How quality standards can turn SMEs into large enterprises

By Deusdedit Mubangizi

There seems to be an underestimation of the impact of small enterprises on the economy, and the small enterprises seem to underestimate the impact of quality standards on their potential to grow into large enterprises.

Yet with appropriate strategies that support quality improvement, Small and Medium Enterprises (SMEs) or to be more precise, Micro, Small and Medium Enterprises (MSMEs) have great potential to grow and turn Uganda into a middle income country faster than we think.

In Uganda and in many other countries, MSMEs are the biggest employers, employing more people than the Large Enterprises and Government combined.  According to the Ministry of Trade, Industry and Cooperatives (MTIC), MSME Policy 2015, Micro, Small and Medium Enterprises are the engine of growth for national economic development.

MSMEs, which are found virtually everywhere, at every street, every trading center and even in villages, include retail and wholesale shops, supermarkets, agricultural farms, manufacturers and processors, metal and carpentry workshops, hotels and restaurants, transporters, private schools, private health service providers and many others. Many are engaged in value-addition to agricultural and other raw materials while others are engaged in services.

I will focus on MSMEs engaged in manufacturing and value-addition, but my analysis equally applies to MSMEs engaged in other services.

Whereas the MSMEs employ many people, there is a general weakness of stunted growth and high mortality rate. Most MSMEs are said to die before their 5th birthday. Many analysts have attributed this problem mainly to lack of access to finance. Whereas this is true, it does not fully explain this problem, especially for MSMEs engaged in small scale manufacturing.

The main cause which analysts seem to have ignored is the problem of poor quality products and services, arising from failure by MSMEs to embrace quality standards.

This quality problem may be much bigger than we think because while many in the manufacturing and value-addition sector are keen to take their products to the market for sale, they are usually reluctant to submit the same products to Uganda National Bureau of Standards (UNBS) for laboratory testing and certification.

Many MSMEs talk of quality as an advertising and sales gimmick but without seriously addressing quality issues. Quality is defined in standards and therefore one can only fully understand the quality attributes of a product such as durability, palatability, compatibility, performance, safety, suitability for use, and others if one acquires and implements the relevant standards.

Poor quality will kill an enterprise

We all need to understand that producing and selling substandard products is not sustainable.

- First of all, consumers today are looking for quality and safety in products.

- Secondly, with substandard products, consumers may buy once but get disappointed with the product and never come back again, that is if they are not harmed by the product and come back with lawsuits.

- Thirdly, if authorities like UNBS or KCCA find out that your products are a health hazard, they will stop the production to protect the consumers of the products.

I recently saw on TV the Police fighting with some young men in Nansana who were making and packing bushera in filthy conditions. I wish the young men had first paid a simple visit to UNBS, they would have been advised on how to make their products in acceptable conditions. But it's not too late; let them seek guidance from UNBS.

Nevertheless, some enterprises have taken quality standards seriously and have greatly improved the quality of their products.

Quality pays

In Uganda, quality is demonstrated through achievement of UNBS quality certification. For enterprises that get UNBS certification, experience has shown that demand for their products increases.

When JESA Farm Dairy, owned by the family of the Late James Mulwana, acquired UNBS certification of their HACCP system (a type of food quality control system recognised internationally) sales shot up and they immediately got orders from British Airways for their dairy products!

There are many examples of companies that started as micro or small scale industries and when they acquired the UNBS Quality Certification Mark, they grew into large enterprises that currently dominate the manufacturing landscape.

They proudly added the phrase "…our products are of high quality and are certified by UNBS" to their adverts. What followed was a tremendous increase in sales.

And as luck would have it, the East African Community (EAC) partner states had signed a protocol that allowed free access to the EAC market for products bearing the quality certification marks. This opened doors into the EAC market.

One CEO confided in me that achieving the UNBS Q-mark worked miracles for his product to the extent that demand shot up and grew regionally and they could not sustain the supplies until they had to set up two more production lines. His company which was an SME, is currently listed among URA's top taxpayers. That's how quality standards can bring miracles in MSMEs.

Quality improvement is not magic

Quality improvement for MSMEs is not very difficult but requires concerted effort and consistency. The first step is to approach standards experts at UNBS. Theay will explain the required standards and give you guidance on quality improvement.

The key quality control requirements include: good hygiene practices, inspection of raw materials, control of the production processes, equipment calibration, proper labeling and packaging, testing of product samples in UNBS labs or any other recognised labs, keeping appropriate quality records, training workers, and control of non-conforming products among others. When an enterprise implements the above, the products will meet quality standards and on applying to UNBS for certification, however small the enterprise is, it will get the certification.

Government support

To encourage MSMEs to embrace quality standards, government is providing support especially in training and advisory services as well as certification through UNBS and its parent Ministry of Trade, Industry and Cooperatives (MTIC). These two institutions have been preparing for this task and have both established departments responsible for MSMEs.

And as luck would have it, the current Minister of Trade, Industry and Cooperatives, Hon. Amelia Kyambadde is an ardent supporter of MSMEs and is the one who pushed for establishment of MSME departments in both UNBS and the Ministry. With support from the Ministry's QUISP program and Trademark East Africa (TMEA), more than 50 MSMEs have already been supported to achieve the UNBS Quality certification Mark which was awarded to them by Hon. Amelia Kyambadde. These are MSMEs that showed a lot of seriousness in quality standards and they were supported so that they can serve as examples to others. More MSMEs are being supported by the QUISP program and TMEA to acquire UNBS certification. The UNBS budget was also boosted with 1.5 Billion shillings to improve capacity to certify MSMEs. Although much more needs to be done, this government support should encourage more MSMEs to embark on quality improvement and get certified.

If many micro and small enterprises take up the mantle and pursue quality improvement in the next few years, they should be able to grow into medium and large enterprises.  This means that the list of 1000 top taxpayers that URA publishes every year may increase to 10,000 or even 100,000. When this happens, the enterprises will be employing more Ugandans, consuming more of our local raw materials, using more utilities and paying more taxes. With such growth, I am confident that Uganda will be propelled into the middle income status. And yes, it's possible in the next 5 years!

The writer is a quality management and conformity assessment expert and works with UNBS as the Manager Testing Laboratories