PROPOSED REFORMS TO BUSINESS LICENSING IN UGANDA

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1 REPUBLIC OF UGANDA PROPOSED REFORMS TO BUSINESS LICENSING IN UGANDA TOURISM, HOTELS AND WILDLIFE- TOURISM AND HOTELS SUBSECTOR Prepared by The Business Licensing Reform Committee Appointed by the Minister of Finance, Planning and Economic Development March, 2012

2 1. BACKGROUND Currently, the Government of Uganda is in the process of implementing business licensing reforms with a view to simplifying requirements, reducing discretionary powers, and eliminating redundant procedures. A high-level Business Licensing Reform Committee (BLRC) comprising of 15 representatives from various Government departments and the Private Sector was appointed to spearhead the reform process. The BLRC undertook the following activities: Comprehensive Inventory of Business Licenses. The inventory covered licenses issued by Government Ministries and Regulatory agencies as well as 23 selected local governments (9 Municipalities, 14 Districts). A total of 790 licenses were identified, of which 572 are issued by Government Ministries, Departments and Regulatory Agencies while 218 are issued by local governments. The inventory exercise identified a total of 87 Laws and 174 Regulations, the majority of which were enacted before Uganda s economic liberalization in Comprehensive Review of Licenses. The following criteria were used to analyze each license: (i) legality whether there is sufficient legal basis for the license and whether the law was outdated or complex; (ii) necessity whether the license serves a regulatory purpose such as health, safety or environmental protection; (iii) impact on business activity availability, clarity and simplicity of procedures and the level of cost incurred by businesses to comply with licensing requirements. Consultations with Private Sector Associations and Business. Consultations were held with private sector business in various sectors including Agriculture, Trade, ICT & Media, Financial Sector, Trade, Transport, Manufacturing, Processing and Small Scale Industries, Import & Export, Health, Construction & Real Estate, Hotel & Tourism. In addition, surveys were conducted with over 700 private sector business in 23 selected Districts and Municipalities. Recommendations. The BLRC issued recommendations stating that of the 780 licenses identified, it is recommended that 47 be eliminated because they do not serve any regulatory purpose, while 305 should be streamlined, 7 reclassified and 13 amalgamated into 10. This document contains the recommendations proposed by the Business Licensing Reform Committee under the Tourism and Hotels subsector. Additional background information including objectives of the reforms, summary findings and proposals are contained in the main report. 1

3 The reform program will be implemented through regulatory and legislative action in the coming months. In the meantime, Business Licensing Reform Committee and Private Sector Foundation of Uganda (PSFU) are collecting public feedback to inform the drafting of implementing laws and regulations. Businesses and citizens can comment on these specific reform proposals online at the feedback portal operated by PSFU 2. TOURISM AND HOTELS SUB-SECTOR LICENSES INVENTORY AND COMPLIANCE COSTS Out of 15 licenses that were identified in the Tourism, Hotels and Wildlife sector, the Committee identified 3 licenses in the Tourism and Hotels sub-sector. The total cost incurred by businesses in complying with the Tourism and Hotels subsector licensing requirements is estimated at UGX million. Tourism, Hotels and Wildlife is one of the priority sectors targeted for reforms to reduce compliance costs. 3. LEGAL FRAMEWORK GOVERNING THE TOURISM AND HOTELS SUB SECTOR: The Uganda Tourism Act, 2008 The Uganda Tourism Act streamlines the law relating to tourism in Uganda. The licences required under this Act are here below. The Authority under this Act is the Uganda Tourist Board according to Section 3 of the Act. Section 36 of the Uganda Tourism Act repealed the three laws that formerly regulated the Tourism and Hotels sector but retained the licences that were issued under the repealed laws. 2

4 4. RECOMMENDATIONS ON THE TOURISM AND HOTELS SUB-SECTOR It is recommended that the 3 licenses be streamlined. Law applicable The Uganda Tourism Act, 2008 License Name Recommended Actions Eliminate Retain Streamline Reclassify Amalgamate Cost Compliance (millions) UGX 1. Tour facility Licence Yes Travel Agents, Tour Yes Operators and Tour guides Licence 3. Tourism Development Levy Yes Tourism and Hotels subsector Licences Licence 1 - Tour facility Licence The licence to operate any accommodation or other designated tourist facility is provided for in section 13 of the Act. The application process for a licence is stated in section 15 and an appeal process in case a person is aggrieved by the decision of the board is provided in section 17 of the Act. Cost of compliance The estimated cost for a business to comply with this regulation is UGX 593,637 and it takes an estimate of 57 hours of administrative activities. The total compliance cost per year for an estimated 30 businesses established is UGX 17.8 million. Analysis The license serves a regulatory purpose. However, there is potential for overlap where the tour facility is also a hotel. Recommendations 1) The license should be retained. However, it should be streamlined to ensure avoid overlap and multiplicity where the tour facility is also subject to other licenses. 3

5 Licence 2 - Travel Agents, Tour Operators and Tour guides Licence This licence is mandatory for a person carrying on the business of a travel agent, tour operator or tour guide per section 14 of the Act. Failure to operate without the licence is punishable under section 14(2) of the Act. Cost of compliance The estimated cost for a business to comply with this regulation is UGX 435, 105 and it takes an estimate of 27.3 hours of administrative activities. The total compliance cost per year for an estimated 300 businesses established is UGX million. Analysis The objective of the Travel Agents, Tour Operators and Tour guides Licence and the tourist Agent licence cannot be inferred from the law although proper identification of persons who may carry on this business provides a safety guarantee for the public. Recommendations 1) The travel Agents, Tour Operators and Tour guides Licence should be retained but streamlined to set standards and improve actual administration. The committee recommends that a single licence be retained with three grades representing the activities that a licence holder is authorised to perform. 2) Regulations should be enacted to list criteria that is necessary to prove qualification for higher licence. 3) Best practice encourages non-regulatory management for sector development for instance; consumer feedback on performance of industry players directly affects the quality of service. Licence 3 - Tourism Development levy Section 9 (1) (b) of the Act states that funds of the board will consist of money accruing to the board from the tourism development levy. However this levy is not operational yet as the regulations for introduction of the levy mentioned in section 34 (1) (e) have not been issued yet. Analysis 1) The tourism development levy is solely a revenue generating mechanism. However, the levy has been justified as necessary to facilitate the growth of the tourism sector in Uganda since the tourists are not attracted by a single firm, but by the status of the entire country as a destination. 4

6 2) At the time of the Committee s consultations, there were no regulations to operationalize the Act but an indication was made that draft regulations were under review. 1 Recommendation The Tourism Development Levy is currently not in place. Consultations are ongoing amongst the stakeholders. It is important to ensure that the industry adopts best practice regarding administration, collection and revenue sharing mechanisms amongst various stakeholders to avoid duplicity of fees and licenses in this sector. General Sub-sector Analysis 1. Currently, there are no regulations for the implementation of the Uganda Tourism Act however draft regulations are currently going through the review process. 2. Section 36 (4) of the Uganda Tourism Act presents an area for clarification as it repeals the Acts listed above and yet allows for the continued enforcement of licences and authorisations of the repealed laws as explained under the Local Government Section of this report. Therefore, although the above Acts were repealed, the Uganda Tourism Act, 2008 makes no provision for the licensing requirements and procedures of the licences previously provided for obtaining the licences under the repealed laws. General Sub-sector Recommendations Regulations should be enacted to operationalize the Act. 1 BLRS Interview with Tourism Board Official, 29th August,

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