Uganda

Abuja, Oct. 15, 2023:The Board of Directors of the African Development Bank (AfDB) Group,  has approved a project to provide 60,000 metric tons of fertilizer to 400,000 smallholder farmers in Uganda.

The bank in a statement issued on its website on Sunday, said this would be done under the Fertilizer Financing for Sustainable Agriculture Management project.

It said: ” Africa Fertilizer Financing Mechanism will provide two million dollars in partial trade credit guarantees and a grant of 877,842 million dollars to the African Fertilizer and Agribusiness Partnership.

”Over a three-year duration, the project will support two wholesalers to sell fertilizer with a value of up to fifteen times the value of the two million dollars partial trade credit guarantee.

” It will also link wholesalers to around twenty-five hub agro-dealers and 125 retail agro-dealers who will on-sell the fertilizer to farmers.”

The bank said the credit facility will reduce the risks associated with suppliers lending fertilizers to wholesalers on credit.

It said the project was expected to boost yields and provide training to 3.4 per cent targeted farmers with 40 per cent of them women.

It said they would be using improved seeds, balanced crop nutrition and best farming practices.

Meanwhile, Marie-Claire Kalihangabo, Africa Fertilizer Financing Mechanism Coordinator, said in Uganda that  the fertilizer consumption was about 2.5 kg/ha.

According to Kalihangabo, the project will help to make fertilizer more accessible and appropriately used by farmers.

She expressed delight as it would in turn boost agricultural productivity and help to improve food security in the country.

”The project will advance the Bank’s Feed Africa Strategy by increasing food productivity and security.

”It builds on the results of the Sustain Africa initiative, the Bank’s Country Strategy Paper for Uganda 2023–2026.

“The project was approved on Sept. 22,” she siad.

Uganda is turning to local pension funds as a survival measure following external freezing of funding from the World Bank.

The government is in talks with the World Bank for the lender to rescind its decision to withhold budget support for Kampala worth Ush6.7 trillion ($1.787 billion).

The bank suspended funding last month in the wake of Kampala’s decision to pass a new anti-homosexual law deemed by the West as a violation of rights of minorities.

Last week, the National Planning Authority, technical officials at the Ministry of Finance, Parliament’s Committee on National Economy, Budget Committee and Finance Committee held a retreat over the economy.

Officials said the Treasury is rethinking its fiscal strategy to increase domestic revenue collection, reduce borrowing, cut nugatory public expenditure and reduce supplementary budgets of government agencies spending above their vote.

Other measures, Secretary to the Treasury Ramathan Ggoobi said, are to downsize state agencies, suspend purchase of vehicles, reduce workshops and foreign travel and freeze creation of new administrative and electoral units.

“We agreed that if this is not done, we will soon go into financial distress and as a country and be flagged by the IMF as a credit risk,” said opposition legislator Gorreth Namugga.

At least 100 state agencies have become a source of wastefulness in spending. The government also took commercial loans from domestic and foreign lenders at unfavourable terms to fund key priorities and splurge on luxuries for government executives.

“The Secretary to the Treasury said that should concessional loans fail; we should look at other sources. And pension funds, like National Social Security Fund are some of the options. It’s something we should start looking at because other countries have done it,” Namugga said.

Ugandan legislator Robert Migadde who chairs the Committee on National Economy told The EastAfrican that the government agencies agreed that borrowing from the domestic market should only be a last resort.

“The option is the local market through issuance of Treasury Bonds. And since it is NSSF and other pension funds that buy the Treasury Bonds, in effect this means we will be borrowing from the pension funds,” he explained.

In June, Uganda presented a Ush52.74 trillion ($14 billion) budget for financial year 2023/24, which the government targets to finance to the tune of 55 percent through domestic revenue, while the remainder is donor money that funds programmes in health, education, water, energy and infrastructure.

The EastAfrican

Uganda is experiencing a lower uptake of loans in foreign currency in tandem with the ongoing fluctuation in exchange rates and increased funding costs faced by commercial banks.

Available official data shows that overall private sector credit grew 9.8 percent in the first quarter of 2023 compared to 10.2 percent last quarter of 2022. This is largely because of a decline in foreign currency lending – from 2.4 percent in the previous quarter to 0.1 percent in the first three months of 2023.

The weighted average lending rate, attached to foreign currency loans fell to 7.7 percent between January and March 2023 compared to a market average rate of 8-10 percent recorded in the past.

In contrast, Uganda shilling-denominated loans grew by 12.1 percent in the period compared to 13.5 percent in the final quarter of 2022, latest Bank of Uganda data shows.

Prime lending rates charged on the local shilling loans rose to 20.5 percent in the period.

Total loan extensions fell to Ush531.9 billion ($140 million) during the first quarter compared to Ush1 trillion ($236.7 million) recorded between October and December 2022.

Subsequent movements in benchmark interest rates applied to foreign currency loans have rendered these credit facilities much less affordable for local borrowers.

In Uganda, clues on the reduced borrowing can be seen in sectors that have traditionally had a strong dollar demand.

“The real estate sector tends to mirror changes in local economic cycles. Faster economic growth implies more investment activity in the real estate sector and the reverse is true,” explained said Moses Lutalo, managing director of Broll Uganda Ltd.

“The cost of dollar loans has risen to about 11 percent per year – a rate deemed too high by many real estate developers,” he explained.

“Funding costs attached to foreign currency loans have gone up and the persistent currency volatility risks have scared away interested borrowers. For example, a $2 million fixed deposit currently attracts an interest rate of eight percent per year,” observed Dr Fred Muhumuza, a director at Bank of Baroda Uganda.

The EastAfrican

Uganda has announced the start of construction of the standard gauge railway (SGR) in August, in a decision that revives hope for the extension of Kenya’s Ksh327 billion ($2.39 billion) project whose viability was dependent on the Ugandan section.

Uganda says it has secured funds from the Standard Chartered Bank with a Turkish company getting the contract to construct the railway line after Kampala failed to get the money from China.

Earlier, Uganda was looking at China Exim Bank for funds to construct their section of the Malaba-Kampala railway under the northern corridor project that required all the member states to put up a modern railway line in their respective States.

“What I want to assure you is that come August, you will see the construction of Standard Gauge Railway on our land,” said Uganda’s State Minister for Works Fred Byamukama.

Kenya’s phase two of SGR, which would have cost Ksh380 billion ($2.78 billion), stalled at Naivasha after China said Uganda must show commitment to constructing its section of the modern railway in order to give more funds for the extension from Naivasha to Malaba.

Uganda’s willingness to put up a line from the Malaba border to Kampala was a prerequisite for Kenya to get more funds for the last leg of the railway line that would run to the border town.

Uganda’s Transport Ministry had said then that it would divert the line from Malaba to Kisumu if Uganda did not commit to putting up the SGR line so that it could use the revamped port of Kisumu as a gateway to landlocked countries.

In 2014, leaders from Uganda, Kenya, Tanzania, South Sudan and Rwanda broke the ground for the construction of SGR to link the member states with the view of boosting trade in the region.

According to the World Bank, these countries have a combined market of over 300 million people, and it is envisaged that the regional rail and road transport infrastructure will stir socio-economic developments in the East African Region.

So far, it is only Kenya and Tanzania that have made progress in the construction of SGR lines in their respective countries while other members are grappling with financial challenges.

Tanzania in January signed a multimillion-dollar deal with neighbouring Burundi to build an SGR linking Gitega to the Indian Ocean.

Published by The EastAfrican

Apart from adult diapers and supply of animal feeds, government is also proposing tax exemptions on premixes, concentrates and seed cake.

The proposals are seeking to amend the Second Schedule of the principal Value Added Tax Act

Government of Uganda plans to exempt payment of taxes on adult diapers, according to proposals contained in the Value Added Tax (Amendment) Bill, 2023.

The proposal, the Uganda Revenue Authority assistant commissioner public and corporate affairs, Mr Ibrahim Bbosa told Monitor are part of measures that seek to support ailing adults.

“The products have been exempted to support ailing adults,” he said in response to Monitor’s inquiries.

It was not immediately clear why government is seeking to exempt adult diapers, however, Mr Bbosa, said: “Once approved and assented to, the changes will take effect on July 1.”

Under the same Bill, government is also proposing tax exemptions for supply of animal feeds, premixes, concentrates and seed cake. The proposals are seeking to amend the Second Schedule of the principal Value Added Tax Act.

Mr Bbosa also indicated that the proposed amendments in sections of the Value Added Tax (VAT) Act are aimed at clarifying ambiguity, reduce tax exemptions and widen the tax base.

Therefore, he said, the amendments had widened the definition of electronic services to include websites, streaming platforms and subscription-based services, cab hailing services, cloud storage, data warehousing and any other services, which all suppliers of the services mentioned above, will be required to collect and remit VAT to URA including non-resident service providers such as Amazon, Netflix, Facebook, and Twitter, among others. 

Other proposed amendments include a provision to include the dollar as a currency through which non-resident companies such as Amazon or Facebook can remit tax, amendment of interest on unpaid tax and payment and tax on imported service, which will require an importer to file and pay taxes for imports within 15 days after end of the tax period.

The exemption of taxes on concentrates will be of particular interest to farmers, which Mr Bbosa noted is part of a plan to “support farmers who deal in the listed agricultural products”.

In October last year, URA and a section of farmers faced off with the tax body, after it seized more than 500 trucks carrying concentrates, which URA argued were not part of the exempted items under animal feeds.

The standoff, which had escalated, threatened a number of farmers in Kampala, Wakiso and Luwero districts, warning of a shortage of poultry and pork products due to lack of feeds.

However, URA later suspended the tax, noting that it would streamline the levy for both value added tax and import duty of 18 percent and 10 percent.

Parliament had in 2017 scrapped VAT on animal feeds and premixes. But URA had argued that concentrates were not listed as part of the exempted items.

URA last year, had indicated that importers of animal feeds had been misclassifying concentrates as premixes, which had been exempted from tax in 2017.

The law had remained silent on concentrates, which prompted URA to enforce collection of the tax, before suspending the process. URA said it would review provisions in the law to identify gaps that traders could have taken advantage of to avoid remitting the tax.

Therefore, the addition of concentrates, among exempted animal feeds comes as a relief. Published by the Monitor