Submit Press release  eTN Team ·  Advertising  ·  eTN Awards  - Worldtourism Events    

Tourism Contracts

Controversy brews over Uganda concession agreements

Wolfgang H. Thome, eTN  May 03, 2010

Information was leaked to the media last week indicating a possible change of government’s policy to stick to and uphold contracts entered into with private sector investors, when news surfaced that apparently existing terms and conditions for lodges in national parks were set to be altered, according to public statements made by the minister of tourism.

In the early 1990s, when investors in Uganda’s tourism industry were few and far between, the then Uganda National Parks (UNP), legal predecessor of the Uganda Wildlife Authority (UWA), offered concessions lasting between 20 and 30 years to those early bird’ who were willing to take the risk of investing.

One of the investments, due to a deteriorating security situation then in the northern park of Murchisons, soon went belly up, was foreclosed, put into administration, and then sold to the cash solvent Madhvani Group, which not long before had also acquired the main concession for the Queen Elizabeth National Park’s Mweya Safari Lodge.

Cognizant of the fact that investors would need a long financial breath to see results from their investments in the tourism sector, UNP had at the time offered exclusion zones of varying radiuses to the concessionaires to avoid competition building literally next door – and it is understood that someone intends to build near the Paraa Safari Lodge – so that a return on the massive investments could eventually be achieved. Most of these first investments faced long periods of sustained losses, justifying the demand for such exclusion zones to the fullest extent, as only the financially strong lodge owners eventually saw their bottom line improve.

Sites outside the parks are available on private land or government land but often rejected by investors, unlike in Tanzania where target="_blank">Tanzania National Parks (TANAPA) strictly enforces it; for instance, the Serengeti has a policy of "no more lodges" inside the park.

New investors in the now gradually-expanded tourism industry in Uganda have regularly questioned these exclusion zones embedded in existing contracts, but so far the government has relied on opinions from, for instance, the Solicitor General’s Office and the AG’s Office, confirming that existing contracts are air tight and government would either need to wait until the present concessions are due for renewal or else be prepared to pay mega money in compensation to existing operators with, at times, still well over 10 years on the clock.

While the ministry of tourism did not comment on specific questions raised by the time of posting this report, there was also the inconsistency of a statement attributed to the minister, who reportedly mentioned that the Uganda Investment Authority would soon advertise for investors, while, by law, it is, in fact, the Uganda Wildlife Authority that is to advertise for concessions. Again, this discrepancy was not addressed either, and the legal validity, as well as the political sense of the announcement, is now coming under scrutiny.

All parties remained rather guarded in the few responses received, but it is clear that should the existing concessions be altered unilaterally, the government would be in for a decisive court battle, and potential investors could count on court injunctions to be granted on application to stop any negotiations, agreements, or building activity until the principal suit would be determined, which can take many years, considering the appeal provisions, and in the end, undoubtedly, result in a massive multimillion US dollar compensation for affected first-round investors.

Controversy brews over Uganda concession agreements
Image via

Premium Partners