PRIVATE SECTOR INVESTMENT SURVEYS (PSIS 2010)
The annual private sector investment survey (PSIS) was established to address the data constraints by providing accurate and timely annual information on the: scale of investment, composition, causes, sustainability and macroeconomic implications. Similar to previous surveys, the specific objectives of the PSIS 2010 were:
i). To generate information on private capital flows and stocks required for the compilation of the BOP and IIP statistics;
ii). To compile direct investment stocks/positions statistics for the IMF?s CDIS;
iii). To provide other related statistical information for macroeconomic analysis to inform policy;
iv). To assess investors? perceptions on the investment climate in Uganda.
Consistent with the above objectives, the findings from the survey provided vital statistics required for estimation of the contribution of private sector investment to gross capital formation and Gross Domestic Product (GDP), compilation of BOP, CDIS and IIP statistics, and assessing the investment climate in Uganda.
The Private Sector Investment Survey (PSIS) 2010 results disseminated on 21st July 2011, was the ninth in a series of annual surveys conducted by the Uganda working group (Bank of Uganda, Uganda Investment Authority, Uganda Bureau of Statistics, Uganda Manufacturers Association, Private Sector Foundation Uganda ,Economic Policy Research Centre ,Uganda Bankers Association) on private sector investments monitoring, with the main players being Bank of Uganda, Uganda Bureau of Statistics and Uganda Investment Authority. At the same time the PSIS 2011 was launched.
The PSIS 2010 survey also incorporated the requirements for the International Monetary Fund?s (IMF) Coordinated Direct Investment Survey (CDIS) whose main aim was to generate a comprehensive and harmonized investment position statement by country to assist with improving the quality of direct investment statistics required for the international comparison of inward and outward data on private capital flows.
The survey targeted a sample of 698 enterprises drawn from domestic and foreign owned enterprises with foreign assets and liabilities from the investor register, the Top tax payers and enterprises which were newly licensed by UIA. The sample design followed stratification by size and random selection for enterprises below pre-determined thresholds. The stratification method was applied to ensure increased emphasis of data collection from large enterprises and consistency in estimates derived from the previous surveys.
The questionnaire was designed to capture general information on the entity, stocks of foreign liabilities and assets as at end 2008 and 2009, transactions conducted during 2009 and Investors? Perceptions during 2010. The design of the questionnaire took into account the revisions introduced by the Balance of Payments Manual version 6 on reporting of financial account transactions and positions statistics. The data collection exercise for the PSIS 2010 was carried out between August and November 2010.
The summary report provides an analysis of the findings from the PSIS 2010 and the up-rated results.
From the 698 entities, 619 questionnaires were administered. Out of the 619 questionnaires administered a total of 567 responded, representing a response rate of 91.6 percent. In terms of the general findings, total turnover of firms with foreign assets and liabilities (FAL) was recorded at Shs.12,316 billion in 2009 with 29 percent of the total turnover recorded in Manufacturing, 20 percent in Wholesale and 17 percent in I.C.T.
The results revealed some growth of foreign private capital inflows during 2009 after the slowdown in 2007 and 2008. FDI inflows, increased by 12% from US$729 million during 2008 to US$816 million during 2009. The main recipient sectors of the inflows were Finance, Manufacturing, ICT and Mining. The industrialized economies continued to be the main source of FDI although there was increased inflows from Sub-Saharan African countries. Foreign assets however, remained small and mainly concentrated in debt instruments.
Total trade attributed to enterprises with FAL was estimated at Shs.3,563 billion for imports and Shs.2,379 billion for exports during 2009. However, a trade surplus was realized between related companies during 2009; with 69 percent of the total export trade of enterprises with FAL destined for related foreign enterprises and 40 percent of total imports from related parties. The net profit of the surveyed entities was Shs.557 billion in 2009. On a net basis, Shs.336 billion was retained while Shs.223 billion was declared as dividends indicating that a larger proportion of the profits remained in the country as additional investment. The activities of foreign affiliates accounted for 68 percent of total turnover, 63 percent of total number of employees, 71 percent of total compensation of employees, 82 percent of total export trade and , 73 percent of the total import trade, recorded in 2009. Further, activities of foreign affiliates were concentrated in Manufacturing (26 percent), followed by Wholesale (25 percent), Finance (18 percent) and I.C.T (14 percent).
In terms of FAL, the survey established that the total stock of foreign liabilities increased by 24.5 percent from Shs.6,189 billion in 2008 to Shs.7,709 billion in 2009 valued at Book Value (BV). The highest composition of the foreign liabilities was Foreign Direct Investment (FDI) constituting 91.7 percent of the total liabilities followed by loans and trade credits (7.2 percent) and Portfolio Investments (1.1 percent). The stock of equity liabilities rose by 34.5 percent from Shs. 3,994 billion at the end of 2008 to Shs.5,373 billion at end 2009. The increase in foreign equity liabilities was on account of high net equity flows of Foreign Direct Equity Investments (FDEI) during 2009. In terms of economic sectors, more than half of the new flows were in the mining sector particularly in the upstream activities of the oil and gas subsector while manufacturing and finance sector contributed about 15 percent each. The main source countries for FDEI were; the UK (25.8 percent), Canada (13.5 percent), Mauritius (8.1 percent) and USA (8.1 percent).
Private sector external debt (PSED) liabilities increased by 6.4 percent from a stock of UGX.2,195 billion at the end of 2008 to UGX.2,336 billion at end 2009. The finance and insurance sector had the largest share of PSED stock averaging at 23 percent, followed by electricity and gas averaging at 17 percent, manufacturing at 12 percent, ICT at 10 percent and mining at 10 percent. Debt between related entities accounted for the largest share of total PSED equivalent to 75 percent of the total or Shs.1,647 billion in 2008 and 76 percent or Shs.1,783billion in 2009. At the transaction level, net flows of PSED amounted to Shs.398 billion comprising disbursements of Shs.1,278 billion and repayments of Shs.880billion respectively. There were other changes due to reclassification (debt for equity swaps and exchange rate valuation gains and losses) worth Shs.257 billion.
The Investor Perception (IP) findings were mixed with some factors showing improvement from the assessment made in 2009 while others indicated deterioration. Overall, more factors were rated to have positively affected business operations compared to those that negatively affected business operations. In particular, domestic market size, access to international markets and domestic credit; cost and efficiency of telecommunication, banking, insurance and internet services; and productivity and availability of both skilled labour and unskilled labour had positive effects on business operations. The assessment of the efficiency of several regulatory or government agencies on business activities was mixed. Challenges faced by the private sector on account of inflation, exchange and interest rates, cost and efficiency of electricity supplied, road transport, municipal services, impact of the global financial crisis, malaria and staff turnover were noted. This notwithstanding, most of the entities indicated that they planned to expand investment in Uganda?s economy in the medium term.
At the policy level, there is need to strategically focus interventions to address the identified constraints to improve the business environment. Continued commitment to maintaining macroeconomic stability will be crucial for the private sector as regards retaining and attracting new investment from both foreign and local investors. The improvements achieved in lowering some costs of doing business and the efficiency gains in the provision of some support services will need to be consolidated to ensure the competitiveness of goods and services produced in Uganda. The ongoing efforts to address the infrastructure bottlenecks have the potential to unlock most of the constraints to the private sector and should be pursued tenaciously.