On Wednesday May 21st 2020, Members of Parliament (MPs) overwhelmingly passed the National Local Content Bill, 2019 with overwhelming support from both sides of the aisle. The bill is a brainchild of Hon. Patrick Nsamba the Member of Parliament, Kasanda North Constituency, Kasanda District. Tabled on January 30th 2019, the bill aims to impose local content obligations on companies or individuals using public money; working on a public license; issued a public works contract and utilizing Uganda natural resources, to give priority to Ugandan companies and Ugandans in their procurements.
The bill is a stitch in time. Prior to it, Uganda had no general local content law. The oil and gas sector is the one that has specific laws to address local content. The National Local Content Bill, 2019 ensures all other sectors of the economy are covered. The areas include energy, mining, tourism, investment licenses, Public Private Partnerships, public works, subcontracts and projects implemented through borrowed money. In public procurement, the Public Procurement and Disposol of Public Assets Act, 2003 does provide for some reservation schemes and guidelines on local content, however these, according to the Bill were not enough since the scope was limited and not legally binding. The Bill doesn’t apply to the oil and gas sector because there are already laws made to cater for that sector.
Uganda has been seeking to improve import substitution policy and localisation as one of the drivers. The Bill operationalizes the “Buy Uganda Build Uganda (BUBU) Policy” which seeks to increase consumption and utilization of local products and increasing participation of the locally established firms in domestic trade. According to the Speaker of Parliament, Rebecca Kadaga, the Bill sets Uganda on a path to import substitution. Import substitution has been a pet subject for President Museveni and emphasis of this has been visible during the Covid19 lockdown.
The bill will become law once assented to by the president- and all signs show he will assent to it.
In our views these are the 14 key things that we think you ought to know about the bill, so you are not caught on the wrong side of it.
- The Bill in its definitions indicates that local content refers to: locally produced goods; locally provided services; and the utilization of personnel, financing, goods and services by a local entity in any operation or activity carried out in Uganda.
- The bill goes further to breakdown a local content entity as Government- including a government Ministry, Department, Authority, local government, Local Authority, statutory body or agency; natural or artificial person; a partnership or any other entity; and an individual or entity contracted or subcontracted by a local content entity.
- The bill defines a Ugandan Company as a company incorporated under the laws of Uganda, which is wholly owned and controlled by citizens of Uganda. Ugandan entity means a Ugandan company or resident company.
- Just like in the Oil and Gas sector where there is The Petroleum Authority of Uganda to enforce local content, the National Local Content Bill 2019 provides for the formation of a department within the Ministry of Finance, Planning, and Economic Development tasked with the responsibility to implement the bill. The department is given at least 14 responsibilities that can are broken up into four functions: planning, implementing, monitoring and promoting local content. The choice of the Ministry of Finance, Planning and Economic Development is its ability to coordinate other ministries and agencies within the government.
- The Bill also goes beyond the scope of procurement and delves into investment licenses, Public-Private Partnerships, tax-exempt companies or individuals and projects implemented through public borrowing. This allays the fears Ugandans have always had that for some infrastructure projects the government has borrowed money for, there are no deliberate local content interventions.
- In building up local content in the supply chain, local entities must be given priority to supply goods and services. According to the Bill, in rejecting Ugandan goods, an entity must prove that a local entity did not have the quality, quantity and timely delivery. In order to procure another entity other than a Ugandan one to supply goods, the procuring entity must write to the department responsible for local content and seek permission to be exempt. The bill explains the three categories – price, quality, quantity and timely delivery.
- The Minister is required to publish a list of goods readily available on the Ugandan market sold by locally registered companies. This has been done to ensure that there is no excuse for companies to claim that certain goods are not available on the local domestic market. The interpretation of this is two-pronged. It can be locally produced goods that are a substitute for imported goods or goods supplied by an entity registered in Uganda.
- The Bill also imposes restrictions on the employment of non-Ugandans. It notes that a non-Ugandan can be employed in the instance where there is no Ugandan citizen to do the role. Companies must also submit a succession plan to the local content department. Companies are also required to train Ugandans with those in public works being set a minimum.
- For public contracts, the Bill states that there will be specifically reserved works for local companies. These reserved works will be listed in consultation with the Public Procurement and Public Assets agency. According to the Bill, at least 40% of subcontracts should go to local entities/persons.
- In order to ensure that there is movement in one direction, the local content Department will develop a National Local Content Plan and Strategy which the Minister of Finance, Planning and Economic Development will review and have that gazetted. Each entity seeking a contract or license has to also develop a local content plan and submit it to the department for approval. It is an offence to deviate from the plan once the department approves it.
- The Bill requires that in procurement planning, the procuring entity must clearly state the local content obligations and minimum requirements as criteria during the evaluation process. This puts local content at the forefront before awarding of a contract. The local content evaluation will take place before a bidder can proceed to the next round. The higher the local content, the higher the score in the evaluation process.
- With loans acquired for public works, a contract must have a local content plan, should commit to giving at least no less than 40% of subcontracts to Ugandan companies. Additionally, in order to be consistent with the Investment Code, companies must hire 60% locals for skilled labour and 100% locals for unskilled labour. The Bill intends to drive up job creation for Ugandans and also building up their skills. Companies will be required to train Ugandans which in part enables both skills and technology transfer.
- In order to ensure that there is a pool of local companies and individuals, the bill recommends that the local content department set up a National Supplier Database for every sector in the economy. The database would include both suppliers of goods and services. The department must publish the database by 31st December of each year. The local content department will be responsible for publishing and updating this database but local entities have the responsibility to submit their information. The Bill also categorizes Ugandan entities and citizens and how they should appear in the national supplier database.
- The Bill also further prescribes punishments for an entity or individual that fails to adhere to the local content provisions. One can face a jail term of up to three years or face a fine of three hundred currency points (UGX6,000,000). Entities can also be blacklisted, fined or suspended for failing to comply with directives of the local content department.
