With Uganda’s first oil exports expected to start flowing next year, as well as a growing service sector and significant agricultural potential, opportunities for economic cooperation between South Africa and Uganda is likely to dominate discussions during the two day state visit.
Uganda will soon be Africa’s latest oil-exporting country, and South Africa is understandably keen to be part of the action, but South Africa’s interest in Uganda is certainly not confined to oil. In fact, close to 50 South African companies already operate in Uganda, including MTN, Stanbic Bank Uganda (a subsidiary of Standard Bank), and Shoprite and Game stores. Investments by South African firms in telecommunications, banking and other service sectors have played an important part in bolstering Uganda’s infrastructure, which may serve as the foundation for closer economic cooperation in the future. For example, Eskom was closely involved in the development of Uganda’s hydro-electricity generating capacity, which now provides most of Uganda’s power.
Uganda also holds opportunities for South Africa’s well-developed mining industry. Uganda has only recently undertaken an effective assessment of its mineral wealth, showing that the country holds substantial deposits of key minerals such as phosphates, gold, tin and zinc. Of course, oil will be a major draw card and South African companies have already expressed an interest in oil exploration and production opportunities in the country.
President Museveni’s state visit follows President Zuma’s visit to Uganda in March 2010. President Zuma called for closer economic co-operation both on a government level through the establishment of a Joint Trade Committee, and in the private sector through the establishment of a Joint Business Council. As with Zuma’s trip to Uganda, President Museveni will be accompanied by several cabinet ministers and a business delegation to explore investment and trade opportunities between the two countries.
As Uganda’s oil sector develops we can expect further improvement in transport infrastructure, financial services and other elements important to foreign companies seeking to invest in the economy. The development of Uganda’s oil in combination with earlier investments by South African companies could well serve as a catalyst for broader resource investments focused on agriculture, mining, forestry and perhaps even fisheries. While the development of Uganda’s renewable and non-renewable resources undoubtedly holds promise both for the country and South African business, questions around resource governance are likely to become ever more urgent in the coming years. Uganda has one of the fastest growing populations in the world, as well as a fairly high rural population, moreover, the richest mineral deposits are situated in the west of the country, which is also an important biodiversity area containing several national parks. We can therefore expect that issues around land ownership, transparency, sustainability and the equitable distribution of wealth arising from Uganda’s natural resources will remain contentious. South African businesses eyeing opportunities in Uganda would therefore do well to monitor the development of resource governance issues within the country.