Skip to main content

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.

(JUNE 2018)

Labels:

Comments

Post a Comment

Popular posts from this blog

FINANCING OUR ENTREPRENEURS, A CHALLENGE WE CANNOT IGNORE

In recent weeks the issues of financing for business has been in the news, in one form or the other. We have seen the challenge a past minister is facing with having to hang onto his home. The case is in court, so we can’t discuss its merits and demerits, just to say he may have fallen prey to some predatory practices, with the lender skirting dangerously on the edge of the law. Across the border in Kenya a cap on bank lending rates has been repealed. Three years ago Kenya’s parliament passed a law restricting lending rates to two percentage points above the rate at which the central bank lent money. In reaction banks pulled back their lending to businesses, depressing the economy and prompting the reversal. So now banks can “properly” price their loans, often to the discomfort of small and medium sized businesses. The two incidents are related and speak to the availability and cost of credit. In my business career I have benefitted immensely from credit. It is next...
Post a Comment
Read more

BEWARE OF THE CON MAN

I read with a mixture of horror and sympathy for the victims of the latest Ponzi scheme gone bad in town. Last week a company, Global Cryptocurrencies Ltd, collapsed and along with it went billions of shillings, by police estimates, of their clients’ money. The company working out of an obscure office on Namirembe road, managed to rope in all manner of clients with the promise of magical returns – 40% a week! I have been in business for most of my life, if I could be guaranteed 40% week I would sell everything I own and jump in with both feet. Or maybe not. And this is why. They say if anything is too good to be true, it is. If you can get an annual return of 40% on your investment you will be doing extremely well. So if you put in a million shillings in your business and walk away at the end of the year with sh400,000 after taxes you have found a good thing, and I would like to be your friend. I have seen my share of scam artists and con men. Below are my fast an...
Post a Comment
Read more

THE MUKWANO I KNEW

We have lost the greatest Ugandan entrepreneur of our time, Mr Amirali Karmali, more popularly known as Mzee Mukwano. I have known Mzee Mukwano for more than 40 years and most of what I am today is due to him. And I am not alone. "He has helped countless people through school – as he did me. Helped countless more in business – as he did me. And he has been a steadfast friend and source of support to countless more – as he was to me.... I first met Mukwano around about 1977. My mother was the secretary for the chief of operations at Uganda Airlines, a man I knew only as Hamid. Mukwano had come to charter the Uganda Airlines’ Hercules plane and I happened to be around the office then. He was a short man, an unassuming man, but clearly a serious businessman who would charter the plane to bring in goods that were in high demand here. He run a popular whole sale shop in Nakasero – Egesa Commercial Agencies, a beehive of activity and the go-to place for anythin...
Post a Comment
Read more

OIL: WE NEED TO GET OUR ACT TOGETHER… YESTERDAY

(Published February, 2017) We are on the cusp of an important period in the history of this country and whether we can derive maximum advantage from this will depend on our capacity to put aside petty rivalries and come together as the business community. Over the next three years at least $20b or almost the size of the entire economy will be spent in readying us for first oil. This money will be spent on building infrastructure in the oil bearing areas of western Uganda, on our side of the oil pipeline to the Tanzanian port of Tanga, on the oil refinery and any number of things that will be needed to support oil production. About $3b (sh11trillion) was spent during the exploration phase of which less than three in every ten shillings   or about sh3trillion went to local contractors and suppliers. But this happened over eight years. This despite our local disorganisation and ignorance of the industry and its dynamics. However we should not be content with t...
Post a Comment
Read more

A STITCH IN TIME

Last week the Bank of Uganda raised its key Central Bank Rate (CBR) a percentage point to ten percent from nine percent. This was the first increase in more than a year, a move prompted by BOU’s projection that price increases coming around the corner. Increasing oil prices, a weaker shilling and new taxes on mobile money services were cited as reason for this anticipated increase. We know that in the last year or so there has been a cash squeeze, money has been hard to come by. While the economy has been growing this has not been spread around evenly. It was hoped that if the economy can keep growing we can all begin to feel the joy. The Bank of Uganda has helped on this front by lowering its CBR from a high of 21 percent about seven years ago when inflation hit record levels. This allowed more borrowing by the private sector which has helped keep our economy ticking. But just when the economy was beginning to gain traction BOU has slammed on the brakes. We may ...
Post a Comment
Read more

SPORTS AS AN ANALOGY FOR BUSINESS

Like everybody else I know, my spirit was lifted by the success of our athletes at the World Athletics Championships last week. The diminutive Halima Nakaayi showed the heart of a lion, sprinting over the last 100m of the women’s 800m event to snatch victory from a more favoured American runner. It was so uplifting to watch. Subsequent stories about the challenges she has had to overcome to get where she is now were testament to the determination of the woman. Joshua Cheptegei’s victory, while no less inspiring, had a different quality to it. Cheptegei was the man to watch going into the event. He won previously at the Commonwealth Games last year and the in the just concluded Golden League. He was a silver medalist in the 10,000m at the last World Championships in London, pipped to the tape by the now retired Mo Farah. Cheptgei still had to battle the Kenyans and the Ethiopians all the way. But as a favourite he lived up to expectations, which sometimes is more diffic...
Post a Comment
Read more

HOW TO RECOGNISE A PONZI AND NOT FALL VICTIM

Another Ponzi scheme has come crashing down around the ears of hundreds of “investors”. Unsurprisingly. In its recent reincarnation poor Ugandans were lured into a scheme where they bought computer tablets. This entitled them to a monthly pay off, $100, and a Christmas bonus for their children. In this case the unsuspecting investors -cum -victims were being given a share certificate. Meaning you accept to take the part of the risk in this project. Which was inadvertently reducing their burden of risk and liability for the issuing company. I leave that area to smart lawyers to handle.   As is always the case with these things, it’s not quite clear where the pay-out will come from. A common characteristic of these schemes is that you might get initial payments before you starting missing a few and the stories begin. The promoters of these schemes or scams often use the money from the latest entrants to pay the older “investors” until one of two things happen. Either...
Post a Comment
Read more