Officials deny Ugandans overlooked for sake of FDI
June 22— Fascination with luring foreign investors to Uganda and overlooking the entrepreneurial abilities of locals is raising some concerns although relevant authorities deny such a thing is happening.
“Foreign investors are businessmen who are only interested in making the maximum profits. That is why at any stage if they feel that they are not making money or there is economic or political insecurities, these companies will immediately pull out and go to look out for greener pastures,” Morrison Rwakakamba, a former special assistant to the President and now CEO of Agency for Transformation (AfT) said during a dialogue on investment this week. The event was organized by the Uganda Investment Authority (UIA).
He said there is a general perception among Ugandans that an investor is a foreigner or a very wealthy Ugandan who spends on big projects. He said this perception has led to continuous disregard for small and medium investors/domestic investments, who continue to be overlooked in pursuit of foreign investors and foreign direct investment (FDI). Rwakakamba said these foreign business people are also being given priority in resource allocation for such things as land and tax incentives.
Other critics say focusing on FDI while ignoring domestic investment is one of the main reasons why developing countries will continue to have an imbalanced economy with a stunted GDP growth that does not go above 5%.
Rwakakamba said, “In 2015 FDI was at $1 billion, a fall from $1.2 billion in 2014. Seventy percent of these investments are in mining and quarry and communications. These two areas are not significant or beneficial for the economic development of the average Ugandan. Even the jobs offered in these sectors are limited to mainly foreigners.”
He suggested the government shifts focus to the domestic investors who will go into long term projects and in the risky sectors like agriculture and manufacturing, because they understand the country’s economy and are possibly more patriotic.
However UIA officials have insisted they are already helping domestic investments by providing tax incentives which are non-discriminatory for both domestic and foreign investors. Fred Opolot, who represented the UIA Board Chairman, said the Authority is going to reserve 22 industrial parks with four already in existence and 20% of this land will be reserved for small and medium projects.
“We still have challenges of domestic projects failing to work out, because of the high interest rates on loans and high electricity charges. However we are concerned about the development of SME’s and we include them in our plans,’’ Opolot said
He said, “Those who have this feeling that foreign investors are favoured are misinformed, because the tax incentives provided by Uganda Revenue Authority are for all investors. Even land allocation is equally given out to local and foreign investors; small and big. The foreign investors may seem to be favoured, because they are the ones who are bringing big money and are doing big visible investments.’’
Jolly Kaguhangire, the UIA Executive Director promised to continue working on issues that are affecting domestic investors so as to help them improve their profile.
David Sseppuuya, a seasoned journalist and now an investment adviser said Uganda’s economic problems are due to the fact that the economy lacks tradable goods to export to other countries hence the imbalance between export and import earnings. He said this was due to limited investments in industrialization or manufacturing that could help the country produce goods that are internationally traded.
He said, “The problem with FDI is that these foreign investors dictate where they want to invest money and that’s why you find them in communications and mining, because they know that’s is where quick money is. However, these kind of investments cannot help this country in growing its GDP.”
Sseppuuya, who recently published a book titled, Africa’s Industrialization and Prosperity, said, “It is very important for Uganda as a country to strategically start encouraging domestic savings investment by availing investment opportunities and support to local investors through easing capital access and mentorship of these projects. Government needs to put up an investment bank that will particularly offer funds not loans to projects that are intended to produce exported goods.’’