NATIONAL SME DEVELOPMENT AND

BUSINESS CLUSTER

PRESENTATION BY

BATARINGAYA JULIUS

JULY 2009

2

Welcome

3

1. INTRODUCTION: The experience of economic development in the

developed countries tells success stories of the role of SME in industrial development, technological innovation and export promotion.

Professionally run Business NGOs complemented by

Business Representative Organisations have offered a range of good quality SME products and services to Uganda.

SME are as much an important catalyst of development in industrialized countries as they are in the developing world.

4

Where is Uganda on the World map?

5

2. General Country Information: Population: 30million persons (current Est.)

Total area: 241,551 sq km (93,187 sq miles)

Literacy rate: 70% (current Est.)

Location: Uganda is located between 10 South to 40 North latitude and 300 to 350 East longitude.

Boundary: Uganda is landlocked and bordered by Democratic Republic of the Congo 765 km in the west, Kenya 933 km in East, Rwanda 169 km in the South West, Sudan 435 km in the North, Tanzania 396 km in the South.

Major Religions: Christianity, Islam

6

General Country Information (Cont…)

• GDP: Purchasing power parity- $2100• GDP-per capita: Per capita income - $440 (2009

est.) • GDP - real growth rate: 7.0% (2009) • Exports - commodities: coffee, fish and fish products, tea, gold,

cotton, tobacco, Maize, flowers and horticultural products

• Exports – Major partners: EU, COMESA, South Africa, UK, USA

• Imports - commodities: Capital equipment, vehicles, petroleum and Petroleum products, medical supplies, cereals and garments

• Imports - partners: Kenya , South Africa , India, UK, US, and OPEC Countries/ Asian Countries

7

3. National SME Development and Business Clusters:

Ugandan SME have made a considerable contribution to

economy transformation in terms of GDP contribution and employment creation

SME’s can be made to grow faster with the introduction

of appropriate technology which will increase productivity and product quality and therefore increased competitiveness.

SME’s also provide the economy with a continuous supply of ideas, skills and innovation necessary to promote competition and efficient allocation of scarce resources.

8

National SME Development (cont..)

It is estimated that there are 26,000 registered

businesses in Uganda, providing employment to 320,000 people and income generation opportunities to low income sectors of the economy. The estimate above is for enterprises that employ five people and above.

9

GDP - composition by sector :

GDP COMPOSITION BY SECTOR

33.7%

15.1%

51.2%Agriculture

Industry

Services

10

National SME Development (cont..)

The following are some of the advantages of SME in Uganda:

1. They use less capital per worker than large farms simply because of the difference in technology that they use to make the same product.

2. They utilize people with little formal training who otherwise wouldn’t be drawn into the development process.

3. They compliment to large scale production by engaging in batch production

4. They generate income and create wealth.

SME are generally contributing tremendously to the national economic recovery and in development efforts.

11

National SME Development (cont..)

SME in Uganda are classified into the following categories:1. Agriculture2. Fishing3. Mining and quarrying4. Manufacturing 5. Utilities6. Construction 7. Wholesale and retail trade8. Hotels, Bars and restraints

12

National SME Development (cont..)

9. Transport and communications10. Finance and insurance11. Education12. Real estate and business services13. Health and social work14. Community, social and personal services.

13

Comparison of manufacturing businesses between 2001/02 and 2006/07

YearRegion  

Central East North West Total

2001/02 1319 470 156 345 2290

2006/07 1843 542 185 448 3014

% increase 40 15 19 30 32

14

Clusters Development Initiative:

The department of Industry and Technology (in MTTI) in collaboration with Makerere University, provides technical guidance, monitoring and evaluation of the initiated pilot clusters to assess the gaps in business management, technology transfer and value addition, product development and innovations, and market access.

Objectives:1. Promoting and facilitating innovation, technology transfer,

creativity for value addition and market access to enhance competitiveness among firms

2. Promote linkages (cooperation) among large and medium industries with small and micro industries within the country through diversification and specialization to enhance industrial growth

3. Promote networking among the business community, policy makers, and the academia (research institutes, and universities) and nurturing competitiveness mindset amongst the cluster members

15

Some of the constraints faced by SME in Uganda:

Bellow are some of the constraints that affect the effectiveness of SME in Uganda:

1. Difficulty in employing competent people with knowledge in financial management because of the salaries such people would demand.

2. Financial problems arising from late payments by debtors

3. Lack of access to credit and initial funding4. Failure to access financial services from formal sources. 5. Isolation and lack of support6. Poor financial records and accounts system.7. Lack of modern management systems.

16

Constraints faced by SME in Uganda (cont..) SME fail to access financial resources in the required

amounts because banks evaluate them on the basis of a checklist that includes:

1. Audited financial statements for the last three years including management accounts,

2. Project proposal highlighting the strengths, weaknesses, opportunities and threats,

3. Financial projections,4. Monitoring costs and5. Credit or default risk because of the problem of

information asymmetry.

17

SME in Uganda are supported by the following Institutions:

1. Ministry of Finance, Planning and Economic Development

2. Ministry of Tourism, Trade & Industry3. Cluster Innovation Systems4. Uganda National Bureau of Standards5. Uganda Industrial Research Institute6. Private Sector Foundation of Uganda7. Uganda Exports Promotions Board8. Uganda Gatsby Trust9. Uganda Small Scale Industries Association.10. Uganda National Chambers of Commerce and Industry11. Association of Micro Finance Institutions of Uganda

18

Supporting Institutions to SME in Uganda (cont..)

12. National Agricultural Advisory Services13. National Agricultural Research Organization14. The Uganda Micro Small and Medium Enterprises

Forum15. Uganda Investment Authority and16. Uganda Manufacturers Association. The government of Uganda has undertaken the

development of the JUA-KALI parks and provision of common facilities as way of supporting SME.

19

4: Current Issues and Trends:

Uganda achieved significant economic growth over the past decade. The economy has grown at an average rate of 6.8% per annum. The industry and services sectors have continuously contributed to the strong growth of Ugandans economy.

The country is gradually moving away from a predominantly agricultural economy towards one emphasizing construction, manufacturing and services including trade, tourism, transport and mining. The growth in the industrial sector has been mainly as a result of the increase in growth of the food processing sub-sector. Growth has also been registered in the textiles, clothing and footwear as well as chemicals, paint, soap and foam products, among others. Industrial development is identified as the cornerstone for the accelerated growth strategy.

20

Current Issues and Trends (cont..):

The contribution of agriculture to GDP declined from 15.7%

in fiscal year 2007/08 to 15.1% this financial year even though the agricultural sector grew annually by 2.6%. This reflects a continued structural transformation of the Ugandan economy as other sectors continue to grow much faster than agriculture. The evidence for the undeniable fact that agriculture is growing is the fact that the recent Agricultural and Livestock Census recorded the existence of 11 million heads of cattle, 12 million goats, 37 million poultry and 3 million sheep and pigs each. The service sector accounts for 51.2% of total GDP and has continued to register strong growth estimated at 9.4% per annum during financial year 2008/09.

21

Current Issues and Trends (cont..):

The financial services sub-sector is estimated to have

increased by 21.7% during the last fiscal year, compared to a growth of 24.1% per annum achieved in the previous year.

Uganda’s investment climate is attractive and profitable and this is reflected by a total fixed investment growth of the sector by 9.2% during fiscal year 2008/9 higher than the growth of 6.5% recorded in 2007/2008 financial year. This means that private investors are focusing on increasing productivity of their investments which is also good for creating jobs as profits continue to grow.

22

Current Issues and Trends (cont..):

Foreign direct investment has remained strong reflecting

continued sound economic fundamentals and therefore strong investor confidence in the economy.

In Uganda, the following are the adopted definitions of

SME:

A small enterprise is defined as an enterprise employing max. 50 people, annual sales turn over of maximum UGX. 360m and total assets maximum of 360 million.

A medium enterprise is defined as an enterprise employing more than 50 people, annual sales turn over of more than UGX. 360 million and total assets of more than UGX. 360 million.

23

5. Achievements:

The Competitiveness and Investment

Climate Strategy (CICS):

The Competitiveness and Investment Climate Strategy whose theme is ‘Enhancing competitiveness through Public-Private Partnership seeks to position Uganda to deal with the next generation of competitiveness challenges by building on earlier efforts to improve the business environment, boost domestic activity and increase participation in the global marketplace.

24

Achievements (cont…): The CICS addresses three key output areas, namely

enhancing the competitiveness of the key productive sectors, the investment climate and promoting regional and international competitiveness.

It recognizes the importance of improving the business environment for SME with access to finance and better infrastructure as cornerstones.

It also emphasises the development and facilitation of clusters as a strategy

25

Achievements (cont…):

Plan for Modernisation of Agriculture: Plan for Modernization of Agriculture is a framework for

eradicating poverty through multi- sectoral interventions enabling people to improve their livelihood in a sustained manner.

The vision of PMA is ‘poverty eradication through a profitable, competitive, sustainable and dynamic agricultural and agro-industrial sector’. The objectives of the PMA are to increase incomes and improve the quality of life of poor subsistence farmers, improve household food security, provide gainful employment and promote sustainable use and management of natural resources.

A National Agricultural Advisory Service was created to coordinate extension service provision to subsistence farmers.

26

Achievements (cont…): Poverty Eradication Action Plan: PEAP is Uganda’s national planning framework that guides

public action to promote economic growth and eradicate absolute poverty. It aims at reducing the proportion of the population living below the poverty line to less than 10% by 2017. It establishes the overall national development goals and the guiding principles for managing the economy to promote economic growth and equity. The ultimate goal is to contribute to the transformation of the economy from being largely a rural population dependent almost entirely on subsistence agriculture into a middle-income one. The process of transformation will involve agricultural development and industrialisation based on private investment in competitive industries.

It is currently being replaced by National Development plan.

27

Achievements (cont…):

Prosperity for All: Prosperity for All is President Museveni’s vision to put in

place varied but integrated socio-economic programmes that mainly target the rural poor in order to transform them into productive and prosperous communities.

It is prosperity for all through production, value addition, agro-processing, improved marketing, savings and accessibility to affordable credit.

Prosperity for All is a multi-faceted policy - a combination of grants and loans, a public-private partnership and responsibility of individuals, homes, communities, public and private leaders, organizations and government at all levels.

28

Achievements (cont…):

Presidential Innovation Fund: Presidential Innovation Fund is a major initiative for

encouraging and funding scientists and innovators to produce prototypes of their innovations, providing assistance to patent operational innovations, commercialisation of innovations and linking innovators to private business sector.

29

Achievements (cont…):

Business Uganda Development Scheme: BUDS is a project implemented by the Private Sector

Foundation Uganda. The project supports the acquisition of know-how through

training programs to increase the capacity and performance of small-scale enterprises in the private sector.

The aim of this project is to provide support to small enterprises in order to increase the pool of technical and business qualified personnel, improve the supply and quality of teaching personnel in technical and business subjects, encourage the entry of women in technical businesses and managerial activities and improve business performance.

30

Achievements (cont…):

UNIDO Master Craftsman Programme: The Master Craftsman Programme (MCP) aims to put in

place a self-sustaining, demand driven system of assistance whereby, business advisors who are skilled technicians provide practical advice to the small-scale entrepreneurs that can be translated to immediate impact on upgrading skills, improved productivity, designs and management practices in order to increase profit to the enterprise. Uganda Small Scale Industries Association, Northern Uganda Manufacturers and Uganda Gatsby Trust are partner organisations in the programme as are institutions like Nakawa Vocational training Institution, Uganda Leather Allied Industries Association and Texda.

31

Achievements (cont…):

Uganda Cleaner Production Centre Project:

Uganda Cleaner Production Centre was a joint project of

the Government of Uganda and the United Nations Industrial Development Organisation (UNIDO). The program introduced Cleaner Production practices to some enterprises in Uganda by helping companies to reduce operating costs through increased overall efficiency especially in the use of materials and energy.

32

Achievements (cont…):

One Village One Product Program: One Village One Product Program is a community

centered and demand driven regional economic development approach. It is a unique approach to local development by which villages and regions are transformed into economically vibrant entities through utilization of local potential (i.e. resources) and creation of unique and appealing local products and environments.

33

Achievements (cont…):

Development of Industrial and Jua-kali parks:

Government Departments, service providers and UIA provide infrastructure (roads, water, power, telecommunications) and prepares the requisite studies (Environmental Impact Assessment and Topographical Surveys, Physical Planning and Master-plans). The UIA Board allocates industrial plots to qualified investors who are then monitored and facilitated in setting up their enterprises.

34

Achievements (cont…):

National Industrial Policy: An Industrial Policy which is a framework for

transformation, competitiveness and prosperity was completed in 2008 and currently a National Industrial Sector Strategic Plan is being developed to guide the implementation of the Industrial Policy

35

Achievements cont…:

Microfinance Outreach Plan: Microfinance Outreach Plan is a major initiative of the

Government of Uganda and Stakeholders in Microfinance Industry intended to facilitate accelerated growth of a sustainable and working Microfinance capacity building market with well-informed consumers and better equipped suppliers of the services.

It is supported by the government, donors and private sector.

36

6. CONCLUSION:

The government in partnership with the private sector and donors is committed to ensure that SME constraints are addressed to improve their efficiency and productivity. This will increase their contribution to the economic transformation, competitiveness and prosperity.

37

Thank You for listening to me!