Deal with rising costs of doing business, experts tell government

Mr John Walugembe, the FSME executive director

What you need to know:

  • This is largely on the account of the high cost of capital/credit and power/electricity – something the government says it is fully aware of and committed to dealing with. But until it happens, the situation remains dire for private-sector economic players, particularly the MSMEs. 

A leading advocacy association for micro, small and medium enterprises (MSMES) in the country wants the government to consider taming the spiraling cost of doing businesses in Uganda.

The country’s cost of production and ultimately that of doing business remains among the most expensive, not just in the region but in the continent. This is largely on the account of the high cost of capital/credit and power/electricity – something the government says it is fully aware of and committed to dealing with. But until it happens, the situation remains dire for private-sector economic players, particularly the MSMEs.    

According to the Federation of Small and Medium-sized Enterprises-Uganda (FSMES) whose main preoccupation includes providing the sector voice to policymakers, the best New Year’s present the country’s largest economic sector expect from government is: “Reducing the cost of starting a business.”

“We believe we are at a very critical point and it is important we respond to the pandemic,” the FSME Executive Director, Mr John Walugembe said in an interview where he evaluated the previous year's gains and misses.

He continued: “It is important to put in place short-term measures, but ultimately we believe that reducing the cost of doing business is the real end game that will support the growth of MSMEs who make up to 90 per cent of the economy.”

This he said can be done by the government tackling access to credit bottlenecks – specifically those things that hamper SMEs from accessing affordable financing.

“The issue here is how do we make sure that we unlock other forms of financing? How do we make sure that government advances in a capital-intensive system that supports young people? How do we make sure that we put in place a private equity industry? These are some of the things that we believe should be looked at seriously this year, 2022.”

“We see no problem with the government saying this year it will ensure SMEs access both domestic and regional market particularly harnessing the African Continental Free Trade Area. We believe that it offers an opportunity for SMEs to sell their products and services beyond Uganda and the EAC region,” he told journalists at a news conference.

The position of the Federation is also for businesses to adopt ICT tools to not only empower their businesses but also use it to reach out to the wider market.  While doing that, SMEs and the government as a whole should be cautious of blindly excluding the population from accessing services on the account that they are not digitally literate, noting: “IT and related solutions shouldn’t become a tool for exclusion but inclusion.”

Despite that, Mr Walugembe noted that MSMEs must be optimistic as the economy gets fully reopened this month despite the resurgent of the omicron variant.

He said 2022 is the year of recovery after even as “very many SMEs continue to struggle with the challenge of diminished demand, resulting into cash flow constraints and overall liquidity limitations.” This is in addition to issues of supply chain disruptions, job losses, and low capacity utilization.

Arrears

Just like FSME, the leadership of Uganda Manufacturers Association and the Private Sector Foundation Uganda, are all calling for government to honour its promise to pay domestic arrears currently in excess of Shs400billion. If this happens year, the economy will be automatically stimulated as it will enable the SMEs to do what they do best – generate production. 

Equally important are associations’ recommendations that government pays well its personnel such as doctors and teachers arguing that by increasing purchasing power their ability to spend is not only strengthened but good for the economy as well.

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