By Charles Nsamba
The continent marked the Africa Industrialisation Day (AID) on 20 November, with Kampala being privileged to host the 2025 African Industrialisation Week. Under the theme, “Transforming Africa’s Economy through Sustainable Industrialisation, Regional Integration and Innovation”, the platform offered an aperture to showcase domestic gains and catalyse regional investment and technical partnerships.
Uganda’s economic performance provides a foundation for industrial optimism. Real Gross Domestic Product (GDP) rose from 6.1% to 6.8% in the nine months from July 2024 to March 2025, according to the World Bank. The growth was driven by agriculture, manufacturing, construction and strong household consumption. This broad-based growth aligns with the sustainable industrialisation requirement. However, a key outstanding challenge is a lack of sustained momentum towards the deeper structural change that the country’s Vision 2040 demands.
As important, sustainable industrialisation needs a predictable regulatory horizon and a fiscal regime that allows businesses to undertake long term planning.
The Q1 2025 Uganda Business Confidence Index, published by the Economic Policy Research Centre, reveals that businesses face mounting operational challenges. The index declined from 91.1 to 88.8 points in Q1 of 2025, with businesses citing key constraints such as increasing multiple taxation, unreliable power supply and limited access to finance. This mounting unpredictability is precisely what makes long-term planning impossible.
When businesses cannot predict the fiscal terrain three to five years ahead, they defer expansion, delay technology upgrades and adopt defensive postures rather than pursuing growth. The friction between revenue mobilisation and industrial policy produces an equilibrium trap that leaves both goals underachieved.
Put differently, planning uncertainty is expensive for a country aiming for upper middle-income status by 2040. According to the Uganda Manufacturers Association, manufacturing contributes 15.4% to the GDP today, but that aggregate masks fragility. Each year of ambiguity compounds into lost industrial capacity and postponed value addition. How much capacity is forgone while businesses wait for policy stability and predictable incentives? That is the question policy makers should be asking.
A second pillar of sustainable industrialisation is a framework that rewards compliance and penalises illicit trade. For instance, independent third-party studies indicate that illicit trade in cigarettes now accounts for 34% of the Ugandan market, up from 25% in 2023. The annual revenue loss from cigarettes alone is roughly UGX 30 billion shillings.
The problem is wider. The Uganda Alcohol Industry Association reports that 67% of alcohol consumed in 2024 was outside the tax net, creating an approximated annual fiscal loss of UGX 3 trillion shillings. Illicit trade is not a minor nuisance. It erodes the level playing field by shifting the full burden of taxes, excise duties and compliance costs onto legitimate businesses, while tax-evading operators undercut them with cheaper products, triggering structural attrition in the formal sector.
Innovation is the third ingredient that converts aspiration into industrial reality. Innovation needs patient capital, skilled labour and institutional space for experimentation. The Uganda Investment Authority says that, as of May 2025, it has licensed over 628 companies across government and private industrial parks with 307 being operational, which is encouraging. The question now remains whether existing frameworks actively nurture innovation or simply tolerate it when entrepreneurs push through systemic friction.
Vision 2040 projects GDP expanding from USD 50 billion dollars in FY 2022/23 to USD 500 billion dollars by 2040. Manufacturing must carry significant weight in that tenfold ambition. However, I reckon that will not happen while compliant operators compete with entities that evade duties and compliance with regulations. Shortcuts must close and compliance becomes the commercially rational path. This requires steady policy frameworks, robust enforcement actions and regional coordination.
Hosting the African Industrialisation Week in Uganda was an opportunity to not only showcase the country’s industrial potential but also confront its structural constraints. For a country that envisions upper-middle-income status through manufacturing expansion, the week served as a critical platform towards aligning fiscal, trade and industrial policies in the manner Vision 2040 explicitly requires. Success will be measured by the actions taken to resolve the very issues highlighted during these discussions.
The writer is the Corporate and Regulatory Affairs Manager, BAT Uganda
