Muhoozi Kainerugaba: Why Uganda is the Best Investment Location in Africa

By Muhoozi Kainerugaba

Uganda enjoys a unique location at the heart of Sub-Saharan Africa within the East African region and lies astride the equator. The country is bordered by Sudan in the north, Kenya in the east, the United Republic of Tanzania in the south, Rwanda in the southwest and the Democratic Republic of Congo in the west. This land linked position, gives the country a strategic commanding base to be a regional hub for trade and investment. Uganda enjoys pivotal trade partnerships that create a viable market for business.

A potential investor considering investing in Uganda, will find a well regulated highly liberalized economy in which all sectors are open for investment and there is a free movement of capital to and from the country.
The 2013 Index of Economic Freedom ranked Uganda, the 8th freest economy out of the 46 Sub-Saharan Africa countries. The business operating environment allows the full repatriation of profits after the mandatory taxes have been paid, as well as 100% foreign ownership of private investments. The incentive regime is structurally embedded in the country’s tax laws making them non discriminatory and accessible to both domestic and foreign investment depending on the sector and level of investment.

The minimum capital investment required for a foreign investor to be eligible to invest in the country in virtually any sector, apart from those that may compromise the country’s security, is US$100,000.
Uganda’s labour is highly trainable, English speaking and the cost compares favourably in Africa.
Return on investment is about 5% projected to increase to about 7% due to ongoing and planned infrastructural (roads, railway, energy) development that will ensue from the developments in the oil sector (refinery and crude oil export). Uganda’s GDP is between US$25 billion to US$26 billion, with stable economic growth averaging 5 to 7%.
Inflation has now stabilized to 6.6% after the global economic downturn against which the Uganda economy was resilient and continued to attract foreign direct investment during the period.

The country’s political and economic environment has been consistently improving and stable since 1986. Under the leadership of H.E. Yoweri Kaguta Museveni, Uganda has been able to be a political stabilising force in the region, which has provided a secure environment for business to thrive. Security of investment is also guaranteed under the Constitution of Uganda and the Investment Code 1991, as well as the major international investment related agreements / treaties to which Uganda is signatory.

In order to provide a conducive environment for doing business in Uganda, the government of Uganda has created a One Stop Centre (OSC) for business registration and licensing at the Uganda Investment Authority. The OSC also assists in tax advice and registration, immigration and work permit issues, land acquisition and verification, as well as environmental compliance and approvals. Accessing all these services under one roof saves the investor both time and money to have their projects licensed and implemented expeditiously.

Uganda’s Priority Sectors for Investment
1. Commercial Agriculture and Agro processing
Uganda has the unrivaled potential to be the food basket of the East African Community, as well as the Great Lakes regions, with the capacity to export processed food stuffs to the wider COMESA economic bloc if more investment is targeted at processing more of the agro products. Uganda is among the leading producers of coffee and bananas. It is also a major producer of tea, cotton (including organic cotton), tobacco, cereals, oilseeds (simsim, soya, sunflower, etc), fresh and preserved fruit, vegetables and nuts, essential oils, orchids, flowers and sericulture (silk). Opportunities include commercial farming and value addition, as well as the manufacture of inputs (fertilizers, pesticides etc.), supply of agricultural machinery and the establishment of cold storage facilities as well as the production of packing materials. Public Private Partnership investment opportunities exist in the commercial production of cereals (maize and rice) and beans. A Public Private Partnership Investment Opportunity is detailed in the projects section

2. Adding Value to Minerals
Uganda has large under-exploited mineral deposits of gold, oil, high grade tin, tungsten/wolfram, salt, beryllium, cobalt, kaolin, iron-ore, glass sand, vermiculite, phosphates (fertilizer), Uranium and rare earth elements.
There are also significant quantities of clay and gypsum. Gold occurs in many areas of the country, including Busia in the east, Buhweju and Kigezi in the west, Mubende – Kiboga in the central region and significant occurrences in Karamoja in the north east. Particularly, the demand for iron and steel is rising due to the need to develop the infrastructure projects in energy, oil and gas, as well as the railways.
Uganda provides special incentives to the mining sector with some capital expenditures being written off in full.
Oil and Gas:

According to the Petroleum Exploration and Production Department, 21 oil and/or gas discoveries have been made in the country to date. 87 oil wells have been drilled and there are 21 fields in existence. Currently over 3.5 billion barrels of STOIIP have been discovered with over 1.2 billion barrels of oil equivalent estimated as recoverable. However, appraisal of the discoveries is still ongoing. Less than 40% of the Albertine Graben has been evaluated.
Investment opportunities available in upstream activities include:
-Licensing for petroleum exploration and production
-Joint Ventures and farm-in arrangements in existing licenses
-Heated crude oil pipelines to refinery
-Environmental services, given that most activities are located in ecologically sensitive areas. Waste treatment and disposal for both solids and liquids is critical
-Service provision and contracts in the fields of Engineering, Procurement, Construction, Environmental consultancy, drilling services, down-hole services etc.

3. Information Communication Technology (ICT)
Uganda’s ICT sector is one of the most vibrant within the region and fastest growing sector in the economy. This vibrancy hinges largely on the good legal and regulatory frameworks.
The supportive investment climate therein has exposed numerous opportunities in ICT innovation services leading to maximum utilization of the existing youthful human resource base as quite suitable for the ICT work. The newly developed and highly qualitative ICT infrastructure is also ready to accommodate more future investments. Uganda is now connected to three marine fibre optic cables.

4. Tourism
Uganda is home to the source of the Nile, the longest river in the world and around Jinja. The Nile offers the best white-water rafting experience globally.
Lake Victoria, which is shared with Tanzania and Kenya, is the 2nd largest fresh water lake in the world, while Lake Bunyonyi in south western Uganda is the 3rd deepest in the world!
It is estimated that 50% of the world’s population of mountain gorillas lives in Uganda.
It is no wonder that even during the British colonialist times; Uganda’s unique character and incomparable beauty were recognized by Sir Winston Churchill who described Uganda as the “The Pearl of Africa”, a coined phrase that depicts Uganda today.

Potential areas for investment in this sector include:
Establishment of a white sand resort beach
The project offers a complete package of lodging and dinning for tourists/ visitors, and conference hall for different clients for holding meetings and seminars.
The total investment cost is estimated at US$ 4,227,044.
The project is proposed to have 62 separate executive huts and 30 standard rooms.
The payback period is estimated at five (5) years.

Domestic air transport
The objective of this project is to provide efficient and reliable domestic air transport services to Uganda’s major tourist destinations as well as providing reliable and fast air transport services to local travelers.
The total investment cost is estimated US$ 5,391,240.
The payback period is estimated at five (5) years.
Establishment of a tourism & hospitality training institute
The objective of this project is to produce competent graduates who are capable of working in the tourism and hospitality industry offering internationally rated professional services.
• The total investment cost is estimated at US$ 3,492,995.
• The payback period is estimated at five (5) years.
Construction of a wild life/forest lodge
The objective of this project is to provide additional accommodation to mid-range travelers to Uganda’s protected areas (PAs).
The proposed locations include Mabira and Budongo forests, Queen Elizabeth National Park (QENP) and Murchison Falls National Park (MFNP). The project is also aimed at providing water rafting services between Karuma and Murchison Falls, game drives, angling and nature walks in addition to accommodation.
The total investment cost is estimated at US$1,136,170.
The project is proposed to have 20 spacious cottages with en suite facilities.
The payback period is estimated at five (5) years.

Other sectors include:
5. Packaging
Many Ugandan enterprises are missing out on the opportunities in larger markets because their packaging doesn’t meet international standards.
In order for Ugandan processed honey, fruit juices, mineral water, herbal medicines and chemicals, among other products to be competitive nationally, regionally and globally, the packaging has got to be quality.
Currently, there are about seven companies involved in producing packaging materials among which is Riley Packaging in Mukono, Afroplast Enterprises Ltd in Luzira, General Molding in Industrial Area, Rwenzori Bottling company. However, most of them deal in general plastics using the blowing technology. The PVoC packaging technology is more acceptable worldwide.
Most of the companies that need good quality packaging, import their customized packaging from Kenya, South Africa and China.

6. Pharmaceuticals
Uganda’s pharmaceutical industry presents numerous opportunities for new investors as reflected by the growing local and regional demand for medicines and health supplies. 90% of the medicines in Uganda are imported mainly from India, Kenya, Netherlands, China and Denmark (UBOS, 2011).
Medicine accessibility stands at 45.7% in public health facilities, 57.5% in missionary units and 56.3% in private health units. Although Uganda’s market comprises both antibiotics and injectibles, the level of antibiotics prescribed by health facilities is higher than that of injectable medicines. The high demand for Essential Drugs for the treatment of Malaria, HIV/AIDS and Tuberculosis is reflected by the trends in causes of morbidity in Uganda. HIV/AIDS, Tuberculosis, and Malaria which are some of the major killer diseases account for 54% of the total disease burden in Uganda. Malaria is the leading cause of morbidity and mortality but Tuberculosis is on the increase.
The growing demand for medicines and health supplies in Uganda has instigated the emergency of the Pharmaceutical Industry evolving from 2 manufacturers in the 1990s to over 10 licensed manufacturers by 2010. The sector has also recorded rapid growth in the number of pharmacies and drug shops country wide but these are predominant in urban and semi urban areas. The sector provides numerous opportunities with an assured internal market and external market given that 90% of pharmaceuticals, sundries and medical equipment are imported in to the country.

The opportunities ranging from small scale to large scale include:
a) Production of Human Liquid formulations;
b) Manufacturing of Diagnostic material and equipment;
c) Production of Human Parenteral Drugs;
d) Production of Human vaccines;
e) Processing of Herbal medicines from the neem tree and aloe vera;
f) Manufacturing of veterinary pharmaceuticals;
g) Production of Human Solid dosage forms such as tablets , capsules, etc;
h) Processing of medical sundries (Cotton wool, syringes, sanitary pads, bandages, glucose, water for injections, infusions syrups and oxygen etc and;
i) Manufacture of Medical Equipment.
j) Research and Development in ARV drug production and formulation

7. Other viable investment opportunities that can be explored are in Services – Education, Finance, and Health
Government has completely divested itself from these sectors and private investment is thriving in the mentioned areas as Uganda has positioned herself to be an education hub in the region.
There is a need for diverse financial solutions for the quickly expanding middle class In Uganda.
The health sector is also a viable sector for investment considering many Ugandans travel outside Uganda for specialized treatment and healthcare. The investment environment has been conducive for investments in the health sector

Investment Projects
1. Agro processing
Title of Project: Establishment of an integrated agricultural produce, marketing and value addition park in Uganda
Project Location: Kampala
Lead Agency / Project Promoter: Ministry of Agriculture, Animal Industry and Fisheries
Project Description: Establishment and maintenance of the integrated agricultural produce, marketing and value addition facilities for the benefit of small scale farmers and producers as well as consumers
Current Status/ Stage of Project: New Project
Actions Required/ Implementation Arrangements/ Contract Type: A Public Private partnership projects that would require the implementing partners to be private sector and other Government ministries, agencies and departments
Availability of Pre-Feasibility Studies, Feasibility Studies, and other Studies: None available. A feasibility study is needed to further refine and disaggregate the project functions while bring out clearly core public functions (Government), Development partners functions (United Arab Emirates) and private sector input under the PPP arrangement
Estimated Cost of the Project: US $ 37,558,400
Period of Implementation: To be determined by the feasibility study
Contact: Mr. V.R. Rubarema, Permanent Secretary, Ministry of Agriculture, Animal Industry and Fisheries, Email: psmaaif@infocom.co.ug , ps@agriculture.go.ug . Tel: +256 414 531411
A detailed project proposal is available on request

2. Building and Construction
Title of Project: Construction of Low Cost Housing for Bugembe Public Servants
Project Location: Bugembe, Jinja District
Lead Agency / Project Promoter: Ministry of Lands Housing and Urban Development
Project Description: The project is a medium scale housing project to be developed on a 30 acre land leased by Government. About 500 housing units will be constructed for direct purchase by the public servants.
Current Status/ Stage of Project: New project. Land has been secured. Government is securing funding for the infrastructure development and looking for a private developer to undertake the construction of the houses
Actions Required/ Implementation Arrangements/ Contract Type: The project will be implemented in collaboration with a private developer through a PPP. It is a mixed development design with commercial area (offices, shops, entertainment and banking), institutional areas (health, schools, church) as well as public open areas and play grounds
Availability of Pre-Feasibility Studies, Feasibility Studies, and other Studies: Feasibility done – Private developer is expected to provide affordable capital funding to construct the houses. Government of Uganda will provide the land and infrastructure services such as roads, water and electricity to the project. The government will also organise interested public servants into housing cooperatives so that they are able to save for the houses. Monthly deductions will be made to the housing revolving fund to managed by Housing Finance Bank. The bank will provide the medium to long term mortgages to the members
Estimated Cost of the Project (US$ / UG SHS est 2,600): UG SHS 91.12 billion
Investment Required: Private developer – Ug Shs 70.6 billion, Government funding for infrastructure – Ug Shs 14.12 billion and Ministry coordination Ug Shs 3.54 billion. Government to promote Shared Equity Ownership Initiative
Contact: Ms Agnes Kalibbala, Director for Housing in the Ministry of lands, Housing and Urban Development, Email:
agnesbkk@gmail.com , Tel: +256 777 508015
Other private ventures in real estate can be carried out to meet the growing demand for housing in Uganda’s urban centres

3. Transport (Aviation)
Title of Project: Upgrade of Priority Air Fields in the Tourism and Oil producing areas to Airports
Project Location: 6 Upcountry Locations
1. Kasese Airport (Kasese)
Project description: Upgrade to international airport construction of runway and associated taxi ways
Project cost: US $ 84 million
2. Gulu Airport (Gulu)
Project description: Upgrade to international airport, widening and strengthening of runway and new terminal
Project cost: US$ 162 million
3. Kisoro Airport (Kisoro)
Project description: Upgrade for tourism, upgrading and strengthening of the runway/ taxiway and apron
Project cost: US$ 20 million
4. Kabale Airport (Kabale)
Project description: New International Airport for the Oil Industry as part of the refinery
Project cost: US$ 192 million
5. Kidepo Airstrip
Project description: Upgrade for tourism benefits
Project cost: US$10 million
6. Arua Airport (Arua)
Project description: Upgrading for regional benefits, paving of the runway
Project cost: US$160 million
Contact: Mr. Hannington Banyendera, Manager Strategic Planning, Tel: +256 757 425782, Email: hbanyendera@caa.co.ug or Mr. Joseph Bukenya, Strategic Planning Officer, Tel: 0772 426863, Email:
jbukenya@caa.co.ug

4. Oil and Gas (Oil distribution)
Title of Project: Pipeline from Hoima oil fields to storage facilities in Kampala and Jinja
Project Location: Hoima
Lead Agency / Project Promoter: Ministry of Energy and Mineral Development (MEMD) / Petroleum Exploration and Production Department (PEPD)
Project Description: Construction of a 205 km inland pipeline from the Hoima refinery to Buloba terminal near Kampala (capital city)
Current Status/ Stage of Project: Land will be acquired after resettlement action plan and detailed route surveys. Resettlement is on going
Actions Required/ Implementation Arrangements/ Contract Type: International competitive bidding / Public private partnership arrangement
Availability of Pre-Feasibility Studies, Feasibility Studies, and other Studies: Feasibility study with conceptual layout is done
Estimated Cost of the Project: US$ 131 million
Period of Implementation: 2015
Contact: MEMD / PEPD – Emails:
pepdebb@petroleum.go.ug , refining@petroleum.go.ug , Website:
www.petroleum.go.ug

5. Information Communication Technology (ICT)
ICT services
Title of Project: Government Integrated Data Centre
Project Location: To be determined
Lead Agency / Project Promoter: National Information Technology Authority – Uganda
Project Description: Government Integrated Data Centre (GIDC) project entails construction of the national data centre infrastructure including installation of integrated infrastructure service, integrated operation management service, integrated security management service, DRS services, shared infrastructure services
Current Status/ Stage of Project: Brown field
Actions Required/ Implementation Arrangements/ Contract Type: Public Private Partnership
Availability of Pre-Feasibility Studies, Feasibility Studies, and other Studies: Feasibility done
Investment Required (US$): Year 1 – 467,028 Year 2 – 19,800,656, Year 3 – 33,426,487, Year 4 – 3,918,526
Contact: Ms Vivian Ddambya, Ag Director Technical Services, Email:
Vivian.Ddambya@nita.go.ug , Tel: +256 417 801038

6. Fruit Pulp Processing
Fruit Pulp is part of a bigger group of preserved fruits and vegetables which also comprises fruit juices, pulp and concentrates.
The processing industry is the largest user of fruit pulp, where it is used as ingredients in a wide range of food products including juices, yoghurts and Ice creams, as sweeteners and flavours, and because of this wide applicability, the demand and trade in fruit pulp has been raising.
The horticultural sector is one of the fastest growing sub-sectors in Uganda with a growth rate of 20% per year. The fruit and vegetable sub-sector is important in the rural economy because of the contribution to value addition and diversification of income generation for
Project Cost: US$2,351,000
Purpose of the Project:
The purpose of this project is to increase the supply and availability of fruit pulp for industrial and retail use and explore the excess demand especially for organic fruit pulp as a way of increasing value addition to the abundantly available fresh fruits, but at the same time create a market for thousands of smallholder producers involved in fruit production (apple bananas, mangoes and pineapples, passion fruits). All of the fruit concentrate in Uganda is imported mainly from Kenya and South Africa.
The project is planned to target the four most highly demanded fruit pulp products from Uganda, which include; Pineapple pulp, Mango pulp, Apple banana pulp and Passion fruit pulp. Other pulp products such as papaya, guava etc may also be produced additionally as and when a demand arises. An average of 8 tonnes of fruit pulp will be produced per day (160 tonnes per month) at the project processing plant, once sufficient equipment is installed. 50% of this will be pineapple pulp, 30% apple banana pulp, 10% Passion fruit pulp and 10% Mango pulp.
Location:
UIA has secured land that it can lease out to investor for setting up of processing plants. To date a number of these pieces of land have been developed into industrial parks in Wakiso and Mukono districts a range of about 15 to 30 Kms from the Kampala city centre, with all the basic infrastructure (power, water sewerage disposal and road networks) established.
Feasibility: The feasibility of this project was carried out in 2009. An interested investor will have to review the detailed feasibility available from Uganda Investment Authority, due to the minimal price changes.

7 Energy Generation
Uganda enjoys sunshine throughout the year making it feasible for solar energy. The various rivers interspersed with waterfalls are potential sites for micro hydro power development. The abundant rainfall ensures constant water flow throughout the year. The organic wastes from households, institutions and agricultural production present huge promise for briquette and biogas production. Despite this abundant natural resource base, the level of electrification in Uganda is still low with less than 10% of the population connected to the national grid. The potential areas for investment in this sector include:
i) Manufacture and marketing of charcoal briquettes
The plant will manufacture 70 tonnes of briquettes per day, which will be marketed as a replacement for firewood and charcoal. The raw material will be dried organic Municipal Solid Waste (MSW) collected from households and surrounding markets in Kampala.
• The total investment cost is US$ 2,389,771 and this includes all the costs such as licenses, land, connection to utilities, initial training etc. Infrastructure and utilities account for 44% of the total investment.
• The payback period is estimated at three (3) years.
ii) Assembly and marketing of solar units in Uganda
The objective of this proposed project is to set up a mega plant for solar energy.
• The capital cost for equipment is estimated at US$3.12 Million, but the full start-up cost (including raw materials for 3 months) depending on the production capacity will be up to approximately US$ 4.85 Million. Such a plant has the capacity to produce 1,500 MWh per month.
• The payback period is estimated at five (5) years.
iii) Design, construction, sales and service support of biomass plants
The objective of this project is to increase the economic viability of a large scale electricity generation from organic garbage in Uganda. This will provide quality and reliable grid electricity to meet the energy demand for both the rural as well as the urban sector.
• The total investment is evaluated at US $ 4,338,650 which can be covered from equity and loans.
• The plant has the capacity to produce 1,500 MWh per month.
• The payback period is estimated at five (5) years.
iv) Acquisition, installation & services of micro hydro dams in Uganda
The project aims at constructing micro hydro power dams and a number of micro hydro power schemes to address the acute energy deficit in rural areas as well as unreliable grid power in small towns that are off-grid.
• The total investment cost is US$ 3,006,050.
• The payback period is estimated at five (5) years.
An investor will have to review the cost implications of these projects whose feasibility was done 2 years ago
For more Information:
Rev. Canon Aaron Mwesigye
Senior Presidential Advisor -Investments
State House
Email: aaron.mwesigye@statehouse.go.ug
Mob. +256 772455129
3rd Floor, Parliamentary Building
RM K 20
P.O Box 25497
Kampala-Uganda
Uganda Investmentment Autority
http://www.ugandainvest.go.ug/
http://www.ugandainvest.go.ug/index.php/one-stop-centre

This article was picked from Muhoozi Kainerugaba’s Facebook page. Gen Kainerugaba is the senior presidential adviser on special operations