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‘Housing industry in the country is the fastest growing sector in our economy’

Interview - August 12, 2014
The PM Communications team interviewed Hon Daudi Migereko, Minister of Lands, Housing and Urban Development, and asked him about the latest developments in the housing sector in Uganda. Mr. Migereko spoke about the rising urbanization rates and the growing demand for construction. He also encouraged foreign investors to tap into the emerging opportunities in the sector.
Construction means employment, inclusive economic growth and prosperity and also represents how a country is building up a socioeconomic welfare state model. Investors and business analysts look at it as a thermometer of development. Could you give us an overview and highlight Uganda’s construction, housing and urban development scenario?

The housing industry in the country is the fastest growing sector in our economy. It addresses unemployment, which is one of the biggest problems we presently have. As the government, acting in the direction of HE the President, one of the things we take into account, are those areas that help create employment. Clearly, housing and construction is one of those areas. I say this because the housing industry utilizes local raw materials by large. That means that there are a lot of forward and backward linkages in the sector, which entail huge material effects in the economy. We, as a country, have got practically all the critical raw materials we need for the construction industry. We can produce, and produce enough cement to supply the construction industry in the country. We have sand, which is also critical for the industry, and also for the production of glass, which is another area we are trying to market. We also have a good supply of iron to produce steel. We can be in a position to produce steel for the construction industry in the country, and not only for houses but also for bridges and hydro power schemes that are coming up in the country. Previously, there was the issue of gas and coal supply for the running of a viable steel industry. Fortunately, there have been discoveries of huge deposits of coal. Therefore, any exploitation of the iron in the country would not come with coal supply problems. We have got iron and can produce steel for construction. We can construct high-density buildings, which are critical for the growing urban population in search for better accommodation. We can also produce the tiles for purposes of giving a good finish to the buildings we are constructing. We have plenty of granite and marble. Nevertheless, we haven’t yet established a sound industry for processing them, and it is therefore an area for further investment. Similarly, the roofing materials can be produced in the country. We have good supplies of clay, and it can be used to produce roofing tiles. Iron sheets are also critical for the construction industry. In other words, we have many materials that can be utilized in construction. If anybody decided to invest, and it is our appeal for investors to come, the supply of raw materials wouldn’t be a problem. We have emphasized the utilization of locally produced raw materials because it is one of the easiest ways to bring down the cost of housing construction and products. When we import the items for construction, 50% of their cost can be associated with transportation and handling. If we produce them here, we can be in a position to reduce our construction expenses by almost 50%. That will help us provide affordable housing for the bulk of people in need of accommodation and good shelter. As we do this, we create employment and improve the country’s economic performance.

Can we consider that, in terms of raw materials for the construction sector, this country is self-sufficient?

We have supplies that can sustain the industry. Nevertheless, where we need to import materials to supplement what we have, that is not a problem.

Are you working together with the private sector to target all those companies that can be interested in adding value to raw materials for construction?

The land, housing and urban sector depend on the private sector when it comes to real estate development. Our appeal has been for companies with a good track record of developing real estate to come to Uganda to: 1) participate in the real estate sector, and 2) bring managers with a good track record in managing real estate, so that we can have a vibrant and sustainable sector.

Why do international investors think in Uganda?

We have the market. The economy has been doing well, hence creating effective demand for housing. For anybody who tries to invest anywhere, and would like to see some return, we offer good returns on any investment in the country.

International players do the most part of the construction...

We have both international and local companies, and we would like to encourage partnerships between them. At the end of the day, this is how to sustain the industry. When we get international firms with a long and distinguished record in construction, they can help us create local capacity, which can, at the end of the day, be in a position to run the sector more economically.

What is the biggest challenge for national constructors? Is it access to finance?

Access to finance is still a problem (particularly cheap and affordable credit and mortgage). Lately, I have been reaching out international lending agencies with a view for securing credit for the sector. We would like those well-established international companies to come to Uganda with financial arrangements so we can inject investable funds in the housing sector.

How is the legal framework for land acquisition?

Land acquisition is a matter that we can handle. As a government, there is an arrangement where land can be provided to investors. Companies can also work in partnership with the National Housing and Construction Corporation, which is the government official off taker in the housing sector. We have also come out with an arrangement in which we work with the Uganda Landowners Association such that members of the private sectors who have huge chunks of land can be put in contact with international investors, so they can be in a position to agree on certain levels of cooperation to establish partnerships in the developing of the housing sector. The local landowners comes in with land, the international investor with capital and funding that is critical for ensuring that the project takes off.

One of the flagship companies of the government has been the National Housing and Construction Corporation (NHCC). How has this institution engaged in joint ventures with international companies?

We have been encouraging the NHCC to go into joint venture arrangements and PPPs, so that they can be in a position to bring on board funding, technical support and technology, so these partnerships enhance the supply of housing in the market. They are doing well. They have been in the position to negotiate partnership arrangements and we will give them more support so they conclude more deals and construct more houses.

Can you elaborate on the expansion plans of urban development?

Urbanization is a phenomenon that we cannot stop. We have been having many people settled in the rural areas and participating in agriculture. As they get educated, and our economy performs well, there is a drive to leave rural areas to urban areas. The push for urbanization is one we are expected to anticipate and plan accordingly. We expect people to move from rural to urban areas, and we plan urban areas so they are better organized (with supply of roads, water, reliable electricity, garbage collection and housing). It is something we are working on and a fertile area where we can seek investment. Investment opportunities are very good and create employment. People leaving rural areas are searching employment and better living conditions.

Four topics will be discussed in the Global Africa Investment Summit: agribusiness, energy resources, power and infrastructural development. What would you like to say to the attendants?

My message is that the urban sector is one of the sectors that people seeking investment opportunities should target. As I pointed out, as the economy continues performing well, and population growing along with a push for urbanization, there will be requirements for urban development. When you develop a city, you create employment and opportunities for those in the construction industry. This will inevitably provide good returns on investment. As we seek to urbanize, we must create better living conditions, and provide accommodation to our people. Our housing-supply deficit is about 160 thousand units a year. As we continue to urbanize, that figure will increase even higher.
We need to be prepared for all this. My understanding is that this provides investment opportunities which people should be ready to tap into. When we talk about construction, we should not only look at road construction, or hydropower development; there must be housing as well. As all these sectors grow, people need to stay in decent and comfortable places. Faster construction, being in a position to deliver housing units, is something that should be a requirement on the part of potential investors.

Do you think the discovery of oil and gas has been a pole of attraction for potential investors in the housing sector?

Yes, because whenever you discover oil, there is a natural call for investment into the industry, but also indirectly into supportive sectors. This is what we are seeing. Investments are actually coming, and there is a huge demand for housing in that area.

As a country we have discovered oil and gas, but also quite a long list of minerals. Mineral discoveries in the country are big and commercially feasible. We must equally prepare to invest in these other minerals because there will be needs arising from these discoveries.

What would be the image you would like Uganda to portray in Washington during the Africa Leaders Summit and in London in October?

I must say our president is a great communicator and he has a very clear vision for our country. For us, that is a huge asset. At a conference like this, you can have no better resource than that. We have to make sure that once the president delivers his message, we are in the position to provide investors with the necessary information and guidance so investment can take off. I have got every belief that HE the President and the team of Uganda will be in a position to put up an excellent image for the country. The timing of the conference couldn’t have been better.

When you think of Italy, you think in pizza; when you think of New York, you think in the Statue of Liberty. What would you like people to think about when they think of Uganda?

In nature. This is a country gifted by nature. We have excellent weather and friendly people.