Uganda could grow its economy, create jobs and strengthen its trade position in East Africa by increasing private sector investment in its agribusiness, energy and housing sectors, and by advancing business climate reforms, a report by the International Finance Corporation (IFC) and the World Bank has found.

The 'Country Private Sector Diagnostic' (CPSD) report found that the energy, housing and agribusiness, namely fisheries, dairy and maize, sectors are among those that offer strong potential to address job creation and competitiveness challenges amid high population growth and urbanisation.

However, to realise growth in these sectors, Uganda will need to continue advancing reforms and attracting private investment, the IFC and the World Bank say, while applauding Uganda for the progress it has made in liberalising parts of its economy.

The country must also consider areas where increased private sector investment, expertise and reform could further support growth, the institutions suggest.

"A competitive and dynamic private sector is essential for Uganda to create sufficient jobs for a young and rapidly growing labour force. We will leverage the World Bank Group’s comparative advantage to bolster the country’s private sector and implement meaningful reforms," says World Bank country manager for Uganda Mukami Kariuki.

The CPSD report further found that constraints in these areas limit private sector investment, especially in housing.

"Housing construction is especially important for post-Covid-19 economic and social recovery because of its ability to create jobs," the IFC and World Bank say.

Further, in energy, the availability of reliable electricity from a production and distribution perspective will contribute to the country's competitiveness and present investment opportunities for the private sector, such as in renewable energy.

The World Bank Group will channel its private sector development lending, investment and advisory operations in Uganda to target the sectors and reforms highlighted in the CPSD to help the government of Uganda prioritise the actions the report recommends, Kariuki says.

Over the past two decades, Uganda has had a good record implementing pro-private sector policies that have led to significant inward investment, high levels of regional trade and a vibrant informal economy.

However, the country’s growth rates have recently slowed and there are signs of the government’s pro-private sector agenda losing some ground.

The shock of Covid-19 has contributed to economic headwinds impacting Uganda, reversing some recent gains and sending an estimated 2.6-million Ugandans back into poverty in the short term, the organisations say.

Other challenges slowing growth in Uganda relate to infrastructure, human capital, institutional capacity and the land system.

"The IFC’s goal is to help strengthen Uganda’s competitiveness, economy and job creation by supporting increased private sector investment in key growth areas. Uganda has immense potential for progress and the IFC is a committed partner helping the country realise its long-term development objectives," says IFC country manager for Uganda Amena Arif.