Auditor General reveals cronyism inside Uganda’s political economy

East Africa

Published on Wednesday, 26 April 2017 Back to articles

John Muwanga, Uganda’s Auditor General

The annual reports of Uganda’s Auditor General, John Muwanga, don’t make the same splash as that of his Tanzanian equivalent. Muwanga’s office does, however, give us a glimpse into the cronyism that dominates Uganda’s economy. The most recent revelations from his 2015-2016 report focus on tax breaks afforded to domestic and international investors.

Kenyan multinational consumer goods manufacturer, Bidco Africa, tops the list for favourable treatment. In 2003, it struck a deal whereby its VAT payments would be covered by the Ugandan government for the first 11 years of operation, as well as 26,500 acres of land for palm oil production. After this period, Bidco Uganda was to repay the VAT over a period of eight years. As only 16,500 acres of land had been made available, the state is still covering the firm’s VAT obligations. For 2015-2016, this amounted to almost US$3.5 million.

Mohammed Hamid’s Aya Group also received spectacular treatment from the revenue authorities, being granted an exemption of import duty for construction of the group’s planned Hilton Hotel. There has been no follow-up to triangulate the actual imports against construction bills that were originally certified by the Uganda Revenue Authority. This has effectively granted Hamid duty free import of materials that can be released to the local market.

Hamid is also at the centre of the alleged bribery scandal that has seen Herbert Kabafunzaki — State Minister for Labour, Employment and Industrial Relations — lose his job (see East Africa Politics & Security11.04.17).

Other firms reported to have benefited from tax breaks — though not mentioned in Muwanga’s reports — include Cipla Quality Chemicals and Steel and Tube Ltd. The latter topped the list of firms angling for a bailout last year. Uganda National Oil Company chairman, Emmanuel Kitangole, is the founder of Cipla.

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