2012-10-29 14:37:35 - New Construction market report from Business Monitor International: "Uganda Infrastructure Report Q4 2012"

BMI View: Foreign investment continues to drive the Ugandan construction and infrastructure sector in the face of weak underlying indicators. Large natural resources attract new projects and developments despite endemic corruption, a fluctuating currency, high inflation and other structural weaknesses in the business environment. Savage monetary tightening from late 2011 has put a brake on activity in 2012, with real growth in the construction sector forecast to come in at just 1.4% for the year; however, we foresee a durable recovery thereafter, as the central bank gradually reduces interest rates in response to disinflation. We anticipate annual construction sector growth to average 10.2% between 2013 and 2016.


Full Report Details at
- www.fastmr.com/prod/464575_uganda_infrastructure_report_q4_2012. ..


The key developments in the sector over the

last quarter were:

* The Bujagali power project reached its full 250MW generating capacity in July 2012, according to Bujagali Energy Limited. The first turbine had become operational in February, before an additional four started generating electricity over the next five months. However, while the company had built transmission lines (from Bujagali to Kawanda, Mutundwe and Nabumali), UMEME, the country's principal power distributor, cautioned that some areas would not immediately be able to access the new online capacity. Completion of the project had earlier been delayed by the hijacking of cargo by Somali pirates and theft of electric cables.
* A compensation scheme for resettling people to make way for the 600MW Karuma Hydropower Project has begun, it was reported in July 2012. The project, which will cover over 465,000 hectares of land, will be built on the site of a number of existing villages in Kiryadongo district, including Akurudia, Awoo and Nora, where a total of 414 households are affected. The compensation process was being overseen by India's Energy Infrastructure (PVT), and the contractor anticipated that 90% of claimants would agree to the scheme.
* The African Development Bank (AfDB) issued the first tranche of a UGX125bn (US$50mn) bond in July 2012 to finance infrastructure development in Uganda. The initial tranche involved offering UGX12.5bn (US$50mn) with a duration of 10 years, to be followed by additional tranches before the end of 2012.
* The Uganda National Roads Authority (UNRA) announced in July 2012 that it was seeking to raise US$950mn of capital to construct 1,900km of new roads in the country. UNRA spokesman Dan Alinange called on contractors to source external funding, against a backdrop where Uganda's domestically generated revenues remain limited. He added that the UNRA expected to receive expressions of interest over the following three months, ahead of finalising new contracts early in 2013. However, taking account of the high levels of risk aversion in global financial markets, these goals appeared ambitious. Given the ongoing sovereign debt crisis in the Euro Zone and the frailty of Uganda's own fiscal position, the prospects for achieving such a high level of externally generated private financing were questionable over the short to medium term, even accounting for the potential collateral created by Uganda's expected future oil windfall.
* In the same month, the Ugandan parliament's committee on physical infrastructure resolved to establish a sub-committee to investigate the UNRA, amid concerns about delays to road improvements. The committee appointed a three-man team of engineers to look into delays surrounding road projects between Kampala and Masaka, Mbale and Soroti, Fort Portal and Bundibugyo, Kamuli and Jinja and Mbale and Tororo. UNRA regional manager Eng. Godfrey Kaaya claimed that the delays had been caused by inclement weather, while works and transport minister Abraham Byandala acknowledged that there was a problem with the late delivery of design documents to contractors. Byandala also stated that there was a cash-flow problem between the government and the UNRA.

Uganda will face several challenges over our 10-year forecast period to 2021, including popular unrest related to one-party rule, the need to overcome the legacy of civil war in the North and a lack of jobs for its youthful population. Despite this, we maintain a cautiously positive outlook on Uganda and foresee a relatively successful resolution of these challenges going forward.

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