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2.0 Background: Entrepreneurship and Small Business Enterprise Growth in Uganda

Guest post by: Makerere University Business School

Article Overview: Small scale enterprises worldwide have been recognized as engines of growth and development (Harper, 1984; et al, 1997; Ba-el and Felsenstein, 1990) and in many countries there has been some considerable effort to support them so as to create the necessary employment opportunities, incomes and productive capacity.

2.0 Background: Entrepreneurship and Small Business Enterprise Growth in Uganda

by
Waswa Balunywa
Director
Makerere University Business School
Kampala, Uganda

Background

Small scale enterprises worldwide have been recognized as engines of growth and development (Harper, 1984; et al, 1997; Ba-el and Felsenstein, 1990) and in many countries there has been some considerable effort to support them so as to create the necessary employment opportunities, incomes and productive capacity. Besides the evidence available about the role of small enterprises some of the reasons for them being preferred as follows: ease of formation, capital requirements, flexibility, mobility and a variety of other factors. Seen from a global perspective, small businesses have a specific niche in global economic affairs. The global market is dominated by world class competitors in the form of multinationals and for the developing countries, small business appears to be the way to compete.

In Uganda Small Scale Enterprises (SSEs) are reported to contribute about 20% of Uganda's GDP (Tulip and Bitekerezo, 1993). This figure may be much higher given that Uganda's GDP is constituted by mostly agricultural production. this is mainly by small holders who may not even fit in the definition of micro and small businesses. Besides, since a great component of GDP is non-monetized and largely subsistence, it is possible that the contribution of both micro and small units is much larger than 20%.

It is also reported by the Ministry of Planning and Economic Development (1992) that over 80% of Uganda's manufacturing output is by small enterprises. The sector also employs up to 2.6 million people in Uganda (Uganda Investment Authority, 1996).

In Europe, the number of small and medium enterprises were 16,005,000 against large enterprises and they employed 68.6 million people as against 34.6 million people by large enterprises (The Netherlands, 1997).

In 1992, 53% of all jobs in America were held by people working in small businesses (Stoner, et al, 1996) and between 1988 - 90. While large businesses were laying off people, the small businesses were recruiting. In India, about 45% of total export earnings are contributed by micro and tiny enterprises (National Research Development Corporation, 1998). This is true in many countries worldwide that the small enterprise plays an important role in job creation and income generation.

Despite the importance of SSEs, they appear not to have been very successful in the Saharan Africa. Many studies that have been done (Wanyama, 1991; Ngobo, 1995; Sewanyana, 1997; Mutazindwa, 1997) indicate that small businesses have a variety of problems some of which are managerial and lack of markets. Since the small units have been identified as important players in the world markets, it is important that they are supported in their development.

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Article Tags: Ministry of Planning and Economic Development 1992, National Research Development Corporation, Uganda, Uganda Uganda Investment Authority



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