Concerns are growing within Uganda’s textile industry following allegations that Grace Textile International Investment Ltd, formerly known as Grace Foam, received government-backed tax support that was not extended to competing manufacturers.
The controversy stems from reports that the Ministry of Finance authorized the payment of certain import-related taxes on behalf of the Mbale-based textile manufacturer, a move that rival firms claim has created an uneven competitive environment within the sector.
According to documents cited by industry stakeholders, the Ministry of Finance reportedly directed the Uganda Revenue Authority (URA) to clear imported textile inputs destined for Grace Textiles and submit the corresponding invoices to the government for settlement. The arrangement was reportedly intended to support the company’s operations and promote local textile production.
However, competing manufacturers have questioned what they describe as preferential treatment. Industry players argue that while other firms continue to meet their tax obligations independently, Grace Textiles allegedly benefited from government intervention that reduced its operating costs and enhanced its market competitiveness.
Among the companies raising concerns is Sunbelt Textiles Ltd, which has reportedly questioned why similar support measures were not made available across the industry. Company representatives contend that equal treatment is essential for ensuring fair competition and fostering sustainable growth within Uganda’s manufacturing sector.
The issue gained further attention following reports that URA issued a tax demand notice to Grace Textiles seeking payment of outstanding tax liabilities reportedly amounting to billions of shillings. The notice is said to relate to obligations accrued after the period covered by the government support arrangement.
Critics have called for greater transparency regarding the criteria used to award tax incentives and other forms of government support to private investors. They argue that public disclosure of such arrangements would help dispel perceptions of favoritism and strengthen investor confidence by ensuring that all businesses operate under clear and consistent rules.
Government officials and representatives of the SINO Mbale Industrial Park have defended investment incentives as a legitimate policy tool for attracting foreign direct investment, creating jobs, and accelerating industrial development. They maintain that incentives granted to investors are intended to advance Uganda’s broader economic growth objectives.
Supporters of the policy point to increased production capacity, employment opportunities, and technology transfer associated with industrial park investments as evidence of the benefits generated through targeted government support.
As debate continues, industry observers are calling for a comprehensive review of Uganda’s investment incentive framework to ensure that it promotes both industrial expansion and fair competition among manufacturers.
At the time of publication, neither the Ministry of Finance nor the Uganda Revenue Authority had publicly announced the outcome of any formal investigation into th allegations. Consequently, the claims remain the subject of public debate, with stakeholders urging authorities to provide clarity on the issues raised.
Background
Grace Textile International Investment Ltd operates within the SINO Mbale Industrial Park and is among several foreign-owned manufacturing companies established under Uganda’s industrialization agenda. The company is engaged in textile production and related manufacturing activities serving both domestic and regional markets.
The allegations surrounding tax support have reignited broader discussions about the balance between attracting investment through incentives and maintaining a level playing field for existing businesses operating in Uganda’s manufacturing sector.
