Ugandans were proud – though not too surprised – to hear their nation had topped a ranking last summer of the world’s most entrepreneurial countries. According to the Global Entrepreneurship Monitor (GEM), 28% of adults own or co-own a new business, The Guardian reports. .
“Ugandans are opportunists by nature,” says Daniel Joloba, a programme manager at Enterprise Uganda, a public-private body that supports small and medium enterprises (SMEs). But the main reason for this high figure, he says, is a dearth of other options: 400,000 young people enter the job market annually, for a mere 9,000 new jobs each year.
Survival versus growth
But Uganda isn’t over-populated with self-made business leaders. “Only a few of our businesses go the whole distance,” says Joloba. Most ventures in the east African nation remain small-scale and informal. It’s partly intentional, he says. Staying informal means avoiding taxes and registration costs – but it also means missing opportunities, like bidding for government contracts, that could offer financial security and a path for growth.
While almost 10% of Ugandans started a business last year, a fifth of individuals aged 18-64 have also discontinued a business in the past year, GEM found. Young entrepreneurs in particular have “generally low” growth expectations; few innovate or vary product lines. Creating an additional business is more common than expanding an existing one, adds Rebecca Namatovu, from Makerere University Business School and coordinator of GEM-Uganda.
What of those with ambitions to grow? Orator Twesiime runs a horticulture business called Natural Basket Uganda that has expanded from supplying eight supermarkets in 2012, to 60 at present. But concerns about her cash flow still gives her sleepless nights. Loans are difficult, she says: her only collateral is her father’s or husband’s property, and interest rates are well over 20% at banks, twice as high from other lenders.
Her solution? Using cooperatives, and putting aside 20% of sales revenue each month to invest in the company. “It’s a slow process, but it’s sure,” she says.
The Ugandan government’s Youth Venture Capital Fund offers another route for those seeking capital to grow their business, offering loans at 15% on up to 25 million Ugandan shillings (around £5000). But Rebecca Kaduru, a co-founder of KadAfrica, a commercial passionfruit farm that trains and equips out-of-school girls as growers, is unconvinced. “This is a very high interest rate and a relatively low cap – neither is particularly sustainable for growing a business.”
Social enterprise Tugende thinks there could be another option for loans. It is among the first to lend affordably to motorcycle taxi drivers, an occupation that employs an estimated 400,000 Ugandans, enabling them to buy their bikes after 19 months.
“Most people thought it was too risky,” says founder Michael Wilkerson, when he started lending his own money in 2009 to just three clients. Drivers are considered untrustworthy, and accidents assumed commonplace, he says. Nearly 2,000 loans later, though, Tugende employs over 30 staff – and has a waiting list of 500 drivers. Wilkerson believes the model could work for any cash-generating asset, from sewing machines to welding equipment.
Money’s not everything
Entrepreneurs across Africa often cite access to capital as the biggest barrier to growth. But money alone is unlikely to produce significant results.
It is financial discipline, says Paul Mugambwa, that has enabled him to grow and diversify the landscaping and maintenance company Motion Gardeners he started in 2010. Today, he has seven employees.
Mugambwa is a graduate of Educate!, which helps secondary level pupils set up and run their own businesses, also training them in financial literacy, saving, and business planning. The programme has seen demand from schools exceed expectations: when charges were introduced in 2014, 248 schools agreed to pay up.
Without the type of guidance that Mugambwa received, says Joloba, businesspeople will be held back by poor record-keeping, mixing business capital and personal money, or spending profits on themselves instead of on the company. This short-term thinking is damaging.In 2013 GEM identified nearly a dozen entrepreneurship promotion schemes – but found that young Ugandans were “woefully” unaware of them. 89% of young entrepreneurs had never accessed the programmes, and a third of those who had were dissatisfied with them.
The country’s first ever national policy on SMEs was agreed last year – aiming to offer a more structured framework for support. But Namatovu, from GEM Uganda, worries it won’t go far enough: “Many training programmes highlight starting up, but ignore growth or crucial activities that can sustain firms.”
Often it is an entrepreneur’s surrounding network that has the biggest potential to impact their future. For Tugende, a big achievement has been convincing insurance companies to take on motorcycle taxi drivers.
For Kaduru, the main factor affecting the ability of girls to develop their businesses is their circle of influencers: “Girls are often seen as more valuable at home than out earning an income, leading to reduced attendance and dropouts, so KadAfrica provides their families with passionfruit seedlings too and invites them to family days to see their daughters’ progress.”
They also employ a full time community engagement manager to explain the value of investing in skills and inputs. After years of NGO and government giveaways, says Kaduru, one of the biggest challenges is helping people understand that ultimately they will only earn what they put into it.
Getting people to understand that the responsibility is theirs, rather than waiting for conditions to be perfect, is the key, agrees Joloba. “If you crack that, you’re 80% of the way there.”