Uganda National Budget 2020/2021: Key Investment Takeaways

By David Rupiny

The Minister of Finance, Planning and Economic Development, Hon. Matia Kasaija, today (Thursday) presented the 2020/2021 National Budget under the theme ‘Stimulating the Economy to Safeguard Livelihoods, Jobs, Businesses and Industrial Recovery’.

Breakdown

Total Budget UGX45 trillion; Works and Transport (UGX5.8 trillion (13%); Security UGX4.5 trillion (10%); Interest Payment UGX 4 trillion (9%); Education UGX3.6 trillion (8%); Health UGX2.7 trillion (6%).

Other expenditures: Energy UGX2.6 trillion; Accountability Sector UGX2.1 trillion; Justice, Law and Order Sector UGX2 trillion; Local Government UGX1.7 trillion; Water and Environment UGX1.6 trillion; Agriculture UGX1.3 trillion; Public Administration UGX1.3 trillion, and Parliament UGX667.8 billion.

More expenditures: UGX 662.5 billion on Public Sector Management, UGX264.5 billion on Science and Technology, UGX200 billion on Lands, Housing and Urban Development, UGX193.6 billion on Tourism, UGX172.2 billion on Social Development, UGX171.8 billion on Trade and Industry and UGX162 billion on Science and Technology.

Key Investment Sector Highlights

  1. Expedite construction of priority industrial parks and special economic zones; and
  2. Electrification of industrial parks has also progressed with the commissioning of the Mukono and Iganga Industrial Parks sub-stations;

COVID-19: Investment Opportunities

The Minister said although the Covid-19 pandemic presents challenges for the economy, the country has also drawn several lessons and opportunities that inform the Government’s Economic Stimulus and Growth Strategy in implementation of the Budget in the medium term.

  1. Acceleration of import substitution and export promotion strategy for a range of goods including medicines and other health products;
  2. Agro-industrialization and light manufactures (based on Uganda’s comparative advantage);
  3. Adding value to agricultural products and minerals;
  4. Digitalization of many aspects of socio-economic activity to improve efficiency and reduce costs (e-Commerce; e-Government (including tele-conferencing, procurement and the dispensation of justice); e-Learning; robotic automation, artificial intelligence, cyber security and cloud computing; and digital marketing in tourism – this will entails fast-racking the Fourth Industrial Revolution (4IR);
  5. Reform of urban transport to reduce congestion, starting with the Greater Kampala Metropolitan Area and eventually Regional Cities;
  6. Domestic tourism stimulation to encourage many Ugandan residents to explore local touristic destinations; and
  7. Building a strong and durable economy around eight fundamental human needs namely: Food, Clothing, Shelter, Defence, Human Resource Development (Health and Education), Infrastructure (electricity, roads, rail, ICT, Telecoms); and Spirituality.

NB: These will establish a firm basis for Service industries such as tourism, hospitality (hotels, bars, night clubs, casinos, etc.) as well as entertainment (concerts, sports, etc.) to flourish;

Investment financing

To improve the availability of investment finance and the cash-flows of Micro, Small and Medium Enterprises and other manufacturing firms, the Government will implement the following measures:

  1. Allocation of UGX94 Billion to provide credit to micro and small-scale enterprises through Savings and Credit Cooperatives (SACCOs) and Micro Finance Institutions;
  2. Provide UGX1,045 Billion to Uganda Development Bank to offer low interest financing to manufacturing, agribusiness and other private sector firms;
  3. Increase funding of UGX138 Billion to Uganda Development Corporation for public-private partnership investments to facilitate import substitution and export promotion strategy;
  4. Provide for Banks to restructure loans to their borrowers who are facing liquidity constraints and provide additional liquidity on a case by case basis, as recently guided by the Bank of Uganda;
  5. Reduce charges on mobile banking and mobile money transactions, to improve efficiency, reduce person-to person contact to prevent spread of the Corona Virus; and
  6. Expedite the payment of arrears owed by Government to private sector firms commencing July 2020, for which UGX673 billion has been provided in order to address liquidity constraints faced by suppliers of Government. Priority will be given to Small and Medium Enterprises, cooperative societies and contractors.

Economic Stimulus and Growth Strategy

Minister Kasaija said the Economic Stimulus and Growth Strategy is aimed improving peoples’ welfare, the viability of farms and businesses, and the social eco-system in which they exist, hinged on the following three key objectives:

  1. Improving wellbeing of Ugandans – strategic interventions will be in food security and good nutrition, enhanced healthcare provision, ensuring universal access to water and sanitation, increasing social protection for the most vulnerable population, and transforming education delivery.
  2. Boosting economic transformation – strategic interventions include restoring household incomes and safeguarding jobs, reigniting business activity, providing tax relief to businesses, enhancing economic infrastructure, and improving good governance and maintaining security, law and order; and
  3. Improving peace, security and good governance.

Economic infrastructure

To enhance economic infrastructure (roads, rail, water, irrigation and air transport) in order to ensure economic recovery and boosting of economic transformation, the Government will implement the following interventions:

  1. Undertake emergency maintenance across the country of roads and bridges infrastructure following the destruction caused by floods;
  2. Develop warehousing capacity at community, district and regional hubs across the country to restore supply chains and promote exports;
  3. Expedite construction of priority industrial parks and special economic zones;
  4. Rehabilitate the Meter Gauge Railway;
  5. Improve water transport safety by installing navigation aids;
  6. Develop air cargo infrastructure, including the completion of the new cargo facility at the Entebbe International Airport; and
  7. Expand feeder and national road network, power, and Information and Communication Technology (ICT) infrastructure.

Some economic indicators

Minister Kasaija highlighted a few economic indicators key for investments:

  • GDP in 2019/2020 is estimated to amount to UGX138 Trillion (equivalent to US$37 Billion);
  • The economy is estimated to grow by 3.1 percent, down from 5.4 percent as earlier projected (a decline on account of the Covid-19 pandemic);
  • Agriculture sector grew by 4.2 percent, up from 3.8 percent in the previous four years;
  • Medium term outlook for economic growth is positive and will be stronger given measures in the Budget;
  • Primary production of commodities has increased significantly, for example, Coffee production increased from 5.7 million 60-kg bags to 7 million bags between 2017 and 2019, and Fish catches have grown from 391,000 metric tonness to 561,000 metric tonnes between 2017 and 2019;
  • Literacy rate of Ugandans in 2018 increased to 74 percent of all adults compared to 72 percent in 2014;
  • Electricity generation capacity now stands at 1,254 Megawatts;
  • Electrification of industrial parks has also progressed with the commissioning of the Mukono and Iganga Industrial Parks sub-stations;
  • Under the Rural Electrification Programme, 14,820 kilometres of medium-voltage power lines and 10,280 kilometres of low voltage distribution power lines have been constructed;
  • Transport infrastructure has improved considerably with the stock of the paved national road network today totaling 5,600 kilometres, up from 4,300 kilometres in 2015;
  • The meter gauge railway network is under rehabilitation – the railway currently facilitates transportation of 18,000 tons of cargo monthly, and 2,000 passengers daily in order to support decongestion in Greater Kampala;
  • In the air transport sector, thirteen (13) aerodromes have been rehabilitated countrywide and the expansion of the Entebbe International and the construction of the Kabale International Airports are progressing as scheduled;
  • Uganda Airlines is revived and began operations during the month of August 2019;
  • ICT services have improved – Internet users have increased from 7.5 million in 2016 to 11 million in March 2020, total telephone subscriptions, of which mobile connections constitute 60 percent, increased from 21 million in 2016 to 28 million in January 2020, the value of mobile money transactions increased from UGX 3.4 Trillion in 2016 to UGX7.2 Trillion in March 2020;
  • National Backbone Infrastructure now covers forty-nine (49) districts, 480 Ministries, Agencies and Local Governments, and 7 border posts;
  • The monthly average unit cost of internet bandwidth for One Megabite per second (1Mbps) on the Backbone has reduced from $300 to US$70;
  • Urban security has improved significantly, Phase One of the Safe City CCTV Project has been rolled out in Kampala Metropolitan, Wakiso, Mukono & Entebbe;
  • E-visa/works permits systems and the Integrated Border Management System is now operational at 11 border posts and was extended to 17 Uganda Missions Abroad that can issue visas to intending visitors, consequently, average monthly visa applications have increased from 4,500 applications in 2016 to 12,700 applications in 2019;
  • Electronic-passports have been integrated with the National Identification and Registration Agency (NIRA) Register leading to a reduction in passport issuance from 10 working days in 2016 to 4 working days today;
  • Business registration now takes four hours and service centres have been established at 18 Zonal Offices to eliminate bureaucracy and reduce cost of doing business.

***