Digital economy in Uganda: Progress and its future

by Musa Hashim Kasibante
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The Information and Communications Technology (ICT) sector in Uganda contributes 9% of the country’s Gross Domestic Product (GDP). The digital economy in Uganda has great potential to contribute to the country’s socio-economic transformation through innovation, transportation, improved service delivery and food security, plus access to markets, especially for agricultural produce.

But the exorbitant high and multiple taxes on digital products and services are hindering affordable and universal access for most Ugandans.

Many companies in Uganda, especially those in financial services, insurance, transportation and medicine like Rocket Health, among others, have in recent years adopted digital products to enhance their delivery of services. These include banks, ride-hailing apps like Uber, Safe Boda, and Bolt and event promoters, who use online digital platforms to sell out tickets for their concerts and shows.

By September 2021, Uganda had 29.1 million telephone subscriptions that translate into a national penetration of seven connections for every 10 Ugandans, according to the communications sector regulator, Uganda Communications Commission (UCC).

ROCKET HEALTH -Last-mile-delivery (Digital economy in Uganda)
ROCKET HEALTH -Last-mile-delivery (Digital economy in Uganda)

Nevertheless, the percentage of Ugandans who essentially own or use mobile phones is less than 70% due to multiple SIM card ownership.

According to UCC, internet subscriptions stood at 22 million by September of 2021, which is a 52% penetration, but this can be deceptive or inaccurate since the percentage of the Ugandan population that actually uses the internet is much lower than that portrayed, due to the fact that many users in Uganda have numerous subscriptions.

How digital economy was boosted during the lockdown:                                                                

At the height of the COVID-19 pandemic in Uganda, Rocket Health, a telemedicine company experienced a spike in demand for its digital medical services.

This suggests a correlation between pandemic lockdowns and the adoption of telemedicine services in Uganda. The health crisis coupled with lockdown restrictions forced the market to take a leap, quickly change and adapt thereby increasing the demand for remote and accessible health services.

While the months when lockdowns were imposed were associated with jumps in interest, the overall trend was an increase in the use of Rocket Health services over time.

Deliberate marketing efforts from Rocket Health promoting the e-shop were no doubt also associated with the steady rise in website visits from 4,343 total e-shop visits in the third quarter of 2019 to 241,056 in the third quarter of 2021.

“The highest number of e-shop visits was 75,142 achieved in July 2021 when there was a running promotion on COVID-19 home packages on the e-shop. Tele-consultations experienced their first spikes during the first countrywide lockdown in April 2020, when most people were in their homes, but needed medical assistance, and thus resorted to teleconsultations. The rise in e-shop visits and teleconsultations seemed loosely correlated, though didn’t always change at the same rate. The highest level of teleconsultations overall was reached in June 2021, amid another national lockdown and Uganda’s most deadly wave of the pandemic,” notes the management of Rocket Health in a published communication.

In August of 2020, the research team at Whitehead Communications carried out research on awareness of and public opinion on telemedicine in Uganda.

The research objective was to ascertain to what extent Ugandans understood telemedicine and may be open to using such services. The team also gathered feedback from Rocket Health customers in Uganda to learn how the telemedicine provider could serve them better.

This research was done through surveys and focus groups (more on the methodology below).

“We surveyed 392 Ugandans about their views on Telemedicine, 37% of which were located in Kampala where Rocket Health is based, and the rest were spread across the country. Our findings suggested that while the majority (58%) had never heard of telemedicine, more (80% +) were open to the idea,” says Anne Whitehead in the report.

Uganda’s Internet and mobile telephone penetration are still low in comparison to neighbouring Kenya which has 122% internet penetration and 133% mobile phone penetration.

Rwanda, another neighbouring East African nation, has 64.4% internet penetration and 84.2% mobile penetration, and Tanzania with 50% internet penetration and 91% mobile penetration.

In Uganda, an average phone subscriber spends just Ush10,500 (about USD 2.8) per month on voice, data and SMS services. This average revenue per user (ARPU) in Uganda is significantly lower than in most other African countries.

Uganda levies a direct 12% levy on the net price of internet data, after which a Value Added Tax (VAT) of 18% applies.

Additionally, there is also a 12% excise duty on prepaid airtime, postpaid airtime, and value-added services, as well as a 10% import duty on devices.

 This multiple taxation translates into the high cost of services, devices, hardware and software, with suppliers and service providers passing on the financial burden onto their consumers, which worsens affordability. 

 According to research by a civil society organisation, cipesas, innovation and e-commerce continue to suffer regression with initiatives such as the National ICT Initiatives Support Programme (NIISP) and Digital Uganda Vision achieving minimal impact.

 It has been noted that poor internet access in Uganda hinders knowledge creation and stifles innovation in a world where fintech, mobile payments and a growing array of e-services and e-trade are getting mainstreamed.

Freedom of expression and access to information has been undermined by the government despite consistent calls by the private sector to the government to refrain from blocking access to the internet and some social media sites such as Facebook.

This practice undermines citizens’ access to information and freedom of expression. It also cripples business operations.

These are the measures the government should embrace to create an enabling and vibrant digital economy.

The government through its tax body Uganda Revenue Authority (URA) should repeal all retrogressive legislation such as the Excise Duty (Amendment) Act of 2021 which provides for a 12% levy on the net price of internet data.

This can be achieved by lowering the Value Added Tax on ICT services from the current 18% to not more than 12% and reducing import duty by 50% on all ICT devices as well as the excise duty on airtime and value-added services.

For a brighter outlook in the future, the Ugandan government should also cease implementing measures that disrupt access to the internet and social media, and if any such measures are taken, they should be necessary, proportionate and for a very limited period.

Business Times Uganda

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