Communities worldwide are under immediate threat from climate change, particularly those in vulnerably situated countries like Uganda. The impacts of climate change are widespread, affecting agriculture, water resources, and overall socio-economic stability.

Uganda’s National Development Plan states that climate change threatens Uganda’s ambition to transform  into a competitive upper middle-income nation by 2040. In 2019, Uganda was ranked 85th out of 149 countries in the German Watch Global Climate Risk Index of 2017.

It has been calculated that inaction will cost between USD 273 and USD 437 billion between the years 2010 and 2050. Building resilience, adjusting to shifting conditions, and reducing the negative effects of climate change all depend on having access to climate finance.

This finance needs to target the most vulnerable communities for support to be effective and equitable. Within low-income communities, women are frequently more vulnerable to the effects of climate change. This article explores how better access to climate finance will not only support women but strengthen communities as a whole and support national economic development.

Women’s vulnerability to climate change in Uganda

The impact of climate financing on vulnerable populations in Uganda depends significantly on gender. This is because the effects of climate change and access to climate finance may differ for men and women.

If we look at differences in how men and women spend their time, for example, women in Uganda are frequently more vulnerable to climate change as a result of risks associated with their work in cooking, water collection, and agriculture.

Women, children, the elderly, people with disabilities, and other vulnerable groups are more physically, economically, and socially exposed to risks and disasters. For example, it is mainly women who are burdened with caregiving responsibilities, which makes them less able to escape disasters. Men tend to flee whenever natural disasters like starvation, droughts, and floods occur, and leave women and their children behind.

Initiatives that address the unique needs and vulnerabilities of women should be given priority in climate finance.

Women’s limited access to resources, particularly climate funding, also makes it difficult for them to adopt climate-resilient practices. Women frequently have less access to technology, land, and credit. To address the issues posed by climate change, a comprehensive change in behavior, technology, and recognition of women’s central role in agriculture is necessary. Many of the obstacles faced by women farmers in agriculture could be addressed by labor and time-saving technologies. These would help rural women boost agricultural productivity in a changing climate – with benefits for the whole community and national economy. Labor-saving technology and practices can improve women’s income by reducing the burden of household chores and creating opportunities for economic empowerment. For example, cleaner, more efficient biomass stoves, can reduce the time spent on cooking and collecting firewood, freeing up time for other activities. Similarly, modern agricultural technologies can empower women in rural areas by making farming more efficient and by reducing the physical labor involved in agriculture.

Climate funding can help women’s education and capacity-building initiatives, giving them the tools they need to actively participate in resilience-building initiatives and adjust to climate change. However, many training programs and capacity-building activities on disaster prevention and preparedness target more men than women.

Women’s knowledge is also typically under-represented in evidence bases for disaster mitigation and prevention. Women typically possess a greater understanding of their surroundings, which could be used to improve disaster preparedness initiatives that benefit both men and women, such as environmental management programs and radio-delivered early warning signals.

How to help communities access climate finance.

In Uganda, empowering communities to access climate finance is not only essential for tackling problems brought about by climate change. It will also improve community resilience by advancing sustainable development and enhancing the welfare of disadvantaged groups.

To support the development of women and girls in the context of climate change and the development of gender responsive practices, Uganda’s Ministry of Water and Environment conducts participatory gender assessments. This involves examining gender differences, along with other social factors, to identify shocks, cycles, and trends (vulnerability), and assessing the results to help the institutions create mitigation, preparedness, and preventive programs that reduce vulnerability and increase resilience.

These aim to improve the effectiveness, as well as sustainability, of projects by incorporating gender considerations into climate financing initiatives. They have ultimately enabled greater resilience for women and girls in the face of climate change.

Disaster Risk Management (DRM) also plays a crucial role in making funds available for at-risk communities. Societies may prepare for and respond to catastrophes more effectively by investing in disaster risk reduction and management, which will ultimately lessen the impact of disasters and foster a safer and more resilient future. To effectively implement DRM priorities and increase resilience to climate-related disasters, access to climate finance is crucial.

Uganda’s DRM priorities are outlined in the nation’s Disaster Management Policy, which was adopted in 2011. These priorities include bolstering institutions and funding for climate change adaptation, creating multi-sectoral adaptation plans, putting programs in place to lessen the socioeconomic impact of natural disasters and climate change, and boosting community resilience to climate change. Municipal leaders are now able to create their own Disaster Prevention, Mitigation, and Response Committees, as well as create and carry out their own emergency and DRM plans, thanks to this support. Bilateral partners also offer capacity building help for disaster preparedness and management as well as post-disaster recovery, intended to increase women’s and vulnerable groups’ access to financing while acknowledging the difficulties these groups have after disasters. For instance, it makes sure that these groups are actively considered in risk assessment and resilience strategy development. This helps communities better prepare for disasters.

Climate finance has the potential to either worsen already existing gender gaps or to be an effective instrument for advancing resilience, gender equality and sustainable development for all members of vulnerable populations. Climate finance projects must, therefore, incorporate gender-sensitive measures for vulnerable communities. Women and disadvantaged communities must also be active players in climate financing projects. These steps will maximize the impact of resources and climate resilience initiatives, while achieving increased empowerment, equity, and inclusivity. Finally, while progress is being made, much more needs to be done to keep improving women’s access to finance in Uganda and around the world.

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The informal sector accounts for a large proportion of Uganda’s economy in terms of jobs: 91% of non-farm employment, with young people (those aged between 18 and 30) occupying 95% of those jobs. This is too big yet very important as 60% of skills developed in the informal sector are a key part of the transition needed for developing economies.

In the financial year 2017/18, approximately 51% of Uganda’s total GDP was generated in the informal economy, where businesses are typically unregistered and thus not captured by the tax system. While estimates of the size of the informal economy vary, there is a substantial amount of economic activity that goes untaxed.

The informal sector comprises more than just the unregistered street vendors and tiny businesses in the markets. It also includes established businesses that employ hundreds of people in industries as diverse as trade, manufacturing, agriculture, forestry and fishing, hotels, restaurants and other eating places, transport and storage services, mining and quarrying.

Uganda’s government is aiming to reduce the share of the informal sector from 51% of the economy in 2018/19 to 45% in 2024/25 by increasing the competitiveness of the private sector and promoting sustainable inclusive growth. As such, it has put in place strategies to enable taxation of the informal sector. These taxes are both direct and indirect through formalization to push firms and individuals into the tax net.

Many businesses have been encouraged to formalize given the compensation received based on Value Added Tax (VAT) refund compared to the benefits of delivered public services. This has strengthened citizens’ tax morale, thus contributing to reducing the informal economy. The VAT refund has been done through the Electronic Fiscal Reporting Integrated System (EFRIS) where the process of application and verification has been streamlined.

Formalization encourages business growth, creates a better business environment, and helps to build a culture of tax compliance. Many businesses continue operating informal systems, yet those that have formalized keep many of their operations informal. One study reports that the legal environment plays a significant role in explaining tax evasion and informality.

Strategies to increase formalization

The government has put in place best practices to reduce the size of the informal sector and increase taxation. There are mandated organizations such as the Uganda Registration Service Bureau (URSB), which ensures that businesses obtain legal Identity/status by acquiring trade names. An e-licensing portal makes it possible for potential investors anywhere in the world to get information easily on any license that they need to operate from whichever part of Uganda in any sector.

The Kampala City Council Authority (KCCA) has reported the highest revenue collection growth of 16% in the financial year 2021/22. This was attributed to automated or digitized revenue processes, an e-cities system and identification of eligible taxpayers who previously were not paying taxes. This expanded the tax base, vigorous taxpayer sensitization campaigns using electronic, print media and workshops to educate citizens, and formation of a special unit to deal with large taxpayers.

The Uganda Revenue Authority (URA) introduced automation of the tax system, which eliminates corruption by building tax compliance and winning public confidence through improved service delivery. Tax procedures are simple and transparent. Tax payers are also educated on tax laws and collection systems, which has enabled them to know their obligations.

The challenges still faced

Despite these strategies, Uganda still has a thriving informal sector of up to 80% of the economy, which leaves the burden of paying taxes to only 20% in the formal sector. This has the consequences of overburdening taxpayers, leading to tax avoidance and evasion, shrinking the tax base, and further widening the informality gap.

A recent assessment shows that despite the government’s efforts, there is still little awareness of digitization initiatives such as e-tax and other innovations. There are also infrastructural impediments such as poor internet and power connectivity that limit the innovations.

The persistence of informality is also attributed to lack of information on registration fees by non-registered businesses, and the number of days it takes for registration. In addition, the country lacks a uniform identification system for registered businesses, making it difficult to share and compare information across different agencies. Agencies are also at different levels of automation, with the majority still operating manual registers.

Full enforcement of taxation on the informal sector will increase labor productivity and output by reducing economic distortions. But it is unlikely that taxing the informal sector through formalization will bring in significant tax revenues in the short to medium term.

In general, businesses’ decisions about whether to formalize are based on several factors, such as analysis of the costs (which can include higher taxes) and benefits (such as growing the business through official advertising and access to credit markets). The various business constraints have implications for tax evasion and informality.

Empirical evidence shows that businesses tend to operate at a bigger level of informality when faced with transport, macroeconomic, and inadequately skilled manpower challenges. Further research shows that there is very low tax morale among small to medium-sized enterprises (SMEs) given that tax compliance attitudes are influenced by trust, knowledge of the tax regime, perspectives on public goods and service delivery, fairness and the authorities’ power in enforcing compliance.

While this sector presents a significant source of revenue considering its contribution to the share of national income, its potential has not been exploited in Uganda as there are still gaps that need to be filled – especially when it comes to registration and formalization.

Some of the government’s stringent measures are still frustrating small businesses. Therefore, encouraging tax compliance demands not only lowers costs but also strengthens the potential benefits of formalization from increased security to new economic opportunities.

The most straightforward administrative strategy for improving informal sector taxation is to reorganize tax administration and strengthen monitoring to provide a more focused incentive for administrators to target small firms and build digital financial literacy for the informal sector.

This series is organized in partnership with CERDI, UCA, FERDI, and the conference team at GDN. The guest editors for this series are Grégoire Rota-Graziosi, director of the Centre d’Etudes et de Recherches sur le Développement International (CERDI), University Clermont Auvergne, and Anne-Marie Geourjon, program manager at FERDI, associate researcher at CERDI-Université Clermont Auvergne and an expert for the International Monetary Fund in tax policy and customs administration.

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