VENTURES AFRICA – Uganda’s planned investment more than tripled in the first quarter of this year from the preceding quarter on the back of a growing interest in the energy sector, with Uganda set to become a top-50 crude oil producer.
The chairman of the Uganda Investment Authority (UIA), Patrick Bitature, confirmed that planned investments between January and March were worth $806 million, compared with $223.3 million in the last quarter of last year. Uganda is the region’s third largest economy and is forecast to grow by 5.4 percent in the next fiscal year, having seen growth of 5 percent this year. Investments in infrastructure and energy are at the centre of this expansion. It fits into a general trend, with seven of the top ten sources of foreign direct investments being from emerging markets.
Regular power outages have in the past prevented the Ugandan economy from growing, with the government standing accused of not investing enough in the sector. 24-hour power outages last year resulted in riots across the country, and the government has escalated efforts to at least promote private investment, even if public investment has not been forthcoming. This is set to change now, however, with the government allocating $86.59 million for the completion of a 700 megawatt hydropower project in Karuma. Private investment, particularly in oil, is also continuing apace, with UK company Tullow Oil planning to invest up to $750 million this year as Uganda looks to begin commercial oil production by the end of 2012. An oil boom in Uganda looks likely, with output from the Ugandan fields, which hold an estimated 2.5 billion barrels of oil, expected to exceed 200,000 barrels of oil a day.
The UIA confirmed that the energy/oil and water sector had recorded the most planned investment, worth a total of $561 million from four projects that would produce an estimated 1,225 jobs. Mining and quarrying was second on the list, with just short of $100 million in planned investment, creating 825 jobs from seven projects.
“The energy…sector recorded the highest value of planned investment … followed by mining, real estate and business services,” said Bitature.
“These (job projections) are arrived by applying due diligence on the projections of the investors on whether their estimates are possible,” he said.
In spite of Tullow’s plans, the majority of the investments planned are local, 32 projects in all. Only 13 per cent, totalling $98 million, are foreign, and this is spread over 30 projects. The largest planned investments come from Sweden, with India, China and the UK also featuring amongst those that are putting money into Ugandan projects. These projects will also serve to boost employment in Uganda, creating 6,000 jobs in all.
Bitature said that it will take more than 24 months for these investments to mature, but that they would eventually have visible rewards such as taxes and employment.
“Look at Tullow, it has been around for only five years. Its wells are yet to start flowing but its contribution is already significant,” he said.