Uganda ticks the right boxes, econ­omy picks up

Man­u­fac­tur­ing, oil and gas sec­tors spurring FDI flows though po­lit­i­cal ten­sion could dent eco­nomic out­look

The East African - - MARKETS - By BERNARD BUSUULWA

The value of for­eign direct in­vest­ment in Uganda in­creased by about 21 per cent last year to $700 mil­lion in spite of dif­fi­cult eco­nomic con­di­tions, with notable gains in the man­u­fac­tur­ing, oil and gas sec­tors.

But the in­vest­ment out­look could come un­der pres­sure from lat­est po­lit­i­cal ten­sions, an­a­lysts warn.

While Chi­nese-owned fac­to­ries are en­gaged in pro­duc­tion of build­ing ma­te­ri­als and beverages, new fac­to­ries in east­ern Uganda are fo­cused on pro­cess­ing lime­stone, phos­phates and iron ore.

In­vest­ments in the ce­ment in­dus­try are largely mo­ti­vated by a con­sid­er­able back­log in hous­ing es­ti­mated at more than 500,000 units, projects such as the ex­pan­sion and up­grade of En­tebbe Air­port, the planned 77km Kam­pala-jinja Ex­press­way and high de­mand for con­struc­tion ma­te­ri­als in mar­kets like South Su­dan.

The ce­ment plants in east­ern Uganda in­clude the Simba Ce­ment fac­tory, a sub­sidiary of Na­tional Ce­ment Kenya with pro­duc­tion ca­pac­ity of one mil­lion tonnes per year, val­ued at $55 mil­lion.

A new Hima ce­ment plant in the same area has a pro­duc­tion ca­pac­ity of 800,000 tonnes per year and is val­ued at $40 mil­lion. This plant be­longs to La­farge Hol­cim, a global ce­ment sup­plier and par­ent com­pany to Bam­buri Ce­ment of Kenya.

Re­newed in­ter­est in Uganda’s oil and gas sec­tor last year stim­u­lated fresh in­vest­ments in this in­dus­try as some old play­ers re­turned to the coun­try and new oil field services firms joined the sec­tor.

Po­lit­i­cal ten­sions

De­lays in ap­prov­ing field development plans sub­mit­ted by Tul­low Oil Uganda, To­tal E&P Uganda and the China Na­tional Off­shore Oil Cor­po­ra­tion slowed com­mer­cial ac­tiv­ity four years ago, lead­ing to exit of some for­eign play­ers, sig­nalling dis­tress in the af­fected local firms and re­duced tax pay­ments. How­ever, ma­jor pol­icy de­ci­sions taken last year have in­spired fresh op­ti­mism de­spite a longer than ex­pected prepara­tory pe­riod for com­mer­cial oil pro­duc­tion.

The gov­ern­ments of Uganda and Tan­za­nia signed a pipe­line con­struc­tion deal with To­tal E&P in 2017 for the Hoima-tanga route, val­ued at around Ush16 tril­lion ($423 mil­lion) while Stan­bic Bank Group was ap­pointed one of the trans­ac­tion ad­vi­sors for this project by the Uganda gov­ern­ment.

The Al­ber­tine Graben con­sor­tium that in­cludes Gen­eral Elec­tric Com­pany of the US and some Euro­pean firms was awarded a con­tract to build Uganda’s oil re­fin­ery ear­lier this year. The con­sor­tium was al­lo­cated a 60 per cent share in the re­fin­ery and the re­main­ing 40 per cent to be dis­trib­uted among East African Com­mu­nity mem­ber states.

Grow­ing po­lit­i­cal ten­sions might still af­fect this in­vest­ment mo­men­tum. Vi­o­lent con­fronta­tions be­tween the mil­i­tary and op­po­si­tion sup­port­ers dur­ing the Arua mu­nic­i­pal­ity par­lia­men­tary by-elec­tions could af­fect in­vestor sen­ti­ment, sim­i­lar to lat­est trou­bles af­fect­ing the tourism sec­tor.

Tours and travel com­pa­nies have re­ported a rise in trip can­cel­la­tions and post­poned ar­rivals since last month and this has trans­lated into mil­lions of shillings in lost rev­enues for the tourism in­dus­try value chain which in­cludes air­lines, ho­tels, car hire com­pa­nies, gift shops and game parks.

Pic­ture: File

Con­struc­tion of the En­tebbe-kam­pala ex­press high­way con­tin­ues, but some of the com­pleted sec­tions are al­ready in use.

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