Let us give SMEs a chance

Jun 29, 2018

Our MSMEs are not fully engaged in the public procurement processes through a combination of internal weaknesses and bureaucratic impediments.

Something is wrong when most of Ugandan business is shut out of the government procurement process.

This is happening in Uganda today.

Micro, Small & Medium Enterprises (MSMEs) account for 90 percent of the private sector. These account for 65 percent of national output (GDP).

On the other hand 75 percent of our now sh32trillion national budget is earmarked for public procurement but the MSMEs' share of this action is only 15 percent.

It does not take a rocket scientist to see that such numbers are behind the huge inequalities in our society and why the majority of us do not have hope of a better and brighter future.

Thankfully this is not an insurmountable problem.

If MSMEs had access to more opportunities accruing from the national budget the benefits to themselves and to the nation as a whole would be huge.

These would include increased production which would lead to job creation, raise incomes at household levels, leading to reduced income inequalities.

On a macro level this increased involvement would lead to stabilisation in inflation, interest rates and even the shilling as well as raise much needed revenue for government to improve our debt management and balance of payments situation.

Our MSMEs are not fully engaged in the public procurement processes through a combination of internal weaknesses and bureaucratic impediments.

Through our own surveys at The Private Sector Foundation of Uganda (PSFU) we have narrowed the issues to the following; the biding process for public procurements is complicated, time consuming and costly, political interference and corruption at local government level, insufficient capacity among our local contractors in the construction industry, similarly a general inadequacy in skills and entrepreneurship and last but not least, delayed payments for work done by government agencies.

Recognising that MSMEs minimal participation is partly due to their own deficiencies PSFU is working on ways to organise and train MSMEs in various sectors, create a Special Purpose Vehicle with MSMEs and other players - Banks, ICT companies for example which can be used to partner with foreign companies to bid for work. This can also be done with public entities under a Public Private Partnership arrangement.

And to lay the ground for the above we are exploring opportunities that can be ring fenced for our companies, mapping MSMES in by location and sector and doing a baseline survey of the opportunities available in the public procurement space.

That being said government needs to meet us halfway in promoting local participation.

The existing legal framework supports the promotion of local content.

Already government is pushing the Buy Uganda, Build Uganda (BUBU) initiative, some contracts have been ringfenced for nationals at the local government level, the Public Procurement and Disposal of Assets (PPDA) Act 2013 has already been amended to allow for MSMEs participation, local content law for Oil & Gas has been implemented and active steps to ensure this happens such as the set of a database of MSMEs to supply the industry is in place.

All that being said we at PSFU think more can be done.

For starters we think public procurement guidelines should not be only employed to curb corruption and increase transparency but to spur the economy through increased participation of MSMEs.

In addition, we think the framing of an "SME procurement agenda" to help address policy constraints, work on capacity deficiencies and address business development support issues would be timely.

We also urge greater transparency and simplification of the national procurement system. PSFU would also like to see the set up, "Tender help desk" to guide suppliers in preparing and submitting responsive bids. To cap it all we would like to see a Local Content Law enacted which has specific provisions for sub-contracting, that helps to build local capacity.

These are broad brush strokes of what we are thinking but the underlying principle, to shift more of the national budget towards our local businessmen cannot be overemphasised.

Efforts in this direction can only provide a win-win situations for us all, especially in these times when the economy is not at its best and regardless of this the needs of the people continue to grow.

The author is the chairman of the Private Sector Foundation of Uganda (PSFU)

Let us give SMEs a chance

Something is wrong when most of Ugandan business is shut out of the government procurement process.

This is happening in Uganda today.

Micro-, Small & Medium Enterprises (MSMEs) account for 90 percent of the private sector. These account for 65 percent of national output (GDP).

On the other hand 75 percent of our now sh32trillion national budget is earmarked for public procurement but the MSMEs' share of this action is only 15 percent.

It does not take a rocket scientist to see that such numbers are behind the huge inequalities in our society and why the majority of us do not have hope of a better and brighter future.

Thankfully this is not an insurmountable problem.

If MSMEs had access to more opportunities accruing from the national budget the benefits to themselves and to the nation as a whole would be huge.

These would include increased production which would lead to job creation, raise incomes at household levels, leading to reduced income inequalities. On a macro level this increased involvement would lead to stabilisation in inflation, interest rates and even the shilling as well as raise much needed revenue for government to improve our debt management and balance of payments situation.

Our MSMEs are not fully engaged in the public procurement processes through a combination of internal weaknesses and bureaucratic impediments.

Through our own surveys at The Private Sector Foundation of Uganda (PSFU) we have narrowed the issues to the following; the biding process for public procurements is complicated, time consuming and costly, political interference and corruption at local government level, insufficient capacity among our local contractors in the construction industry, similarly a general inadequacy in skills and entrepreneurship and last but not least, delayed payments for work done by government agencies.

Recognising that MSMEs minimal participation is partly due to their own deficiencies PSFU is working on ways to organise and train MSMEs in various sectors, create a Special Purpose Vehicle with MSMEs and other players - Banks, ICT companies for example which can be used to partner with foreign companies to bid for work. This can also be done with public entities under a Public Private Partnership arrangement.

And to lay the ground for the above we are exploring opportunities that can be ring fenced for our companies, mapping MSMES in by location and sector and doing a baseline survey of the opportunities available in the public procurement space.

That being said government needs to meet us halfway in promoting local participation.

The existing legal framework supports the promotion of local content.

Already government is pushing the Buy Uganda, Build Uganda (BUBU) initiative, some contracts have been ringfenced for nationals at the local government level, the Public Procurement and Disposal of Assets (PPDA) Act 2013 has already been amended to allow for MSMEs participation, local content law for Oil & Gas has been implemented and active steps to ensure this happens such as the set of a database of MSMEs to supply the industry is in place.

All that being said we at PSFU think more can be done.

For starters we think public procurement guidelines should not be only employed to curb corruption and increase transparency but to spur the economy through increased participation of MSMEs. In Addition we think the framing of an "SME procurement agenda" to help address policy constraints, work on capacity deficiencies and address business development support issues would be timely.

We also urge greater transparency and simplification of the national procurement system. PSFU would also like to see the set up, "Tender help desk" to guide suppliers in preparing and submitting responsive bids. To cap it all we would like to see a Local Content Law enacted which has specific provisions for sub-contracting, that helps to build local capacity.

These are broad brush strokes of what we are thinking but the underlying principle, to shift more of the national budget towards our local businessmen cannot be overemphasised.

Efforts in this direction can only provide a win-win situations for us all, especially in these times when the economy is not at its best and regardless of this the needs of the people continue to grow.

The author is the chairman of the Private Sector Foundation of Uganda (PSFU)