The Ugandan national budget for 2024/2025 was approved by Parliament, with a total expenditure of Shs72.136 trillion. The budget consists of recurrent and development expenditure, with the largest portion coming from domestic revenue.
Other sources include budget support, domestic financing, project support, and domestic debt refinancing. The budget allocates Shs3.1 trillion for external debt repayment, Shs9.5 trillion for project support, Shs12 trillion for domestic refinancing, Shs9 trillion for interest payments, and Shs293.9 billion for appropriation in aid.
With GDP projected to grow by 6 percent this financial year 2023/24 compared to 5.3 percent in FY2022/23, this year’s growth of 6 percent is even more impressive when compared to Sub-Saharan Africa’s average of 3.8 percent, and the global average of 2.9 percent projected for the year 2024.
Uganda’s growth strategy for next financial year and in the medium term is anchored on four key growth drivers: (i) Agro industrialisation; (ii) Tourism development; (iii) Mineral development including oil and gas; and (iv) Science, technology and innovation (STI).
I find a lot of resonance with these growth pillars as they mirror our own Africa Recovery and Resilience Plan (ARRP) that was launched in 2020 to accelerate growth post-COVID-19 and continue the economic and social recovery after the pandemic.
The ARRP comprises 6 strategic pillars that are entrenched in: a) a more coherent and productive natural resource ecosystem in agriculture and extractives, b) manufacturing and logistic anchors c) Trade and investment to give broader market access and support factor mobility d) MSMEs e) Social and environmental transformation and f) Technology-enabled economy.
Looking at the budget as a banker, there are several opportunities we can all take advantage of. First, one needs to read the budget from end to end to fully understand it; and understand it they must from a sector-to-sector point of view. The budget is anchored on the tenfold growth strategy and presents a multitude of opportunities and interventions to improve the business environment further.
Secondly, there are some measures taken by the Government for enhanced tax administration and rationalisation of tax exemptions in line with the Domestic Revenue Mobilisation Strategy. An imposition of excise duty at a rate of 0.5 percent of the value of withdrawals of money from other platforms other than mobile money (this does not apply to withdrawals from agent banking or banking halls) will fully support the digitisation policy put in place by the Government and Bank of Uganda to promote cashless banking. This will fully support other incentives put in place for financial deepening.
Thirdly, the Government has provided tax holidays on the income of a person who develops, establishes or operates a medical facility or hospital facility. Investment in health is one that we have seen is important to provide much-needed medical services; through Equihealth, an affordable medical insurance cover targeting individuals in a group, allowing them to get coverage for themselves and their families.
Fourthly, the Government has extended the waiver of penalties and interest on arrears outstanding by June 2023; this waiver will apply when the taxpayer pays between July and December 2024. We believe that this will unlock the much-needed cash flows of many businesses indebted to the state. I implore all businesses with penalties and arrears due to URA to take advantage of this incentive and use this money to recapitalise their businesses for more success in the coming year.
However, the introduction of a 10 percent withholding tax on commission paid to the banking agents and fintech agents (payment service providers) will reverse the gains made on agent banking; these services have been pivotal in the administration of banking services to millions of customers in Uganda who cannot physically access bank branches.
As a parting note, the Ugandan economy has shown resilience over the last four years: from Covid-19 to post-Covid-19 shocks and then the Russian–Ukraine war coupled by global supply chain shocks and instability in global oil prices. We firmly believe, in line with our ARRP, that to ensure continued social and economic development on the continent and ultimately realize Africa’s nascent economic opportunities, local private sector will need to play a more prominent and intentional role in the recovery and resilience of the African continent.
Equity Group’s corporate strategy, as an African-grown and African-focused plan, is to be a catalyst of wealth transformation for the African continent. The plan ultimately aims to capacitate, finance and connect East African Community value chains to global supply chains.
As Hon. Matia Kasaija, Minister of Finance, Planning and Economic Development, said in his closing statements: “Let every adult Ugandan engage in producing a good or a service for sale. That way, we shall be able to create a bigger pie for the greater good of our country”: let us all engage in wealth creation for economic and social empowerment of ourselves, our people and our generations.
Written by Anthony Kituuka, Managing Director Equity Bank Uganda Ltd
