Download Infrastructure

Infrastructure
Uganda
December 2014
1
ID: UG0114-01
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Market Intelligence for Informed Decisions
UGANDA: Infrastructure
Published: Dec 2014
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LIST OF CONTENTS
SWOT Analysis …………………………………………………………………………………………………………………… 7
Uganda: Country Brief………………………………………………………………………………………………………… 8
Sector Overview…………………………………………………………………………………………………………………. 9
Construction: Industry Profile
Construction Sector’s Wealth
Growth in the Construction Sector
Cement Supply
Market Share in Cement Production
Cement Demand and Consumption
International Trade …………………………………………………………………………………………………………… 16
Recent Developments ………………………………………………………………………………………………………. 17
Uganda joins LAPSSET Corridor
East African Superhighway
Boost for Roads Transport
Tarmac Roads for Business Park
Deal signed for East African standard-gauge line
Modernisation of Entebe International Airport
Fears Rise over Uganda’s Mega Projects
Products and Markets ……………………………………………………………………………………………………… 20
Housing sector ……………………………………………………………………………………………………… 20
- Housing Needs
- Challenges in the Housing Sector
- Investments in Urban Infrastructure below International Average
Transport Infrastructure……………………………………………………………………………………….. 23
Railways Sector
- East African Railways Network
- Reforming the East African Railways
- Uganda’s Part of EA Railways Upgrade is Underway
- German and Chinese contractors to work on Uganda’s new railway
- East Africa Railways Authority
Roads Sector
- Completed Road Projects
- On-going Road Projects
- Up-coming road projects
- Ferries
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Energy Infrastructure………………………………………………………………………………………………… 35
Chinese-built Power Plants
Micro-Hydro Projects
Leading Companies …………………………………………………………………………………………………… 37
National Housing and Construction Company (NHCC)
Tororo Cement Limited
Hima Cement Limited
Bamburi Cement Limited
Uganda Clays Limited
New Entrants……………………………………………………………………………………………………………… 41
Sanlam
BASF - RRM
Turkish Investors
Drivers of Growth ……………………………………………………………………………………………………… 42
Population’s Growth and Demand for Housing
Urbanisation
Tourism
Government Spending
Discovery of Oil
External Factors
Barriers to Entry……………………………………………………………………………………………………….… 45
Capital and Financing……………………………………………………………………………………………….… 46
Capital for Individuals
Capital for Investors
Lending to the Construction Sector by Commercial Banks
Regional Funding in East Africa
World Bank's MIGA
Africa50
Emerging Africa Infrastructure Fund (EAIF)
Materials, Availability and Cost of Labour…………………………………………………………………. 49
Labour
Materials
Office Hire
Policy and Regulatory Environment ………………………………………………………………………….. 51
Regulatory Acts
Governing Bodies
Infrastructure and Uganda’s Vision 2040
Uganda on the way to National Construction Industry Policy
Lack of Regulation for Construction Sector
Land tenure reforms since 1995
Protracted Public – Private Partnerships (PPP) Legislation
Foreign Investment ……………………………………………………………………………………………………… 55
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Foreign Investment in Uganda
Foreign Investment in the Construction Sector
Chinese Investments
Government Policy on Foreign Investment
Land ownership by Foreign Investors
State Incentives for Foreign Constructors
Risks & Challenges ………………………………………………………………………………………………………. 57
Lack of laws & Law Enforcement
Limited Access to Housing Finance
Power Supply
Bureaucracy
Technology
Transport Costs
Upholding of Contracts
Lack of Transparency
Insecurity in the Region
Lack of a Competition Law
Non Participation in Production
Market Trends & Outlook……………………………………………………………………………………………. 60
Uganda’s Growing Economy Outlook
Construction Sector Outlook
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LIST OF FIGURES
Figure 1: Real GDP growth…………………………………………………………………………………………………
Figure 2: Construction in Uganda’s GDP ……………………………………………………………………………
Figure 3: GDP by economic activity at current prices, 2010-2014……………………………………….
Figure 4: Monetary and non-monetary GDP at current prices……………………………………………
Figure 5: Growth in the Construction Sector, 2010-2014……………………………………………………
Figure 6: Cement Production in East Africa, 2014………………………………………………………………
Figure 7: Trends in domestic market share in cement production, 2011-2013……………………
Figure 8: Cement production and consumption in Uganda………………………………………………..
Figure 9: Uganda’s exports and imports of cement……………………………………………………………
Figure 10: Real Estate in Uganda’s GDP, 2009-2014……………………………………………………………
Figure 11: Housing Indicators in Uganda, 2012-2022………………………………………………………….
Figure 12: Transport Sector in Uganda’s GDP ……………………………………………………………………
Figure 13: Completed national roads in the period 2008-2014…………………………………………..
Figure 14: On-going Major Projects in 2014……………………………………………………………………….
Figure 15: Upcoming road projects since 2014…………………………………………………………………..
Figure 16: Uganda’s Existing and Planned Ferries………………………………………………………………
Figure 17: Energy in Uganda’s GDP, 2009-2014………………………………………………………………….
Figure 18: GDP growth per capita………………………………………………………………………………………
Figure 19: Capital Formation in Uganda…………………………………………………………………………….
Figure 20: Lending to Private Sector, 2013-2014………………………………………………………………..
Figure 21: Basic monthly salaries...…………………………………………………………………………………….
Figure 22: Cost of Basic Materials, 2014…………………………………………………………………………….
Figure 23: Office hire in major cities………………………………………………………………………………….
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12
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20
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24
30
32
33
34
35
43
44
47
49
50
51
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SWOT Analysis
Strengths
Construction is the fastest growing industry in Uganda. In 2013-14, the sector
registered 6.7% increase, growing faster than the overall economy (4.7%).
contributes 13.8% to Uganda’s GDP
Uganda is the third largest producer of cement in East Africa. Its annual
production of cement represents 15% of the region’s total output
The country’s massive infrastructure needs are driving the government
spending on housing and transport networks
As the macroeconomic picture improves and government remains committed,
the industry will enjoy a growing trend of private equity interest in
infrastructure projects for years to come
Weaknesses
Uganda has relatively fewer foreign investors in the sector in comparison to its
neighbours but they dominate the construction landscape
The sector is relatively small and has limited potential returns
Uganda’s construction sector remains largely unregulated. Increasing numbers
of fake constructors affect efforts to attain the intended development
The greatest risks in the Ugandan construction industry are still corruption and
lack of transparency. Tendering procedures are not clear, or non-existent
Rules on Public-Private Partnerships are yet to be approved by the Parliament
Lack of skilled labour and management also hinder the construction industry
Opportunities
Uganda’s liberalized economy is attracting foreign investors. Foreign investors
may form 100% foreign owned companies and majority or minority joint
ventures with Ugandan partners without restrictions
Due to lack of human and financial resources of local firms, foreign construction
companies have a comparative advantage in bidding for governments projects.
With local oil production set to begin in Uganda, companies could benefit from
cheaper furnace oil to run their factory activities. This which could lower their
cost of doing business and hence more profitability.
Threats
President Yoweri Museveni and his ruling National Resistance Movement limit
multi-party competition and impede democratic checks and balances
Cement imports from India, Pakistan and China are blamed for flooding the
Eastern African market and pushing the prices downwards
Ugandan anti-gay law of 2014 resulted in an immediate boycott of the country
by international businesses. Norway and Denmark announced they would hold
back donations to Uganda
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UGANDA: COUNTRY BRIEF
According to the World Bank, Uganda has a record of sensible macroeconomic management
and structural reforms. Uganda’s GDP stood at US$ 19.88 trillion and grew at 4.8% in 2013. This
was an improvement from the country’s slump to 2.6% in 2012 from a healthy 6.7% a year
earlier. Uganda’s economy is one of the fastest growing in Africa. Its real GDP is expected to
grow by 6.2% in 2014 and 7% in 2015.
The country has the population of 37 million. Over 70% of Ugandans are under the age of 25. Its
population is projected to increase to 47 million by 2020 reaching 54 million by 2025. This will
have immediate implication on the country’s infrastructure growth pushing up demand for the
construction of housing, transport and services.
Figure 1: Real GDP growth (in %)
2011
4.4
2012
4.7
2013
5.7*
2014f
6.2*
2015f
6.3*
Tanzania
6.4
6.9
7.0
7.2
7.0
Uganda
6.7
2.6
4.8
6.2
7.0
Rwanda
8.3
7.7
7.6
7.2
7.0
Burundi
4.2
4.0
4.5
5.1
5.5
-
-53.0
32.1
49.2
5.4
Kenya
South Sudan
Source: World Economic Outlook, 2013; KNBS 2014; *figures after September 2014 rebasing
Uganda’s liberalised economy makes the country open to foreign investors. Being landlocked,
Uganda depends on imports that mostly come through the Port of Mombasa in Kenya. Most of
Uganda’s imports are from India and China whereas it exports more to the local economic
region – the Common Market for East and Southern Africa (COMESA). Coffee is Uganda’s single
largest export.
Uganda is moving toward deeper economic integration with the countries of the East African
Community (EAC)—Burundi, Kenya, Rwanda, and Tanzania. New arrangements on common
currency and cross-border payments sealed at the end of 2013 give Uganda a new economic
impetus.
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Vision 2040 policy aims at turning Uganda into a middle-income country by 2040. With the
discovery of oil in 2006 the energy sector is likely to increase economic growth projections,
boost industrialisation and transform Uganda a large-scale oil exporter. The government has
increased investments on education and infrastructure. In the 2013/14 National Budget, at
least 40% has been committed to infrastructure projects like roads and railways. There is a
renewed focus on stepping up Uganda’s electricity generation to attract investments especially
in manufacturing.
SECTOR OVERVIEW
Construction: Industry Profile
Over the last five years, Ugandan construction industry has emerged as one of the fertile,
profitable and competitive industries. In Financial year 2013-2014, the construction industry
contributed 13.8% to Uganda’s GDP. Services sector is the biggest contributor to Uganda’s
economy (45.4%), followed by Industry (26.3%) and Agriculture (22.2%).
The government acknowledges that improved infrastructure is considered a stimulator for
increased output in the productive sectors through value addition, particularly in agriculture,
manufacturing and the services. According to 2013/2014 Uganda budget report, the
government plans to accelerate airport, road infrastructure and power plants development
which will spur further growth in the construction industry.
The expansion of the construction sector coupled with the government’s increased spending on
infrastructure has resulted in an increase in the number of local and foreign companies
operating in Uganda. However, local contractors have been relegated to spectators instead of
competitors in the goldmine that construction and road development have become. The
industry is dominated by foreign companies.
The sector suffers from lack of technological innovations. There is need to position the Ugandan
construction industry with advanced technological solutions required to provide and maintain
economic and social infrastructure. The upgrade of local workforce is also considered as one of
the conditions to attract investment.
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Figure 2: Construction in Uganda’s GDP (in %)
2009/10
2010/11
2011/12
2012/13
2013/14
100.0
100.0
100.0
100.0
100.0
Agriculture, forestry and fishing
23.6
22.7
23.8
22.5
22.2
Industry
24.9
25.3
26.3
26.3
26.3
Mining & quarrying
0.3
0.3
0.3
0.3
0.3
Manufacturing
Formal
Informal
7.7
5.7
1.9
8.6
6.6
2.0
8.4
6.3
2.1
8.0
6.1
1.9
7.7
5.9
1.8
Electricity supply
1.4
1.4
1.2
1.3
1.2
Water supply
2.8
2.0
3.4
3.2
3.2
Construction
12.7
13.0
12.9
13.4
13.8
Services
45.5
46.2
44.3
45.1
45.4
Wholesale & retail trade; repairs
12.1
13.6
13.6
12.7
12.0
Hotels & restaurants
4.6
4.3
5.2
5.4
5.7
Transport & communications
6.4
5.0
4.8
5.1
5.3
Financial services
3.0
3.4
3.7
3.8
3.4
Real estate activities
6.0
6.1
5.2
5.6
6.1
Other business services
1.7
1.7
1.5
1.7
1.7
Public administration & defence
3.3
3.5
2.8
2.9
3.0
Education
5.2
5.3
4.0
4.4
4.7
Health
0.9
0.9
0.9
0.8
0.8
Other personal & community services
2.3
2.4
2.6
2.7
2.8
Adjustments
6.0
5.8
5.6
6.1
6.2
Total GDP at market prices
Source: Uganda Bureau of Statistics, 2014
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Construction Sector’s Wealth
Construction is the largest sub-segment of Industry, Uganda’s second biggest sector. On the
whole, in FY 2013-2014, Industry was worth USh 15,909 billion, the value of the construction
sector stood at USh 8,345 billion. Over the last five years, the construction segment has been
steadily generating half of the Industry’s sector wealth. Within the Industry sector, this was
followed by manufacturing (USh 4,678 billion) and water supply (USh 1,939 billion).
In comparison, services, the country’s biggest sector, produced USh 27,436 billion and
agriculture generated USh 13, 408 billion.
Figure 3: GDP by economic activity at current prices, 2010-2014 (in billion Shillings)
2009/10
20010/11
2011/12
2012/13
2013/14
34,908
39,086
50,193
55,602
60,475
8,245
8,891
11,966
12,488
13,408
8,675
9,895
13,179
14,605
15,909
Mining & quarrying
106
134
175
186
204
Manufacturing
2,675
3,363
4,194
4,471
4,678
Electricity supply
486
556
624
696
742
Water supply
982
776
1,695
1,804
1,939
Construction
4,427
5,067
6,490
7,448
8,345
15,888
18,049
22,257
25,092
27,436
2,100
2,250
2,792
3,417
3,722
Total GDP at market prices
Agriculture,
Forestry and Fishing
Industry
Services
Adjustments
Source: Uganda Bureau of Statistics, 2014
Construction in Uganda includes activities such as construction of infrastructure and buildings,
manufacture and supply of products as well as maintenance, operation and disposal.
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Figure 4: Monetary and non-monetary GDP at current prices (in billion shillings)
2009/10
2010/11
2011/12
2012/13
2013/14
34,908
29,890
5,019
39,086
33,823
5,263
50,193
43,391
6,802
55,602
48,168
7,434
60,475
52,332
8,143
Construction
Monetary
Non-monetary
4,427
4,317
110
5,067
4,939
128
6,490
6,340
149
7,448
7,263
185
8,345
8,149
196
Real estate activities
Monetary rents
Owner-occupied dwellings
2,108
672
1,436
2,380
753
1,627
2,597
815
1,782
3,126
972
2,154
3,670
1,131
2,538
Total GDP at market prices
Monetary
Non-monetary
Source: Uganda Bureau of Statistics, 2014
Growth in the Construction Sector
Construction is the fastest growing industry in Uganda. The sector registered 6.7% annual
growth in 2013-2014, a slight decrease from 7.4% a year earlier. The overall economy expanded
by 4.7% throughout 2013-2014. Services sector and the overall Industry sector both grew by
5.6% during the same period.
The growth rate in the construction sector has been consistent and higher than in most other
sectors over the last five years with the exception of 2011-2012 when construction’s growth
rate contracted to 3.2%. Services on the other hand show a decreasing growth trend over the
last five years.
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Figure 5: Growth in the Construction Sector, 2010-2014 (in %)
2009/10
2010/11
2011/12
2012/13
2013/14
Total GDP at market prices
5.9
6.6
3.4
6.0
4.7
Agriculture, forestry and fishing
2.4
1.2
0.8
1.3
1.5
Industry
6.5
7.9
2.5
6.8
5.6
15.8
18.6
5.7
-0.4
4.3
6.6
6.1
8.2
8.0
9.1
4.5
-0.3
-2.2
5.9
5.7
6.8
2.5
4.4
4.8
2.9
14.5
10.7
7.4
9.9
0.8
Water supply
4.4
4.0
4.1
4.7
4.6
Construction
5.9
7.8
3.2
7.4
6.7
Services
8.2
8.2
3.6
6.5
5.6
-2.7
3.0
8.9
8.1
1.3
Mining & quarrying
Manufacturing
Formal
Informal
Electricity supply
Adjustments
Source: Uganda Bureau of Statistics, 2014
Cement Supply
Uganda is the third largest producer of cement in East Africa. Its annual production of cement
represents 15% of the region’s total output. Kenya is the region’s biggest producer supplying
53% of cement, followed by Tanzania with 30%. With the current public sector infrastructure
projects and the rapid growth of the middle class in Kenya, it’s expected to drive the cement
consumption for years to come.
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Figure 6: Cement Production in East Africa, 2014
Others
2%
Uganda
15%
Kenya
53%
Tanzania
30%
Source: KNBS Statistical Release; 2014
Cement is the main component in the construction sector, carrying 65-75% weight. In 2013,
production of cement in Uganda reached 1.7 million tons rising to 1.9 million in mid-2014.
Kenya is the regional leader in cement production in East Africa producing about 400,000
metric tons of cement per month. Tanzania comes second with 2.5 million tons per year.
By the end of 2014, cement producers in the East African region had begun to experience
mixed results due to an oversupply of the product. The entry of new firms, a proliferation of
cheap imports from Asia and further capacity enhancement by existing cement firms has seen
the market flooded with cement. An investment company Old Mutual Kenya projected in 2013
that East Africa will experience an oversupply of cement by 2015. ‘This is expected to result in
downward pressures on price which will benefit consumers in the East African Community,
simultaneously raising concerns about the long-term profitability of the industry,’ the firm said.
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Market Share in Cement Production
As of 2014, Uganda produces over 1.9 million mt of cement annually. Tororo Cement accounts
for 60% of production and is Uganda’s biggest supplier. Tororo manufactures building
materials- cement and construction steel and galvanized iron sheets, both for domestic and
foreign markets. However on-going fighting in the neighboring South Sudan since December
2013 and instability in DR Congo have forced the company to cut exports by 20%.
Figure 7: Trends in domestic market share in cement production, 2011-2013
2011
2012
2013
Tororo Cement
58%
57.4%
60%
Hima Cement
12%
10%
15%
Bamburi*
20%
20%
10%
EAPC*
2%
0.5%
0%
Mombasa Cement *
8%
6%
8%
-
6.1%
7%
Imports
Source: Standard Investment Bank, 2013; *Imports from Kenya
Other producers of cement in Uganda, Hima Cement accounts for much smaller output. Hima
Cement produces an estimated 850,000 metric tons annually. The cement produced by the
company is marketed to the eastern African countries of Uganda, Kenya, Tanzania, Rwanda,
Burundi, Democratic Republic of the Congo and South Sudan.
Uganda relies on imports from Kenyan producers: Bamburi Cement, East Africa Portland
Cement and Mombasa Cement. For the last 2 years, Ugandan market has been hit hard by
inflationary pressures and spike in lending rates forcing many builders to suspend construction.
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Cement Demand and Consumption
On average over the past decade, East African cement consumption has been growing at a rate
of 14% and is expected to continue growing in the near future at around 8% per annum with
total capacity expected to reach 14.4 million tons by 2017
In Uganda, the 2014 production capacity stands at 1.9 million tons, against a demand of 2.4
million tons. The country’s consumption of cement stands at 35 kg per capita.
Figure 8: Cement Production and Consumption in Uganda (in metric tons)
2009
2010
2011
2012
Local production
1162
1347
1666
1780
Net domestic Consumption
1338
1489
1665
1701
Source: Uganda Bureau of Statistics, 2013
INTERNATIONAL TRADE
Between 2009 and 2010 consumption of cement in Uganda was higher than its production a
factor behind the country’s negative trade balance. Over the recent years however, supply and
demand seem to go hand in hand.
Figure 9: Uganda’s exports and imports of cement (in metric tons)
2009
2010
2011
2012
Imports
566
503
501
449
Exports
390
362
502
528
Source: Uganda Bureau of Statistics, 2013
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In the broader Eat African region, imports from India, Pakistan and China have been blamed for
flooding the market. The growing imports from Asian countries continue to pose the biggest
challenge for the industry, particularly in Tanzania where producers estimate that 300,000 tons
of cheap cement could be finding its way into the local market every year. Uganda has been
less exposed to the damaging effect of cheap imports from South Asia. This is due to transport
costs from Kenyan and Tanzanian ports to Uganda that largely push cement prices upwards and
make it less attractive in the Ugandan market
RECENT DEVELOPMENTS
Uganda joins LAPSSET Corridor
Uganda is one of the latest countries to join the Lamu Port and Lamu-Southern Sudan-Ethiopia
Transport (LAPSSET) Corridor. The project is built in collaboration with Kenyan, South Sudan
and Ethiopian governments. The project aims at better integrating the countries and increasing
the volume of trade in East Africa. It will build and then connect Port Lamu in northern Kenya
via a 1,500 km standard-gauge railway line and a road network from Lamu to the Ethiopian and
South Sudanese capitals (Addis-Ababa and Juba). It will also include an oil pipeline linking Kenya
to South Sudan and Ethiopia and now Uganda. A new oil refinery at Bargoni in Lamu District is
expected to refine approximately 120,000 barrels of oil a day. Airports and resort cities will be
built in Lamu, Isiolo and Lake Turkana.
In July, 2014, presidents of Kenya, Uganda, South Sudan and Ethiopia agreed that the seven
components of the project require an estimated budget of $24.5 billion. Securing financing is
under way and multiple bodies have expressed interests in the project. Three Lapsset projects
are being handled by the Chinese companies: China Communication Construction Company
(CCCC) and China State Construction Engineering Corporation.
African Development Bank (AfDB), Trademark East Africa (TMEA), World Bank,
Intergovernmental Standing Committee on Shipping (ISCOS), Port Association of Eastern and
Southern Africa (PMAESA), Lamu Port South Sudan Ethiopia Transport (LAPSSET), Central
Corridor Transit Transport Facilitation Agency (CCTTFA) and Northern Corridor Transit Transport
Coordination Authority are also participating in the project.
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Deal Signed for the East African Standard-Gauge Line
The Presidents of Kenya, Rwanda and Uganda agreed to construct a railway line that will run
through the three East African countries. In May 2014, Chinese premier Li Keqiang and the
president of Kenya Uhuru Kenyatta signed an agreement for the construction of a 609km
standard-gauge (1,435 mm / 4ft 81⁄2in) railway linking the port city of Mombasa to the Kenyan
capital Nairobi. The line will be extended from Nairobi to the Uganda capital Kampala, and later
to Rwanda's capital Kigali and Juba in South Sudan. The agreement was witnessed by East
African presidents Yoweri Museveni of Uganda, Paul Kagame of Rwanda and Salva Kiir of South
Sudan.
The initial Mombasa - Nairobi section will be constructed by China Roads and Bridge
Construction at a cost of $US 3.6bn, which is considerably less than the $US 5.2bn estimated
earlier by a Kenyan parliamentary committee. The Chinese contractor was appointed without
competitive bidding after Kenya agreed to this as a condition for Chinese funding. China will
finance 90% of the project while Kenya will provide the remaining 10%. China will provide a $US
1.6bn commercial loan and $US 1.63bn as a concessionary facility. Work on the project was
planned to begin in October 2014 and is due to be completed in March 2018.
East African Superhighway
The three governments (Kenya, Uganda and Rwanda) are also planning to build a superhighway
from Mombasa, Kenya to Kigali, Rwanda, that will go around Lake Victoria via Uganda.
Trademark East Africa will facilitate the construction. The road is expected to have six lanes and
is intended to ease the movement of cargo, reducing the cost of doing business and increasing
intra-regional trade. Construction is due to start in 2016.
Boost for Roads Transport
The Uganda government has secured US$ 1.5 billion in technical support in order to fast track
the construction of four multibillion road projects under a Public Private Partnership. The
Finance ministry has allowed the Uganda National Roads Authority to engage the International
Finance Corporation, the private sector arm of the World Bank, to be its financial advisor. The
project is expected to reduce transportation costs, improve access to social and economic
infrastructure and increase mobility.
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Tarmac Roads for Business Park
In 2014 works are to begin on upgrading roads connecting Kampala’s 894-acre industrial and
business park, 15km east of Kampala, from gravel to tarmac. The project will cost USh 6 billion
($2.37 million). This is an average of $600,000 per kilometre of a seven-metre wide asphalt
carriageway, flanked by one metre asphalt concrete shoulders and other safety features.
Upgrading the four kilometres of access roads into the Kampala Industrial and Business Park,
off the Kampala-Jinja highway, is the latest effort by the Uganda National Roads Authority and
Uganda Investment Authority to give the business park a shot in the arm.
Pioneers in the park, mainly Roofings Rolling Mills, Hima Cement, Export Trading Company,
Kyagalanyi Coffee and Victoria Seeds have since 2009 endured transport infrastructure
headaches, as well as other major concerns like inadequate power, lack of water and fibre optic
cables, as well as inadequate drainage and solid water management facilities.
Modernisation of Entebe International Airport
The government has pledged to spend US$400m on upgrading and modernisation of Entebbe
International Airport, along with a number of other transport upgrade projects. Uganda aims at
having four international airports in total by 2040.
Fears Rise over Uganda’s Mega Projects
Questions are beginning to emerge over the cost of energy and transport projects, the growing
pile of debt to pay for them, and the lack of transparency in some of the contract awards. Mega
infrastructure projects do not come cheap. The Kampala-Entebbe highway will cost at least
$350 million; Karuma $1.7 billion; Isimba $570 million; the new Jinja bridge $130 million while
the oil infrastructure alone is estimated to cost between $15 billion and $20 billion. The
standard gauge railway is conservatively estimated at around $3 billion. By June 2012, the debt
was $4.3 billion but Finance Minister Maria Kiwanuka said in a policy document that it had
grown to $7 billion in March 2014, up from $5.6 billion a year earlier.
Between 2009 and 2014 Uganda has undertaken, or signed off, more infrastructure projects
than it has in all the years since the country’s Independence in 1962. The bulge in public debt is
already showing. Uganda was the first beneficiary of the Highly Indebted Poor Countries debtforgiveness program in 1998 that, together with the Multilateral Debt Relief Initiative, saw its
public debt drop from $3.7 billion to $1.6 billion. Debt is expected to rise more rapidly as more
projects reach financing stages (the oil and railway projects, for instance) and as the
19
government turns to more expensive non-concessional loans to finance infrastructure and plug
funding gaps left by donors cutting aid.
The World Bank and African Development Bank, which are key lenders, and the IMF, which is a
key policy advisor, say the debt, which is now around 33% of GDP and rising, is still within
manageable levels.
PRODUCTS AND MARKETS
HOUSING SECTOR
Uganda’s housing sector contributes around 6% to GDP. As a comparison, in neighbouring
Kenya the sector contributes up to 25% and in the so-called Asian Tigers its contribution is
above 40%. Between 2009 and 2014, the real estate segment has been growing at a rate of
5.8%, a slight increase from 5.6% per annum between 2004 and 2008. Its growth is attributed
to rapid population growth, increase in disposable income, increase in foreign direct
investment, and immigrant remittances.
Figure 10: Real Estate in Uganda’s GDP, 2009-2014
2009/10
2010/11
2011/12
2012/13
2013/14
100.0
100.0
100.0
100.0
100.0
6.0
6.1
5.2
5.6
6.1
Total GDP at market prices
5.9
6.6
3.4
6.0
4.7
Real estate activities
5.7
5.7
5.8
5.8
5.8
Percentage of GDP
Total GDP at market prices
Real estate activities
Growth rate (in %)
Source: Uganda Bureau of Statistics, 2014
20
Uganda’s Ministry of Land, Housing and Urban Development estimated in 2013 that Uganda
had about 6.82 million households living in 6.2 million housing units in 2012. An average
household size is five people. The national occupancy density is estimated at 1.1 households
per housing unit, giving a total backlog of 710,000 housing units. There is also a backlog of
about 900,000 housing units as a result of sub-standard houses and structures, which were
never meant for human habitation. Out of a total backlog of 1.6 million housing units, about
210,000 units are in urban areas while 1.395 million units are in rural areas
Additionally most households are characterized with congestion, which is a potential health
risk. More than 50% of all households in Uganda occupy one roomed houses with about three
quarters of households in Kampala have one bedroom. Congestion with the highest average
number of people (4 people) per sleeping room is with the Northern and Eastern regions while
other regions have about 3 people.
According to Uganda’s statistical report 2013, the stock of housing in the country has tripled
over the recent years. This is indicated by the total number of plans submitted progressively
increased from 1,458 plans in 2008 to 4432 plans in 2012. The highest increase in number of
plans submitted was 71.7% recorded in 2011, at 3,282 plans from 1,912 a year earlier. The
major increase was in residential and commercial segment. Residential plans almost doubled
from 1,075 plans in 2010 to 1,954 plans in 2011, while commercial plans increased from 657
plans in 2010 to 1,128 plans in 2011.
Housing Needs
The annual need for new housing for the entire country is estimated at 200,000, of which
135,000 are rural and 65,000 in urban areas resulting from the population growth of 3.5%
national and 5.1% urbanization. By 2022, Uganda’s population is projected to be about 49
million people. With the current household size of five persons, the housing need resulting
from population growth will be about three million housing units. The estimated construction
rate of reasonably good houses is estimated at 40,000 housing units per year in the rural areas
and 20,000 in urban areas. This will create a deficit of 135,000 inadequate houses nationally of
which 95,000 are in rural areas and 45,000 in urban areas. This shortage does not include the
backlog of 1,600,000 housing units carried forward.
21
Figure 11: Housing Indicators in Uganda, 2012-2022
Year 2012
Urban
Rural
Total
Population
5,800,000
28,330,000
34,130,000
Number of households
1,160,000
5,666,000
6,826,000
Existing Housing Stock
1,055,000
5,150,000
6,205,000
Backlog
105,000
605,000
710,000
Current deficit
100,000
790,000
890,000
Permanent housing stock
700,000
1,100,000
1,800,000
9,400,000
39,648,000
49,048,000
Additional housing need by 2022
720,000
2,263,600
2,983,600
Projected housing need to 2022
925,000
3,658,600
4,583,600
Annual housing requirement to meet
the need
93,000
365,000
458,000
Year 2022 projections
Population
Source: Directorate of Housing, MLHUD, 2013
Challenges in the Housing Sector
The Ministry of Lands, Housing and Urban Development evaluates the housing sector is
characterized by poor quality housing both in rural and urban areas though urban areas have an
extra burden of quantity leading to overcrowding and creation of slums and informal
settlements.
The private real estate sector is not properly regulated for it to be able to conform to planning
regulations and standards, building standards and other services requirements such as
management of, solid waste, access roads, and electricity among others. The result is
inadequate availability of low cost housing amidst increasing population and lack of affordable
and accessible housing for special needs population such as the elderly or physically challenged.
Inadequate supply of cheap building materials on the market has enhanced competition for the
few available building materials. The household survey (2009/10) revealed that 71% of the total
housing stock is constructed out of temporary materials; 11% is semi-permanent and 18% of
the stock is in permanent materials. On the whole 22% of Ugandans reside in huts, 15.2%
22
tenements and the majority 60.5% detached. Over the recent years, the housing situation has
been improving and is reflected by an increase in the proportion of housing units built in
permanent materials in both urban and rural areas.
Investments in Urban Infrastructure below International Average
Investments in urban infrastructure and services have not kept pace with the growing
demographic and economic importance of urban centres. This has resulted in the growth of
unplanned settlements, urban poverty, inadequate basic urban services, and deteriorating
urban environment. It is estimated that slums and informal settlements provide
accommodation to more than 60% of the urban dwellers in Uganda. Such settlements are
characterized by lack of basic services, overcrowding, tenure insecurity, makeshift dwelling
units, crime, and poor sanitation.
Whereas the urban sector contributes over 60% of the national GDP, it only receives 3.4%
(40Bn) annually of the total Local Government Budget of 1.3 Trillion. Investment in urban
infrastructure has been lower than the international average as a portion of total fixed-asset
investment and GDP. It is also unevenly distributed.
TRANSPORT INFRASTRUCTURE
On the whole, the transport sector, including roads, railways and air-transport, contributes over
5% to the Ugandan economy. Roads, railways and water transport account for half of the
overall figure. The sector has been recording a double digit growth over the last years. Airport
has continuously accounted for growth’s biggest proportion.
23
Figure 12: Transport Sector in Uganda’s GDP (in %)
2009/10
2010/11
2011/12
2012/13
2013/14
Total GDP at market prices
100.0
100.0
100.0
100.0
100.0
Transport & communications
6.4
5.0
4.8
5.1
5.3
Road, rail & water transport
2.5
2.3
2.5
2.5
2.5
Air transport and support services
0.6
0.6
0.6
0.7
0.7
5.9
6.6
3.4
6.0
4.7
17.5
14.1
11.8
13.5
4.1
14.1
0.9
7.9
3.3
3.0
12.0
3.3
9.8
4.9
14.2
Percentage of GDP
Annual Growth Rate (in %)
Total GDP at market prices
Transport & communications
Road, rail & water transport
Air transport and support services
Source: Uganda Bureau of Statistics, 2014
RAILWAYS SECTOR
A major overhaul of railways network is underway in Uganda and East African region. The
Ugandan Railway dates back to colonial times and was constructed to metre gauge (1,000 mm /
3 ft 3 3⁄8 in). Uganda is connected only to Kenya (same gauge 1,000 mm (3 ft 3 3⁄8 in). There are
no lines directly connecting Uganda with neighbouring Rwanda, Congo or South Sudan. There
used to be a ferry train to Tanzania across Lake Victoria. It is no longer in operation. The new
railway line to South Sudan has been proposed.
Within Uganda, the long disused line to Gulu was reopened in September 2013 to work
alongside 8 km line between Kampala and Port Bell and the 190km main line from Kampala to
the Kenyan border at Tororo.
24
East African Railways Network
Uganda operates the shortest line in EA
network from the Kenyan border around
the Lake Victoria to Kampala.
The line was extended from Kampala to
Kasese near Mount Ruwenzori, the
Mountains of the Moon, in 1956.
The Northern Uganda branch from Tororo
was extended to Pakwatch on the Nile
above Lake Albert, in 1964.
This line was has now been extended
across the White Nile to Arua near the
border with Zaire.
In Kenya the initial railways connected port in Mombasa with inland mines and plantations on
the way towards Lake Vitoria. In Tanzania (then Tanganyika), the Germans constructed the
Central Line from Dar es Salaam to Kigoma on Lake Tanganyika.
The last main line to be built in the East African region was TAZARA (TAnzania-ZAmbia RAilway),
the Chinese funded and equipped Tazara line from Dar es Salaam to Tunduma on the border
with Zambia. This line was completed in 1976 and intended to give Zambia an alternative outlet
to the coast. Unlike the other East African lines the TAZARA was built to the 1,067 mm / 3'6"
(3ft 6 in) gauge of the Southern Africa railway system. This allows through running to Zambia,
Zimbabwe and South Africa if required. There had, for many years, been plans to convert the
East African network to ‘Cape Gauge’ with some of the later steam engines and the earlier
diesel classes being designed for easy conversion.
25
Reforming the East African Railways
The existing railway network is to be rejuvenated and extended. New standard-gauge lines will
replace a narrow-gauge track built more than 100 years ago. East African Community (EAC)
prepared The East African Railway Master Plan, a blueprint for revamping the existing railways
connecting Kenya, Tanzania, Uganda and extending the lines to Burundi and Rwanda and later
to South Sudan and Ethiopia.
Kenya, Uganda and Rwanda decided to
upgrade the existing East African
Railway network to Standard Gauge
Railway (SGR) to link Kenya's coast with
Uganda, Rwanda and South Sudan.
In Uganda, the Tororo (on the border
with Kenya) – Gulu (Uganda) – Nimule
(on the side of South Sudan’s border)
line to SGR line by March 2018. The
line is further proposed to reach Juba,
the capital of South Sudan.
The southern part of the line will go
around the Lake Vitoria from the
capital Kampala, to Kigali (Rwanda) and
further to Bujumbura (Burundi), also by
March 2018.
Image: Kenya Railways Corporation, 2014
The completion of the Mombasa (Kenya) – Kampala (Uganda) – Kigali (Rwanda) project is set
for March 2018, according to a communique issued at the end of the Second Infrastructure
Conference concluded Kenya’s coastal city of Mombasa on Wednesday 28th August 2013.
On the Kenyan side of the border, the project is expected to be completed in 2018 and cost $US
13bn, with funding to be sourced from China and Russia. Tanzanian president Mr Jakaya
Kikwete said in April 2014 that his government, along with Rwanda and Burundi, are seeking
26
transaction advisors to secure financing for a $US 4.2bn cross-border railway. Passenger trains
will travel at a top speed of 120km/h (75 mph), while freight trains will have a maximum speed
of 80km/h. The cost of sending a ton of freight one km will drop from 20 US cents to 8 cents.
The Ugandan, Kenyan and Rwandan leaders agreed to develop the Kenya Railway Training
Institute and the Tororo Road/Railway Polytechnic into regional training centres for railway
construction, maintenance and operations.
Uganda’s Part of EA Railway Upgrade is Underway
Around 1,400km of new railway will be constructed in Uganda and Rwanda. This includes the
section from Malaba on the Kenya/Uganda border via Kampala to Mirima Hills on the
Uganda/Rwanda border and then on to Kigali, the capital of Rwanda. There will also be
branches to other towns in the two countries.
Ugandan phase of the project encompasses around 1000km of lines from the border with
Kenya to Rwanda via Uganda, and to a town close to the border with the Democratic Republic
of Congo. The Ugandan part of the railway line will connect with the new standard-gauge line in
Kenya from Malaba via Nairobi to Mombasa, the Kenyan phase is under construction and is due
to be completed in March 2018.
John Byabagambi, Ugandan Minister of Works, says the new standard-gauge network will
speed up freight shipments and carry heavier loads than the country's existing metre-gauge
system.
German and Chinese contractors to work on Uganda’s new railway
In July 2014, German infrastructure consultant Gauff Ingenieure has been awarded a $US 8.6m
contract to design the new standard-gauge railway line linking Uganda's capital Kampala with
Kigali in Rwanda.
Six Chinese companies were invited in July 2014, for engineering, procurement and
construction contracts worth up to $US 8.3bn to expand to country’s railway network for the
Ugandan part of the project. In August 2014, Ugandan works minister Mr John Byabagambi told
Bloomberg that Uganda had signed an exclusivity agreement with China but declined to name
the companies in question. On 30 August 2014, Uganda’s leading daily newspaper, New Vision,
wrote that the Government had signed an agreement, finally giving away the lucrative deal to
27
upgrade and expand Uganda’s railway network to standard gauge, to a Chinese firm China
Harbor Engineering Company (CHEC). Two Chinese companies – CHEC and state-owned China
Civil Engineering Construction Corporation (CCECC) – have been involved in a fight for the deal.
CCECC had earlier in 2012 been given the deal, which was later cancelled by the Government.
CCECC’s representatives (Ligomarc) told New Vision that “gloves are now off” and that they will
continue to challenge Ugandan Government’s decision to award the contract to CHEC.
According to the agreement, CHEC will work closely with the UPDF Engineering Brigade and also
construct a polytechnic school in Uganda for continuous training of army officers in technical
and engineering skills. A statement issued by CHEC’s representatives also expressed
commitment to the above MoU singling out that the Government of South Sudan has also
selected the company to upgrade her railway line.
The construction of the Uganda part of the railway was launched in October 2014. The East
African Community member states have set March 2018 as the target for the upgrading of the
regional railway network to standard gauge system.
East Africa Railways Authority
In early 2013, the EAC approved the budget for the East Africa Railway Authority — a
secretariat expected to oversee related projects for the EA region — setting the stage for repair
works and the construction of new lines, at a projected cost of $29 billion.
The regional authority, set up by the EAC at a cost of $1.8 million is now expected to implement
a 2009 East African Railway Master Plan that seeks to ensure the region is fully inter-linked
within the next decade. Funds to set up the authority came from the African Development
Bank, India Trust Fund and the New Partnership for African Development (NEPAD).
Top among the authority’s agenda is increasing efficiency by converting the railway into
standard gauge which will double the speed of trains to 80 kilometres per hour. When the
original plans for a regional rail authority were first made in 2009, only 6,334km of the total
railway system's 7,363km was in use. While governments in the East African Community had
set aside millions of dollars over the years to revamp the railway system, politics, indecisiveness
and bureaucracy frustrated key projects.
In August 2012, the African Development Bank (AfDB) has provided $US 500m to the East
African Community (EAC), which covers Kenya, Tanzania, Uganda, Rwanda and Burundi, to roll
28
out projects under its Railway Master Plan. The money will be used to establish a technical unit
to coordinate the upgrading of existing railways and the construction of new lines.
ROADS SECTOR
Completed Road Projects
An upgrade of Ugandan railways is accompanied by plans for a revamp of the country's road
network. For a long time, the country’s deficient road network has proved a barrier to
economic growth and a costly detriment to regional trade. Indeed, of Uganda's 20,000km
national road network, just 15% is tarmac. In July 2012, the country announced plans to raise
US$950mn to finance the construction of 1,900km of new roads.
The results of Uganda’s increased determination to improve national roads network are
beginning to show. Over 1,527 national road projects have been completed between 2008 and
2014. Further 1,563 km of roads are under construction, most of the projects in their final
stages or nearing completion.
29
Figure 13: Completed national roads in the period 2008-2014
Km
72
Completion
July 2009
Kampala Northern Bypass
21
September 2009
3.
Accident Black Spots on Kampala – Jinja Road
15
February 2009
4.
Soroti – Dokolo – Lira
123
April 2010
5.
Kawempe – Kafu road (Phase 1)
166
September 2009
6.
Masaka – Kyotera/ Nyendo – Villa Mari
48
January 2010
7.
Mbarara – Ishaka/ Ishanyu – Bwizibwera
83
September 2010
8.
Matugga – Semuto – Kapeeka
41
February 2011
9.
Nakasongola Loop
25
June 2011
10. Kampala – Mukono
23
June 2011
11. Lira – Kamdini – Karuma
88
August 2011
12. Kampala – Gayaza-Zirobwe
44
August 2011
13. Kampala – Masaka Phase 1
63
July 2012
14. Busega – Mityana
57
June 2012
15. Masaka – Mbarara
154
August 2012
16. Kabale – Kisoro – Bunagana/Kyanika
101
September 2013
17. Nyakahita-Kazo
68
February 2014
18. Kazo – Kamwenge
75
March 2014
103
March 2014
20. Malaba/ Busia – Bugiri
82
April 2014
21. Mbarara – Kikagati – Murongo Bridg
75
May 2014
22. Kampala (Busega)-Masaka (Phase ll)
51
September 2014
1.
Jinja – Bugiri road
2.
19. Fort Portal – Bundibugyo-Lamia
Total
1,527
Source: Uganda National Roads Authority (UNRA), 2014
30
On-going Road Projects
The National Roads Authority requested expressions of interest in the projects, which would be
structured as contractor financed and with the contractors to secure financing through financial
institutions and then be repaid by the government, as opposed to the government providing an
upfront sum from the budget. The first contracts were signed in Q1 2013.
Works on the construction of the US$350mn, four-lane 51.4km Kampala- Entebbe highway has
started, with the project set for completion in the next four years. Danish engineering
consultancy COWI has secured an output- and performance-based road contract from the
Uganda Road Authority to work on a highway project. The overall 403km highway project
would run from the Kenyan border to the city of Gulu in Uganda. On completion, the highway
would run through three countries, namely Kenya, Uganda and South Sudan.
The European Investment Bank has granted a EUR112.5mn (US$153.05mn) loan to the
Ugandan government for the construction of the Mbarara Bypass and the widening the
Kampala Northern Bypass' (Phase II), according to Uganda's works minister, Abraham Byandala.
This will support an earlier investment amounting to EUR28mn (US$38.09mn) contributed by
the country's government. The Mbarara project would involve the construction of a 14km
bypass and restoration of the existing road to national road standards. Meanwhile, the Kampala
project involves an upgrade of the Northern Bypass to a 21km dual carriageway. The works
started in March 2014.
31
Figure 14: On-going Major Projects in 2014
Km
Status
1.
Tororo- Mbale- Soroti
GoU
152
2.
Jinja-Kamuli
GoU
60
3.
Kawempe-Luwero-Kafu (Overlay)
GoU
60
4.
Hoima-Kaiso-Tonya road
GoU
92
5.
Gulu-Atiak road
WB / GoU
74
6.
Vurra – Arua – Koboko – Oraba
WB / GoU
92
7.
Mbarara (Buteraniro) -Ntungamo
EU / GoU
59
8.
Ntungamo-Katuna Road
EU / GoU
74
9.
Mukono – Jinja
GoU
52
10.
Ishaka – Kagamba
GoU
35
11.
Nakapiriprit – Moroto Road
GoU
93
12.
Exim Bank /
GoU
WB / GoU
51
13.
Kampala-Entebbe Express Highway
with a spur to Munyonyo
Kamwenge-Fort Portal
14.
Kafu-Kiryandongo
GoU
43
15.
Luuku-Kalangala
PPP
66
80% completed. Section Tororo-Mbale to
be completed by Sept. 2014, Mbale-Soroti
by Dec. 2014
80% of the works done and the project will
be handed over in September 2014
90% of the works done and to be
completed by September 2014
80% works completed, to be handed
in by December 2014
70% of the works done and the project to
be completed in June 2015
70% of the works done and the project to
be completed by June 2015
75% of the works done and to will be
completed by Dec. 2014
60% of the works done and the project to
be completed by Dec. 2014
70% of the works done and the road will be
completed in Dec. 2014
40% of the works done and the project to
be completed by June 2015
30% of the works done, project to be
completed by Jan. 2016
30% of the works done and the project to
be completed by Dec. 2017
20% done; project to be completed by Jan.
2016
20% done; project to be completed by June
2015
30% of works completed
16.
Atiak –-Nimule
JICA / GoU
37
15% of the works done
17.
Mbarara-Bypass
EIB / GoU
40
5% of the works done
18.
Mpigi-Kanoni
GoU
64
The works commenced in Feb. 2014
19.
Mukono-KyetumeKatosi/Kisoga-Nyenga
Kiryandongo-Kamdini-Gulu
GoU
74
Contractor mobilizing
GoU
123
Contractor mobilizing
20.
Total
65
1,563
Source: Uganda National Roads Authority (UNRA), 2014
32
Up-coming road projects
Throughout the second half of 2014, projects for additional 1,872 km or roads are under
preparation.
Figure 15: Upcoming road projects since 2014
1.
Kanoni-Ssembabule-Villa Maria
Funding Body
GoU
2.
Musiita-Lumino-Busia/Majanji
GoU
104
Contract awarded. Works to begin Sept. 2014
3.
Pakwach - Nebbi
GoU
30
Contract awarded. Works to begin Sept. 2014
4.
Acholi Bur – Musingo
GoU
86
Contract awarded. Works to begin Sept. 2014
5.
Olwiyo – Gulu
GoU
70
Contract awarded. Works to begin Sept. 2014
6.
Gulu – Acholi Bur
GoU
86
Contract awarded. Works to begin Sept. 2014
7.
Kampala Northern Bypass Expansion
EU/EIB/GoU
17
Contract awarded. Works to begin Sept. 2014
8.
Ntungamo-Kakitumba/Mirama Hills
DFID/TMEA/ GoU
37
Contract awarded. Works to begin Sept. 2014
9.
Kigumba-Masindi-Hoima-BulimaKabwoya
AfDB/GoU
135
Bids evaluation completed. Report
submitted to AfDB for award contract
BADEA/OPEC
41
GoU
107
Bid evaluation completed. Report submitted to
BADEA for “No Objection” to award contract
Bid under evaluation
WB/GoU
105
Bid under evaluation
GoU
94
Procurement ongoing
AfDB/GoU
112
Procurement ongoing
BADEA/
OPEC/GoU
GoU
111
Procurement ongoing
50
Bid under evaluation
17. Ishaka-Rugazi-Katunguru
GoU
55
Bid under evaluation
18. Sironko-Namusi-Muyembe
GoU
32
Bid under evaluation
19. Nansana-Busunju
GoU
47
Bid under evaluation
20. Mbale-Nkokonjeru
GoU
20
Bid under evaluation
21. Kapchorwa-Suam
AfDB/G0U
73
Project preparation
10. Masaka-Bukakata
11. Design and Build of MubendeKakumiro-Kibaale-Kagadi
12. Kyenjojo-Kabwoya
13. Mukono-Kayunga-Njeru
14. Rukungiri-Kihihi-IshashaKambuga/Kihihi-Kanungu-Kambuga
15. Tirinyi-Pallisa-Kumi/Kamonkoli
16. Kyenjojo-Fort Portal
Km
120
Status
Contract awarded. Works to begin Sept. 2014
33
22. Hoima-Wanseko
111
Project preparation
23. Kayunga – Galiraya
88
Project preparation
24. Zirobwe-Wobulenzi
25
Project preparation
25. Muyembe – Nakapiripirit
Islamic Dev. Bank
94
Project preparation
26. Mbale-Bubulo-Lwakhakha
AfDB/GoU
41
Project preparation
Total
1,872
Source: Uganda National Roads Authority (UNRA), 2014
Ferries
Figure 16: Uganda’s existing and planned Ferries, 2014
10 Existing Ferries
Laropi Ferry:
Across the Albert Nile between Laropi (Moyo District)
and Umi (Adjumani District)
Masindi Port Ferry
across the Victoria Nile between Masindi Port (Masindi
District) and Kungu (Apac District)
Wanseko Ferry
across the Lake Albert between Wanseko (Buliisa
District) and Panyimur (Nebbi District)
across the Lake Victoria between Nakiwogo (Entebebe
Municipality) and Kyanvubu (Wakiso District
Nakiwogo Ferry
Kiyindi Ferry
New Ferries acquired since 2008
A ferry across the Nile River from Mbulamuti in
Kamuli District to Nabuganyi in Kanyunga District
A ferry across the Albert Nile between Obongi
(Moyo district) and Majii (Adjumani District)
A new ferry across Lake Kyoga at Nakasongola
(Zengebe) to Namasale
MV Kalangala ferry across Lake Victoria from
Bukakata to Kalangal
New Laropi Ferry
across the Lake Victoria between Kiyindi (Mukono
District) and Buvuma (Mukono District)
Started operations in May 2013
Started operations in 2012
Started operations in 2012
in partnership with Kalangala Infrastructure Services
(KIS) Project under a PPP
Started operations in 2013
34
Ferries under Procurement
Second ferry for Namasale
Sigulu Islands ferry
Ferry replacing the old Panyemuru ferry
Lake Basina Ferry
Bunkungu – Kagwara ferry
Source: UNRA, 2014
ENERGY INFRASTRUCTURE
Energy is one of the smallest sectors in Uganda. It contributes just above 1% to the overall
economy. The sector registers growth of under 1% per year. Recently, on top of plans to
develop the country’s roads, railways and airport infrastructure, Ugandan government has
commenced a number of renewable power stations to tackle power shortages.
Figure 17: Energy in Uganda’s GDP, 2009-2014
2009/10
2010/11
2011/12
2012/13
2013/14
100.0
100.0
100.0
100.0
100.0
1.4
1.4
1.2
1.3
1.2
5.9
6.6
3.4
6.0
4.7
14.5
10.7
7.4
9.9
0.8
Percentage of GDP
Total GDP at market prices
Electricity supply
Annual growth (in %)
Total GDP at market prices
Electricity supply
Source: Uganda Bureau of Statistics, 2014
35
In Uganda, the government started to pursue a reform programme of the then-wholly stateowned utility Uganda Electricity Board in the late 1990s, with the restructuring resulting in
three separate business units (power generation, transmission and distribution). While the
power generation and transmission units have been semi-privatised through long-term
concessions, the distribution segment remains in public ownership. With the Electricity Act of
1999, the government also established the Electricity Regulatory Authority to regulate the
industry independently of the Ministry of Energy and Mineral Development, which is
responsible for policy.
Chinese-Built Power Plants
-
Early 2013 Uganda signed a contract granting China’s Sino Hydro Group Ltd a tender to
build a large hydropower dam on the Nile River. China International Water and Electric
Corp. started construction work at the $500 million Isimba hydro power plant in June
2013, the latest in a series of projects being implemented by Chinese companies. The
188 MW Isimba plant will be financed by a concessional loan provided by China's Export
and Import Bank and is expected to be completed in 34 months.
China's Sinohydro Group Ltd. is already building the 600 megawatts Karuma hydro
power plant, but the project has been dogged with delays, legal disputes, and
corruption allegations. It is not likely to be completed until 2017 as initially planned.
-
China International Water and Electric (CWE) has commenced construction on a 183MW
hydropower plant in Kayunga district, at Koova Island. As part of a bilateral agreement
signed between the governments of Uganda and China in July 2013, the project was
awarded to CWE and is being funded by the China Export and Import Bank. In addition
to construction, CWE will also provide training and employment to Ugandans. The total
cost of the project, including a substation, is estimated to be around US$556mn, while
the associated transmission line will cost another US$11.7mn. Construction of the entire
project is expected to take approximately 34 months.
Micro-Hydro Projects
In an effort to double the length of its power grid in four years at a cost of US$500mn the
government of Uganda is constructing a number of micro-hydro projects along the Nile River
and is promoting the development of sources of renewable energy such as hydroelectric power
stations, thermal power stations and solar power stations. In 2010, the Electricity Regulatory
36
Authority announced renewable energy feed-in tariffs to encourage greater private sector
participation in power generation. Recently completed stations include, Kabalega, Bujagali, and
Nyagak power stations and Bugala thermal power station.
LEADING COMPANIES
Ugandan construction sector is dominated by foreign companies. Local contractors have been
relegated to spectators instead of competitors due to their difficulties with accessing capital,
lack of skills and know-how. For example, even with sh 2 trillion up for grabs for upgrading
1,900 km of priority roads under the Contractor-Facilitated Financing (CFF) mechanism, none of
the 100 local contractors bided. A total of 46 international companies, 16 from China, 9 from
India, 5 from Turkey, 3 from South Africa, 2 from USA, and 2 from Spain, 1 each from Egypt,
France, Portugal, Israel, Ireland, Netherlands, Malaysia, Switzerland and the UK bided.
Uganda has two major cement manufacturers, Tororo Cement Limited is the largest followed by
its rival Hima Cement Limited. Suppliers of steel include East African Steel Mill Ltd, Bugirinya
United Steel Mill, Sembule Steel Mill Ltd etc. National Water Uganda supplies water and sewer
utilities while Multipower Contractors and Engineers Ltd provide electrical services.
NATIONAL HOUSING AND CONSTRUCTION COMPANY (NHCC)
NHCC is a Ugandan based construction and real estate management company. It is owned
100% by the Government of Uganda. The Company’s mandate is to increase the housing stock
in the country, rehabilitate the housing industry and encourage Uganda to own homes in an
organized environment. The Company offers a wide range of products and services including:
design, construct and sale high quality homes in an organized environment, offer consultancy
services in real estate development and management, provide construction services for
medium and large scale projects, offer Property Management services for the government, etc.
37
Financial results
In 2002, the Corporation became a Public Limited Liability Company. NHCC owns assets in
excess of US$70 million, with annual turnover of US$6 million.
TORORO CEMENT LIMITED
Tororo Cement Limited (TCL) is a leading manufacturer of construction materials in east Africa.
The company was established in 1952 by the British colonial government, to manufacture
cement from the abundantly available limestone in the area around the eastern Ugandan town
of Tororo. The company, then known as Uganda Cement Industries (UCI), was administered as a
parastatal company, under the umbrella of the Uganda Development Corporation (UDC). In
1995, the Government of Uganda diverted from Uganda Cement Industries, which was acquired
by the present owners who re-branded the company as Tororo Cement Limited (TCL).
In the last two years, Tororo cement limited has been investing heavily in its production
capacity 1.8 million metric tons annually. The company had to invest up to $ 30 million in their
production line in addition to over $70million that they had invested earlier. This makes it the
largest manufacturer of cement in the country, with a 60% market share. Besides producing
cement TCL also manufactures steel products for use in the construction industry, including
steel bars, galvanized wire, chain link fence wire, corrugated iron sheets and steel nails.
HIMA CEMENT LIMITED
Hima Cement is the second largest manufacturer of cement in Uganda. In 1994 parastatal,
formerly known as Uganda Cement Industries was privatized by the government of Uganda. It
was split into two entities, (a) Tororo Cement and (b) Hima Cement. The two companies were
acquired by different investors. Tororo cement eventually became Tororo Cement Limited. In
1999, the French conglomerate, LaFarge, acquired 100% shareholding in Hima Cement and
rebranded the company into Hima Cement Limited. Hima Cement in a subsidiary (70%) of
Bamburi Cement Limited, based in Kenya (Bamburi Cement Limited is itself owned 100% by
Lafarge, the construction materials manufacturer based in France). Hima produces an
38
estimated 850,000 metric tons annually. The cement produced by the company is marketed to
the eastern African countries of Uganda, Kenya, Tanzania, Rwanda, Burundi, Democratic
Republic of the Congo and South Sudan.
Financial results
According to Bamburi Cement Limited financial reports 2012, Hima’s profit before tax drop to
2.3 billion compared to 2011 mainly due to a higher power price, volatile global fuel prices,
resulting in increased input prices and freight charges.
BAMBURI CEMENT LTD
Bamburi Cement Ltd. is the leading cement and cement related products producer in East
Africa. It operates mainly in Kenya and Uganda. The but serves the wider East Africa market. In
Kenya it operates two plants; the Mombasa plant and the Nairobi grinding plant in Athi River.
Both have a capacity of 2.5 million tons of cement per annum. The company is a subsidiary of
the Lafarge group. The French-owned Lafarge group is a world’s largest cement manufacturer,
and the leader in building materials and the top ranking player in the cement, aggregate and
concrete industry.
The group employees 65,000 people in 64 countries worldwide and posted sales of $21.7931
billion in 2012. Lafarge owns 58.6% of Bamburi Cement. It also has a 41% stake in Portland
Cement, which has for long been a contentious point, with the government insisting that it cut
the stake. Bamburi Cement Company has three subsidiaries; Hama Cement Limited, Bamburi
special products limited launched in 1998 and Lafarge eco systems limited that was set up in
1971.
Financial results
In 2013, the groups’ revenue grew by 4% to $ 431 million. This was attributed by the 2%
increase in domestic sales volumes. The company’s operating profit declined by 6% ($ 48.28
million) in 2013. This was driven by a 15% growth in cost of sales arising from higher
consumption of imported linker.
39
UGANDA CLAYS LIMITED
Uganda Clays Limited (UCL) is a building materials manufacturer in Uganda. The Company
manufactures baked clay building products, using Italian-made heavy clay processing machine.
The company is listed on the Uganda Securities Exchange (USE), being the first equity to list on
the exchange in 2000. The company was started on July 10, 1950 by two private investors. Since
then, several entities have owned partial ownership of the company including, government of
Uganda, White tower Corporation, Barclays Bank (Uganda) and many more. The company was
said to be embroiled in management problems and recording bad performance, which has seen
shareholders walk away without any dividends for four years. UCL is currently owned by NSSF
with 32.5%, NIC 17.8% and other 2,600 shareholders who share the rest.
The Company’s products can be classified into nine categories and include roofing tiles, bricks,
interlocking and corner blocks, partitioning blocks, decorative grilles, ventilators, floor tiles,
pipes and cable covers. Its Kajjansi plant produces over 300 tons of wet materials daily while
the Kamonkoli plant does about 100 tons daily
Financial results
According to the company’s audited in December 2012 Financial Report, the company is a
medium-size business enterprise. Its total assets were valued at nearly US$30 million with
shareholders equity approximately US$14 million. Roofing tiles and bricks account for the
largest portion of revenues generated from sales contributing 53% and 11 % respectively. The
company’s share price has been fluctuating and as at 7 th December 2013 it was selling at 30shs
with 0.00% change. On Feb. 07, 2014, its share price stood at Shs 25, there was no trading on its
counter apart from the more than 1. 5 million and the 1.4 million bids and offers that were
recorded respectively. The company currently employs more than 600 people - 523 of them in
Kajjansi and 83 in Kamonkoli in Mbale District. Company data shows that the company pays an
annual tax bill of about Shs 4 billion (VAT Shs 3 billion and PAYE Shs 1 billion).
40
NEW ENTRANTS
SANLAM
South African financial services group Sanlam is making its way into East Africa, including
Uganda and Kenya. Sanlam is set to close the initial capital raising process in 2014, and is
targeting a portfolio of $500 million (Sh42.7 billion) in the medium-term. US$ 190 m will be
invested in Uganda’s real estate sector. The firm will not be looking into residential assets but is
instead seeking to buy out a mix of income generating properties such as shopping malls, office
space and a bit of industrial properties.
In February 2014, the firm disclosed that the real estate fund will be launched in March 2014,
and will be listed on the Stock Exchange of Mauritius. The fund is part of Sanlam's growth
strategy for Africa, which is seeking to exploits its existing footprint. The real estate fund has set
sights on Kenya, Tanzania, Uganda, Ghana, Nigeria, Mozambique and Zambia among a few
other countries.
BASF - RRM
BASF, the world's leading chemical company, has recently entered Ugandan market with coil
coatings. Since the end of 2013, the company has supplied coil coatings to Roofings Rolling Mills
(RRM), located in Uganda. RRM is part of the Roofings Group, East Africa's largest steel
producer. At its site in Namanve Industrial Park, RRM operates three production lines with an
annual capacity of 240,000 metric tons. BASF has supplied a Pevicoat mixing unit, based on site
at RRM. RRM has invested 125 million dollars in the site in Uganda, including for the BASF coil
coating line. The company also acquired technical support from its Japanese partner Yodogawa
Steel Works and uses its technologies. Yodogawa Steel Works has produced coated coils for 75
years.
41
TURKISH INVESTORS
Top Turkish real estate company Zirve and ILik Marble and Granite company are set to invest in
Uganda. Lands and Housing Minister invited the two groups during a meeting with them in
Turkey late June 2014. Uganda’s marble in north eastern part of the country is among the best
in the world, according to industry sources
-
Murat Ilik, who runs a giant marble factory in Ankara says they import marble from
many parts of the world to supplement what they mine locally in Turkey. Marble is used
in fine finishing at construction sites and furniture
-
Hassan Toprak of Zirve real estates specializes in storied residential flats, which
Migereko says would be good for Uganda’s shortage of residential houses.
DRIVERS OF GROWTH
The strong growth in the construction sector, currently at over 7% has been due to a number of
factors including the country’s fast growing and urbanizing population, discovery of oil and
increased tourism.
Population’s Growth and demand for housing
Uganda's population is reaching 37 million people and is projected to grow to 47 million in 2020
and 54 million by 2025. Half of that population is currently below the age of 15. The country’s
growing population is becoming richer, as growth of GDP per capita is predicted to steadily
increase in the coming years.
42
Figure 18: GDP growth per capita (in US $)
Kenya
2011
833
2012
977
2013
1,073
2014f
1,246*
2015f
1,268*
2016f
1,357
Tanzania
516
599
663
713
749
788
Uganda
510
589
580
597
626
657
Rwanda
624
693
730
780
833
891
Burundi
275
282
288
314
340
366
1,825
1,175
1,278
1,672
1,741
1,922
South Sudan
Source: World Economic Outlook, 2013; *figures after September 2014 rebasing
Urbanisation
Back in 2002, the level of urbanization was 12.3% and is currently about 19% growing at a rate
of 5.1% p.a. The level of urbanization is projected to increase to 20.7% by 2015 and it is
estimated that about 50% of the total population will be living in urban areas by the year 2050.
Although the urbanization rate is rather low compared to other countries, it overstretches the
capacity of urban authorities to provide for the housing needs.
The growth of urban population is not matched with growth and development in basic
infrastructure, housing, social amenities, management and skills. Consequently, housing and
human settlements in urban areas lack guidance or control thereby leading to urban sprawl and
proliferation of slums. This has also led to overcrowding, traffic congestion, growth of informal
settlements, dilapidated housing and poor sanitation. The country’s current housing gap is
estimated to stand at 555,000 units, with Kampala alone accounting for 500,000 units.
Tourism
In 2013, tourism became Uganda's biggest export earner after it fetched $1.4bn in financial
year 2013/2014, up from $1.1bn the year before, according to Bank of Uganda. The sector
surpassed diaspora remittances and coffee. The introduction of new joint tourist visa between
Kenya, Rwanda and Uganda in January 2014 is expected to attract higher number of tourists to
EA countries. East African region intends to harvest a much larger share of the over 50 million
tourists visiting Africa each year boosting its needs for hotel and leisure infrastructure.
43
Government Spending
According to the 2013/2014 Ugandan national budget, now estimated at USh 13 trillion, one of
the sectors that has benefited from this financial allocation is the roads and transport sector. A
lot of emphasis has been put on improving road infrastructure, with 2,395 billion shillings
allocated to roads, up from 1,650 billion shillings in the previous financial year. This is an
increase of 744 billion shillings.
Multiple government investments in major urban planning programs, transport, as well as in
energy industry are the country’s prime source of capital and contracts for construction
industry. The government is currently revamping infrastructure, including timely completion of
Entebbe Express Highway, expanding Entebbe Airport and constructing the planned standard
gauge railway to boost transport, tourism and other sectors.
Figure 19: Capital Formation (in billion Shillings)
2009/10
2010/11
2011/12
2012/13
2013/14
Gross fixed capital formation
Public
Private
8,109
1,890
6,219
9,686
2,632
7,054
12,211
2,844
9,368
13,249
3,048
10,200
14,524
4,061
10,464
Construction works
Public
Private
5,770
1,055
4,715
6,674
1,532
5,141
8,439
1,452
6,987
9,757
2,006
7,751
11,073
2,907
8,166
Machinery and equipment
Public
Private
In constant prices
2,339
835
1,504
3,012
1,100
1,912
3,772
1,391
2,381
3,491
1,042
2,449
3,451
1,154
2,298
Gross fixed capital formation
Public
Private
5,393
1,232
4,161
5,952
1,587
4,364
6,132
1,392
4,740
6,451
1,485
4,966
6,776
1,898
4,878
Construction works
Public
Private
3,982
729
3,253
4,340
999
3,341
4,423
761
3,662
4,789
988
3,800
5,176
1,363
3,812
Machinery and equipment
Public
Private
1,411
503
908
1,611
588
1,023
1,709
631
1,078
1,662
497
1,166
1,600
535
1,065
At market prices
Source: Uganda bureau of Statistics, 2014
44
Vision 2040, Uganda’s long-term plan for economic development, expects that revenues from
oil and gas are to be used to kick start major infrastructure development projects to enhance
the country’s competitiveness. The domestic and international borrowing shall include;
domestic and sovereign infrastructure bonds, venture and investment funds. Also, the Vision
2040 proposed the establishment of an infrastructure fund to significantly lower the cost of
infrastructure development.
Discovery of Oil
The discovery of oil in the Lake Albert Rift Valley in north-west Uganda may eventually help
reduce future energy costs. Construction companies could benefit from cheaper furnace oil to
run their factory activities. This in turn could lower their cost of doing business and result in
greater profitability. It is expected that export revenues will boost the investments in the
country’s infrastructure.
External Factors
External factors have contributed to the growth of construction sector. With local oil
production set to begin in Uganda, the country will attract significant foreign investment in
construction sector.
Uganda became the 5th African country to join the Construction Sector transparency initiative
(COsT). The initiative aims to fight against corruption, mismanagement, inefficiency and
improve value for money in construction industry.
BARRIERS TO ENTRY
Several factors prevent new entrants into the construction industry in Uganda. According to
Crossroads Report, difficulties in accessing finance and equipment, countrywide lack of skilled
equipment operators and experienced foremen are the major obstacles. Companies lack
business planning and financial management skills are some of the barriers.
45
According to Frost and Sullivan, Uganda has inadequate power supply and poorly maintained
roads. They have held back Uganda’s growth by 3% and hindered the country’s ability to
enhance trade relations. In 2012, 5% of Uganda population was connected to the national
power grid while only 15% of Uganda’s 20,800km road network was tarmacked.
CAPITAL AND FINANCING
Capital for individuals
Only 4% of Ugandans can afford a mortgage loan. The majority of houses are therefore built
incrementally with short term loans. Majority of those applying for short term loans belong to
Uganda’s homogenous young urban middle-class. Apart from using short-term loans they rely
on savings to finance their house and land.
Capital for investors
-
Uganda’s banks perceive Uganda road contractors to be financially risky businesses. Banks
charge high rate of interest when lending. As result most local contractors are underfinanced. They find it difficult to win contracts and access the machinery needed for
construction
-
Liquidity in the sector depends largely on foreign (most notably Chinese) investment.
Uganda attracts foreign investment by its vast mineral and hydrocarbon wealth, growing
commercial and industrial base coupled with robust population growth
-
Socially committed government, in its efforts to address housing shortages, is the industry’s
key provider of capital. Government investment budget is often assisted by international
donors
46
Lending to the Construction Sector by Commercial Banks
Construction is the biggest borrower in Uganda and banks have been steadily increasing lending
to the industry. Throughout FY 2013-2014, the building and construction sector, trade, personal
and household loans continued to account for the bulk of private sector credit. These three
sectors together accounted for over 60% of outstanding credit to the private sector as at June
2014. The distribution of loans and advances, and percentage of shares by sector was as
follows:
Figure 20: Lending to Private Sector 2013-2014
Private Sector Credit (USh billions)
Private Sector Credit (as % of total credit)
Jun-2011 Jun-2012 Jun-2013
Jun-2014
Jun-2011 Jun-2012
Jun-2013
Jun-2014
449.4
490.2
626.0
872.9
6.7
6.5
7.8
9.6
Agriculture
19.7
31.5
27.8
22.3
0.3
0.4
0.3
0.2
921.8
1,005.7
1,119.6
1,207.3
13.7
13.4
14.0
13.2
1,519.5
1,695.5
1,688.3
1,971.3
22.5
22.6
21.1
21.6
518.6
490.8
461.4
489.0
7.7
6.5
5.8
5.4
61.1
74.5
112.5
107.7
0.9
1.0
1.4
1.2
1,352.7
1,707.6
1,805.8
2,068.5
20.1
22.8
22.6
22.7
Business Services
292.1
269.7
412.8
399.6
4.3
3.6
5.2
4.4
Social Services
223.0
263.0
251.9
300.6
3.3
3.5
3.1
3.3
1,067.6
1,150.1
1,091.2
1,566.7
15.8
15.3
13.6
17.2
317.9
324.1
406.3
124.7
4.7
4.3
5.1
1.4
6,743.2
7,502.8
8,003.6
9,130.6
100.0
100.0
100.0
100.0
Mining & Quarrying
Manufacturing
Trade
Transport
Electricity & Water
Building, Construction
Personal & Household
Other
Total
Regional Funding in East Africa
East African Development Bank is set to issue a new bond in 2014 to raise funds for onward
lending to projects across the region. It will cover financing for various sectors: agriculture,
infrastructure, housing, transport, education, rural developments. The bank owned by four East
African member states - Kenya, Tanzania, Uganda and Rwanda - however did not state the size
47
of the debt note, but will raise at least KSh2 billion in the first tranche, according to directorgeneral Vivienne Yeda. EADB is partly financed by the states with stakes in it, but raises a large
part of its funds through borrowing. The bank can finance up to $25 million (Sh2.15 billion) in a
single project and does participate in government debts.
World Bank's MIGA
MIGA is a loan guarantee instrument provided by the World Bank. Multilateral investment
Guarantee Agency (MIGA) is a member of the World Bank Group. MIGA promotes foreign direct
investment (FDI) into ‘difficult operating environments’ of developing countries to help support
economic growth, reduce poverty, and improve people's lives.
MIGA's investment guarantees cover projects in a broad range of sectors and subsectors, with
projects in the infrastructure sector accounting for the largest share (44%) of the agency's
outstanding portfolio at the close of fiscal year 2013. At the close of fiscal year 2013, the
financial sector accounted for 32%; agribusiness, manufacturing and services sector accounted
for 13%. The oil, gas and mining sector accounted for 11% of the agency's gross exposure.
Africa50
In 2012, African Development Bank established a new delivery vehicle called Africa50. It aims at
mobilizing private financing to accelerate the speed of infrastructure delivery in Africa. Africa50
will focus on high-impact national and regional projects in the energy, transport, ICT and water
sectors. It will be complementary to and legally independent of existing development finance
bodies in Africa.
Africa50 will establish two business segments: Project Development to increase the number of
bankable infrastructure projects in Africa and Project Finance: to attract additional
infrastructure financing (bridge equity, senior secured loans, refinancing/secondary
transactions, credit enhancement). Africa50 was designed to be fully operational in 2014. The
total of $500 million is to be raised from among the African Central Banks whose savings are
held in American , European and Asian markets and are not attracting returns as well as other
identified investment platforms, including African Sovereign Wealth Funds.
48
Emerging Africa Infrastructure Fund (EAIF)
The Emerging Africa Infrastructure Fund (EAIF) is a Public Private Partnership able to provide
long-term USD or EUR denominated debt or mezzanine finance on commercial terms to finance
the construction and development of private infrastructure in 47 countries across sub-Saharan
Africa. Our of its total budget of US$ 587 million EAIF is able to provide between US$ 10 million
to US$ 36.5 million (or its equivalent in EUR) to projects across a wide range of sectors including
telecoms, transport, water and power, amongst others. EAIF offers lending to private
companies (or soon to be privatised companies) for greenfield projects or for refurbishment,
upgrade or expansion of existing facilities.
MATERIALS, AVAILABILITY AND COST OF LABOUR
LABOUR
Currently Uganda’s labor productivity is the lowest in East Africa. This is due to poor working
conditions that were identified as one of the main factors by Social Development Sector
Investment Plan two 2011/2012 to 2015/16. Also value added per worker in Uganda is 68%
lower than that in India and 96% lower than that in China.
Uganda’s minimum wage is 6,000 Ugandan shillings per month. However, a new wage bill 2013
has been proposed of Shs 53,000 per month.
Figure 21: Basic monthly salaries, 2014 (in Shillings and $)
Beginner
Experienced
Shs
In $
Shs
In $
Unskilled
113,800
44.25
118,800
Skilled
126,320
49.11
146,060
56.79
Administrative
145,080
56.41
161,500
62.79
Managerial
257,201
100
385,801
150
46.19
49
MATERIALS
In 2013, prices for construction materials were slightly higher than in 2012. The Producer Price
Index (PPI) revealed by the Uganda Bureau of Statistics in May 2014, revealed a general
increase in the prices of construction materials and manufactured products, while the hotel
industry generally recorded price falls over the festive period in December.
The construction sector indices show that the prices of construction materials, wage rates, and
equipment hire rates increased by 0.9% in the year ending December 2013, compared to the
year ending in December 2012. The index examined the prices of construction inputs such as
timber, paint, PVC pipes, water tanks, clay bricks and tiles, cement, concrete, steel bars, roofing
sheets and iron and steel bars, electrical wires and cables, lime, stone aggregate, diesel and
bitumen.
Figure 22: Cost of Basic Materials, 2014
In Shs
In $
Cement
25,500-27,000
9.91-10.5
Timber (panel of mahogany)
70,000-80,000
27.22-31.1
Steel bar 12mm
30,000-40,000
11.66-15.55
150-250
0.09-0.1
Burnt Bricks
The price increase was attributed to increase in wage rates due to the increased cost of living,
as well as increase in the average prices of inputs for roads such as bitumen arising from a rise
in operational costs at the port of entry in Mombasa.
However, there was a decline in the prices of inputs for residential buildings, attributed to a fall
in the price of cement due to falling demand following the outbreak of civil war in South Sudan.
Also, the fall in the price of concrete products, roofing sheets and electrical wires was
attributed to availability of cheaper raw materials especially cement, as well as the fall in the
exchange rate for dollars.
50
OFFICE HIRE
Figure 23: Office hire in major cities
100 sq m
Kampala
In Shs
257,201-514,402
In $
100-200
Gulu
205,761-462,962
80-180
Lira
128,601-462,962
50-180
Mbarara
128,601-462,292
50-180
More recently, the demand for office space in many of the Kampala’s modern office has been in
steady decline, a situation that has got property owner and managers worried. The situation is
attributed to speculators who are blamed for inflating the price of properties.
POLICY AND REGULATORY ENVIRONMENT
Regulatory Acts
-
Vision 2040
The National Development Plan, 2010-2015
The National Land Policy 2013
The National Land Use Policy 2008
The Physical Planning Act, 2010
The Local Government Act
The Land Act
The National Environment Act
The National Planning Authority Act, 2002
51
Governing Bodies
-
Ministry of Lands, Housing and Urban Development (MLHUD)
The Ministry is responsible for providing policy direction, setting national standards and the
coordination, of all matters related to lands, housing and urban development
-
Uganda Land Commission (ULC)
The mandate of ULC is to hold and manage any land in Uganda vested in or acquired by the
Government of Uganda
The Ministry gives policy direction to the following institutions:
-
-
-
-
The National Physical Planning Board
The Board is responsible for ensuring orderly, progressive and sustainable urban and rural
development through appropriate physical planning
The Architects Registration Board
The Board is responsible for regulating and maintaining the standard of architecture in the
country through registering Architects
The Surveyors Registration Board
The Board is responsible for regulating the surveying profession in the country.
National Housing and Construction Company Ltd
The Company aims at creating the reality of home ownership in well-planned and
permanent built environments
Housing Finance Bank Ltd
The bank provides financing options for home development and acquisition
Infrastructure and the Vision 2040
Uganda plans to transform its economy ‘from a peasant to a modern and prosperous country
within 30 years.’ The country intends to lift its status to middle-income country by 2017 and to
achieve $9,500 per capita by 2040. Services are envisaged to contribute almost 60% to the
country’s economy, from the present 45%. Industry will increase to 31% from current 26%. Key
projects proposed by the Vision 2040 will have an immediate impact on infrastructure sector:
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A hi-tech ICT city and associated ICT infrastructure
Large irrigation schemes in different parts of the country
Phosphate industry in Tororo
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Iron ore industry in Muko, Kabale
Five regional cities (Gulu, Mbale, Kampala, Mbarara, and Arua)
Five strategic cities (Hoima, Nakasongola, Fortportal, Moroto, and Jinja)
Four international airports
A standard gauge railway network with high speed trains
Oil Refinery and associated pipeline infrastructure
Multi-lane paved national road network linking major towns and cities
Nuclear power and hydro power plants (Ayago, Isimba, Karuma, and Murchison Bay)
Science and Technology parks in each regional city
International and national referral hospitals in each regional cities
Uganda on the way to National Construction Industry Policy
In August 2014, the Ministry of Works and Transport revealed the National Construction
Industry policy and pushed for the enactment of the Building Control Act. Under the policy, is
the proposed Uganda Industry Construction Commission (UCICO) Bill that intends to create
various opportunities for supporting local contractors. The National Building Review Board and
its secretariat will be set up.
According to Stephen Chebrot, the Transport Minister, the ministry will address all the
bottlenecks that hinder the industry to play its rightful role in making the economy competitive
and preferred destination for investment. The ministry in particular and the government
appreciate the contribution of a developed infrastructure as the surest way to attract
investment in manufacturing, services and ICT sectors.
Lack of Regulation for Construction Sector
Despite the Government’s plans to develop the overall policy for the construction sector, in
October 2014, major players in the industry asked the Government to regulate it, saying
increasing numbers of quacks will affect efforts to attain the Uganda Vision 2040. With 70% of
works involving civil works in flagship sectors of energy, roads and ICT, the failures caused by
fake constructors will curtail the intended development.
According to Jonathan Wanzira, the chairman of Uganda National Association of Building and
Civil Engineering Contractors, ‘For years, the Building Control Bill has not been enacted into law.
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The failure to regularise the Uganda Construction Industry Council has also affected the
industry.’ Stewart Mutabazi, the Uganda Road Sector Support Initiative executive director, says
low capacity of the local construction industry had resulted in foreign contractors taking over
road works.
Land tenure reforms since 1995
The 1995 constitution vests land in citizens of Uganda, who can own land under the four
different tenure systems namely; freehold, leasehold, mailo and customary. Land can either be
held as private, government or public.
The administration and management of government land is by Uganda Land Commission, which
holds the land in trust of ministries, departments and Agencies of government while District
Land Boards hold and allocate land in the districts which is not owned by any person or
authority.
Protracted Public – Private Partnerships (PPP) Legislation
The Government of Uganda struggles with its commitment to private sector’s participation in
public services and public infrastructure. As of the end of 2014, Uganda does not have a distinct
piece of legislation governing public private partnerships. The policy on Public Private
Partnerships was adopted Back in 2010. It was followed by a number of PPP Bill passed by the
parliament and rejected by the President. The latest bill was passed on 18th July 2014. President
Yoweri Museveni rejected it on grounds that it was wrong to subject all public-private
partnerships to Parliamentary approval. The bill will return to Parliament for further
amendments.
If/when approved, the Bill will create a PPP unit to oversee the implementation of publicprivate partnerships. The unit will help with project selection, development, tendering and
management.
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FOREIGN INVESTMENT
Foreign Investment in Uganda
Uganda is open to foreign investment. The country has recently emerged as a favourite
destination for foreign investors in the East African region ahead of traditional rival, Kenya,
according to the United Nations. The World Investment Report 2013, released by the United
Nations Conference on Trade and Development—UNCTAD, shows that Uganda received the
most Foreign Direct Investment (FDI) in 2012 particularly in the oil, gas, and mining sectors. The
report shows that Uganda’s FDI inflows increased by 92 % from US$ 894 million in 2011 to US$
1.721 billion, a rise believed to have been boosted by the recent discoveries of oil in the
country. Democratic Republic of the Congo, Mauritania and Mozambique are other African
counties that registered FDI inflows driven by oil, gas and mining.
Foreign Investment in the Construction Sector
In the construction sector, due to lack of human and financial resources of local firms, foreign
construction companies have a comparative advantage in bidding for governments projects.
Most of the foreign investors come from Kenya, USA, Norway, India, China and Iran.
Foreign companies dominate major bids, for example:
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13 companies expressed interest in construction of a multi-billion Justice, Law and
Order Sector (JLOS) complex in Naguru, a Kampala suburb in 2014. The bidding
companies included only one Ugandan firm; Africana Finance and Investments,
Oubuntu Consulting and Prism Architects (Joint Venture/Consortium). Five Chinese
firms also expressed interest alongside two others from South Africa. France, US, Israel,
Greece and Portugal, each have one company bidding. Companies from China included:
Weihai International Economic and Cooperative Company, China State Construction
and Engineering Company Limited, Beijing Uni-Construction Group Company Limited,
China Jiangxi Corporation for International Economic and Technical Cooperation,
Complant-China Complete Plant and Import and Export Corporation Limited
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Out of 4 companies who submitted proposals for the development of Uganda’s refinery
in 2014, all were foreign: China Petroleum Pipeline Bureau (CPPB) from China,
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Marubeni Corporation from Japan, RT – Global Resources from Russia and SK Group
from South Korea. The winner is to be revealed by the end of 2014.
Chinese Investments
China has emerged as the biggest investor in Uganda. Chinese companies are most prominent
in energy and transport infrastructure segments.
In September 2013, China agreed a US$3.2bn loan for construction of a standard gauge railway
that will run from Mombasa to Nairobi with a planned extension to Malaba on the border
between Kenya and Uganda and further to Kampala, the Ugandan capital. The government
hopes to complete the project by 2018.
More recently, six Chinese companies were invited in July 2014, for engineering, procurement
and construction contracts worth up to $US 8.3bn to expand to country’s railway network for
the Ugandan part of the project. The deal went to China Harbor Engineering Company (CHEC)
against the state-owned China Civil Engineering Construction Corporation (CCECC).
China has also set aside US$30m for construction of a vocational training institute in Kampala
Business Park, Namanve to service industries that are coming up. In addition to funding
Karuma, Isimba and Ayago hydropower projects, China would finance the proposed expansion
of Entebbe International Airport.
Government Policy on Foreign Investment
Foreign investors may form 100% foreign owned limited or unlimited liability companies and
majority or minority joint ventures with Ugandan partners without restrictions. The investment
code allows foreign participation in any industrial sector except those touching on national
security or requiring ownership of land. Licensing from Uganda’s Investment Authority requires
a commitment to invest over $100,000 over three years. For local investors, the minimum
investment requirement is $50,000. Local investors, however, are not obliged to seek approval
in order to implement their project. Foreign investors can acquire domestic enterprises or
establish Greenfield ventures.
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Land ownership by Foreign Investors
Foreign companies or foreign individuals may not own land. However, with UIA (Uganda
Investment Authority) approval they may hold it under 99-year leases. Foreigners must seek
Land Ministry approval through the UIA to lease land over 50 acres for agricultural or animal
production purposes. Uganda has not initiated any changes to allow foreign investors to
purchase freehold property. However, some foreign investors circumvent land ownership
restrictions by establishing locally incorporated companies.
State Incentives for Foreign Constructors
The government of Uganda has provided the following incentives to attract foreign investors to
the construction industry:
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20% initial allowance on the cost base of industrial and commercial buildings in the first
year of use
5% industrial building allowance on cost of assets
Withholding tax exemption on the supply of plant and machinery
VAT exemptions for road construction
0% import duty on plant and machinery
In Kampala 50% capital allowance for plant and machineries are deductible for a
company’s income on one-time basis; elsewhere in Uganda 75% of those capital allowances
are deductible
100% of training costs are deductible on a one-time basis
RISKS & CHALLENGES
Lack of laws & Law Enforcement
The housing sector suffers from the lack of a comprehensive Housing Regulatory Framework
(National Estates Management Policy, Housing Policy, Landlord-Tenant law). There is no current
and complete land database for housing investment. Monitoring and supervision is widely
considered insufficient. The broader construction field also remains largely unregulated.
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Limited Access to Housing Finance
The financial market is still narrow in Uganda, shallow and undeveloped. The few financial
institutions providing mortgage financing charge high interest rates which is prohibitive to
ordinary Ugandans.
Power supply
Power supply remains one of the largest obstacles to investment, and Uganda’s electricity
network urgently needs renovation and expansion. Access to electricity countrywide is a
meager 12%, and only 5% of the rural population has access to electricity. With the
commissioning of the new 250-megawatt Bujagali Hydropower Project in 2011, Uganda is
currently able to meet its power demand, but with demand growing at 10% per year, it is
expected to outstrip supply again by 2014.
Bureaucracy
Uganda maintains a liberal trade and foreign exchange regime, and largely adheres to
IMF/World Bank programs to fight poverty, maintain macroeconomic stability and restructure
the economy. The government is revising a range of laws and regulations to improve
government accountability, open markets, develop infrastructure, and build a more attractive
environment for foreign investment. However, the country’s sluggish bureaucracy, non-tariff
barriers and government interference in the private sector can make Uganda a challenging
investment climate.
Technology
Currently the technology in the industry is not developed. However, companies are coming up
with new innovations to make products more affordable. For example Afcan Construction
Materials LTD, a company that manufactures bricks came up with a new technology which
makes bricks without sand. They use 93% less cement and 50% less labour.
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Transport Costs
High transportation costs are another constraint on Uganda's economy. Uganda’s dilapidated
road and bridge infrastructure needs considerable investment, its railway system is in disrepair,
and air freight charges are among the highest in the region. A two-lane highway from Kenya
remains the primary route for 80% of Uganda's trade, making transportation slow, costly and
susceptible to disruption.
Upholding of contracts
Ugandan courts generally uphold the sanctity of contracts though judicial corruption and
procedural delays caused by well-connected defendants are a serious challenge. Courts apply
the principles of English common law.
Lack of Transparency
The greatest risks in the Ugandan construction industry are still corruption, vague rules and lack
of transparency. Tendering procedures are not clear, or non-existent.
For example, the state-owned China Civil Engineering Construction Corporation (CCECC) – won
a deal to upgrade Uganda’s railways in 2012, which was later cancelled by the Government. In
2014, a new deal, worth US$8bn, was signed with a different Chinese company. CCECCis
determined to challenge Ugandan Government’s decision to award the contract to CHEC. An
American construction company, which had secured funds in 2012 for the tarmacking of
Mukono-Kyetume-Katosi landing site road petitioned President Yoweri Museveni, protesting
the re-tendering of the contract it had won.
Insecurity in the region
Insecurity in the neighboring countries such as South Sudan and DR Congo present a challenge
for companies seeking to export to the rest of the region. This makes the products to be sold in
Ugandan market only which for the last 2 years has been hit hard by inflationary pressures and
spike in lending rates.
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Lack of a Competition Law
Although the Uganda economy has been gradually liberalised, currently there is no regulation
that specifically protects consumer interests and ensures that entrepreneurs can compete fairly
in the market.
Non participation in Production
Ugandans are mere consumers of technology and hardly contribute to the development and
innovation of new products, services and content. No opportunities to acquire new skills
prevent the potential investors from setting up telecommunications manufacturers in the
country.
MARKET TRENDS & OUTLOOK
Uganda’s Growing Economy Outlook
Economic growth in 2013/14 is projected at 4.7%, much lower than the 2012/13 outturn of 6%.
The downcast in real GDP growth over the year is in partly attributed to delays in the
implementation of government infrastructural programs, particularly the construction of the
two hydro power projects and dismal performance in exports. Growth is however projected to
recover in 2014/15 and increasing to the economy’s potential GDP growth of 7% in 2017/18.
This growth will be supported by Government investment in infrastructure, improved private
investment consistent with the recovery in the growth of private sector credit, and the
relatively accommodative monetary policy stance. Increased government expenditure on
infrastructure is expected to boost economic activity in the medium-to-long-term, and to
trigger a multiplier effect on other sectors of the economy.
Domestic and external demand is also expected to pick up on account of improved economic
confidence, slightly more relaxed credit conditions and lower inflation. Over the medium term,
import growth is expected to continue to exceed export growth, and hence the growth of net
imports is likely to weigh on economic growth. The Bank of Uganda (BoU) estimates that
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inflation will remain stable, with core inflation expected to remain within the BoU’s target of
5% in the near-to-short term.
With local oil production set to begin in Uganda, an increased number of investors should be
descending on the country in the nearest future. Local and foreign companies could benefit
from cheaper furnace oil to run their factory activities. This in turn could lower their cost of
doing business and result in greater profitability.
Construction Sector Outlook
Uganda offers one of the most attractive markets to investors in Africa. The demand for
construction industry products and services is significantly bolstered by the country’s large
population growth rate, one of the highest in the world. Its current total population of 37
million is expected to expand to 54 million by 2025. This trend, coupled with positive mediumterm macro growth outlook, will create potential markets for products and continuous growth
in the sector. This suggests there is room for rapid growth in the social housing and social
infrastructure spheres.
Infrastructure is at the heart of Uganda’s long-term transformation plan from the peasant to
middle income economy. All key projects proposed by the country’s Vision 2040 will have an
immediate impact on infrastructure sector. This, coupled with ever increasing spending on
infrastructure indicates significant growth of the country’s infrastructure in the mid-term.
However, investors may shy away in the face of lacking legislation regulating the construction
sector, widespread corruption and lack of transparency. The Government of Uganda also
struggles with its commitment to private sector’s participation in public services and public
infrastructure. As of the end of 2014, Uganda is still awaiting legislation governing public private
partnerships.
Eastern Africa is still perceived as high-risk region for international investment, government
financial and legal support will remain vital to the growth of the construction industry.
Increased growth in FDI in housing and non-residential markets is already taking place across EA
countries of Kenya, Tanzania and Uganda. The multi-billion investments into the East Africa’s
Railway networks began to take off throughout 2014. Thus, as the macroeconomic picture
improves and government remains committed, the industry will enjoy a growing trend of
private equity interest in infrastructure projects for years to come.
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