Country Profile: UGANDA

East Africa

Monday, 23 November 2009 00:00

This country profile was published in November 2009 in our annual 'Africa in 2010' issue. The next edition, 'Africa in 2011' will be on sale in November 2010.

Cracks in the formerly unshakable edifice of President Yoweri Kaguta Museveni’s 24 years of one-man rule seem likely to grow wider and deeper. Although the President is still remarkably agile in fending off threats to his government’s rule, his authority has been perceptibly weakened by his apparent unwillingness to renew his coterie of loyalists. He is also increasingly vulnerable to accusations of tribal favouritism toward his own Bahima people.

  UGANDA These perceptions, more widely shared throughout the country than before, will make it increasingly difficult for him to maintain support from the Baganda, Uganda’s largest ethnic group, not to mention the disparate northern groups that have been kept at arm’s length throughout Museveni’s years in power. The approach of another round of parliamentary and presidential elections in early 2011 will make the increasingly threadbare condition of Museveni’s political clothing more transparent than ever before.  

Having failed to groom a successor, the President is almost certain to thrust himself forward again as the candidate of stability, confident that his authority over the National Resistance Movement (NRM) has no rival. But, for the first time since full multiparty politics was reintroduced to Uganda in 2000, there seems to be a real opportunity to provide a serious political challenge for the incumbent party and its leader. As a result, the country’s political life in 2010 promises to be sparky and hot. The return in August of Uganda’s most famous political exile, Olara Otunnu, has already provided an unprecedented opportunity for a realignment of the political forces arrayed against the NRM. 

Museveni has always needed the Baganda vote and until fairly recently seemed able to nurse it successfully, especially in rural areas, at election time. But confrontation seems to be looming. The kingdom of Buganda’s monarchy and parliament could yet try to face down the republic of Uganda’s president and parliament. Rioting erupted in September when police stopped the king from attending a rally in the Kayunga district, where the local people want to secede from Buganda as it begins to demand more autonomy. 

Buganda’s restiveness is fuelled by worries over the government’s proposed land bill, which is seen as threatening to the kingdom’s authority and its agreed boundaries. The government reacted to the riots by closing radio stations but may well seek to negotiate its way out of the impasse before it is too late. In an unlikely alliance, the Baganda-dominated Conservative Party has been in discussions with its old enemy, the Uganda People’s Congress (UPC). Although Otunnu did not immediately declare allegiance to the UPC, it would be the natural political home from which to develop a presidential challenge. 

Other issues likely to dominate national life in 2010 will be: the prospect of having a newly-independent southern Sudan on Uganda’s doorstep after its referendum planned for 2011; the continuing murderous activities of the Lord’s Resistance Army – mainly in neighbouring Democratic Republic of Congo (DRC), Central African Republic and Sudan, but also not quite extinguished at home; and the progress of negotiations with DRC over the development of massive oil deposits around and under Lake  Albert. At least relations with the DRC would appear to have been restored to something like normality after a long 11-year break, and Uganda is certainly eager to capitalise on the huge business opportunities presented by the return of peaceful conditions in north-eastern DRC.

 The prospects of becoming an oil producer have transfixed Ugandans and have put the government into a series of fast-moving positions, alternately nationalistic and pragmatic. The main challenges are those of geography and an underdeveloped local economy, to which have also been added complex ethnic politics and simple competition for business from  all quarters.  

As the search for oil is still ongoing, there is no knowing how much is waiting there to be found, although the current reserves estimate of at least 2bn barrels would most probably allow for a combination of crude exports and local refining. The energy ministry has already issued a tender for a feasibility study for a refinery with capacity of 150,000 barrels a day. Local refining would in theory be highly profitable for Uganda, as it could become a competitive source of fuel for several neighbours, and the argument for it is helped by the fact that most of the oil found is waxy and therefore difficult to export in crude form by pipeline. Uganda survived the first year of the global downturn relatively well. The main points of pressure have been the lower levels of remittances from Ugandans abroad, a drop in foreign direct investment, tighter credit and two years of high food price inflation.  

After economic growth of 9% in 2008, the rate dipped to an estimated 7% in 2009 and is expected to slide to 6% in 2010.  Construction activity will continue and longer-term investments have not suffered greatly. Thanks to a good record of fiscal management and continued donor support, the government has preferred not to force tax increases or tinker with public spending levels too much, except in the fields of works and transport. However, the prospect of government oil revenues is still several years away, and the economy will have to survive in the meantime on its core  agricultural, industrial, trade and services activities. 

UGANDA GRAPH Coffee exports were strong in 2008, but are thought to have dipped in volume and value in 2009. The Uganda shilling has been slipping in value, with a rapid depreciation seen in the first part of 2009 to levels around $1=USh2,000, but this will be welcomed by coffee exporters hit by the rising costs of their imported inputs. High food inflation has been a feature of recent months, and it is thought that the main cause is the widespread and increasing shortage of food in other parts of East Africa, sucking out Uganda’s food surplus and upsetting the domestic market. The Bank of Uganda has calculated an inflation rate of 14.5% for 2009.  

One of the anticipated benefits of Uganda’s emerging oil industry and its resultant increasing economic weight within East Africa is the growth of tourism. Several new tourism investments are ongoing, including the Chobe Lodge inside Murchison Falls National Park, which is due to open for business in early 2010. Entebbe airport is increasingly becoming a rival hub to Nairobi, with its own direct flights to other cities around the world. British Airways recently added more flights to its London-Entebbe services, catching up with the regular services provided by Emirates, Ethiopian Airlines and KLM. 

Uganda’s trade with its neighbours has been growing rapidly, most especially with southern Sudan, which is now Uganda’s largest single trading partner. The ongoing growth of a new regional economy with Uganda at its heart is a positive sign for the future, allaying earlier fears of Kenyan domination within the five-country East African Community (EAC). At the same time, the new EAC common market has been given a new start-up  target of 1 July 2010. One of its promises is the free movement of labour within the community.

Cables aimed at the heart of Africa

The East African banking system was well prepared for the arrival of the faster technology provided since the arrival of the Seacom high-speed fibre-optic cable on the Kenyan coast. Thanks to the fact that a cross-border connection with Kenya was already in place, Uganda was able to benefit immediately. Instant payments anywhere within the EAC are now possible, at least in theory. But the Kenya-Uganda link quickly proved inadequate for faster email communications by ordinary folks. The local internet provider, Infocom, showed signs of being overwhelmed by the traffic, suggesting that substantially greater investment in fibre-optic cables is still needed. The government puts great stock in technology and it will continue to open up the telecoms field to an increasing number of competitors. A sixth mobile operator, I-Tel, started services in September. It also offers fixed-line telephony, data and research services and promises to invest $150m over the next three years. The mobile market is still led by the pioneer, MTN, with 4m subscribers. Others in the field are Zain Uganda, followed by Uganda Telecom, Warid Uganda and Orange Uganda. Orange is appealing to the top end, with a 3G platform and wireless mobile services. The government is now trying to level the field by mandating uniform interconnection rates between companies.