The Uganda Trap
Apparently Ugandans very rarely say no; they much prefer to say maybe. As I sit (without a previous appointment) in Prime Minister’s Amama Mbabazi waiting room hoping for a slot to open up in his busy schedule, I can see this cultural practice work to my advantage. His secretary is doing everything in his power to find the time for Mbabazi to see me.
To have the chance to speak to the prime minister reflects my impressions of Uganda in a nutshell. Unlike Kenya where I spent the previous week, Uganda seems less intense, much safer and above all, has a more relaxed competitive spirit. It is therefore easier to access high profile individuals and business opportunities.
Then again, I might have fallen into the “Uganda trap.”
“Uganda is very attractive when you look at macroeconomic indicators, the country is growing at 5.6% average in the last 5 years. Now we have oil, which will come online in 2016, which means we will grow even faster. But to be honest, the addressable market is much smaller than it might appear on paper,” says the CEO of a leading bank in the country. “If you want to be successful here, you have to own the market, invest heavily to become the number one player. Many investors don’t know that, they are lured by the figures rather than seeing it for themselves. That is what I call the ‘Uganda trap’.”
While this might be true when looking at Uganda as a single market, I cannot help but see its many advantages. The country benefits from a strategic geographic position – despite being land-locked, it serves as the main access point to neighboring Eastern DRC, Rwanda, and South Sudan. The nascent oil sector will be a game-changer and there are many gaps in the market waiting to be filled.
Although Uganda’s addressable market is smaller than Kenya’s – in part due to past political instability that hindered economic development – there is still strong demand for a wide variety of goods. Wealth is evident. I passed a well-maintained golf course in central Kampala and sipped a creamy cappuccino in the city’s new shiny Acacia shopping mall.
In addition to offshore oil finds, Uganda is also building an oil refinery and hopes to become an exporter of refined oil in East Africa. Hopes are high that the government will properly manage this natural resource as did Botswana with its diamonds. To that end, a special government task force was sent to oil-producing countries in order to learn from their successes and mistakes. The government eventually decided to follow the Norwegian model.
Despite strong upstream and downstream potential, Uganda’s main advantage vis-à-vis its neighbors lies in agriculture. A common prejudice in the region states that Ugandans are less productive than Kenyans because they never had to worry about getting enough food on the table. “In Uganda, if you throw something out of the window, next thing you know, a tree has grown there. Uganda is so fertile, no one stays hungry,” someone told me.
Uganda contributes to a large portion of arable land in East Africa and is surrounded by countries that have difficulty feeding their populations. Large opportunities abound for the country to turn its raw materials into processed foodstuff and export it into the region. However, the capital required for a supply and marketing chain is missing, although new revenues from the oil sector might help.
Agriculture and oil are not the only opportunities. On my way to the ministry of finance, I bumped into a group of Turkish businessmen waiting for the elevator. They told me they worked in construction, “building a lot of roads to be precise.” I asked them about Chinese competition, given that many Chinese companies tend to win most infrastructure tenders in Africa. The businessmen answered that, “the roads that were built by the Chinese, are already in decay. African governments now want good quality.”
Uganda might be less mature than some of its neighbors, but I find that it will become a small and important market in itself. In a few years down the line, the country could become a hub to service Anglophone central Africa for international companies.
To quote the Prime Minister, who I have now seen and who emphasized the country’s readiness for agro-processing, fisheries and minerals as areas of investment, “Uganda is not a land-locked country, but a land-linked country, ready to export more of its products into the region and the world.”
For additional insight from Anna’s research trip in East Africa, be sure to read her earlier posts: Kenya – A Regional Trendsetter, Notes from the Field: Kenya, Nairobi – African Cities Need Urban Planning, Kenya – Let the pictures speak for themselves.
Author: Anna Rosenberg, Head of Sub-Saharan Africa at FSG, is currently on a research trip to Kenya, Uganda and Ethiopia.