The role of small businesses in Uganda's industrialisation agenda

On November 20, 2020, Uganda commemorated Africa Industrialisation Day under the theme Inclusive and sustainable industrialisation in the Africa Free Trade Area (AfCFTA) and COVID-19 era.

Since 2018, the African Union Commission has always hosted week-long events to celebrate African industrialisation.

The main objective of this event is to raise awareness of the strides made in industrialising Africa, as well as, to identify the binding constraints in advancing structural transformation on the continent. Unfortunately, due to the COVID-19 pandemic, the celebrations were subdued and mainly virtual, this year. Without getting lost in the theoretical, allow me to state that Africa as a continent has the fastest-growing and youngest population, which is migrating from rural to urban areas.

This situation presents opportunities to create new urban-based jobs, through manufacturing, without neglecting the agricultural sector which is still the backbone of our economies.

African countries need to reject the artificially driven division of labour where we export raw materials and import manufactured goods from the West. No wonder, President Yoweri Museveni insists that Africa is the donor to the West and not the other way round.

In Uganda, a lot of progress has been made in the industrialisation arena. As the Minister of Trade, Industry and Co-operatives stated in her remarks, the Government has been singularly focussed on creating an enabling environment for industrialisation through making strategic interventions in constructing roads, lowering the cost of electricity, promoting information and communication technologies and negotiating for favourable terms for accessing international markets.

Indeed, the revival of the Uganda Development Corporation and the making of public investments in Teso Fruit Factory, Atiak Sugar Factory, Kigezi Highland Tea and Kayonza Tea Factory, among others, is testament to this resolve. However, we need not ignore the catalytic role that small and medium-sized enterprises (SMEs) should play in industrialising Uganda. If we aspire to have inclusive and sustainable industrialisation, SMEs should be allowed to play a central role in this process. The experiences of India and China which rejected the neoliberal Washington consensus ideology by supporting local small-scale manufacturing and ignoring the route of privatising public enterprises, is a good one to follow.

Since SMEs dominate Uganda's private sector, I suggest that our industrialisation strategy should seek to build on what already exists, instead of reconfiguring things. I would like to argue for an SMEcentric industrialisation agenda in Uganda for the following reasons: First, unlike large enterprises, SMEs tend to be more labour intensive. As such, they are a very good vehicle through which urban low-skilled jobs can be created for the youth. Secondly, SMEs are easier to start, as they require lower investments. For many Ugandans, who complain of access to capital, SMEs are the perfect way through which they can join the manufacturing gravy train.

Thirdly, SMEs are invisible colleges that impart much needed hands-on industry knowledge and know-how to young people.

Finally, SMEs are quicker at adapting new technologies and innovating, compared to their larger counterparts.

However, for Ugandan SMEs to thrive, they need to take advantage of intra-African trade. Close to 50% of all Ugandan exports are destined for the region. Of these, SMEs may account for close to 80%.

Clearly, SMEs find it easier to export to the region and Africa, than to other international markets. Uganda's belonging to various trading blocs such as: The East African Community, the Common Market for East, Central and Southern Africa (COMESA), The African Continental Free Trade Area (AfCFTA), among others is a good thing.

However, for them to compete in these expanded markets, efforts should be made to build their supply side capacities, to protect them from non-tariff barriers, to support their staff to acquire work ready skills and to improve their access to affordable financing.

The writer is the executive director of the Federation of Small and Medium-Sized Enterprises — Uganda