FORTNYT SERIES “STATE OF STARTING BUSINESS IN UGANDA “.
TechBuzz Hub hosted the second Fortnyt Series discussion on the 27th –October -2017 at its main office in Ntinda Najim Mall. Moderated by Keneth Twesigye at 6:30pm, the Q&A discussion was paneled by business experts, entrepreneurs, management partners and advocates under the theme” STATE OF STARTING A BUSINESS IN UGANDA”.
TechBuzz Hub aims at changing lives and helping the youth start up and grow their ideas; that’s why it organizes these fortnight discussions where individuals of like minds come together to talk about issues concerning business and start-ups. Later after the Moderator’s questions, the audience raised their questions to the panelists
Keneth started off the discussion quoting the rankings made by world bank, “According to world bank report, The Ease of Starting a Business considered the following ten indicators; starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority, investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency.
Uganda ranks 115th out of 190 assessed economies, which is a step by seven places from the previous year. In sub-Saharan Africa, the country ranks 12th out of 48 economies and in third place behind Kenya and Rwanda in East Africa.”
“Uganda made starting a business easier by eliminating the requirement to commission and file a declaration of compliance when incorporating a company, thanks to the Business licenses (miscellaneous repeals) Act, which entered into force July 1, 2015”.
“Uganda also made paying taxes easier by eliminating a recquirement for tax returns to be submitted in paper copy following online submission. This form also relieved the administrative burden on businesses filing corporate tax and VAT returns.”
Mr. Eugene Miheso: Swinnerstone Eugene Miheso is an ICT expert with a Information technology degree from Nairobi Kenya, a software developer, certified project manager, CEO Trend systems E.A Limited with operations in four countries in Africa (Uganda, Kenya, Rwanda and Tanzania), an architectural and building and ICT company in which he is a director and managing partner.
Mr. Asiimwe Raymond: Raymond Asiimwe is a Lawyer, practicing advocate of the High Court of Uganda, Business Strategist with a particular bias on Startup law, Intellectual Property and Computer Information Technology Law. Raymond Asiimwe is an LLM candidate at UC-Berkeley and holds a Bachelor of Laws Degree LLB (Hons) from Makerere University and a Postgraduate Diploma in Legal practice from the Law Development Centre. Raymond has worked with Katende Ssempebwa and Company Advocates a chambers global top tier Law Firm in Uganda. Raymond is founding and Managing Partner of Bytelex (bytelexhq.com); The first tech startup growth legal practice in East Africa.
He has a deep understanding of how startups are formed, financed, grown, taken public and merged. While at Bytelex, he has played a crucial role in promoting growth of Tech startups through targeted legal solutions that create value in the field of Intellectual Property, commercial transactions, compliance and Computer Technology related issues.
As a business strategist, he has spurred startups to early monetization through targeted and tailored business solutions.
Ms Eyogyiire Irene is a partner at Bytelex, Irene is a legal practitioner with experience in commercial and transactional areas of law. Irene has experience in Company and Enterprise law extending to provision of advisory services on set up and organization of enterprises including licensing and other incidental matters. Irene has also been engaged in contract drafting including security documentation and business agreements.
Irene Eyogyiire has a keen interest in tax law and is interested in ensuring entrepreneurs structure their businesses and transactions in the most tax friendly manner.
Mr. Jordan Lawoko is a Partner in Bytelex whose specialty is business setup and advisory. Jordan Lawoko has gained profound experience advising businesses to set up in a dispute free manner.
- We have seen fresh and amazing startups start with synergy and die, how did you beat the odds to survive such times?
Mr. Eugene Miheso
Mr. Eugene quotes the 2017 Forbes list “The best countries to start up a business in the world includes Scandinavian countries: Norway, Sweden, Denmark, these have tax waivers, Singapore don’t impose dividends.”
New Zealand a startup is given a day, to open business as well as the rate of corruption in these countries is limited and the nationals of these countries are assumed to be early adaptors.
United Kingdom a company can be incorporated in a day at only 14 pounds and more so offer tax benefits to employees and founders.”
According to Forbes listing July 2017 Uganda is ranked 107 as one of the best countries to start up business in the world based on its GDP growth, GDP per capital.
Eugene said “ it wasn’t easy but you have to be focused and persistent on what you’re doing and also the whole experience of stating up a business in 2009 which later collapsed in 2011 taught him to learn to consult lawyers and admits that up to now he still gets fined for late filling of tax returns”.
He noted “If government can find a way to help startups benefit from their ideas, help exempt them from tax which can be pushed to a later time when they can afford to pay tax then these startups can work harder to pay off those debts.
Improve on how fast one can incorporate a company- people loose morale during the long process to officialize all the legalities.
The government should set up policies to support businesses and startups , attract investors encourage business people to work with government and says the reason why Rwanda in excelling in East Africa is because the government set up processes that limit bribery and corruption in the country he said”.
Raymond managed to beat the odds of starting and growing his law firm by learning and understanding the market fit, knowing what the customer wants, knowing the problems they were facing helped him a lot.”
Every economy has its own advantages: For Uganda’s legal regime it is a little relaxed and so many startups can actually operate before even being registered or taxed.
For instance a Tech company in the USA will be challenged by a vigilant and effective legal regime which could be an impediment to startup growth.” Raymond said.
Whereas our taxes have been criticized for not supporting startups, from practice we have found that that Startups in Uganda don’t have proper records for their company expenditure on the small things like lunch, transport and if they can be registered as company expenses can be deductible on the final tax bill.
“Team building, good communication channels, startups need to know what kind of people they have on their team”. Having a competent person for each department and level of your startup will help your business go far.
You need to have a business idea and also get a person who is a visionary. Having a business idea is the starting point for a startup or any business venture however for your business to succeed you need to get a person with a like mind, a person who sees and believes in what you are trying to accomplish.
Irene however, disagrees with Forbes and the likes of World Bank listings which claim that scandinavian countries are the best countries to start a business may not really be true. According to her, Forbes list maybe is too general and focuses on foreigners outside of Uganda. [Raymond interjected to say For instance a desk in a hub in neighbouring Kenya can be as $230, In Sanfrancisco a desk on average is $349] She also says, setting up a business outside Uganda is very hard and expensive. You can set up a company at or under $100
“I don’t believe tax is an issue for startups. Startups need to separate themselves from the business by documenting all company expenses. It is possible to file zero tax returns, all they have to do is show proof of how money was spent while filling tax returns.”
2. For those that die, how and what role (as people who are informed about the procedures and standards) have you played in mitigating such gaps?
Raymond says, Bytelex is dedicated to helping startups not fall into legal issues. We have tried to partner and reach various hubs in Uganda, give them professional services through advice and counsel. Started with a free package for about a year but we are no longer free.
Miheso Eugene Swinnerstone: I personally have trained and mentored so many people in the ICT sector some of whose startups are doing very well like TechBuzz Hub among others said Eugine.
Lawoko Jordan: You will find us reachout almost all hubs majorly to connect easily with startups.
Eyogyiire Irene: Personally, I do a lot about taxation, I advise and assist in accounts for startups that come for the service so is a role I have played!
3. What are the most common issues you identified causing high startups and business failure rate in Uganda?
Most of these startups want quick money and advises startups, “patent your ideas before you present or pitch them to these hackathons and innovation awards organized”.
Mr. Asiimwe Ramond
Added onto the point saying that if “you protect your idea and take part in these competitions and your idea is reproduced by the same organizers at a later time you have a stronger case in court.”
I have identified that most of these startups don’t have a clear well set business plan, most of these startups go into the market and pitch their ideas but when asked about the revenue model, breakeven point they actually have no clue, she therefore urges startups to have a clear business plan and proper budget.
Most of these big companies understand that these startups don’t consult lawyers that’s why they use tricky languages in there terms and conditions and these startups unknowingly waive away their rights says Jordan.
4. What are the factors to consider when choosing a lawyer?
Having someone you know and you can trust.
Every lawyer is gifted differently and every one specializes differently, “make sure your lawyer understands the startup model”.
Quoted what the moderator of the discussion Mr. Keneth Twesigye stated at the start of the session that; Lawyers are not allowed to advertise saying, it’s true “they mainly get their business through referrals from their previous clients.” Startups or people should look out for lawyers they can trust and have expertise in the different areas they have concern.
5. I believe as business experts, having a sound legal structure in regards to contracts matters, how does this connect to business sustainability?
Asiimwe Raymond says a lawyer needs to understand the industry his/her clients is involved in if your lawyer is not well experienced in a particular industry such as media, software if they draft a contract they are bound to miss well known standards in such an industry. It is up to the experienced startup founder to give input about their contract if they realize their lawyer is inexperienced in a certain industry.
Lawoko Jordan: Understand your product, when you understand your product the kind of contract you make will be much more protective of your interests.
Eyogyire Irene: According to Irene, when drafting a contract partners usually look out for how profits and loses will be shared, duties and obligations of partners, criteria bringing in new partners, intellectual property, indemnification.
Questions from the audience:
How are lawyers or law firms paid by clients? (Sylvia Noelines Nagawa)
Raymond: some lawyers charge on an hourly model (pay by the hour) others, on retainer-ship which is affordable to very few, while some bill you as they see you, if you’re a person of high profile they will definitely charge you a high fee where as other firms mode of payment is pay half before the service and the other half of the fee for after service.
When does the URA start taxing a startup or a business? (Sylvia Noelines Nagawa)
Irene: The URA immediately starts anticipating tax from the time your issued a TIN number however you can file zero returns if your company didn’t make profits that year all you have to do is to follow up on your tax returns because if you don’t URA will anticipate your profits and issue you with a fine.
Instead of firms charging startups for a one time consultation fee can’t firms have an agreement with startups, settle them and be their advisor for a year? (Victor Rhywinson)
Jordan: I would rather much prefer these startups to come and we make an agreement rather than them drafting up contracts and going into partnerships that may be costly in the long run.
Irene: startups don’t like consulting law firms because of fear of paying consultation fee and yet if they were to consult and draft their contracts and present them to lawyers, the lawyer would be in a position to advise them and put in clauses to secure their interest.
What if your ability is in delivering a product or a service like in security, as an individual is it advisable to open a one man’s company? (Joshua Asiimwe)
Raymond said it is possible to register a one man’s company, however, the challenge is people are suspicious of one man companies and the process of converting it into a private company is lengthy.
The state of starting business in Uganda is promising however the startups in Uganda need to understand their business model, grasp the art of selling their business idea to their target market, understand the laws governing the businesses they are involved in, get the right people on their team, consult lawyers to find out the best way to protect their best interest and finally copy right, patent, trademark their intellectual property however small or underdeveloped it may be that is the only way we shall start and grow these startups.
And also, being part of organizations that are focused at developing startups and sustainable business models is key. TechBuzz Hub is one of such spaces where there is freedom of knowledge sharing that is startup oriented.