Construction material manufacturing
Construction material manufacturing
Business Model Description
Sustainably produce affordable building materials, such as bricks, steel, tiles and concrete.
Expected Impact
Enable access to inputs for affordable housing options for low income communities.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Uganda: Central
- Uganda: Western
- Uganda: Karamoja
- Uganda: Elgon
Sector Classification
Consumer Goods
Development need
To achieve a successful structural transformation, Uganda has to reduce the share of agriculture in its gross domestic product (GDP) while increasing the share of manufacturing and services. Manufacturing has the capacity to transform the economy. It can create and utilize all backward and forward linkages with other sectors including agriculture, construction and extractives.(I)
Consumer Discretionary Products
Development need
Uganda has considerable under-investment in manufacturing.(I)
Building Products and Furnishings
Pipeline Opportunity
Construction material manufacturing
Sustainably produce affordable building materials, such as bricks, steel, tiles and concrete.
Business Case
Market Size and Environment
< USD 50 million
Uganda spends over USD 13 billion annually on importing mineral products, which drives up the prices of materials. There is a push towards export substitution, exemplified by increased local production of cement from 2.3 million metric tons (MT) in 2015 to 6.8 million MT in 2018.(I) It is a sign of an advancing sector, although there is still room for investments in other materials.
Indicative Return
15% - 20%
The estimated return rate for investors is 16% to 21%. This rate is a benchmark based on a cost of equity with a country risk premium, reflecting an average return required by investors active in construction supplies and building materials subsectors.(23)
Investment Timeframe
Long Term (10+ years)
Production of traditional bricks in a similar context generated benefits within 4 years.(8)
Market Risks & Scale Obstacles
Market - still consolidating
Impact Case
Sustainable Development Need
In Uganda, SDG 9 - Industry, Innovation and Infrastructure and SDG 11 - Sustainable Cities and Communities are major challenges. While SGD 9 is moderately improving, SDG 11 is falling.(2)
Gender & Marginalisation
Women and marginalised communities, such as the lowest income groups, are expected to be particularly affected by unaffordable housing.
Expected Development Outcome
Reduced cost of housing construction, increased construction of affordable housing and reduced housing deficit
Gender & Marginalisation
Improved living conditions especially for low and middle income populations who could not afford upgrading their houses
Primary SDGs addressed
8.4.2 Domestic material consumption, domestic material consumption per capita, and domestic material consumption per GDP
Secondary SDGs addressed
Directly impacted stakeholders
People
Indirectly impacted stakeholders
Corporates
Outcome Risks
Production of bricks degrades the soil during extraction. The high need for firewood can also damage forests.(5)
Impact Classification
What
Great potential to generate wealth and employment opportunities as well as provide better materials for home improvements
Who
People looking for houses and real estate developers who are aggrieved due to high prices of construction materials, which make houses unaffordable
Risk
Lack of clear regulations and policies for construction materials and industry in general may increase the risk of investment. Training may be necessary to develop labour market competencies.
Impact Thesis
Enable access to inputs for affordable housing options for low income communities.
Enabling Environment
Policy Environment
National Development Plan III (NDPIII) 2020/21 – 2024/25: This plan prioritizes producing steel and iron for construction, expanding manufacturing and free zones, and increasing construction industry capacity. Imports of steel and iron will be reduced from USD 370 to USD 96 million, while investment in exploring and processing minerals will increase from USD 0.8 to USD 1.3 billion.(I)
A Draft National Industrial Development Policy 2020 - 2025 is being currently developed and will provide a framework for industry development.(9) The Draft National Industrial Policy 2018 and Draft National Industrial Development Strategy 2020 - 2025 will support the industries promoting sustainable development and economic growth. Iron, steel and cement will be promoted as key commodities.(9)
However, currently the industrial policy has been criticized for not being focused and targeting the whole manufacturing sector. (9)
Financial Environment
Fiscal incentives: In Uganda raw materials for manufacturing roofing tiles are imported with a duty rate of 0% for 1 year.(12) Earthmoving machinery and concrete mixers have no import duty.(12) Transport vehicles between 5-20 tons have a 10% import duty.(12)
Other incentives: Manufacturers of construction materials in an industrial zones are exempt from corporate income tax (CIT) for 10 years if the investment is above USD 10 million.(12)
Regulatory Environment
Building Control Act 2013: This Act regulates house construction, also provides standards and regulates building authorities.(14) Regulations created under the Act regulate matters such as inspections, safety, utilities for constructions and penalties for non-compliance.(10)
Physical Planning Act 2010: This Act established requirements for obtaining permission for any construction.(15)
National Environment Act 2019: This Act specifies environmental requirements.(16)
The Uganda Bureau of Standards provides the standards for construction materials.(11)
Marketplace Participants
Private Sector
Uganda Development Bank, Diamond Trust Bank Group, Tororo Cement Limited, Hima Cement Limited, Simba Cement Uganda Limited, iBM Ready-Mix Concrete Co., Roofings Ltd, East African Roofing Systems Ltd
Government
Ministry of Trade, Industry and Cooperatives
Non-Profit
Uganda Manufacturers Organization, Uganda National Association of Building and Civil Engineering Contractors, Centre for Affordable Housing Finance in Africa
Target Locations
Uganda: Central
Uganda: Western
Uganda: Karamoja
Uganda: Elgon
References
- (I) National Planning Authority. National Development Plan III (NDPIII) 2020/21 – 2024/25. (II) Uganda Investment Authority. Why Uganda? https://www.ugandainvest.go.ug/why-uganda/
- (1) World Bank database. https://data.worldbank.org/
- (2) Sachs, J., Schmidt-Traub, G., Kroll, C., Lafortune, G., Fuller, G., Woelm, F. (2020). The Sustainable Development Goals and COVID-19. Sustainable Development Report 2020. Cambridge: Cambridge University Press.
- (3) International Trade Administration (2020). Uganda - Country Commercial Guide. https://www.trade.gov/country-commercial-guides/uganda-construction
- (4) Delmendo, L.C. (2019). 'Uganda’s housing market gradually improving', Global Property Guide. https://www.globalpropertyguide.com/Africa/Uganda/Price-History#:~:text=Demand%20for%20low%2Dcost%20housing,deficit%20of%20about%20600%2C000%20units.
- (5) Hashemi, A. and Cruickshank, H. Delivering Sustainable Low-income Housing in Uganda, Challenges and Opportunities, https://papers.ssrn.com/sol3/Delivery.cfm?abstractid=2705280#:~:text=The%20major%20reason%20for%20the,more%20demand%20for%20rental%20properties.&text=Overcrowding%20is%20one%20of%20the%20major%20challenges%20in%20Uganda.
- (6) Mukiibi, S. (2015). The potential of local building materials in the development of low cost housing in Uganda. Department of Architecture and Physical Planning, Makerere University. https://www.technoscience.se/wp-content/uploads/2016/11/2015_9_The-potential-of-local-building-materials.pdf
- (7) Nuwagaba, H.M. (2020). Opportunities for Affordable Construction in Uganda using Locally Available Materials. University of Illinois at Chicago. https://dspace.mit.edu/handle/1721.1/127321
- (8) Saediman, H., Noraduola, D.R. and Nafiu, L.O. (2014). 'Financial Feasibility of Traditional Small-Scale Brick-Making Enterprises in Southeast Sulawesi, Indonesia', Ethiopian Journal of Environmental Studies and Management. https://www.researchgate.net/publication/285871324_Financial_Feasibility_of_Traditional_Small-Scale_Brick-Making_Enterprises_in_Southeast_Sulawesi_Indonesia
- (9) Konrad Adenauer Stiftung (2020). Industrial Policy for Economic Transformation in Uganda. https://www.kas.de/documents/280229/9581001/CDA_KAS+Reality+Check+12_Industrial+Policy+for+Economic+Transformation+in+Uganda.pdf/34cdb812-3de4-87e2-7281-0256682ba53f?t=1594904315863
- (10) Angualia Busiku and Co Advocates. Construction of Buildings in Uganda: What you need to know. https://lawyers-uganda.com/construction-of-buildings-in-uganda-what-you-need-to-know/
- (11) Uganda Bureau of Standards (2018). Uganda Standards - Solid concrete block — Specification. https://members.wto.org/crnattachments/2018/TBT/UGA/18_5779_00_e.pdf
- (12) Uganda Revenue Authority (2019). A Guide on Tax Incentives /Exemptions available to the Uganda Investors, https://www.ebiz.go.ug/wp-content/uploads/2020/03/TAX_INCENTIVES_GUIDE_FOR_INVESTORS_IN_UGANDA_October_2019.pdf
- (13) Uganda Investment Authority. Industrial Parks. https://www.ugandainvest.go.ug/parks/#:~:text=There%20are%20three%20Government%2Downed,Industrial%20and%20Bweyogerere%20Industrial%20Parks
- (14) Government of Uganda (2013). Building Control Act. https://unapd.org/wp-content/uploads/2019/07/Building-Control-Act-No10-of-2013.pdf
- (15) Government of Uganda (2010). Physical Planning Act. http://mlhud.go.ug/wp-content/uploads/2019/03/Physical-Planning-Act-2010.pdf
- (16) Government of Uganda (2019). National Environment Act. https://www.wipo.int/edocs/lexdocs/laws/en/ug/ug019en.pdf
- (17) Centre for Affordable Housing Finance in Africa (2020). Uganda’s housing construction and housing rental activities. http://housingfinanceafrica.org/app/uploads/UGANDA-FINAL-formatted-version-1.pdf
- (18) Gotino (2018). Top 3 Most Important construction materials in Uganda. https://gotinoconstruction.com/construction-materials-in-uganda/
- (19) Kayamba, W.K. and Kwesiga, P. (2017). 'Breaking through traditions: The brick and tile industry in Ankole region, Uganda', Net Journal of Social Sciences. http://www.netjournals.org/pdf/NJSS/2017/2/17-012.pdf
- (20) National Planning Authority (2018). Developing the iron and steel industry in Uganda – harnessing the low hanging fruits. Uganda. http://npa.go.ug/wp-content/uploads/2018/07/Iron-and-Steel-Industry-in-Uganda.pdf
- (21) State House of Uganda. National priorities: Infrastructure Development in Roads, Railways and Energy. https://www.statehouse.go.ug/national-priorities/infrastructure-development-roads-railways-and-energy
- (22) Ebohon, O. and Rwelamila, P. (2002). Sustainable Construction In Sub-Saharan Africa: Relevance, Rhetoric, And The Reality. Agenda 21 for Sustainable Construction in Developing Countries. https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.199.601&rep=rep1&type=pdf
- (23) PwC analysis based on Prof. A. Damodaran data, 2020.