Kampala, Uganda — The Economic Policy Research Centre (EPRC) has released the latest findings of the Uganda Business Climate Index (UBCI) for the April – June 2025 quarter, showing a slight improvement in business confidence across the country’s private sector.
The index increased by 3.7 points—from 88.8 in the previous quarter (Q1 2025) to 92.5 in Q2 2025, although this remains below the neutral threshold of 100 (scores above 100 signal an above average/improving business climate, while scores below 100 indicate below potential conditions.). According to the report, increased business activity, sales turnover, and profitability and better selling prices underpinned the increase in confidence.
“Our latest index captures cautious optimism among Ugandan businesses,” said Rehema Kahunde, Research Analyst and co-author of the BCI Report. “Demand picked up around the Easter season and school reporting for second term, boosting sales for many firms, which contributed to the slight improvement in sentiment. However, it is important to address the persistent challenges that continue to weigh on businesses if we are to sustain this momentum,” she said.
Sectoral Performance: Service Surges as Agriculture and Manufacturing Dip
The second quarter findings show mixed fortunes across sectors. The services sector registered a modest improvement, with its BCI rising by 2.4 index points to reach 94.7 from 92.3 reported in the previous quarter. This was driven mainly by large businesses in education, monetary intermediation, warehousing and storage services, which reported increased business activity, sales turnover, favourable selling prices and profitability.,
By contrast, agriculture and manufacturing recorded modest decline. The agriculture sectors’s index dipped by 1.0 index point to 98.3 (from 99.3, and manufacturing fell by 1.7 index points to 79.9 (from 81.6). EPRC survey attribute the softer agricultural outlook to reduced business activity and sales turnover in agribusinesses, linked in part to a slump in global coffee prices that discouraged farmers.
Manufactures faced obstacles from unstable power supply, shrinking selling prices, high input costs and unavailability of skilled labour. Despite these sector specific challenges, all indices remained below 100, underscoring that business conditions while improving, are still weaker than the long-term average.
Key Business Challenges in Q2 2025
The BCI report highlights a set of recurring challenges that continue to constrain businesses across Uganda. Multiple taxation and competition from informal businesses remain major obstacles. Additionally, unfavourable macroeconomic factors (e.g. interest rates, inflation) and an unreliable power supply were also reported. These challenges have, in many cases, intensified compared to earlier in the year. For example, multiple taxation and informal competition intensified in most regions (except the north), where poor transport infrastructure, insufficient demand, and limited finance were more pressing during Q2.
“Tax-related challenges seem to crop up every quarter, which underscores the importance of balancing tax policy with business sustainability,” noted Ms. Kahunde, highlighting the need for policy reforms. The recurring nature of these issues each quarter signals that deeper structural measures, from tax code simplification to encouraging formalisation, are needed to improve the business climate.
Rehema Kahunde, the EPRC Research Analyst, addressing reporters at EPRC offices in Makerere on July 23, 2025
Impact of Power Service Transition (UMEME to UEDCL)
The transition of electricity services from UMEME to UEDCL on April 1, 2025, negatively impacted 42% of businesses. The primary issues reported were increased power outages (74%), a perceived rise in electricity costs (fewer units for the same price), and increased voltage fluctuations (10%). These disruptions particularly affected energy-reliant sectors and larger businesses, with 49.8% of large manufacturers reporting issues, underscoring the critical need for reliable power to support industrial growth.“Ever since the power company changed hands, outages have been more frequent, and it’s hurting our productivity,” said a Kamapla-based manufacturer who participated in the survey. “We’ve had to run generators more often to keep production on track, which drives up our costs. We’re really hoping the new provider can stabilise the supply soon.” The EPRC report urges UEDCL to fast-track solutions to these gaps so as not to deepen the optimism in the private sector.
Positive Outlook for Q3 (July-September 2025)
Optimism prevails for July-September 2025, with the BCI projected to reach 100.3, crossing the “above average” threshold. This positive outlook is driven by anticipated general business optimism, increased demand from expected political spending, and a projected decline in input costs. All sectors are expected to improve, with agriculture rising significantly to 109 (due to the harvest season), services to 101, and manufacturing to 82.
Conclusion
The April-June 2025 Uganda Business Climate Index shows a marginal improvement to 92.5, driven by increased activity and consumer demand, with larger businesses seeing more pronounced gains. While services improved, agriculture and manufacturing experienced declines due to global price fluctuations and high input costs. Persistent challenges include multiple taxation, informal competition, and adverse macroeconomic factors, which worsened for most regions. The transition from UMEME to UEDCL power significantly impacted 42% of businesses, citing increased outages, higher costs, and voltage fluctuations, particularly affecting larger firms. Despite these challenges, strong optimism for July-September 2025 projects the BCI to reach 100.3, signalling a shift to more favourable conditions, driven by anticipated political spending and declining input costs across all sectors.
“The anticipated uptick in economic activity – from election-related spending to seasonal harvests – could help lift the index back to neutral or even positive territory. If this momentum is sustained and coupled with improvements in the business operating environment, Uganda’s private sector could be on the cusp of a more significant recovery,” Ms. Kahunde observed.
Policy Recommendations
- The Ministry of Energy and UEDCL should increase investment in old electricity infrastructure to ensure power reliability especially in industrial zones
- To reduce cases of vandalism, enforcement measures need to be put in place to reduce theft of electricity towers.
- Ensure a violent-free election cycle to prevent the distortion of the business environment e.g. intensify civic education and protection of businesses and property
For Media Inquiries, Contact:
Alon Mwesigwa, Communications Officer, EPRC. Email : amwesigwa@eprcug.org | Mobile 0784010803Phone: +256 (0) 414 541023
Website: www.eprcug.org
For More InformationRehema Kahunde
Co-Author, Macroeconomics Department, EPRC
Email: info@eprcug.org
Phone: +256 (0) 414 541023
Website: www.eprcug.org
