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Oil related-investments raise FDI inflows to Shs5.5 trillion
Uganda has seen a spike in Foreign Direct Investment due to oil-related activities. Photo / File
What you need to know:
- Oil-related activities have heightened in the last two years, after government and joint partners signed the Final Investment Decision in February last year
Foreign Direct Investment (FDI) increased by Shs1.55 trillion to Shs5.5 trillion between 2021 and 2022, the highest level ever, fostered by investments in greenfield oil projects.
The Shs1.55 trillion investment, according to UN Conference on Trade and Development (UNCTAD), was the biggest, across East Africa fuelled by injections in development of the Lake Albert oil field - a joint venture between China National Offshore Oil Corporation (CNOOC) and the Uganda National Oil Company (UNOC) for an estimated Shs23.7 trillion ($6.5b).
Other oil-related investments include the Shs12.8 trillion 1,440 kilometre East African Crude Oil Pipeline, which will ship oil from the Lake Albert oil fields to Tanzania’s Tanga port for export.
Uganda is estimated to have at least 6.5 billion barrels of oil in the Albert Graben region, of which 1.4 billion is recoverable. Over the next 25 years, oil is expected to earn Uganda Shs22.88 trillion annually, which is almost half of the current budget.
During the period, total FDI into East Africa stood at Shs31.7 trillion, with Kenya seeing an increase to Shs2.77 trillion, while Tanzania’s increased to Shs4 trillion, according to UNCTAD data.
Uganda’s FDI growth outpaced EAC’s growth of 3 percent.
Comparatively, FDI in 32 landlocked developing countries, as a whole, increased by 6 percent to Shs72.86 trillion but it remained concentrated in a few economies, with the top five recipients being Kazakhstan, Ethiopia, Uzbekistan, Mongolia, and Uganda, respectively.
The five countries accounted for 83 percent of total FDI to landlocked developing countries.
Uganda’s FDI has increased from Shs2.93 trillion in 2017 to Shs5.57 trillion, which has seen the country’s stock of FDI increase from Shs2.94 trillion to Shs65.9 trillion in the last the six years.
However, Uganda Investment Authority (UIA) said the growth is less than what the country needs to spur the desired economic growth.
“We need an infusion of about Shs10.93 trillion to Shs14.57 trillion every year to catch up with the urgent needs such as provision of jobs and infrastructure development,” Mr Angelo Izama, the UIA director of domestic participation, said.
The UIA December 2022 investment memo indicates that FDI has been a large contributor in creating jobs, especially in manufacturing.
Mr Izama said this has been enhanced by government’s push for import substitution, heightened by Covid-19, which was characterised by border restrictions and supply chain disruptions.
UIA is also addressing investment gaps on a micro level through collaborations with industrially developed countries that have markets for Ugandan produce.
Uganda is currently negotiating with countries such as Germany and India to supply vegetables and cash crops, such as tomatoes and coffee, in order to promote growth of sole industries and increase foreign exchange inflows.
Mr Izama also said government is increasing promoting domestic ownership and participation in FDI projects to create a positive ripple on infrastructure, skill and social development.
