THE CASE OF UGANDA

1. Competition Policy, Private Sector Development and Poverty Reduction in Africa- An International Conference "Capacity Building on Competition Policy in Select Countries of Eastern and Southern Africa (7Up3 Project)" Presented by Shaban R. Sserunkuma 29-30, March 2007, Mauritius THE CASE OF UGANDA Organised by Consumer Unity and Trust Society (CUTS) International Co-hosted by Ministry of Industry, Small & Medium Enterprises, Commerce & Cooperatives, Government of Mauritius

2. Road map • Overview • Key socio-economic indicators • Background • Policy and institutional context • Competition Law • History & status quo • Objectives, scope & coverage • Other issues • Sectoral approaches • Competition perception survey findings • Conclusions

3. Sights of Uganda

4. Overview • The market economy is still in its infancy, characterised by inexistence of enabling frameworks or the existence of inadequate and/, or archaic policies and laws (Cases: SOG, Consumer protection, food safety, IP etc). • The emergence of competition in the marketplace has largely been as a result of government direct involvement intervention (import substitution, etc. ). • There is market concentration in several sectors of the economy, particularly in financial services (insurance), manufacturing (mainly food processing) and beverages among others. • A monopolistic competitive dispensation prevails in several sectors, i.e. very many buyers, many sellers, minimum difference in nature of products and number of barriers to entry or exit.

5. Key socio-economic indicators

8. Background • Uganda’s economy until very recently has been highly regulated. • The majority of firms in Uganda are small family controlled entities, making the need for an enforceable competition regime hard to implement • Involvement of the state in business still exists to some extent (telecom, power, milk processing, etc). • Policy options that hurt competition like ill-enforced public procurement and selective and inequitable provision of subsidies to some businesses and industry • Multinationals are making in-roads into the major production sectors of the economy as well as provision of basic services • One can hardly speak of an institutional framework, rather of a series of sectoral arrangements • Competition has been dealt with usually in the context of other legislations and not directly

9. Policy and institutional context • Development policy: Poverty Eradication Action Plan (PEAP) • Industrial Policy • Trade policy • Regulatory Policy • Investment policy • Government procurement policy • Labour policy • SMEs Policy • Consumer Policy

10. COMPETITION LAW • Uganda neither has a law nor a policy on competition regulation • Today we have a draft law in place, to be known as the Competition Act, and it seeks to: • create, encourage and protect competition; • encourage investments; • strengthen the efficiency of production and distribution of goods and services, and; • protect and promote social welfare of consumers in Uganda.

11. History and Status quo • Government’s unwritten policy has been to wind down both access and economic regulations as and when competition becomes sufficiently strong • Sector regulatory bodies are largely instituted to perform their traditional ‘policing’ roles in a bid to persuade the private sector, i.e. prospective investors, that the government was committed to making the transition. • Divestiture of tens of formerly state-owned enterprises, some with immense powers in the marketplace and therefore a threat to smaller competitors as well as consumer welfare.

12. Objectives, scope and coverage In addition to dealing with structural, stranded cost and universal service issues, five other broad areas have been given attention: • Competition protection - controlling anti-competitive conduct and mergers; • Access regulation - ensuring non-discriminatory access to necessary inputs, e.g. network infrastructures; • Economic regulation - adopting cost-based measures to control monopoly pricing; • Technical regulation - setting and monitoring standards so as to assure compatibility and to address set concerns, e.g. environmental protection concerns. • Consumer Protection – Setting and monitoring standards and benchmarks against which consumers would be protected.

13. Objectives, scope and coverage cont’d • Fostering and sustaining competition in the Ugandan market; • Protect consumer interests; • Safeguarding the freedom of economic action of various market participants; • To prevent practices which limit access to markets or otherwise unduly restrain competition, affecting domestic or international trade or economic development and to establish regulatory body, the Uganda Competition Commission.;

14. Objectives, scope and coverage cont’d • Horizontal restraints • Vertical restraints • Dominant market position • Mergers and acquisitions (M&As) • Cross-boarder abuses Other Characteristics • No civil court to entertain business before the commission including High court? • Establishment of competition fund

15. Other issues Regional integration and competition policy/law • Comesa Competition policy and law • EAC Competition policy/ Law Consumer protection policy/ Law • Gives a broad set of options for defence, promotion, enforcement of consumer rights including individual, collective, mediation, negotiation, arbitration or litigation.

16. SECTORAL APPROACHES Deregulation to check anti-competitive activities and actions of unethical firms and persons that could be injurious to the economy Utilities: Communications Sector • The passage of the Communications Act 1997 and subsequently, unbundling of State monopoly UP&TC led to major changes: • 2 Network Operators (MTN, UTL) • One service provider (Celtel Uganda) • One new kid on the block (HITS Telecom) • One prospect (Warid Telecom)

17. Consequences, Outcomes • Price wars – predatory pricing; • Trans-regional network operations for celtel and through agreements for MTN, Vodafone and Safaricom; • Expanded coverage; • Policy incoherence – secret pacts between UTL, MTN and government for exclusivity operations, later curiously quashed.

18. COMPETITION PERCEPTION SURVEY • Carried out to gauge the baseline status of Uganda on market competition; • Conducted in November-December 2005 Covered public-private sector and civil society organisations as well individual customers; • A total of 100 respondents: institutions (80%) and individual consumers (20%) were sampled and their respective responses logged.

19. COMPETITION PERCEPTION SURVEY CONT’D The samples for the survey were, save for consumers, pre-selected from five stakeholder categories to wit: • Consumers (COs); • Businesses/business support organisations (BUSO); • Research and Academic Institutions (RAI); • Law, Policymakers and Regulatory bodies (LPR), and; • Civil Society Organisations (CSOs).

20. SURVEY FINDINGS Awareness and impact • Knowledge about competition issues is relatively appallingly low, even among the elite and educated - an indictment of low business and economic literacy in the country.

21. Prevalence of ACPs CON - (collective price fixing, price discrimination and resale price maintenance); BUSO - (bid rigging, unfair trade practices, Entry barrier) RAI (Collective price fixing, price discrimination, entry barrier). CSOs (Bid rigging, unfair trade practices and entry barrier); LPR (price discrimination, unfair trade practices and bid rigging). SURVEY FINDINGS CONT’D

22. SURVEY FINDINGS CONT’D Most affected sectors • Agriculture • Trade • Services Extent of ACPs • Agriculture • Trade • Services