May 10, 2018—The government is looking at the Uganda Free Zones Authority (UFZA) as vital for helping to balance the country’s international trade with imports presently doubling export earnings, but more free zones can cause a turnaround.
While presenting the new board members, Matia Kasaija, the finance minister reminded them the government’s main policy objectives of establishing Free Zones was to promote investment in the manufacturing and processing sector in order to boost industrialisation exports.
The Free Zones Act defines a Free Zone as ‘a designated area where goods introduced into the designated area are generally regarded, so far as import duties are concerned, as being outside the customs territory and includes an Export Processing Zone or Free Port Zone. Plans are to develop 10 free trade zones by 2020.
The Board consists of two representatives from the private sector; the Chairperson Eng Dr Frederick Kiwanuka and the Vice Chairperson, Grace Achire Labong. Other members are Stephen Kasangaki from Ministry of Finance, Cleopas Ndorweire from the Ministry of Trade, Robert Nyombi from Uganda Land Commission (ULC), Lawrence Byensi from Uganda Investment Authority (UIA) and Stella Nyapendi Chombo an ex-officio member from Uganda Revenue Authority (URA).
According to Bank of Uganda (BoU) figures for November 2017 show Uganda exported goods and services (both formal and informal) worth UGX11.5 trillion ($3.1 billion), up from UGX9.8 trillion ($2.6 billion) registered the previous year. However total imports amounted to UGX20.8 trillion ($5.4 billion), leaving the country in the difficult position when it comes to balance of payments.
Basic conditions for a company to get a free zone license begin with being registered or incorporated for the sole purpose of operating a Free Zone in Uganda. Other criteria are the company must demonstrate its technical capacity and have an adequate equity base/access to capital to enable it develop a Free Zone or operate in a Free Zone; the activities of the projects for which the Developer or Operator seeks the licence to operate in the zone must be commercially viable and must be based on a suitable and credible business plan.
All goods and services produced must be for export, but if not, no more than 20% can be sold on the domestic market. The Authority also expects that the activities performed in Free Zones should lead to an increase in employment and not endanger the environment. The UFZA Evaluation Committee scrutinises the application and prepares a detailed report within 30 working days from receipt of the application and the licensee is required to start operations within 12 months from the grant of the licence.
Cut-flower exporters, notably Fiduga and Rosebud, were among the first to apply and receive licenses to operate free zones. These zones are Customs controlled areas where raw materials, goods, plant and machinery may be landed, handled, manufactured or reconfigured for export without being subject to import and export duties.
The Minister tasked the Board to ensure the Authority’s objectives are aligned to the government’s aspirations as enshrined in the National Development Plan II and Vision 2040. He told them of the need to spearhead the implementation of the Authority’s Strategic Plan, whose goal is to foster industrialisation, export-oriented investment and employment through establishment of strong and competitive Free Zones Schemes.