Kampala, Uganda | URN | Uganda’s construction sector is being held back by weak regulation, inadequate political commitment, a shortage of skilled labour and bureaucratic procurement processes, limiting its ability to create jobs and drive economic growth.
Although the sector contributes between 12 and 17 per cent of the country’s Gross Domestic Product (GDP) and is expanding at an annual rate of about 12 per cent, it accounts for only 2 to 2.5 percent of total employment.
The low level of job creation, particularly quality employment, shows broader structural weaknesses within the industry, including poor construction standards, delayed project completion and limited productivity.
According to the World Bank Group’s 27th Uganda Economic Update, these challenges can be addressed, positioning the construction sector as one of the country’s leading sources of employment.
Published under the theme “Building on Urban Transformation: Construction as a Jobs Engine,” the report examines the sector’s untapped potential, the structural constraints limiting its growth and the reforms needed to unlock its role as a driver of employment and economic transformation.
Speaking at the report’s launch, Qimiao Fan, the World Bank Division Director for Uganda, Kenya, Rwanda and Somalia, said Uganda’s rapid population growth and urbanisation are intensifying pressure on the labour market, yet planning has not kept pace with the growing demand for jobs.
Fan said the construction sector alone has the potential to create about 6,000 direct jobs annually, rising to approximately 22,000 when linked with related sectors such as climate resilience. However, he noted that the industry remains dominated by micro and small enterprises, with weak demand and poor sector governance limiting its potential.
Fan added that affirmative action is needed to strengthen local construction firms through improved access to finance, skills development and increased competitiveness.
Phan Thi Huyen, Senior Urban Specialist at the World Bank, said the construction industry has significant potential to generate employment not only within the sector but also across related industries such as transport, manufacturing of construction materials and logistics.
However, she said delays in establishing the Uganda Construction Industry Commission continue to hamper the sector’s growth. As a result, key issues such as employment standards, formalisation of firms, land acquisition and project implementation delays remain unresolved
Huyen noted that although the National Building Review Board targets issuing building permits within 30 to 60 days after receiving complete applications, the average processing time exceeds 100 days. She also expressed concern over land acquisition laws, saying lengthy compensation processes continue to delay infrastructure projects and discourage investment.
The World Bank also faulted government inefficiencies for worsening challenges in the construction industry. Commercial banks say delayed government payments for completed projects have placed many contractors under severe financial strain. Most firms finance projects using bank loans, expecting repayment once the government releases funds.
Melissa Nyakwera, Stanbic Bank’s Head of Commercial Banking, said prolonged payment delays mean contractors continue to accumulate interest on their loans, often exhausting their working capital before they are paid. In many cases, she said, firms are forced to borrow even more to remain operational.
Henry Harrison Irumba, Assistant Commissioner for Policy at the Ministry of Lands, Housing and Urban Development, said several laws governing the sector require urgent review to reflect current realities. He noted that the Land Acquisition Act, enacted in 1965, contains provisions that have since been nullified by court decisions.
Irumba explained that the current legal framework prohibits any project activity on land until the entire acquisition process, including compensation, has been completed. While reforms have been proposed through the Land Acquisition Bill, the legislation had to be reintroduced following the change in government, as required by law.
Flavia Bwire, the Executive Secretary of the National Building Review Board, questioned the need for entirely new legislation, arguing that existing laws already provide solutions to many of the issues being raised.
Instead, she said, the focus should be on strengthening institutions responsible for implementing the laws. She cited the Occupation Permit, which is required before a building can be occupied, noting that it falls under the mandate of the Ministry of Gender, Labour and Social Development.
Bwire revealed that a recent survey of 100 buildings in Kampala found widespread non-compliance with the National Building Code. She also attributed delays in approving building permits to the previous composition of approval committees, which included both politicians and technical experts and were chaired by politicians. Since committee meetings depended largely on the availability of political leaders, permit approvals were often delayed.
Bwire said the committees have since been restructured and are now composed solely of technical experts, a move expected to speed up decision-making. However, she also blamed some developers and their engineers for failing to respond promptly to technical queries raised during the application process, with some taking as long as two years to submit the required information.
She added that the planned establishment of the Construction Committee has stalled after Cabinet suspended the creation of new government agencies. Meanwhile, the Ministry of Finance, Planning and Economic Development says delays in project financing are not always attributable to the ministry.
Moses Kaggwa, the Director of Economic Affairs, said while the ministry often approves and releases funds on time, implementation is sometimes delayed by other institutions, particularly local governments.
According to Kaggwa, some district councils and committee members fail to convene meetings needed to approve projects because they lack sitting allowances. In other cases, they demand facilitation from the Ministry of Finance before proceeding, creating additional bureaucratic delays that slow project implementation and increase construction costs.
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