Weighing potential returns against Losses of investing in Uganda

by Christopher Kiiza
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For any investor to make a final decision to put their money on ground, they strike a delicate balance between opportunity and risk, carefully weighing potential returns against the possibility of losses.

Investors often consider political and regulatory stability, economic strength and growth characterized by high GDP growth rates and low inflation, currency stability with predictable exchange rates, infrastructure and resource availability such as transport and energy networks among others, which combined make a conducive investment environment.

Finance Minister, Matia Kasaija says government has put in place a conducive investment climate, and made Uganda one of the best investment destinations.

 “Government has undertaken significant reforms to streamline processes, reduce bureaucratic hurdles and improve the general environment. Our goal is to make it easier for investors to set up and operate businesses in Uganda,” he says.

Uganda has hosted the East Africa Business and Investment Forum in Kampala as a side event of the Non-Aligned Movement (NAM) Summit – a forum of 120 countries and the second largest grouping of states after the United Nations with 55% of the global population.

At the event, President Museveni represented by Vice President, Jessica Alupo rallied investors from across Africa and beyond to tap into the immense investment opportunities in Uganda and the East African region.

“Uganda’s US$ 50 billion economy enjoys market linkages within the US$305 billion East African Community (EAC) economy – the fastest growing and most diversified economic bloc on the African Continent. Uganda is centrally located, providing access to the regional markets of the EAC, the Common Market of East and Southern Africa (COMESA), and the Africa Continental Free Trade Area (AfCFTA) with over 55 Member States. The African Continental Free Trade Area created a market of 1.4 billion consumers, making it the ideal partner for trade and investment. Therefore, the Agreement on Africa Continental Free Trade Area will increase trade among Africans by about 33 percent and boost investment in Africa,” Alupo said.

According to Bank of Uganda, Uganda’s economy is projected to continue recovering, with growth accelerating from 5.2% in FY2022/23 to 6.0% in FY2023/24, supported by the continued recovery of activity in the industry, agriculture, construction, and services. 

Similarly, Uganda’s GDP per capita, which according to Alupo, now stands at US$1,100, is “fast rising” and thus promising a sustainable market for local production of fast-moving consumer goods and services, making the country highly rewarding for Foreign Direct Investment (FDI).

On account of prudent macroeconomic management, government says Uganda continues to enjoy a stable macroeconomic environment characterized by low inflation (now at 2.6%), stability of the national currency, the shilling having registered the lowest depreciation rate against the dollar among all other currencies of the East African region.

Alupo says “Uganda’s economic outlook is very optimistic mainly because of the consistent support to the private sector through supportive policies that create a business-friendly environment.”

Market Availability

Uganda is a member of the East African Community, which has a population of over 300 million with a combined GDP of US$ 305 billion.

This offers a large market for exports within the region, and a growing middle class.

However, the East African regional market has had its fair share of challenges created by the very member countries of the regional bloc.

These include, the non-tariff barriers, complex regulations and inconsistent border procedures such as the recent pounding of Uganda’s maize trucks to South Sudan, informal cross-border trade flourishes, smuggling, the recent Rwanda – Uganda border closure which discourage regional trade and investment.

Others include imposition of sanctions against regional goods such as the recent Kenyan ban on all Ugandan poultry and diary products, political tensions such as the one between Rwanda and DRC among others.

On a positive note, Uganda has trade deals with China and India and investors can access these markets by domiciling in Uganda.

Uganda also has a good working and living environment having been rated as the 3rd most welcoming country in the world and 4th best country in the world.

Additionally, Uganda is one of the most open economies to FDI with are no restrictions on

ownership of investments, movement of capital or foreign exchange.

Uganda is a liberal economy with open trade policies and a liberal investment regime, and according to government, all sectors are open for investment.

“The country allows free movement of exports and imports and free movement of capital with unrestricted transfer of dividends,” Alupo told investors at the East Africa Business and Investment Forum in Kampala.

The Vice President assured investors of high return on their investment in Uganda. 

“For example, agribusinesses, unlike many other jurisdictions, is very profitable here, with an average return on investment of about 14 percent. The current heavy investment in infrastructure is lowering the cost of doing business especially in transportation and energy, and creating business competitiveness. Favourable medium term economic growth prospects of at least 7% per annum, supported by infrastructure development, skilled labour force, and abundant natural resources.”

Areas of Investment

Uganda is a resource rich country, which provide a significant opportunity for exports and light manufacturing. 

These include oil and gas with commercial

production scheduled to start in 2025, Beryl, Chromite, Lead, Lithium, Silver, Zinc, Kyanite, Feldspar and Diatomite, Manganese, Diamond, uranium, iron ore, Vermiculite, Limestone and marble, gold, graphite, aluminous clay rich in Rare Earth Elements (REE), Phosphate and Iron.

The Minister of Energy and Mineral Development, Ruth Nankabirwa presented to the Forum the investment opportunities in Uganda’s energy sector.

“All the minerals that you need, we have them in Uganda. Add value, transfer technology to our people, give our people jobs, you will be in Uganda forever.”

Nankabirwa reiterated Uganda’s position that it will not abandon the exploitation of its oil resources despite the pressure from climate activists and global powers.

“If the big economics use petroleum to develop, why not Africa. We still have other areas which need exploration; Moroto – Kadamu where oil sips are on the ground. You can really see oil. You can see gold when you are there. So, we are continuing to issue licenses for oil exploration,” she said.

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