What you need to know:
- Government is also evidently struggling with its cashflow and is seemingly finding it hard to get grants and concessional loans. So, if the economy is not doing well, then government also has to struggle.
What is a Small and Medium Enterprise (SME)?
A Small and Medium Enterprise (SME), is business whose operation in Uganda, has a threshold of at least Shs 100 million in total assets and employing between 5 and 250 people.
How are SMEs adjusting to the prevailing business environment?
The uncertainty surrounding the Ebola disease and whether there will be a lockdown and so forth is undermining the recovery of SMEs.
The focus should be on building certainty and confidence in them that interruptions such as a lockdown is not in plan whatsoever. Remember, the negative impact of the Covid-19 pandemic are still prevailing, inflation and so on. All the same, while SMEs are looking to recovery after the effects of the pandemic; extraneous factors such as fluctuation oil and commodity prices are still of concern.
There are reports that the Small Business Recovery Fund (Shs200 billion) initiated by government has not been well absorbed by (SMEs) your members. Why is this so?
We believe that the awareness of this (SME) fund is still very low. As a federation, we are looking forward to engage with Bank of Uganda, to ensure that there is more information regarding the fund’s structure and access by enterprises.
There is also the issue of the demand side constraints such as book-keeping, filling the right loan application and where exactly to access the credit from. However, this in itself is not a lot of money. It is a drop in the ocean.
But if an SME must have a maximum capital of Shs 100 million, who exactly was this fund targeting? We should not appear like this small business recovery fund will solve all our financing needs. It is one solution. We could explore others. Financial institutions have come up with other options. Recently, they launched the export facility to support SME businesses. I think this collaboration between SMEs and the financial sector is the way to go. SMEs, in particular, mid sized firms can even have capital worth more than Shs5 billion.
How best can access to affordable financing for the SME sub sector be improved?
We lay a lot of emphasis on financing and ignore other eco-systems which affect the growth of a business. We look at macro factors and how those are conducive for business operation but still derailing SMEs. Consider, laws, regulations, licensing, workplaces; all these need to be solved. Not forgetting their internal weaknesses such as governance practices within SMEs.
Without solving these, it all undermines interventions that are being fronted. We are aware that government has come up with a Business Development Services framework, which is a good blue print on what it intends to do, to build the managerial capacity of SMEs. So, we need to ensure that this is actualised.
The economy remains slow. But the Tax Authority is insisting on widening the net. Any common positions that can enable mutual growth?
Government is also evidently struggling with its cashflow and is seemingly finding it hard to get grants and concessional loans. So, if the economy is not doing well, then government also has to struggle.
While Uganda Revenue Authority is hitting its targets, it should be mindful of how to maintain balance so that businesses are not affected with heavy tax burden to the extent of closing or new ones losing interest in starting operations. Achieving short-term wins and creating longterm challenges for SMEs may not be feasible.
The after Covid economic recovery appears dampened further by sentiments around the Ebola virus. Isn’t it time for health and economic experts to begin generating common models that be applied in shielding the economy against such adverse effects? I think better communication is now more important. We have managed far worse crises. We have taken experts to Liberia, Siera-Leon to manage their Ebola crisis. Our health resource are experts on Ebola.
But let us not use these diseases and viruses to undermine our economy through scare-mongering with lockdowns. Business people and the international community need to know that Uganda is a safe country. Such an approach will strengthen our economic recovery.
How are the trends around regional trade, connected to SME clusters in doing export business?
If we are looking at the export market, we need to be agile. We need to have a robust export marketing intelligence agency. The way we have External Security Organisation and Internal Security Organisation.
We have a long term export development strategy. In the short-term, we have these opportunities in Zambia and Kenya which is currently facing the worst drought in nearly half a century.
Kenya can not now talk about standards. They just need food. Ugandan businesses people are not sufficiently taking full advantage of the fact that all food can now move across our borders and this can enable them recover from the liquidity challenges they are facing.
Are SMEs effectively taking advantage of the opportunities under the Parish Development Model’s resource pool?
We need to focus more on producer Saccos (Savings and Credit Cooperative Organisations). We can not have vendors, salon operators and boda boda riders in the same groups. Once we prioritise producer cooperatives, we shall be developing more value chains that will be more productive and sustainable.
What are your thoughts around the current ongoing reforms on land registration by government in particular, community land in the East, North & West Nile regions? Can it bolster entrepreneurship?
I think this initiative by government is good because it will unlock the challenges around land ownership. But it needs to be more clear in its processes and procedures to eliminate infiltration.
Land registration will ensure security of tenure, particularly for women and youth-owned businesses who remain at the back of the queue in obtaining finances. This is a critical factor of production and every one needs to come on board at the earliest opportunity.
What is the outlook of the domestic, regional and international economy in the new year?
Globally, the supply side occasioned by the Covid-19 ripple effects, the war in Ukraine which seems not to have a clear sign of ending. This in the short and medium term will have an impact on the world business environment. But perseverance, harmonising interventions and general improvement of the country’s economic climate could cushion investments, trade and commerce.
Closer home, with the prevailing challenges, reducing inflation, fair domestic revenue generation, cost of fuel and others, the nex budget under formulation must be mindful of those fundamentals and their impact on SMEs.