Uganda’s services sector posted a dramatic upswing between July and September 2025, emerging as the key engine of business growth even as agriculture and manufacturing recorded steep declines, according to the latest Uganda Business Climate Index (BCI) from the Economic Policy Research Centre (EPRC).
The sector’s sentiment score surged by 15.2 index points to 132.3, buoyed by heightened business activity, rising sales, and improved profitability. The strongest gains were reported among medium and large firms in education, financial services, transport, and warehousing.
The findings were released in EPRC’s quarterly BCI report, drawn from a nationally representative survey of 1,152 businesses across the Eastern, Central, Northern, and Western regions.
The broader business climate brightened as the overall BCI rose to 125.6, up from 117.9 in the previous quarter. Researchers attributed this improvement largely to favorable macroeconomic conditions, including a strengthening shilling, reduced input costs, and rising demand — particularly within the services sector.
The BCI, a perception-based quarterly index, tracks business sentiment across manufacturing, agriculture, and services to provide early indicators for policymakers and investors.
“We are witnessing a notable shift in sentiment driven by service-based businesses that have managed to capitalize on better prices and increased demand,” said Ms. Rehema Kahunde, Research Analyst and co-author of the report.
She added that improved exchange rates helped ease cost pressures for firms reliant on imports, offering relief after tougher earlier quarters.
Despite the buoyancy in services, the productive sectors told a different story.
The agriculture sector plunged by 36.5 points to 105.5, a drop largely blamed on the planting season colliding with sporadic dry spells. These disruptions weakened demand for agricultural inputs — from seeds and fertilizers to tractor hires and agrochemicals — curbing activity among businesses involved in storage, transport, and processing.
Manufacturing also suffered a sharp reversal, falling 32.6 points to 84.1, with many firms citing reduced activity and lower capacity utilization.
Power outages were the most frequently cited challenge, affecting 32.2% of surveyed firms. The transition of electricity distribution from Umeme to UEDCL, Kahunde noted, has left many business owners frustrated.
“Power is constantly on and off, and we all know what that means for a business that relies entirely on electricity,” she said. “Even a small shop with a fridge full of milk or juice can suffer a total loss.”
Multiple taxation was highlighted by 11.3% of firms, particularly within manufacturing and services, with many reporting confusion over overlapping charges, levies, and fees.
Improved conditions did not translate into new jobs. Most firms kept staffing levels unchanged, while businesses that cut workers mainly reduced part-time positions due to seasonal changes, especially in industry.
Despite the obstacles, businesses remain upbeat about the final quarter of the year. Firms anticipate a 16.6-point rise in the BCI to 142.2 between October and December 2025, driven by expected holiday-season demand.
“As we approach the festive season, firms are gearing up for higher demand. This is the time to enable supportive policies that translate optimism into real productivity and inclusive growth,” Kahunde said.
Kahunde urged closer collaboration between the Uganda Revenue Authority and local governments to strengthen taxpayer education, clarifying distinctions between central taxes and local fees.
She also called for intensified efforts to curb vandalism of high-voltage power infrastructure, which has left some areas vulnerable to prolonged outages.
“Agriculture and manufacturing remain vulnerable to seasonal shifts, price volatility, and employment fragility,” she noted. “Targeted interventions — from improving value chains to stabilizing markets and strengthening workforce resilience — can help these sectors regain strength.”
