Parliament has approved an Shs18 billion tax relief package for Newplan, easing the company’s tax burden as Uganda’s government securities market records higher yields on longer-dated Treasury bills. The tax relief gives the local engineering and consulting firm additional financial room at a time when investors are showing strong demand for government securities.
Separately, the latest Bank of Uganda Treasury bill auction saw the yield on the 364-day paper rise to 13.95%, amid heavy oversubscription. The two developments carry significance for corporate treasury management, particularly for businesses seeking to balance operational liquidity with returns on surplus cash.
For Newplan, the Shs18 billion relief represents cash retained within the business rather than paid immediately in taxes. The additional liquidity could support working capital, project mobilisation, equipment purchases and other operational requirements. Government securities also provide an alternative destination for surplus funds.
At a 13.95% annualised yield, Shs18 billion invested for a full year would generate approximately Shs2.51 billion in gross interest, before applicable taxes and transaction costs, if the quoted yield were achieved for the entire investment period.
The calculation, though, should not be interpreted as an indication that Newplan intends to invest its tax savings in Treasury bills. The higher T-bill yield reflects conditions in Uganda’s fixed-income market, where strong investor demand and auction dynamics are influencing the returns available on government paper.
For corporate treasurers, the development presents a familiar balancing exercise: how much cash should remain immediately available for business operations and how much should be invested to earn a return? Allocating all of the tax relief to securities would potentially increase investment income, but it would also reduce the cash immediately available for Newplan’s engineering and consulting activities.
A more conservative treasury approach would therefore match investments to expected cash requirements. Funds required for project mobilisation, salaries, equipment and other near-term obligations would remain liquid, while genuinely surplus funds could be placed in instruments whose maturity corresponds with the company’s expected financing needs.
The 364-day Treasury bill is particularly relevant for businesses with predictable cash requirements roughly one year ahead. Holding the security until maturity provides greater certainty over the investment period, although the return ultimately depends on the terms of the specific auction and the investor’s tax position.
The rise in yields also has wider implications for Uganda’s corporate sector. Higher government security yields influence the opportunity cost of holding cash and provide businesses and institutional investors with an alternative to bank deposits and other investments. At the same time, higher domestic interest rates affect the cost of borrowing for companies that depend on credit to finance expansion and working capital.
For Newplan, the tax relief therefore arrives alongside a market offering higher returns on government securities.
The immediate benefit is greater financial flexibility. The strategic question is how much of the additional liquidity should support the company’s core operations and how much should be placed in interest-bearing assets.
With engineering and consulting contracts often requiring substantial upfront expenditure before payments are received, liquidity management will remain important. The Shs18 billion tax relief and the 13.95% 364-day Treasury bill yield consequently represent two separate developments with a common implication for corporate finance: cash management matters.
For companies with temporary surplus liquidity, the current government securities market offers an opportunity to earn returns while preserving a relatively low credit-risk investment profile. For companies facing immediate project obligations, retaining sufficient working capital could be more valuable than maximising investment income. The key issue for Newplan, therefore, is not simply how much the company has been relieved from taxation, but how effectively the additional liquidity is managed.
