President Museveni on Uganda’s Oil Sector, Investment Opportunities and Economic Strategy

World Business Journal talks to Ugandan President H.E. Yoweri Kaguta Museveni about the country’s investment climate, including opportunities for investors, the timelines and economic impact of the oil and gas sector, and advancements in agricultural productivity. We also explore strategies for improving market access and the dynamics of the internal market as purchasing power among the population rises.

With Uganda being recognised as the best investment destination at the AIM Congress 2024 and achieving a record all-time high of $3.034B in foreign direct investment for the financial year 2023/2024, what strategic initiatives is your administration implementing to further improve its attractiveness to foreign investors?

Investors are looking to make profits, and several key factors are essential for achieving this goal: peace and raw materials from agriculture, minerals, forests, and fresh water, all of which we have in plenty in Uganda.

To support growth, we acknowledge the importance of strong utilities, including electricity, roads, and low transportation costs. The ongoing development of the Standard Gauge Railway (SGR) aims to further reduce transportation expenses and improve logistics efficiency. Now that UEDCL has assumed the operation of electricity distribution from Umeme, we want to ensure improved service delivery, and our objective is to reduce electricity costs to 5 cents per kilowatt-hour.

Financial accessibility is another critical aspect. The Uganda Development Bank (UDB) is working to make financing more affordable for local businesses, while foreign investors come with their own resources, often at lower interest rates due to their access to international capital.

Market access is essential for selling products. Uganda’s strategic position provides entry to the East African Community (EAC), the African Continental Free Trade Area (AfCFTA), COMESA (Common Market for Eastern and Southern Africa), as well as Europe, the USA, the Middle East, China, and others.

We are focusing on four key sectors for investment: agro-industrialisation, tourism, mineral development, and science and technology innovation (ATMS) to accelerate growth. Our goal is to expand the economy from $50B to $500B by 2040.

As the nation progresses towards oil production, could you please update us on the current status of the anticipated first oil production? 

We project the commencement of oil production by 2026 or early 2027. Should any delays arise, they are not expected to occur more than two years from now. Significant progress is being made, with the Final Investment Decision (FID) secured for the refinery, active developments underway for the East African Crude Oil Pipeline (EACOP), and ongoing oilfield exploration initiatives.

Without oil, our economy has experienced robust growth rates of 6–7%. Once oil production starts, we anticipate double-digit growth, driven not only by the revenues generated from the oil and gas sector but also by the introduction of new raw materials, such as gas and petrochemicals, which will further invigorate the economy.

The financial resources generated from the oil sector will be strategically allocated to critical infrastructure projects, including electricity, railways, and advancements in science and education. In addition, a portion of these funds will be invested in a sovereign wealth fund to ensure sustainable wealth creation and financial stability for the future.

What do you have to say to organisations that have concerns about the environmental impacts of oil and gas exploration?

While some NGOs may hold misconceptions about the oil and gas sector, our industry has made major advancements regarding environmental stewardship. For instance, the new refinery project is engineered to eliminate gas flaring, a common practice that can release harmful emissions into the atmosphere. Instead, we will capture and utilise all associated gas, converting it into a valuable resource for energy production and reducing greenhouse gas emissions.

With agriculture being the backbone of Uganda’s economy, what initiatives are in place to support farmers and increase agricultural productivity?

As the economy expands, the agriculture sector is poised to become more productive and increasingly integrated with manufacturing and services. Our country is fortunate to possess fertile land, offering a wealth of investment opportunities across a diverse range of crops. 

One example is the floriculture sector, where we have identified a significant market demand for flowers. As we strengthen our connections with the global marketplace, we acquire helpful information about consumer needs and high-value products.

For instance, there is a growing demand for macadamia nuts, cashew nuts, avocados, and jackfruits. By focusing on these in-demand crops, we can better align our agricultural output with market requirements, driving growth and profitability in the sector.

With nearly 9,000 factories now operational, how is Uganda improving market access?

There are three key directions for our market access strategy. First, we have the East African Community (EAC) market, which is accessible, and the Western and Northern African markets, which can be reached by air or sea. 

The second market includes the Middle East, Russia, China, the European Union, and the United States, among others. 

Finally, we have our internal market, which is still growing. Many people currently do not have enough money in their pockets, resulting in low purchasing power. By establishing new factories and promoting commercial agriculture, we are creating more jobs. When people are employed and have money in their pockets, it contributes to a better quality of life for our citizens and facilitates their integration into the money economy.

I can give you an example from the dairy industry. We currently produce 5.4 billion litres of milk, but the internal market is only able to absorb around 800 million litres. This process creates an artificial surplus, as the population is under-consuming milk. According to the World Health Organisation (WHO), each person needs 210 litres of milk per year. Based on our population, this means we actually require more than 9 billion litres annually. Therefore, our current production is insufficient to meet the needs of the internal market, especially as purchasing power increases.