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The East African : Sep 5th 2015
The EastAfrican BUSINESS SEPTEMBER 5-11,2015 56 OF THEM ARE UNNECESSARY Uganda business ranking hit by excess licences Pa≥liament has not acted on ≥ecommendations to ≥educe bu≥eauc≥atic bottlenecks By DICTA ASIIMWE Special Correspondent U ganda risks getting a bad World Bank competitiveness rank- ing next year due to the failure by parliament to strike out 56 business formalisation licences considered unnecessary. Kampala got $100 million from the World Bank in 2013 to improve competitiveness and enterprise development and has since been trying to reduce red tape, but parliament has not acted on recommendations to reduce bureaucratic bottlenecks. Bemanya Twebaze, registrar- general at the Uganda Registration Services Bureau (URSB), said that even with the money, the country will probably perform poorly in next years’ Doing Business Index due to parliament’s failure to act on the recommendations. Mr Twebaze said that Uganda has failed to achieve the desired progress, as challenges still exist in resolving insolvency, getting electricity and paying taxes — the things the World Bank factors into its report. Uganda improved by two places from 152 in 2014 to 150 in the last competitiveness ranking, behind Rwanda, which was ranked 46th globally; Tanzania at 131 and Kenya at 136. Frank Ssebowa, executive direc- tor of the Uganda Investment Authority (UIA) said he was frustrated at parliament’s refusal to drop some of the licences that government officials wanted dropped, saying it reduced the country’s capacity to attract investors. Mr Ssebowa said Uganda has been regressing in the Doing Business rankings from the 120th position in 2012 to 150 now and that parliament’s actions will worsen the rating. Information from URSB shows the government attempted to have parliament repeal 56 licences to ease business formalisation at the budget process in April and May. But parliament only repealed five. He added that different govern- ment agencies require licences from the same business, which makes the process cumbersome. Peter Ngategize, the National Co- ordinator in charge of Competitiveness and Investment Climate, said the regulatory burden caused by the many licensing requirements costs the country Ush725 billion ($197.3 million). $197.3m An electronic shop in Kampala. The many licences needed to start a business in the country make it difficult to attract investors. Picture: File The amount the regulatory burden caused by the many licensing requirements costs the country, which is Ush725 million Other than reducing the number of licences, URSB is using some of the $100 million from the World Bank to automate business registration. The World Bank Doing Business rankings measure different indicators such as dealing with construction permits, getting electricity and starting a business. 35 COSTLY PROCESS Information from URSB shows the government attempted to have parliament repeal 56 licences to ease business formalisation at the budget process in April and May. But parliament only repealed five. Peter Ngategize, the national co-ordinator in charge of Competitiveness and Investment Climate said the regulatory burden caused by the many licensing requirements costs the country Ush725 billion ($197.3 million). Uganda performs the worst when compared with its East African counterparts in the starting a business category. It takes seven days to start a business in Rwanda; five in Burundi; 30 in Kenya and 26 in Tanzania, compared with Uganda’s 32 days. Uganda performs the worst when compared with its East African counterparts in the starting a business category. It takes seven days to start a business in Rwanda; five in Burundi; 30 in Kenya and 26 in Tanzania, compared with Uganda’s 32 days. URSB seeks to improve the starting a business category ranking — where Uganda fell four places from 162 to 166 out of the 189 economies ranked this year — through automation of business registration. The registration bureau has now started the process of automating business registration and improving collaboration with other government entities that issue business licences. So far, the automation system now makes it possible for an individual intending to register a business to find out the number of licences necessary to start the registration process and if the business name had already been taken. URSB has also used the money from the World Bank to create a onestop centre, so that registration of a business is done on one floor. “All company registration services are done on one floor, including the payment of the required charges,” said Arthur Kwesiga, the URSB manager in charge of information technology. T≥easu≥y u≥ges ≥ise in banks’ minimum capital By JAMES ANYANZWA The EastAfrican KENYA’S NATIONAL Treasury plans to lobby Members of Parliament to pass a proposal to increase core capital requirements for commercial banks, which are charging high interest rates but are unable to finance large infrastructure projects on their own. The MPs had rejected the new measures meant to create strong banking institutions on the grounds that the policy would kill nascent banks and stifle competition. National Treasury Cabinet Secretary Henry A banking hall. The increase in core capital requirements is meant to create strong lending institutions. Picture: File Rotich said a strong and stable financial sector is critical for the growth of the economy and attainment of the country’s long-term development plan. “We shall lobby parliament so that they understand the significance of creating strong banks,” said Mr Rotich. Kenya’s average lending rate currently stands at 15.26 per cent, according to data from the Central Bank of Kenya, compared with Uganda’s 22.34 per cent, Tanzania’s 16.1 per cent and Rwanda’s 17.26 per cent. The high cost of credit is brought about by lack of effective competition and high overhead such as wages, infrastructure costs and cash-in-transit, according to CBK. Other factors are high risk premiums, lack of alternative sources of non-bank funding and shareholders expectations of high profit margins. The country’s parliamentary Budget and Appropriation Committee overruled the “We shall lobby parliament so that they understand the significance of creating strong banks.” Henry Rotich, National Treasury Cabinet Secretary provision in the Finance Bill, 2015 seeking to increase the capital base for the lenders, arguing the move would choke the banking industry by blocking new investors. Budget statement In his budget statement for the 2015/2016 fiscal year, Mr Rotich proposed to increase the minimum core capital requirement for commercial banks progressively over three years from the current Ksh1 billion ($9.45 million) to Ksh5 billion ($47.26 million). Under the proposed plan banks are re- quired to top up their core capital from Ksh1 billion ($9.45 million) to Ksh2 billion ($18.9 million) by December next year (2016), then Ksh3.5 billion ($33.08 million) by December 2017 and finally Ksh5 billion ($47.26 million) by December 2018. More than half of Kenya’s 43 commercial banks — 23 banks — stand to be affected by the proposed law.
Aug 29th 2015
Sep 12th 2015