DIASPORA DOLLARS AND THE GROWTH STORY THEY TELL

When Patrick left Uganda in 2005, he was twenty-five, restless, and convinced that life had to be better elsewhere. A cousin had lined up a cleaning job for him in Dubai, and though he barely had enough for the ticket, he boarded that plane with a single promise to his mother in Masaka: he would send something home every month. Nearly two decades later, Patrick still keeps his word. Every few weeks, a few hundred dollars trickle through a mobile transfer to Masaka—money that has built a modest brick house, paid school fees, and stocked the small shop his mother now runs.


Patrick’s story is far from unique. Tens of thousands of Ugandans like him—the unsung foot soldiers of the economy—send money home from wherever they can find work: Dubai, Doha, Riyadh, London, Boston, and beyond. Those quiet transactions, repeated millions of times each year, form one of Uganda’s most resilient economic arteries—remittances, the invisible lifeline connecting toil abroad to survival and hope at home.

According to the Bank of Uganda’s September Macroeconomic Indicators Report, remittances reached about US$1.42 billion by mid-2024, a slight dip from US$1.51 billion the year before. Back in 2005, the total was barely US$450 million. That’s a threefold increase in less than two decades. Yet there’s a paradox hiding in those numbers. Even as the dollars have grown, their share in the economy has shrunk—from around 5 percent of GDP in 2005 to less than 3 percent today.

The story is not that Ugandans abroad are sending less, but that Uganda’s economy has grown much faster. In 2005, the country’s GDP stood at about US$8.5 billion. By 2024, it had swollen to just over US$50 billion. The remittance river has deepened, but the la

It’s tempting to think of remittances as a driver of growth, but in reality, they tend to move with growth rather than cause it. Both rise together, but for different reasons. GDP has expanded because of investments in infrastructure, growth in services, and the steady modernization of agriculture. Remittances, on the other hand, have surged because of Uganda’s expanding diaspora and the growing demand for labour in the Middle East.

When global economies hum, remittances surge. When they stumble, they dip. The COVID-19 pandemic offered a textbook illustration: remittances fell to about US$1.06 billion in 2020, from US$1.42 billion the year before. But as Gulf economies reopened, the numbers rebounded. The rhythm of Uganda’s remittance economy beats in time with the global business cycle.

Still, the story is not only about the macro numbers. It’s about what happens when those dollars reach home. The Bank of Uganda estimates that more than 80 percent of remittances are spent on consumption—food, school fees, health care, and housing. On the surface, that sounds unproductive, but in reality, it fuels a powerful consumption multiplier. Every time Patrick’s mother restocks her small shop in Masaka, she keeps suppliers, boda riders, and wholesalers in business. The same money changes hands several times before it fades from the economic bloodstream.

That pattern has helped smooth household incomes and keep rural economies ticking even in hard times. When agriculture falters, remittances keep families afloat. When jobs dry up locally, it’s those overseas transfers that keep consumption steady and the cash tills ringing. They may not show up in the factories or export earnings, but remittances help sustain the quiet heartbeat of the domestic economy.

"Yet for all their importance, remittances have not been fully harnessed. The Bank of Uganda’s reports show that only a small fraction of these inflows find their way into productive investment—the kind that creates jobs or expands manufacturing capacity. Most of the money ends up in land or housing, which store value but rarely generate broad economic activity.

If just ten percent of the annual inflows—about US$140 million were channelled into investment vehicles like diaspora bonds, voluntary NSSF schemes, or SACCO-backed funds, Uganda could unlock a new stream of domestic capital. Those remittance inflows could help finance small businesses, agro-processing, or renewable-energy projects. The potential is there; what’s missing is structure.



Still, remittances perform one quiet but crucial role: they strengthen Uganda’s external position. The September BOU report notes that, year after year, these inflows help plug the current-account deficit and stabilize the exchange rate. Alongside tourism and gold exports, remittances are among Uganda’s top three foreign-exchange earners. When export earnings falter, diaspora dollars keep the central bank’s reserves cushioned.

But new risks are emerging. The shift of Ugandan migrant labour from traditional destinations like the UK to Middle Eastern countries has made inflows more vulnerable to foreign policy shifts. The planned UAE visa restrictions in 2026 could disrupt one of Uganda’s fastest-growing remittance corridors. A small change in migration policy there could ripple through Ugandan households here. It’s a reminder that the remittance economy, though resilient, is not invincible.

The relationship between remittances and GDP is best described as symbiotic. Stronger domestic growth fuels migration and hence remittances; remittances, in turn, sustain consumption and stabilize the economy. The causation runs both ways, but the weight of influence leans toward GDP driving remittances rather than the reverse.

Still, the indirect impact is profound. Remittances help families invest in education, healthcare, and small businesses—building the human capital and social stability that growth ultimately rests on. They keep the economy resilient, lubricating it through hard times. In that sense, they are not the engine of growth, but the oil that keeps the engine from seizing.

For policymakers, the task is to transform sentiment into strategy. The Bank of Uganda has already moved in this direction with efforts to improve data collection, reduce transfer costs, and formalize remittance channels. The next step is to design financial instruments that turn diaspora affection into domestic investment—remittance-linked savings products, diaspora investment funds, and tax incentives for overseas Ugandans who invest back home.

"Uganda’s GDP may have outgrown remittances as a share of output, but it has not outgrown their importance. Each dollar that Patrick and others like him send home is more than a financial transaction—it’s a story of trust, responsibility, and invisible nation-building.

The diaspora may not appear in national budgets or corporate boardrooms, but in countless living rooms across the country, their money keeps lights on, stomachs full, and children in school. Those dollars may not move markets, but they move lives. And in the long ledger of Uganda’s economic history, that might count for even more.

BUJAGALI TAX WAIVER MAKES SENSE FOR UGANDA

The story of Bujagali dam best illustrates the saying “No good deed goes unpunished”.

 A little background will put the Bujagali dam issue in better perspective.

At the beginning of the century government unbundled the Uganda Electricity Board (UEB) monopoly into its constituent parts of generation, transmission, distribution. It then leased its assets in generation and distribution and opened up the sector to private investors. Government then created Electricity Regulatory Authority (ERA) to oversee the liberalized sector.

As a result of these reforms about $4b (sh15.2trillion) has been invested in the sector since 2000.

While we now have unlimited power supply, a far cry from the daily loadshedding we were suffering before Bujagali dam was commissioned in 2012, it has come at a price.

"The pricing of finance for these investments have been high and understandably so. The perceived risk of investing in Uganda, which was emerging out of decades of instability, made the cost of finance high...

Now that we have unlimited supply the challenge is how to reduce the end user tariff, especially for business and industry. President Yoweri Museveni has made it his stated aim to bring it down to $5cents a unit of power.

In pursuit of this target government  helped Bujagali Energy Ltd (BEL) refinance their debt, which was helped by government offering a tax waiver on its corporate profit. This helped lower what Bujagali was charging for the power it generated.

The initial five year tax waiver lapsed in 2021/22 and parliament has been reluctant to renew it, giving two annual extensions pending an audit into Bujagali’s finances.

 "The continued refusal to allow the tax waiver has far reaching repercussions not only for our effort to lower local tariffs but also future investment in the sector and the economy at large...

According to the original power purchase agreement, of the $11cents BEL was charging, the larger proportion $6.7 cents went to debt repayment and shareholder return, $2.3 cents for taxes and government repayments and about $1.0 cents for operations, maintenance and administration.

The scope for reduction in the tariff is in refinancing the loan – extending the tenure of the loan or suing for a lower interest rate and waiving taxes. While these two did not bring the tariff below the magical $5cents it was a good start.

A denial of the tax would not necessarily hurt BEL as they would pass it on to the customer, raising the tariff.

But as a part of the condition of refinancing, the government of Uganda was supposed to offer the tax waiver for the duration of the loan, which now ends in 2032.

We may not take it seriously, but for businesses and countries that want to play on the bigger stage, reputational risk is a big deal. Reneging on a contract attracts reputational risk. Reputational risk can add a few percentage points on our loans, which could mean millions of dollars in additional interest payments.

While we appreciate parliament’s attempts at oversight of the electricity sector, we need to keep in mind we are playing in a bigger field, where our laxity on matters of reputation will be frowned upon.

It has happened before.

"The initial developer of the Bujagali dam, US firm AES Nile Power found their project stalled by parliamentary sniping and the heckling of environmentalists. Economic crisis in South America where AES had its other developments forced them to pull out of Uganda in 2002, pushing back the development of the dam. AES Nile Power would have completed construction by 2007, five years after they ground broke in 2002.

Building of the current dam started in 2008 and was completed in 2012.

While for us Africans we don’t take time seriously, in the global environment we operate in, time is money. It should come as no surprise to us that we often times get the short side of the stick in negotiations because we do not take time seriously.

We need to focus on the bigger picture. While BEL will enjoy tax relief, the ripple effect through the economy of cheaper power would be invaluable in improving living standards of Ugandan consumers.

 

NSSF HAS COME A LONG WAY

It was around 1996 and I was a younger business reporter.

Then National Social Security Fund (NSSF) boss Abel Katembwe and architect Henry Sentoogo made us climb several flights of stairs to the seventh floor of a two tower shell  in the middle of Kampala.

The reason for this morning exertion was to explain to members of the board the options the NSSF had for the building.

"Believe it or not lifts were not planned in the original design of the 14-floor twin towers building. The options were to finish them as separate properties or have two walk ways at the seventh floor and the top, to join the two towers or make the massive outlay on a bank of lifts, which would fit nicely between the two towers.

It seemed obvious to me that Katembwe and Sentoogo had talked about it and they favoured the last option,  but new the cost would be a sticking point.

The rest as they say is history. So the next time you are in Workers' House and waiting for the lift, know that where the lifts are was open space and also explains the 14 floor atrium in the center of the building.

The Fund, which was barely 11 years old at the time must have had assets of less than a trillion and struggling to get employers to comply with their obligations to their workers.

Nearly three decades later and NSSF has become the biggest financial institution in the country and the biggest statutory social security fund in the region.

In between the Fund has battled perennial scandal that ensured a revolving door of CEOs, before settling down over the last decade or so to post its best performance ever.

Since the entrance of Richard Byarugaba in 2011 the Fund has grown from around sh2trillion to sh18.56trillion in assets under management. This is a 20 percent compounded annual growth over the period or it has been doubling in size every four years.

It helps that more and more people are contributing to the Fund. I could not get figures for 1996 but in 2011 the fund was collecting about Sh400b annually, which is what it now collects in about three months...

It did not happen by accident.  

Increased transparency, aggressive chasing of member contributions, better strategy and most importantly, execution of that strategy have been the key to turning around the institution.

The strategy that has been executed in the last ten years has its beginnings in the short lived tenure of David Jamwa, who run the Fund before Byarugaba.

I remember at the time seeing the new strategic objectives and worried that Jamwa was smoking very potent stuff.

It looks easy, collect money from members, invest the money, mostly in government paper and voila you have a profitable and rapidly growing company.

But there are a lot of moving parts that have to move well for this to happen consistently for a decade, despite some very drastic economic events -- covid lock down to mention but the major one.

It has been clear for a while now, that NSSF is an aberration in our economy, a public institution that works.

Its main strategic objectives until 2035 is that it will grow into a sh50trillion fund and that it will have half the workforce as members...

The growth to Sh50trillion is about 9 percent annual growth over the next 12 years, considerably slower than the last 12 years, but that maybe because we are working from a larger base now.

This means that the Fund's management has to be more disciplined in their execution of strategy and also keep costs to the bare minimum. They are already the most efficient Fund in the region, they must sustain that discipline or get better.

The culture of achievement has to go on. we members have been spoilt rotten, they have given us an inch we now want a mile.

In the mean time as this column has mentioned before, NSSF has become too big for this economy, that some of the people tasked with overseeing it can not wrap their heads around the numbers it deals in.

We saw it during the parliamentary probe. The honourable members -- who do not contribute to the Fund, could not understand how staff could share a bonus of Sh200b.

This is not new, about a decade ago a former chairman of the Fund exasperated by his inquisitors bellowed, "Watch me as I spend the money," in answer to a question about the huge sums NSSF would have to invest to make good on one real estate deal...

The way I see it two things have to happen. Either NSSF as part of its working commits to widely educating the public about how it does what it does or/and a law is past which shields it from the politics of the day.

It will still be supervised by the relevant ministries and audited by the Auditor General, but its day to day affairs will be beyond the prying eyes of parliament.

It happens already with the central bank and arms of government like the Judiciary and dare we say, parliament.

And finally going into the next stage of its development NSSF should not lose sight of the fact that, to those who much is given mush is expected.

Good governance is what has got us to this favourable point, a slip here will inevitably begin to show in the numbers and returns to members.