Friday March 25 2016

10th Parliament should be the sieve for our future (Part II)

By Matsiko Kahunga

In its historical role of being transition leaders, the 10th Parliament’s fourth dreg that it will have to sieve from entering our future, is Uganda’s informal sector. Actually, the ‘informality’ therein is more of a modus operandi than a substantive economic activity.

The informal way of doing business cuts across all economic activities, from a tomato stall woman in Kalerwe, to a ‘tycoon’ running a fleet of public transport buses.

Being the employer and source of livelihood for the majority of us, it is one of those risky but essential dregs that the 10th Parliament must sieve.

This is because the sector has been clothed in a garment of vulnerability by ‘concerned’ partners. Remember one maverick MP (now ex-MP), who was agitating against UNBS ‘harassing’ small manufacturers and traders?

He was applauded, yet he was doing a disservice to those SMEs since they cannot compete in the East African market, unless their goods are quality certified.

UNBS has to-date developed close to 2,000 standards, yet less than 500 Ugandan goods are certified. This is against Kenya’s over 6,000 certified goods, which have an express right of way across EAC borders. Now you know who will reap from South Sudan joining the EAC.

To appreciate the untapped potential of this sector, hear this: a few years back, while employed with a regional tyre manufacturer, one of the key accounts in Uganda is a transport company owned and run by three brothers.

With scores of a mixed fleet of trailers, trucks and omnibuses, the company is literally run from the pockets of the owner-managers - no systems, no structure, no procedures, no processes. All workers are literally casual employees, recruited through ‘invitation’ or recommendation/request by friends and relatives.

In Kenya, a similar company with an even smaller fleet, has a staff of 182 (the last time I counted), run as a typical corporate entity, with systems, structures, processes and procedures.

Headed by a general manager with the owner as the chairman, the company employs both skilled and semi-skilled workers, pays taxes, social security, medical insurance, and related benefits.

Awakening the sleeping potential of the informal sector will require a few simple initiatives, if our legislators prioritise this. These include:
• Simplification of the company registration:
The first step is to decentralise the Uganda Registration Services Bureau to the sub-county level.

The recent initiative of on-line registration will have limited impact. We need a business registration desk manned by a trained para-legal, with basics of Company Law, to register every business, however small.

The data can then be fed into the URSB data base, to avoid duplicity and keep track of ‘dying and rising’ businesses. The alternative is to benchmark the NGO sector where community based organisations are only registered at district level by the community development office.

• Rethinking the ‘Funding’ Model:
The 10th Parliament needs to spearhead changing of the current model of spreading credit finance thinly in commercial banks and microfinance institutions. All government credit funds should be pooled centrally into Uganda Development Bank, with branches all over the country. SMEs need development financing, not commercial, speculative, trade financing.
The current policies and lending terms at government lending institutions are not different from those of commercial banks. No economy has ever developed through commercial banks, much less foreign ones. These take their policies from elsewhere, and are not always in tandem with government policy goals and strategies.

Mr Matsiko is a management and development consultant.