Determinants of Private Investment Behaviour in Ugandan Manufacturing Firms

Aggrey Niringiye

Working Papers from African Economic Research Consortium

Abstract: This study investigated the determinants of private investment behaviour using panel data. Evidence shows a combination of relatively low investment rates, high profit rates, but small profit effects on investment in Sub-Saharan Africa. Little was previously known about the determinants of investment in Ugandan manufacturing firms. This study adopted the flexible accelerator model with some modifications. The probit and tobit regression models were used in the analysis. The tobit regression results showed that debt capital ratio, financing of new investments with credit, and access to credit problems were consistently associated with the propensity to invest. Other factors found to be associated with the propensity to invest include ethnicity, firm size, corruption, skill problems and competition from imports. Sector effects also influence the decision to invest or not. It is clear from the results that low access to credit and inadequate skills are hindrances to manufacturing firms' investments in Uganda.

Date: 2014-05
Note: African Economic Research Consortium
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