EXECUTIVE TALK

By Keith Kalyegira

That Uganda is committed to attracting investment into the country goes without question.

Uganda has consistently attracted the highest foreign direct investment (FDI) in East Africa and the Red Sea region by attracting between $250 – 300m in FDI annually over the past five years, according to various reports.

This has been attributed to stable and consistent macro-economic policy management, liberalised business environment, proximity as a logistics hub within the Great Lakes region and increasing regional trade.

FDI has been directed towards telecommunications, real estate, banking, insurance, petroleum sector, energy, mining and agro-export sectors.

The direct benefit of FDI is seen in improved communication and financial services, and in employment.

Despite arguments to the contrary, FDI has been the principal delivery mechanism for the global technological advancements that underpin the benefits of these investments to the local trade, foods & beverages, hospitality, real estate and transport sectors.

All these have experienced robust growth over the past decade.

The Government has continued to promote foreign investment through the Uganda Investment Authority, the Presidential Investors Round Table and by minimising macroeconomic policy shifts, which make doing business in Uganda more predictable than in neighbouring countries. Despite all this, Uganda’s global competitiveness is declining, and ranks 128th out of 134 countries surveyed in the World Economic Forum’s 2008/09 “Global Competitiveness Index”.

This is mainly attributed to weak institutional business ethics and poor infrastructure.

In order to maintain investor confidence, the executive needs to focus on short - term policy and institutional measures to improve this score by at least 40%.

The negative perception around foreign investors has been marred by the sentiment that they are accorded preferential treatment in the granting of incentives, work permits and the significant profits repatriated annually, which arguably require policy attention.

However, the absence of size-able local funding sources makes it inevitable to rely on external private funding for capital intensive ventures like mining, energy, telecommunications and transport
infrastructure.

The presence of a Private Equity (PE) firm in any transaction helps boost a company’s international credibility, attract international managerial talent and debt financing.

Numerous large scale investments in Uganda have been undertaken by Private Equity (PE) and should continue to attract PE capital in sectors like mining and infrastructure.

In order for the country to benefit from the current sustained high global commodity prices, substantial investment in the mining sector is required.

The re-opening of Kilembe Mines would require at least $250m in investment and working capital and will have a huge direct impact on over 10,000 Ugandans in Kilembe and Kasese.

The estimated cost of improving the rail infrastructure is $600m and could be much higher if a new modern standard gauge railway line is to be built.

In a recent visit to Uganda, the World Bank president pledged to support Kenya and Uganda rehabilitate the railway line to boost regional trade.

The recent move by Citadel Capital expressing interest in becoming the lead investor in the Kenya-Uganda 25 year concession consortium, should be welcomed by both Governments.

Citadel Capital is a multi-billion dollar private equity firm headquartered in Cairo with over $8b in mining, transport, energy and other investments in Africa and the Middle-East.

Ongoing Investment in Africa in sectors like railway infrastructure and energy that promise to grow in lock-step with resource extraction confirms the soundness of Citadel Capital’s strategy in the region.

The benefits of having these projects up and running are well worth the real and perceived cost, in my opinion.

The writer is the chief executive officer, ReNaissance Capital, a licensed investment advisor