Foreign direct investment into Uganda grew by 14 per cent to $1.154 billion in 2013/14 from the previous financial year, according to data from the country’s central bank.

The growth was supported mainly by rising investor interest in the mining and manufacturing sectors, observers said.

“The government’s investment promotion efforts are beginning to pay off, resulting in new large investments,” said Frank Sebbowa, the executive director of the Uganda Investment Authority.

READ: Kenya, Uganda among top FDI recipients

Dr Sebbowa said the mining sector has attracted new Chinese and Turkish players who are interested in the commercial production of minerals. Targeted minerals include gold, iron ore, marble, gemstones and copper.

The Sukuru Phosphate Project in Tororo district in eastern Uganda stands out as the most ambitious investment in the non-oil and gas segment. The project is valued at $620 million, and is funded by the Guangzhou Dongsong Energy Group of China.

Challenges

In contrast, delays in approving field development plans submitted by the three major oil exploration firms in Uganda, and the government’s reluctance to issue licences for the second exploration round are likely to slow down new investments in the oil and gas segment this financial year, sources argue.

However, senior executives in the oil and gas industry expect that key financing agreements for commercial production will be completed before the end of 2015.

“The exploration and appraisal stages have been completed and we are currently preparing for field development operations,” said a senior manager at Tullow Oil Uganda who requested anonymity.

Large projects in the manufacturing sector are dominated by cement producers.

So far, three new plants are under construction in eastern Uganda with foreign investors targeting a surge in demand for cement and other building materials expected from the start of physical works on the $1.4 billion Karuma hydropower dam and the 183MW Isimba hydropower dam.

“While big investors from Europe have focused on capital intensive projects in the mining and manufacturing sectors, investors from Asia have concentrated more on service related businesses. However, parliament’s frequent bickering over business issues has proved a disincentive to investor confidence,” said Patrick Mweheire, executive director at Stanbic Uganda.