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Failing startups a big cost to the economy

A local entrepreneur

A local entrepreneur

Government needs to consider dealing with the challenges forcing business startups into collapsing, a case an enterprise development expert observed as one of the most dangerous costs hitting Uganda’s economy so hard, writes JUSTUS LYATUU.

Charles Ocici, the Enterprise Uganda executive director, says failing businesses is a big cause to worry about because once budding enterprises fail, owners and employees are rendered jobless, the would-be tax revenues are missed, which precipitates poverty and a low purchasing power.

“If we continue just looking on as small businesses are swept away in just a space of one to three years after their establishment, we are depriving this country of the opportunity to amass large-scale enterprises with the capacity to employ more people and support Uganda’s competiveness on international market frontiers,” he said.

He was speaking to journalists last week on the sidelines of a one-week Basic Enterprise Startup Tools training organized for Kyegegwa district in conjunction with the area woman member of parliament Stella Kiiza.

Ocici suggested that to avoid business failures, business owners and managers needs to be empowered financially and equipped with knowledge relevant in seeing them through the different stages; that is, from startups to small and medium, medium and large-scale brands.

“Sustaining enterprises would take empowering people with knowledge on how to manage enterprises at all stages, creating flexible tax incentives and loan financing options, building an infrastructure that supports marketing of goods and services, among other tools,” he added.

According to the 2015 Global Entrepreneurship Monitor (GEM) report, Uganda is currently dominated by small businesses, a few of which are growing. GEM further ranks Uganda as the most entrepreneurial country globally, with 28% of adults owning or co-owning a new business. However, most of those business are small-scale, informal and with little employment effect and high discontinuation rates.

The most recent census (2010/2011) of business establishment in Uganda, found out that only 17,000 (about 4% of the total) businesses had five employees or more and an annual turnover of $2,600 (Shs 7m).

BITING CHALLENGES CURTAILING SMALL BUSINESSES

The 2018 Uganda Entrepreneurial Ecosystem Initiative survey by Aspen Network of Development Entrepreneurs (ANDE) around Kampala and Gulu, identified small business constraints as lack of access to low-cost loan financing, limited access to information about enterprise establishment and sustainability, government interventions that are inclined to financing only youth and women enterprises as opposed to the general growth-oriented enterprises, among others.

ANDE is a global network of more than 280 organizations from 150 countries that propel entrepreneurship in emerging markets through dealing with the challenge that hinder them from flourishing.

During the same training, Kiiza underscored the need for business management training across the whole country, but since Enterprise Uganda’s resource envelope is too narrow to afford that, government needs to devise avenues of providing training tools at regional levels so that those that have been trained by Enterprise Uganda can train those that haven’t had the same chance.

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