A US government report has identified corruption, rising debt-servicing obligations, aggressive tax collection and political uncertainty among the major risks facing foreign investors in Uganda, despite strong economic growth and record foreign direct investment inflows.
The 2026 Investment Climate Statements on Uganda, published by the US Department of State, says the country offers opportunities in infrastructure, energy and agriculture but faces regulatory, political and logistical challenges that could undermine investor confidence.
The report notes that foreign direct investment (FDI) inflows rose by 8.8% to a record $3.7 billion in 2025, largely driven by oil-related investments, while the economy grew by 6.7%, according to figures attributed to the International Monetary Fund (IMF).
“However, investors note the biggest challenges to investment include” aggressive pursuit of law-abiding private sector firms to meet revenue collection targets, rising debt-service obligations, corruption, weak rule of law and shortages of skilled labour, the report states.
Other concerns include a complicated land tenure system, increased local content requirements, limited public investment in health and education, shrinking civic space and human rights violations.
The report says Uganda’s economic growth has been supported by industrial and agricultural activity, with oil-related investments continuing ahead of the country’s planned commencement of commercial oil production.
Inflation stood at 3.5% in 2025, below the Bank of Uganda’s 5% target, while the central bank maintained a cautious monetary policy, keeping its benchmark lending rate at 9.75% as of June 2026.
Despite the positive economic indicators, the report warns that uncertainty over Uganda’s political future could affect investment decisions.
It cites questions surrounding succession to President Yoweri Kaguta Museveni, who the report says won re-election in January 2026 with 72% of the vote amid reports of political violence and restrictions on democratic space.
The report argues that political uncertainty increases risks for foreign businesses, particularly given concerns about the country’s history of political transitions and the perceived absence of a clear succession plan.
It also points to the country’s youthful population, noting that young people increasingly demand employment opportunities, improved healthcare, better education and stronger infrastructure.
Corruption and taxation concerns
Corruption remains a central concern in the report, particularly in public procurement and government contracting.
Although Uganda has laws and institutions intended to combat corruption, the report says enforcement remains a challenge and alleges that well-connected individuals sometimes avoid prosecution.
“Endemic corruption remains a serious problem and a major obstacle to investment,” the report states.
It adds that US firms have complained about corruption in government institutions and procurement processes, arguing that companies willing to disregard environmental standards, labour rights and tax obligations can gain an unfair advantage over businesses that comply with stricter international rules.
The report also raises concerns about tax administration, saying some investors consider revenue collection practices increasingly aggressive and believe compliant businesses are subjected to disproportionate audits and penalties.
It argues that Uganda’s large informal economy presents an opportunity to broaden the tax base rather than placing excessive pressure on formal businesses.
Land, skills and regulation
The report identifies land acquisition as another major obstacle to investment, citing the complexity of Uganda’s land tenure system, corruption and inefficiencies in land registration.
Foreigners cannot directly own freehold land in Uganda and are generally limited to leasehold arrangements of up to 99 years, although foreign investors can establish Ugandan companies that own real estate.
Bureaucratic delays also remain a challenge despite the Uganda Investment Authority’s one-stop centre, which allows investors to register businesses, apply for investment licences and access other services.
The report says investors may still need to engage multiple government agencies to complete regulatory requirements. For large investments, some companies have reported that political backing and relationships with senior officials are effectively necessary.
Uganda’s shortage of specialised skills is another concern. Although the country has a large labour force, the report says there is an acute shortage of skilled and specialised workers, while much of the economy remains informal.
The report also notes that local content requirements, particularly in the oil and gas sector, require investors to prioritise Ugandan goods, services and workers where possible.
Opportunities remain
Despite the challenges, the report recognises several opportunities for investors, particularly in agriculture value addition, tourism, mineral processing, science, technology and innovation.
It highlights government incentives available through the Uganda Investment Authority and the Uganda Free Zones and Export Promotions Authority, including tax incentives for qualifying investments and export-oriented businesses.
The report says Uganda’s market of more than 45 million consumers, favourable climate, arable land and ongoing development of oil and mineral resources offer significant commercial opportunities.
It also notes that Uganda participates in the African Continental Free Trade Area, which seeks to expand intra-African trade by reducing tariffs and other barriers.
The report’s overall assessment presents Uganda as a market with substantial growth potential but where investors must weigh commercial opportunities against governance, regulatory and political risks.
