EPRC study shows Uganda’s business climate has improved

The Commissioner for Processing and Marketing at the Trade Ministry, Joshua Mutambi, addressing participants during the dissemination of business climate index findings at Skyz Hotel in Kampala. (Photo by Francis Emorut)

At the sectoral level, Kahunde explained that business sentiments improved in the services and agriculture sectors but experienced a slight decline in the industry sector during the quarter under review.

Kahunde informed participants that the BCI is based on ten business evaluation indicators that collectively capture firms' perceptions of current and future business conditions, including levels of business activity, turnover, profitability, and the acquisition of new business.

Other indicators of business performance include capacity utilisation, average input costs, prices of produced goods, business optimism, employee numbers, and average monthly salaries. The researcher noted that, in addition to assessing business performance perceptions, the index also tracks operational constraints and their changes over time, benchmarking against the previous quarter.

She mentioned that the improvement in the Business Confidence Index (BCI) is supported by strong business optimism, driven by expectations of favourable product prices and increased demand for goods and services in the upcoming quarter.

Challenges

The researcher highlighted that business competition among companies operating within the same sector was the most reported challenge during the April-June 2026 quarter. Further analysis indicates that this competition was predominantly noted by small and medium-sized businesses in the services sector, particularly those in wholesale and retail, education, and transport.

According to Kahunde, approximately 56% of small-sized firms and 27% of medium-sized firms identified competition as a major constraint, indicating heightened competition for customers.

Following the challenge of competition was the decreased demand for goods and services, which was primarily reported by medium-sized businesses in the services sector. Specifically, 61% of firms in the accommodation and information and communication subsectors reported subdued demand for their products and services.

Additionally, electricity-related challenges, such as delays in obtaining new connections and unreliable supply, were predominantly reported by medium-sized businesses in the services sector. Nearly 60% of the affected firms operated in activities such as printing and stationery, radio broadcasting, and other electricity-dependent services.

Tax-related challenges, especially perceptions of multiple taxation and high compliance fees, were most pronounced among small businesses in the industrial sector, particularly construction firms.

Kahunde stated that these constraints increased operating costs and disrupted business operations, making it difficult for firms to comply with tax regulations and enforcement activities. Furthermore, these challenges limited companies' abilities to expand production and services, especially due to fluctuations in the exchange rate and challenges related to imported deliveries.

Government response to the findings

Joshua Mutambi, the commissioner for processing and marketing at the Ministry of Trade, Industry, and Cooperatives, emphasised that while there is a rebound in economic optimism, persistent structural challenges require decisive action.

The Commissioner for Processing and Marketing at the Ministry of Trade, Joshua Mutambi (wearing a red tie), the acting chairman of KACITA, Issa Ssekito (seated second left), and Samson Ssemakalu (seated second left) pose for a group photo with participants during the dissemination of business climate index findings at Skyz Hotel in Kampala. (Photo by Francis Emorut)

"We must translate the diagnostic evidence collected today into concrete policy responses that support our industrial sector, streamline taxation, and reduce operational overheads," Mutambi stated during the event.

He highlighted three key themes that impact the ministry's mandate: navigating sectoral divergence and leveraging private sector optimism, addressing structural constraints and external shocks, and ensuring energy reliability and infrastructure as core drivers of industrial growth.

"The findings indicate that challenges related to electricity, such as connection delays and unreliable supply, continue to be significant obstacles, particularly for medium-sized enterprises in manufacturing, printing, and services. Reliable and affordable electricity is not a luxury; it is essential for regional trade, industrialisation, value addition, and competitiveness. The ministry will continue to engage with stakeholders in the energy sector to ensure a reliable power supply and mitigate inflationary pressures on energy inputs," Mutambi concluded.