All You Need To Know About The National Local Content Act in Relation to Locally Manufactured Goods & Services
The National Local content Act was passed into law on the 20th may 2020 and its main aim is to remedy the shortcomings of some existing policies, legislation and guidelines on the subject of local content in Uganda such as, the Public Procurement and Disposal of Public Assets Act, 2003, ( PPDA), the Petroleum (Exploration, Development and Production) Act, 2013, , the Guidelines on Reservation Schemes to Promote Local Content, 2018 and the ‘Buy Uganda Build Uganda’ (BUBU) Policy and others not mentioned herein. It also applies to persons in possession of an investment licence or enjoying a tax incentive, an entity under a public private partnership agreement pursuant to the Public Private Partnership Act, 2015; any person carrying out public works whose activities are financed through public borrowing or any similar arrange.
The Act defines local content to ‘include the quantum or percentage of locally produced goods, locally produced services and the utilisation pf personnel, financing, goods and services by a local content entity in any operation or activity carried out in Uganda’.
The Act establishes a Local Content Department under the Ministry of Finance, Planning and Economic Development to implement the provisions of the Act, (Department). The functions of the Department include: coordinating and managing local content in Uganda, advising Government on local content issues, developing a local content plan, approving local content plans, and undertaking public education on local content in Uganda.
They also include developing guidelines for the implementation of local content, monitoring and evaluating performance of entities under the Act, and promoting development of local content in Uganda. The Department shall have powers to institute inquiries and review contracts subject to Article 119 of the Constitution.
The Act places an obligation on a local content entity to give preference to goods manufactured and services produced in Uganda. In which case, the local content entity must ensure that the required goods or services are provided by an entity that has a joint venture with a Ugandan company or citizen.
Where a non-citizen has been approved for a position, the law requires that provision is made for skills transfer and the entity must submit a succession plan in respect to the role performed by the non-citizen.
There’s also a mandate stressed by the act to employ Ugandans; Only employ non-citizens after it has been certified by the Department that there are no Ugandans capable of performing the work.
There’s prohibition of subcontracting of any contract or works contracted under the Act. It also sets out a mandatory requirement for foreign entities to subcontract 40% of contracted works to a Ugandan company that meets the criteria set out in section 16.
The grant of work permits for foreign nationals must now be supported by a letter from the Department certifying that an applicant possesses skills necessary for employment and that no Ugandan possesses the skills for that role. All positions held by Ugandans will attract emoluments commensurate to the role and, in the case of any difference with a non-citizen, it will not be more than 10%.
Important to note is that a local content entity cannot reject locally manufactured goods or services provided by a Ugandan citizen solely on grounds of quality, where:
- In the case of goods, they been approved by the national standards agency or through an international standards agency;
- In the case of services, they have been provided in accordance with best industry practices;
- In the case of manufactured goods, the provider is willing to meet the required quality and time.
An exception is made where such goods or services do not meet the required quality, quantity or timeline for delivery or completion. In which case, the local content entity must ensure that the required goods or services are provided by an entity that has a joint venture with a Ugandan company or citizen.
The act also spells out another mandatory requirement for every supplier, contractor or provider to develop a local content plan. These plans should be submitted for approval within six months of the commencement of the Act.
It’s also important to note that being a Ugandan citizen or entity alone does not guarantee one the grant of a contract or sub-contract. Other competencies are still binding, experience inclusive.
The overall object of the National Local Content Act therefore is to impose local content obligations on ALL persons using public resources or carrying on an activity under a license in Uganda.