Uganda's Crossroads: Navigating Geopolitical Risks in Pursuit of Infrastructure Investment Opportunities

Uganda, a nation straddling East Africa's economic and strategic heart, finds itself at a critical juncture. Under President Yoweri Museveni's three-decade rule, the country balances potential for growth in sectors like oil and infrastructure against deepening political instability, institutional decay, and human rights concerns. For investors, the challenge lies in parsing this complex landscape to identify opportunities where geopolitical risks can be mitigated.

The Geopolitical Tightrope: Political Instability and Repression

Museveni's regime has tightened its grip in recent years, with key risks including:
1. Succession Uncertainty: The president's son, Gen. Muhoozi Kainerugaba, has emerged as a de facto successor, leveraging military patronage and repression of dissent. Opposition leaders like Bobi Wine face violent crackdowns, with arrests spiking ahead of the 2026 elections.
2. Judicial Erosion: Courts increasingly side with the regime, exemplified by the denial of bail to opposition figure Kizza Besigye and the revival of military trials for civilians.
3. Human Rights Backlash: The 2023 Anti-Homosexuality Act led to Uganda's expulsion from the African Growth and Opportunity Act (AGOA), costing $1.2 billion in lost trade preferences. The World Bank suspended $2 billion in funding until reforms occur.

Despite these risks, GDP grew at 5.2% in FY 2022/23, driven by pre-oil investments and agriculture. However, public debt now exceeds 52% of GDP, with only $870 million of a $1 billion IMF loan disbursed due to stalled reforms.

Infrastructure: The Silver Lining Amid the Storm

Uganda's infrastructure pipeline represents one of the few sectors where geopolitical risks are offset by transformative potential. Key projects include:

1. East African Crude Oil Pipeline (EACOP)

This $10 billion pipeline, linking Uganda's Albertine Basin to Tanzania's Indian Ocean port, promises to unlock Africa's next major oil boom. However, it faces hurdles:
- Environmental and Social Opposition: Indigenous communities displaced by land seizures have staged protests, with Human Rights Watch documenting forced evictions.
- Political Volatility: Delays could arise if 2026 election violence disrupts operations.

2. Transport and Energy Upgrades

• Standard Gauge Railway (SGR): A $3.6 billion rail network connecting Kampala to Kenya and Rwanda aims to boost trade.
• Power Projects: The 600 MW Karuma Hydropower Plant and solar initiatives address a chronic energy deficit (only 34% of rural households have electricity).

3. Free Zones and Tech Hubs

The Uganda Free Zones Authority (UFZA) offers tax incentives for manufacturers and exporters. While free zone exports fell to $65 million in 2022/23 (down from $125 million), the sector could rebound with better supply chain management. Tech firms, meanwhile, benefit from a young, English-speaking population, though the 5% Digital Services Tax and internet bans on platforms like Facebook pose challenges.

Investment Strategy: Pragmatic Engagement Amid Uncertainty

Investors must adopt a risk-aware approach, prioritizing sectors with clear government support and high multiplier effects:

Recommendations

1. Focus on Oil and Infrastructure:
2. Partner with firms like TotalEnergies (operating EACOP) or local contractors with government ties.

3. Monitor to assess fiscal sustainability.

4. Leverage Local Partnerships:
   Collaborate with Ugandan firms or diaspora networks to navigate bureaucratic hurdles. The Uganda Investment Authority's “one-stop shop” can streamline licensing, though delays remain common.

5. ESG Considerations:
   Avoid projects linked to land grabs or human rights violations. Engage with NGOs like the Uganda Human Rights Commission to mitigate reputational risks.

6. Hedge Against Political Risks:
   Diversify investments across sectors (e.g., combine oil with renewable energy). Consider political risk insurance for long-term projects.

7. Monitor the 2026 Elections:
   A violent or illegitimate outcome could trigger sanctions, capital flight, or civil unrest. Maintain flexibility to exit high-risk assets.

Conclusion: Uganda's Calculated Gamble

Uganda's prolonged leadership regime presents a paradox: a government capable of stifling dissent is also the only entity capable of fast-tracking infrastructure deals. For investors, the calculus hinges on whether Museveni's authoritarian stability—or its eventual unraveling—will dominate the next decade.

The most promising plays lie in oil and transport infrastructure, where tangible returns outweigh geopolitical risks for those willing to engage cautiously. However, the stakes are high: misread the political climate, and even the most shrewdly chosen investments could falter. As Uganda's youth demographic (77% under 30) demands change, the next few years will test whether the regime's iron fist can hold back the tide—or if new leadership will open a window for transformative, inclusive growth.

Invest with eyes wide open.