From The Times November 26, 2007

From muddy track to ‘African Bangalore’
Kakungulu Satellite City is rising on a hillside with dreams of harnessing the brainpower of Ugandan graduatesDavid Byers in Kampala Recommend? At first glance, Kakungulu, with its handful of half-built houses on a hillside dirt track, looks like a typical East African town. Looks, however, can be deceiving. It is, in fact, the front line in a battle to establish Uganda as the information technology hub of Africa.

On the green, thousand-acre hillside between Kampala and Entebbe in south-central Uganda, builders have started work on a new city that, according to its chief funder, will turn the country into the continent’s answer to Bangalore, India’s IT hub.

Designed to comprise a vast IT park, a stadium, a hospital, an extensive housing development and a hotel and golf course, Kakungulu Satellite City is being primed to employ a huge pool of Ugandan graduates in outsourced Western-style call centres. In five years its backers expect it to generate up to £97 million annually, almost 20 per cent of the total of the country’s yearly exports.

Its location is no accident. Commonwealth statistics suggest that Uganda generates more graduates per capita than any other country in the world. Its literacy rate is 74 per cent – considerably better than the estimated 60 per cent found in India. In addition, the vast majority of the urban population speaks English and Uganda is regarded as one of the more politically stable countries in Africa.

“All these BA and MA graduates from Uganda are doing all kinds of jobs, but they’re not utilising the skills they learnt at university – some are even working as security guards in Iraq. The jobs in Uganda are just not there at the moment,” Vijay Kumar, the director of the projects and finance division of the Commonwealth Business Council (CBC), which is funding the project, said.

With the skill levels high and opportunity levels low, Uganda has been earmarked by some business chiefs as an economic boom waiting to happen.

“The country has a highly literate population, a knowledgeable and skilled workforce,” Mohan Kaul, the director-general of the CBC, said. “It is obvious that we can use the knowledge and skill base available, like in India, and turn Uganda into the Bangalore of Africa.”

If British customers ringing call centres are accustomed to being greeted by Indian accents on the telephone, some people believe that they may soon be hearing Ugandan ones instead. Kakungulu Satellite City will have offshore development centres, call centres, back-office facilities, data processing centres and data centres, all of which will be much cheaper for multinational firms to run than those in Britain.

According to Prakesh Sundaram, the city’s project manager, it will undercut even India, which is growing increasingly expensive as it becomes a high-demand location and its workforce is being paid higher wages. He said: “India is now not as attractive as it once was, so we think Uganda may soon take over as the leading place to outsource your business.”

World attention was on Uganda last week when the country played host to the Commonwealth Heads of Government Meeting (Chogm), with the Queen and Gordon Brown among the heads of state and political leaders gathering in Kampala. The city was spruced up for the visit of a monarch who was last there in 1954 and Chogm was seen as an opportunity for Uganda to sell itself to the world.

Support may not have been universal – there were demonstrations from political opponents of President Museveni, complaining of infringements to civil rights and demanding sanctions against the country – but Mr Museveni has been widely credited for leading Uganda away from the legacy left over from the troubled days of the 1970s, when the country languished under the regime of Idi Amin. Then the country was largely cut off from the international community by a government that undertook the persecution of minority groups, leading to hundreds of thousands of deaths and a sharp economic decline; now, a stable Uganda is attracting inward investment. The potential of Kakungulu Satellite City could, its backers argue, usher in a bright new era for a country that Winston Churchill dubbed the “Pearl of Africa”.

CBC officials, who are unveiling their plans for the city at a conference in Kampala this week, hope that its development may encourage the citizens of African states that are beset by economic crises, such as Zimbabwe under Robert Mugabe, to take heart that revival is possible.

Mr Sundaram said: “Instead of just throwing money at the situation, like some NGOs and charities do, this development will make a much bigger contribution by actually equipping Ugandan graduates with jobs to improve their lives. We believe it is the start of great things for Uganda.”

Uganda is an African success story



Uganda is an African success story. After the madness of the Idi Amin and Milton Obote years, in 1986 President Yoweri Kaguta Museveni was elected and led the country to economic liberalization and development, with almost two decades of unbroken growth.

Uganda is perhaps Africa's friendliest country, and the warmth and hospitality of the locals often amazes visitors. Kampala's expatriate areas remain uncrowded, peaceful and pleasant despite the rapid expansion of the city.

The two decades of unbroken growth has led to an increase in the number of expatriates. The development of new residential areas within the outskirts of Kampala has increased the housing supply. The luxury housing sales market is dominated by investor-landlords intending to let to foreigners. The expatriate market can be broadly divided into two, according to Knight Frank, the old areas and the new.

The old areas have been established expatriate housing areas for more than a decade. These areas are within the city centre. They are generally more expensive. The new areas are on the outskirts of the city. They usually have better views, and are less expensive.

The 1996 Constitution grants land ownership rights solely to citizens of Uganda. Foreign nationals and corporations may, however, obtain leases for 49 or 99 years.




RENTAL YIELDSLast Updated: Dec 07, 2005



Yields are high in Kampala


The increase in supply and development and the refurbishing of existing supply is exerting downward pressure on rents, but yields are still quite high at around 8.6% to 10%.

Rents are around US$6 to US$8 per square metre (sq. m) per month (around Ugandan Shilling (UGS) 11,635 to UGS14,300). So the rent for a 200 sq. m. property would be around UGS2.5 million (US$1,358) per month.

Selling prices very widely from between UGS1.5 million and UGS10 million (US$815 to US$5,432) per sq. m.

There are no serious issues of security, power or water supply in the established expatriate areas, but it always helps to have a back-up generator.


Read Rental Yields »




TAXES AND COSTSLast Updated: May 15, 2009



Rental income tax is moderate in Uganda


Rental Income: Rental income is taxed separately from other income. Gross rental income earned by non-residents is taxed at a flat rate of 15%.


Effective Tax Rate on Rental Income
Monthly Income €1,500 €6,000 €12,000
Tax Rate 15% 15% 15%
Click here to see a worked example
Source:
Shonubi Musoke & Co.
Disclaimer





Capital Gains: Capital gains realized by non-residents are taxed at the standard progressive income tax rates.

Effective Tax Rate on Capital Gains
Property Value US$2,500,000 US$20,000,000
Tax Rate 26.7% 26.8%
Click here to see a worked example

Source:
Shonubi Musoke & Co.
Disclaimer




Inheritance: No inheritance or gift tax is levied in Uganda.



Residents: Residents of Uganda are taxed on their worldwide income at progressive rates, up to 30%.



Read Taxes and Costs »




BUYING GUIDELast Updated: Aug 03, 2006



Uganda's total transaction costs are moderate


The round-trip transaction cost. i.e. the total cost of buying and selling a property, is around 7.5% to 12.7%. The biggest cost is the real estate agent's commission, at 5% to 10%. Most fees are fixed, and paid by the buyer.

Real estate transactions are typically quoted and concluded in Ugandan Shillings.


Read Buying Guide »




LANDLORD AND TENANTLast Updated: Jul 19, 2006



Large advance rent payments are normal in Uganda


Rental market practice is pro-landlord.

Rent: Rents and rent adjustments can be freely negotiated. Rents are paid three months to one year in advance, with subsequent rents paid quarterly, in advance. However, as the market becomes more of a tenant's market, one year advance payments are becoming less popular.

Tenant Security: There are no specific tenant protection laws, and it is relatively easy to evict tenants.


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ECONOMIC GROWTHLast Updated: Sep 12, 2006



Unparalleled 20 years of growth


Uganda is a major safari destination with a large primate and bird population and a diverse landscape, dense jungles, and white-water rafting on the Nile. Tourists can also relax on the shores of Lake Victoria - the second largest body of fresh water in the world.

In the years following independence in 1962, Uganda experienced dictatorship and military rule. Most notably, Idi Amin rose to power in 1971 and imposed a reign of terror. His incompetence ruined the economy and he expelled about 50,000 Asians. From 1970 to 1980, government-initiated violence killed about half a million people.


Museveni's enormous achievement has been to put all that behind Uganda. From 1995 to 2005, the average annual GDP growth was 6.4%. Inflation was down to 8.2% in 2005 from a peak of 240% in 1987.

Crime levels are low, but it is advisable to avoid the northern region, where there is fighting between the Lord's Resistance Army (LRA) and government troops.

Though GDP per capita rose 76% in real terms between 1986 and 1995, poverty remains a serious problem, and 72% of the population live below the poverty line.