PM COMMUNICATIONS team interviewed Sebalu & Lule Advocates and Legal Consultants and spoke to Barnabas R. Tumusingize (Managing Partner), Joseph Luswata (Partner), Nicholas Ecimu (Partner), Moses Segawa (Partner) and Gertrude Wamala Karugaba (Partner) about the legal environment and procedures in order to do business in the main sectors of the economy. The Sebalu & Lule partners spoke about the strong reputation and business expertise of the firm, their international affiliations and the key role that they are playing in guiding foreign investors and companies in the country.You know what moves this economy and the means of ease of doing business in Uganda from a legal perspective. Can you give us an overview about the changes in the legal and commercial framework in the last few years, and what do you know that should be known by those foreign investors willing to come to the country?
The investment climate in Uganda has been changing since 1986. Before then, we had some problems with security. From 1986 to 1990 security stabilized, and from 1990 we began seeing the liberalization of the economy, with the opening of the banking sector, the liberalization of the telecom sector (breaking the monopoly and opening up to different providers). There were also changes in the foreign exchange and currency control aspects. Foreign exchange restrictions were removed with the result that local and foreign investors could freely transact and repatriate hard currencies. That was significant because investors were concerned about the ease with which they could bring in and take out money in foreign currency when they wanted. The liberalization allowed investors to take out their money when they wanted to, without restrictions. In the 1990s, the government decided to step out of direct investment, allowing the private sector to take the lead by developing appropriate policies and passing good laws. The government decided to reform and divest out of key areas such as oil marketing, hospitality and leisure, banking, mining and manufacturing and set up a privatization unit to oversee the divestiture activities. In the electricity sub-sector, for instance, government created three entities for power generation, transmission and distribution. Many regulatory bodies were formed such as the Electricity Regulatory Authority, for the electricity sub-sector and the Uganda Communications Commission for the ICT sector. We also saw the government taking the lead in the creation of a better investment climate, which began in 1991 with the enactment of the Investment Code Act and the establishment of the Uganda Investment Authority (UIA). UIA was tasked to promote, facilitate and supervise investments in Uganda, amongst other things, through licensing investors and assisting potential investors in identifying and establishing investment projects in Uganda. The UIA is proposed to become a one stop center where an investor gets everything needed to start business in Uganda. In about two years, that should be fully functional and there is a lot of effort in ensuring that happens. The government is focused on reducing bureaucracy and the time it takes to begin business. Bureaucracy has been a problem in the country.
The liberalization of the banking sector has seen the number of players grow from under 10 to over 25. Banks are now able to finance $100 million projects. That was not possible then, and it was made possible because of the opening up of the banking sector. Following the collapse of some banks in the 1990s, regulatory oversight in the banking sector has been enhanced and the capital requirements are reviewed by the Central Bank from time to time. There’s also been a proliferation of micro-finance institutions (some of which are regulated by the Central Bank) and other unregulated credit providers. The insurance sector now has more players (including foreign ones) although the penetration is still very low.
We have also seen reforms in lands, which are key for investment in the country. Investors are able to incorporate companies and acquire and transfer land. One of the major security forms for secured lending in the country is land. Many banks take it as security. There were problems in the land register, but it was computerized to make registration as easy and reliable as possible. There are teething problems but good progress is expected within the next 12-18 months.
Another area that was relevant to investors was the ease of resolution of commercial disputes. The government reacted in 1996 by setting up a special division in the high court, called the commercial court, which adopted good practices including mediation and arbitration, and which performs really well despite major constraints. A law to support alternative dispute resolution through arbitration and conciliation was also enacted in 2000.
There have been improvements in infrastructure, like in the road network. More roads have been tarmacked. That helps in the transportation of goods from the rural areas, and also the movement of people. There are also efforts to generate more power, which is critical for industrial development, the latest to come on grid being Bujagali. Karuma and Isimba power projects are underway. Some years ago, there were areas without power but connectivity has improved greatly with over 50,000 new connections annually.
The latest major legislation relates to oil and gas production, the regulation of public-private partnerships (PPP) and anti-money laundering.
The communications area has also been liberalized and has seen the proliferation of broadcasting, telecommunications, print media and other players in the communications industry. There are several mobile network operators, televisions and radio stations and publishing houses in the market compared to the 1990s when the area was just getting opened up.Is Ugandan Land Commission in charge of Land in the country? Can you elaborate on what the East African Community represents in terms of business trade and its potential?
Uganda Land Commission manages government land mainly. They can also find land for private investors, so it is a key institution for investment.
In order to increase markets, there have been many interventions including the joining of major trading blocs like the Common Market for Eastern and Southern Africa (COMESA) and the East African Community that recently adopted the Customs Union of the East African Community. First, under the Customs Union, the member countries are supposed to harmonize the laws on labor, remove restrictions on labor movement, adopt common tariffs and remove non-tariff barriers. It also increases cooperation and the market for locally produced products. We expect it to enhance and encourage specialization. In that area, Uganda has an advantage in agriculture, because of the very good climate, and tourism, which requires promotion. This law firm was established before the arrival of democracy, so you have been evolving as the market evolved. The capable agents of the economy are the private investors and companies. How has this institution contributed to the developing of friendly policies to attract investment throughout this period? You can also act as a lobby to push for that.
We are proud to have been here for 34 years and have grown immensely during that period not just in client and employee numbers but in our influence as a key stakeholder. We have supported and grown with a lot of private sector investors, many of whom we have assisted in setting up business in Uganda. We advise almost all the large banks (foreign and local) in the country. A lot of companies coming to the country benefit from our services across all our sector groups and practice areas. We regularly advise foreign and local investors interested in oil and gas, energy, mining, infrastructure, financial services and other areas. We have also trained a lot of lawyers as a firm. There are a lot of people who come to this firm and then go to work in critical sectors. Others come here, go work somewhere else, and then return to the firm. Two of our partners left to work elsewhere and returned. One was with the Ministry of Finance (within the privatization unit), driving railway and electricity projects, and directly engaged in the reform and divestiture of several government owned enterprises. The other partner worked with the largest bank in Uganda and was actively engaged in capital raising, capital markets and project and other financing activities. We support a lot of other sectors including manufacturing, insurance and real estate.
We try to make sure that investors coming to the country find an environment that is conducive to them doing what they are supposed to do. We have positioned ourselves as people who can be asked to participate in legislative and policy reform. When unfriendly legislation is proposed, we support our clients to put industry and individual positions across including making formal submissions to legislators, or (where appropriate) having critical conversations with key decision makers. Those things work for our clients.
Uganda had to reform its labor code 8 years ago, to align it with the International Labor Organization’s standards. As an investment destination, we have progressive legislation that protects worker’s rights. Some critics say the legislation is stringent to employers, but comparatively to other southern African countries, we rank high in terms of flexibility of our labor code. A regulatory framework has been put in place with regard to the retirement benefits sector, allowing the private sector to come in, and participate in the investment and management of those savings. This is an ongoing process, and we have been a part of it, intimately, supporting the government and clients. Our firm boasts of having the premier employment and pensions law practice in Uganda covering general labor matters and immigration.
We also need to talk about the energy and the mining. The mining sector is getting reorganized, and we feel positioned to be the go to firm in terms of serious mining work. We have trained the civil service here, and did an organized training for the Ministry of Energy and the Minerals Department together with other law firms and the banking sector. There is mining, but how do you access finance? How do you structure your business to attract FDI? We did that training last year, and we also encouraged people not to sit on their mining licenses, but also attract others to work with them and go into production stages.
We have been very instrumental in the development of capital markets in Uganda by supporting the reform of the capital market and advising market players (both issuers and intermediaries). Right now, a lot of changes are taking place in terms of legislation (by way of directives) with the East African Community. They came out with directives, and we have been very active in supporting the process of reform. We represent the three largest listed companies locally, which give us access to a cross sector point of view. We represent them in terms of their listing requirements. We are recognized as an important stakeholder by the Capital Markets Authority, and we are usually co-opted in their engagements. A few people have been selected to drive the capital markets growth agenda forward, and we are part of that forum.
There are several international investors who come to this country without knowledge of local laws, practices and other peculiarities. We play a key role in advising them on how to set up in the country and comply with regulatory frameworks in key sectors. Having operated in this market for 34 years, we are very aware of the peculiarities of operating in this market and how such issues can be resolved in order for the investor to run his or her business successfully.
In the early days, also, we were known for standing up against laws that we didn’t think met the constitutional requirements. We have done a couple of groundbreaking cases that have shaped the laws of Uganda in a positive way.You have international and national clients. We can use your portfolio of clients as a thermometer of the investment climate. When they demand your services, which sectors are the most frequent?
The most frequent sectors are mining, banking and finance, energy (power and oil and gas), transport and infrastructure. We represent power generators (including IPP) and distributors.People don’t know much about Uganda. When you think of tourism, you look at Kenya. There are also untapped opportunities in the mining sector. You have this special partnership with DLA Piper, one of the sponsors of the Global Africa Investment Summit. In which area has this partnership helped you develop, and how are you helping them?
There are several aspects in which the arrangement helps. First of all, there are firms in Africa and around the world, so, from a cross border perspective we have sufficient coverage for our clients with cross border operations. In the event that there is work that needs to be done in one of those countries, there is a law firm that I can call right away. If one of the DLA firms or their clients needs to do something in Uganda, they call us. That is beneficial for the firms, and they get work they wouldn’t get before the arrangement.
There is also knowledge management based on experience in critical sectors. Information flows quite quickly between the member and affiliate firms. That is critical. The partnership enables our lawyers to acquire knowledge they would not be able to acquire locally.
Increasingly, there are lots of businesses in the West looking at Africa. It is easy for them to walk into the London office and ask for help. They will be directed to us to advise and support their requirements.
When they come here, they get the same quality of service they’d get there. We make sure everybody is operating at the highest level. They don’t have to fly lawyers to Africa to get their work done. It turns out cheaper for investors, and it takes less time as we on the ground know how things are done locally. The people who have benefited the most are certainly the clients. We have got mandates in banking and finance and intellectual property from the DLA relationship.
Aside from the technical competence, in terms of best-practices we found that the DLA group has come with a risk management framework, and we are looking at different aspects that are going to benefit all of us in the Africa Group. If I was an investor, in addition to the technical knowledge, I would like to be sure that the partner firm in Uganda espouses the same values around aspects like anti-bribery and anti-corruption that DLA Piper has.
Another aspect is training. Every year we rotate training programs within the East African countries, and focus on one key area. We get specialist lawyers from London or Dubai who come and train the lawyers in specific topics of interest for all of us. If we have a project in Uganda, and we feel we need certain competences, we are able to draw on the resources from any of the other DLA group firms. How many employees do you have and what is your market share?
We have 20 lawyers of which 6 are partners. Some of our lawyers are people we trained and sent to our clients on secondment. In house, we have 20 lawyers, and about 19 support staff. The outlook for us is about 40-50 lawyers in the next three to five years.
Although no market share statistics are available, we are a leading law firm in the country and have consistently been ranked as such by Chambers and Partners. We want to have the leading lawyer in every relevant sector. We have the leading employment, banking, energy, corporate, tax and dispute resolution lawyers in the firm. We try to be the best in our respective fields. When you develop a trade, the market respects you.
We have also aligned ourselves with the key sectors driving the economy and try to develop competences as the market is evolving in order to remain relevant as a firm.How do you perceive your presence in the Global Africa Investment Summit in London is going to be beneficial for the firm?
Because of our technical depth and practice experience in the summit focus areas and this market, we are best placed to support investors looking to successfully operate in Uganda. We are ready and open for business. It is a great opportunity for us to walk away with many significant prospects of work with serious investors. We recently had engagements with large private equity funds, and we expect those who are there to come and work with us.
That summit is the gateway into the international sphere. Anyone should be there to get known. I would like to finish this interview speaking about the values of Sebalu & Lule as the main entrance for investors to Uganda’s market place. At the end you are the eyes of those investors that want to navigate in this economy.
We like sharing ideas with serious investors. Our knowledge and expertise has allowed us to build up a reputation in Uganda and beyond. We want to help investors to navigate this economy and create long-term relations using our knowledge base that will be beneficial for all.
To us, this is a very good opportunity. This promotion is very critical. I was once in a lounge in Dubai reading a magazine with an advert about tourism in Kenya, and nothing about Uganda! People promoting the country are not doing enough. We hope more and more people know about Uganda. Thank you very much for your comments.