27 April 2014

Uganda Plots for Investors

Despite challenges, Uganda is continuing to be one of the leading investment destinations in the region according to a new report on investment, which was commissioned by the Uganda Investment Authority (UIA) and the Uganda Bureau of Statistics (UBOS). Earlier reports such as the US's Investment Climate Statement on Uganda in 2012 highlighted issues such as bureaucracy, poor infrastructure, insufficient power supply, high energy and production costs, non-tariff barriers, corruption, and government interference in the private sector - all of which could be making Uganda a challenging investment destination.

However, Uganda has continued to attract investors and according to the various international reports Uganda's fastest growing sectors of the economy include the financial services, construction, manufacturing, transportation, telecommunications, energy infrastructure, and of recent oil and gas.

In 2012-13, UIA licensed 404 projects that generated 5,251 jobs out of the planned 9,656 jobs. The manufacturing sector remained the top job creator by yielding 2,877 jobs out of the planned 2,964 jobs accounting for 56.4 percent of the total jobs.

Agriculture emerged second - creating 882 jobs out of the planned 4,268 jobs. A look at the distribution of the investment by region indicates that most of the investments were concentrated mainly in Kampala attracting US$324 million.

Investments concentrating in Kampala can best be explained by the disparity in the availability of infrastructure facilities and access to market opportunities.

The trend however is changing with other regions especially the Northern and Western regions starting to attract major investments especially in the Mining and Quarrying sector.

However, growing impatience over a system of slow bureaucracy coupled with the poor rankings in international business reports could push back more investors to look for other destinations living Uganda behind despite the many incentives it offers investors.

In an interview, Frank Sebowa, the UIA executive director, when asked about the character of the Chinese investors, he told this writer, "The Chinese investors are rather impatient with the system of slow bureaucracy that is how I would say."

"The Chinese move on, rather they find a solution to any challenge they meet." He cited an interesting example with some company which is going to make motor cycle and eventually motor vehicle tires. They came and asked 20 acres of land, which UIA didn't have in the various industrial parks around Kampala. They went and bought it on their own and within a month they were ready to roll.

It is such a cases that need to look into critically before attracting investors who end up packing their bags and relocating to other countries like the case was with Africa's richest man Aliko Dangote who wanted to invest in Uganda but was frustrated because of both corruption and bureaucracy.

On how the Chinese business have managed in overcoming the investment hurdles in Uganda, the chairman of the Chinese Association in Uganda Jeff Lin told The Independent that as more and more Chinese investors are coming to Uganda, they need to quickly enlighten them on the way to do business in Uganda starting from how to register a business, starting up and also to educate them on how to follow the Ugandan law so they dont go against the law and also to understand the difference between themselves and their Ugandan counterparts.

Speaking at the 2014 UIA Investment Summit in Kampala recently, Sebbowa admitted that investors still complain about a number of challenges including accessing affordable credit for expansion and investment.

Responding to Sebowa's concerns at the summit, Central Bank Governor Emmanuel Tumisiime Mutebile re-assured investors of a stable macroeconomic environment backed by predictable information flow to enable them decide on where and when to invest in Uganda.

He said the Central Bank makes public its forecast for inflation one year ahead and that this enables the public to understand the monetary policy hence making it more effective.

Mutebile was optimistic that more competition would help curb the high cost of borrowing that has to some extent strangled private sector expansion because of lack of cheap expansion capital.

"I have also complained about the high interest rates, but as I speak now, banks such as Stanbic Bank have agreed to base their lending rates on the Central Bank Rate (CBR). I am sure you will see the cost of loans go down," he said.

Economists in Uganda's financial market have always been critical of the CBR saying it is reactionary rather than proactive as it is announced after inflation figures come out and yet it is supposed to be for controlling inflation.

The summit came as government of Uganda was in the final stages of passing the Public Private Partnership (PPP) Bill which is expected become law by the end of next month.

If passed, the PPP law would make the grossly lacking infrastructure across the country an attractive investment hotspot through structured modes where investors can partner with government and each other hoping corruption and bureaucracy will not delay the PPP's.

The summit was convened by the UIA under the patronage of Ministry of Finance, Planning and Economic Development.


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