Kampala, Uganda — The Economic Policy Research Centre (EPRC) has released the latest findings of the Uganda Business Climate Index (UBCI) for the January–March 2025 quarter, showing a slight decline in business confidence across the country’s private sector.
The index dropped by 2.3 index points—from 91.1 in the previous quarter (October- December 2024) to 88.8 in January- March 2025—mainly due to reduced business activity, sales turnover, and profitability. This decline reflects growing operational challenges across sectors, particularly among micro and small enterprises. Overall, business confidence remains below its potential.
Despite this dip, most businesses remain optimistic about the future, with several firms indicating expectations of improved business conditions in the coming quarter. The positive prospects are attributed to a projected improvement in the general business environment, increased business activity, sales turnover, and profitability, boosted by the Easter Season demand, especially in the retail and hospitality sectors.
The UBCI is a critical tool that captures real-time business sentiments and informs evidence-based policymaking for Uganda’s private sector development. The quarterly index, which measures business perceptions among 1,152 formal enterprises nationwide, offers critical insights into the operating environment for Micro, Small, and Medium Enterprises (MSMEs)—the backbone of Uganda’s economy.
“While we saw a modest drop in business confidence, particularly among micro and small enterprises, the outlook remains positive. The decline reflects real but manageable challenges in the operating environment,” said Dr. Brian Sserunjogi, EPRC Research Fellow and lead investigator of the survey.
Sectoral Performance: Manufacturing Surges as Agriculture and Services Dip
The report highlights improved business sentiment in the manufacturing sector, which grew by 4.8 index points to reach 81.6 from 76.9. This was attributed to increased product prices, profitability, and capacity utilisation, mainly among large firms in the soft drinks, cement, and pharmaceuticals sectors. By contrast, agriculture and services recorded modest declines of 4 and 1.2 index points, respectively. Agricultural businesses—particularly small and medium-sized enterprises (SMEs) dealing in tea, milk, flowers, inputs, and post-harvest equipment—cited reduced profitability, labour shortages, and declining business activity as the drivers of the decline. In the services sector, businesses in forex, cargo handling, the creative arts, and real estate noted shrinking profits, business activity and reduced sales turnover.
Top Business Challenges Identified: Taxation, Power Supply, and Informality
The survey also identifies persistent challenges affecting the business environment:
- Multiple taxation concerns rose by 5.2 index points (from 72.0 to 77.2).
- Competition from informal businesses increased by 5.6 index points (from 62.8 to 68.4).
- Unreliable power supply became a more serious problem, rising by 6.9 points (from -4.1 to 11.0) compared to the previous quarter.
These challenges were most severe among micro, small, and medium firms across all sectors. Micro businesses also highlighted limited access to finance as a growing concern.
Policy Recommendations for Government and Regulators:
To address these bottlenecks, EPRC recommends that:
- The Ministry of Finance, Planning and Economic Development and URA, in collaboration with local authorities, should streamline and integrate sector-specific taxes, business licenses, fees, and levies into a single payment system to ease compliance for businesses.
- The Ministry of Trade, Industry and Cooperatives, together with the Ministry of Local Government, should enforce trade order, zoning and urban planning regulations, especially in new cities, municipalities, and local governments.
- The Ministry of Energy and UEDCL should invest in reliable power distribution to enhance power system efficiency, minimise outages, and expand reliable access to industrial zones.
- The Ministry of Lands should accelerate land registration by promoting nationwide land titling using digital systems to improve transparency and enhancebusiness investment security. This would also support business formalisation and stability.
- The Ministry of Gender, Labour, and Social Development should bolster inspections and enforcement of workplace regulations to ensure fair treatment and productivity in the labour force.
- Promote Public–Private Dialogue: Encourage structured engagement platforms to ensure responsive policy development in support of micro, small, and medium-sized enterprises (MSMEs).
- Expand Access to Finance: Support MSMEs with access to affordable financial services and strengthen institutional capacity to deliver business development support.
About the UBCI:
The Uganda Business Climate Index is a quarterly perception-based index that assesses the economic outlook and business operating environment across three sectors: manufacturing, agriculture, and services. It captures real-time business sentiment from formal enterprises across Uganda’s four regions through a perception survey. A total of 1,152 formal businesses were surveyed from all four regions of Uganda. The index monitors changes in sales, profitability, employment, and sector-specific challenges, providing government and stakeholders with timely evidence for responsive policymaking. An index score below 100 indicates that business conditions are below potential, 100 signifies potential, and a score above 100 indicates above-potential performance.
For Media Inquiries, Contact:
Alon Mwesigwa, Communications Officer, EPRC Email: amwesigwa@eprcug.org | Mobile 0784010803; Phone: +256 (0) 414 541023
Website: www.eprcug.org
For More Information on the survey
Dr. Brian Sserunjogi
Lead Researcher, Macroeconomics Department, EPRC
Email: info@eprcug.org/ bsserunjogi@eprcug.org
Phone: +256 (0) 414 541023
Website: www.eprcug.org