Achieving stable and consistent annual economic growth is every government’s goal. According to World Bank statistics, Uganda’s Gross Domestic Product (GDP) growth averaged 7.3 percent between 2000 and 2010.
However, between 2011 and 2014 there was a slump with average growth numbers of 4.3 percent recorded. This was due to economy instabilities such as the high interest rates, rocketing inflation and depreciation of the Uganda Shilling which stood in the way of foreign direct investment, savings and investments.
In 2015, growth improved to 5.3 percent. The figure dropped to 4.8 percent despite projections of 5.1 percent in 2016. The economy was greatly hurt by the depreciation of the Shilling and a drop in investments due to the uncertainties of the February 2016 general elections. Uganda’s rapidly growing population (estimated at over 40 million) vis-à-vis the low private sector consumption does not favour growth either.
Forecasts for 2017 stand at 5.8 percent though growth has declined by 0.2 percent in the first quarter of 2016/17.
Based on the above, it can be noted that in as much as the Ugandan economy is growing, this growth is at a much slower pace than in the past.
The country’s GDP is estimated at $25b (Shs 89 trillion) and its biggest contributors are agriculture, the service sector (telecommunications and transport) and industry (mining, manufacturing and construction).
However, with Uganda’s growing population there is great need to improve per capita income through enhanced economic growth.
Oil and gas/petroleum, tourism, ICT, manufacturing are the major industries that could shape the economy in the future.
Oil and gas/petroleum
Uganda’s oil and gas sector has transitioned from the exploration and appraisal phase to the development phase in preparation for sustainable production of the petroleum resources that have been discovered in the country. According to the Directorate of Petroleum, 21 oil and gas fields have so far been found in the Albertine Graben. Petroleum resources in these areas are estimated at over 6.5 billion barrels of oil in place with 1.5 billion recoverable barrels. There is also 350 cubic feet of gas.
By the time production starts, the Uganda National Oil Company (UNOC) that is in charge of the country’s commercial interests, expects revenue earnings in the range of Shs5 trillion (US$ 1.5billion) annually.
Cumulative foreign direct investment in petroleum exploration alone so far is estimated at over US$ 3 billion and this figure is expected to grow in the coming years.
China National Offshore Oil Corporation Uganda Limited (CNOOC (U) Ltd), Total E&P Uganda B.V and Tullow Uganda Operations Pty Limited are the three main players involved in the exploration and production.
The government is tackling the development of a refinery and construction of pipelines in preparation for production and this is set to attract a host of more investors.
The development of a 60,000 barrels of oil per day (bpd) refinery is underway at greenfield in Kabaale, Hoima district to secure the East African regional market. The project includes a 201 km refined products pipeline from the refinery to Buloba near Kampala. However the refinery will be done in two phases of 30,000 bpd. The first is set to be completed in 2020. Furthermore, in a bid to export crude oil, the planning and development of a 1,400-kilometre (800-mile) pipeline through Tanzania to the south of Lake Victoria through to the port of Tanga is underway.
With strong players such as CNOOC (U) Ltd, Total E&P Uganda B.V and Tullow Uganda Operations Pty Limited, the sector is bound to attract more investors.
This sector, if well-handled will be a blessing to Uganda’s economy as it comes with thousands of jobs, massive infrastructural development in the form of schools, roads, business centres, hospitals and enhanced energy supply; generally the establishment of a metropolitan area in the Albertine region.
If handled well, the success story of the petroleum industry will come with increased local revenue which means less dependence on foreign aid.
As is the case with many resource-rich African countries, windfalls from oil can trigger corruption and instability from unfulfilled expectations among the population, often referred to as the oil curse.
The failure to implement the policy framework governing the sector will also lead to the ultimate curse.
The environmental risk associated with petroleum is critical. If not well handled, spillovers will be costly to human life and the environment.
Tourism is one of Uganda’s biggest exports. The country boasts a diverse culture, landscape, flora, and fauna. Uganda received over 1.5 million tourists in 2016 and the tourism industry is increasingly becoming instrumental in socio-economic development of the country. The sector is a major contributor to employment, revenue generation, and foreign exchange earnings.
Tourism adds approximately US$2.5 billion to Uganda’s GDP and approximately US$1.5 billion in foreign exchange earnings annually. This translates to 9% of national output and 26% of export earnings.
Proper planning and commitment of resources in the sector will yield fruitful economic benefits. In 2016, the Uganda Tourism board hired three foreign Public Relations firms to market the country’s tourism industry in North America (Preferred Hospitality Group (PHG) Consulting), United Kingdom and Ireland (Kamageo) and German speaking Europe (KPRN). The role of these firms is to advertise the country in those respective countries with a bid to increase the tourist numbers trickling into the country which will in turn increase revenue and create employment for the local populace.
The improvement of quality of service to both local and international tourists should be key.
The industry boasts of classified 61 hotels all over the country; five of which have received five star rating. However, the government and private sector should dwell on the construction of more infrastructure that conform to international standards.
Uganda Tourism Association, Uganda Hotel Owners Association, Association of Uganda Tour Operators, the Association of Travel Agencies, Uganda Tour Guides Association, Uganda Wild life Authority, Uganda Wildlife Education Centre, Civil Aviation Authority.
Oil and gas exploration production in the Murchison Falls and Queen Elizabeth national parks, if not done in a highly-responsible manner, will not only endanger species but also hinder tourism.
The low involvement of the Ugandans in the industry also poses a challenge to the industry. There are more foreigners than locals visiting the tourist sites in the country. The government should be create awareness towards the benefits of locals embracing the sector. Subsidizing the cost/charges on the locals can be one way of getting them involved.
Poor air transport and inadequate hospitality industry skills.
Information and Communications Technology (ICT)
The ICT industry has quickly morphed into a big player in the growth of Uganda’s economy. The industry plays a great role in the development of the financial services sector, telecommunications, public financial management and scientific research and innovation and e-Government. According to Uganda Bureau of Statistics (UBOS), ICT raised an estimated Shs500 billion in tax revenue collection in 2016 and contributed an estimated average of 2.3 percent in GDP between 2015 and 2016.
The industry is driven by the expansion of mobile telephony and mobile broadband services. With an estimated 24 million telephone subscribers and 14 million internet users the government has embarked on the establishment of ICT Parks at Namanve Industrial Park, Mukono and Entebbe.
The Parks will encompass an Ultra-Modern Information Industry Integrated Area, National Electronic Strength Strategy, National Electronic Information Industry, Business Process Outsourcing, Internet Data Center, Incubation and Innovation Center. The facility is expected to create self-employed and self-innovation platforms for young people and entrepreneurs once it is operationalized. An estimated 20,000 Ugandans will access employment opportunities under the project.
The government decided to revise its education curriculum, teaching ICT right from secondary school in order to prepare the populace for the increasing demand in the ICT industry.
The government also introduced the Science Innovations Fund as part of a strategy to build the country’s scientific and technological capacity to facilitate its development efforts on a sustainable basis. It is a UGX 25 billion five-year project meant to support local innovators.
A part from providing employment, which means better per capita income, these parks will be a lucrative attraction for investors; thus increasing foreign investment earnings.
Increased ICT infrastructural development will come with better internet user penetration. The government is advocating for lower costs of internet use. This will aid ICT innovations and stimulate investment growth of e-services such as mobile money, e-wallet, pay way and their attendant functions.
Infrastructure has continued to play an instrumental role in Uganda’s economic growth. A well-developed transport infrastructure system contributes immensely to increased productivity by facilitating efficient connectivity and easing the movement of goods and the provision of services. This means more revenue collection and more development/projects.
The government of Uganda has through public-private partnerships earmarked over US$ 600 for the expansion of the Entebbe International Airport and development of six upcountry airports in Kasese, Gulu, Kisoro, Kabale, Kidepo and Arua into regional airports to boost tourism, and oil production and distribution.
The construction of Hydropower Projects in Bujagali, Isimba, Karuma and Ayago to the tune of over 1600 Megawatts is underway.
The government is also set to invest $2.3b (Shs8.2 trillion) in the Standard Gauge Railway project running from Malaba to Kampala (273km).
This modern railway system will help cut transportation costs and ease trade. The cost of a 32-tonne container to the Kenyan port of Mombasa will cost KSh165,000 (UShs6m) by rail in one day compared to KSh350,000 (Shs12m) by road in 21 days.
These infrastructure improvements will enable Uganda to take full advantage of the benefits of regional integration with other East African Community partner states. Uganda’s expected electricity surplus will be exported to neighboring countries; and better roads, bridges, railways, and new pipelines will facilitate the movement of citizens across countries and the transportation of goods to seaports.
Timely delivery of infrastructural projects has been a major problem. For example, the 21km dual carriage Kampala Northern bypass has taken over a decade to complete. Such delays and shoddy work by contractors are likely to bring up the cost of the projects and reduce on their contribution to economic growth.
Corruption is also a major challenge in the sector since it attracts a lion’s share of the government’s budget. Previous administrators of the Uganda National Roads Authority (UNRA) have been implicated in corruption scandals.
Whereas agriculture may be the biggest contributor to Uganda’s GDP, manufacturing would be a force to reckon with if prioritized. Uganda’s industrial sector is mostly agro-based, which accounts for 40 percent of manufacturing.
A 2014 study by the African Development Bank found that the Uganda’s manufacturing sector was more competitive than that of other East African countries, the only problem being low priority and low public investment to facilitate the sector.
Venturing into agro-processing given the abundance of raw agricultural products will increase Uganda’s capacity to earn foreign aid, reduce foreign commodity dependence and create job opportunities for Ugandans.
Kiira Motors Corporation’s launched itself as Uganda’s first automotive original equipment manufacturer. The company is currently in pursuit of investors to raise US$350 million for the construction of a new vehicle assembly plant at the Jinja Industrial and Business Park in Eastern Uganda.
The biggest bottlenecks to this aspect are inadequate physical infrastructure (transport, energy, and communication infrastructure), and lack of local technical skills.
In order for the government to transform the economy and accelerate growth, there is need investment in strategic areas that will attract local revenue, create jobs, increase foreign investment, and reduce dependence.