There are, however, a wide range of sectors that still attract foreign investors. The Uganda Investment Authority, the country’s IPA, highlights agriculture value addition, mineral value addition, tourism and ICT as the priority sectors for FDI in Uganda. Furthermore, electronics, edible oil production, pharmaceuticals and infrastructure are also listed as sectors that offer opportunities for foreign investors.
However, an Investment Climate Statement on Uganda by the US Department of State underlines that despite a lot of pro-business noise made by the government, which includes the strengthening in 2019 of the Uganda Investment Authority as a one-stop-shop for investment in the country, the actions taken “do not support its rhetoric”.
The Department of State points to a series of risks to investors, such as poor economic management, growing sovereign debt and a failure to “invest adequately in the health and education sectors”.
On top of that, the report highlights concerns around competing against “third-country firms that cut costs and win contracts by disregarding environmental regulations and labour rights, dodging taxes and bribing officials”, which along with a low-skilled workforce and the fact that foreigners cannot own land directly, make the climate for FDI in Uganda less appealing.
This political turmoil is likely to affect FDI in Uganda, but the strengthening of the IPA and the level of FDI flows seen pre-pandemic are good signs for investment in the country. However, until these political issues are resolved, Uganda will struggle to reach its full FDI potential.
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