I recently had a discussion with several Ugandan friends on the government's plan to develop an international convention center in Munyonyo in collaboration with Sudhir Ruparelia. In January 2024, Uganda will host the Non-Aligned Movement (NAM) summit. 88 heads of state and government have confirmed their presence thus far.
The Serena Hotel in Kampala already serves as an international meeting hub for the country. However, the administration believed that the nation needs a large and modern one for NAM objectives. The new conference center will have a 3,800-person capacity main hall and 12 breakout session rooms. The construction will cost $47 million. Let me disclose an interest: Sudhir is a buddy of mine.
The government, via Uganda Development Corporation (UDC), formed a 50/50 joint partnership with Sudhir. As equity, each side provided $10 million. The government provided the consortium with a $27 million loan.
My Ugandan colleagues were outraged that the government was "giving Sudhir money." They said Sudhir should have borrowed money to construct it. According to them, the government will never profit from this investment.
To defend this, they claim that the government spent $8 million in Speke Commonwealth Resort Munyonyo with Sudhir in 2007 for 25% ownership but has never received profits. They claimed that the consortium would never pay back the $27 million debt.
I despise Uganda's government because it often fails to make cost-effective judgments. However, I believe this was their best investment choice. Why? A huge international conference center was desired by the government. It's reasonable that they wanted to "show off" for purposes of national prestige. However, the convention center might also serve as a foundation for increasing conference tourism in Uganda.
Rwanda's government, which is possibly the most passionate about development on our continent, achieved just that with the Kigali Convention Center and the adjacent Radisson Blue Hotel. Kigali is actively pushing conference tourism and is having success.
A large international convention center like the one Uganda is constructing in Munyonyo is not appealing to private investors. This is because the conference tourism industry is not large enough to justify such an expenditure. That is why no private investor has ever erected one in Kampala, and Sudhir would never borrow money to construct such a white elephant.
Serena, Uganda also boasts an international conference center. The Aga Khan, who leased the previous Nile Hotel, rebuilt it and profited much from it. However, he has never renovated the conference center section. It now has filthy toilets, aged furniture, creaky doors, and moldy glass windows.
However, a huge international conference center may become lucrative if it is promoted globally. No individual investor, however, can afford such a fee. This market failure gives the government a role.
A large convention center may not be viable for private investors, but it may be required by the government to hold large conferences of political significance or reputation.
Uganda is also promoted as a tourism destination by the government. It may aggressively promote Meetings, incentives, conferences, and exhibitions (MICE) tourism as a strategic aim, as Rwanda has. The advantages of increased conference travel in the broader economy will far outweigh the losses on the convention center's profit and loss statement.
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