By John Kakungulu Walugembe
Early this year, the government of Uganda signed for a $100m loan with the World Bank for the competitiveness and enterprise development project.
The objective of this project is to improve the competitiveness of enterprises by providing support for the implementation of business environment reforms, including land administration reform and the development of priority productive and service sectors. This loan is repayable in 40 years and has a grace period of 10 years. This is a very good deal and we should applaud government for seeking to boost the productive sectors of the economy-while offering affirmative support to Micro Small Medium Enterprises (MSMEs).
To understand the importance of this development, we need to appreciate the fact that it is the complexity of the regulatory framework, the high volume of regulations, the constant changes in requirements and the cost of compliance that concern MSMEs the most and their representative bodies, especially given their relatively scarce resource base.
Owner-managers and entrepreneurs can often ill-afford to spend their valuable time dealing with paperwork and regulatory authorities. For example; the 2014 World Bank report states that it takes an average of 32 days to register a business, in which period a person has to navigate through a total of 15 procedures.
Moreover the cost for this is about 78.3% of the income per capita of Uganda. This may look good; however, when contrasted with an average cost of 67.4% in the rest of sub-Saharan Africa, it shows that there is room for improvement. Incidentally, the Uganda has been consistently doing poorly on this doing business index as evidenced by the slip by six points in 2014. (In 2013, we ranked 126, while in 2014 we ranked 132). To address concerns raised by the private sector on issues of competitiveness, the Government established the Competitiveness and Investment Climate Strategy (CICS) secretariat.
The secretariat is a small technical unit housed in the Ministry of Finance charged with coordinating priority actions that seek to improve the investment climate and overall competitiveness. Whereas the CICS secretariat has achieved mixed results since inception and needs to be more proactive in coordinating public and private sector responses to business climate bottlenecks; it has brought to the forefront the importance of a supportive business climate in making local enterprises successful. Moreover, the additional funding, as provided in the CEDP project will go a long way in easing its ability to get things done.
By seeking to simplify business registration and licensing, the government has rightly recognised the importance of creating a one-stop shop for business registration and licensing. In addition, such a mechanism makes it easier for government to have more enterprises join the tax bracket. Furthermore, the project seeks to build on the successes of the Second Private Sector Competitiveness project by funding land reforms. This is pertinent considering that land wrangles have tended to hinder investment projects recently- particularly in areas that have the communal system of land ownership.
The component that we find most interesting is the one that entails providing matching grants to MSMEs to access Business development services such as; management training, quality certification and marketing, record keeping to mention but a few. The sectors prioritised for funding are: tourism, coffee, grains & pulses, edible oils, fisheries, ICT, business process outsourcing. This intervention is not only timely but necessary. The intended beneficiaries in the above sectors need to be informed of this initiative, so they prepare to take advantage of it.
The writer is the executive director of the Uganda Small Scale Industries Association