Is Uganda attracting the calibre of foreign investors it needs?

By Julian Barungi

The article by Edward Kayiwa’s in the New Vision of November 10, 2015, titled “Chinese investments in Uganda to double in five years” caught my eye.

The story states that the recent 18th plenary session of China’s central committee decided to attract more investments to Uganda, in a bid to reduce trade imbalance between the two countries.

The story attributes China’s decision to a recent agreement signed between the presidents of Uganda and China in March 2015. While the desire to reduce trade imbalance between Uganda and China is welcome, a question remains on how exactly this will be done.

Will Ugandans actively participate and benefit from the increased domestic economic activity? Or Shall we see more of goods made in Uganda by China?
 
While I attended the launch of the Citizens Manifesto recently, citizens wondered why an investor would travel all the way from China to Uganda to make bread, cakes or even sell bicycles.

Very soon, we shall see Chinese investors growing food in Uganda. Is this the caliber of investors that Uganda needs? Probably not.

The first mistake that Uganda made was to set the minimum standard investment for any foreign investor to a mere $100,000!.

While this may seem like a lot of money when exchanged into Uganda Shillings, we need to remember that foreign investors do not deal in Uganda shillings so $100,000 is peanuts to a foreign investor and is likely to attract some quasi investors to Uganda.

For those of you that do not think in USD, consider this to be some 100,000 units of a currency that you are used to such as the Uganda Shilling, does it make sense for a foreign country to accept a Ugandan investor to travel there and  invest 100,000 Uganda Shillings? That country surely ought to have a serious problem.

Government of Uganda could consider raising the minimum foreign investment figure to at least $1000,000 to be able to attract the right caliber of foreign investors – the ones that will trigger increased domestic productivity, increase incomes of Ugandans and revenues to the Government of Uganda and also increase Uganda’s GDP growth.

Generally, the scope of Chinese investments in Uganda remains largely unknown. This is one of the major findings from an on-going study on Chinese investments impacting forestland use in Uganda conducted by the Advocates Coalition for Development and Environment.

Part of the problem is the fact that there are more high level interactions between Uganda and China and less interaction at lower levels where the investors from China actually operate.

In most cases, both ordinary citizens and some key policy makers are completely ignorant of the agreements signed at the higher levels and the nature and terms under which the investors are operating. This creates a lot of suspicion among the population.

It is important that Chinese investors interact with citizens and leaders in their areas of operation, beyond the high level government to government interactions. Government could also make it a requirement for the investors from China to be members of relevant local associations.

It is imperative that foreign investors including those from China are sensitised about recommended investment practices and key investment policies if we are to promote sustainable development.

As the Uganda government continues to send out open invitations to China to invest in Uganda, care must be taken to ensure that we attract the kind of investors that Uganda needs.

The Government should make it a requirement for a significant number of Ugandans to be employed by the investors and for investors to procure available locally made goods and services.

In addition, Government of Uganda should encourage China to invest in institutional strengthening beyond infrastructural development.

Strict enforcement of such local content provisions is the only way through which Uganda can optimally benefit from the increased Chinese investments that are expected to double in 5 years.

The writer is a research associate at Advocates Coalition for Development and Environment