Uganda’s Business Climate Index Rises in Q2 2025, Reflecting Growing Confidence.
BY NAOME NAMUSOKE/KMA UPDATES
KAMPALA, 23 July 2025 – Uganda’s private sector continues to serve as the backbone of the country’s economy, contributing more than 80% to the national Gross Domestic Product (GDP) and employing nearly 90% of the workforce, according to the Uganda Bureau of Statistics (UBOS). With the country’s GDP currently valued at USD 50 billion for the 2023/24 financial year and a projected growth rate of 5.2%, Uganda’s business environment remains a focal point for economic policy and investment planning.
To assess the evolving state of the private sector, the Economic Policy Research Centre (EPRC)—a renowned economic policy think tank based at Makerere University—conducts a quarterly Business Climate Index (BCI) survey. The BCI gauges business sentiment across key sectors, including agriculture, manufacturing, trade, and services.
In its latest release for the April–June 2025 quarter, the EPRC announced a slight increase in business confidence, with Uganda’s national BCI rising to 92.5, up from 91.6 recorded in the first quarter.
“This improvement reflects enhanced business activity, increased sales turnover, better profit margins, and a generally more favourable selling environment,” said Rehema Kahunde, a research fellow at EPRC, during the report presentation.
The services sector recorded the strongest performance, with its BCI climbing to 94.7 from 92.3 in the previous quarter. According to the report, this improvement is largely due to increased consumer demand in ICT, hospitality, and transport services.
“There’s a growing optimism in the services industry as businesses continue to recover and expand in urban and peri-urban markets,” Kahunde noted.
However, not all sectors shared in the optimism. The agriculture and manufacturing sectors experienced a mild decline, with the BCI for both sectors falling from 99.3 to 98.3.
In the agriculture sector, the downturn is largely attributed to slumping global coffee prices, which have discouraged farming activities, particularly in Uganda’s traditional coffee-growing regions.
“The drop in coffee prices is having a direct impact on farmer earnings and production decisions,” Kahunde explained.
The manufacturing sector also faced hurdles including unstable electricity supply, shrinking selling prices, and rising input costs, all of which have negatively affected production efficiency and profitability.
“Power interruptions and rising operational costs continue to constrain manufacturing growth,” Kahunde added.
Beyond sector-specific dynamics, the EPRC report outlines several systemic challenges that continue to affect business performance across the country. These include:Multiple taxation by both central and local government authorities,Unfair competition from informal and unregulated businesses,Aging electricity infrastructure and vandalism of power lines, Uncertainty around the 2026 general elections, which could dampen investor and business confidence
“These structural challenges are persistent barriers that must be addressed to fully unlock Uganda’s private sector potential,” Kahunde said.
To mitigate these issues and enhance the business environment, the report recommends: The Ministry of Energy and Uganda Electricity Distribution Company Limited (UEDCL) should invest in upgrading outdated power infrastructure, Stronger enforcement to curb vandalism of electricity installations, Efforts to improve power reliability, especially in industrial zones, Ensuring peaceful and credible elections in 2026 to maintain political and economic stability
“Stable politics and reliable infrastructure are essential foundations for sustainable business growth,” Kahunde emphasized.
As Uganda continues to recover from past economic shocks, and with elections on the horizon, the performance of the business sector will remain a key indicator of national resilience and growth. The EPRC’s quarterly Business Climate Index stands as a valuable resource for government decision-makers, investors, development partners, and the business community to guide informed strategies and policies.