Kampala, Uganda
Confidence among Ugandan businesses jumped sharply in the second quarter of 2026, according to the latest Uganda Business Climate Index published by the Economic Policy Research Centre, but the same report warns that the rebound sits on shaky ground as rising fuel prices and global uncertainty continue to squeeze operating costs. The findings, released in early August and reported by The Independent, offer one of the clearest snapshots yet of how Ugandan firms are navigating a year marked by a disputed election, a domestic Ebola outbreak and renewed conflict in the Middle East.
The headline number is striking: the Business Climate Index rose by 20.1 points to 124.9 in the April-to-June quarter, up from 104.8 in the first three months of the year. Because a reading above 100 signals that businesses expect conditions to improve while a reading below 100 signals expected decline, the jump indicates that Ugandan firms, after a genuinely difficult start to 2026, are now looking ahead with meaningfully more optimism than they were in March.
That optimism is concentrated in expectations for the current quarter, July through September. Firms surveyed by EPRC said they expect customer demand to rise, business activity to pick up and prices to move in a more favourable direction. Much of that expectation is tied to Uganda's agricultural calendar: the first harvest season typically boosts agricultural output and, with it, activity for the transport operators, traders, wholesalers and retailers who move and sell that produce. Agriculture remains foundational to the Ugandan economy, employing a large share of the population and feeding raw materials into other sectors.
The recovery, however, is uneven across sectors, and the report's authors were careful to frame the improvement as fragile rather than settled. Services registered by far the strongest turnaround, with sentiment swinging from negative 28.0 percentage points in the first quarter to positive 21.9 percentage points in the second — a shift EPRC attributes to stronger customer demand and increased commercial activity in transport, trade and hospitality. Agriculture also improved, moving from negative 43.0 to negative 27.9 percentage points, which EPRC linked to better weather, greater availability of irrigation water and government-backed financing programmes for farmers, though sentiment in the sector remains net negative overall.
Manufacturing told a different story. The industrial sector's confidence reading slipped slightly, from negative 41.7 to negative 42.2 percentage points, as manufacturers cited high production costs, weak demand, underused factory capacity and thinning profitability. Firms that depend on imported raw materials were hit particularly hard by a combination of rising global oil prices and a weaker Ugandan shilling, both of which have made imports and shipping more expensive. The renewed conflict in the Middle East, which has disrupted energy markets and pushed up fuel prices internationally, was cited repeatedly by respondents as an external shock squeezing margins regardless of how domestic demand was trending.
Those cost pressures show up clearly in the survey's broader complaint data. Competition among businesses was the most commonly cited concern, particularly for small and medium enterprises in retail, wholesale trade, education and transport. Reduced consumer demand ranked as a major issue for medium-sized firms in accommodation and information and communication services. Taxes, unreliable electricity supply and general economic pressure rounded out the list of recurring obstacles. Roughly four in ten businesses surveyed said reduced demand, economic uncertainty and corruption had gotten worse compared with the previous quarter, and about three in ten pointed specifically to worsening electricity-related problems — a complaint that lines up with separate parliamentary scrutiny this month of the state utility UEDCL over delayed connections and lengthening outages.
Businesses were more cautious on one front in particular: hiring. Despite the improved mood, 86.8 percent of firms surveyed kept their headcount unchanged during the quarter, 10 percent cut staff — construction companies accounted for a disproportionate share of those losses — and only 3 percent added workers. That pattern suggests firms are treating the improved outlook as provisional, waiting for sustained evidence of recovery before committing to expansion. For Uganda's labour market, where youth unemployment remains a persistent structural problem, that hesitancy means improved sentiment has not yet translated into new jobs.
The report also quantified something that has been widely discussed anecdotally since May: the economic toll of Uganda's Ebola outbreak. EPRC found that 40.7 percent of businesses were affected by the outbreak, with accommodation, transport and other person-to-person service sectors hit hardest. Nearly half of affected firms reported losing customers outright, while 19 percent said they incurred additional costs implementing public health measures. Uganda's Ministry of Health formally declared the outbreak over on July 28, twelve days after discharging its last patient from the Mulago National Referral Isolation Centre, but the EPRC data is a reminder that the economic aftershocks of even a contained outbreak can linger well past the point of epidemiological closure.
The Business Climate Index findings arrive alongside two other economic threads that will shape how the third quarter plays out. Uganda's long-delayed oil sector is nearing a milestone many Ugandans have heard promised for years: as of late June, the Tilenga project was 74 percent complete with 234 wells drilled — above the 170-well minimum needed for production — and the Kingfisher project was 79 percent complete, with government and industry now targeting first crude exports around October 2026. Separately, gold has overtaken traditional exports to become Uganda's leading foreign-exchange earner, with export earnings reaching roughly $5.8 billion in the year to November 2025, supported by a growing domestic refining industry now capable of producing gold at 99.99 percent purity. Neither development shows up directly in the EPRC survey, but both represent structural shifts in the economy that could reshape the business climate picture well before the current fragile recovery has time to solidify.
For now, the message from Uganda's business community is a qualified one: sentiment has clearly turned a corner after a rough start to the year, but the underlying cost pressures — fuel prices, currency depreciation, unreliable power, and a still-fragile services and agriculture base — have not gone away. Whether the optimism registered in the second-quarter survey holds through the July-September period, EPRC's next reading due later in the year, will depend heavily on factors largely outside Ugandan firms' control, from the trajectory of the Middle East conflict to the pace of the electricity sector's own troubled turnaround.
