The widespread image of the resource-rich yet sclerotic African economy, which is characterised by an overdependence on commodity exports and an underdeveloped domestic market, is a stereotype that Henry Oryem Okello, Uganda’s minister of state for foreign affairs, has been keen to distance his country from.

Oil discoveries in the Lake Albert Basin to the west of Uganda in 2010 sparked a bidding war among oil majors, including Chinese and French firms Total and China National Offshore Oil Company, but Mr Okello insists that while international attention has focused heavily on Uganda’s hydrocarbon exports, it would be a mistake to attribute its robust growth solely to its oil sector.

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Structural growth

Uganda’s GDP growth accelerated from 4.4% in 2012 to 4.9% in 2013, according to the African Development Bank (AfDB). Mr Okello maintains that far from being driven solely by greenfield FDI in the oil sector, the infrastructure sector has been at the heart of the country’s growth.

“Uganda has been one of the fastest growing economies not only in Africa but the world, and infrastructure has played a big role in this,” says Mr Okello. Pointing to the government’s decision to invest in its infrastructure, Mr Okello says that Uganda is currently at a critical juncture as it strives to reach its middle-income target by 2030. Thus investors that adopt a long-term view when investing in the country’s mega-infrastructure projects will be well placed to benefit from significant returns over the long term.

“Uganda was upgraded to a B rating by Fitch, the credit ratings agency, as the government has engaged in a combination of infrastructure projects in energy, roads and railways to ensure Uganda maintains this rating,” says Mr Okello. “To reduce the cost of the transportation of goods we are in the process of building new roads and we are also in the process of constructing three dams across the country, which will collectively have the capacity to generate 1200 megawatts of power.”

Dangerous ground?

The government’s efforts to tighten Uganda’s fiscal and monetary position, and its proactive attempts to develop an internationally competitive workforce by investing in a host of healthcare and educational schemes, led the AfDB to predict that the country's real GDP growth would reach 5.5% in 2014. But, while the government’s initiatives have been notable, the country’s consistently low polling on several international indicators, including the World Bank’s Doing Business report, which downgraded the country from 126th to 132nd place in the 2014 ranking, reveals that these changes continue to be limited in their impact.

While Mr Okello concedes that addressing Uganda’s structural weaknesses will take time, he maintains that foreign investors that judge the country solely on such rankings risk misconstruing a complex reality, which, he says, is positively evolving on the ground.

“The World Bank downgrading was a bit unfair,” says Mr Okello. “It’s important to note that part of this decision was a reflection of developments in the region, which have nothing to do with Uganda. The recent [terrorist] attacks in Kenya, led [countries such as the UK] to post travel warnings for Uganda. This is unfortunate as it is important for those that intend to do business in Uganda to look at it as an individual entity in a larger region."

Figures from greenfield investment monitor fDi Markets show that FDI inflows into the country peaked at $7.8bn in 2010 – buoyed by the country's hydrocarbons discoveries – but have declined in recent years, with just $752m recorded in 2013. Nevertheless, Mr Okello remains convinced of the country's investment potential.

"Risks do exist, but the opportunities are enormous," he says. "Additionally, companies in places such as London, which are adopting an extra-cautious approach to doing business in Uganda, may lose out to India and China. If they [bypass] Uganda, the Chinese will come here and offer similar products and investors from Europe and the US can really lose out on this growing opportunity.”