The Streamlined Trade-Licensing System

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The Streamlined Trade-Licensing System in Uganda encompasses several key initiatives that ease the regulatory burden on businesses.
What are the main aims and objectives?

The Streamlined Trade-Licensing System aims to improve the country's business environment and reduce compliance costs for enterprises, particularly small and medium-sized businesses. Its primary objectives include reducing the administrative burden associated with business licensing, simplifying procedures, and making them more consistent with Uganda's trade liberalization policies and obligations under the East African Community Common Market Protocol. The system seeks to eliminate unnecessary licenses, streamline existing ones, and establish an e-licensing portal to facilitate easier access to licensing information. By implementing these reforms, the government aims to reduce licensing compliance costs by 25%, encourage the formalization of businesses, promote private sector growth, and enhance Uganda's competitiveness as an investment destination. 

How does the program work?

The Streamlined Trade-Licensing System in Uganda is a comprehensive reform initiative aimed at simplifying and improving the business licensing process in the country. This system works through several key components and processes:

First, the government conducted a thorough review of the existing licensing regime, identifying 790 different business licenses that were in place. Following this review, a plan was implemented to eliminate 27 of these licenses, which was estimated to save businesses $21 million. This reduction in licenses is a crucial part of the streamlining process, removing unnecessary bureaucratic hurdles for businesses.

A central feature of the streamlined system is the e-licensing business portal, launched in June 2013. This portal allows businesses to easily access information on required licenses for their operations. By providing a centralized, digital platform for licensing information, the government has significantly reduced the time and effort required for businesses to navigate the licensing process. The implementation of this portal was anticipated to result in total savings of $123 million for businesses.

The system also includes the adoption of a mandatory Regulatory Impact Analysis (RIA) mechanism. This tool is designed to promote efficient regulatory policy and improve the quality of legislation affecting business operations. By assessing the potential impacts of new regulations before they are implemented, the government aims to prevent the introduction of unnecessary and complicated licensing requirements.

Efforts have been made to establish a One-Stop Shop to ease business formalization processes. This approach consolidates various licensing procedures into a single location or process, further simplifying the administrative burden on businesses. Additionally, the government has committed to reforming the entire licensing regime and automating the licensing process, which should further streamline operations.

The system also addresses specific sectors and types of businesses. For instance, in Kampala, the Kampala Capital City Authority (KCCA) oversees the licensing process, which involves assessing businesses based on factors such as appropriate premises location, hygiene standards, and building standards. The assessment is conducted by a Revenue Officer who issues a Payment Advice Form, with fees determined by a schedule from the Ministry of Trade and Industry.

For foreign traders, the Ministry of Trade, Industry and Co-operatives regulates the process, requiring documentary evidence of clearance to enter the country and the purpose of their stay before considering issuing a trade license.

What is the overall cost?

The Ugandan government allocated $300,000 (approximately UGX 1.1 billion) for the fiscal year 2013-2014 to support the implementation of licensing reforms.

How was it implemented?

In 2009, the Ugandan government launched multi-stakeholder consultations to identify bottlenecks in doing business. These consultations revealed several obstacles, including legal and regulatory barriers, infrastructure deficiencies, limited access to finance, power supply issues, and corruption. To address these challenges, the government sought assistance from the World Bank Group to eliminate legal and regulatory barriers in the country.

The investment climate teams of the World Bank and International Finance Corporation (IFC) worked together to conduct a comprehensive review of Uganda's business licensing regime. This review, carried out over a six-month period, included validation workshops with business representatives from fifteen different sectors of the economy to gain their perspective on the business environment. 

In 2012, the government established the Business Licensing Reform Committee (BLRC) under the Uganda Investment Climate Program (UICP). The BLRC was tasked with reviewing the processes of the business licensing regime in Uganda and making recommendations for reforms. The committee produced a two-volume report that identified critical business-licensing burdens and proposed a series of legal, regulatory, and administrative reforms.

The reform process also involved legislative changes. The Trade (Licensing) (Amendment) Bill, 2012, was introduced to streamline the procedures for licensing trade and make them consistent with the government's policy on trade liberalization and Uganda's obligations under the East African Community Common Market Protocol. The bill aimed to clarify which businesses required licenses and adjust the validity periods of trading licenses.

What impact has been measured?

A report by IGC found that the licensing reform efforts from 2012 to 2022 had mixed impacts: 

Positive impacts:

  • 116 legal reforms were implemented across different sectors between 2012-2017
  • Some reforms led to elimination of burdensome regulations, improvements in government services, and easier access to services in many sectors
  • Administrative reforms resulted in overall compliance cost reductions of 31% (UGX 93.4 billion) through decentralization, automation of licensing processes, and capacity building

Challenges and mixed results:

  • Overall compliance costs increased by 8.0% (UGX 58.1 billion) during 2012-2017, despite reform efforts
  • Legal reforms had mixed results - some reduced costs while others increased costs through new licenses, expanded regulations, and fee increases
  • Many proposed reforms remain incomplete or contested, particularly in sectors like agriculture, energy, mining, and oil/gas
  • Uganda's rankings on ease of doing business and other business environment indicators have not significantly improved
What lessons can be learned?

Based on the report, several key issues have emerged with Uganda's business licensing reform efforts:

Incomplete Implementation

Despite significant reform efforts since 2012, many proposed changes remain incomplete or contested. Some key issues include:

  • Many recommended reforms are still outstanding, particularly in sectors like agriculture, energy, mining, and oil/gas.
  • Some Acts of Parliament lack preceding policies or are yet to be operationalized with regulations or statutory instruments.
  • Institutional structural reforms, like the establishment of the Food and Drug Authority, are not yet in place.

Coordination Challenges

Inter-agency coordination issues persist, hampering effective implementation of reforms. For example:

  • There are delays in enacting certain laws due to contests between ministries (e.g., the Food and Drug Authority Act).
  • Limited sharing of information and coordination among government agencies creates inefficiencies.

New Regulatory Burdens

Some reform efforts have inadvertently introduced new regulatory burdens:

  • New legislations, especially in sectors like oil and gas, have introduced additional licensing requirements and fees.
  • New governance frameworks and structures (e.g., NIRA) have created new administrative rules and compliance requirements.

Technological and Capacity Constraints

Implementation of reforms is hampered by:

  • Unreliable and costly internet infrastructure
  • Limited capacity for data sharing between government agencies
  • Inadequate business registers and monitoring capabilities in many local governments and agencies

CURATED BY

Tom Hancock

Research Associate
Global Entrepreneurship Network
United Kingdom