Small business neglect limits Uganda growth potential
July 23,2018—Research shows that owners of small and medium enterprises (SMEs) in Uganda feel a general sense of neglect when it comes to helping them acquire the practical skills necessary to grow and continue to be sustainable writes Eva Ssewagudde.
Despite being internationally recognised as one of the most entrepreneurial countries, the majority of Ugandan businesses rarely live to celebrate their 3rd birthday. While the reasons for this phenomenon have been identified, and various interventions undertaken to buck the trend, the same challenges still exist with the same results.
Long term business sustainability among SMEs is a critical issue that must be addressed within Ugandan business circles, especially in the nascent oil and gas industry which is fast transitioning from the exploration to commercialization phase with an estimated $25 billion of investment is expected over the next five to 10 years.
This massive inflow of foreign direct capital presents Ugandan SMEs with a once in a lifetime opportunity to scale up their operations by becoming strategic partners, contractors or suppliers of international companies who operate at a much higher level than most Ugandan companies have ever experienced before.
It is against this background that The Stanbic Bank Business Incubator has been established. Developed as an entrepreneurship development centre, it was created to support the development and sustainability of SMEs who are currently involved in or aspire to be a part of the Oil and Gas industry.
A variety of strategic industry partners, professionals, government and educational institutions are involved in the programme, offering sector expertise and experience including government, the oil companies, audit firms, legal firms, Industry consultants and respected business professionals and individuals.
SME owners who are accepted into the programme are taken through a vigorous training programme where they are given the necessary skills, knowledge and access to information geared towards achieving the particular standards and bridging skills gaps they have ,in anticipation of participating in Uganda’s oil sector. The main aim is to ensure the SMEs will eventually run their businesses a lot more professionally and are therefore better positioned to bid for and win,major contracts with International companies.
At the recent Stanbic Enterprise conference, Patrick Mweheire the Chief Executive of Stanbic Bank Uganda said, “One reality Ugandan companies need to appreciate is the fact that International oil companies maintain and adhere to very high operational standards which cannot and will not be compromised just to accommodate local players. This tells us that local companies especially SMEs need to step up their game and not the other way round.”
But why focus on SMEs one might ask? In spite of their size SMEs are the real engines of economic growth and generation of wealth in Uganda. Statistics from the Uganda Investment Authority (UIA) show that SMEs account for approximately 90% of the entire private sector, generate over 80% of all manufactured output, contribute 20% of the gross domestic product and employ 2.5 million people.
Despite this significant contribution to GDP by SMEs, they remain constrained by lack of financing, skills, business records, low corporate governance, poor banking history, limited ability to adhere to terms and conditions of business contracts and fierce local and international competition. These limitations lead to the high mortality rate of SMEs and limited growth for those that survive.
To overcome the many challenges Ugandan SMEs face and make them more resilient so as to harness their full potential is not an easy task. The Stanbic Business Incubator is but one small but positive step in the right direction, however in order to go further and to the next level, such efforts need to be scaled up and replicated across as many key sectors as possible.
This will only happen if up-skilling collaborations are made across the board between public and private sector players who both have a vested interest in having a strong SME sector because it represents a win-win for everyone.
Eva Ssewagudde is the Programme Manager Stanbic Uganda Business Incubator