Investment Climate in Uganda

Economy

Global Factors affecting the economy

  • Slow economic recovery in Europe. This has translated into lower demand for our export commodities.
  • Economic recovery in the USA. This has led to a reduction in capital flows to Africa, as investors prefer to invest in US markets.
  • Rise in interest rates globally. This has resulted in high cost of capital and borrowing.

 Regional and domestic factors affecting the economy

  • Civil conflicts in South Sudan , DRC and Somalia
  • Climate change and environmental degradation.
  • High interest rates and non-performing loans.
  • Undue Delays and inefficiency in execution of Government programmes and projects.
  • High rate of corruption.

The economic outlook
Uganda’s real gross domestic product (GDP) growth  driven mainly  by industry, services and public infrastructure investment was 4.7% in 2014, 5.3% in 2015 and  5.1% in 2016 and a moderate growth of 3.9% in 2017 . The moderate growth recorded during FY 2016/17 is a result of smaller increase in agriculture, forestry and fishing sector production due to the prolonged drought during the year. The growth in 2017 is lower than the projected growth of 5.5% but higher than Sub-Saharan Africa estimated growth rate of 1.4. The lower performance in 2016/17 is due to the slowdown in the economies of the trading partners, the current uncertainty surrounding post Brexit, the unresolved conflict in South Sudan, the delays in the implementation of major public infrastructure projects and the adverse weather conditions. The size of the economy is estimated at USD 25.7 billion in 2016/17. The economic growth for 2018 is projected at 5.8%.

Sector growth

Growth in agricultural output slowed to 1.3% in 2016/17 when compared to growth rate of 2.8% in 2015/16 due to unusually prolonged droughts. Agriculture employs over 70 percent of Uganda’s workforce. Industrial sector growth also dropped to 3.4% in 2016/17 when compared to the growth rate of 4.7% in 2015/16 due to the contraction in mining and quarrying activities.    Growth in Services also slowed to 5.1% when compared to 5.9% in 2015/16 as a result of marginal growth in trade and transportation, and contraction in financial services.  However aggregate demand grew by 2.7% in 2016/17 when compared to 1.0% in 2015/16.

International reserves and borrowing

Uganda’s international reserves at end December 2016 stood at US$ 3 billion, equivalent to 4.2 months of imports of goods and services which is close to the target of 4.5 months of import cover to be achieved in 2021 as agreed in the EAC Monetary Union protocol. Uganda’s external and domestic public debt amounted to USD 8.7 billion as of 31st December 2016 that is equivalent to 33.8% of our GDP. The future discounted public debt to GDP ratio stands at 27%.  The percentage of public debt is still sustainable as the percentage is lower than the threshold of 50% beyond which public debt becomes unsustainable.

 Projected economic growth

Uganda’s economy is projected to rebound to annual growth rates of 7% in the medium term provided the following are achieved;

  • Increasing production and productivity in the key primary growth sectors of agriculture, tourism and minerals, oil and gas;
  • Industrialization through value addition;
  • Enhanced private sector development; and
  • Increased public sector efficiency.

The economic development challenges in FY 2017/18 will include the uncertainty surrounding the recovery in global economic growth, weak commodity prices and geopolitical events in some of the key trading partners.

In order to achieve the economic growth, the government plans to do the following;

  1. Re-organizing agriculture sector in order  to increase production and productivity;
  2. Addressing the impact of climate change;
  • Harnessing the huge tourism potential ;
  1. Fast industrialization of the economy;
  2. Reforming the financial sector to provide long term capital at affordable cost
  3. Speeding up execution of government projects and programmes; and
  • Dealing with corruption officials in the public service that frustrate investors.

Overall, the government   remains focused in 2017/18 on containing inflationary pressures and on enabling growth by ensuring exchange rate stability, maximising domestic resources mobilisation and dealing with corruption. Headline inflation has risen to 6.8 % in 2017 owing to rising food inflation on account of unfavourable weather conditions. In 2018 the inflation is projected to average 6.0%.

Why invest in Uganda?

  • Foreign investors have access to land  for investment purposes
  • Uganda has achieved macro-economic stability with low inflation rate around the target of 5% and annual economic growth averaging 6% per annum;
  • Liberalised economy with free inflow and outflow of capital;
  • All sectors are liberalized for investment;
  • Uganda gives an investor access to Eastern African market and The Common Market for Eastern and Southern Africa (COMESA);
  • Uganda enjoys a unique location at the heart of Sub-Saharan Africa giving it a commanding base for regional trade and investment;
  • Rich endowment  of rainfall, fertile soils, and favourable temperature range;
  • Unexploited mineral resources and tourism potential 
  • Government is committed to private sector led economy;
  • Uganda has a good education system  that produces trainable human resources;
  • The country guarantees security of investment;

Political

Uganda is a Sovereign State and a member of the United Nations, African Union, the Commonwealth and a number of international organisations. The Constitution of Uganda provides for three branches of government namely the executive, the legislature, and the Judiciary with roles and powers of each of the Government properly spelt out. President Yoweri Kaguta Museveni under National Resistance Movement has ruled Uganda without interruption since in 1986. Yoweri Kaguta Museveni who has been credited with restoring relative stability and economic prosperity to Uganda since 1986 was in February 2016 democratically re-elected for another term with a vote of 60.62%.

Population

According to the 2014 National Population and Housing Census (Census) Uganda’s population stood at 34.9 million with average annual growth of 3.0%. The population is projected to reach 36.9 million in 2017. The population is expected to reach 54 million by 2025. Nearly half of the population is below the age of 15 years and the population structure is expected to remain youthful for the next fifteen years. Many Ugandans are now living longer and better lives as summarized below;

  1. Life expectancy today is 63 years, up from 48 years in 2002.
  2. Literacy rates for adults stand at 74% rising from 68% in 2002.
  • 79% of the population has access to safe water compared to 59% over the same period.
  1. Immunization of children against measles is 82% up from 62% fifteen years ago.
  2. Per capita incomes in real terms have more than tripled to USD 773 in 2016 up from USD 250 in 2002. This is despite an increase in population from 26 million to 36.9 million people.

Urbanisation        

Uganda’s urban population has increased rapidly from less than 1 million in 1980 to 6.4 million persons in 2014, indicating a more than six fold increase and estimated to be over 7 million in 2017. The percentage of Uganda’s population living in urban areas increased from 15.77% in 2014 to 16.1% in 2015 and stands at 19% in 2017. Uganda’s urbanisation rate stands at 5.43 % per annum an indication that Uganda is becoming urbanised at a fast rate.

Doing business in

The highlights of World Bank score of doing business in Uganda are summarised as follows;

Topics World Bank  2017 Rank World Bank 2016 Rank Change in Rank
Overall 115 116  

-1

Starting a Business 165 162  

-3

Dealing with Construction Permits 151 153  

2

Getting Electricity 161 168 7
Registering Property 116 118  

2

Getting Credit 44 42 -2
Protecting Minority Investors 106 101 -5
Paying Taxes 75 76 1
Trading across Borders 136 141 5
Enforcing Contracts 64 63 -1
Resolving Insolvency 111 104 -7

The government is the in process of creating conducive environment for doing business.

Credit Rating

In 2016, Standard & Poor’s credit rating for Uganda stands at B with stable outlook. Moody’s credit rating for Uganda was last set at B2 with stable outlook. Fitch’s credit rating for Uganda was last reported at B+ with stable outlook.

Remittances

Uganda keeps open capital accounts and the law imposes no restrictions on capital transfers in and out of Uganda. Investors can obtain foreign exchange and make transfers at commercial banks without approval from the Bank of Uganda in order to repatriate profits and dividends and make payments for imports and services.

Arbitration

Uganda’s legal system is based on English Common Law and a number of commercial laws aiming at regulating the conduct of business are in place. All commercial disputes are required to go through mediation to reduce backlogs in the court system and the Center of Arbitration for Dispute Resolution (CADER) can assist in mediating disputes. Uganda has created a Commercial Court to deliver an efficient, expeditious, and cost-effective mode of adjudicating commercial disputes. In order to increase transparency and efficiency an “e-court environment” has been established. The government is a signatory to the Convention on the Recognition and Enforcement of Foreign Judgments in which binding international arbitration of investment disputes is recognized. Pursuant to the Reciprocal Enforcement of Judgment Act, judgments of foreign courts are accepted and enforced by Ugandan courts where those foreign courts accept and enforce the judgments of Ugandan courts. Uganda is a party to both the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID) and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.

Key development challenges

  • Per capita income has been growing at only 2% annually compared with population growth of 3% per annum. This presents several challenges to future economic growth and structural transformation unless serious measures are taken to convert population growth into a population dividend;
  • Inadequate and unreliable power supply remains one of the largest obstacles to private sector investment;
  • Dealing with high rate of corruption;
  • Land fragmentation;
  • Uncertainty surrounding the recovery in global economic growth;
  • Weak commodity prices;
  • Geopolitical events in some of the key trading partners;
  • FDI flows and remittances; and
  • Excessive reliance on rain fed agriculture.

Corruption index

Uganda ranks number 151 least corrupt nation out of 175 countries and scored 25 points out of 100 according to the 2016 Corruption Perceptions Index reported by Transparency International. The government has given a commitment to decisively deal with corruption in the public service that frustrate investors.

Security

The security situation is generally stable around the country but one has to take extra care to avoid opportunistic crimes. The government has guaranteed to provide the peace and security across the country.

Unemployment and skilled labour

According to the National Household Survey 2012/13 the percentage unemployed in urban areas was 8% and 10% in rural areas. There is growing unemployment among the youth. The government strategy of enhancing agricultural production and productivity and increasing the pace of industrialization is expected to create a number of jobs to address the unemployment challenge among the youth.

Attitude to Foreign Direct Investment

Ugandan investment code and supporting policies, laws, and regulations have created a conducive investment climate. Uganda Investment Authority (UIA), a government agency, has the responsibility of attracting and assisting foreign investors. UIA operates a dedicated one-stop-center that helps investors to quickly comply with the investment code and the laws and regulations of Uganda. Uganda offers investment incentives for investors in four “priority” sectors of information and communication technology; tourism; value-added agriculture; and value-added investments in mineral extraction. Uganda also plans to attract investors to several industrial parks under development in various Uganda’s urban centres. Uganda Investment Authority has been mandated to establish twenty-two (22) Industrial and Business Parks (IBP’s) throughout the Country to create jobs and add value to locally available raw materials.The Namanve Industrial Park  on the outskirts of Kampala divided into four main industrial clusters: food processing, light industry and services, heavy industry, and  small and medium enterprises (SMEs)  has already attracted a number of investors. The government also provides generous incentives for industrial development. The country guarantees security of investment under the Constitution and the Investment Code 1991. Uganda is a signatory to main international investment related institutions including Multi lateral Investment Guarantee Agency (MIGA), Overseas Private Investment Corporation (OPIC) of US; Convention on the recognition and enforcement of foreign arbitral award (CREFAA), ICSID, TRIMS, GATS, and TRIPS.

Restrictions on Foreign investment

Ugandan law allows for 100 percent foreign-owned businesses and foreign businesses are allowed to partner with Ugandans without restrictions. There is no screening of foreign direct investment apart for general review of the application to ensure investors comply with the laws of the country and are accorded the necessary assistance.

Intellectual Property (IP) Rights.

Ugandan law protects intellectual property rights (IPR) and allows for investors to enforce their rights through the court system. Uganda Registration Services Bureau provides a standardized process for registering each type of intellectual property.  The enforcement of IPR however remains weak mainly due to lack of resources by the enforcement agencies. The laws enhancing the protection of the intellectual property rights include The Industrial Property Act, The 2006 Copyright and Neighboring Act and The 2010 Trademarks Act and The 2014 Industrial Property Act among others. The Uganda National Bureau of Standards (UNBS), the Uganda Revenue Authority (URA) and the Uganda Police Force (UPF) are responsible for enforcing the existing laws.

Natural Resources

The key natural resources include copper, cobalt, limestone, salt, gold, hydropower, arable land and tourism potential.

 

Information on Investment in Uganda

The key information on investment in Uganda is organised as follows

Uganda Vision 2040
Investment Incentives in Uganda
Investment Policy
Investment Climate
Land in Uganda
Tax Climate
Investment Facilitation
Facilitating Organisations
Business Environment
Taxation Treaties in Uganda
Economy of Uganda
Corruption in Uganda
Intellectual Property Rights
International Arbitration
Remittance Policies
Settlement of disputes
Uganda credit rating
Uganda Property rights
Urbanisation rate in Uganda
Attitude toward Foreign Direct Investment

 

Sources of information

http://www.worldbank.org

www.state.gov

www.afdb.org/

 

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