The Uganda Manufacturers Association (UMA) has called on Parliament to take firm action against informal businesses, warning that their rapid expansion is undermining the country’s tax base and placing formal manufacturers under increasing pressure.
Appearing before the Parliamentary Finance Committee, UMA Board Chairperson Aga Sekalala urged lawmakers to prioritise formalisation efforts, arguing that unregulated business activity is distorting competition in the economy.
Sekalala described the situation as a growing structural imbalance, where compliant businesses are struggling to survive while a large untaxed informal sector continues to expand.
“This dualistic monster reinforces a compliant formal sector on life support, amid rampant untaxed activity threatening to drag even formal manufacturers into informality if unchecked. Parliament must act decisively now. Formalisation is not an option but a lifeline to rescue revenue-starved growth and avert economic collapse,” Sekalala said.
He warned that the informal sector has become a major constraint on manufacturing growth and government revenue mobilisation, describing it as a “ticking time bomb” for the economy if left unchecked.
According to UMA, the informal sector accounts for 54.5 percent of Uganda’s Gross Domestic Product and employs more than 70 percent of the workforce—about 9.8 million people. The association estimates that the sector generates approximately Shs41.3 trillion annually, much of which remains outside the tax net.
Sekalala further noted that more than 85 percent of informal businesses are unregistered, contributing to low tax compliance levels nationwide.
He said that out of about 2.5 million economically active individuals, only 700,000 are registered taxpayers, while just 12 percent are integrated into formal supply chains.
UMA is now advocating for stronger enforcement and policy reforms aimed at bringing more businesses into the formal economy, widening the tax base and improving revenue collection.
“We should remain engaged to ensure that reforms needed to deliver the NDP IV growth trajectory are addressed,” Sekalala added.
The association argues that increased formalisation would not only strengthen government revenue but also create a more level playing field for compliant manufacturers competing in the market.
