While Uganda’s booming hydrocarbons sector continues to dominate international attention – indeed the government’s move in early May this year to reclaim the Ngassa oil field in the west of Uganda after the UK-based firm Tullow Oil wrote it off as “uneconomical” called into question the viability of some of its oil reserves – Amelia Kyambadde, Uganda’s minister for trade and industry, remains keen to highlight that far from being dominated by one sector, Uganda’s growth has been highly diversified.
Pointing to government-led developments in the country’s infrastructure and manufacturing sectors, Ms Kyambadde maintains that government efforts in encouraging FDI through simplifying bureaucratic procedures and reining in the country’s fiscal and monetary policies means Uganda’s economic development over the short term will be increasingly diversified.
“Over the past two years we have focused on helping the private sector overcome Uganda’s constraints to growth,” says Ms Kyambadde. “We want to provide [business operators with] more roads, cheaper and reliable power, piped water, and accessible office and factory facilities.”
While the agricultural sector has traditionally been Uganda’s mainstay – the government estimates that agriculture accounts for 27% of the country’s exports – the sector remains over-reliant on smallholder farmers who lack the capital and regional access to export products including coffee, maize, spices, sugar and rice on a commercially scalable level. Yet Ms Kyambadde maintains that the government has been at the helm of developing the agro-processing sector which will offer the economies of scale to enable Uganda to competitively export its goods to neighbouring regional markets.
“While our regional partnerships have offered us a secure level of uninterrupted trade, we are yet to gain the maximum benefits from our agricultural exports because we are unable to process the raw materials in Uganda,” says Ms Kyambadde.
“We need more FDI in agribusiness so that we can process the goods and increase the value per unit of these tradeables. We are seeking investment in the refining and agro-processing sectors, in order to improve the shelf life of the products we wish to export, as well as improve our penetration into the west African market, which will help Uganda’s current account deficit. Additionally, our agreement with China to construct a standard gauge railway connecting Uganda, Kenya, Rwanda and South Sudan will further reduce the cost of trade in the region.”
Although the government’s efforts to develop investor confidence in Uganda's fiscal and monetary policies have significantly boosted its GDP growth – the country’s GDP accelerated from a low of 2.8% in 2012 to 5.2% last year, and the African Development Bank (AfDB) expects the country’s growth will increase further to 6.6% this year – a stubbornly high poverty rate and growing geopolitical risks have cast doubts on the country’s ability to continue its high growth over the long term. According to the AfDB, while Uganda managed to reduce its poverty rate from 24.5% in 2010 to 22.2% in 2013, economic gains remain concentrated among a select elite.
Additionally, fresh bouts of political instability in parts of nearby South Sudan and the Democratic Republic of the Congo pose another threat to the Ugandan economy as both countries are key trading partners. According to Ms Kyambadde's estimates, informal trade between South Sudan and Uganda peaked at an estimated $380m in 2013, while the value of formal trade fell 30% to $890m.
Yet Ms Kyambadde remains optimistic that governmental investment into Uganda’s workforce, as well as planned subsidies which aim to facilitate foreign investment into the country, will continue to make it one of the key investment destinations in east Africa.
“We also wish to build not just a workforce with technical skills, but a consumer base with effective demand,” says Ms Kyambadde. “Some investors are also unaware of government subsidies and tax cuts that have been implemented. For example, we now allow investors to import machinery for manufacturing plants tax free. I would also encourage investors to look at Uganda because it is the hub of the region and of Africa as a whole. Although we are landlocked, we are actually landlinked.”