Delay of final investment decision affecting growth prospects

By Edwin Muhumuza

The current stalemate in the local oil and gas industry that has led to the delay in commercializing Uganda’s petroleum resources is going to have an effect on Uganda’s growth prospects.

This is according to Standard Chartered Bank ,Africa Strategist Ms. Eva Wanjiku Otieno as she was presenting the Macroeconomic & Global Geopolitical Outlook of the region.

Ms Wanjiku noted that Uganda has a mixed growth outlook supported by public investment in infrastructure but the delay of the Final Investment Decision (FID) and upcoming elections would weigh on business prospects.

Ahead of the 2021 general election, she said that Election related uncertainty may increase supply concerns going into H2 of 2020 which may pressure yields higher.

She made the remarks during a Manufacturer’s Business Forum for over 150 manufacturers and various stakeholders at Hotel Mestil, with the aim to provide a platform for market players to network, share forward-looking insights and best practices.

The forum was themed “Practices for Sustainable Business Growth” which brought together subject matter experts and leading manufacturing businesses to deliberate on current trends affecting business growth in Uganda as well as share the latest research on important and policy-relevant topics.

Albert Saltson the Chief Executive Officer, Standard Chartered Bank Uganda said that “This new decade presents immense opportunities for business growth. It is critical that business leaders make insight led and research-based business decisions in partnership with strong and reliable financial partners who will help them stimulate their business growth.”

The Ugandan economy reported strong growth in 2019, estimated at 6.3%, largely driven by the expansion of services. Services growth averaged 7.6% in 2019, and industrial growth 6.2%, driven by construction and mining.

Agriculture grew at just 3.8%. Retail, construction, and telecommunications were key economic drivers. And Inflation is expected to remain below 5%, strengthening the domestic economy.

The Central Bank policy rate being at a historical low level due to subdued inflation has allowed for past easing.

However Government spending continues to increase and expenditures have increased faster than domestic revenues, widening the fiscal deficit which is largely financed through external borrowing, supplemented with domestic securities.

Despite the rise in the deficit, Uganda is classified at low risk of debt distress. But, debt reached an estimated 43.6% of GDP in 2019, up from 25% in 2012, raising medium-term concerns. Lending remains within IMF limits, but risks have increased due to higher costs of debt servicing and infrastructure investments.

This engagement granted an opportunity to the Bank’s clients to learn, engage, network and be empowered to improve their operating environment.