Foreign Direct Investment (FDI), simply put, is the expansion of business in other countries. A method that includes partnerships, takeovers, developments, etc but focuses on the controlling position. The investor group or entity has superior control over the management system.

FDI has a lot of input to a country. It is accompanied by job creation, technology transfers, economic growth, infrastructure development, etc. FDI helps to grow the economy by maximizing the capacity in several potential sectors.

Uganda is one of the top FDI receivers in East Africa, and the growth rate is almost 39%, as reported by recent research into the market. Most of the opportunistic sectors are untapped. In this article, we will explore the opportunities in the potential sector where you can fit your money into.

Uganda has several untapped sectors that have the potential to receive foreign direct investment.

The country, being one of the top FDI receivers in East Africa, focuses more on developing both infrastructure and government policies to draw the interest of overseas investors.

The future potential markets include opportunities in mining, transportation, finance, manufacturing, and ICT. 

Uganda’s total stock of FDI contributes almost half of its GDP, a whopping 37%. In numbers, the value reaches approximately USD 18 billion, as per the calculation done after the end of the year 2022.

The country is one of the top in receiving foreign direct investment in East Africa. 2022 alone saw a 39% growth rate, and the primary source of FDI was the Netherlands, contributing 38% of the total investment. However, the reason behind such massive growth was the oil reserve of Uganda. A collaboration among TotalEnergies, a French company, China National Offshore Oil Corporation, and Uganda National Oil Company for the development of the Lake Albert oil field mounted the investment surge.

The rise of the graph doesn’t end here. With a vast natural resource and geographic location, Uganda is the next-gen hub for overseas investors who are looking for a market with the capacity to provide expected returns.

Though Uganda relies on agriculture and its adjacent sector, the driving industries to attract FDI are otherwise. Like in most other countries, sectors such as mining, transportation, finance, manufacturing, and ICT are on the top-choice list for investors. However, agriculture has a boastful impact on the country’s economy and also receives ample investments, which are mostly commercial.

There are a few industries i.e. mining, transportation, finance, manufacturing, and ICT that can be marked as the most potential sectors. Again, opportunities should be measured before investing in any of these sectors. While the market size is big, let’s explore the opportunities that each sector can deliver.

Uganda has rich mineral reserves hidden inside its fertile soil. As mentioned earlier, the biggest investments are coming into this mining sector from giant companies that operate throughout the globe. Uganda is trying to enter the middle-income club by 2040, minerals are going to be the key player in capturing both foreign investments and creating job opportunities.

The existing mining sector drove an average of US$799 million in export earnings between 2016 and 2020. The growth rate is also 36%, making sure to bring more players into the scene. The most promising field among minerals is iron ore, with a 99% untapped reserve. The value is almost US$799 billion. Not only iron ore, but most of the minerals are still untapped. Gold, Copper, Nickel, Cobalt, Phosphate, Rare Earth Elements, etc. are altogether worth trillions.

Transport is a sub-sector of infrastructure. Development in the infrastructure of Uganda will affect the transportation most. Being a landlocked country, Uganda only relies on land transportation for both import and export. But the country lacks adequate infrastructure and needs them resolved now.

To rise up as the next hub of the economy in East Africa, the need for developed roads and railways was never this crucial. Investing in this sector will gain a huge return, exclusively for the foreign bodies that are looking for a chance to make a sustainable investment.

Manufacturing opportunities in Uganda are centered on basic products like paper, beverages, textiles, plastics, pharmaceuticals, etc. Other products, such as leather, tobacco, pharmaceuticals, fertilizers, etc, are also on the list of existing opportunities. 

Currently, the country doesn’t have a stronghold in manufacturing. But with the growing infrastructure and developments, the sector is bound to bloom. Thus, foreign investors can make use of this opportunity by jumping into the business. With a young population ready to work, manufacturing could turn the tide of the economy.

Let’s take a look at one of the subsectors. Banking activities in Uganda are centered in Kampala, the capital. Thus, 42% of people have to rely on informal financial sectors, while 30% are entirely out of the service. Only 2.5 million people are under the radar of financial services in Uganda. 

So, the whole sector is unexplored. As the future is going to be a sustainable economy, services related to finance will require more establishments. It is a potential mammoth market but lacks a fine touch from the investors. To make a great profit from financial services, this opportunity should not be overlooked by any investor companies.

This sector mostly concerns the establishment of information and communications infrastructure at first. As of January 2022, only 29.1% of people can access the internet in Uganda. While globalization is taking the world in the palm of a hand by joining the world via digital means, Uganda is on the last line.

Interestingly, internet users have increased by 1.8 million in 2022 compared to the preceding year. Apart from internet accessibility, the educated portion needs knowledge of the latest technology, while the regular citizens need access to digital ways of communication. So, information and communication technology possess vast opportunities for receiving FDI.

While Uganda features high potential in ROI and receiving investment from foreign investor bodies, the money would never come by itself. Rather, investors, after taking a close look at the market by studying it, will step into it. Thus, the determining factors to invest in Uganda must be precise, and the hiccups should also be monitored. Here are some factors that can be considered before investing in Uganda.

Foreign farms are influenced by effective regulatory frameworks, standards of the government, and hassle-free processes before making investment decisions. Uganda is continuously emphasizing to enhance these factors. As a result, the massive uprising in FDI has become possible, and the country is racing towards sustainable economic growth.

The country is full of promising sectors. Uganda has a large reserve of natural resources, and it is one of the richest in Africa. To understand the value, an example of the biodiversity is sufficient. The estimated gross return of this sector is US$ 63.9 billion per year. Now, adding the other sectors, the value would surpass trillions!

Source: WatchdogUganda

Uganda has a massive area of fertile land. Besides, the country has almost 6.5 billion barrels of oil reserves and an estimated 500 billion standard cubic feet of gas reserves. Moreover, Uganda’s potential to generate hydropower is over 4500 MW. 

The Pearl of Africa is witnessing steady progress in economic growth. It has now a stable politics. Uganda is carrying out decent infrastructure development by launching several projects with the help from overseas countries. A growing population is on the verge of emerging, which will, in the future, be trainable to make a skilled young generation eager to work for the development of the country. The foreign policy overall is friendly for the investors. Furthermore, the country has a welcoming climate for harvesting crops.

But there are a few obstacles as well to consider before deciding to invest in Uganda. FDI has to face a few problems, such as high poverty and inequality rates, poor electrical and overall infrastructure to support the investors, and corruption. However, there will always be a few reasons holding the progress back. Considering the fact that the possibility of return is way greater than the risk, Uganda is maybe the best country right now to invest in.