An audit of the Uganda Development Corporation has highlighted a stark disconnect between Uganda’s industrialization goals and the financial performance of state-backed investments.
In the 2023/24 financial year, UDC realized just Shs1.4 billion in investment income from Shs1.3 trillion invested across 22 companies — a return on investment of only 0.09%.
The Auditor General’s report identifies a structural flaw in UDC’s funding model. Although mandated to operate as an independent investment arm, UDC currently receives project-specific allocations, meaning government funds are earmarked for predetermined companies.
This restricts UDC’s ability to conduct independent appraisals and prioritize investments based on financial viability.
The consequences are evident: of the 10 active companies reviewed, 80% recorded net losses for at least two consecutive years. For example, Kaaro-Koffi Ltd, which received UGX 3.1 billion, remains non-operational four years after the initial capital injection. Eight other companies loaned a combined UGX 23 billion have not paid any principal or interest, violating repayment agreements.
UDC’s Accounting Officer defended the performance, noting that success should not be measured solely by dividends.
Under UDC’s 2020–2030 Strategic Plan, priority is given to social outcomes such as job creation, local raw material utilization, and balanced regional development.
The government maintains that UDC’s role is to de-risk national priority investments with high development impact but low financial returns.
To improve outcomes, the Ministry of Finance is considering a two-tier funding model, separating low-return “social” projects from core capital that could yield better financial returns.
The Auditor General has called for a fundamental change in the parent-subsidiary relationship, urging the Permanent Secretary/Secretary to the Treasury to provide UDC with broad capital funding while holding it strictly accountable for reasonable financial returns.
Without such independence, UDC risks remaining a “pass-through” vehicle for state-directed spending rather than a self-sustaining driver of Uganda’s economic growth.
