The 26th World Bank economic report has revealed that the construction sector offers an important near-term entry point for job creation that Uganda’s Tenfold Growth Strategy could leverage on.
Data from the bank shows that as the economy seeks to expand from a GDP of US$50 billion to US$500 billion by 2040, construction will play a central role in supporting the infrastructure and urban expansion needed to sustain long-term growth. It adds that the sector, which remains well below its employment potential, has a major untapped opportunity that could yet support Uganda’s growth ambitions.
‘Despite growing by 11.6 percent in FY25, it employs an estimated 2.3 percent of Uganda’s workforce-less than one-third the employment share of comparable East African economies-reflecting low productivity, limited firm growth, and weak job quality,’ the report discloses.
It further states that construction also plays a broader role in structural transformation by providing the infrastructure through which urbanisation translates into higher productivity across firms, workers, and cities. The report also examines how reforms to strengthen land governance, urban planning, firm productivity, and labor-intensive public investment can position construction as a stronger engine of more and better jobs, productive urbanisation, and structural transformation.
The employment gap in construction reflects a dual market failure, on the demand and supply side. Despite a large underlying need for housing and infrastructure, formal housing remains unaffordable for most Ugandan households. This is thanks to mortgage rates of 16-22 percent, leaving a large gap between housing need and effective demand.
On the supply side, low productivity, fragmented firms, and high input costs limit the sector’s capacity to scale. Together, these constraints suppress activity in the affordable housing segment, where the significant potential for job creation lies, underscoring the need for coordinated reforms to unlock both demand and supply, the report states.
Uganda’s construction sector is dominated by small, informal firms, with few medium-sized firms able to scale productivity and employment. Weak certification, limited career pathways, and low participation of women reinforce low-quality employment and constrain productivity gains, despite evidence that stronger sector organisation and standards can improve these outcomes.
The report reveals that sector underperformance reflects inter-connected constraints spanning three areas.
‘Governance failures are the most foundational: the absence of a sector regulator, weak land administration, slow permitting, inadequate urban planning coverage, and an unapproved land acquisition and compensation policy together create the conditions in which informality is more rational than formalization,’ it states.
‘Second, market failures compound these issues: without a wage premium for certified skills, neither workers nor firms invest in training; without a contractor register, lenders cannot price construction risk, and credit remains expensive and scarce,’ it adds.
Structural conditions-including shallow capital markets, a landlocked geography, high input costs, prohibitive mortgage rates, and tight credit-squeeze both contractor liquidity and household demand while cementing dominant informality in the sector.
Uganda’s own programmes show that construction can generate jobs at scale when project design is aligned with employment objectives, with the report pointing to the Uganda Support to Municipal Infrastructure Development (USMID) and the Greater Kampala Metropolitan Area Urban Development Program (GKMA-UDP). The two undertakings indicate that labour-intensive urban investments can generate labour shares of 38-44 percent of project costs, compared with 18-22 percent for mechanised works, while also supporting stronger inclusion outcomes.
‘These experiences provide a credible domestic basis for scaling construction approaches that are more job-intensive and inclusive,’ the report states.
The report proposes a sequenced reform agenda built around three mutually reinforcing policy pillars. The first, and the prerequisite for the others, strengthens the institutional foundation through enacting the Construction Industry Development Bill (CIDB) (formally called Uganda Construction Industry Commission-UCICO Bill), endorsing the land governance legislative package, and streamlining permitting.
The second activates demand through reforming the Physical Planning Act to mandate integrated planning, updating physical development plans with infrastructure servicing commitments, establishing serviced plot programmes on verified public land, scaling labor-intensive public investment and affordable housing.
Qimiao Fan, World Bank director Somalia, Kenya, Rwanda and Uganda, said the third reduces construction costs and strengthens market competition by expanding contractor finance, improving procurement and local content, lowering input costs, and strengthening construction skills.
‘Together, these reforms can transform construction from a fast- growing sector into a leading engine of more and better jobs, competitive cities, and structural transformation,’ he said.