialization.
Noting that government is the largest single buyer with 65% of its budget being meant for procurement of goods and services. The UMA Vice-chairman reiterated the need to foster a stronger partnership that shall promote local content mainstreaming within the Electricity Supply Industry (ESI) to support local manufacturers of Transformers, cables, Poles, Steel, Plastics, Uniforms, Cement, among others.
In her response, Hon. Nankabirwa assured manufacturers of the ministry's total commitment to supporting local content especially for generation plants under construction, cable supplies to Umeme Ltd, the Rural Electrification Programme, and UEDCL – supply of locally available materials to generation plants under construction, cable and transformers to Umeme Ltd, Rural Electrification Programme, and UEDCL.
Electricity Reliability improvement:
Hon. Nankabirwa reported that her Ministry approved USD 11 million for the Jinja – Kayunga Industrial park, distribution investments, penalty framework for Umeme Ltd and UETCL.
The Minister highlighted several other interventions earmarked to enhance the electricity supply industry in Uganda as follows;
a) A commitment to the reduction of the tariff for commercial and medium industrial consumers in the third quarter of 2021.
b) Isimba and Karuma were constructed as public plants thereby reducing the generation Tariff to less than US cents % during the debt recovery period and less than US cents 1.2 thereafter.
c) Enhanced focus on loss reduction within the ESI through Improved operational efficiencies in transmission and distribution networks.
d) Leveraging the electricity rebate policy to increase industrial connections in the country.
e) Investment in electricity supply improvement for industrial parks.
What you need to know about the Duty Remission Scheme
Duty Remission is a reduction of duty on goods imported for the manufacture of goods in a Partner State. Premised under S140 of the EACCMA, 2004.- “The Council may grant remission of duty on goods imported for the manufacture of goods in a Partner State”.
According to the Duty Remission Regulations, 2008, “manufacture” means any process by which a commodity is finally produced and includes assembling, packing, bottling, repacking, mixing, blending, grinding, cutting, bending, twisting, joining, or other similar activity;
The Duty Remission Committee is comprised of Uganda Manufacturers Association (UMA), Ministry of Finance and Economic Development (MFPED); Ministry Industry and Cooperatives (MTIC); and Uganda Revenue Authority – Customs. They receive, vet, and process the applications.
Objective of the facility
To Promote intra-regional trade
To make locally manufactured goods more competitive;
Promote industrialization within the region
Types of Duty Remission
Regional Duty Remission- is granted to all Partner States on goods imported for use in the manufacture of approved goods for home consumption.
Country Specific Duty Remission- is granted upon a request by a Partner State- In the event, finished goods are sold in another Partner State, they will attract duties as provided in the EAC CET.
A manufacturer or producer Applies to the Commissioner Customs and whom remission is granted and published in the Gazette in accordance with Section 140 of the Act.
An application for remission of duty shall be made to the Council in writing through the Commissioner detailing the following:
Detailed Item/ Product Description of the Product to be imported under the Duty Remission Scheme;
Specific Product Tariff Classification in accordance with the East African Community Common External Tariff (EAC-CET);
The required quantities in metric tons or liters for the products to be utilized by the Company under the new financial year;
The finished product will be manufactured out of the listed products.
Evidence of filing quarterly returns, to the Commissioner giving relevant information on the input-output coefficient (IOC) for the products obtained from the raw materials granted to manufactures for the previous period for duty remission.
Evidence of Payment of taxes on the byproduct, scrap, or waste of commercial value that results from the manufacturing process for existing manufacturers.
Attachments of documents that include tax compliance certificates, certificates of incorporation, Tax Identification Number (TIN), Value Added Tax (VAT) registration.
Convenient date and time for Inspection/visitation of Manufacturer’s premises- For new manufacturers and those with new production lines.
Publication in the gazette
Upon receipt of an application for remission, the Commissioner shall forward the application to the Committee for its comments. The Commissioner shall after receipt of the comments under sub regulation (2) forward the application together with his or her comments to the Council for publishing in the Gazette in accordance with Section 140 of the Act.
- Regional remission shall be valid for a period of twelve months from the date of publication of the grant in the Gazette.
- Country specific remission shall be valid for one financial year from the date of the publication of the grant in the Gazette.
- Pay duty on any imported goods that are not used in the manufacture of goods approved under the Duty Remission Scheme.
- Submit returns quarterly, to the Commissioner giving relevant information as the Commissioner may require.
- Ensure not to exceed Quantities for which you have been Gazetted for without informing the Commissioner Customs.
WITHDRAWAL FROM THE DRS
- Notify the Commissioner Customs in Writing
- The Company is audited to ensure that the raw materials applied for have been utilized and no balance
- Payment of taxes on the Raw materials will be done on the subsequent consignments
- Communication is given to Secretariat for Publication on the Withdrawal
The Council may for reasons to be communicated to the applicant revoke a grant of duty remission.
Proper financial reporting / Financial information: companies need to have proper audited financial records because investors will make due diligence before investing to know how the business has been operating.
Credibility: Need to have an executable vision for your business; as you look at attracting investors, you need to have a clear vision of how you expect to use the financing too.
Clear Business strategy/plan: Need to be knowledgeable about your Business, Products, Market; make research of your product prices, their profitability, etc.
A clear organizational structure that separates a form of ownership and management of the businesses such that in case you bring on other people to take on the business differently, you can separate that from management.
Nature of capital: Understand the nature of capital required for your business at whatever stage it is currently. A young business that not require the same capital as a 40-year business that has been in existence and successful over the years.
Internal Governance: Need to streamline your internal processes at a Governance level.
How to make your company attractive for Mergers and Acquisition
Your business needs to have;
- Stable operating business models
- Strong and stable revenue growth
- A stable management team has to be leveraged to take the business forward
- Industry growth and is your business growing in line with the industry of above it
- Opportunities for expanding to move the business from where it is to the next level
Funding for startups / small businesses under the Capital Markets
The Early-stage fund called Venture capital is available for companies at the initial stages.
What happens if you disagree with the investor?
Clear agreements: there is a need to have a legal agreement that should be reviewed by a competent transaction advisor/lawyer especially when you are bringing a private equity partner. The lawyer will ensure that your interest is taken care of; in case something goes wrong, it becomes easier to remedy that sour situation.
What you need to do to avoid disagreements
Alignment of vision: the person funding you should have the same aspirations as you for the business. This is critical to avoid friction.
More rigorous reporting: management accounts are needed monthly because the private equity funders need these reports to understand how their investments are progressing.
Deploy funds for purposes they were intended for instance if it's new machinery, make sure it’s purchased and installed.
Communication is key: In case of unforeseen circumstances like Covid, you need to communicate the effects early enough with your funders. This can call for restructuring; have short-term budgets.
Challenges faced when dealing with Ugandan firms:
Limited preparation ahead of fundraising capital/financing: most businesses want the money but do not know how much they need and the right kind of financing that best suits them.
Limited awareness: Many business owners think that money can only come from commercial banks. There is limited awareness of non-bank financial institutions as an option for businesses.
Fears of loss of ownership by family businesses especially under the private equity arrangements.