INVESTING

IN UGANDA’S

DAIRY INDUSTRY

CONTENTS

Why invest in Uganda?	2
Overview of the dairy industry	5
Developments in the dairy industry	6
Trends and performance of the dairy industry	7
Investment opportunities in the industry	13
Uganda’s competitive advantage	17
Market and market potential	18
Players in the industry	19
Useful contacts	21

Why invest in Uganda?

A Vibrant Economy

· Uganda’s economy has been growing at a rate of 5 - 6% per annum for the last 15 years, one of the fastest growing in sub-Saharan Africa

· Uganda has achieved macroeconomic stability, characterized by single digit annual inflation rates and stable exchange rates

· Over the period 1993-2000, investors’ perception of Uganda as an investment location increased by 15.6%, the second largest increase in sub-Saharan Africa.

· Uganda has a sound financial sector, with the shilling fairly stable and fully convertible

B Fully Liberalised Economy

· The economy is fully liberalised and open to foreign investment, with no restrictions on remittance of dividends

· No restrictions on sectors - foreign investors allowed to invest in any economic activity

· 100 per cent foreign ownership allowed

· Government divestiture creating opportunities in well established enterprises

C Access to Regional and International Markets

· Firms in Uganda have unrestricted access to the East African Community market which has a population of 74 million

· Uganda is a member of the COMESA (Common Market for Eastern and Southern Africa) consisting of 23 member states and a population of over 300 million

· Uganda is strategically located on the continent and shares borders with Kenya, Tanzania, Rwanda, the Democratic Republic of Congo and Sudan. Geographical proximity to many countries ensures easy inter-country trade.

· Ugandan products enjoy preferential access to the European Union under the Lome Convention and into the USA under the Generalised system of preferences

· Uganda has bilateral trade and promotion arrangements with the United Kingdom, South Africa, Kenya, Italy, Tanzania and many other countries

D Abundance of Natural Resources

· Uganda is endowed with reliable rainfall, favourable temperatures, fertile soils, vast under exploited water bodies and a wealth of mineral deposits which offer unrivalled investment opportunities

· Uganda also boasts of a wealth of beautiful natural scenery

· Investment opportunities include among others Agriculture, Agro-processing, Fisheries, Manufacturing, Tourism and Service Industry

E Readily available highly trained labour force

· Uganda’s 12 Universities and several polytechnics turn out over 10,000 graduates with varied skills annually

· Training institutions in Uganda are responsive to the needs of the private sector, which has resulted in practical graduates

· Uganda has no history of labour disputes

· Ugandan workers are proficient in English and a number are proficient in other international languages like French and Germany

F Developed Infrastructure

· Uganda has a well-connected road network linking the country to its principal trading partners and has rail links to seaports. The national airport at Entebbe has developed into a hub for regional trade

· Abundance of power. Installed capacity for power generation has increased from 183 MW to 240 MW through the extension of the Owen Falls Dam

· Telecommunications is well developed, with rural areas covered by cellular communication.

· 1,000 ha, located at Namanve, about 15 km from the city centre are being developed into an Industrial and Business park

G Support from Government and International Development Partners

· The Government of Uganda has set up the Uganda Investment Authority, which is a one-stop facility for private investors

· The Uganda Government values private investors as partners in efficient and productive economy

· Numerous International Development Agencies such as USAID, DFID, UNDP and ADB have invested millions of dollars in promoting the private sector in Uganda

H Security of Investment

· MIGA Coverage - Uganda is a member of the Multilateral Investment Guarantee Agency (MIGA) under which foreign investors can insure their investment in Uganda against a wide range of non-commercial risks

· Uganda has bilateral investment protection arrangements with a number of Countries

· Uganda’s constitution guarantees the right to property

· Uganda has a strong and independent judiciary to cater for the commercial and legal requirements of investors

I Good Quality of Life

· Uganda has a wealth of natural and man-made attractions that makes it one of Africa’s greenest and most scenic countries

· Has friendly people and a rich cultural climate

· There are high quality educational and medical facilities

· Uganda has first class hotels, restaurants and other entertainment facilities

Uganda Country Data (2001)

Item	Quantity
Land Area	197,097 Sq. Km
Water & Swamps	43,942 Sq. Km
Altitude Mimimum Maximum	620 (m.a.s.l) 5,110 (m.a.s.l)
Mean Temp.	21^0C
Minimum Temp.	12.5^0C
Maximum Temp.	30^0C
Annual Rainfall	1380 mm
Humidity	65 – 75%
Population (estimated)	22.2 million
Pop. Growth rate	2.8%
Literacy rate	61%
Official language	English
Other languages	Swahili, French

OVERVIEW OF THE DAIRY INDUSTRY

The food processing industry in Uganda (comprising of soft drinks, dairy products, milling fish and meat processing) contributes approximately 4.3 % to the national GDP. The dairy industry contributes an estimated 20.1 per cent to Uganda’s food processing industry. The other major contributors are soft drinks, milling, fish and meat processing. The output from the livestock sector has grown at an average rate of 2.8 per cent per annum since 1995, with most of the growth coming from the dairy industry[1].

The cattle population has increased steadily from 5.40 million herd in 1996 to 5.97 million herd in 1999[2]. The increase in cattle population has been attributed to general improved animal health due to nation wide disease control, improved breeding programmes and better management practices. The demand for milk in milk processing plants has further stimulated animal production. Milk and milk products in Uganda are mostly from cattle and about 34 per cent of the present cattle population are dairy cattle.

The dairy herd country wide has increased to an estimated 285,000 exotics and cross-bred from 220,000 in 1995. Because of the high productivity associated with intensive dairy farming methods such as zero grazing of improved breeds, most farmers have adopted modern farming techniques at various levels of production.

The population of goats has also increased by an average of 3.0 per cent from 5.8 million in 1997 to 6.0 million in 1998. The number of the exotic dairy goats has proportionately increased with Kasese district still leading. Most of the milk produced by these goats is however consumed at house-hold level with minimal processing.

The liberalisation of the dairy industry in 1996 broke the monopoly of the Dairy Corporation and opened up opportunities for private investment. Subsequently, the proportion of the national milk production that is processed before marketing has increased to an estimated 156 million litres in 2000.

DEVELOPMENTS IN THE INDUSTRY

POLICY REGULATIONS AND PLANS

Until 1994, the dairy industry was dominated by The Dairy Corporation, a public company which monopolised the formal market for pasteurised milk and other dairy products. In the 1990s however, the Government of Uganda liberalised the dairy sector. The dairy industry has undergone considerable transformation leading to substantial growth and increased private sector participation.

The role of Government in dairy sector has changed from direct participation in milk production, processing and marketing to creating an enabling environment in which farmers and private investors can grow and develop the dairy industry.

Legal framework

Until 1997 the legal framework for the dairy industry was based on four instruments namely: the Dairy Industry Act of 1967, the Public Health Act of 1963, the Food and Drugs Act of 1962 and the Co-operative Societies Statute of 1991.

In 1998, the Dairy Industry Act of 1967 was replaced by the new Dairy Industry Act of 1998. The new act reformed the organisational and policy framework for the dairy industry and provides for the establishment and functions of the Dairy Development Authority (DDA). The act also provides for the promotion and control of production, processing and marketing of milk and dairy products as well as the general facilitation and development of the Dairy Industry.

The commencement for the Dairy Industry Act, 1998 was 2000. Subsequently, the DDA, a full-time semi-autonomous regulatory body for the Dairy Industry, was inaugurated. The Dairy Corporation Ltd. (DCL), a company with limited liabilities, was incorporated from the former Dairy Corporation and will soon be floated for privatisation.

Development of co-operative societies

Recently, co-operative societies have developed and many of them are involved in milk collection and marketing. Some have gone into milk processing. The Uganda Dairy Industry Stakeholders’ Association (UDISA), an organisation of all stakeholders in the dairy industry was recently formed. UDISA together with the Uganda National Bureau of Standards have completed the formulation of the Code of Practice for Raw Milk Handling and Marketing. The code of practice will soon be enforced.

TRENDS AND PERFORMANCE OF THE DAIRY INDUSTRY

Contribution of the Dairy Industry

The Dairy Industry currently contributes about 20 per cent to the food processing industry. The food industry contributes about 4.3 per cent to the National GDP. Though small, this contribution to the GDP is steadily increasing. Table 1 shows the index of industrial production of food processing and dairy processing.

Table 1: Index of industrial production for food processing and dairy processing.

Year	Index of dairy processing	Index for food processing
1994	57.3	309.7
1995	113.5	361.8
1996	134.3	450.4
1997	100.9	449.5
1998	120.7	480.0
1999	119.0	523.2

Source: Uganda Bureau of Statistics, 2000 Statistical Abstract.

Cattle population

The national cattle population over the last ten years has experienced steady growth. The growth has been attributed to the increasing demand for milk by consumers and milk processing plants, better herd management, adoption of improved breeds and improved animal health and support services. An average growth rate of 3.1 per cent has been experienced over the last six years as shown in Table 2.

Table 2: Cattle Population (‘000) over for the period 1994 - 1999

	1994	1995	1996	1997	1998	1999
Indigenous cows	4,897	5,045	5,196	5,352	5,514	5,679
Exotic & cross-bred cows	209	221	234	248	263	279
Total	5,106	5,265	5,430	5,600	5,776	5,956

Source: Uganda Bureau of Statistics, 2000 Statistical Abstract/Land ‘O’ Lakes Uganda

Dairy Farming

Since 1994 dairy farming has grown with many farmers adopting high milk producing exotic and cross-bred cattle, and better farming methods. The exotics and cross-breeds proportion of the dairy herd country wide increased to about 285,000 in 2000 from an estimated 220,000 in 1995. The exotic breeds include the Jersey, Holstein, Fresians, Guernsey, Ashyire and the Brown Swiss. Consequently, the national milk production levels have increased as shown in Table 3.

Table 3: National milk production for the period 1994 to 1999

Year	Annual milk production (‘000’000 litres)
1994	446
1995	487
1996	540
1997	584
1998	619
1999	718

Source: DDA/Ministry of Agriculture Animal Industry & Fisheries

The leading districts in dairy production are Bushenyi, Mpigi, Mbarara, Mukono, Ntungamo, Kampala, Rukungiri, Jinja and Kabale in that order. The major milk producing districts are categorised in into six milk sheds as shown in Table 4.

Table 4: Major milk producing districts

Milk shed	Districts	Per cent of total production
Southern	Bushenyi, Mbarara, Rakai, Rukungiri, Kabale, Kisoro, Masaka	37
Central	Jinja, Kalangala, Kamuli, Kampala, Mukono, Mpigi	34
Western	Masindi, Bundibugyo, Kabarole, Kasese, Mubende, Luwero	10
Eastern	Iganga, Kumi, Mbale, Pallisa, Tororo	7
Other regions	various districts	12

Source: DDA/Uganda Dairy Master Plan, 1993

Milk supply

Milk production country wide has steadily increased since 1994. In 1999, the national milk production was estimated at 718 million litres which was over the projected production for that year. Milk production is expected to increase if the current rate of growth is maintained

Demand for milk and milk products

The per capita consumption of milk has increased over the last three years and is currently about 30 litres/year. However, this is still below the World Health Organisation recommended level of 200 litres/person/year. In urban areas, the per capita consumption is higher estimated at 39.0 litres/year while in rural areas its is estimated at 22 litres/year. The World Health Organisation recommends a per capita consumption of 200 litres/year. Table 5 shows the per capita consumption of milk since 1997.

Table 5: Per capita consumption of fluid milk over the last three years

Year	Per capita consumption (litres/person/year)
1997	28.5
1998	29.5
1999	30.0

Source: DDA/Ministry of Agriculture, Animal Industry and Fisheries

The demand for milk in Uganda comes from households, schools, hospitals, catering institutions, food and dairy processing plants. The demand for processed milk is estimated at 385 million litres per year. The demand for milk from processing plants and other consumers is expected to increase. Table 6 shows the production of processed fluid milk since 1994.

Table 6: Production of processed fluid milk (1994 - 1999)

	1994	1995	1996	1997	1998	1999
‘000 litres	138,355	118,005	134,470	137,340	162,025	132,470

Source: DDA /Uganda Bureau of Statistics, 2000 Statistical Abstract.

MILK PRODUCTS

Uganda produces a variety of milk products. A substantial amount of milk and milk products is also imported indicating that the domestic production is not sufficient to meet market demands. Uganda also exports dairy products[3] mainly to the regional market. The exported dairy products are mainly composed of pasteurised and UHT milk. Table 7 shows the dairy products imports and exports by value for the period 1993 to 1999.

Table 7: Import and export of dairy products by Value (‘000 US $) for 1994 - 1999

	1994	1995	1996	1997	1998	1999
Imports (‘000 US $)	2,817	2,657	2,376	1,485	3,285	1,471
Exports (‘000 US $)	239	275	254	476	2,622	163

Source: Uganda Bureau of Statistics, 2000 Statistical Abstract

Pasteurised milk

Production of pasteurised milk is the largest processing activity in the dairy Industry. About 80 per cent of processed milk goes into the production of pasteurised milk. Currently 10 firms are involved in the production of pasteurised milk.

UHT Milk

Until 1995, all the UHT milk in Uganda was imported mainly from Kenya. However, today, three firms in the country produce UHT milk with a combined capacity of an estimated 45 million litres/year. The DCL has a capacity to produce 16.4 million litres per year. The other two firms situated in Mbarara have a combined capacity of about 32 million litres/year.

Cheese

Although cheese is produced, Uganda continues to import this product. The DCL produces 3.0 metric tonnes/year which mainly is Cheddar, Gouda and Maribou cheeses. Other private firms like Paramount Dairies Ltd in Mbarara have exploited the increasing cheese market and started production of cheese mainly Cheddar and Gouda types.

Cream and Ice-cream

A few firms produce cream but this is mainly an input product. The DCL produces substantial amounts of cream which it uses in the production of ice-cream. A few other private dairy processors produce cream for sale on the market.

Many firms in urban areas including multi-national fast food chains produce and market ice-cream. Since the late 1980s, the demand for ice-cream has increased tremendously.

Yoghurt

The yoghurt produced in the country is mainly the set and drinking type. Led by the DCL, the production of yoghurt has continued to increase due to the growing market for this product. In 1999 the DCL produced about 1.3 million litres of yoghurt up from 0.9 million litres in 1994. Since 1995, a number of small and medium scale dairy processors have started producing and marketing yoghurt.

Cultured Milk

Commercial cultured milk is newly developed from indigenous cultured milks. Production and marketing of cultured milk is done by several small scale dairy processors. The market for cultured milk is growing steadily.

Butter and Ghee

A few firms produce salted and unsalted butter. Production is lead by the Dairy Corporation Ltd with a capacity of 1.5 metric tonnes/year. Jesa Dairy Farm Ltd. and other private companies have started producing butter. The butter demand and production is expected to increase.

Ghee is mainly produced by farmers on a small scale for domestic consumption and sale. The DCL produces ghee and its production has increased to 19,560 Kg in 1999 up from 11,350 kg in 1996. A number of small scale dairy processors have started production and sale of ghee. Other firms producing ghee include GBK Daires (U) Ltd. based in Mbarara.

MARKETING STRUCTURE OF DAIRY PRODUCTS

The milk and dairy products market in Uganda has been liberalised since early 1990s. The prices of both raw milk and its products are determined by market forces. This led to free participation of the private sector and increased informal marketing of milk. The new Dairy Industry Act of 1998, however, provides for the processing and marketing standards and regulations for dairy products.

Currently the milk market is mainly in two categories namely: the formal and informal sector. The formal sector markets pasteurised milk and other dairy products. The informal sector mainly markets un-pasteurised milk because the Public Health Act which prohibits its sale is not enforced. The enforcement of the Public Health Act, will begin 2003 and this will prohibit the sale of un-pasteurised milk. This will boost sales of pasteurised milk.

The formal sector distributes and markets dairy products through vendors or direct delivery to groceries, supermarkets, hotels, restaurants, schools and hospitals. Some dairy co-operative societies and agents are also involved in marketing of fluid milk. Individual farmers and/or agents market mainly un-pasteurised milk.

PRICING OF MILK AND MILK PRODUCTS

Currently, the production costs of pasteurised milk ranged between US $ 0.32 and 0.41 per litre[4] while the farm-gate price paid to the farmer ranged between US $ 0.15 and 0.30 per litre. The sales price for pasteurised milk ranges between US $ 0.51 and 0.72. The price fluctuations are seasonal. Thus an investor could make a return on investment of between US $ 0.01 to 0.28 per litre of processed milk. The production cost of yoghurt is about 0.40 to 0.62 per litre. The price of yoghurt is between US $ 1.0 and 1.9 Considering the same price of fresh milk, the returns to yoghurt range from US $ 0.08 to 0.56 per litre.

PASTURES, WATER AND ANIMAL FEEDS

Forage resources in Uganda range from extensive natural grasslands supporting semi-nomadic pastoralism and unfenced communal grazing to perimeter fenced farms with paddocks of natural or planted grasses. Government through its Plan for Modernisation of Agriculture (PMA) will support better pasture development and management practices through introduction and production of better pasture seed. This will improve pasture quality.

Uganda has enough natural water bodies and receives enough rainfall (750 - 2000 mm/year) to cater for its livestock. However, water shortages may occur in some range lands and could be widespread in cases of long droughts. Under the PMA Government will construct more valley dams and tanks country wide.

Feed mills

There are over 55 feed mills in Uganda producing high quality feed. Most of the feed mills are located in the central and eastern regions of Uganda. Farmers around urban areas use concentrates from such mills as feed supplements. Some commercial farmers however, prepare their own feed concentrates to supplement the forage supplies.

SUPPORT SERVICES

The National Agricultural Research Organisation (NARO) is responsible research and development in the livestock sector. Different NARO divisions do research and development in animal health, breeding and nutrition of livestock. The Animal Breeding Centre (ABC) also produces semen and offers artificial insemination (AI) services to private farmers. Veterinary services in the country are now privatised and are easily available.

Man power development and training facilities

Uganda has a well established skilled manpower which is ably participating in the development and shaping of the Dairy Industry. The work force is composed of over 100 professionals in the field of Food/Dairy Science and Technology and over 600 Veterinarians and Animal Scientists.

The main educational and training institutions for the Dairy Industry development are the Veterinary Training Institute, Bukalasa; ABC, Entebbe; and Makerere University’s Faculty of Veterinary Medicine, Department of Food Science and Technology and Department of Animal Science. The institutions offer both long and short professional courses.

INVESTMENT OPPORTUNITIES IN THE DAIRY INDUSTRY

IMMEDIATE OPPORTUNITIES

A Core Investor for the DCL

With the commencement of the Dairy Act of 1998, the Dairy Corporation was incorporated into the Dairy Corporation Ltd (DCL). The DCL is a limited liabilities company which is currently owned 100 per cent by government. Government is re-capitalising this company. Preparations for the privatisation of the DCL are in advanced stages. Soon a core investor will be needed for the DCL and some of its shares will be floated on the Stock Exchange. The DCL currently produces a range of products including pasteurised and UHT milk, butter, ghee, yoghurt, cheese and ice-cream.

The DCL’s other milk processing and cooling plants in various parts of the country will also be divested. All these provide the private sector with immediate opportunities of investment in the dairy industry.

JOINT VENTURES

Small scale and medium processors

A number of existing small and medium scale dairy processors want to expand their operations but are limited by financial capital, equipment, technology and/or expertise. Such firms are interested in joint ventures with other private investors. The firms that are interested include, Umoja Farmers Ltd. Located in Kampala.

Dairy breeding and farming

Dairy farms are another investment opportunity that is not yet fully exploited. Uganda has adequate land for dairy farming and the climatic conditions are favourable to dairy farming. A well established dairy farm would produce milk and also breed in-calf heifers for sale. With the growth registered in the dairy industry, the demand for in-calf heifers is expected to increase. On the domestic market, an in-calf heifer costs not less than US $ 1,000. Currently most of the heifers on sale are imported.

OPPORTUNITIES IN DAIRY SUPPORT SERVICES

Establishment of Dairy Industry support services

With the fast growth registered in the dairy industry, there is need to establish firms that provide dairy related support services. Such services include artificial insemination, farm input supplies and market information. The artificial insemination business alone has grown from 10,000 inseminations in 1994 to 25,000 inseminations in 1999. Such services are currently being provided by individuals whose availability is limited to a few localities.

Establishment of collection centres and distribution facilities

Post-harvest milk losses are still high especially during the peak seasons when production is high. This is due to limited access to milk collection centres (MCCs). While the Mbarara milk shed has a number of MCCs set up by private firms and the DCL, the Kampala-Jinja milk shed still lacks collection facilities. The Kampala-Jinja milk shed includes the districts of Jinja, Kampala, Mukono, Mpigi, Kalangala, Kamuli and Iganga all of which have registered increased milk production.

In addition, substantial amounts of milk spoil in transit. This is due to the containers and mode of transport used which lead to delays and high temperature build up in the milk. Thus, investment opportunities exist in establishing more and better MCCs as well as reliable milk distribution facilities.

OPPORTUNITIES IN MILK PROCESSING

Powdered Milk production

Uganda imports powdered milk which is used in the food industry and for domestic consumption. Annual consumption of powdered milk is currently estimated at 2,700 metric tonnes per year. Powered milk on the Uganda market is priced at US $ 2.8 to 4.0. Processing surplus milk into powdered milk would reduce post-harvest losses and add value to a product for both the domestic and regional market.

The ideal location for the powdered milk plant is the Western milk shed. This location would take advantage of the milk surplus in this production area, largely reduce transport costs for the raw milk and has proximity to the regional market of Rwanda, Burundi, Tanzania and the DR Congo.

Processing of Sweetened-Condensed milk

Sweetened-condensed milk offers a product which has a longer shelf life with out refrigeration and can be easily transported over distances. Refrigeration in Uganda is relatively expensive. Although sweetened-condensed milk is not very popular, it can easily find acceptance on the domestic market if it is well promoted.

Flavoured and UHT Milk

The production of UHT milk has steadily increased since 1995. Three other dairy plants produce UHT milk. The total UHT milk production in the country is currently estimated at over 46 million litres per year. Only the DCL has been producing flavoured UHT milk. The production of flavoured milk by the DCL has shown growth mainly due to the demand from schools and other educational institutions. Although there are three plants producing UHT milk in the country, there remains considerable investment opportunities in this market.

Production of Butter and Ghee

Although it produces butter, Uganda also imports considerable amounts mainly from Kenya, Zimbabwe and Europe. The DCL and some private firms produce butter. The sales price of butter is between US $ 3.6 and 4.4.

Ghee is a popular product on the local market. Although its mainly produced on a small scale by farmers, the DCL and GBK Dairies Ltd. produces and markets considerable amounts of ghee. The current price of ghee is between US $ 1.6 and 2.2.

Cheese production

Few private firms produce cheeses as their principle products. The DCL also produces substantial amounts of cheese. However, Uganda still imports cheese. The market price of cheese is between US $ 6.5 and 8.3. Cheese production provides yet another investment opportunity.

Yoghurt and Cultured milk production

The DCL is the leading yoghurt producing firm. However, other private firms produce and market yoghurt. Yoghurt quality has improved and sales have increased by an estimated 10 per cent since 1997. The number of companies processing yoghurt has increased.

Cultured milk is very popular country wide and its demand is expected to grow. However, its production is by small scale processors and the informal sector. Investment by the formal sector is required in order to exploit this market and develop it further.

Cream and ice-cream

The DCL produces cream which it uses in production of ice-cream. Some private companies produce cream for the open market. Production of cream can be profitable because most of the ice-cream (a product made from cream) is imported to meet the demand for the local market.

The number of firms producing ice-cream has increased in the last six years to over eight in Kampala alone. Although most of the ice-cream producing firms are concentrated around Kampala, there is an untapped market up country.

Small-scale milk processing

Small-scale processing plants in relatively low milk producing areas provide investment opportunities. These areas include the north, north-east and the north-west parts. Such small processing plants would exploit and develop the respective markets in those parts.

UGANDA’S COMPETITIVE ADVANTAGE

Compared to its neighbours, Uganda enjoys the following advantages:

Good natural resource base

· A natural resource base for dairy farming, a favourable climate and good soils in most parts of the country ensure good production of pastures for dairy herds.

· Less pressure on its land. This implies that more land can be available for dairy farming at a relatively lower cost of establishment.

Stable and attractive macro-economic and investment environment

· Macro-economic stability which is characterised by low inflation, stable exchange rates and steady economic growth. These give the investors confidence

· A liberalised economic environment where market forces determine prices. Almost all Uganda’s economic activities are unrestricted.

· Abundant skilled and unskilled labour for cheap production. Labour rates per hour in Uganda are US $ 0.6 compared to 1.1 for Kenya, 0.7 for Zambia and 2.8 for Zimbabwe.

· A package of investment guarantees which insure private investments in Uganda. These include the Multi-lateral Investment Guarantee Agency, Overseas Investment Insurance Scheme and the Overseas Private Investment Corporation to mention a few.

· Strategic location in the heart of sub-Saharan Africa gives Uganda a commanding position as a base for regional trade and investment.

Good infrastructure

· Improved infrastructure. About half of the total national major road network in the country is surfaced (tarmac) which eases transportation. All the other roads are easily motorable.

· Uganda’s telecommunications sector has been fully liberalised which has greatly improved the availability of telecommunication services. There are three cellular phone service providers including MTN, CelTel and TeleCel. The Uganda Telecoms Ltd. provides over 250,000 fixed telephone and fax lines. Private companies including AfricaOnline and Infocom provide Internet and related multimedia services.

· The energy sector has also been liberalised which has improved energy service provision. Hydro-electric power has increased from 180 MW to 260 MW between 1994 and 1999 which has reduced power shortages. Power production is expected to increase with the construction of more generation stations.

Investment Incentives

Investment incentives are covered under the Income Tax Act 1997. These incentives are administered by the Uganda Revenue Authority as part of the taxation system. The investment incentives are indicated in the following tables:

Table 6: Capital Allowances

· Initial allowances on plant and machinery located in Kampala, Entebbe, Namanve, Jinja and Njeru	50%
· Initial allowances on plant and machinery located outside Kampala, Entebbe, Namanve, Jinja and Njeru	75%
· Start up costs spread over the first 4 years	25%
· Scientific research expenditure	100%
· Training expenditure	100%
· mineral exploration expenditure	100%

Table 7. Deductible annual allowances

Depreciable assets specified in 4 classes under declining balance method
Class 1 Computers and data handing equipment	40%
Class 2 Automobiles, construction and earth moving equipment	35%
Class 3 Buses, goods vehicles, tractors trailers, plant & Machinery for farming, Manufacturing and Mining	30%
Class 4 Railroad cars locomotives, vessels, office furniture, fixtures etc.	20%

Table 8. Other annual depreciation allowances

· Industrial buildings, hotels and hospitals	5%
· Farming general farm works (declining balance depreciation)	20%

Uganda has a priority investment areas list. Investments into priority areas indicated in table 9 are accorded additional benefits.

Table 9: Priority Investment Areas

· Crop processing	· Storage
· Education	· Forestry and processing of forest products
· Fish processing	· Steal industry
· Electronics	· Cotton and textiles
· Floriculture	· Edible oil
· Metal and Metal products	· Mining industry
· Construction and building industry	· Ceramics industry
· Energy	· Manufacture of industrial spare-parts
· Tourism industry	· Meat processing
· Manufacture of building materials industry	· Iron and steel
· Transport and communications	· Real estate development industry
· Pharmaceutical industry	· Packaging industry
· Dairy and Dairy products	· Financial services
· High-technology industry	· Health care
	· Fruits and vegetables

Other incentives

In addition to the incentives listed in tables 6-8, Uganda offers the following:

· Import Duty Exemptions. Apply to motor vehicles, personal effects and plant and machinery.

· Duty drawback facilities. Allows exporters to claim taxes on inputs used to manufacture exportable products.

· Corporation tax. With the exception of mining there is a uniform corporation tax rate of 30%, which allows the “carry forward of losses”. Practically, this means, profits are not taxable until, previous years’ losses are fully covered.

Investment protection

· Investment guarantees-Uganda is a member of the Multilateral Investment Guarantee Agency (MIGA) of the World Bank and VAT deferred payment agreements.

· Externalization of funds-Foreign investors are allowed to externalize funds for:

· Loan repayment in a foreign country

· Payment of financial earnings to foreign personnel

· Payment of royalties or fees

· Payment of profits or proceeds on disposal of assets.

· Protection against compulsory acquisition. Compulsory acquisition can only be made in accordance with the Constitution of Uganda. Should compulsory acquisition take place, the investor must be compensated within 12 months from the date of acquisition, based on fair market value of the enterprise .

MARKET AND MARKET POTENTIAL

Uganda itself has a market of about 22 million people. The greater market potential, however, lies within the regional market. The dairy industry in neighbouring countries of Rwanda, Burundi and the DR Congo are not well developed. The export of milk and dairy products to these countries is therefore expected to continue. While Kenya is an important exporter of dairy products to these countries, Uganda has a competitive edge of lower transport and production costs.

Market developments in the region

The establishment of the East African Co-operation (EAC) is complete. This paves the way to the formation of a single market and investment area.

Some developments in the implementation of the EAC Treaty Programmes include, the member states adopting a single customs entry document in 1999. Forty two (42) standards have been harmonised and adopted as East African Standards - three of the adopted East African Standards deal with milk and milk products. The East African Dairy Business Association (EADBA) regional interim committee was formed in 1999. The EADBA seeks to enhance developments and trade in the dairy industry within the region.

Success stories

Uganda’s Dairy Industry has already benefited from the EAEN and other EAC regional programmes. The East African Dairy Business Project was implemented in 1998. Some of the achievements under this project include, the DCL increased its milk sales by 15 per cent through new trade links with Brookside Dairies (Kenya). New packaging for yoghurt was introduced through trade links with Tech-Pack Industries (Kenya) subsequently, package imports from Kenya have increased by 50 per cent implying increased production and sales of yoghurt. Brookside Dairies (Kenya) purchased shares in Western Highland Dairies (Uganda). BUDICO a co-operative society (Uganda) is linking up with a foreign company to set up a UHT milk plant.

PLAYERS IN THE INDUSTRY

Major Feed mills

Name	Location	Capacity (metric tonnes/day)
Maganjo Grain Miller Ltd	Kampala	10
Prisons Feed Mill	Kampala	3
Kwenzi Enterprises	Kabarole	3
Quality Animal Feeds	Kamuli	10
Uganda Feeds (NUVITA)	Jinja	10
Kenana Traders	Bushenyi	4
Liberty Trading Co.	Kampala	5

Dairy processing enterprises

Company	Location	Products	Operational capacity (litres)	Status
Countrytaste (U) Ltd	Mbarara	pasteurised milk, ghee, butter	15,000	Operational
Dairy Bell Ltd	Fortportal	Pasteurised milk, cheese	2,500	Operational
Dairy Corporation Ltd	Kampala, Entebbe, Mbale	Yoghurt, pasteurised milk, UHT milk, ice-cream, butter, ghee, cheese cream	210,000	Operational
GBK Dairy products (U) Ltd	Mbarara	UHT Milk, Pasteurised milk	30,000	Operational
Kaisa Bamulengeyo & Sons Ltd	Jinja	Milk production and processing	5,000	Operational
Masaka United Dairy Farmers Ltd	Masaka	Pasteurised milk and cultured milk	2,500	Operational
Nerika Traders Ltd	Mbarara	Ghee	2,500	Operational
Nshwere Ghee	Kampala	Ghee	4,000	Operational
Paramount Dairies Ltd	Mbarara	Cheese	1,000	Operational
Ramilk Ltd	Mbarara	pasteurised milk	20,000	Suspended operations
Western Highland Creameries Ltd	Mbarara	pasteurised milk, ghee	20,000	Suspended operational
White Nile Diaries (U) Ltd	Jinja	pasteurised milk, ghee, yoghurt	6,000	Operational
Jesa Dairy Farm Ltd	Kampala	pasteurised milk, butter	4,000	Operational
Liberty Dairies Ltd	Entebbe	Cheese	1,000	Operational
Farm Foods Management	Kampala	Yoghurt, cream	2,000	Operational
Anifarm Ltd	Kampala	Yoghurt	1,000	Operational
Umoja Farmers Ltd	Kampala	Yoghurt	1,000	Operational
Mityana Mwera	Mubende	Yoghurt, ghee	3,000	Operational
Negico Yoghurt Ltd	Mbarara	Yoghurt	1,000	Operational

USEFUL CONTACTS

Name	Address	Tel/Fax	E-mail
Uganda Export Promotion Council	Plot 17/19 Jinja Road P O Box 5045 Kampala	Tel: 230233 Fax: 259779	uepc@mukla.gn.apc.org
Uganda National Bureau of Standards	Plot M217 Nakawa Industrial Area P O Box 6329 Kampala	Tel: 222367/9 Fax: 236606
Uganda National Chamber of Commerce and Industry	P O Box 3809 Kampala	Tel: 258791/3 Fax: 258793
Uganda Manufacturer’s Association	Lugogo Show Grounds P O Box 6966 Kampala	Tel: 221034 Fax: 220285
Private Sector Foundation	P O Box 7683 Kampala	Tel: 342163 Fax: 259109	prisf@starcom.co.ug
Privatisation Unit	Ministry of Finance P O Box 10944 Kampala	Fax: 259997
Uganda National Farmers Association	27 Nakasero Road P O Box 6213 Kampala	Tel: 230705/255250 Fax: 230748
National Environment Management Authority	P O Box 22255 Kampala	Tel: 236817	nema@imul.com
Dairy Development Authority	Plot 1 Kimathi Avenue P O Box 34006 Kampala	Tel: 344901/343883 Fax:250270	dda@afsat.com
Uganda Small Scale Industries Association	P O Box 7725 Kampala	Tel: 221785	ussia@starcom.co.ug
Uganda Dairy Industry Stakeholders’ Association	P O Box 29273 Kampala	c/o Tel: 2591134	lol@africaonlone.co.sug

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[1] National Bureau of Statistics and the Dairy Development Authority.

[2] Ministry of Finance & Economic Planning

[3] Uganda Bureau of Statistics, 2000 Statistical Abstract.

[4] Dairy Corporation Ltd.