Uganda’s state-owned investment arm, the Uganda Development Corporation (UDC), generated only Shs1.4 billion in investment income in the year ended June 30, 2025, despite having invested about Shs1.3 trillion over the past decade in 22 companies, raising concerns about weak financial returns from public capital.
The findings are contained in the Auditor General’s report to Parliament, which shows that the income represents a return on investment of just 0.09%, prompting renewed scrutiny of UDC’s investment strategy and capital structure.
Loss-Making Portfolio
According to the report reviewed by ChimpReports, a review of 10 active investee companies that submitted financial records found that eight recorded net losses for at least two consecutive years. Several firms financed through loans have also failed to meet their debt obligations.
The Auditor General noted that eight companies, which borrowed a combined Shs23 billion from UDC, had not paid any principal or interest by the time of the audit.
One notable case is Kaaro-Koffi Ltd, which received Shs3.1 billion in UDC funding but remains non-operational four years after the initial investment.
“The above analysis shows that the investment decisions made for UDC are not yielding returns,” the Auditor General stated.
Funding Model Under Fire
The report partly attributes the poor performance to UDC’s funding structure. Although the corporation is expected to operate on a commercial basis, most government funding is project-tied, meaning funds are released already earmarked for specific investments.
This model, the Auditor General said, limits UDC’s ability to independently appraise opportunities, adjust its portfolio, or prioritise commercially viable projects.
Development Mandate vs Profitability
UDC management defended its performance, arguing that the corporation’s Strategic Plan 2020–2030 prioritises development impact over short-term profitability.
Management said success is measured through indicators such as job creation, use of local raw materials, import substitution, improved trade balance, local entrepreneurship, and balanced regional growth, in line with Uganda’s industrialisation and export strategies.
They added that many UDC-backed projects have long gestation periods or low profit margins that discourage private investors but are considered strategically important for national development.
Proposed Reforms
Despite the defence, the Auditor General recommended a rethink of UDC’s capital structure, proposing a separation between high-impact but low-return projects and commercial investments.
One recommendation is for government to establish a separate fund to finance national priority projects with limited financial returns, allowing UDC’s core capital to focus on investments capable of generating sustainable returns.
“I advised the PS/ST to consider providing capital funding to UDC and then demand an expected return on investment,” the Auditor General said.
The recommendations are expected to inform parliamentary debate as Uganda weighs how best to balance industrial policy goals with accountability for public funds.
