Capital inflows are a good indicator of the state of a nation’s economy, and Uganda has good news on that front. Data from the Uganda Investment Authority released recently showed a shift in foreign direct investment toward the manufacturing sector. This is good news for Uganda as it will support consumption and help to sustain the annual growth rate beyond 6 percent. In the oil, petri chemical, agriculture, metal and machinery sectors, investment in the 2013 period totalled $500 million, up from $200 million a year earlier. That means more jobs for Ugandans, helping them break out of poverty and move into the middle class. Manufacturing is expected to be country’s biggest employer in the next decade and with increased investment, this sector can push down the unemployment rate further.
Manufacturing provides close to a million jobs as of August 2013, up 6 percent from estimated 900,000 jobs a year earlier, and accounted for 18 percent of Uganda’s total jobs in 2013, up from a 14.7 percent contribution in 2012. Still, in terms of activity, the manufacturing sector accounted for more than ten percent of Uganda’s economy last year, up from slightly over 5 percent in 2011 as services and trade have picked up. There are challenges including building better roads to facilitate the transportation of goods from the factory floor to upcountry and landlocked neighbouring countries like Rwanda, South Sudan, Eastern Democratic Republic of Congo for shipping abroad and to local retail centres that we cannot forget. The Ugandan government has worked hard to improve the business climate, and this proves its efforts are bearing fruit. However, more can and should be done, especially in regard to offering tax incentives and lowering the corporate tax rate. Getting labor to be more cooperative and less strident will also be crucial.