VZCZCXRO2783
RR RUEHGI RUEHRN RUEHROV
DE RUEHKM #1370/01 2410748
ZNR UUUUU ZZH
R 290748Z AUG 07
FM AMEMBASSY KAMPALA
TO RUEHC/SECSTATE WASHDC 9284
RUCNIAD/IGAD COLLECTIVE
RUEHXR/RWANDA COLLECTIVE

UNCLAS SECTION 01 OF 02 KAMPALA 001370 
 
SIPDIS 
 
DEPARTMENT PASS TO USTR FOR BILL JACKSON 
 
SIPDIS 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ETRD KTDB PGOV UG
 
SUBJECT: UGANDA: AUGUST ECONOMIC REVIEW 
 
REF: A) KAMPALA 0160 B) KAMPALA 0406 
 
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Summary 
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¶1. (SBU) Uganda breaks ground on USD 800 hydroelectric dam which 
when completed will represent the largest U.S. direct investment in 
the country.  The GOU is reporting a recent uranium discovery by a 
Canadian firm.  The Ministry of Finance is promising tax breaks for 
foreign investors which is raising concerns in the banking sector 
that Uganda will not have adequate revenue collection for GOU 
services.  A new report asserts the GOU lost more than USD 87 
million to corruption during the last fiscal year.  The GOU has 
announced it will create a separate corruption court as part of its 
efforts to reduce corruption in the country.  The coffee market is 
making a significant comeback with export earnings nearly doubling 
for this year's crop.  End Summary. 
 
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Energy 
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¶2. (SBU) Construction on the 250 megawatt Bujagali dam began on 
Wednesday August 22nd.  The ground breaking was attended by 
President Museveni and the Aga Khan whose foundation is providing 
significant financial support.  Both assert that the dam is the key 
to affordable and accessible electricity in Uganda.  U.S. firm Sithe 
Global, part of the private equity firm Blackstone, will finance 
close to half of the USD 799 million project.  The project is the 
larges U.S. direct investment in Uganda and is scheduled for 
completion in 2011. 
 
¶3.  (SBU) In an August 14th article, the New Vision newspaper 
reported the presence of uranium in Uganda. Adam Cegielski, chief 
executive officer of Canadian based Uranium Hunter Corporation 
stated that an aerial survey of both Tanzania and Uganda produced 
positive results.  The USD 42 million investigation which began in 
January is being sponsored by the GOU, World Bank, African 
Development Fund, and the Nordic Development Fund.  Uranium Hunter 
and NPK Resources have a joint initiative in the Kibaale project 
which consists of the Kagadi and Nkoko properties.  Both hope to 
pursue the initial phases of uranium exploration in the upcoming 
months.  The Ministry of Energy and Mineral Development Daudi 
Migereko confirmed the uranium find to Econoff. 
 
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Capital Markets and Banking 
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¶4. (SBU) The GOU will offer foreign investors tax incentives and 
exemptions ranging from a 10 year tax holiday on VAT to a reduction 
in VAT on the sale of residential properties.  In its July report 
Standard Chartered Bank recognized the positive performance of the 
Uganda Revenue Authority (URA) in increased revenue collection, but 
criticized the move towards increased tax exemptions.  On August 14, 
the Daily Monitor newspaper quoted Razia Khan, the head of Standard 
Chartered as stating, "It is not clear how Uganda will compensate 
for the revenue forgone as a result of these measures."  The 
situation is further complicated by Uganda's lackluster performance 
in generating revenue.  The Standard Chartered report suggested that 
the GOU could lessen the negative effects of the concessions through 
an issuance of high yield T-bills and a reduction in its reliance on 
donors for financing the budget. 
 
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Anti-Corruption / Intellectual Rights 
Property Protection 
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5.(SBU) On August 25th the Daily Monitor reported on the release of 
the National Public Procurement Integrity Survey documenting 
corruption in the procurement sector.  The report reveals that the 
GOU lost at least USD 87.3 million in the last fiscal year as a 
result of mismanagement by various government agencies, districts, 
and municipalities. The report cites high levels of corruption 
within the Office of the Prime Minister, the Electoral Commission, 
and the Solicitor General's Office.  The report asserts that 
corruption pervades all aspects of Ugandan society from citizens 
paying bribes to receive basic healthcare to bribery in public 
tenders, suggesting that corruption is part of the local culture. 
Okoth Ochola, head of the Criminal Investigations Directorate 
asserts that corruption can be decreased by better judicial 
management of corruption cases and the ratification of the 
Prevention of Corruption Act. 
 
¶6.  (SBU) The Daily Monitor reported on August 14, that the GOU was 
 
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creating an anti-corruption court.  The proposal is the result of a 
broad based program to end corruption. Information Minister Kirunda 
Kivejinja stated that, by establishing the court, the GOU will be 
silencing critics and reinforcing its stance against corruption. 
The court will still require an act of Parliament to be created, 
which could take months.  The proposed court legislation will be 
supplemented by a proposed whistleblower law which will fill in the 
gaps of the IGG (Inspector General of Government) Act of 2002 and 
the Leadership Code Act of 2002. 
 
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Agriculture 
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¶7. (SBU) According to an August 14th report by the New Vision 
newspaper, Uganda's coffee industry is flourishing. In the last year 
export earnings have almost doubled and production is steadily 
rising.  The Uganda Coffee Development Authority reports that the 
boom in business is due to the renewal of GOU replanting programs, 
favorable weather, and good prices.  Uganda is the leading exporter 
of coffee in Africa, after Ethiopia, and the European Union remains 
its largest purchaser. 
BROWNING