Business 26 August 2026 Daily Monitor (Uganda)
Tax Uncertainty and VAT Delays Hamper Ugandan Manufacturers' Financing
Ugandan manufacturers are facing escalating financing challenges due to tax uncertainties, delayed Value Added Tax (VAT) refunds, and customs costs, compounding existing issues like high borrowing rates and stringent collateral demands. Source: https://www.monitor.co.ug/uganda/business/markets/tax-uncertainty-emerges-as-fresh-hurdle-for-manufacturers--5572176
Manufacturers in Uganda are grappling with a worsening financial landscape, primarily driven by unpredictability in tax policies and significant delays in Value Added Tax (VAT) refunds. These issues, coupled with escalating customs costs, are placing immense pressure on businesses seeking capital for crucial investments.
The problems are not new; expensive credit, short repayment terms, and substantial collateral demands have long stifled industrial expansion and the adoption of new technologies. A recent report by Ernst & Young (EY) highlights that the financing dilemma extends beyond mere capital availability, encompassing factors like tax compliance, readiness for investment, cash-flow stability, policy clarity, and corporate governance maturity.
These challenges arise at a critical juncture for the manufacturing sector, which contributes a significant portion to Uganda’s Gross Domestic Product (GDP). Manufacturers require patient, flexible, and production-linked capital, yet the market predominantly offers high-cost loans with short tenors, ill-suited to the multi-year gestation periods of machinery and plant investments.
Tax-related burdens are particularly concerning. Delayed VAT refunds tie up working capital, while import duties and other customs charges can erode the viability of planned projects. Furthermore, a lack of clear awareness or certainty regarding available tax incentives for investment, exports, or green production adds another layer of risk, making it difficult for manufacturers to secure lender confidence.
EY characterizes the situation as a “capital and confidence gap,” where inherent weaknesses in governance, internal controls, and financial reporting make businesses appear riskier to financial institutions. Addressing this requires a multi-pronged approach involving government, banks, and manufacturers themselves to foster policy certainty, develop tailored financial products, and strengthen internal operational controls.