Government, through the ministry of Finance, is making forward steps into supporting small informal businesses to build internal capacities strong enough to see them transition to fully formalised, compliant medium entities.
Through the Informality Management for Compliance and Resilience (IMCORE) program, the strategy framers also seek to deal with the severe survival challenges bedevilling a larger fraction of small businesses in Uganda.
According to a 2023 research paper published in the African Journal of Business Management, the median survival rate for Small and Medium Enterprises (SMEs) in Uganda was 4.85 years. This means that over 60% of those enterprises do not survive past their fifth year.
In one of the key arrangements, government plans to recruit and train at least 300 business management graduates that will be deployed to offer hands-on support in 10,000 participating small informal businesses across the country, where two managers will be stationed at an enterprise for only one month; one will deal with the financials and the other will handle other aspects of Business Development Services (BDS).
By Uganda’s standards, the size of an enterprise is largely defined by the monetary value of assets and number of employees, where small ones should have between 10m and Shs100m worth of total assets, employing between 5 and 49 workers, while medium-sized ones boast of total assets ranging between Shs100m and Shs360m and employing between 50 and 100 workers.
One of the key areas the IMCORE program focuses on is establishing simplified accounting, record keeping, and other financing reporting systems to ease formalisation and compliance of small businesses.
Consequently, the United Nations Conference on Trade and Development (UNCTAD) has partnered with the ministry to provide free technical support that will enable all benefiting enterprises to integrate the UN-developed e-accounting tool in their financial reporting infrastructures.
According to Elena Botvina, the UNCTAD Economic Affairs Officer, Division on Investment and Enterprise, the digital tools will empower enterprises to generate financial records that will inform key internal decisions on the direction of expansion.
“Integrating our free standard digital financial reporting tools in the system of local SMEs will unlock their potential and build capacity for them to be able to avoid the costs of hiring expensive accountants and auditors, thus reducing the cost of doing business,” she said.
She was recently speaking at The Grandville Hotel- Bugolobi during a week-long training workshop for 100 small informal enterprises that were introduced to the IMCORE program- that being the group that will be supported at a pilot stage during the first half of year 2025.
Other program implementing partners include the Uganda Revenue Authority, Uganda Registration Services Bureau, local governments, universities, commercial banks, Enterprise Uganda, Institute of Certified Public Accountants of Uganda, Mat Abacus Training Institute, Private Sector Foundation Uganda, and Private Sector Development Unit, among others.
Charles Ocici, the Enterprise Uganda executive director, pointed out that IMCORE was a sign that government was deepening its recognition of the centrality of empowered small enterprises in dealing with the challenge of unemployment and widening the country’s tax base.
“Over the years, we have developed and imparted a wide range of BDS among enterprises spread across the country. We are happy that the IMCORE program comes with new ingredients that will further strengthen our mandate of hand-holding local SMEs along their growth and sustainability journey,” he said.
He was optimistic that formalising small businesses presents an opportunity for them to attract commercial bank credit for expansion, form joint investments and operate in conformity with the legal requirements of the government.
According to Richard Mubiru, the Finance ministry’s Lead Officer for Enterprise Growth and Development, the IMCORE program contributes to the United Nations aspiration of “leaving no one behind” by contributing to the creation of decent work and economic transformation.
He added that the program is in line with the NDP III Private Sector Development Program (PSDP) target of reducing the informal sector from 51% to 45% in five years through strengthening internal capacities of small informal enterprises.
“Empowering our enterprises will further help them profitably tap into the competitive economic benefits of the African Continental Free Trade Area, because whatever requirements that must be in place for them to qualify is exactly what the IMCORE program is going to address,” he said.
