Trends and Developments
Uganda’s M&A landscape has been shaped by an interplay of legal, economic, political and social factors. As the country draws closer to the 2026 general elections, political dynamics are expected to exert a significant influence on investor confidence and transactional activity, creating ripple effects across various sectors.
Over the past few years, Uganda has experienced fluctuations in M&A activity. While 2024 saw an increase in transaction values averaging USD3.3 million, there are early indicators for 2025 suggesting a potential resurgence, with transaction values reaching an estimated USD12.48 million within the first two months of the year.
Several key trends have driven M&A activity in Uganda, including the passing of the Competition Act, Cap 66, in 2024, heightened environmental, social and governance considerations, regulatory and compliance reforms, and shifts in the tax regime. These developments, observed in 2024 and preceding years, are expected to persist in 2025 and beyond, and are expected to shape the M&A transactional landscape in Uganda.
In the past year, Uganda has experienced significant growth in M&A activity across different sectors, including technology (particularly fintech), financial services, insurance, healthcare, manufacturing, and oil and gas. By way of example, there has been an uptick of investment in the telecommunications space, on account of regulatory requirements that have led major mobile network operators such as MTN and Airtel to list a portion of their shares on the Uganda Securities Exchange.
There was notable M&A in key industries, which were fairly active last year, namely financial services, insurance, agro processing, telecommunications, pharmaceutical and healthcare sectors. A notable trend was the increase in cross-border acquisitions of local entities, such as the recent acquisition of Uganda Telecommunications Corporation Limited, Uganda’s national telecom provider, by Rowad Capital Commercial LLC. In the banking sector, Finance Trust Bank and Access Bank PLC announced the signing of a definitive agreement for Access Bank’s equity investment in Finance Trust Bank. Upon completion of the transaction, Access Bank PLC is expected to have an approximately 80% shareholding in the target company.
Another significant transaction, this time in the natural resources sector, involved Rare Earths Limited, an Australian mining company, which signed a conditional share purchase agreement to acquire an additional 34% stake in Rwenzori Rare Metals Limited. This acquisition increased its majority interest in the Makuutu Rare Earths Project to 94%. The project is one of the world’s largest and most advanced ionic adsorption clay rare earth deposits.
In the pharmaceutical sector, Cipla Quality Chemical Industries Ltd announced the completion of its acquisition by Africa Capitalworks SSA 3, a Mauritius-based investment vehicle, from India’s Cipla Group, making Africa Capitalworks the new majority shareholder. The transaction was valued at USD25 million. Africa Capitalworks acquired a 51.18% stake in the pharmaceutical company from the Indian group.
Sector-Specific Trends
Energy – clean cooking
The global transition towards green energy and the increasing focus on renewable energy solutions are expected to significantly shape M&A activity in Uganda’s energy sector. As many businesses and investors seek to align with sustainability goals, Uganda’s latest changes in the energy framework are expected to have an effect on the way that acquisitions, mergers and joint ventures are conducted in Uganda.
The Energy Policy for Uganda, 2023, which replaced the Energy Policy for Uganda, 2002, is set to play a key role in driving investment in the clean energy sector. The policy lays emphasis on the development and utilisation of energy resources in a financially viable, equitable and environmentally sustainable manner. In particular, it aims to attract foreign direct investment and mobilise local capital to enhance Uganda’s energy infrastructure, especially in renewable energy, biofuels and clean cooking technologies.
Recognising the need to accelerate the adoption of clean cooking technologies, the Government, through the Ministry of Energy and Mineral Development, has further prioritised initiatives to promote ethanol-based clean cooking solutions through the introduction of fiscal incentives, including the exemption of value-added tax (VAT) on the supply of liquefied gas and denatured fuel ethanol, a move that is aimed at making clean fuels more affordable, as well as VAT waivers on ethanol stoves to reduce the cost burden on households and encourage widespread adoption. These measures are expected to create an attractive investment landscape for both local and international energy firms seeking to expand their footprint in Uganda’s clean cooking sector, presenting an opportunity for entities looking to offset their carbon footprint through investments in sustainable energy projects.
Financial sector
In November 2022, the Bank of Uganda announced a six-fold increase in the minimum absolute paid-up capital requirement for Tier 1 credit institution licences, raising the threshold from UGX25 billion to UGX150 billion. This requirement, operationalised through the Financial Institutions (Revision of Minimum Capital Requirements) Instrument, 2022, took effect on 1 July 2022, with institutions given until 30 June 2024 to comply.
The vast majority of Uganda’s 25 commercial banks at the time successfully met the new capital requirement, with only three banks opting to downgrade to Tier 2 credit institution licences, which have a significantly lower capital requirement of UGX25 billion. The ten largest banks, having already accumulated equity exceeding UGX150 billion by the time the policy was announced, complied without the need to raise additional capital. Instead, they met the requirement by reallocating other equity reserves, primarily retained earnings into paid-up capital.
The new capital requirements, however, had significant implications for undercapitalised financial institutions. Some banks, foreseeing difficulties in meeting the threshold, opted to downgrade their licences. Against this backdrop, M&A activity also emerged as a strategic response to the new minimum capital thresholds. In January 2024, Finance Trust Bank and Access Bank PLC announced the signing of a definitive agreement for Access Bank’s equity investment into Finance Trust Bank, signalling a trend of consolidation within the banking sector. With commercial banks under increasing pressure to strengthen their capital bases, further mergers and acquisitions are anticipated in the coming years.
Competition
The Competition Act, Cap 66
The enactment of the Competition Act, Cap 66, in 2024 marks a significant milestone in Uganda’s regulatory landscape, introducing a structured framework for the oversight of mergers, acquisitions and joint ventures. This legislation is expected to have a far-reaching impact on M&A activity across various sectors by enhancing regulatory scrutiny, ensuring competitive market conditions and providing investors with greater clarity regarding compliance requirements. However, while the Act strengthens Uganda’s competition regime, it also introduces new procedural obligations that may influence transaction timelines, deal structuring and strategic investment decisions.
A key requirement under the Act is that any investor seeking to engage in a merger, acquisition of control, or joint venture must notify the Ministry of Trade, Industry and Cooperatives and obtain prior approval before finalising the transaction. Failure to comply renders the transaction void. However, a notable gap in the legislation is the absence of prescribed financial thresholds for notifiable mergers.
The Act establishes specific timelines for providing notice to the Ministry, depending on the nature of the transaction. For mergers and amalgamations, notice must be given after the relevant boards have approved the proposal. In cases involving the acquisition of control, notification is required after the conclusion of negotiations for the acquisition agreement, while for joint ventures, notice must be submitted after the execution of the joint venture agreement. These timelines align with international best practices in competition, where regulatory approvals are incorporated as conditions precedent to closing transactions. However, investors must now factor in the Ministry’s 120-day review period, which, while relatively standard, may introduce additional complexity in time-sensitive transactions.
One of the most striking provisions of the Act is its definition of “control”. An entity is deemed to acquire control if it (i) holds at least 49% of the voting rights in another entity, (ii) can appoint more than half of the board members, or (iii) has the ability to direct the affairs of another entity. This 49% threshold is lower than the conventional 51% threshold common in other jurisdictions. Consequently, minority investments that might not typically trigger merger control in other jurisdictions could require approval in Uganda, impacting structuring considerations for investors and transaction advisors.
Once full notice of a merger, acquisition or joint venture is received, the Ministry must complete its inquiry within 120 days. If the Ministry fails to issue a decision within this timeframe, the transaction is deemed approved. This mechanism ensures that regulatory inaction does not unnecessarily hinder business transactions, providing a level of certainty for deal makers. Additionally, the Act allows for conditional approvals, meaning that transactions can proceed subject to specified regulatory commitments, thereby offering flexibility to parties in complex transactions.
The COMESA competition regime – proposed amendments
On 24 January 2024, the COMESA Competition Commission published the Draft COMESA Competition and Consumer Protection Regulations, marking a significant step towards updating and enhancing the competition framework of the Common Market for Eastern and Southern Africa (COMESA). These amendments, which aim to align the regulations with contemporary market dynamics, are expected to have far-reaching implications for M&A activity in Uganda, a key member state of COMESA.
One of the key proposed changes under the Draft Regulations is the shift towards a mandatory, suspensory merger control regime. Under the proposed regulations, mergers meeting certain criteria will require prior approval from the Commission before they can proceed. This marks a departure from the current regulations, which allow mergers to be implemented before receiving the Commission’s approval, subject to post-transaction review. This change aims to ensure that potentially anti-competitive mergers do not harm market dynamics before they are scrutinised.
A notable addition to the Draft Regulations is the introduction of transaction value thresholds for mergers in the digital market sector. Mergers involving digital platforms that exceed the specified thresholds will need to be notified to the Commission for review. However, the regulations fail to provide a clear definition of the “digital market industry”, leaving uncertainty about whether different thresholds will apply across various sectors. Mergers in this domain will be subject to unique considerations, including the impact on data control, accessibility and network effects, which are becoming increasingly important in the digital economy.
Another crucial development is the introduction of public interest factors in the merger evaluation process. The Commission will be required to take into account the broader societal impact of mergers, such as effects on employment, the competitiveness of small and medium-sized enterprises, the ability of the common market to compete with international markets, and considerations relating to environmental sustainability. This represents a shift towards a more holistic approach to merger control, balancing economic efficiency with public welfare.
The Draft Regulations also emphasise the binding nature of COMESA’s competition law over the national laws of member states. Member states will be prohibited from relying on their own competition laws when dealing with conduct covered by the Regulations. This approach is intended to position COMESA as a one-stop shop for competition enforcement.
The proposed amendments to the Regulations also raise important questions about the interaction between regional and national competition laws. Currently, Uganda’s Competition Act does not account for the interface with regional competition regimes such as COMESA, leading to the need for dual notifications – one to the Ministry of Trade, Industry and Cooperatives and another to the Commission. However, with the operationalisation of the proposed amendments, it is anticipated that the Ministry will cede jurisdiction over merger control matters to the Commission, further centralising competition enforcement within the region.
Tax Considerations: Income Tax (Amendment) Act, 2024
Exempt income
The Income Tax (Amendment) Act, 2024, introduced a new tax amendment that is likely to have an impact on M&A activity in Uganda. One key development is the tax exemption for income derived by private equity and venture capital funds regulated by the Capital Markets Authority.
The income of individuals and entities meeting specific investment criteria is exempt from income tax. Investors that, within a period of ten years from the commencement of business or from making additional capital investment, invest at least USD10 million (for foreign investors) or USD300,000 (for Ugandan citizens operating in urban areas) or USD150,000 (for Ugandan citizens operating in upcountry areas) qualify for tax exemptions. However, such investors must meet the following conditions:
- at least 70% of their raw materials must be locally sourced, subject to availability;
- at least 70% of their employees must be Ugandan citizens, earning an aggregate wage of at least 70% of the total wage bill; and
- they must be engaged in the manufacture of electric vehicles, electric batteries or electric vehicle charging equipment; the fabrication of electric vehicle frames and bodies; or the operation of specialised hospital facilities.
Furthermore, income derived by private equity and venture capital funds regulated by the Capital Markets Authority is now exempt from income tax. The prior provision that granted non-recognition of capital gains tax on the sale of investment interests in a registered venture capital fund, as long as at least 50% of the sale proceeds were reinvested within the year of income, has been repealed.
This means that venture capital funds are no longer required to reinvest at least 50% of the proceeds of the sale of their interest in Uganda for them not to be charged with capital gain tax.
This is predicted to increase M&A activity by venture capital firms in Uganda owing to an improved fiscal climate.
Replacement of branch with permanent establishment
The Income Tax (Amendment) Act, 2024, repealed the definition of a branch and replaced it with “permanent establishment” to align with the nomenclature under the international tax treaties to which Uganda is party. A permanent establishment is defined to include, among other things, a fixed place of business through which the business of an enterprise is wholly or partly carried on.
An entity shall be deemed to have a permanent establishment in Uganda, in respect of any activities which the agent undertakes on behalf of the principal, if such agent habitually concludes contracts or plays the principal role leading to the conclusion of contracts that are routinely concluded without material modification by the principal, where the contracts are:
- in the name of the principal;
- for the transfer of ownership of, or for the granting of the right to use, property owned by the principal or that the principal has the right to use; or
- for the provision of services by the principal.
Even agents who do not habitually conclude contracts nor play the principal role leading to the conclusion of such contracts, but habitually maintain in Uganda a stock of goods or merchandise from which the agent regularly delivers goods or merchandise on behalf of the principal; manufacture or process in Uganda for the principal, goods or merchandise belonging to the principal; or secure orders in Uganda wholly or almost wholly for the principal or associates, may create permanent establishments for the principal.
It is therefore necessary for non-resident entities to carefully consider the terms of engagement between them and the persons they contract with in Uganda to avoid inadvertently creating permanent establishments in Uganda through agency relationships.
A permanent establishment is now treated as a distinct and separate entity from the non-resident person of which it is a permanent establishment, and the transactions between the permanent establishment and non-resident person have to be conducted at arm’s length.
Exemption from stamp duty
Investors acquiring shares in a private equity or venture capital fund, or private equity or venture capital funds regulated by the Capital Markets Authority, are not required to pay stamp duty on nominal share capital or any increase of share capital, or a transfer of shares or other securities, to or by them.
With the above exemptions, it is expected that there will be a rise in investments in or by private equity and venture capital funds in Uganda. In addition, instruments such as debentures and further charges, among others, that these entities execute will be exempt from stamp duty if the manufacturers provide for substitution of at least 30% of the value of imported products.
However, some of the thresholds to be met by entities already operating in strategic investment projects to qualify for stamp duty exemptions were increased. For example, they should also:
- have the capacity to use at least 80% (previously 50%) of locally produced raw materials, subject to availability; and
- have at least 80% of employees who are citizens earning an aggregate wage of at least 80% of the total wage bill as opposed to merely having the capacity to employ a minimum of 100 citizens.
Companies Act, Cap 106
The amendments require legal entities to maintain a register of beneficial owners containing “beneficial ownership information” and then notify the registrar of companies through timely filing of a beneficial ownership form at the Uganda Registration Services Bureau. The penalty for non-compliance is the refusal of the registrar to accept subsequent filings on the company file in addition to a statutory fine of UGX500,000 (approx. USD135) for every corporate officer of the company for each day the company is in default. The spirit behind the requirement to disclose beneficial owners stems from the need to combat criminal activity that may lead to capital flight, tax evasion, corruption, money laundering and terrorism financing, and to provide transparency around the ownership and control of Ugandan legal entities. The cloak of anonymity provided by the lack of obligation to disclose the actual owners of these legal entities had created an unregulated space allowing for criminal activity to occur.
Firstly, under the Companies (Beneficial Owners) Regulations, 2023, a beneficial owner is defined as a natural person who has the final ownership or control of the company or a natural person on whose behalf a transaction is conducted in a company, including a natural person who exercises ultimate control over a company. This implies that where a company registers individuals or corporate shareholders as the owners of the company, the beneficial owners are the individuals who own or control the corporate shareholder or who exercise significant control over the individuals registered as the legal owners.
However, the definition of “ultimate control” and the criteria or designated threshold to determine the ultimate controller is not provided. Therefore, companies are required to disclose and register every ultimate individual beneficial owner irrespective of the level of shareholding.
