Uganda’s investment climate presents both important opportunities and major challenges for U.S. investors. With a market economy, ideal climate, ample arable land, a young and English-speaking population, and ongoing development of fields containing at least 1.4 billion barrels of recoverable oil, Uganda offers numerous opportunities for investors. In 2022, Uganda lifted all restrictions that had been imposed to curb the spread of COVID-19, which briefly inspired confidence in the economy, but prospects for economic recovery fell following rising commodity prices caused by supply chain shocks and the effects of Russia’s war in Ukraine. In 2022, inflation peaked at 10.7%, the highest rate since August 2012, because of surging fuel prices that reached historic highs, contributing to high transport prices, higher production costs, and eventually a tightening of monetary policy by the Bank of Uganda (BOU). In the Fiscal Year (FY) 2021/22, Uganda’s economy grew by 4.7%, a slight improvement from 3.5% in FY 2020/21. According to the BOU, Foreign Direct Investment (FDI) increased by 37% to $1.4 billion in 2022 compared to $911 million in 2021. The growth in FDI was influenced by oil sector project-related spending. The BOU forecasts that pre-oil investment will average $2 billion annually until first oil is achieved in 2025. The ongoing investment in drilling rigs and the oil pipeline also have large import components.
Uganda maintains a liberal trade and foreign exchange regime. Uganda also sustained liberal policies even as commodity prices rose, and policymakers ignored political pressure to implement a subsidy regime to cushion the population from rising prices. In 2022, the IMF approved the third tranche of the Extended Credit Facility (ECF) to the government to help the country deal with the COVID-19 crisis and boost private-sector led growth. Uganda received the first tranche of $258 million in June 2021, the second tranche of $125 million in March 2022, and the IMF approved the third tranche of $240 million in December 2022. The ECF conditions included the GOU’s implementation of reforms on increased social spending, ensuring debt sustainability, and improved governance. As the economy continues to recover to pre-pandemic levels, Uganda’s power, agricultural, construction, infrastructure, technology, and healthcare sectors present attractive opportunities for U.S. business and investment.
President Yoweri Museveni and government officials vocally welcome foreign investment in Uganda. However, the government’s actions do not always align with its rhetoric. The closing of political and democratic space, poor economic management, endemic corruption, growing sovereign debt, weak rule of law, growing calls for protectionism from some senior policymakers, and the government’s failure to invest adequately in the health and education sectors all create risks for investors. U.S. firms often find themselves competing with third-country firms that cut costs and win contracts by disregarding environmental regulations and labor rights, dodging taxes, and bribing officials. Shortages of skilled labor, a complicated land tenure system, and increased local content requirements also impede the growth of businesses and serve as disincentives to investment.
An uncertain mid-to-long-range political environment also increases risk to foreign businesses and investors. President Museveni was reelected in January 2021. He has led Uganda for more than 36 years and appears to have no plans to step down. Domestic political tensions and restrictions on democratic institutions continued following the 2021 elections. Parliament recently passed the Anti-Homosexuality Act of 2023, which, if assented by President Museveni will further criminalize LGBTQI+ individuals. Many of Uganda’s youth, a demographic that comprises 77% of the population, openly clamor for change. However, President Museveni has not provided any indication that he or his government are planning reforms to promote more inclusive, transparent, and representative governance.
On the legislative front, Uganda’s parliament passed amendments to seven existing laws to remove Uganda from the Financial Action Task Force (FATF) gray list. The amendments to Trustee Incorporation (Amendment) Act 2022, The Partnerships (Amendment) Act, Anti-Terrorism (Amendment) Act 2022, Insolvency (Amendment) Act 2022, Cooperative Society (Amendment) Act 2022, Anti-Money Laundering (Amendment) Act 2022, and Companies (Amendment) Act 2022 aimed at improving anti-money laundering and combatting the financing of terrorism (AML/CFT). Some of the amendments include improved identification of beneficial owners and greater regulatory oversight including powers to impose levies on entities or persons violating AML/CFT provisions.
|TI Corruption Perceptions Index||2022||142 of 180||2022 Corruption Perceptions Index: Explore the… – Transparency.org|
|Global Innovation Index||2022||119 of 132||2022 Global Innovation Index|
|U.S. FDI in partner country ($M USD, historical stock positions)||2021||USD 81 M||Bea: Uganda – International Trade and Investment Country Facts|
|World Bank GNI per capita||2021||USD 760||GNI per capita, Atlas method (current US$) – Uganda | Data (worldbank.org)|