Uganda Presents Great Opportunities For Infrastructure Development

Aug. 1, 2009 - PRLog -- Uganda's infrastructure is getting a much-needed boost, with a large number of projects in transport and utilities under way and/or in the pipeline. As such, in BMI's Q309 Uganda Infrastructure Report, we are forecasting the construction industry to grow by 7.18% in 2009 to reach a value of UGX3.1trn (US$1.41bn).

Uganda presents great opportunities for infrastructure development with the government working hard to develop the country's power and transport sectors. Uganda is a key transit route to other countries in East Africa, acting as a corridor connecting Kenya and its port of Mombasa to other countries in the region such as the DRC and Sudan. As such, investing in the country's transport network is essential to the more efficient transport of goods, especially as a land-locked country. The country has in place an ambitious plan to develop transport infrastructure – the 15-year National Transport Plan, which is expected to cost US$900bn over the next few decades to 2050. It will cover all modes of transport including road, rail, air and water.

The road sector has been the main emphasis of this plan, as the country's rail network lags far behind.

Roads continued to be the focus of the transport industry over the past quarter. In May, the government launched the road fund with a budget of US$128mn. The fund will obtain revenues from road users and will allocate funds for road maintenance. Rail plans are in the pipeline, but progress has been slow, with no significant progress made over the last quarter. Issues with Rift Valley Railways are continuing to hamper development in the sector.

The government has also pledged its commitment to boosting electricity supply and access.

Electrification rates (i.e. the percentage of the population with access to electricity in the home) fall far below the regional average and shortages in supply are impacting the business environment. In June 2009, President Museveni announced that Uganda would double its energy capacity by the end of 2010 through the completion of two hydropower projects, the Bujagali and the Karuma Falls. Progress was announced for the Karuma falls, which has been in the pipeline for over a decade and has been subject to major delays related to the ex-contractor, Norpak, which withdrew in 2008. In April the project underwent a redesign, expanding planned capacity to 750MW, making it the largest planned project in Uganda, and increasing costs to US$1.2bn. The government has noted that it has already raised some of the funding, and although it will be developed under a public private partnership (PPP), the country could start construction before the contractor secures financing using its own funds.

Although the construction industry is continuing to register strong activity, BMI notes that the risks continue to be to the downside owing to the global financial environment. Uganda's GDP is expected to post real growth of 3.8% in 2009, down from 9.8% in 2008. This suggests that the government will have less in its coffers for infrastructure projects. In addition, private sector investments will be reduced over the short term owing to risk aversion and difficulty in accessing finance. However, one upside is the presence of the African Development Bank, which has historically supported Uganda's infrastructure development over recent years, and will continue to be a key source of funding.

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