India and Uganda’s great expectations of business deals

A significant development package offered to Uganda by Indian Prime Minister Narendra Modi during his visit overshadowed business deals being pursued behind the scenes. Details of deals signed between local investors and their Indian counterparts remained scanty, with reports of local entrepreneurs still struggling to conclude new investment transactions.
The Prime Minister announced a $200 million loan facility for Uganda, targeted at the energy, agricultural and infrastructure sectors during the visit in a move viewed as an “ice breaker” for India’s latest diplomatic charm offensive.
The energy sector was allocated the lion’s share of this credit line, with $141 million provided for construction of new power lines and electricity substations.
The sector’s financing gap is currently estimated at more than $500 million, reflected in worn-out sections of the country’s power supply network and a low electricity penetration rate of less than 20 per cent of the population. However, The EastAfrican has learnt that a number of major business deals anticipated in the pharmaceutical, motor assembling, food processing and Information and Communication Technology (ICT) sectors did not materialise during Modi’s visit, with sources in the business community reluctant to reveal the outcome of negotiations.
Popular Indian imports include motorcycles, generic drugs, industrial chemicals and electronics. According to Sanjay Tanna, a second generation Ugandan of Indian origin and former member of parliament, Ugandan-Indians were focused on securing a pie of their ancestral home’s fast expanding middle class especially in the tourism sector.
Tanna says the Indian tradition of families travelling together would offer Ugandan tourism a major boost. “Ugandan Indians already control the bulk of the tourism industry in Uganda and East Africa and since Indians culturally tend to visit as families — from grand children to grandmothers — if the Indian government through policy directed just a part of that large population to Uganda, and each visitor is able to spend just $1,000, that would be big for us.”
Prime Minister Modi seemed to respond to this when he promised to build a shrine for revered Indian leader Mahatma Gandhi at Jinja. Much of Indian tourism tends to be religious or spiritual and a monument of Gandhi at the equally touristy iconic source of the Nile would be significant.
“The Indian community contributes around 55 per cent to 57 per cent of Uganda’s total output and tax revenues. India is willing to offer Uganda direct air access between Entebbe and Delhi for our new national airline and has also committed to building a technology incubation centre to promote local ICT skills,” said Mike Mukula, a local business owner and past chairman of the Uganda-India friendship Society.
Targeted investments in the energy sector are likely to raise India’s profile in this area, after years of regular participation by Indian contractors in the construction of electricity sub-stations located across Uganda. “Any investment in the power sector is welcome. We still need funds for the repair of old supply infrastructure in some areas and construction of new distribution lines in areas that are not connected to the national electricity grid. So far, the Europeans have dominated investments in the mini hydro generation subsector while China has dominated the large hydro generation segment through financing and construction of the Karuma and Isimba power dams. The Indian firms, in comparison, have been very active in construction of many electricity sub-stations commissioned by Umeme Ltd in various parts of Uganda,” said Julius Wandera, spokesperson of the Electricity Regulatory Authority.
Before arriving in Kampala, Modi spent some time in neighbouring Rwanda where he had arrived shortly after Chinese President Xi Jinping in what appears to be a fresh push by leaders of fast growing Far East economies courting resources and markets in East Africa.
After their East African tours, the two leaders joined counterparts from Russia, Brazil and South Africa for a BRICs summit in South Africa. President Yoweri Museveni and other leaders from the region were also invited to the BRICs summit where more trade deals were expected to be concluded.
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