Uganda’s Business Growth Slows As Fuel And Transport Costs Squeeze Firms

UgandaToday: Uganda’s Business Growth Slows As Fuel And Transport Costs Squeeze Firms

Uganda’s private sector is still expanding, but the pace of growth is slowing as higher fuel, transport and utility costs put pressure on businesses already grappling with the challenge of keeping their products affordable.

The latest Stanbic Bank Uganda Purchasing Managers’ Index (PMI) shows that business conditions remained in expansionary territory in September, although the pace of improvement weakened compared with August.

The index fell to 53.0 in September from 55.0 in August, according to reporting on the survey compiled by S&P Global. A reading above 50 indicates improving business conditions compared with the preceding month, while a reading below 50 indicates deterioration.

The figures offer a mixed picture for the economy: customers are still generating orders, but the rising cost of supplying those customers is becoming an increasingly important challenge.

Twenty Months Of Expansion — But For How Long?

The September survey marked the private sector’s twentieth consecutive month of expansion, extending a run that began in February 2025.

Businesses reported sustained demand, higher output and improvements in new orders. Promotional campaigns and efforts to improve products also helped some companies attract customers.

However, the fall in the PMI suggests that the improvement in business conditions is losing momentum. It does not mean that the economy has entered a contraction, but it does indicate that businesses are facing a more difficult operating environment.

For manufacturers, wholesalers, retailers and transport-dependent enterprises, the question is increasingly whether sales growth can keep pace with the rising cost of delivering goods and services.

Fuel Costs Are Moving Through The Supply Chain

Fuel is an important cost for businesses that transport raw materials, deliver finished products or depend on regular staff and customer movements.

When transport expenses rise, the effects can extend from the factory or wholesale market to the shop, restaurant and household.

A distributor may pay more to move merchandise. A manufacturer may face higher delivery costs. A retailer may then have to choose between absorbing the additional expense, reducing other costs or increasing prices.

The September PMI reporting identified fuel, transport, utility and wage costs among the pressures affecting businesses. Companies also reported higher prices for imported goods and the effects of exchange-rate depreciation.

These pressures matter because businesses cannot always pass every increase on to consumers without risking a loss of sales.

Consumers Could Feel The Pressure

The implications extend beyond company balance sheets.

Households already managing expenditure on food, rent, school requirements, transport and healthcare can be affected when businesses raise their selling prices.

Small enterprises are particularly exposed when their operating costs rise faster than their revenues. A shop with limited working capital, for example, may struggle to replenish stock if suppliers demand higher prices while customers resist paying more.

Some firms may respond by reducing profit margins, delaying expansion or postponing recruitment. Others may increase prices to protect their cash flow.

The PMI findings identify cost pressures, but they do not establish that every business has raised prices or that all households will experience the same effects.

The extent of the impact will depend on the sector, the level of competition and how long the cost increases persist.

What The Numbers Mean For Investors

For investors, the PMI provides a useful snapshot of business conditions, but it is not a complete measure of national economic performance.

The continued expansion indicates that commercial opportunities remain available. Firms with strong supply chains, efficient operations and reliable customer demand may be better positioned to grow.

However, companies planning new investments must pay attention to energy costs, logistics, access to affordable financing and the availability of working capital.

Manufacturers that can source more inputs locally, reduce waste and improve productivity may be better equipped to withstand external price shocks.

For policymakers, the figures underline the importance of a stable operating environment, efficient transport networks and access to financing that allows viable businesses to invest and employ more people.

Jobs And Household Incomes At Stake

Private-sector growth matters because businesses are a major source of employment and household income.

If companies continue expanding, they can create opportunities for workers, suppliers, distributors and service providers. But if rising costs undermine profitability, the pace of hiring and investment may weaken.

The challenge is to sustain demand while making it easier for businesses to produce and distribute goods at competitive prices.

Government initiatives aimed at supporting enterprise development will be most effective when businesses can access affordable finance, dependable infrastructure and predictable regulatory arrangements.

The performance of smaller enterprises deserves particular attention because many have limited financial reserves to cushion prolonged increases in operating expenses.

What Should Businesses Do Now?

Companies cannot control every change in the international oil market or exchange rates, but they can strengthen their resilience.

Practical measures include reviewing delivery routes, negotiating better supplier terms, reducing avoidable energy consumption, managing inventory carefully and monitoring which products generate sustainable profits.

Businesses should also assess whether their marketing is generating measurable sales rather than simply increasing expenditure.

For policymakers, the priority should be to understand the sources of cost pressures and avoid measures that unnecessarily increase the burden on productive enterprises.

The Bottom Line

Uganda’s private sector has not stopped growing, but the latest PMI figures are a reminder that expansion alone does not guarantee strong profits or better household incomes.

The September reading of 53.0 signals continued improvement in business conditions, albeit at a slower pace than in August.

The coming months will test whether sustained consumer demand can offset higher operating costs.

For Uganda’s economy, the goal must be to turn continuing business activity into productive investment, stable employment and more affordable goods and services.

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