At first glance, Kakungulu, with its handful of half-built houses on a hillside dirt track, looks like a typical East African town. Looks, however, can be deceiving. It is, in fact, the front line in a battle to establish Uganda as the information technology hub of Africa.

On the green, thousand-acre hillside between Kampala and Entebbe in south-central Uganda, builders have started work on a new city that, according to its chief funder, will turn the country into the continent’s answer to Bangalore, India’s IT hub.

Designed to comprise a vast IT park, a stadium, a hospital, an extensive housing development and a hotel and golf course, Kakungulu Satellite City is being primed to employ a huge pool of Ugandan graduates in outsourced Western-style call centres. In five years its backers expect it to generate up to £97 million annually, almost 20 per cent of the total of the country’s yearly exports.

Its location is no accident. Commonwealth statistics suggest that Uganda generates more graduates per capita than any other country in the world. Its literacy rate is 74 per cent – considerably better than the estimated 60 per cent found in India. In addition, the vast majority of the urban population speaks English and Uganda is regarded as one of the more politically stable countries in Africa.

“All these BA and MA graduates from Uganda are doing all kinds of jobs, but they’re not utilising the skills they learnt at university – some are even working as security guards in Iraq. The jobs in Uganda are just not there at the moment,” Vijay Kumar, the director of the projects and finance division of the Commonwealth Business Council (CBC), which is funding the project, said.

With the skill levels high and opportunity levels low, Uganda has been earmarked by some business chiefs as an economic boom waiting to happen.

“The country has a highly literate population, a knowledgeable and skilled workforce,” Mohan Kaul, the director-general of the CBC, said. “It is obvious that we can use the knowledge and skill base available, like in India, and turn Uganda into the Bangalore of Africa.”

If British customers ringing call centres are accustomed to being greeted by Indian accents on the telephone, some people believe that they may soon be hearing Ugandan ones instead. Kakungulu Satellite City will have offshore development centres, call centres, back-office facilities, data processing centres and data centres, all of which will be much cheaper for multinational firms to run than those in Britain.

According to Prakesh Sundaram, the city’s project manager, it will undercut even India, which is growing increasingly expensive as it becomes a high-demand location and its workforce is being paid higher wages. He said: “India is now not as attractive as it once was, so we think Uganda may soon take over as the leading place to outsource your business.”

World attention was on Uganda last week when the country played host to the Commonwealth Heads of Government Meeting (Chogm), with the Queen and Gordon Brown among the heads of state and political leaders gathering in Kampala. The city was spruced up for the visit of a monarch who was last there in 1954 and Chogm was seen as an opportunity for Uganda to sell itself to the world.

Support may not have been universal – there were demonstrations from political opponents of President Museveni, complaining of infringements to civil rights and demanding sanctions against the country – but Mr Museveni has been widely credited for leading Uganda away from the legacy left over from the troubled days of the 1970s, when the country languished under the regime of Idi Amin. Then the country was largely cut off from the international community by a government that undertook the persecution of minority groups, leading to hundreds of thousands of deaths and a sharp economic decline; now, a stable Uganda is attracting inward investment. The potential of Kakungulu Satellite City could, its backers argue, usher in a bright new era for a country that Winston Churchill dubbed the “Pearl of Africa”.

CBC officials, who are unveiling their plans for the city at a conference in Kampala this week, hope that its development may encourage the citizens of African states that are beset by economic crises, such as Zimbabwe under Robert Mugabe, to take heart that revival is possible.

Mr Sundaram said: “Instead of just throwing money at the situation, like some NGOs and charities do, this development will make a much bigger contribution by actually equipping Ugandan graduates with jobs to improve their lives. We believe it is the start of great things for Uganda.”

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