As players in oil and gas sector registers more activity
Kampala, Uganda | PATRICIA AKANKWATSA | Foreign direct investment into Uganda rebounded in 2018 owed to positive growth in the economy and the prospective investments in the oil and gas sector.
Latest data from the Bank of Uganda shows that the country recorded a nearly 66.5% growth in FDIs to US$1.336bn last year, up from US$802.4 million in 2017 and US$ 625.6 million in 2016. This is the highest FDIs that the country has ever recorded.
Adam Mugume, the director for research at the BoU told The Independent by email that the country’s FDIs are projected to rise further in 2019 to about US$1.5 billion.
“This is partly a reflection of global economic recovery but also activities in the oil sector that have increased,” he said.
The global economy is projected to grow at 3.5% in 2019 and 3.6 % in 2020, 0.2 and 0.1 percentage point below last October’s projections, according to the International Monetary Fund.
But, in Uganda, the economy is projected to grow at 6.3% this year compared with 6.1% in June based on assumptions of a stable global economy, maintained private sector credit confidence and the planned investments in oil and gas sector, a head of production in 2023.
Emily Kugonza, the chairperson board of directors at the Uganda Investment Authority told The Independent that the growth trend in FDI is also supported by the growing confidence in the Ugandan market by foreign investors because of the policies that are being pursued.
“Our country globally is getting more known but I think there is more we can do in terms of marketing the country,” he said.
“If you look at the investment promotion, it is very meager and if we could access a little more resources in terms of facilitating our teams to market the country in conjunction with our foreign missions, I think we can be high there.”
Uganda’s attraction for FDIs grew from US$644.3million in 2005 to US$812.7 million in 2008 due to the prospects in the development of oil and gas sector.
However, in 2009, the country registered a 37.7 % decrease in FDI due to the effects of the global financial crisis that led to the cancellation of investments destined into the country and other parts of the world to meet the rising cost of living.
In 2010, the country witnessed initial recovery of FDIs peaking at US$1,159.1million in the subsequent year, in anticipation of the oil developments, whose vibrancy was cut short by the decline in the global oil prices and the delays in issuing of production licences.
Since the discovery of oil in 2006, the government has awarded eight production licences to UK-listed Tullow Oil [Uganda] and France’s Total E&P (Uganda) B.V and CNOOC.
Eliminate bureaucracy, corruption to stir growth
Fred Muhumuza, a senior economist says the new FDI projection is achievable subject to reduction in bureaucracy in government as well as corruption.
“There is need to have stimulus budgets to increase domestic demand as well as fine tune incentives that will attract investors,” he said.
Emily says commercial diplomacy needs to be supported including improved funding for foreign missions.
“When you look at our missions, there is much that wants to be done but they are under resourced. As an investment promotion agency, we need to have a high level of international marketing materials,” he said.
FDIs trend over the years (US$)