Quick snippets from our morning read on Thursday, 01st April 2021
Despite being ranked the world’s most entrepreneurial country, few Ugandan businesses hit the big time. How can they leap from surviving to thriving? Today’s morning read looks at the entrepreneurial spirit of Ugandans.
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.
“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.
Read the rest of the article here.
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