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The East African : June 23rd 2014
The EastAfrican 44 BUSINESS PARTNERSHIPS 13 more Danish firms eye Uganda investments The pa≥tne≥ships will help t≥ain and help Ugandan ag≥icultu≥al ente≥p≥ises to access capital and the Eu≥opean ma≥ket By ISAAC KHISA The EastAfrican T hirteen Danish firms are seeking to invest in Uganda’s agri- culture value chain in partnership with local businesses, following the success of 24 companies from Denmark that have been operating in the Ugandan market in the past 10 years. The partnerships, which also extend to the services sector, will help train and help local agricultural enterprises to access capital and the European market, according to the Danish ambassador to Uganda, Dan E. Frederiksen, who led a group of Danish investors in a meeting with Ugandan business people. “We believe that the agriculture sector in this country has the greatest potential to spur economic development. This country can build its economy through increased food production, processing and distribution of finished goods,” he said. Although officials at the Danish embassy in Kampala would not reveal the identities of the companies already in partnership, a source familiar with the arrangements told The EastAfrican that Mogen Brix Koldkjaer and Dan Hatch have partnered with Uganda’s Asiima Agri Concern Ltd since 2011 in the production of day-old chicks. Tomex, a leading fresh food dis- tributor in Denmark, partnered with Olympus in Uganda in 2011, leading to an increase in revenue for the latter firm from $36,364.6 to $909,116 in 2013. The vanilla trading company UVAN entered into a partnership with Danish firm Firmenich in 2007, leading to an increase in vanilla production and formation of a savings scheme dubbed Village Savings and Loans Association. Two years earlier, Bruno Mato- vu, a farmer at Kinoni in central Uganda, had partnered with Jens Jensen, a Danish farmer in commercial maize production, subsequently leading to establishment of a new company called Central Ugandan Grain Company. Other Danish firms that have partnered with Ugandan firms are Bromine with Morgatech in the provision of information communication technology services, Solhjulet A/S and African Organic in the production of organic foods for export, and Danish Noir Illuminati with Gulu Agricultural Development Company in the commercial production of cotton. Dr Okoth Ochola, director at Asiima Agri Concern Ltd, said that the partnership has helped the firm to import new incubators and increase the fertility rate from 91 per cent to 96 per cent and the rate of BUSINESS JUNE 21-27,2014 Taxman c≥acks down on VAT defaulte≥s By BERNARD BUSUULWA The EastAfrican JUST WEEKS before the close of the financial year, Uganda’s taxman has intensified efforts to recover tax arrears, with value added tax accounting for half of the outstanding taxes. The construction and real estate sectors recorded the lowest compliance rates in paying VAT. Data from Uganda Revenue Authority (URA) shows that the total tax arrears accumulated by various taxpayers amounted to Ush80 billion ($30.9 million) by the end of March 2014, with Ush40 billion ($15.5 million) alone attributed to unpaid VAT. About Ush55 billion ($21.3 mil- lion) had been paid by the end of May. The tax body has warned defaulters that they risk prosecution and closure. Sources at URA blame low VAT Day-old chicks displayed at the Uganda Agricultural show in Jinja. Danish investors are enabling farmers to use modern incubators to increase production. Picture: Morgan Mbabazi hatching from 82 per cent to 88 per cent. “The partnership helped us to reduce the production cost of poultry feeds, which normally accounts for 72 per cent of our operation,” Dr Ochola said. Sector is stagnating Alex Muganwa, managing di- This country can build its economy through increased food production.” Dan E. Frederiksen, Danish ambassador to Uganda rector at Olympus, said their partnership with the Danish firm has led to an increase in efficiency in distribution. Now, 13 more Danish firms are seeking partnerships with Ugandan firms. If the new companies come in, the two countries will have 37 firms in partnership, with the Danish firms owning between four per cent and 50 per cent shares in the local firms for to six to eight years. Uganda’s agriculture sector is stagnating due to low funding, de- spite employing 72 per cent of the population. Agriculture’s contribution to GDP has averaged 20 per cent for the past five years, with growth figures between 1.5 per cent and 3 per cent annually. In East Africa, Danish firms have invested in close to 40 ventures worth $436.4 million through partnerships especially in agriculture, energy and the service sectors. In Uganda, the firms have invested close to $11.63 million in the agriculture and service sectors. Uganda’s Minister for Trade and Industry Amelia Kyambadde said the country’s exports to Denmark, which include fish, coffee, tea and fruits, have grown steadily from $1.8 million in 2008 to $7.4 million in 2009, before declining to $2.85 million in 2013 due to the economic downturn in Europe. Tanesco launches $14m plan to save ene≥gy costs By ERICK KABENDERA The EastAfrican TANZANIA’S POWER utility firm Tanesco plans to spend Tsh24 billion ($14.63 million) to replace 3.2 million incandescent bulbs with energy savers in a bid to promote efficient use of power. The changes will save Tanesco 37.9MW, which is enough to supply Mbeya, a city in southwest Tanzania. The plan will also involve working with industrialists to move their power demands from peak hours and reducing the use of emergency power during peak hours, which amounts to 100MW, and save the utility Tsh67 billion per year. The pilot phase of the energy efficiency pro- gramme has started in Dar es Salaam, which uses over 50 per cent of the total electricity gen- erated in the country. The Swedish International Development Co- operation Agency (Sida) has committed to funding the project. Aron Nanyaro, Tanesco’s senior manager for research, said the company has started a public awareness campaign on the efficient use of electricity in households before they start replacing bulbs. Phase out power rationing He said although Tanesco is not producing enough electricity to satisfy its customers, the plan will help it phase out power rationing. He said the biggest challenge the company is facing is the rapid increase in new mega buildings in the cities that consume a lot of electricity. “We hope that replacing bulbs will reduce en- ergy consumption and promote energy efficiency activities,” said Mr Nanyaro. Tanzania’s annual consumption is 97kWh per capita and the demand for electricity is expected to double in the next three years. The rapid growth of demand for electricity, over-reliance on hydro generation and soaring energy losses from ageing transmission and distribution systems have hampered efficient distribution of electricity. Hussein Kamote, Confederation of Tanzania Industries director of policy and research, said Tanesco has not contacted its members about the plan but the confederation has launched an energy audit project to help manufacturers reduce electricity use. “Most industries have old machines that use electricity inefficiently. We will advise our members to upgrade their systems,” said Mr Kamote. compliance in the construction sector on delayed payments by the government, with some contractors waiting up to six months to receive payments. In the $85m Uganda’s projected revenue deficit by the end of May, blamed on VAT payment defaults real estate sector, poor compliance with the VAT regime is attributed to tax avoidance. “The construction and real estate sectors account for most of the VAT arrears, with many players unwilling to file tax returns for their transactions. We feel there is a need to amend the public procurement rules so as to compel government departments to make funds for projects available before civil works begin. This will directly improve contractors’ cashflows and ability to pay taxes on time,” said Waiswa Abdul, URA’s debt collection manager. But signs of distress among the affected businesses have overshadowed prospects of full recovery of tax arrears. Accumulated excise duty Parambot Breweries Ltd was closed last month over accumulated excise duty worth Ush2.4 billion ($929,512) but was reopened after three days upon paying Ush200 million ($77,459), with promises to clear the balance later. Some banks have recorded weak earnings in the first six months of this year, and experts predict a bigger revenue deficit than the Ush120 billion ($60 million) recorded in 2012/13. The recovery of tax arrears may therefore have little impact in reducing the revenue deficit, estimated at Ush220 billion ($85.2 million) by the end of May.
June 16th 2014
June 30th 2014