Report: businesses struggling as taxes, politics tighten the noose

Uganda’s business environment showed a bit of a lift in the final months of 2024—but behind the small improvements, many businesses are still struggling to survive.

A new report by the Economic Policy Research Centre (EPRC) reveals that while confidence is slowly returning, challenges like high taxes, low demand, weak manufacturing, and growing political tensions are weighing the economy down.

The EPRC’s Business Climate Index, a measure of how businesses feel about the economy, rose slightly from 87 to 91 points in the last quarter of 2024. That’s better than before—but still well below the 100 mark that would signal a stable and confident business environment.

“This improvement was mostly seasonal,” the report explains, noting that the end-of-year holidays helped boost sales and activity, especially in the services sector. But as the report warns, this recovery is fragile.

SERVICES SECTOR GROWS, MANUFACTURING CRASHES

For the service industry—things like banking, hospitality and tourism—saw the biggest improvement, jumping almost 15 points.

This was helped by a small interest rate cut from the Bank of Uganda in October, which made borrowing a bit easier and encouraged spending. But it wasn’t good news across the board.

Uganda’s manufacturing sector had a tough quarter. Business confidence dropped by nine points to 77, the lowest since mid-2022. Manufacturers faced lower demand, falling product prices, and rising costs.

On top of that, the shilling weakened slightly against the dollar, making imported raw materials more expensive. One business owner in Jinja said, “Even when you make a good product, the cost to keep the business running keeps rising—and buyers just don’t have money.”

FARMERS HOLD THEIR GROUND

Agriculture, which employs many millions of Ugandans, saw a modest improvement thanks to the planting season and lower input prices, according to the report. Although the growth wasn’t huge, the sector showed stability—which is good news in a country where most people depend on farming. One of the loudest complaints from businesses is about taxes.

A new 10 percent withholding tax on commissions introduced in July 2024 hit many small businesses hard, especially those working with mobile money and payment agents. On top of that, unclear tax rules, multiple overlapping taxes, and complex compliance procedures have left many entrepreneurs frustrated, the report found.

“Instead of helping us grow, the system feels like it’s designed to punish us,” said a small business owner in Kampala.

DEEP-ROOTED PROBLEMS

The report also highlights long-standing structural issues that continue to drag the economy down. These include unfair competition from informal businesses and cheap imported products, lack of support for small and medium-sized enterprises (SMEs), and weak enforcement of quality standards.

These problems discourage formal business growth and reduce investment, especially from local entrepreneurs who already face many hurdles.

POLITICAL SEASON RAISES NEW FEARS

With Uganda’s 2026 elections drawing closer, political uncertainty is already starting to affect business confidence. Around 40 percent of businesses surveyed said they expect disruptions in the months ahead.

Some worry about possible insecurity, while others fear reduced consumer spending or government overspending causing inflation. Sectors like tourism are particularly concerned, with some already reporting cancelled bookings.

LOOKING AHEAD: CAUTIOUS OPTIMISM

Despite the challenges, businesses expect things to get a little better in 2025. The EPRC predicts the Business Climate Index could rise to 93.5, helped by lower input costs, school reopenings, and increased demand.

Agriculture is expected to perform best, possibly reaching 105 points. Manufacturing might improve slightly to 85, while services could continue their slow upward trend. But these gains are far from guaranteed.

WHAT NEEDS TO CHANGE?

The EPRC says urgent reforms are needed to keep the economy on track. These include: Simplifying tax procedures and reducing unfair tax burdens,

• Supporting small businesses with better financing and training,

• Protecting formal businesses from illegal competition,

• Preparing the economy for potential political shocks as elections near.

“The government needs to listen to what businesses are saying,” one trader in Mbale told us. “We’re ready to grow, but we need a better environment.”

WHY THIS MATTERS

Behind all the numbers are real people—entrepreneurs trying to keep their businesses running, farmers hoping for fair prices, and workers trying to hold onto their jobs.

The business climate doesn’t just affect profit margins—it affects how families put food on the table, how youth find jobs, and how the country grows. Uganda has the potential for strong, inclusive growth.

But that will only happen if reforms are made in time, and if leaders prioritize the needs of real businesses over short-term politics.

As one youth entrepreneur put it: “We don’t need handouts. We need clear rules, fair taxes, and a system that believes in us.”

If the government delivers on that promise, then 2025 might just be the turning point Uganda’s economy has been waiting for.