Oil and Gas, Tourism, Infrastructure, Energy and Agriculture to Boost the Economy of Uganda

Interview with Martin Okumu, Chairman of East Africa Entrepreneurs Association (EAEA)

What are the key sectors in Uganda? What are the business opportunities here?

The major sector that is attracting a lot of foreign direct investment is the oil and gas industry. Uganda only recently discovered substantial quantities of oil and gas. We are in the process of developing the refinery, the pipeline, and there are many wells that have already been established at commercial scale. The major players that are in the oil exploration, development, and the pipeline are Total, PLC, CNOOC from China, and many others. The refinery is now going to be developed by an American firm that has already signed a contract with the government. That is a huge investment area that many people are coming to Uganda for. Once the refinery is up and the pipeline is working, many other industries will develop out of the byproducts of oil which will trigger a lot of business opportunities here.

Why does this continue to be delayed?

When you invest a certain amount of money in the Ugandan economy, you will be given tax incentives. If you come here and say you want to start an industry, the government of Uganda will give you land to set up that industry. While you are setting up, the machinery that you are importing within that period will be tax free.

The delay is a bit technical and comes from the government trying to negotiate with the major oil companies. They are trying to secure the development of the pipeline and the development of the refinery itself. It looks as if it is delayed, but the discussions are going very well. Many agreements have already been signed. The overall expectation is that by 2023 the pipeline will be up and the refinery will be completed. The pipeline is being jointly implemented with counterparts in Tanzania. If you go now to where the oil wells are, they are already developing the airport because most oil companies say that there are certain pieces of equipment that they need to airlift straight to the oil well. The airport at Kabaale near Hoima City is 40% complete. SBI, an Israeli company, is overseeing the construction. According to them, it should be complete in the next two years. So, it is moving and as the business community in Uganda, we look forward to exploiting the huge opportunity in the oil and gas sector. Many other industries will develop out of that. You need real estate, transport, banking, etc. It will be one of the flagship sectors that will trigger massive growth in the economy.

The second major sector that is developing very fast currently – it is actually leading in foreign direct investment in Uganda – is tourism. Uganda is lucky in that it has more than 10 national game parks. These game parks are not yet fully developed in terms of accommodation, airstrips, airlifts, and all the other services that need to be put into place for tourists. The natural potential is there. Uganda accounts for 20% of bird species in the whole of Africa. Uganda accounts for over 40% of primates, including the mountain gorillas that are very rare. Uganda has mountains with snow and yet we are on the Equator. Mount Rwenzori, Mount Elgon, all those have snow caps. Tourists wonder how on earth a mountain on the Equator can have snow on top of it, but it is there. Mount Rwenzori and Mount Elgon are real tourist attractions. Uganda is developing a lot of tourism sites along the River Nile. Uganda is the source of the Nile. The 3,000 miles the Nile travels begins in Uganda. If you go to Jinja where the Nile starts, there are many opportunities that have not been tapped yet. We can build tourist lodges. There are many rapids which is good for rafting. Major parts of the Nile in Uganda are navigable. From Lake Kyoga up to Karuma Falls is navigable. From Lake Albert where the Nile goes towards the South Sudan border is also navigable. We want to exploit the tourism potential along the Nile. We welcome all investors to invest along the River Nile because there is a lot of tourism potential there. Uganda is also developing the kind of tourism where you come here and stay with a family that has accommodations, personal residential buildings, that will take care of tourists who have medium sized income. They do not want to spend much and they want to stay with families in cheaper rooms but with facilities that tourists need. That will trigger massive amounts of tourists coming to Uganda but at a much cheaper rate. Recently, we revived Uganda Airlines. Uganda Airlines had been defunct for some time. Currently, there are 8 routes for regional flights that are already up and running. If we get the delivery of the bigger planes, then Uganda will be connected to Europe, Asia, and many other countries. You will have a direct flight to Uganda. That had been a source of contention for tourists. They would have to come to Nairobi in Kenya then pay a lot of money for a 45-minute flight to Entebbe. With the direct flight to Uganda, the cost for transportation will be much cheaper.

The third major sector that is developing quickly in Uganda is the infrastructure and energy sector. Currently, we are developing four hydropower dams. We are lucky that God gave us many rivers with rapids. Two dams are about to be complete. Isimba is nearly complete and Karuma is about 80% complete. Uganda will be efficient in electricity generation not only for Uganda but also for neighboring countries like South Sudan, Rwanda, northern Tanzania. They will depend on energy generated from Uganda. We also welcome those who want to develop solar power generation. We are on the Equator so the temperature in Uganda is quite hot. You can create so many solar plants here without any problem. Especially in northern Uganda where it is a bit hotter, you can generate a lot of electricity there. Infrastructure development is another major undertaking of the government. The government wants to link all our border posts with tarmac roads. Currently, you can drive from the southernmost part of the country to the northernmost part of the country on all tarmac roads. Uganda is one of the leaders in infrastructure development in the region and there are still a lot of opportunities for those that want to invest in infrastructure construction. There are many companies coming in and the leading ones are from China. They come with their money, they invest, they construct their infrastructure, and they jointly own it with the government. The Kampala-Entebbe Expressway is an arrangement where the Chinese came, built it, they will own it, and they will collect the road toll to repay the loan. There are many people who want a direct and fast way to reach the airport. We are expanding the airport in Entebbe and building four more regional airports. That air infrastructure is also demanding a lot of investment.

The fourth largest industry or sector that we invite investors to Uganda for is agriculture. Over 30% of arable land in all of East Africa is in Uganda. We get enough rainfall in a year so you do not even need irrigation, you can rely on rainfall to grow almost anything here. We have rivers and water bodies scattered all through the country so if you are going into livestock rearing, ranches can easily have access to water. In the agriculture industry, we have a lot of opportunities that we have been advertising and offering to businesses. There are people with land in Uganda that do not have the capital or the entrepreneurship to transform their land into something useful. We welcome partners who can come and be linked up with those who have land and will sign contracts. I personally assisted South Africans and Zimbabweans who wanted to develop big agricultural projects in northern Uganda. We negotiated with the landowners. They leased the land for about 40 years. It is a win-win situation. The owner of the land will get capital to develop part of the land, but a big chunk is also given to investors. We now have investors from Germany and South Africa. Some of the white farmers that were chased away from Zimbabwe are in northern Uganda. For us, it is a win-win situation. You give us the capital, we give you the land, and we can offer ready labor. Most Ugandans are employed in the agriculture industry. What we need is processing. What is produced in Uganda should be processed into a finished product that can go into the market. We need transportation to boost agriculture products. We need investment in marine services, even small boats, in Lake Victoria, Lake Kyoga, Lake Albert to link our big farms to DRC, South Sudan, etc. Where I am now is only 250 meters to Lake Victoria. But if you go there, there are no water vessels. Water vessels that connect Uganda to Tanzania only come once per day. If tourists want to travel from Tanzania to here, we do not have the means of transport.

But how are we going to attract investors? There are two good policies. First, Uganda currently is a country where you can invest and own your business 100%. You can come with your workers and your technical staff and register your company. We do not put any regulations that you must recruit Ugandans. Just your presence here, what you are going to buy from here, the kind of industry you will set up is good enough for us. Secondly, there is the policy of repatriation of your profit. In all the East African countries, Uganda is the only one that offers 100% repatriation. If you walked in here through Entebbe Airport with 1 million USD and invested in Uganda, in one year, including your capital, you would have made 1.5 million USD. You can repatriate that. The Ministry of Commerce will joke that you can come with a bag full of dollars and walk back out with your bag full of dollars without anyone asking you to leave some behind. That is how liberalized this economy is. The third policy, which is an act of Parliament, is that when you invest a certain amount of money in the Ugandan economy, you will be given tax incentives. If you come here and say you want to start an industry, the government of Uganda will give you land to set up that industry. While you are setting up, the machinery that you are importing within that period will be tax free. You can set up your industry, get it up and running, then start paying tax later. That tax waiver has attracted a lot of FDI to Uganda. Another very important incentive is that we have the youngest population in Africa. The median population age in Uganda is 15. Over 50% of the people are under 15. They are in school, they are easily trained, and you can shape them into the kind of labor that you want. Over 80% of Ugandans are under 30 years old. That ensures a market and a working population. They are young, vibrant, and have energy. Investment in Uganda for long-term industries is to your advantage because you are dealing with a very young population. The population growth rate of Uganda is 3.4% per annum which means that every year, we add another 1 million people to the Ugandan population. In the business community, we look at this as an opportunity for the market and a good labor force. The last incentive is regional cooperation. Uganda may not have a coastal area but we are land linked to Kenya, South Sudan, DRC, Rwanda, and Tanzania. If you set your business in Uganda, because of the East African Common Market Protocol that has been signed, your goods and services will not only be for Uganda but will serve the entire East African community. That is over 150 million customers which is the total population of the six countries in the East African region. We now have a very good working relationship where goods from Kenya can flow and pass through Uganda to DRC without much delay. It now takes only 4 days from Mombasa to Kampala because the Northern Corridor leaders signed an agreement that once you check containers in Kenya, you need not check them again in Uganda. You only need to put a cargo tracking system. Five years ago, getting goods from Mombasa to Kampala would take you two weeks in a lorry, moving slowly, with a lot of checks. Non-tariff barriers have all been removed along the highway. Police and the Revenue Authority are not going to stop you. Once goods are checked and sent from Mombasa, they are deemed now to move unencumbered to their destination. That has generated a lot of good opportunities in Uganda.

One other major opportunity is financial services. If anyone wants to invest and get rapid return on investment, they should come with their money and set up a bank or a microfinance. The business community in Uganda is borrowing at 20% interest per annum. The banks are reaping in Uganda. Our capital market is narrow and we need more money at a lower interest rate. But that is a win-win. At the moment, if you come and invest in financial services, you will make a lot of money.

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