Uganda’s urban economy is feeling the pinch of persistent fuel price hikes, with businesses across major towns grappling with rising fuel and transport costs and reduced consumer spending.
While the government insists that measures such as direct fuel imports through the Uganda National Oil Company (UNOC) will stabilize prices in the long run, the short-term reality is hitting hard.
Transport Costs Skyrocket as Fuel Prices Climb
Transport costs have become increasingly unpredictable. In urban centres like Kampala, Entebbe, and Mukono, public transport fares change frequently sometimes on a daily basis driven by fluctuating pump prices.
A commuter who pays UGX 5,000 to Entebbe today may be asked for UGX 6,000 tomorrow. The volatility, largely influenced by global oil prices and exchange rate pressures, is disrupting daily life and squeezing business margins.
A recent market survey by Business Times Uganda shows that fuel prices in Kampala have increased, with petrol and diesel now selling at noticeably higher rates depending on the fuel station. This marks a significant rise from the prices recorded in December 2024.
Major fuel companies such as TotalEnergies, Shell, and Stabex International dominate the market, operating thousands of outlets countrywide. Despite increased competition and growing retail footprints, there has been no significant drop in prices.
Business Costs and Profit Margins Shrink
Rising transport costs have had a direct impact on product distribution and supply chain logistics. Small and medium-sized enterprises (SMEs), which rely heavily on boda bodas and taxis for deliveries and procurement, are experiencing a cost squeeze.
Retailers and traders who operate on thin profit margins are being forced to either absorb the extra costs or increase their prices both of which are hurting competitiveness and demand. In some instances, businesses are opting to reduce operational hours or cut down on workforce to stay afloat.
Urban Consumers Feel the Squeeze
The cost of commuting has made urban life more expensive for ordinary Ugandans. Public transport operators, including taxi and bus associations, frequently revise fares to match pump price increases.
The Uganda Taxi Operators and Drivers Association (UTODA) has on several occasions petitioned the Ministry of Works and Transport to regulate fuel pricing to protect both operators and commuters.
This dynamic has had a knock-on effect on urban productivity. Some workers are now choosing to work from home when possible or relocate closer to their jobs to save on transport costs.
In sectors like retail and hospitality, which rely on physical presence, foot traffic has declined, reducing sales volumes.
Government’s Intervention Through UNOC
In response to persistent public concern over fluctuating fuel prices, the Ugandan government implemented a direct fuel importation strategy in early 2024 through the Uganda National Oil Company (UNOC).
The policy aimed to stabilize fuel prices and ensure a reliable supply of petroleum products by cutting out intermediaries and purchasing directly from international suppliers.
According to UNOC, the long-term objective of this initiative is to promote price stability and protect Uganda from global supply chain shocks.
However, despite these assurances, consumers have yet to experience significant relief at the fuel pumps.
UNOC attributes this increase to temporary logistical disruptions, especially involving fuel transportation routes through Kenya.
These disruptions have caused delays and raised transport costs, which in turn have driven up pump prices.
Despite the rise in prices, UNOC maintains that fuel availability across Uganda remains stable. Nevertheless, critics argue that the expected benefits of the government’s direct importation strategy have yet to trickle down to ordinary Ugandans.
Increase in Fuel Stations, But No Relief
Uganda has seen a significant expansion in the number of fuel stations, with new players entering the market alongside legacy brands like Shell and TotalEnergies. Stabex International, in particular, has become more visible in both urban and rural areas. Yet, the increased presence has not led to meaningful price competition.
Stabex International petrol stations remain a common sight across Uganda, despite ongoing concerns over fuel pricing and affordability. (Courtesy Photo)
Most fuel stations maintain a narrow pricing band dictated by market conditions and regulatory frameworks. Taxes including import duties, Value Added Tax (VAT), and fuel levies still constitute a large portion of the final pump price, limiting the ability of suppliers to offer discounts.
Businesses Adjusting Strategies for Survival
Despite the challenging environment, some businesses are adapting to minimize the impact of transport costs. A growing number are shifting to digital platforms to reduce physical delivery needs. E-commerce players are optimizing delivery routes, using data analytics to cluster orders geographically.
Others are adopting energy-efficient logistics or partnering with third-party courier services such as Maersk that offer bulk transport solutions.
Restaurants and supermarkets are reducing free delivery zones and implementing minimum order values to protect margins.
In the manufacturing sector, companies are considering relocating production facilities closer to their raw material sources or major markets to cut down on distribution expenses.
Future Outlook: Hope Lies in Policy and Innovation
There is cautious optimism that Uganda’s fuel pricing will eventually stabilize, especially if the government strengthens the supply chain under UNOC and addresses inefficiencies in the energy import system.
In the meantime, economists warn that sustained high fuel and transport costs could slow urban economic recovery and delay national growth targets.
The Ministry of Finance, in its FY2025/26 budget, highlighted the importance of investing in public infrastructure, including mass transport systems, to mitigate these effects.
There is also growing interest in alternative energy sources and fuel-efficient technologies. Companies are exploring hybrid fleets, electric motorcycles, and carpooling models to cope with high energy costs.
Start-ups in the mobility tech space may also play a transformative role in reshaping urban transport affordability.
Uganda’s businesses are at a crossroads, caught between rising fuel costs and the need to remain competitive in a sluggish urban economy.
While government interventions offer a glimmer of hope, the immediate burden of transport volatility remains a pressing challenge. It is now up to entrepreneurs, policymakers, and industry players to innovate and collaborate for cost-effective, sustainable solutions.