ASSIGNMENT

The macro environmental trends influence market demand and can have positive or devastating effects on the performance of
firms operating in that market. In relation to this statement, analyze the macro environment in Uganda and its impact on the
country’s overall business climate. How has this environment influenced the competitive landscape and affected business across
the key sectors of the economy?

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ABSTRACT
Companies both local and multinational firms who are going to establish or have already
established subsidiaries in Uganda have to deal with many different factors to either integrate or
sustain their subsidiaries. Macro environment factors as well as intercultural dimensions have to
be considered in their complexity. This research focuses on the analysis of the macro
environment in Uganda as a whole and its impact on the country’s overall business climate.

The company has to closely monitor the various elements of the macro environment. This will
help them understand the dynamic nature of the macro environment. It also helps them adapt to
the constant changes in the environment.

The company is not alone in its business environment. It is surrounded by and operates in a
larger context. This context is called the Macro Environment. It consists of all the forces that
shape opportunities, but also pose threats to the company.

Companies both local and multinational firms who are going to establish or have already
established subsidiaries in Uganda have to deal with many different factors to either integrate or
sustain their subsidiaries. Macro environment factors as well as intercultural dimensions have to
be considered in their complexity. This research focuses on the analysis of the macro
environment in Uganda as a whole and its impact on the country’s overall business climate.

Domestic demand supported by healthy private sector credit (PSC), as well as investments in
public infrastructure together with Foreign Direct Investment (FDI) inflows are also expected to
drive growth of the economy in FY19/20. This positive outlook assumes continued good weather
conditions, robust external demand, increase in FDI inflows as oil exports draw closer, and
public infrastructure spending is properly executed as planned. At the moment, most
macroeconomic fundamentals in the country remain positive. For example, foreign exchange
reserves are adequate currently at 5.3 months of import cover; consumer price inflation is

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comfortably below the BoU’s medium term target of 5.0%; and public debt though increasing, is
still considered sustainable.
The aim of the paper is to explain how the environment influences the competitive landscape and
affected business across the key sectors of the economy.
Keywords:
Uganda, Macro environment, environment, Intercultural dimensions

INTRODUCTION

MACRO ENVIRONMENT
Today’s organizations find themselves operating in an environment that is changing faster than
ever before. The process of analyzing the implications of these changes and modifying will
require advanced business strategy that relates to the macro environment in which they work in.

A macro environment is a set of external conditions that affect a business’ development efforts
either positively or negatively. These elements are considered uncontrollable and they have an
impact on the company’s overall performance.

The macro-environment can also directly affect consumers’ ability and willingness to spend.
Luxury goods industries and big-ticket consumer goods can be highly impacted by fluctuations
in consumer spending. Consumers’ reactions to the broad macro-environment are closely
monitored by businesses and economists as a gauge for an economy’s health.

Kieser and Kubicek (1976, 61, 224) saying, differences in organization and structure of a
company are also influenced by external factors. These can for example be: task specific
environment, competitive situation, customer structure, dynamic of technology, global
environment, social conditions, and cultural conditions.

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Mussnig (2007, 41) says that a company can only be successful if it can manage to use its own
potential and to attune that to the company’s environment.

Skinner (1964, 125) divides the environmental factors of a company into four segments:
Technical system, political system, cultural system and economic system.

Ansoff (1965, 1997) developed the term “double strategic fit”. This term describes, that the
organization of a company has to adapt and link its own strategy on the one hand to the structure
and culture of the company itself (internal fit) and on the other hand it has to consider also the
requirements of the environment (external fit) and to link it the strategic direction.

Some of these elements are Political, Economic, Socio-cultural, Technological, Legal and
Environmental (PESTLE). Demographic elements too should not be ignored. This analysis is
popularly used to examine the organization’s macro environment.

PESTLE ANALYSIS
All organizations need to identify external factors within their environment that could have an
impact on their operations. Many of these will be things that the organization has no control
over, but the implications of which need to be understood that is considered as pestle analysis.

Pestle analysis is a concept used as a tool by companies to track the environment they are
operating in or are planning to launch a new project/product/service etc. It is also used to identify
the external factors that influence an organization. It denotes P for Political, E for Economic, S
for Social, T for Technological, L for Legal and E for Environmental.

The analysis provides you with a framework that enables you to investigate your external
environment by asking questions for each factor and discussing the likely implications. How you
categorize each question raised doesn’t matter. For example, whether you classify an impending

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government regulation as a political or legal issue is not important. The only thing that matters is
that it is identified as potentially having an impact on an organization.

Political factors
These factors determine the extent to which a government may influence the economy or a
certain industry. There are always policy changes in government even when the political
situation seems relatively stable and this leads to changes in government priorities which in turn
can result in new initiatives being introduced as well as changes to trade regulations or taxation.
These can include employment law, consumer protection laws, environmental regulations, trade
restrictions or reforms, health and safety requirements.

In reaction to these factors Uganda carries out trade with China, many imports are accepted even
then taxes are paid as recommended by Uganda Revenue Authority but following months of
trade Uganda National Bureau of Standards deems the goods unfit hence causing losses to the
trader. So companies involved in the importation may struggle to sustain themselves in the
competitive markets. We have also experienced the importation of plastic rice as identified by
the ministry of Health and this is not permitted by the health and safety laws hence
predetermining the consumers’ choice.

Politics also affect businesses in quite a number since they are usually the major governing body
of the country. A stable political environment is known to create a favorable environment for
different types of businesses and vice versa.

Political groups can also influence the government to allow for establishment of certain
businesses or cripple them. Therefore, before establishing or when running a business, it is
imperative to consider the role of politics in the location. This will enable you to employ
necessary strategies to cushion your business from political influences.

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Government stability
The state of the government is very important for any business. A government that is stable
creates a favorable environment for businesses. What’s more, it builds confidence in existing and
potential investors. Without confidence that a business will grow based on a government’s
political status, investors and business persons will shun off.

Despite the long-standing stability that the government of Uganda has faced, there have been a
few wars that have affected the country and its overall business climate in the recent. These
conflicts have included the LRA insurgency that led to insecurity in northern Uganda, the
political demonstrations that were frequent on the streets after the February 2016 elections, the
Kasese insurgency between tribes in Kasese and Demonstrations by the Youth in various parts of
the Country . These conflicts, especially the northern one and Kasese conflicts, led to the
destruction of property including businesses and they also cost the country in terms of revenue
from tourists especially for the northern war. This prevented the country from receiving foreign
exchange from tourists, as they could not turn up given the instability in the area. However, these
insurgencies were later settled and given that the bigger part of the country was at peace,
businesses thrived in other areas.

Trade policy
Trade policy is one of the factors that also play a crucial role in determining the success of a
business. A government that allows free trade enables many businesses to grow. However, a
government that imposes restrictive policies prevents the growth of businesses. Fortunately,
Uganda has implemented significant economic reform, including a liberalization of the trade
regime, over the last decade and a half. This has attracted foreign direct investment, mainly in
manufacturing, and contributed to continued economic growth. Indeed, over the past six years,
Uganda's real GDP has grown at around 6% per annum on average, and is expected to continue
growing at about 7% per year in the medium term. These are some of the observations contained
in a (WTO report) on the trade policies and practices of Uganda. However, certain guidelines

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must be followed before investment in order for a license to be received as the investment regime
in Uganda is governed by the Investment Code of 1991, which was revised in 2000. Foreign
investors require a minimum of US$100,000 in planned investment in order to secure an
investment license from the Uganda Investment Authority, whereas for local investors, the
minimum planned investment requirement is US$50,000. Foreign investors who meet the
requirements stipulated in the Investment Code, usually benefit from tax and other investment
incentives which include VAT refunds on materials for industrial and commercial buildings;
duty-and tax-free imports of plant and machinery; and duty exemptions on personal effects and
motor vehicles (previously owned for at least 12 months) for all investors and expatriates
entering Uganda.

Diplomatic events
Diplomatic events in a country also play a crucial role in determining the success or downfall of
a business. There are diplomatic events that promote businesses especially in developing
countries. The events also can change the current and future trends of a business. An example of
these could include the East African Federation. Uganda is part of the EAC, which has a market
of over 135 million consumers with a total GDP of USD84.7 billion. As a result intra-community
tariffs are gradually being reduced or removed on:

● All goods imported into the region

● Most goods originating and traded within east Africa
● Most capital goods, agricultural inputs, pharmaceuticals, medical equipment, raw materials
and chemicals
There are also tax incentives through various export schemes covering:
● Export processing zones
● Manufacturing under bond
● Duty drawback for manufacturers of goods for export
● Inward processing

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Government legislation
It is almost always an uphill task to separate the political and legal environment as it so happens
that the people in politics are the ones who almost single handedly draft legislation. This makes
the legal environment almost a subset of the political environment. That said, it is one of the
most important considerations to be made before any business is setup as legalities must be
complied with.

Government legislation affects businesses in such a way that it can create rules and regulations
that promote specific businesses. In other cases, the legislations can prevent specific business for
special reasons or consumer interests. For example, the government of Uganda Prohibits and/or
Restricts Importation of among others Pornographic materials, Used motor vehicle tires, Used
computers and appliances, Imports which are also banned under international agreements to
which Uganda is signatory. In addition, the Uganda Revenue Authority imposes an
environmental levy on vehicles over eight years old, and the Ugandan government has banned
the importation of used computers and used refrigerators. Therefore as a business person or a
potential entrepreneur, it is essential to consider these factors before and when running a
business. It will enable you to make wise and informed decisions at all times. What’s more,
understanding these factors enables you to adapt well to your business environment and run your
operations without any form of interference.

Economic factors
There are a number of external and internal risks that may affect the positive economic outlook.
These factors are determinants of an economy’s performance that directly impacts a company
and have resonating long term effects. For example, a rise in the inflation rate of any economy
would affect the way companies’ price their products and services. Adding to that, it would
affect the purchasing power of a consumer and change demand/supply models for that economy.

The external risks include low commodity prices and demand for the country’s exports in major
markets, the appreciation of the U.S. dollar due to the expected rise in interest rates in the United

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States, a slowdown and tightening of global financing conditions, which could discourage
investment and development assistance.

Other external risks include adverse spillover shocks from some of the fragile regional
neighbors, and the continued uncertainty in the global markets and trade as a result of the trade
war between the US and China,Coronavirus and Brexit.Major internal risks to the economy
include reduced domestic revenue mobilization and higher public spending on contingencies,
poor institutional capacity. and governance, and weak public financial and investment
management systems. The agricultural sector’s susceptibility to adverse weather conditions will
always remain a major risk to the economy.

In addition, the government’s continued failure to meet budget targets, together with the under-
execution of the development budget remains a concern.

The low GDP per capita, underpinned by high unemployment and growing population, together
with the ever increasing un-planned rural urban migration will result in the projected growth not
being felt by all Ugandans, especially the urban poor.

These issues include; inflation rate, taxes, interest rates, exchange rates, trading regulations and
excise duties. Organizations seek to create strategies that fit changes in the economic situation
and in particular the financial aspects of the macroeconomic situation.

According to the Monetary Policy Statement, Annual headline and core inflation declined to
1.9% and 2% respectively from 2.1% and 2.7% in August 2019. The decline Dr. Adam Mugume,
Director Research BoU said was partly driven by a relatively stronger shilling, moderation of
smaller domestic demand and lower food prices.

Food crops inflation declined from minus 1.4% in August 2019 to 3.0% in September 2019.
However, Dr. Mugume said Energy Fuel and Utilities (EFU) inflation rose to 2.5 percent in

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September 2019 from 1.0% percent in August 2019. With the decline in inflation food
processing companies are motivated to invest heavily with a prospect of earning high profits.

Examples of economic factors affecting business include;Interest rates, Exchange rates, Inflation,
Taxes

Interest rates
Interest rates might appear in a range of different places, imposed by a range of different people.
It’s obvious that the status quo for interest rates is of great interest to banking institutions, but it
might also affect companies whose strategies rely on taking out large loans. The Bank of Uganda
(BoU), in August 2019, maintained the Central Bank Rate (CBR) at 10 percent. The band on the
CBR was maintained at +/-3 percentage points (PPs) and the margin on the rediscount rate at 4
PPs on the CBR, placing the rediscount rate and the bank rate at 14 percent and 15 percent,
respectively.BoU continued to use Repurchase Agreements (REPOs)/reverse REPOs and deposit
auctions to align liquidity conditions in the domestic interbank market with the desired monetary
policy stance.

Exchange Rates
The Uganda Shilling remains largely stable with a bias towards appreciation. On a quarterly
basis, the Shilling strengthened by 0.8 percent against the US Dollar, to an average mid rate of
Shs 3,706.4/USD in the three months to August 2019, compared to the weakening by 1.1 percent
observed in the quarter ended May 2019. Similarly, on a month-on-month basis, the Shilling
strengthened by 0.1 in August 2019 and 1.0 percent year- on-year to a mid-rate of Shs. 3,693.7/
USD, driven largely by Strong inflows mainly from NGOs and Financial Institutions and export
proceeds.

On a trade weighted basis (Nominal Effective Exchange Rate – NEER), the exchange rate
appreciated by 1.4 percent quarter on quarter, and 4.4 percent year-on-year in the quarter ended
August 2019. On a monthly basis the NEER also appreciated by 1.1 percent in August 2019 and

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3.5 percent year-on-year. Taking inflation into account, the real effective exchange rate (REER)
appreciated by 0.3 percent month on month and 4.7 percent year on year in July 2019.

Developments in regional exchange rates were mixed during the three months to August 2019,
with the Uganda Shilling appreciating, the Tanzania Shilling remaining largely stable and the
Kenya Shilling and Rwanda Franc depreciating slightly against the US dollar. The Kenya
Shilling appreciated by 1.8 percent to average KES 102.7/US$, the Tanzania Shilling depreciated
by 0.01 percent to average TZS 2,300.5/US$, while the Rwanda Franc depreciated by 1.1 percent
to average RWF 900.2/US$ in the quarter ended August 2019 compared to the previous quarter
ended May 2019.

Inflation.
Central Bank Rate (CBR) increased to 10.0% in response to inflationary pressure.as a result,
inflation remains stable and contained. This has been possible because the annual core inflation
trended below BoU’s medium term target of 5.0%. However, the recent rapid rise of global oil
prices, together with the depreciation of the shilling in the first quarter of FY18/19, as well as the
new taxes introduced in the June 2018 budget, resulted in some inflationary pressure on the
economy.

There was a concern within BoU that these inflationary pressures could result in a rise in core
inflation within the economy. In order to curb these inflationary pressures, BoU increased the
country’s benchmark CBR by 100 basis points from 9.0% to 10.0% in October, 2018. BoU felt
that a slight tightening of the monetary policy was necessary to maintain the growth momentum
within the economy and control inflation.

Despite this increase in the CBR, the government is still confident that the economy remains on a
steady path of growth supported by robust domestic demand, public infrastructure investments,
improving agricultural productivity and a recovery in FDI.

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In the last six months (first half of FY18/19), annual headline and core inflation averaged 3.0%
and 3.4% respectively. The low inflation recorded during the period was mainly due to the
relatively stable exchange rate and favorable weather conditions, which resulted in an increase in
food supplies. On this account, annual inflation remains within BoU’s medium term target rate of
5.0%.

Annual headline inflation is projected to rise to 5.1% mainly on account of increasing oil prices
and increase in domestic demand following a rebound in economic growth. However, in
FY19/20 and the medium term,headline inflation is projected to remain stable within single
digits and core inflation remaining close to BoU’s policy target rate of 5.0%.

The country’s macroeconomic policy stance remains focused on containing inflationary

pressures, enhancing exchange rate stability, and stepping up domestic resource mobilization
growth by 0.5% points of GDP per annum.

Taxes.
Taxes are another variable that can have an impact on the business climate of a country. Quite a
number of taxes are levied on businesses opened in Uganda including company tax, capital gains
tax, branch profits tax, and value added tax, local hotel tax for hotels, excise, import and customs
duties. These reduce the number of investors willing to invest in the country (pkf world tax guide
2013). However, on the other hand, tax exemptions are provided for under section 21 of the
Income Tax Act, the Value Added Tax Act and the East African Customs Management Act
(EACMA). Some of the exempted supplies include unprocessed foodstuffs, unprocessed
agricultural products, postage stamps, supply of financial services, supply of insurance services,
unimproved land, education services and supply of social welfare services amongst others. The
other supplies that are exempt include lifejackets, lifesaving gear, and headgear and speed
governors. In such scenarios, people providing such goods usually supply more of them and they
also boom in business as they make good profits given the tax exemption.

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Social-Cultural Factors

Social Factors
According to Sinkiene (2008), these factors scrutinize the social environment of the market, and
gauge determinants. The social factors that need to be considered include age distribution,
population growth rate, employment levels, income statistics, religious beliefs, education and
career trends, cultural and social conventions.

Cultural factors embrace the country or region residents’ mobility for changes, the attitude to the
main issues of business activities and development (openness, rationality, cosmopolitanism,
etc.).
The population size in Uganda is highly dominated by youths. The situation opens up an
opportunity for the private sector to enjoy the labour availability hence increasing productivity
and this is evident in Mukwano industries.

When you talk about the social aspects, you focus on the societal forces. So, these could be
family, friends, neighbours, colleagues and even the media. All of these factors are able to affect
our attitudes, our opinions and our interests, thereby directly impacting product sales and
services by businesses and revenues earned. We as people are shaped by these factors and our

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behavior, even our attitudes towards what we buy, are all affected by these. This is a number of
ways;

A number of people usually prefer to spend time with friends for social events like parties,
watching football matches and the like. During such celebrations, money is spent on drinks like
alcohol and maybe a number of snacks. Some of the people start drinking thanks to their peers.
This has led to an increase in the number of hangouts in the country and has helped to grow the
trade in alcohol.
The business climate in Uganda has also been affected by religions. Different religions have
different beliefs that prevent them from engaging in certain activities. Widely known is the fact
that Muslims are not supposed to take pork or alcohol. This would clearly mean one can’t set out
to carry out such trade in Muslim filled communities. Christians themselves have the fasting
period which is the same period they are in now. Most of them don’t consume foods like meat in
these periods. This reduces the quantities of these foods sold in these areas.

The business climate in Uganda has also been affected by the change in trends leading to change
in tastes. This has been the case in the sector of gadgets especially smartphones. Changing trends
and brands of phones have gotten people to switch from the nokia phones that were widely used
originally to the most recent brands and types like Samsungs and iphones. This has forced Nokia
to further develop their brand to meet the changing trends and compete favorably.

Cultural Factors
The government of Uganda has stood to benefit economically its vast cultural endowment in
terms of the tourists who visit the country and bring in foreign exchange. Uganda wrecked over
4.9 trillion Ugandan shillings (US$1.88 billion or €1.4 billion as of August 2013) to Uganda's
GDP in the financial year 2012-13 as tourists visited among other things the cultural sites given
below. Since then, tourism has continued to be a major contributor to Uganda’s GDP (Moses
2013)

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Kabaka’s administration palace and Lake (The Kabaka’s Lake)
Bulange Mengo is the official palace of the Kabaka, Buganda’s King. It’s located on Nateete
road off Rubaga road and is built with high walls, beautiful gardens and a large statue of King
Ronald Muwenda Mutebi II. It is where the king meets his council and it serves as an assembly
and an administrative centre for Buganda. It’s the pride of Buganda and some of their occasions
are held there.

Uganda Museum Located in Kampala is a centre for Ugandan culture which was founded in
1908. It carries a display of Uganda’s cultural Heritage including ethnological and natural
historical exhibitions. All cultural backgrounds in Uganda are represented, and the displays show
the different developmental stages they have gone through. The museum holds approximately
3000 volumes of maps, periodical photographs and artifacts, sociology, travel and science pieces.
It is indeed fun paying a visit to this wonderful place.

Bahai Temple A temple of its kind in the whole of Africa. The temple also called Marsriqu l’-
Adhukar, is located on Kikaya hill on Gayaza road about 4 miles from Kampala, and was built
40 years ago on nine big pillars. It belongs to the Bahai religious group, believed to have begun
by the messenger called Bha’u’llah born in Tehran Iran 1817-1892. The temple was opened to
the public on 15th January 1962, and attracts many tourists since it’s the only one in Africa.

Martyrs Shrine – Namugongo The physical source for Ugandan Christian faith. Namugongo
martyrs shrine is situated 12km to the North-East of Kampala. It commemorates the conspiracy
and harrowing brutality that sums up the tale of 22 brave Christian Ugandan martyrs. These 22
Ugandan Roman Catholics were burnt alive in 1886 for refusing to denounce their faith. In case
you want to know more about the strength of our Christian faith here in Uganda, come and
witness yourself. Uganda martyrs day is celebrated every 3rd of June and up to this day the
martyrs are honored around the world for their faith and courage. The shrine attracts thousands
of pilgrims every year to pay homage to the saints.

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Fort Bigo Bya Mugyenyi Believed to have been by the bacwezi and their related kingdoms,
Bigo Bya Mugyenyi and unique earth works are the largest and most important of the several
works built by the Bacwezi. Bigo is thought to have been a fort built to protect the southern
extreme of the Bacwezi kingdom. The outer ditch and an inner royal enclosure built on a small
hill make up the interesting two concentric sets of earthworks. Locals regard this place as having
supernatural powers. The supernatural being of the Bacwezi makes this part of the world
interesting and worth visiting once in Uganda.

Kasubi Royal Tombs Kasubi tombs are the traditional royal tombs of the kings of Buganda. The
tombs are situated 5km away from the Kampala city centre. This interesting site is where the
dead kings of Buganda kingdom are buried. Buganda kingdom is in the central and southern part
of Uganda. Buganda kingdom is the most dominant kingdom in Uganda. The architecture of the
tombs reflects the early civil architectural ingenuity which makes the site a popular tourist
attraction for both locals and foreigners.

Naggalabi coronation site Buddo It is here that the kings of Buganda have been crowned for
the last 700 years. The site is located on Buddo hill a few kilometers from Kampala on Masaka
road. It is therefore an important site in Buganda culture. The Buganda kings are crowned on this
hill because it’s believed that the first Muganda thus first king Kintu killed his brother Bemba on
this hill. It is here that the current Kabaka / king of Buganda kingdom Ronald Muwenda Mutebi
was crowned on 31st July 1993.

Technological factors
As Sinkiene (2009) states, the scientific-technological environment includes research, knowledge
and technology. Technological factors increase the country’s competitiveness through the
provision of timely and effective information. The tourism sector uses technology as a product
provision possibilities, the modernization of servicing systems, the assurance of appropriate level
of quality and other measures based on innovations and adapted technology.

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According to Hjalager (2002), tourism is inevitably associated with new technologies,
organizational and structural innovations. It is necessary to provide management and marketing
knowledge to residents as well as to develop the information for tourists when reorganizing and
improving the information system of Ugandan tourism and the marking system of tourist sites.
When using modern technology and information systems, it is necessary to achieve that tourism
information would be available for Ugandan residents and tourists from foreign countries as
well.

Banking sector has been one of the most advanced embracers of technology and this is evident
with the use of agent banking which facilitates easy movement of cash.

Marketers must watch the technological environment closely and adapt in order to keep up.
Otherwise, the products will soon be outdated, and the company will miss new products and
market opportunities.

In Uganda, modern technology is highly contributing to the country’s economy. Over the last
decade, the country has witnessed rapid growth in its technology sector. That’s evident in areas
such as computer applications, mobile devices, data processing, and information sharing. This
growth has attracted international investors such as Betway and MicroPay, among others. That
has made the ICT sector to have a profound impact on Uganda’s economic growth.

According to the UN, the global economy grew by 3.6% in 2017, resulting in a decrease in the
level of unemployment in 2018. The growth is attributed to technological advancement
especially in developing countries such as Uganda. That has encouraged the youths to forge
innovative ways to promote business growth and curb unemployment.

Due to the rise of ICT growth in Uganda, the country has seen a significant increase in the
number of entrepreneurs in this sector. That includes the betting market, with the Betway login

17
portal receiving thousands of visitors daily thanks to various internet providers. Other markets
have also grown immensely with the tech advancement.

Targeting both the public and the private sector, these entrepreneurs have enjoyed a decrease in
the cost of production though that has come with its challenges. For starters, many Ugandan
startups don’t live to see their first anniversaries. That’s mainly due to lack of internal
innovation, an aspect that has resulted in many entrepreneurs replicating the already existing
ideas with a change of only the name or process. That has ultimately resulted in various web-
based start-ups dealing with IT support services, news, web designing, and internet cafes.

Along the busy streets of Uganda’s capital city, Kampala, one can’t help to notice the high-level
of the door to door duplication of ICT services by entrepreneurs. However, despite these
challenges, there’s been numerous key achievements, the biggest being the development of ICT
innovation hubs. These hubs encourage tech-oriented individuals to network, share ideas, design
and work together.

The initiation of ICT hubs has played a significant role in incubating numerous entrepreneurial
ideas in Uganda and sub-Saharan Africa at large. Makerere University, one of the top
universities in Uganda has also played a major role in ICT innovation in the country. The
country has also welcomed a number of global tech giants such as Microsoft and Google.

Though Uganda still has a long way to go in terms of technology, the current developments are
very encouraging. The technological advancement has not only created a wider market for
businesses and entrepreneurs in the ICT sector, but also for Ugandans in the retail sector outside
the urban centers. Nonetheless, there’s still the need to nurture innovation at the grass root level
to avoid the challenges that have been affecting entrepreneurs. That will further facilitate
innovation and business growth in the region.

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Uber X, Uber Boda, Safe boda, Taxify are some of the new Technologies introduced that have
made getting a ride around Kampala so easy. Users do a few taps on your smartphone, and the
ride will find them in a few minutes unlike the Traditional Special hire Taxis and Ordinary
Bodas. All you need now is an active data bundle and either cash or visa card. But 5 years back,
if you wanted to hire a private car also known as Special Hire or Special, you needed to know
where to get the special hire guy and then run through a series of price negotiations that often
meant being ripped off. (Kasomi.E, 2018)

Legal factors
These factors have both external and internal sides. There are certain laws that affect the business
environment in a certain country while there are certain policies that companies maintain for
themselves. Legal analysis takes into account both of these angles and then charts out the
strategies in light of these legislation. For example, consumer laws, safety standards, labor laws
etc. Fish (Amendment) Act, 2011, establishes fishing vessels to have identification plates
displayed on the vessel. The act establishes the punishments of using small size net and catching
in-mature fish.

Government legislation.
It is almost always an uphill task to separate the political and legal environment as it so happens
that the people in politics are the ones who almost single handedly draft legislation. This makes
the legal environment almost a subset of the political environment. That said, it is one of the
most important considerations to be made before any business is setup as legalities must be
complied with.

Government legislation affects businesses in such a way that it can create rules and regulations
that promote specific businesses. In other cases, the legislations can prevent specific business for
special reasons or consumer interests. For example, the government of Uganda Prohibits and/or
Restricts Importation of among others Pornographic materials, Used motor vehicle tires, Used
computers and appliances, Imports which are also banned under international agreements to

19
which Uganda is signatory. In addition, the Uganda Revenue Authority imposes an
environmental levy on vehicles over eight years old, and the Ugandan government has banned
the importation of used computers and used refrigerators.

The process of Starting a business in Uganda is also another tedious and expensive process
involving the below processes:

● Company name Reservation with Uganda Registration Service Bureau (URSB). This
requires payment of Ug.X 20,000 and Ug.X 2,200 bank fee . You will need to fill the
Company name assessment forms.

● Membership Subscription with Uganda National Chamber of Commerce (UNCCI) .This

requires payment of Annual subscription as per category Associate = 1,100,000, Gold =
510,000, Silver = 260,000. One will be required to fill a Certified Name Reservation Form-
Business Case and present Passport copy and Photo of one of the directors.

● Company Registration to obtain the Certificate of Incorporation with URSB. Registration

fees of UGX 20,000– Stamp duty: 0.5 % of the share capital, Stamp Duty on Memorandum
& Articles of Association: UGX 35,000,Filing Fees: UGX 25,000, Filing Form A3: UGX
20,000, Filing Form 7/20: UGX 20,000, Filing Form A9: UGX 20,000, Filing Form A2:
UGX 10,000 .On top of all the above, one must have Company Books, Memorandum of
Agreement, Articles of Association, Declaration of companies, Fill Form A1, Form A2,
Form A3, Form 7, Form 9A and must have Company Resolutions.

● Register for a Tax Identification Number (TIN) with Uganda Revenue Authority (URA).
The TIN application can be completed online on the website URA: www.ura.go.ug. Each
director must fill a Personal inquiry form.

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● Register for VAT with Uganda Revenue Authority (URA) if the company has a threshold
of over 50,000,000 shillings. Requirement is a Statement of Nominal Capital Form that
states share capital, number and class of shares, value of the shares.

● Register for the trading license with the Municipal Authority where the company premises
are located Municipal Authority eg. Kampala Capital City Authority (KCCA) .Charges
depend on the nature of business and grade. It is assessed by Municipal Authority/KCCA ,
Requirements are; Memorandum of Understanding and Articles of Association, Form
7,With the name of the directors, Certificate of incorporation, Lease/Tenancy agreement.

● The final stage is to register with the National Social Security Fund (NSSF). All employers
with more than 5 employees are obliged to pay an NSSF contribution of 10% to their
employees. NSSF No charges

Additional Items a Company needs to operate well:-

A Company Seal
This will cost not less than 225,000 and takes 1 day. It’s mandatory to have company seal.
Section 117 (b) of the companies Act 2012 provides that every Company shall have its name
engraved in legible letters on its seal which shall take the form of embossed metal die.
Opening a Bank Account
When you have all the official documents for doing business in Uganda, you can then open up a
current account for the company in any commercial bank. Some of the requirements for opening
a bank current account include:-

● Tax Identification Number (TIN)

● Certified Certificate of Incorporation.
● Certified Memorandum of Understanding and Articles of Association,
● Company form 7 or 19,
● A Trading License

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 ● A company resolution on a headed paper to open up an account.
● An official letter to the Bank Manager requesting to open up an account
● Plus a specified minimum opening amount

Physical Offices or Premises

You need premises from which to operate smoothly your business or industry. Ecoland Property
Services is a provider for all types of business buildings or space. You can work on the physical
address before you fulfill most of the above-mentioned steps for doing business or setting up an
industry in Uganda.

Post Office Box Number

It’s professional for any company in Uganda to have a Post Office Box Number through which
parcels, documents or physical items can be addressed to it.

Stamp and Logo

A Stamp or a Logo offers a corporate look for the company. You need a stamp and logo that will
always appear on the company documents and other assets.

Recruitment of Staffs
After meeting all the legal requirements to do business in Uganda, you then embark on recruiting
all categories of manpower that you need to run the company.
Therefore as a business person or a potential entrepreneur, it is essential to consider these factors
before and when running a business. It will enable you to make wise and informed decisions at
all times. What’s more, understanding these factors enables you to adapt well to your business
environment and run your operations without any form of interference.

Environmental/Ecological factors
These factors include all those that influence or are determined by the surrounding environment.
This aspect of the PESTLE is crucial for certain industries particularly for example tourism,

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farming, agriculture etc. According to Morrison (2009), under the National Environmental
Management Policy, Article 39 of the Constitution of Uganda provides for the right to a healthy
and clean environment. The National Environmental Management Statute was also enacted,
establishing the National Environmental Management Authority (NEMA) as well as providing
for a broad range of issues pertaining to the functions of NEMA and measures for environmental
protection. On the face of it, therefore, Uganda has moved a great distance towards providing a
sound policy and legislative framework for environmental protection. The issue however, is
whether these policy and legal claims are well integrated in Uganda’s investment policy.’’
Article 245 states that Parliament shall, by law, provide for measures intended to:

1) Protect and preserve the environment from abuse, pollution, and degradation;
2) Manage the environment for sustainable development; and
3) Promote environmental awareness

The northern region has been invested with desert locusts which eat up all the vegetation and
with policies in place, the ministry of agriculture in conjunction with other government bodies
have established measures to overcome the situation hence providing hope for the agricultural
sector.

Demographic Factors
Demographic environment refers to the study of the human population in terms of size, density,
location, age, gender, race and occupation. This is the very important factor that helps the
marketer to divide the population into different market segments and target markets.
Demographic data also helps in preparing geographical marketing plans, age and sex wise plans.
Marketers divide the world population into three parts: The name refers to the term Demography
which is the composition of a particular human population. The latter refers to the study of
human populations. This includes size, density, age, gender, occupation and other statistics. The
needs of people is the reason for businesses to exist. In other words, people are the driving force
for the development of markets. The large and diverse demographics both offer opportunities but

23
also challenges for businesses. Especially in times of rapid world population growth, and overall
demographic changes, the study of people is crucial for marketers. The reason is that changing
demographics means changing markets. Further, changing markets means a need for adjusted
marketing strategies.

Income level
It can be defined as the flow of cash or cash-equivalents received from work (wage or salary),
capital (interest or profit), or land (rent). Income is one of demographic variables that can affect
businesses. A company's products usually appeal to certain income groups. For example,
premium products such as high-end women's clothing usually appeal to women with higher
incomes. Conversely, people with comparatively lower incomes are more sensitive to price and,
therefore, may prefer purchasing discount products. People with lower incomes have less
disposable income. Value is a major determinant in the products they purchase. Hence, a
company may best reach lower-income people through discount retailers and wholesalers and
attract higher-income buyers in specialty retail shops.

According to the Uganda Poverty Assessment Report (2016), Uganda has reduced monetary
poverty at a very rapid rate. The proportion of the Ugandan population living below the national
poverty line declined from 31.1% in 2006 to 19.7% in 2013. Similarly, the country was one of
the fastest in Sub-Saharan Africa to reduce the share of its population living on $1.90 PPP per
day or less, from 53.2% in 2006 to 34.6% in 2013. Similarly, in 2012 when the Uganda Bureau
of Statistics last released figures of Uganda’s poverty situation, 6.7 million Ugandans were
considered poor. In the capital city Kampala where 35% of Uganda’s GDP is gotten from, a
number of slums are developing, income inequality is increasing and 2 in 10 Ugandans are living
in abject poverty.
This greatly affects the business climate unfortunately negatively as the reduction wasn’t enough
to take a big population out of poverty. Despite the impressive figures on paper, Mr Patrick
Ocailap, an economist says it’s a different picture on ground and says "The economy actually
grew slower than was projected." The economy, he said, had been projected to grow at 5.2

24
percent in 2015/16, but the results returned by Uganda Bureau of Statistics (UBOS) showed it
would grow dismally at 4.2 percent, which could rise to 4.8 percent. Lee and Tuljapurkar (1994,
1997). This is down from the 5 per cent growth registered in 2014/15.

Age
The proportion of children below the age of 15 in 2015 was 48.1 percent, 49.4 percent was
between 15 and 65 years of age, while 2.5 percent was 65 years or older. (UBOS 2015)

Age structure: 0-14 years: 48.26% (male 9,223,926/female 9,268,714)

15-24 years: 21.13% (male 4,010,464/female 4,087,350)
25-54 years: 26.1% (male 5,005,264/female 4,997,907)
55-64 years: 2.5% (male 460,000/female 496,399)
65 years and over: 2.01% (male 337,787/female 431,430) (2016 est.)

Source: CIA World Factbook

Age is another demographic element that impacts businesses. A company's products and services
are more likely to appeal to certain age groups. Younger people under 35 are often the first
consumers to purchase high-tech products like cell phones, electronic books and video games.
Certain buying groups also have more buying power than others. For example, there are about 76
million baby boomers in the United States, according to "Entrepreneur" online. This is the single
largest population segment.

There has also been an increase in the number of schools that have been constructed to take up
this young generation with the private secondary schools standing at about 4000 schools and 652
Boards of Governors waiting to be approved by the Minister in order for the schools to open.
(Private Schools and Institutions Department (2012). The age variable also affects the business
climate in terms of the dependency ratio that constitutes the country is age statistics. It is
unfortunately a huge figure for Uganda’s population with the age bracket below 30 accounting
for about 78% of the population with 83% of these not involved in any form of formal

25
employment. (The New Vision 26th February 2013). Such figures have created a large age
dependency ratio. Age-dependency ratio is an indicator of the economic burden that the
productive population must bear. Populations with very high birth rates coupled with low death
rates have a high age dependency ratio. Overall the age dependency ratio is 103. This implies
that for every 100 economically active persons there are 103 dependents. The dependency ratio
active age is higher for males (110) than for females (97).

Geographic Region
People's buying preferences also vary by geographic region, which is another type of
demographic. Those who meet buyers' needs and requirements in certain geographic regions can
earn higher sales and profits. For example, people often prefer certain food and drink flavors in
certain markets. Companies that sell the flavors consumer’s desire in various areas are more
likely to profit. Those who do not offer these flavors may risk losing customers to other
competitors. Suppliers who also ply their trade in geographical locations with large population
sizes make more sales that their counterparts in areas with limited populations. According to the
National Population and Housing Census (2014), Wakiso was the most populous district with
close to two million persons while Kalangala district was the least populous with less than sixty
thousand persons. The urban population has been increasing overtime from about 1.7 million in
1991 to nearly 7.4 million in 2014.

Household size.
According to the business dictionary, Household size refers to the number of usual members in a
household. Usual members are defined as those who have lived in the household for at least 6
months in the past 12 months. However, it includes persons who may have spent less than 6
months during the last 12 months in the household but have joined the household with intention
to live permanently or for an extended period of time.

The Mean Household Size is the average number of persons per household. The average
household size in Uganda has been estimated at 5.0 and it has remained more or less the same

26
when compared with previous surveys. The results also indicate that the average household size
is bigger in rural areas than in urban areas and this is consistent with the findings from the
previous surveys.

Generally, apart from the Central region where the average household size decreased from 5 to 4,
the rest of the regions remained the same when compared to previous surveys. The census
enumerated a total of 7.3 million households countrywide with the majority of the households
(75 percent) being resident in rural areas. Thirty percent of the households are female headed.
The female headed households have a smaller household size compared to male headed
households with the male headed households having averagely 5.1 members and 4.1 members in
rural and urban members respectively. Their female counterparts recorded 4.2 members in rural
areas and 3.5 members in the urban areas in the families they head. The household size dictates
the spending habits of the household in terms of the quantities of what will be purchased.
However, it doesn’t always turn out that way as the rural area that has larger household
purchases less because they engage in subsistence agriculture coupled with the fact that people in
Urban centres have a better capacity and need to purchase their necessities like food in this case.

Gender.
The gender of the population also impacts on the goods that are demanded by the population as
females demand for different goods depending on their male counterparts in relation to the age.
This can also be looked at in terms of the businesses cropping up in the country.

The National Population and Housing Census (2014) population presented Uganda to be having
17,060,832 males and 17,573,818 females. However, in Uganda, females are still marginalized
in a number of factors one of which being entrepreneurship. The average profile of a female
entrepreneur is a female aged from 18-34 years old (Global Entrepreneurship Monitor 2014).
Informal enterprises account for almost 50% of employment where almost half of these
businesses are owned by women (Stevenson et al 2005). Moreover, Uganda experiences an
increase in the number of enterprises moving from the micro level – less than five workers – to
small businesses – more than five employees – where the majority of these ventures are also

27
owned by women (Stevenson et al 2005). Since 2003, there has been a steady increase of female
participation in entrepreneurship whereby the current ratio is now 1: 0.92 (Enock 2014). This has
helped to increase the number of SMIs introduced by women which has helped to improve the
overall business climate in the country.

Employment Status
The employment status in Uganda is one of the variables in the demographic variables that have
an impact on the business climate in Uganda. This term generally means the characterization of a
working arrangement between an employer and an individual for legal purposes. Employment is
a direct provider of income to the population, which is used in the purchase of goods. The more
the unemployment levels in Uganda, the less the purchase and supply of goods which affects the
business climate in the country. Unfortunately this is proving the case in Uganda especially
among the youth. This is because the youth unemployment rate stands at 22.3% which is an
alarming rate given that the youth make up the bigger part of the Ugandan population. This
reduces the capability for the youth to purchase goods as well the capacity of the employed to
purchase goods since most of the unemployed youth are dependants on the employed population.
This has greatly affected the business climate in Uganda.

Average age of marriage.

Arranged marriages for adolescent girls without their consent are also common in Uganda
especially in the rural areas (FIDH and FHRI 2012; Benschop 2002; Bantebya, Muhanguzi, and
Watson 2013; 2014; MGLSD, 2007). Roughly two years later a UNFPA (2013) report also
indicated that prevalence of child marriages is highest in northern Uganda estimated at 59%,
followed by Western region (58%), Eastern region (52%), East central (52%), West Nile (50%),
Central (41%), South west (37%), and lowest in Kampala (21%) (UNFPA, 2013). The average
marriage affects the business climate in Uganda in a sort of chain reaction. The early marriages
prevent students from completing school deeming them unable to purchase products on the
market which in turn greatly affects the business climate in the country. Marrying at young ages
causes lifelong poverty (Rubin et al., 2009; Schlecht et al., 2013) and retards a country’s

28
economic and human resource progress. In fact, child marriage is both a cause and a
consequence of poverty and gender inequality (Warner et al., 2013).

Recommendations to some of the challenges

● According to UBOS, focus should be put on creation of more jobs to reduce or to completely
do away with the poverty through creation of more jobs i.e. Industrialisation.

● The progress of Business registration should be simplified to allow potential investors easily
register their businesses.

Conclusion:
As we have seen, the company is surrounded by a complex environment. The Macro
Environment consists of a large variety of different forces. All of these may shape opportunities
for the company, but could also pose threats. Therefore, it is of critical importance that marketers
understand and have an eye on development in the Macro Environment, to make their business
grow in the long term.

The economic outlook for 2020 is very positive thanks to a recovery in the agriculture sector, the
sustained growth in services, and the continued huge investment by the government into public
infrastructure.

The Medium term growth of the economy is also very positive. The government is projecting the
economy to grow by 6.2% in the next financial year 2019/20, with agriculture, industry and
services projected to grow at 3.8%, 5.6% and 7.8% respectively.

29
The Ugandan economy is now on a path of rapid and sustained growth, however, the number of
new jobs arising from this growth has been disappointingly low. Sustained growth of the
economy was expected to create jobs, drive poverty reduction and make growth more inclusive.

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