GLOBALENTREPRENEURSHIP

MONITOR

GEM UGANDA 2003

EXECUTIVE REPORT

Thomas WalterWaswa Balunywa

Peter RosaArthur SserwangaStefanie Barabas

Rebecca Namatovu

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Co-Sponsors

CopyrightThomas Walter, Waswa Balunywa, Peter Rosa, Arthur Sserwanga, Stefanie Barabas, Rebecca Namatovu

for GEM Uganda @ MUBS, Kampala, Uganda.All rights reserved.

Design: Herbert Musisi, Acha Graphics

SPEAR MOTORS LTD.

Principal Sponsors

European Union Bank of Uganda

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Preface

The experience of countries like Taiwan and Singapore shows that a nation does not need to own plentifulnatural resources to prosper economically. It is people that are a country’s greatest resource, and when theypossess a spirit of enterprise and are exposed to opportunity incentives and a conducive environment, theywill become prosperous.

How far have Ugandans developed such a spirit of enterprise? Until now we have had to rely on observationand anecdotal evidence to answer this question. We are aware of many successful entrepreneurs who havemade their mark on the Ugandan economy. These entrepreneurs are not just drawn from migrant communi-ties, but they are also from indigenous Ugandans themselves. We can point to many developments theyhave been responsible for (tea factories, shopping malls, hotels, entertainment complexes, many types ofmanufacturing, and banks). Yet these entrepreneurs appear an elite few. Most Ugandans still live in abjectpoverty. It is not uncommon for Ugandans to think of themselves as lacking an entrepreneurial culture. Mosthighly educated Ugandans have a reputation for aspiring for white-collar employment, and are reluctant to“make their hands dirty”. Despite this, examples can be found of even highly educated people becomingsuccessful business men and women. This again illustrates how little we actually know about the state ofentrepreneurship in Uganda. What are the facts? How does Uganda’s entrepreneurial achievement com-pare with that in other countries?

To seek answers to these questions Makerere University Business School (MUBS) has joined the GlobalEntrepreneurship Monitor to conduct a survey of entrepreneurship in Uganda. The Global EntrepreneurshipMonitor is a consortium of researchers from over thirty countries which is coordinated by the London Busi-ness School in the United Kingdom and Babson College, Boston in the USA. GEM is an ongoing pro-gramme, which will be repeated in future years. This will ensure that MUBS can compare the state ofentrepreneurship in Uganda with that in other countries, and also monitor changes over time.

This inaugural 2003 GEM Executive Report for Uganda highlights the results of the first year of research,which was made possible by sponsorship from the European Union, Bank of Uganda, Spear Motors Ltd.and Makerere University Business School. It shows that the spirit of enterprise in Uganda is thriving, but thatthe economic environment and public infrastructure still need to be improved before entrepreneurship canbe fully exploited to serve national reconstruction and economic development. The findings are of value notjust for academics, but for all policy makers and practitioners interested in the development of Uganda.

E. Tumusiime-MutebileGovernor, Bank of Uganda

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Contents

Tables and Figures 5

Abbreviations and Country Codes 6

Acknowledgements 7

Executive Summary 8

Introduction 10

Part I 15

Entrepreneurial Activity in Uganda:The Adult Population Survey

Part II 19

Interpreting the Nature of Entrepreneurial Activity in Uganda,and How Far or in What Way it is Linked to Economic Growth

Part III 27

Assessment of Uganda’s Entrepreneurial Climate:The Expert Interviews and Questionnaires

Outlook 49

References 50

Appendices 51

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Tables and Figures

Table 1: TEA comparisons and the Opportunity/Necessity Ratio in 2003 21

Table 2: TEA and GDP per capita 22

Table 3: Structural TEAs in Uganda 23

Table 4: Innovation Perception and Availability of Technologies/Procedures 24

Table 5: Entrepreneurial Scorecard (comparison of 31 countries) 48

Table 6: Characteristics of Uganda Country Experts 51

Table 7: APS Demographics 53

Table 8: GEM Uganda 2003 - Adult Population Sample 54

Figure 1: The GEM conceptual model 12

Figure 2: Total Entrepreneurial Activity (TEA) by Country - 2003 16

Figure 3: Opportunity and Necessity Entrepreneurship by Country - 2003 16

Figure 4: Start-Ups and New Firms by Country - 2003 17

Figure 5: TEA Differences in Gender by Country - 2003 17

Figure 6: TEA, TEA opportunity, TEA necessity, start-ups and new firms 17

by age and gender of Ugandans

Figure 7: Business Angels by Country - 2003 18

Figure 8: Amount of Money Provided by Ugandan Business Angels- 2003 18

Figure 9: Inflation (CPI) 28

Figure 10: Exchange rates – UGX/USD (average devaluation of 9%) 28

Figure 11: Selected Interest Rates (%) 28

Figure 12: Percentage of Ugandans Living in Poverty 30

Figure 13: Uganda’s GDP Growth Rates at Factor Cost at Constant (1997/98) Prices 31

Figure 14: Uganda’s GDP Per Capita Growth Rates 31

Figure 15: Perception of Government Policies in an international comparison 32

Figure 16: Perception of Government Programmes in an international comparison 35

Figure 17: Perception of Financial Support in an international comparison 37

Figure 18: Perception of Education and Training in an international comparison 39

Figure 19: Capacity for Entrepreneurship in Uganda in an international comparison 39

Figure 20: Perception of R & D Transfer in an international comparison 41

Figure 21: Intellectual Property Rights in Uganda in an international comparison 41

Figure 22: Perception of Commercial and Professional Infrastructure 42

in an international comparison

Figure 23: Perception of Market Openness in an international comparison 44

Figure 24: Business Opportunities in Uganda in an international comparison 44

Figure 25: Perception of Access to Physical Infrastructure 45

in an international comparison

Figure 26: Perception of Cultural and Social Norms in an international comparison 46

Figure 27: Social Legitimacy of Entrepreneurship in an international comparison 47

Figure 28: Women Entrepreneurs in Uganda in an international comparison 47

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AbbreviationsBOU Bank of UgandaCOMESA Common Market for Eastern and Southern AfricaDANIDA Danish Agency for International DevelopmentDFID Department for International DevelopmentDR Democratic RepublicEAC East African CommunityEFC Entrepreneurial Framework ConditionGDP Gross Domestic ProductGEM Global Entrepreneurship MonitorGOU Government of UgandaGTZ Gesellschaft für Technische Zusammenarbeit (German Technical Co-operation)ILO International Labour OrganisationKfW Kreditanstalt für Wiederaufbau (German Bank for Reconstruction)LC Local CouncilLRA Lord’s Resistance ArmyMFPED Ministry of Finance, Planning and Economic DevelopmentMSE Medium-Scale EnterpriseMUBS Makerere University Business SchoolNEPAD New Partnership for Africa’s DevelopmentNRM National Resistance MovementOECD Organisation for Economic Cooperation and DevelopmentPAF Poverty Action FundPC Personal ComputerPEAP Poverty Eradication Action PlanPMA Plan for the Modernization of AgriculturePSFU Private Sector Foundation UgandaR&D Research & DevelopmentSIDA Swedish International Development AgencySME Small and Medium EnterpriseTEA Total Entrepreneurial ActivityUBOS Uganda Bureau of StatisticsUGX Uganda ShillingUNHS Uganda National Household SurveyUSAID United States Agency for International DevelopmentUSSIA Uganda Small Scale Industries AssociationUWEL Uganda Women Entrepreneurs Association Ltd.

Country CodesAR Argentina AU AustraliaBE Belgium BR BrazilCA Canada CL ChileCN China DE GermanyDK Denmark ES SpainFI Finland FR FranceGR Greece HK Hong KongHR Croatia IR IrelandIS Iceland IT ItalyJP Japan NL NetherlandsNO Norway NZ New ZealandSE Sweden SG SingaporeSI Slovenia SW SwitzerlandUG Uganda UK United KingdomUS U.S.A. VE VenezuelaZA South Africa

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Acknowledgements

♦ Our principal sponsors: the European Union (in co-operation with the Ministry of Finance,Planning and Economic Development as well as the Private Sector Foundation Uganda) and theBank of Uganda - without your financial support Uganda’s participation in GEM 2003 would nothave been possible. We are further indebted to the European Union for approving to sponsorGEM Uganda @ MUBS in 2004 and 2005.

♦ Our co-sponsors: Spear Motors Ltd. and Makerere University Business School – yourfinancial support has been of fundamental help in running the GEM Uganda @ MUBS office.

♦ Our country experts (key informants) who shared their valuable insights into the state ofentrepreneurship in Uganda and our respondents of the adult population survey for theirwillingness to answer all our questions.

♦ The Uganda Bureau of Statistics for their essential assistance in designing the sample for theadult population survey, specifically Atai Imelda, Muwonge James, Mayinza Seth N., TamusuzaTony.

♦ Dr. Stephen Haslett (Director and Associate Professor, Statistics Research and ConsultingCentre, Massey University, New Zealand) for his professional statistical advise on samplingmethods and procedures as well as his powerful understanding of the Ugandan specific context.

♦ Nick Roberts (Advisor to the NAO, Ministry of Finance, Planning and Economic Development) forhis excellent advice and support in establishing GEM Uganda @ MUBS.

♦ The Local Council Chairpersons of the following parishes: Kabigi, Gulama, Kwapa, Nangambo,Katookye, Mabungo, Ayipe, Pamitu, Kagugube, Kazo, Naguru 1, Namokwekwe, Kamakuzi,Mvara. They were most helpful in locating selected respondents for the adult population surveyand introducing them to our field staff.

♦ The field teams who excelled carrying out the expert interviews and the interviews of the adultpopulation survey.

♦ The GEM coordination team at London Business School and Babson College for theirprofessional support and their special effort to integrate GEM Uganda 2003 into the globalconsortium.

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Executive Summary

What is the Global Entrepreneurship Monitor (GEM)?

GEM originated in September 1997 as a research programme run jointly by London Business School inthe UK and Babson College in the USA. Teams from each country who participate in the GEMprogramme undertake entrepreneurship research based on a core set of standardised measuringinstruments and methodologies. Teams produce an independent report (GEM Uganda, GEM USA, etc.)that explores in detail the nature, extent and effects of entrepreneurship within their country, and includescomparisons with other nations.

The GEM study seeks answers to three fundamental questions:

• Does the level of entrepreneurial activity vary between countries (and regions within countries)and if so, how much?

• Does the level of entrepreneurial activity affect national or local rates of economic growth?

• What factors (economic, cultural) make a country more or less entrepreneurial?

The GEM Uganda team, in its first year of research, interviewed (face-to-face) 1,015 Ugandans ofworking age about their entrepreneurial intentions and activities. To investigate the entrepreneurialclimate in Uganda, secondary economic reports and statistics were analysed, and supplemented withinterviews of 36 experts on the economy of Uganda.

What is the level of entrepreneurial activity in Uganda, and how does it compare toother countries?

• Uganda has the highest TEA (Total Entrepreneurial Activity) index (29.2) among all GEMcountries, signifying that 29 out of 100 Ugandans – almost every third Ugandan - is engaged insome kind of entrepreneurial activity. In comparison the USA, the “country of entrepreneurship”has a score of 11.9, Germany, Italy, Japan and France are less than 6%. The mean TEA for all31 GEM countries in 2003 is 8.8.

• This index is extraordinary high for Uganda independently in both men (highest) and women(second highest), though Uganda follows the world trend in showing a higher TEA for men.

• The GEM Consortium distinguishes between entrepreneurship inspired by necessity from thatinspired by opportunity. Uganda has the highest rates both for “necessity” and “opportunity”entrepreneurship.

• Uganda scores by far highest among all GEM countries on the number of “business angels” -respondents who have provided any kind of funds for other people to start a business. Theaverage amount of money invested by these “angels” is, however, very low.

What do these high rates mean and how are they linked to economic growth?

• Developing countries appear to have a higher rate of entrepreneurial activity than developedcountries. This implies that the processes and effects of entrepreneurship may be different insuch countries. Previous GEM research has identified “necessity” entrepreneurship being muchhigher in developing countries, and “opportunity” entrepreneurship lower than in developedcountries. The Ugandan data, however, suggest that the processes are more complex, as:

♦ Opportunity entrepreneurship is also very high, and indeed, higher than the index fornecessity entrepreneurship.

♦ There are marked regional differences in rates of entrepreneurial activity. The Easterndistricts show spectacularly high rates of activity, whilst the Western districts reveal lowlevels. High rates in the East are unexpectedly higher than thos in the Southern and Centraldistricts dominated by Kampala.

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♦ In groups where education and income is high, the rate of opportunity entrepreneurship isexceptionally high by world standards. With access to more opportunity, Ugandans are evenmore entrepreneurial.

♦ Up to a third of Ugandans feel that they are selling products that are relatively new andinnovative for their areas. This suggests that highly competitive and routinised “low quality”businesses are less prevalent than is generally thought.

• The relationship between entrepreneurship and economic growth is also complex. Across allGEM countries, there appears to be a strong correlation between the index for “necessity”entrepreneurship and per capita annual GDP. There is no relationship with the “opportunity”index. This, however, merely shows that countries with lower GDP have more necessity drivenentrepreneurship. When GROWTH in per capita GDP is considered, both necessity andopportunity indices show significant correlations (measured in local currency).

• Another complex problem is how far economic growth is caused by entrepreneurship and howfar entrepreneurship feeds off economic growth. It is possible that it is the entrepreneurs withlarge amounts of capital (the mainstream habitual or portfolio entrepreneurs) who have thegreater role in creating wealth and development. Smaller scale entrepreneurs are more likely todistribute wealth rather than create it.

What is the environment like for entrepreneurship in Uganda?

GEM identifies a number of framework conditions relating to the environment for entrepreneurship in eachcountry. For each framework condition the report provides a summary overview, followed by an analysisof the expert evaluations and recommendations. The EFCs analysed are:

• EFC1: Government Policy

• EFC2: Government Programmes

• EFC3: Financial Support

• EFC4: Education and Training

• EFC5: R&D Transfer

• EFC6: Commercial and Professional Infrastructure

• EFC7: Market Openness

• EFC8: Access to Physical Infrastructure

• EFC9: Cultural and Social Norms.

The experts feel that although the Government of Uganda has made many positive strides towardsencouraging entrepreneurship, this has not gone far enough or has been sufficiently well targeted toneeds. In terms of international comparisons, Uganda is still underdeveloped in terms of physicalinfrastructure, commercial infrastructure and the development of human capital and knowledge. Mostserious of all, the number of international capitalist entrepreneurs thriving in Uganda are few, R&D isalmost non-existent, and indigenous corporations have failed to proliferate yet. A strong entrepreneurialspirit is wasted if the conditions handicap entrepreneurs in trying to compete at a global level.

Outlook

This report is the first attempt to monitor the state of entrepreneurship in Uganda. Conclusions will beinevitably tentative until the evidence from subsequent years is available for comparison, and for thisreason strong recommendations are not offered as they would be premature. The first year’s resultsshow, however, that there is nothing wrong with the entrepreneurial spirit of the people of Uganda. Theyare the world’s most entrepreneurial people to date. How this translates into economic development andpoverty alleviation remains a fundamental, but still open, question. The report has shed some light onthese complex issues, and hopes to build upon this knowledge in future years.

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Introduction

Why does Entrepreneurship matter in economic development?

The causes of economic development have been much debated. The dominant view, propounded byneo-classical economists, is that economic development is largely a function of capital and labour. Toincrease development, an economy must invest in capital and labour (financial and physicalinfrastructure, health, education, skills and training). In this view, the economy is seen to be generallybalanced (in equilibrium) changing slowly and at a relatively constant rate as investment in capital andlabour improves. For countries starting at a low level of development, a great deal of investment isneeded before a country can “take off” and become a fully-fledged mature capitalist economy. This islikely to take a very long time.

The limitations of this traditional view of economic development have been exposed since the 1960s,when major changes occurred in all domains (political, social, economic and technological). Countrieswho relied on steady state growth (including the US and the UK) ran into economic difficulties asconditions changed. The multinational corporations, the traditional sources of jobs and wealth, were nolonger performing well. A period of (often) traumatic reconstruction was forced on many countries. Thiscontinued into the 1990s as large state or parastatal organizations in former communist countries wereexposed to competitive market forces.

The realization that small or new firms were an important ingredient in economic development wasreleased in the 1970s. At that time the small firms sector was the only one contributing significantly to thecreation of new jobs, and even today all economies contain a significant small firm sector in which smallfirms are proportionally the great majority of all businesses. The special importance of small firms todeveloping countries was recognized as early as the late 1940s, when India invested heavily in promotingsmaller firms. Developing countries have few indigenous corporations, and multinationals as a source ofjobs have proved to be unreliable, as peripheral multinational branches tend to be an early candidate forclosure when times get hard. The protection and development of small firms have come to be regardedas especially vital. Small or new firms are started by entrepreneurs, not systems or governments. To havea healthy small firms sector, therefore, you need a plentiful supply of entrepreneurs to create them.Entrepreneurs are thus vital to economic development.

Perhaps the dominant reason why entrepreneurs are important for economic development, however, istheir role in the commercialisation of new knowledge. Most of the world’s great and small inventions havebeen commercialised not by innovation units in large companies, but by entrepreneurs. The “Biro” pen,for example, transformed the way we write, but “Biro” was a real inventor and entrepreneur. The light bulbwas not developed by a committee, quango or innovation unit, but by Thomas Edison, an inventorentrepreneur. The list of inventor/entrepreneurs is very long, and all have radically transformed economyand society. Most inventions have led to significant new multiplier effects. For example how manyapplications and services have arisen from the PC? Baumol (2003) attributed most of the spectacular risein economic development in the last fifty years to the partnership between inventors/entrepreneurs andcapital, chiefly in the form of corporate organization and finance.

People in developing countries, such as Uganda, can become disheartened that all the innovations seemto come from abroad. In terms of development, however, entrepreneurs also play an important role intransferring and diffusing the benefits of innovation to their home countries. Most of the benefits from newinnovations, even in developed countries, are “transfer” developments from the source of originalinnovation. This process is simply more obvious in developing countries. Finally there are indications thatinventions are beginning to take off in developing countries where a science and technology base hasbeen developed. The lack of effective partnerships between inventors, entrepreneurs and capital,however, is impeding their commercial development.

Although the neo-classical model of economic development is still dominant, and the importance ofentrepreneurship is often overlooked in this model, research has now established that entrepreneurshipmay not just be a factor in the equation, but a major driver of economic development. If this is true,entrepreneurship and its link to economic development needs serious study and research.

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What is The Global Entrepreneurship Monitor?

Uganda participated in the Global Entrepreneurship Monitor (GEM) for the first time in 2003. The aim ofGEM is to create an annual assessment of entrepreneurial activity across countries as well as to explorefactors, which are responsible for differences in entrepreneurial rates. A greater understanding of thesefactors is essential in order to develop policies that can enhance entrepreneurial activity and economicgrowth.

The Global Entrepreneurship Monitor (GEM) originated in September 1997 as a research programme runjointly by London Business School in the U.K. and Babson College in the USA. Teams from each countrywho participate in the GEM programme undertake entrepreneurship research based on a core set ofstandardised measuring instruments and methodologies. Teams can supplement this core research withmore customised agendas. They each produce an independent report (GEM Uganda, GEM USA, etc.)that explores in detail the nature, extent and effects of entrepreneurship within their country, and includescomparisons with other nations. Additionally, one international document (the GEM Executive Report) isproduced, which summarizes findings across all the participating countries. GEM enables countries, forthe first time, to compare themselves not just in terms of conventional OECD indicators of economicgrowth, but also in terms of entrepreneurial performance. It is this that makes GEM such an exciting newset of indicators for economic development planners and policy makers.

The first GEM report in 1999 only encompassed the G7 countries. Since then the number of countriesparticipating in GEM grew year on year and has increased to over 30 in 2003. The increasingparticipation of developing countries has widened the scope of GEM considerably, and has introducednew problems of comparability and interpretation of the core data. At the same time, as new countries areadded, opportunities are increased for fresh insights into global entrepreneurship processes.

The GEM study focused on answering three fundamental questions:

• Does the level of entrepreneurial activity vary between countries (and regions within countries)and if so, how much?

• Does the level of entrepreneurial activity affect national or local rates of economic growth?

• What factors (economic, cultural) make a country more or less entrepreneurial?

What is Entrepreneurship?

The definition of entrepreneurship has proved controversial. Not only do different people have differentviews of what entrepreneurship is, but also the same people may use different definitions whenresearching entrepreneurship in different economic and social contexts. Three main types of definitionsare commonly distinguished:

• Entrepreneurship as a set of creative personal qualities that contribute to personal success.What these qualities are is also controversial, but most scholars would include high achievementmotivation, opportunism, goal orientation, creativity, a feeling of being in charge, leadership, persistenceand a high need for independence or autonomy. An “entrepreneur” is thus a person, either born orsocialised in such a way that he or she possesses many of these traits in abundance. It follows that thesequalities may be necessary for success not just in a small business context, but also in large businessesand the public sector. The entrepreneur is thus likely to be encountered in many walks of life. In this typeof “person centred” definition, a person, once an entrepreneur, will keep acting entrepreneurial whereverhe or she goes. Logically many people will also never be entrepreneurs, as they do not possess thesequalities in significant measures.

• Entrepreneurship as a creative process for extracting value from the environment.This definition has much in common with the previous one, as enterprising qualities such as those justlisted remain an essential component of success. The main difference is that they are not permanentlylinked with a person. They just manifest themselves while the entrepreneurial process or event is takingplace. This makes it possible for a person to suddenly display these qualities when called upon to do so,or when external constraints relax, even though he or she may have not acted entrepreneurial for most oftheir lives. Under this definition anyone can potentially act entrepreneurial.

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• Entrepreneurship as the creation of a new organization (usually a new business).This derives from the 18th Century view of the entrepreneur as a contractor, whose transactions lead tothe formation of business enterprises. This is one of the most neutral definitions of entrepreneurship as itdoes not matter what “entrepreneurial abilities” the entrepreneur has in the sense of the other definitions.It is merely sufficient to start an enterprise to become an entrepreneur.

GEM defines entrepreneurship as “any attempt at new business or new venture creation, such as self-employment, a new business organization, or the expansion of an existing business, by an individual,teams of individuals, or established businesses.” This includes formal as well as informal entrepreneurialactivity.

The GEM definition is thus of the third type, and concentrates on business formation. It is important tokeep this firmly in mind when interpreting the GEM statistics. Entrepreneurial activity is the creation ofnew businesses. If a nation shows a low level of entrepreneurial activity, for example, it does notautomatically mean that its people do not possess “entrepreneurial qualities” in the sense of definitions 1and 2. It merely means that the number of new firms started is comparatively low. A low level ofentrepreneurial attitudes and qualities in the people could be a reason why levels of new firms are low,but this would need to be established in separate research and is not an automatic feature following fromdefinition 3.

What is the GEM-model?

A GEM model for entrepreneurship and economic development has been constructed by the centralBabson/London Business School team. It is essentially an empirical model that looks at both theestablished and the entrepreneurial sector and illustrates the relationship between them. GEM specificallyexamines the strength and influence of the entrepreneurial sector on the economy. GEM is committed toempirically explore this model, and seeks to develop it further in the light of new evidence from thecountry studies. Figure 1 illustrates the GEM conceptual model.

The GEM conceptual model specifies two distinct but complementary mechanisms for national economicgrowth, both being subject to a country’s social, cultural and political context. The first one describes the

influence of the generalnational frameworkconditions (the generaleconomic environmentin a specific country) onthe established firms,which contribute to thenational economicgrowth.

The second importantmechanism for nationaleconomic growth is theimpact of businesschurning, which isdetermined by acountry’sentrepreneurialframework conditions.They influence theindividual’s perceptionof entrepreneurialopportunities as well asthe entrepreneurialcapacity (skills andmotivation) to act onsuch opportunities.

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What methods does GEM employ?

GEM uses the following approaches to collect data which are standardised for all countries:

• An adult population survey of working age adults• Interviews with country experts on entrepreneurship

• Questionnaires for country experts on entrepreneurship

Country teams are encouraged to supplement this with secondary data sources and to add researchagendas of their own to supplement the core.

Data collection in Uganda

1. Adult Population Survey

The same Adult Population Survey is supposed to be conducted in all GEM countries, consisting of(ideally) telephone interviews of a random sample of 2000 people in each country. Unfortunately, theUgandan sample consisted of only 1015 respondents as the survey had to be done in a very short periodof time. The method usually employed is a telephone interview but due to the lack of telephone facilities1

in Uganda, face to face interviews were conducted (see Appendix III and IV for details on demographicsand procedures).

The respondents were questioned about their entrepreneurial activity as well as about their assessmentof the entrepreneurial climate in Uganda. Respondents who were engaged in starting a new business,owned a business or had invested in somebody else’s start-up were questioned in more detail aboutthese activities.

The main problem with administering the questionnaire was that of language. Ugandans speak a numberof diverse languages. Many people speak English well (it is the official language of Government andcommerce in Uganda, and a majority of schools teach in English), but only a minority could speak Englishto a standard that the questionnaire could be easily understood. Of the 1015 questionnaires, 196 (19.3 %)were administered in English and a further 130 (12.8%) were conducted in mixture of English and a locallanguage. The remaining 689 (67.9%) were conducted in nine Nilotic and Bantu languages (Kakwa, Alur,Lugbara, Ateso, Luganda, Lusoga, Rufimbira, Rukiga and Ruankole). Of these the largest group wasLuganda (228). This diversity of language introduced problems of validity, but the interviewers werecarefully trained to tease out what the question is really asking for. For example the Adult PopulationSurvey GEM 2003 Q1d states:

“You have, in the past three years, personally provided funds for a new business started by someoneelse, excluding any purchases of stocks or mutual funds”.

It would be, taking this question literally, very difficult to translate “stocks or mutual funds” into, say, Alur,Kakwa or Lusoga and only the more educated members of these people would have any idea of whatthese are. Nevertheless it is possible to convey reasonably accurately whether money had been given tosomeone else to help them start a new business. In this way, the Uganda team is confident that theessential questions in GEM have been delivered satisfactorily, even though much work remains to bedone to further research validity problems. Problems of validity may be more extreme for Uganda, but arenevertheless common to most GEM countries.

1 It is not just a case of most people lacking telephones. Over half a million Ugandans use mobile rather than land phones,making it very difficult to identify telephone numbers.

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2. Country Expert Interviews

In Uganda 36 experts on entrepreneurship were chosen by reputation and referrals concerning theirknowledge of one of the entrepreneurial framework conditions. Our experts consisted of 22 professionalsand 14 entrepreneurs. “Professionals” have acquired expertise on entrepreneurship as academics,bankers, consultants, or politicians. “Entrepreneurs” in contrast have a history of practical experience inentrepreneurship. These experts were interviewed about factors that limit and contribute toentrepreneurship as well as about suggestions on how to increase entrepreneurial activity in their country.The experts are listed and profiled in Appendix I.

3. Country Expert Questionnaires

The 36 experts also completed a questionnaire on the framework conditions and some additional topicslike entrepreneurial opportunity, capacity and motivation, intellectual property rights and womenentrepreneurs. In addition, they were asked the initial questions of the Adult Population Survey.

4. National and International Economic Data

The GEM global team provides national and international economic data from a variety of crediblesources (i.e. OECD, ILO, World Bank), which is supplemented by economic data from Ugandan Sources(i.e. UBOS, MFPED, BOU).

The data collection and analysis in every participating country is coordinated by the GEM global team toensure comparability.

Structure of the GEM Uganda 2003 Executive Report

In line with precedence from other GEM country reports, the Uganda country report is divided into threemain parts:

Part I Entrepreneurial activity in UgandaThis section deals with the results of the Adult Population Survey indicating howentrepreneurial Uganda was in 2003 in comparison to other GEM countries.

Part II Interpreting the nature of entrepreneurial activity in Uganda, and how far or in what wayit is linked to economic growth.

Part III Assessment of Uganda’s entrepreneurial climateThe results of the Expert Questionnaires and Expert Interviews are the contents of this part,describing the state of the Entrepreneurial Framework Conditions in Uganda.

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As just indicated, the GEM definition of entrepreneurship focuses on the start-up of new firms andventures. The more people participate in new venture formation, the more entrepreneurial the country. Inorder to measure this, GEM has compiled three measures of entrepreneurial activity based on theinformation from the Adult Population Survey:

1. Start-ups: the percentage of adults who have engaged in any activity to start a business in the past12 months, expect to be a full or part owner, and have not paid salaries or wages for more than threemonths.

2. New firms: the percentage of adults who are actively involved in a new firm as full or part owner andmanager, and have not paid salaries or wages for more than 42 months.

3. Business angels: the percentage of adults who have provided funds for other people to start abusiness (informal venture capital).

The first two indicators are used to compute an index of Total Entrepreneurial Activity: the TEA index. Thepercentage of start-up entrepreneurs and new firm entrepreneurs are added, adjusting for doublecounting (adults who fit in both categories are counted only once) and “don’t know” answers to variousscreening questions (for further details see GEM global report 2003 or www.gemconsortium.org). Thismeasure is assumed to be robust and valid and, for the purposes of this report, it will be treated as such.However, it should be realized that validity of the TEA is yet to be fully tested, especially in the context ofdeveloping countries.

Total Entrepreneurial Activity (TEA)

Figure 2 displays the confidence intervals for the TEA index in the different GEM countries. As only asample of a population can be interviewed the calculation of average scores always bears the risk of notrepresenting the population properly. For this reason a confidence interval of 95% was selected torepresent the TEA, indicating that the real TEA rate in the population lies somewhere on the vertical linedrawn for each country with a probability of 95%.

It is striking that Uganda has the highest TEA index (29.2) among all GEM countries, signifying that 29 outof 100 Ugandans – almost every third Ugandan - is engaged in some kind of entrepreneurial activity.Uganda is closely followed by Venezuela (27.3) - the TEA scores could even be identical taking intoconsideration the overlap of the confidence intervals. Uganda far outstrips many of the world’s largesteconomies. Argentina as the country with the third highest TEA only reaches a value of 19.7, the UnitedStates as the “country of entrepreneurship” a score of 11.9. Germany, Italy and Japan are less than 6%and France as the country with the smallest TEA scored a value of only 1.6. The mean TEA for all 31GEM countries in 2003 is 8.8.

Entrepreneurial activity in UgandaThe Adult Population Survey

Part I

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Opportunity and necessity entrepreneurship

GEM distinguishes between entrepreneurship motivated by a good business opportunity andentrepreneurship motivated by necessity – the absence of any other work opportunities. Other commonexpressions for this distinction are “push versus pull entrepreneurship” or “replication versus innovationentrepreneurship”.

The high Ugandan TEA index is composed of the highest opportunity (17.1) and the highest necessity(13.2) entrepreneurship rates in all GEM countries, 56% of Ugandan entrepreneurs being motivated byopportunity and 44% by necessity. Uganda is again closely followed by Venezuela, which has a TEAopportunity of 16.1 (58%) and a TEA necessity of 11.6 (42%) (Figure 3). It is striking that the rates ofopportunity entrepreneurship are higher than the rates of necessity entrepreneurship in all of the GEMcountries except China. In developing countries like Uganda and Venezuela we expected highernecessity than opportunity entrepreneurship rates (see part II).

Start-up and new firm entrepreneurial activity

A comparison of the number of start-ups and new firms in the different GEM countries is displayed inFigure 4. The sum of start-ups and new firms is slightly higher than the TEA score as double counting(respondents who are engaged in both start-ups and new firms) is eliminated in the TEA score.

Uganda has by far the highest new firm participation rate (16.9) and the second highest start-up activity(14.8) among all GEM countries. Venezuela, as the country with the second highest new firm rate, onlyreaches a score of 9.7 but out numbers Uganda in terms of start-up activity (19.2). Like the TEA scoresboth start-up and new firm rates are much lower in most other GEM-countries.

The Ugandans are slightly more involved in new firms (53%) than in start-ups (47%) which is against thetrend in most other GEM countries – only one third has a higher new firm than start-up rate.

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Demographic characteristics of entrepreneurs

As Figure 5 indicates, males are more involved in entrepreneurial activity than females across all GEMcountries, Uganda ranking 23rd (out of 31) in terms of male prevalence (61%).

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Figure 6 gives a more detailed impression of Ugandan entrepreneur’s characteristics in terms of genderand age. All measures for entrepreneurial activity (TEA, TEA opportunity, TEA necessity, start-ups andnew firms) are higher for males between 18 and 44 years whereas between 45 and 54 years, womenseem to be more engaged in entrepreneurial activity than men. Above that age, men and women arealmost equally active – especially in necessity entrepreneurship - women this age seem to be particularlyinvolved in new firms.

Business angels

Uganda scores by far highest among all GEM countries on the number of business angels - respondentswho have provided any kind of funds for other people to start a business (Figure 7). However, a closerlook at the amount of money provided (Figure 8) shows that more than 50% of business angels providedless than UGX100,000 ($50); only 8% provided more than UGX500,000 ($250). Respondents in high-income countries may not have considered such small amounts of funds as worthy of mention and thiscould contribute to their lower rankings on the international scale. Uganda’s high score still givesevidence of the support for entrepreneurs in this country.

The majority of Ugandan business angels provided funds for relatives or friends: 63% gave money to aclose family member, 11% to other relatives, and 22% to friends or neighbours - only 1% provided fundsfor a work colleague and 3% for a stranger. Only half of the business angels (54%) received a share inthe business in return for their investment. Others probably never saw any return, which can also explainthe low amounts. In terms of age and gender, the sample of business angels was composed as follows:73% were males and 27% females; 78% were younger than 44 years (31% between 25 and 34, 27%between 18 and 24, and 20% between 35 and 44 years).

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Uganda in 2003 is the most entrepreneurial country in the world so far, on all measures employed byGEM. In terms of the overall TEA measure, Uganda is nearly three times as entrepreneurial as the USA,the world’s largest economy, five times as entrepreneurial as the UK and Spain; six times asentrepreneurial as Germany and Singapore (each accredited with post war economic miracles); andnearly ten times as entrepreneurial as Italy, Japan and France. How can this be true? What do thesefigures mean? After all Uganda is one of the world’s poorest countries in terms of annual per capitaincome. Can Uganda be dismissed as untypical or a statistical aberration, or do its trends ofentrepreneurial activity provide important clues on how entrepreneurship links in with economicdevelopment? This section will try and shed some light on these questions.

Faced with a dramatic finding, as Uganda’s high TEA is within the context of GEM, the followingpropositions could be used to undermine or marginalize its importance:

• that the Ugandan study is methodologically flawed to an extent that its results are meaningless;

• that the results are meaningful, but that entrepreneurship is quite a different type of phenomenon inUganda than in countries where entrepreneurship really does boost wealth creation – it is a survivalistmechanism based on “necessity”, not “opportunity”;

• That even if it is significantly opportunity driven, entrepreneurship in Uganda is not a creator of wealth,but a mechanism that feeds off the wealth created by other mechanisms;

• Entrepreneurship as a mechanism for wealth creation is not that effective – despite being the mostentrepreneurial country in the world so far, it is still one of the poorest!

That the Ugandan study is methodologically flawed to an extent that its results aremeaningless

The survey, conducted in house, was rigorous in its sampling framework, and its interviewer training andprocedures were of a high standard. These were set up to counteract some of the validity problemsencountered in administering the survey in different languages and different standards of education. Wefeel that the results are meaningful and a reasonably accurate reflection of rates of entrepreneurialactivity in Uganda.

We are confident in stating this, as the high rates are consistent independently in both men and women,and across major regions. However, the ultimate answer to this will only come when the survey isrepeated in 2004.

That entrepreneurship is quite a different type of phenomenon in Uganda than incountries where entrepreneurship really does boost wealth creation – it is asurvivalist mechanism based on “necessity”, not “opportunity”

The GEM model is underpinned by a well argued belief (See Wenneckers and Thurick, 1999; Reynolds etal., 2001) that entrepreneurship is an important driver of economic growth. If this is true, it follows that thehigher the level of entrepreneurial activity in a country, the higher should be its rate of economic growth.

Interpreting the nature of entrepreneurialactivity in Uganda, and how far or inwhat way it is linked to economic growth

Part II

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In the early years of the GEM project, when participating countries were almost exclusively fromdeveloped countries, GEM’s TEA was used as a robust benchmark of relative entrepreneurialperformance between countries. In Scotland, for example, it is widely believed that its economy is laggingbehind other European nations, and that lack of entrepreneurialism is a major cause. In promoting thisview, the low TEA of Scotland was and indeed, still is, commonly referred to by politicians, policy makers,practitioners and even academics as proof of lack of entrepreneurial performance. When, however, acountry reports a high TEA value, there is a hint of pride in this fact. The Australia 2001 report, forexample, stated that “Australia retained its place, established last year, among the countries with thehighest levels of entrepreneurial activity.” (GEM Australia 2001:7).

As developing countries started to participate in GEM, it became apparent that the TEA scores reportedfor developing countries were considerably higher than those for developed countries. In 2001 Mexicowas the first country to have a TEA of (just) over 20, and as more developing countries began toparticipate in 2002, this trend became more pronounced. In 2002, eight out of the top ten TEA scoreswere from developing countries (Thailand, India, Chile, Korea, Argentina, Brazil, Mexico and China). Thetop score in 2002 was Thailand’s 18.9. In 2003, six of the top ten are from developing countries, headedby the very high TEAs of Venezuela and Uganda.

Faced with this trend, there has been a tendency to make a sharp distinction between “necessity” and“opportunity” entrepreneurial activity. The former is “involuntary” and motivated by “necessity” and anabsence of preferred employment opportunities, whilst the latter is voluntary and motivated by the “pursuitof perceived opportunities” (Reynolds et al., 2001:56). If large numbers of people in developing countriesare driven by poverty and lack of jobs to seek an income through some form of self employment orbusiness start-up, we logically would expect a high rate of “necessity” entrepreneurs. In this sense, theTEA then just becomes a proxy measure for “poverty” rather than entrepreneurial dynamism. It wouldmerely indirectly reflect the relative rates of employment between countries. The low TEA scores for mostdeveloped countries compared to developing ones would mirror the large discrepancy in available andrecorded jobs between the two kinds of economies.

Reynolds and colleagues, however, point out that the relationship between entrepreneurship andeconomic growth is complex. A closer analysis of the data shows that “necessity” entrepreneurial activity,though substantially higher in developing countries, is still lower than opportunity entrepreneurship inevery participating country, even in Uganda. Indeed developing countries also have the highest rates ofboth types of entrepreneurial activity. The main difference is in the RATIO1 of opportunity to necessityentrepreneurial activity, which is much lower in developing countries. Denmark for example, appears tohave 14.4 entrepreneurs motivated by opportunity to 1 motivated by necessity, whilst Uganda has just 1.3to 1. Uganda, however, has far more entrepreneurs of both types.

1 This measure was constructed by the Uganda team, and is not analysed centrally by GEM.

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Table 1: TEA comparisons and the Opportunity/Necessity Ratio in 20033

Country TEA TEA TEA O/N RatioOpportunity Necessity

Denmark 5.9 5.3 0.4 14.4

Italy 3.2 2.9 0.2 13.4

Spain 6.8 6.1 0.5 11.9

Iceland 11.2 9.4 0.8 11.7

Belgium 3.9 3.3 0.3 10.4

Sweden 4.1 3.8 0.4 10.1

Norway 7.5 6.7 0.7 9.9

Finland 6.9 5.8 0.6 9.2

Netherlands 3.6 3.0 0.4 8.5

New Zealand 13.6 11.5 1.7 6.9

Australia 11.6 9.9 1.6 6.4

Canada 8.0 6.7 1.1 6.4

Switzerland 7.4 6.3 1.0 6.1

UK 6.4 5.3 1.0 5.5

USA 11.9 9.1 1.7 5.5

Ireland 8.1 6.7 1.3 5.2

Singapore 5.0 3.9 1.0 3.9

Japan 2.8 2.0 0.5 3.8

Slovenia 4.1 3.1 0.8 3.8

France 1.6 1.1 0.4 3.2

Germany 5.2 3.7 1.2 3.0

Croatia 2.6 1.7 0.6 3.0

South Africa 4.3 2.9 1.5 2.0

Hong Kong 3.2 2.2 1.1 1.9

Chile 16.9 10.5 5.9 1.8

Argentina 19.7 11.9 7.5 1.6

Greece 6.8 4.2 2.6 1.6

Venezuela 27.3 16.1 11.6 1.4

UGANDA 29.2 17.1 13.2 1.3

Brazil 12.9 6.9 5.5 1.3

China 11.6 5.5 6.1 0.9

The relationship of these TEA measures of entrepreneurial activity to economic growth has beenanalysed in previous years. Reynolds et al. (2001) identified a strong significant correlation between therate of necessity entrepreneurial activity and various measures of economic growth. Table 2 shows ouranalysis for 2003. There is a strong relationship between all three TEA indicators and GDP growth(2003/04), meaning that all forms of TEA contribute to economic growth. The negative relationship

3 Small differences in the TEA and the sum of TEA Opportunity and TEA Necessity are due to the fact that the data for the TEAmeasure has been harmonised (i.e. the few responses that indicated both opportunity and necessity entrepreneurial activity wereonly counted once). The O/N Ratio is computed using 14 decimals therefore rounding differences can occur.

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between the O/N Ratio and GDP growth indicates that high proportions of opportunity entrepeneurshipare found in countries with low growth rates. Further, the tble shows that the higher a nation’s per capitaincome, the lower the TEA necessity score and the higher the O/N Ratio. In terms of growth in per capitaincome, the relationships are much more moderate but still significant in respect of the O/N Ratio. TheO/N Ratio seems to be a relatively good indicator of the quality of a nation’s total entrepeneurial activity interms of economic development and wealth creation respectively. However, we will investigate thisrelationship more in depth in the next GEM cycle.

Table 2: TEA and GDP per capita

GDP Measure TEA TEA TEA O/NNecessity Opportunity Ratio

Percent Growth in GDP 2003/4,

Local Currency, Constant Prices (projected) 0.587** 0.723** 0.506** - 0.594**

Real GDP Per Capita 2003,

Current Prices USD - 0.294 - 0.591** - 0.173 0.707**

Percent Growth in Real GDP Per Capita 2003,

Current, USD/Person - 0.115 - 0.241 - 0.081 0.400*

** Spearman Correlation is significant at the .01 level (2-tailed).

* Spearman Correlation is significant at the .05 level (2-tailed).

O/N Opportunity/Necessity Index

Further insights into the nature of necessity and opportunity entrepreneurial activity can be gained bylooking at their distribution within Uganda. As Table 3 shows, necessity entrepreneurial activity isprominent in both rural and urban areas, but it is significantly more frequent in urban areas. This mightappear a strange result but it should be noted that despite having a lower income many rural inhabitantsare settled on traditional lands and may have better lifestyles than many urban people. In both urban andrural areas, however, opportunity entrepreneurial activity is narrowly the majority form and is wellrepresented.

Two other results stand out from these figures:

1 The large variation in TEA scores by region and language of survey. When Uganda appears incountry comparisons, it implies that all Ugandans behave roughly in the same way. From anentrepreneurial perspective, however, they differ widely according to region and culture. It couldbe hypothesized that the nearer the region is to the capital, Kampala, the higher the TEA scores.This is not the case. Some samples from the East of Uganda show high scores, despite theirdistance.

The very high rates of TEA from Eastern Uganda (mirrored in the results for the parishes Kwapa,Namakwekwe and Nangambo) are especially interesting. Eastern Uganda, where the sampleswere taken, is near the Kenya border, where a great deal of import and export (legal and illegal)takes place. Substantial wealth is pouring into the region from this source, increasing the numberof available entrepreneurial opportunities. In contrast the low rates from the west reflect the factthat trade opportunities are low in that sector of the Congo and Rwanda border, and that people’sattitudes may not be very compatible with a capitalist economy yet.

2 The large differences by education and income. The higher the monthly income and education,the higher the TEA. In terms of monthly income, the TEA necessity rate does not decline much,but the opportunity rate shoots up to very high levels in the higher income bands. In the case ofeducation, the necessity rate declines sharply, and the opportunity rate shows a dramaticincrease. A staggering 62% of Ugandans who have completed University or College are engagedin some form of entrepreneurial activity (mostly of the opportunity kind) and so are 58% of thoseearning more than UGX 166,000 a month (roughly USD 80). This shows that given education andcapital, Ugandans are indeed incredibly entrepreneurial.

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Table 3: Structural TEAs in Uganda

Number TEA TEA TEA4

Necessity Opportunity

Rural / Urban

Rural 813 12.17 16.45 27.82Urban 139 19.04 20.56 37.67

Region

Central 229 10.55 22.08 30.89North 205 10.82 10.92 22.29East 285 20.16 25.46 43.03West 233 9.25 7.21 16.93

Parish

Ayipe (north) 98 8.25 4.14 12.39Mvara (north) 26 20.66 11.56 32.22Pamitu (north) 81 10.75 18.99 31.13Gulama (central) 82 11.31 15.28 24.13Kabigi (central) 78 6.11 29.73 34.12Kagugube (central) 18 15.83 24.48 40.68Kazo(central) 20 15.62 22.21 39.17Naguru (central) 31 13.29 19.39 29.59Kamukuzi (west) 21 13.62 18.76 32.72Katookye (west) 109 15.70 7.22 22.92Mabungo (west) 103 1.58 4.89 7.45Kwapa (east) 117 18.72 25.42 44.14Namakwekwe (east) 20 26.50 23.25 49.75Nangambo (east) 129 21.08 24.72 42.53

Monthly income (UGX)

Under UGX 60,000 716 12.76 11.31 22.51UGX 60,000 to less than 166,000 139 17.51 36.05 53.11More than UGX 166,000 56 12.61 41.68 58.45

Education

Completed primary school or less 598 13.96 11.81 25.48Completed O-Levels or less 198 17.32 21.79 35.11Completed A-Levels or less 39 4.20 10.57 14.77Some college or university,not completed 52 1.63 26.95 33.08Completed college or university 38 5.17 56.39 61.91

Innovation and Entrepreneurship

Any visitor to an African country is usually struck by clusters of businesses selling very similar products orservices. Competition between them is reputed to be extremely fierce, and many new entrants willcontribute to displacement rather than job or wealth creation. Competition is not always as intense as atfirst appears, as apparently similar products can service different markets and customers (Kodithiwakkuand Rosa, 2002). However in the main, there is no doubt that much competition is cut throat. The scopefor innovation in selling less competitive or less familiar products or services is reputed to be small.

The GEM Adult Population Survey contains questions on the innovatory nature of new products andservices, asked to both starting businesses as well as new and established businesses. Table 4 belowdemonstrates that a surprising amount of innovatory activity underpins the products of start-ups as well

4 See footnote 3, Table 1.

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as new and established businesses in Uganda. Substantial minorities of entrepreneurs indicated that theirproducts were unfamiliar, that their competition was low or non existent, and that their product wasunavailable a year ago. This shows that new opportunities (i.e. new to Uganda or their home area) doconfer important advantages and are keenly sought after.

Further analysis showed that the distribution of innovatory or less competitive products and servicestended to be accessed more by opportunity than necessity motivated entrepreneurs, although thedifference was not large. This again reinforces the fact that entrepreneurship is a positive rather than anegative force in Uganda.

Table 4: Innovation Perception and Availability of Technologies/Procedures

Innovation Perception of (Potential) Customers

Will all, some, or none of your (potential) customers consider this product new and unfamiliar?

start-ups new and established firms

Number % Number %

All 27 14 22 7

Some 22 11 39 12

None 151 75 262 81

Total 200 100 323 100

Innovation Perception of (Potential) Entrepreneurs

Right now, are there many, few, or no other businesses offering the same products orservices to your (potential) customers?

start-ups new and established firms

Number % Number %

Many 125 62 208 64

Few 59 30 93 28

No 16 8 25 8

Total 200 100 326 100

Availabilty of Technologies or Procedures Required

Were the technologies or procedures required for this product or service generally

available more than a year ago?

start-ups new and established firms

Number % Number %

Yes 162 81 283 87

No 37 19 42 13

Total 199 100 325 100

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Overall, therefore, we conclude that Uganda is not dominated by “necessity” entrepreneurship but is acountry, like many others, where “necessity” and “opportunity” entrepreneurship co-exists to form complexrelationships with economic growth. The main difference between Uganda and other countries is that bothforms of entrepreneurship are very high. When Ugandans manage to better their circumstances (throughincome or education) they are even more entrepreneurial in seeking opportunities.

That even if it is significantly opportunity driven, entrepreneurship in Uganda is not acreator of wealth, but a mechanism that feeds off the wealth created by othermechanisms

The Ugandan economy has risen from the ashes of a ruined economy in the 1970s, in which GDP growthwas at times negative. The country basically stood still for 15 years, and only began to recover from theyears of war and economic neglect in the mid 1980s. Since then Uganda has experienced a rapid rise inGDP, ranging from 4% to 11% per year. The following factors can be specially isolated as having beenparticularly important factors in boosting economic growth. Not all of them are directly related to growththrough entrepreneurship:

1. A commitment to free market policies by the Government of President Yoweri Kaguta Museveni.

2. Recovery of agricultural commodities, particularly tea and coffee.

3. Recovery of manufacturing and tourism.

4. The recovery of banking and finance.

5. The decision to invite back experienced Ugandan Asian entrepreneurs. They have led a small cohortof international habitual entrepreneurs who have played a dominant role in reconstructing industry inUganda in the last decade.

6. The decision to welcome back international companies and an increase in direct investment by suchcompanies.

7. The pouring of aid into Uganda since the mid 1980s, reaching a climax in the mid 1990s. The aiditself, is not the full picture. There has also been the spending power of thousands of overseas aidconsultants with high salaries.

8. The multiplier effects of renewing Uganda’s physical and social infrastructure.

The entrepreneur is involved in many of these factors, but there is a problem of causality. Haveentrepreneurs contributed to the growth, or have they fed off the growth generated by primarymechanisms such as the influx of aid, rises in commodity prices, and increased government spending?This is a crucial question, not just in Uganda, but throughout the world.

The most important agents of entrepreneurial development in Uganda have arguably been theexperienced habitual entrepreneurs (whose capital can run into $ millions). Their activities have not beenfounded on pure innovation (like the Bill Gates or Jerry Yangs of this world). As such their contribution topure wealth creation is less clear. They have rather acted like transfer agents, transferring fromdeveloped countries business formulae and imported goods to Uganda. They have exploited the fact thatsuch innovations are new to or highly underdeveloped in Uganda. These prominent entrepreneurs havebuilt hotel chains, leisure complexes, have founded banks, manufacturing industries, insurancecompanies, tea estates and private schools, which have contributed immeasurably to the development ofUganda, as they were not there before at any scale. Their activities have set off multiplier effects, andtheir example has been noted by upcoming Ugandans who are increasingly taking up the challenge ofentrepreneurship. They too are beginning to delve in the unfamiliar and new. They have undoubtedlyprofited from the opportunities created by the influx of money through mechanisms such as aid andgovernment spending, and as such, are perhaps not “drivers of growth”. Nevertheless they have definitely“fuelled” growth and development.

The smaller scale entrepreneurs at all levels have benefited from the increased wealth of Ugandans.Their role, like the wealthy habitual entrepreneurs, has not been a fundamentally innovatory one. It hasrather been to redistribute the wealth created by taking advantage of the new opportunities being thrownup by the primary drivers of wealth in the economy, rather than being primary drivers of the growth. Thesmaller scale entrepreneurs have played a full part in helping to translate the wealth into jobs and todevelop Uganda.

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Entrepreneurship as a mechanism for wealth creation is not that effective – despitebeing the most entrepreneurial country in the world so far, Uganda is still one of thepoorest!

An academic writer in the “Monitor”, one of Uganda’s daily national newspaper, wrote an article onDecember 5th 2003. His argument, voiced by a growing number of Ugandans, is that the Government ofUganda has enthusiastically pursued free market policies, applied the advice of the World Bank and theIMF, has encouraged entrepreneurship, has radically privatised state organizations and functions, hasderegulated as much as it can, cut the civil service and produced tax incentives for businesses - yetUganda remains poor.

Figures could be produced to show that there has been a dramatic fall in poverty and rise in GDP percapita in the last ten years, and that consumer spending and affluence is steeply on the rise in many partsof the country. Yet many people are still very poor, and faced with overseas role models in Uganda whichare drawn from the more affluent parts of the West, expectations are high (few Ugandans have seen poorWhites in Europe or America). Entrepreneurship seems to be the primary mechanism through whichpeople are trying to better their own lives, even when they are employed in good jobs. With human andfinancial capital still grossly underdeveloped, however, it will take time to meet expectations. It is verydifficult for an entrepreneur without much education or with low levels of finance to become aware of orhave the know how and resources to exploit sophisticated market opportunities, such as internet cafes orshopping malls. Until basic education, infrastructure and capital levels improve, the impact ofentrepreneurship is bound to be muted, no matter how enthusiastically it is pursued. Withoutentrepreneurship, however, progress would be slow indeed.

Progress in a country like Uganda is more like a tortoise than a bull. Anyone who has watched a tortoiseknows that though it walks slowly it moves a long way quite quickly. Its progress just tends to gounnoticed.

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The purpose of this section is to investigate Uganda’s entrepreneurial climate. An exploration of thefactors associated with entrepreneurial behaviour supplement the more descriptive findings of the AdultPopulation Survey. GEM identifies 9 entrepreneurial framework conditions which are essential forentrepreneurial development in a country. In the following we will discuss each of the 9 frameworkconditions and present our findings. These will be supplemented with findings on specific and/oradditional categories where appropriate. A scorecard at the end of this part summarises our findings(Table 5).

A total of 36 experts was selected according to their knowledge of the framework conditions (for a list ofexperts see Appendix I, for a list of the framework conditions see Appendix II). The experts were askedfor their assessment of the top 3 limiting and the top 3 contributing factors to entrepreneurship as well asfor 3 recommendations on how to improve entrepreneurial activity in their country. The interviews weresupplemented by a detailed questionnaire.

The discussion of each entrepreneurial framework condition is structured as follows:

1. Framework ConditionA brief definition of the respective framework condition

2. Context in UgandaA description of the respective framework condition in Uganda

3. GEM Uganda 2003 Expert FeedbackA summary of the number of experts that named the specific entrepreneurial frameworkcondition as a limiting factor, a contributing factor or gave recommendations how to improvethis framework condition.

4. Uganda 2003 in an International ComparisonA comparison of Uganda’s scores with the average scores for all GEM countries. Theexperts were asked to rate their agreement to a variety of statements on the frameworkconditions on a scale ranging from 1=’completely false’ to 5=’completely true’. The resultshave been converted to a scale ranging from -2 to 2, representing a score of 3=’neither truenor false’ as 0 to make the distinction between positive and negative answers more obvious.

EFC 1: Government Policy

GEM investigates the extent to which regional and national government policies and their application,concerning general and business taxes, government regulations and administration discourage orencourage new and growing firms.

EFC 1: The Government Policy Context in Uganda

When the National Resistance Movement (NRM) took power in January 1986, it faced a ruined economy.Since then, Uganda has emerged from economic decline, predatory dictatorships and civil war tomacroeconomic stability, high economic growth, considerable poverty reduction and political freedom.Once synonymous with despotic chaos and economic devastation, Uganda in the 90’s had become ashowcase for economic reform and post-conflict recovery in Africa. This recovery has been achievedthrough three fundamental government policies.

Assessment of Uganda’sentrepreneurial climateThe expert interviews and questionnaires

Part III

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First, the government provided a reasonable level of internal peace where previously large-scale violencehad existed. At household level, this has allowed for a gradual shift from subsistence production tomarket-based activities. At macroeconomic level, it has led to a stabilisation of the economic environmentincluding significant improvements of fiscal management.

Second, it rescinded predatory taxation, removing implicit taxation on exports by liberalising the foreignexchange rate and coffee marketing. This made recovery in export crops possible, particularly for coffeeand cotton, but also allowed for the emergence of non-traditional exports.

Third, government ensured fiscal discipline in order to provide a currency whose value did notdramatically erode. The stable currency and orderly macroeconomic management especially allowedhouseholds to transform income into productive investment and physical assets.

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Reforms were focused on the following areas:

• Financial sector,

• Expenditure control, tax policy reforms and the overhauling of the tax administration to raisedomestic revenue,

• Liberalisation and divestiture of public enterprises,

• Pursuing external debt reduction strategy,

• Civil service reform,

• Trade liberalisation and enhancing public-private sector partnerships.

However, despite the reforms that had been initiated, new constraints emerged that inhibited the privatesector from playing its central role as the engine of economic growth, the bulk of which were and still arerelated to poor delivery of public services. The medium-term competitive strategy for the private sector(2000-2005) therefore focuses on institution building in order to support private sector growth. Thefollowing medium term priority actions have been constituted:

• Reforms in physical infrastructure provision(telecommunications, transport, water and waste disposal, and most critically power supply);

• Strengthening the financial sector and improving access (commercial banks anddevelopment finance institutions, micro finance institutions, financial services for small andmedium-scale enterprises);

• Commercial justice sector reforms (reforming key institutions, improving the legalenvironment, formulation of business-friendly laws and regulations, training commerciallawyers);

• Institutional reforms (dealing with corruption, reforms in public procurement, simplifying administrative procedures – deregulation, institutional framework for investment and exportpromotion, improving tax administration);

• Export promotion through removing current sector specific impediments (removing anti-export bias, export finance and guarantees, legislation and quality standards in processedfood exports);

• Improving the business environment for SMEs (skills development and training, public-private dialogue, business development services);

• Cross cutting issues (human capital requirements, health issues, sustainableenvironmental management).

Besides this, government policies target the promotion of a regional and international economicintegration.

• Within the East African Community (EAC) Uganda is involved in creating a common traderegime based on the principle of free internal trade and common external tariffs. Progresshas also been achieved in the harmonisation of the Monetary and Fiscal Policies in theregion, including the macro economic framework, convertibility of the EAC currencies,banking rules and regulations as well as tax policies and administrative systems.

• Uganda has embraced on the New Partnership for Africa’s Development (NEPAD), whichaims at coordinating activities of African countries that support economic growth and canlead to poverty alleviation.

• Uganda’s government is also committed to the global SMART partnership dialogue, whichaims at improving domestic and foreign direct investments in Africa. This includesstrengthening regional cooperation but also reflects on achieving a favourable positioning ofAfrican countries within global trade and investment arrangements (WTO).

• Additionally, Uganda participates in global agreements such as the USA-lead AfricanGrowth and Opportunity Act (AGOA) or the EU lead Everything But Arms (EBA)initiative, which ensure Sub-Saharan countries preferential duty and quota treatment forexports to the respective markets, plus special access for a number of export products.

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Due to heavy donor support, government policies in Uganda are also very much influenced by foreigninterests (IMF, World Bank, EU and national agencies such as DFID, USAID, DANIDA, SIDA, GTZ/KfW toname only a few). Foreign aid has significantly contributed to the improvement of living conditions inUganda and accounts for over 30% of the actual economic growth in Uganda. Donor support for 2002/03,including external debt relief, comprises of UGX853billion budget support and UGX658billion projectsupport, which sums up to roughly 50% of the Ugandan budget being donor funded. In addition to thisfiscal dependency, these so called “donor economies” can also create dependencies and motivationalproblems. Just as direct investments can lead to a welcomed contribution to economic growth, they canat the same time hinder the development of indigenous knowledge and experience, which has negativeeffects on motivation. Donor funding can lead to distortions in the market that create unwantedcompetitive advantages for those who manage to raise funds.

After achieving a considerable level of economic activity and welfare, Uganda’s economic policy stands ata crossroads and must consider shifting from “merely” exploiting the potentials of recovery-growth toachieving real development in an evolutionary sense. Thus, in order to sustain the high growth rates ofthe last years the level of entrepreneurial quality will have to improve significantly. This may call for a wellbalanced mixture of open-market economy and protectionism in order to enable the indigenous Ugandanentrepreneurs to progress and enhance their learning curve. Uganda’s government policies will have toshift from quantity oriented growth to quality oriented development.

In the past few years economic growth has slowed down, but more importantly, a number of politicalproblems remain, which adversely affect economic growth. These include Uganda’s intervention inEastern Congo, which has also distorted relationships with Rwanda, the Ugandan Government’scontinued difficulties in concluding the 17-year old conflict with the Lord’s Resistance Army (LRA) rebelsin the north, overspending on the military budget, delay on deciding an optimal time to move todemocratic, multiparty politics, as well as continuing corruption despite measures to counter it.

Privatisation, liberalization of the foreign-exchange market and the financial system, industrialization,modernization of agriculture and poverty reduction have made a big positive impact on politics, civic lifeand the growth of the Ugandan economy. However, there is much more work to be done beforedevelopment progresses to a level which will meet people’s expectations.

Policies for poverty reduction

The current priority of government policies in Uganda is to tackle poverty. Figure 12 shows that 39% ofthe Ugandan population still lives in poverty and that there is a slight increase in 2002/03 compared to theconstant decline of poverty over the past few years.

Under this objective all government policies and programmes are to be designed to complement theoverall Poverty Eradication Action Plan (PEAP). Many initiatives within PEAP are financed through thePoverty Action Fund (PAF), which accounts for over 30% of the overall government budget and isprotected from any budget cuts. Direct measures focus on poverty reduction through achieving higheconomic growth rates and put a private sector-led growth strategy at the forefront of the action plan.

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This also includes the Plan for the Modernisation of Agriculture (PMA), the National Programme for GoodGovernance and other sector specific plans.

Indirect measures concentrate on poverty reduction through redistribution, which mainly involve publicexpenditure as well as access to and quality concerns of public services. Some areas have exhibitedpositive progress in achieving PEAP targets, whereas key challenges remain in others. In particular theannual rate of economic growth has fallen below the PEAP target of 7% per annum since 1999 (Figure13).

High rates in population growth additionally limit the growth in per capita real income, which is still belowthe PEAP target of 5% per annum (Figure 14).

Low food crop prices, on the one hand, have significant adverse implications for the income ofthe majority of Ugandans who are engaged in agriculture (68% of the employed persons).On the other hand low food crop prices have benefited the urban poor who are net consumersand have to spend a high proportion of their expenditure on food. The absolute Per CapitaGDP in the fiscal year 2002/03 was UGX367,951 (approx. USD200).

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EFC 1: Expert Feedback on Government Policy

Number of mentions:

• As limiting factor – 15 experts• As contributing factor – 13 experts• Recommendations for improvement were stated by 25 experts

Government Policy was the third most nominated framework condition in respect of both limiting andcontributing factors. It was the most nominated framework condition in respect of recommendations toimprove the overall entrepreneurial conditions in Uganda.

Government Policy as a limiting factor:

• The regulatory burden and administrative bureaucracy associated with entrepreneurship isperceived as too high.

• The taxation system is not favourable to the development of entrepreneurial firms.• Government’s understanding and promotion of entrepreneurship is not sufficient.

Government Policy as a contributing factor:

• The broad national policy has supported entrepreneurship.• Policies concerning the international and regional integration of Uganda have been very

supportive.

Recommendations on improving Government Policy:

• Ease regulations within the fiscal system in favour of entrepreneurs.• Improve conceptualisation and administration of policies.• Continue to increase international and regional market access for Ugandan products and

services.• Enable participation of entrepreneurs in policy formulation.• Improve labour laws and public procurement procedures.• Create a favourable framework and incentive scheme especially for start-ups.• Reduce corruption significantly.

EFC 1: Government Policy in an International Comparison

Figure 15 illustrates the average expert perception of Government Policies in Uganda compared to theaverage perception of this framework condition by all participating GEM countries in 2003.

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Ugandan experts were slightly below the international average on most measures. Survey responsessupported the qualitative feedback that government had recognised the importance of entrepreneurship,but there is still a long way to go before this is translated into appropriate and comprehensive policies.

EFC 2: Government Programmes

GEM investigates the presence of direct programmes to assist new and growing firms at all levels ofgovernment – national, regional and municipal. Also examined are the accessibility and quality ofgovernment programmes, the availability and quality of government human resources and their ability toadministrate specific programmes as well as the effectiveness of government services.

EFC 2: The Government Programmes Context in Uganda

In the previous sub-section, we noted that poverty reduction is the overruling policy objective of theUgandan government and that government has identified a private sector-led growth strategy as the mostimportant mean to achieve this objective. In the following we highlight some government programmes,which have been designed to support this policy, especially those relevant to the context ofentrepreneurship.

Programmes under the Plan for Modernisation of Agriculture (PMA) are meant to boost agriculturalproductivity across the board. Areas, where government and donor programmes (projects) for the PMAhave been positioned, are:

• Research and Technology Development,• National Agricultural Advisory Service (NAADS),• Agricultural Education, Rural Finance,• Agro Processing and Marketing,• Natural Resource Utilisation and Management,• Physical Infrastructure.

In addition, government is determined to commercialise agriculture by acting as a catalyst to production incertain key export areas through strategic interventions. For this purpose it has developed the StrategicExports Programme (SEP), which is mainly to support the expansion of traditional exports, coffee,cotton, tea plus other non-traditional exports such as horticulture, livestock and fish. Interventions involve:

• Providing farmers with high quality planting and stock materials.• Implementing fast track amendment and enactment of relevant laws and regulations that support

the strategic investment areas.• Promoting the production of high value-added, quality products through processing and other

specialised techniques such as organic production.• Accelerated skills development in strategic areas such as textiles and garment production.• Information and telecommunication technology.• International trade negotiations.

Uganda has one of the lowest per capita consumption of energy in the world, with an estimated 0.3 tonsof oil equivalent terms per annum. The energy sector is still underdeveloped and continues to place a bigburden on the country’s resources, mainly in terms of depletion of natural resources through excessivedependency on biomass, which provides 90% of the national energy supply. Government has launchedthe Energy for Rural Transformation (ERT) programme in order to tackle this challenge.

Uganda’s government in co-operation with donors has enrolled several programmes/projects aimed atupgrading the skills of the workforce, mainly in order to improve industrial productivity and thus demandfor agricultural products. A key measure for 2003/04 is implementing the Business, Technical andVocational Education and Training (BTVET), which targets 30 community polytechnics.

The relatively high transaction costs of doing business are a major barrier to investment in Uganda.Under the Medium-Term Competitive Strategy for the Private Sector (2000-2005) government hasdeveloped programmes to reduce transaction costs including commercial law reform, contractenforcement and deregulation. Major issues in this context remain the relatively high level of corruption/bribing and the lack of a reliable and predictable law enforcement.

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Uganda’s government is committed to coordinate and integrate its own interventions with those of thedonor community. As we have already mentioned, the donor community contributes approximately 50% tothe government budget and therefore has a very significant impact on the implementation of projects andprogrammes under this framework condition - not only because of their financial contribution but to alarge extent also through their contribution of intellectual capital (expatriates, consultants, researchfindings, etc.). In addition these experts also create an important demand for products and services in theUgandan market. Due to the presence of a large number of projects and programmes, it is not possible tohighlight all of them in this paper. The most comprehensive overview is given on over 1,000 pages of thePublic Investment Plan of Uganda, which is published by the Ministry of Finance, Planning and EconomicDevelopment. We will only mention a few donor programmes/projects directly aiming at the promotion ofentrepreneurship in Uganda:

• BUDS-EDS: The Business Uganda Development Scheme and Enterprise Development Support,which is run in co-operation between the European Union (EU) and the Private Sector FoundationUganda (PSFU).

• Enterprise Uganda is an institution designed to support the government of Uganda in realisingits objective of promoting the development of SMEs to become the main vehicle for expandingproduction, providing sustainable jobs and enhancing economic growth. The idea is to create aone-stop programme, which provides an integrated and comprehensive range of businesssupport services for existing and start-up SMEs using a hands-on approach. It is being promotedby a consortium of local and international donors including UNDP Uganda, UNCTAD and theGovernment of Uganda.

• USAID runs projects such as the Investment in Developing Export Agriculture (IDEA) whichseeks to strengthen the value chain for non-traditional high and low value crops; the Supportfor Private Enterprise Expansion and Development (SPEED) which addresses micro, smalland medium enterprise finance and other business needs in Uganda.

EFC 2: Expert Feedback on Government Programmes

Number of mentions:

• As limiting factor – 5 experts• As contributing factor – 4 experts• Recommendations for improvement were stated by 21 experts

Government Programmes was ranked 7th as limiting and 9th as contributing framework condition. It wasthe third most nominated framework condition in respect of recommendations to improve the overallentrepreneurial conditions in Uganda.

Government Programmes as a limiting factor:

• Lack of information on the availability of entrepreneurship oriented programmes.• Government institutions favour established firms and lack awareness of the special needs of

entrepreneurs.

Government Programmes as contributing factor:

• Government has embarked on many programmes which support entrepreneurship.• Some government programmes are of a relatively high quality.

Recommendations on improving Government Programmes:

• Improve and increase specific services for Ugandan entrepreneurs.• Increase financial support for entrepreneurs through government programmes.• Improve on export promotion programmes.• Increase the scope of programmes.• Reduce costs of physical infrastructure.• Improve on government subsidies.• Create availability of professional information and support services especially for national

entrepreneurs.

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EFC 2: Government Programmes in an International Comparison

Figure 16 illustrates the average expert perception of Government Programmes in Uganda compared tothe average perception of this framework condition by all participating GEM countries in 2003.Ugandan experts were quite significantly below the international average on most measures. Surveyresponses supported the qualitative feedback that government programmes were well designed, butinformation dissemination on and implementation of many programmes was poor.

EFC 3: Financial Support

GEM investigates the availability, accessibility and quality of financial resources for new and growingfirms, including grants, subsidies, equity, seed and debt capital.

EFC 3: The Financial Support Context in Uganda

Uganda has, with the help of the international donor community, initiated a number of programmes aimedat helping individuals and/or enterprises to access financial services. A number of projects are being putin place to assist business development. The Private Enterprise Support Training and Organizationaldevelopment activity (PRESTO), for instance, is expanding rural credit through local financial institutionsand tackling policy and regulatory constraints to business development. The European DevelopmentFund’s micro-project scheme is now reaching some of the most disadvantaged Ugandans through grantsto build infrastructure in rural communities where development was hampered by the protracted civil warsbefore1986. It is also giving loans to individuals to start up businesses ranging from metal working tomushroom growing. It extends to six regions countrywide, offering credit to those who cannot meet theterms and high interest of commercial banks.

Commercial banks dominate the financial system, accounting for about 80% of financial assets. There isan urban bias and most of the foreign commercial banks operate in Kampala and a few bigger towns, butnot in the country-side. This is one of the main reasons why banks play a limited role in financing ruralinvestments and growth. The general problem is the chronic lack of long-term finance. Private sectorlending is limited due to a narrow range of assets accepted as collateral, contact enforcement problems,volatile and high interest rates, poor credit discipline, perceived high risk of lending in the informal urbansector and rural areas and high transaction costs. Thus 50% of commercial banks’ private sector credit isgiven to the trade and services sector, with import financing being the most important lending activity.The size of lending to the agricultural sector is very small accounting for only 10% of total lending.

Although the prime lending rates have declined to less than 18% partly due to increased competition inthe financial sector, they are still relatively high. Most of the households in Uganda cannot easily accessthe facilities offered by commercial banks. This has necessitated the emergence of Micro FinanceInstitutions (MFI). MFIs aim at strengthening households by providing credit to finance new economicactivities and adopt new technologies to help raise incomes, and use group dynamics to improve accessand lower the costs of credit. In some cases, MFIs mobilise savings, providing households with financial

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reserves that can be used to smooth consumption. In the past, regulatory restrictions were preventingMFIs from taking savings deposits from their clients, but a Micro Finance Deposit Taking Bill was draftedto remedy this, enforcing Bank of Uganda to supervise their operations. This new category of MFIs iscalled Micro Finance Deposit Taking Institutions (MDI). Many research findings suggest that micro financehas been successful in providing micro-scale working capital and helping poor households to survive, butless successful in boosting growth businesses which could accelerate the reduction of poverty throughjob creation.

In Uganda, there is no special legal provision for leasing companies and the existing leasing companyoperates under the umbrella of the Companies Act. There are signs of increased leasing activity (72%increase last year). The Development Finance Company of Uganda (DFCU) and the East AfricanDevelopment Bank (EADB) are the two leading institutions in this area.

The insurance sector is still underdeveloped, and is supervised by the Uganda Insurance Commission. Itis characterised by low levels of insurance appreciation by the public. There is a 34% level of insurancebrokering where more than 60% of the broker business is under the control of one broker, professionalloss assessment services are just improving recently, actuarial services are absent and insuranceservices are concentrated in urban areas. Whereas most companies meet the statutory capitalrequirements, the level of capital still requires enhancement to enable the companies to take moresizeable risks, uplift their retention as well as providing social insurance.

In 1997 the Uganda Securities Exchange (USE) was developed with the intention of availing equitycapital to Ugandan firms. The USE is still an infant and rudimentary market and most Ugandans havescanty information about operations on this market and a very obscure picture of what happens there. Todate only 5 corporations are listed and many dealing days are characterised by zero turnover.

In 2003 no Venture Capital was made available to Ugandan enterprises. This is clearly an area whereefforts both from government and private investors would benefit the entrepreneurship development inUganda.

EFC 3: Expert Feedback on Financial Support

Number of mentions:

• As limiting factor – 26 experts

• As contributing factor – 6 experts

• Recommendations for improvement were stated by 19 experts

Financial Support was ranked first as limiting and 5th as contributing framework condition. It was the fourthmost nominated framework condition in respect of recommendations to improve the overallentrepreneurial conditions in Uganda.

Financial Support as a limiting factor:

• General lack of access to the formal financial system for the majority of Ugandan entrepreneurs.

• Lack of availability of capital (especially long-term capital).

• Limited market scope and depth within the financial system.

• Poor quality service delivery by financial institutions (lack of customer orientation).

Financial Support as contributing factor:

• Availability and accessibility has significantly improved in the last few years.

• Increasing availability of international enterprise development funds and foreign investors.

Recommendations on improving Government Programmes:

• Improve availability and accessibility of financial services.

• Improve scope and depth of financial services.

• Improve coordination of public and private financial support.

• Improve capital market performance.

• Create new financial institutions with specific expertise and focus on entrepreneurs.

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EFC 3: Financial Support in an International Comparison

Figure 17 illustrates the average expert perception of Financial Support in Uganda compared to theaverage perception of this framework condition by all participating GEM countries in 2003.

Ugandan experts were clearly below the international average on ALL measures. Survey responses supportedthe qualitative feedback that Financial Support was improving but still far behind the desired level. Especiallythe lack of long-term financial capital that would enable to utilise growth potential was highlighted as apriority area by most experts.

EFC 4: Education and Training

GEM investigates the extent and quality of training in starting or managing small, new, or growingbusinesses in the educational and training system at all levels –from primary school to postgraduatecourses.

EFC 4: The Education and Training Context in Uganda

Literacy rates for the population aged 10 years and above is estimated at 70%, with the female literacyrate being lower at 63% while the male literacy rate is at 77%. There are quite significant rural-urbandifferences, with the literacy rates in the urban areas being 87% and those in rural areas being 67%.Uganda has a 7-4-2 education system (primary, ordinary level and advanced level). The UniversalPrimary Education Policy has increased enrolment in the primary section from 2.9 million in 1996 to 7.3million pupils in 2003. However, it is claimed that the quality of education has declined, especially in therural areas due to increased enrolment. Key indicators are e.g.: a pupil/classroom ratio of 94:1 and apupil/teacher ratio of 54:1.

The ability for Ugandan entrepreneurs to maximise returns from economic reforms is constrained by lackof technical, managerial, accounting, marketing and sales skills in order to respond more efficiently to thenew incentives and opportunities. Education programs that teach skills which enhance internationalcompetitiveness are needed to build a more capable entrepreneurial sector.

The Ugandan government recognises the vital role of education and training for further economic growth,poverty alleviation and social development. Government recognised that education is central toadaptation of new technologies and innovation, necessary to support a vibrant private sector and criticalfor raising the standard of living. Government is spending 31% of the total discretionary expenditure oneducation. There are efforts to promote positive attitudes to self employment and awareness of thiscareer option.

There are efforts to incorporate entrepreneurship education and training in the curriculum of all levels ofeducation from pre-primary to tertiary institutions. The National Curriculum Development Centre hasdesigned the entrepreneurship syllabus for general secondary education.

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Upgrading skills of workforce is key to increasing industrial productivity. Implementing the pilot Business,Technical and Vocational Education and Training (BTVET), which targets 30 community polytechnics, is akey measure for 2003/2004. To date there are 144 public and about 600 private training service providersand an unknown number of apprenticeship and enterprise based training programmes operating inUganda.

The higher education sub-sector is not yet properly integrated into government’s overall education policyalthough it is growing at a high rate with over fifty institutions of higher learning and many programmes ofstudy. The institutions include 16 licensed universities (of which 12 are private) and more than fourty othertertiary institutions. Of the over 75,000 students only 15% are enrolled in the critical sciences andtechnology disciplines.

Although entrepreneurship education is being encouraged and supported by the government, only veryfew students currently receive it.

EFC 4: Expert Feedback on Education and Training

Number of mentions:

• As limiting factor – 15 experts

• As contributing factor – 3 experts

• Recommendations for improvement were stated by 22 experts

Education and Training was ranked 4th as limiting and 10th as contributing framework condition. It was thesecond most nominated framework condition in respect of recommendations to improve the overallentrepreneurial conditions in Uganda.

Education and Training as a limiting factor:

• The education system is too academic and does not deliver any practical entrepreneurial know-how and skills.

• The education system does not promote entrepreneurship as a career option – the mainstreameducation philosophy does not promote self-employment as a desirable and valuable option.

• Education and training in Uganda does not have a well designed and coordinated concept ofinternships, apprenticeships or on-the-job trainee programmes.

Education and Training as contributing factor: Three experts stated that there havebeen some improvements in the education system in respect of entrepreneurshipsuch as:

• Some primary schools have started teaching basic entrepreneurial skills.

• A number of institutions offer training courses/work shops on entrepreneurship.

Recommendations on improving Education and Training:• Introduce entrepreneurship courses at all levels of the education system.

• Increase availability and affordability of tailor made entrepreneurship training units.

• Upgrade education in applied sciences and technology.

EFC 4: Education and Training in an International Comparison

Figure 18 illustrates the average expert perception of Education and Training in Uganda compared to theaverage perception of this framework condition by all participating GEM countries in 2003.

Ugandan experts were below the international average on most measures (except question 4). Surveyresponses supported the qualitative feedback that entrepreneurship education and training has not beenintegrated into the education system adequately. The qualitative feedback also clearly brought out that theUgandan education philosophy in general discourages entrepreneurship or self-employment rather thanto encourage this as a recognised career option.

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In addition GEM also investigates the Capacity for Entrepreneurship, that is the extend of knowledge,skills and competences required to start a new business in the general population. Capacity forEntrepreneurship was ranked 5th as limiting and at the same time 8th as contributing entrepreneurialframework category. Figure 19 illustrates the survey responses to questions relating specifically to theCapacity for Entrepreneurship.

Ugandan experts were again below the international average on all measures (except question 4). Surveyresponses supported the qualitative feedback that most Ugandans do not have sufficient capacity forentrepreneurship. The majority of entrepreneurs in Uganda have little education, cannot keep properbooks of accounts, have no advisors, and often end up in losses. Ugandan businessmen have to grapplewith lack of managerial, technical and risk management skills (Wavamuno, 2000).

EFC 5: R & D Transfer

GEM investigates the extent to which national research and development leads to new commercialopportunities, and whether or not R&D is available for new, small, and growing firms.

EFC 5: The R & D Transfer Context in Uganda

Since 1986, several attempts have been made to provide a conducive atmosphere for the development ofResearch and Development activity in Uganda. Uganda has a number of stand-alone researchorganizations like Centre for Basic Research (CBR), Makerere Institute of Social Research, NationalAgricultural Research Organization (NARO), ACCLAIM, Media Associates, IMPACT Associates, tomention but a few. Additionally, most of the business organizations operating in Uganda have a researchand development function (Unit), which generates either new ideas necessary for competing in theliberalized markets or deals with specific business problems at hand.

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At the National level, a lot of research work has been done on mineral exploration. Data and informationregarding the nature and distribution of these resources is available through the Ministry of Energy andMineral Resources. Government has invested heavily in remote sensing and geographical informationsystem (GIS) data interpretation in traditional fields of geological research and related investigations of aregional scale. However, the general public is not aware of its existence, due to limited transfer ofresearch knowledge from the ministry to its stakeholders.

The trade and industry sector has little formalized research. A lot of research work in this sector continuesto be conducted by individual companies to solve their particular research problems. USAID/IDEA andother international agencies have sponsored research and helped train Makerere University staff,investors and entrepreneurs. UNIDO has been working with women entrepreneurs in developing foodsand beverages (wines and cakes) from local raw materials. This has enabled women entrepreneurs to co-operate and implement new innovations from research. Other organizations like CARINA, NGOs, FUCO(Federation of Ugandan Consultants) are also available to conduct business research at a cost. Studieson small and micro enterprises in Uganda exist. However, reports cannot easily be accessed, eventhough such studies would be particularly relevant to promote entrepreneurship development in Uganda ifthey were easily available. There is therefore a need to build capacity for business research.

In agriculture, NARO has conducted a lot of research and development activity in crops, livestock andfisheries. It has 9 research institutes and 11 Agricultural Research Development Centres (ARDCs). It hasgood facilities and some 700 high quality researchers of whom 200 hold PhD’s. There thus appears to bean adequate human resources capacity to handle agricultural research. NARO works continuously withfarmers, extension staff, NGOs, and many local, regional and international organizations and universitiesto support its activities. Although NARO works closely with its stakeholders to commercialise research, itssuccess is hindered by culture, resource issues and technology management issues.

Despite the above, Uganda still lacks a critical mass of scientists in molecular biology and biotechnologyrisk assessment and management (Kyetere and Blackie, 2000). However it is only recently afterdecentralization that focus has shifted to dissemination and application of research results.

Public-private partnerships for increasing funding and acceptance for biotechnology research anddevelopment in Uganda are still missing. This seriously limits product development andcommercialisation. Market growth and development of biotechnology innovations largely depend on thepublic’s acceptance and the presence of a formal policy linking institutions and institutional framework.Such a policy framework should also deal with issues of intellectual property rights.

EFC 5: Expert Feedback on R & D Transfer

Number of mentions:

• As limiting factor – 0 experts

• As contributing factor – 0 experts

• Recommendations for improvement were stated by 2 experts

R & D Transfer was neither ranked as a limiting nor as contributing factor to entrepreneurship by ourexperts. However, two experts mentioned R & D Transfer in their list of recommendations to improve theoverall entrepreneurial conditions in Uganda.

Recommendations on improving R & D Transfer:

• Create appropriate interfaces to disseminate research findings to existing and potentialentrepreneurs.

• Policies and incentive systems that provide an enabling environment for public privatepartnerships in R & D should be put in place.

• Increase awareness of intellectual property rights and their enforcement.

EFC 5: R & D Transfer in an International Comparison

Figure 20 illustrates the average expert perception of R & D Transfer in Uganda compared to the averageperception of this framework condition by all participating GEM countries in 2003.

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Ugandan experts were quite significantly below the international average on most measures. Surveyresponses supported the qualitative feedback that government programmes were actually quite welldesigned, but information dissemination on and implementation of many programmes was rather poor.

In addition, Figure 21 illustrates survey responses to questions relating specifically to Intellectual PropertyRights (IPR) in Uganda. Experts perceived the status of IPR in Uganda significantly below theinternational average on ALL measures. These survey responses support the qualitative feedback thatrespect for IPR is more or less non existent in Uganda. This is probably mainly due to the fact that thereare almost no Ugandan patents, copyrights, and trademarks that could be protected but only foreignones.

EFC 6: Commercial and Professional Infrastructure

GEM investigates the availability, accessibility, quality and cost of commercial, accounting, and other legalservices, institutions and general sources of information that allow or promote new, small, or growingbusinesses.

EFC 6: Commercial and Professional Infrastructure Context in Uganda

There are a number of professional accounting, legal and consultancy services available mainly in thecapital city, Kampala. However, these professional services are strongly influenced by foreign investorssuch as PriceWaterhouseCoopers or KMPG and are not affordable for the majority of entrepreneurs inthe country. Smaller service firms are characterised by lack of experience in commercial matters as wellas poor governance and ethical standards.

We have already mentioned the commercial justice sector reforms (reforming key institutions, improvingthe legal environment, formulation of business-friendly laws and regulations, training commercial lawyers)which are underway. However, their effectiveness will largely depend on the success in enforcing therespective policies.

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The problem of insufficient market information has been partially solved by the establishment of theUganda Investment Authority, Uganda Commodity Exchange, Uganda Securities Exchange and theimproved coverage of both in the print and electronic media. Nevertheless, access to these institutions isstill limited especially among the poor, rural and the less educated population.

EFC 6: Expert Feedback on Commercial and Professional Infrastructure

Number of mentions:

• As limiting factor – 3 experts

• As contributing factor – 2 experts

• Recommendations for improvement were stated by 3 experts

Commercial and Professional Infrastructure was ranked 8th as limiting and 12th as contributing frameworkcondition. It ranked 7th in respect of recommendations to improve the overall entrepreneurial conditions inUganda.

Commercial and Professional Infrastructure as a limiting factor:

• Restricted accessibility and availability of commercial and professional infrastructure.

• Quality services are not affordable for the majority of entrepreneurs.

Commercial and Professional Infrastructure as contributing factor:

• Availability of quality services for those who can afford them.

Recommendations on improving Commercial and Professional Infrastructure:

• Create affordable quality support services for the entrepreneurial community.

• Improve accessibility of commercial and professional infrastructure services.

EFC 6: Commercial and Professional Infrastructure in an International Comparison

Figure 22 illustrates the average expert perception of Commercial and Professional Infrastructure inUganda compared to the average perception of this framework condition by all participating GEMcountries in 2003.

Ugandan experts were significantly below the international average on all measures except for bankingservices. Survey responses supported the qualitative feedback that good commercial and professionalservices were available but not affordable for the majority of Ugandan entrepreneurs. Central issues aregovernance, ethics and law enforcement.

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EFC 7: Market Openness

GEM investigates the extent to which commercial trading arrangements are stable and difficult to change,thus preventing new and growing firms from competing with and replacing existing suppliers,subcontractors, and consultants.

EFC 7: The Market Openness Context in Uganda

Uganda’s local market is small, due to the small population. Its potential is additionally limited by lowaverage incomes with almost 40% of the population living in poverty. Less than 5% of the Ugandanpopulation earns above UGX400,000 per month (USD200), which explains the low purchasing power ofconsumers and the little wealth the vast amount of Ugandan entrepreneurs (29.2% of the adultpopulation) can expect to create.

Internationally, Uganda has made substantial progress to attain impressive and above averageinternational trade openness levels which are in line with some global good practice countries like Chile,Colombia and Singapore.

EFC 7: Expert Feedback on Market Openness

Number of mentions:

• As limiting factor – 7 experts

• As contributing factor – 24 experts

• Recommendations for improvement were stated by only 1 expert

Market Openness was ranked 6th as limiting and 2nd as contributing framework condition. It wasnominated 10th in respect of recommendations to improve the overall entrepreneurial conditions inUganda.

Market Openness as a limiting factor:

• Problems of market access in the rural areas.

• Lack of market opportunities especially in rural areas.

Market Openness as contributing factor:

• Entry to the national as well as regional markets is easy.

• There are large numbers of unexplored opportunities in the region.

• The five neighbouring countries have enabled Ugandan entrepreneurs to expand their marketactivities significantly, however, smuggling is common due to unpredictable and bureaucraticexport procedures.

Recommendations on improving Market Openness:

• Improve accessibility of national and regional markets.

• Reduce on export/import bureaucracy and increase efficiency.

• Reduce corruption in the public procurement system.

EFC 7: Market Openness in an International Comparison

Figure 23 illustrates the average expert perception of Market Openness in Uganda compared to theaverage perception of this framework condition by all participating GEM countries in 2003.

Market Openness in Uganda was perceived at a level comparable to the international average exceptconcerning the anti-trust legislation were Uganda scored significantly below average. Survey responsessupported the qualitative feedback that especially external Market Openness was an extremely importantissue due to the small and illiquid domestic market and the land-locked situation of Uganda. However, theoverall perception was that Uganda is characterised by a relatively high level of Market Openness.Experts however mentioned that this is also due to the possibility of opening up the markets by bribingand smuggling.

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In addition, Figure 24 illustrates the survey responses to questions relating specifically to the availabilityof entrepreneurial opportunities. The existence of business opportunities was perceived above theinternational average on all measures except concerning the availability of information to assess businessopportunities. Survey responses support the qualitative feedback that Uganda offers a rich pool ofunexplored business opportunities.

EFC 8: Access to Physical Infrastructure

GEM investigates the accessibility and quality of physical resources such as communication,transportation, space, rent and natural resources for new and growing firms.

EFC 8: The Access to Physical Infrastructure Context in Uganda

Compared to the developed world, Ugandan indicators for physical infrastructure are far below levels thatcan stimulate appreciable industrial growth, and sustain high commercial and social activities. Presently,only a small fraction of Ugandans enjoy an adequate level of physical infrastructure. For the majority inthe rural areas, these services are either inaccessible or in a very poor state.

EFC 8: Expert Feedback on Access to Physical Infrastructure

Number of mentions:

• As limiting factor – 2 experts

• As contributing factor – 5 experts

• Recommendations for improvement were stated by 5 experts

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Access to Physical Infrastructure was ranked 10th as limiting and 7th as contributing framework condition.It was ranked 6th in respect of recommendations to improve the overall entrepreneurial conditions inUganda.

Access to Physical Infrastructure as a limiting factor:

• Basic physical infrastructure is not available to the vast majority of Ugandans.• Poor quality of especially roads, power and water supply.

Access to Physical Infrastructure as contributing factor:

• Uganda offers relatively easy access to a broad variety of natural resources/raw materials.

Recommendations on improving Access to Physical Infrastructure:

• Increase accessibility, availability and quality of physical infrastructure.• Improve utilities services.

EFC 8: Access to Physical Infrastructure in an International Comparison

Figure 25 illustrates the average expert perception of Access to Physical Infrastructure in Ugandacompared to the average perception of this framework condition by all participating GEM countries in2003.

Ugandan experts were below the international average on all measures. Survey responses supported thequalitative feedback that Access to Physical Infrastructure was still a serious constraint to private sectorgrowth despite heavy investments in the sector.

EFC 9: Cultural and Social Norms

GEM specifically investigates the extent to which existing social and cultural norms encourage individualsto try new ways of conducting business or economic activities.

EFC 9: The Cultural and Social Norms Context in Uganda

The official language in Uganda is English. Besides English, over 30 local languages are spoken indifferent parts of the country. Bantu speakers predominate in the southern and central areas, whilst Niloticspeakers predominate in the North. Nilo-Hamitic speakers can be found in the North East. ManyUgandans also speak a limited amount of Kiswahili, which is spoken throughout the neighbouring EACcountries Tanzania and Kenya. Christianity is widespread in Uganda with 33% Protestants and 33%Catholics. Indigenous beliefs make-up for about 18% and 16% of the Ugandans are Muslims. There areover 20 different ethnic groups, of which the largest are the Baganda who form 17% of the population.

With such traditional ethnic diversity and large disparities in education and economic modes of livelihood,there is a danger of making sweeping generalizations about Uganda’s culture and norms. There is in facta complex mix of cultural norms and values, subject to forces of change led by education, which do notsupport simple categorizations into “masculine”, “collectivist”, “patriarchal”, “anti-women” and so on. With

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many Ugandans being at least partially influenced by traditional and conservative social attitudes, it is notsurprising that many apparently liberalizing and modernising policies are being resisted. Of these themost noticeable is gender equality. Efforts by the current government to improve women’s position insociety has only been met with partial success so far.

The one social or cultural norm that has a high potential impact on entrepreneurship in Uganda is thedesire by most people to improve their lives. Education is highly valued, and so are the skills needed toparticipate fully in the modern economy. Expectations are growing as people are becoming increasinglyexposed to the flood of imported western consumer goods, to lifestyle role models on radio and TV, toadvertising, and the examples set by wealthy foreigners and Ugandans.

EFC 9: Expert Feedback on Cultural and Social Norms

Number of mentions:

• As limiting factor – 16 experts

• As contributing factor – 6 experts

• Recommendations for improvement were stated by 2 experts

Cultural and Social Norms was ranked the second most limiting and 6th as contributing frameworkcondition. It was ranked 8th in respect of recommendations to improve the overall entrepreneurialconditions in Uganda.

Cultural and Social Norms as a limiting factor:

• Negative attitude towards entrepreneurs.

• Risk adverse cultural norms.

• Inefficient work ethics.

Cultural and Social Norms as contributing factor:

• There are signs of a shift in culture towards appreciating and promoting entrepreneurship,especially in urban areas.

Recommendations on improving the Cultural and Social Norms context:

• Encourage development of entrepreneurial personality traits.

EFC 9: Cultural and Social Norms in an International Comparison

Figure 26 illustrates the average expert perception of Cultural and Social Norms in Uganda compared tothe average perception of this framework condition by all participating GEM countries in 2003. Ugandanexperts were very close to the international average on all measures.

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Figure 27 illustrates survey responses to questions relating specifically to the social legitimacy ofentrepreneurship (motivation) in an international comparison. Survey responses, quite significantly incontrast to the qualitative feedback through interviews, indicate a Social Legitimacy of Entrepreneurshipabove the international level on all measures.

Figure 28 shows survey responses to questions relating specifically to women entrepreneurs. Expertsperceived the situation of women entrepreneurs in Uganda to be below the international average on allmeasures except for the encouragement measure, which may indicate a positive shift in attitude towardswomen entrepreneurs in Uganda.

Differences between Ugandan Experts and the Adult Population

Ugandan experts are much more entrepreneurial active than the Adult Population: 2.5 times as manyexperts are involved in autonomous start-ups (69% compared to 27%) and 46 times as many in starting abusiness for their company (46% compared to 1%). There is almost the double amount of businessowners among Experts than in the Adult Population (64% compared to 35%) and almost 4 times as manybusiness angels (47% compared to 13%).

Ugandan Experts also see more good opportunities for starting a new business within the next 6 monthsthan the Adult Population (84% compared to 64%), and are more convinced of having the knowledge, skilland experience to start a business (94% compared to 87%). The Experts are also less likely to keepaway from starting a business due to fear of failure than the Adult Population (25% compared to 30%).

In terms of an assessment of Uganda’s entrepreneurial climate, the Adult Population is more convincedthan the Experts that most Ugandans consider a new business a desirable career choice (86% comparedto 75%) and consider media stories about successful entrepreneurs to be more frequent (78% comparedto 69%). The same proportion of Experts and Adult Population believe that those with successful newbusinesses have a high level of status and respect (86%).

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Table 5: Entrepreneurial Scorecard (comparison of 31 countries)

Uganda’s Uganda’s Lowest Average Highestscore rank score (GEM) score

Government Policies

- Supportiveness -0.7 21 -1.5 (VE) -0.4 0.6 (TH)

- Regulations -0.8 17 -1.7 (BR) -0.6 1.3 (HK)

Government Programs -1.0 29 -1.8 (VE) -0.4 0.5 (IR)

Financial Support -1.2 30 -1.4 (VE) -0.4 0.6 (US)

Education and Training

- Primary & Secondary -1.3 28 -1.6 (FR) -0.9 -0.2 (US)

- Universities & Management Education -0.6 26 -1.1 (GR) -0.2 0.8 (US)

R & D Transfer -1.4 31 -1.4 (UG) -0.5 0.5 (US)

Commercial, Professional Infrastructure -0.2 28 -0.5 (BR) 0.2 1.2 (US)

Market Openness

- Market Change 0.0 13 -1.2 (CA) -0.2 0.9 (CN)

- Market Opennness -0.5 24 -0.9 (BR) -0.2 0.4 (US)

Physical Infrastructure 0.1 30 0.1 (BR) 0.9 1.7 (HK)

Cultural & Social Norms -0.3 11 -1.3 (SE) -0.2 1.6 (US)

Entrepreneurial Opportunity 0.6 3 -0.8 (VE) 0.2 1.0 (US)

Entrepreneurial Capacity -0.8 22 -1.2 (FR) -0.5 0.4 (US)

Entrepreneurial Motivation 0.9 6 -0.5 (SE) 0.4 1.6 (US)

Intellectual Property Rights -1.4 31 -1.4 (UG) 0.1 1.0 (CA)

Women Entrepreneurs 0.0 22 -0.2 (HR) 0.3 1.2 (TH)

Scores

-2 = completely false

-1 = somewhat false

0 = neither true nor false

1 = somewhat true

2 = completely true

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Outlook

It may appear to be a contradiction that Uganda has such a high rate of entrepreneurial activity (bothnecessity and opportunity driven forms) yet remains underdeveloped and predominantly poor. We started,however, by pointing out that under the traditional view of economic growth, it would take large amountsof investment and capital growth to improve economic growth in a country such as Uganda that was sounderdeveloped in the early 1980s, and that improvement would take a very long time. Entrepreneurshipappears to have accelerated this process. There has been a great deal of growth in entrepreneurialactivity since the early 1980s, and this can be linked to a reduction of poverty from a point when over 50%of Ugandans were living below the poverty line to the current position when just over a third are. Therehas also been a sustained period of high growth rates of GDP from the early 1980s, varying between 4%and 11% growth. This exceeds that achieved by Britain during its Industrial Revolution. Trying to decipherexactly how entrepreneurship has fuelled development and economic growth in Uganda is difficult andcomplex, and remains a challenge. We are confident, however, that without its entrepreneurs, far morepeople would be suffering today. The Government has played a key role in this revival, with policiesgeared towards increasing enterprise and reducing poverty. The experts have been critical that thesehave not gone far enough, and many recommendations were made, as we outlined in part III of the reportto improve matters further. It is hoped that debate in the future will be clarified by the research carried outby GEM Uganda @ MUBS.

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ReferencesAbrahamsson, A. (2002): Alternative Views of Entrepreneurship - The Case of the Kampala Street Citizens, a paper

presented at ICE 2002 - Innovation Creativity Entrepreneurship in a Socially Constructed World,Teleborg Castle, Vaxjoe University.

Baumol, W. (2003): Innovation and Enterprise, the Allander Series, Fraser of Allander Institute, University ofStrathclyde.

Bitarabeho, J. (2003): Curbing Corruption and promoting Transparency in Local Governments, The Experience ofBushenyi District, Uganda, a paper presented as part of the World Bank’s open and ParticipatoryGovernment Programme at the Local Level, World Bank Institute, Washington DC.

Farstad, H. (2002): Integrated Entrepreneurship Education in Botswana, Uganda and Kenya, World BankPublication, Oslo.

Fick, D.S. (2002): Entrepreneurship in Africa: A Study of Success, Quorum Books, Westport.

Kappel, R.; Lay, J. and Steiner, S. (2003): The Missing Links, Uganda’s Economic Reforms and Pro-Poor Growth,report commissioned by the Gesellschaft für Technische Zusammenarbeit (GTZ), unpublished draftreport.

Kodithuwakku, S. and Rosa, P. (2002): The Entrepreneurial Process and Economic Success in a ConstrainedEnvironment, Journal of Business Venturing, May, Vol. 17(5), pp. 431-465.

Kyetere, D. and Blackie, B. (2000): Biotechnology in Uganda: an Analysis of Institutional and Human ResourceCapacity, a paper presented on a regional workshop organized by ACTS, Nairobi-Kenya, 6-8December 2000.

Mboijana, S.A. (2003): Coping with Economic and Technological Change: The Ugandan Experience, a paperpresented at the 7th Annual Management Conference, Entebbe.

MFPED (1998): Vision 2025, A Strategic Framework for National Development, Vol. II, Kampala.

MFPED (2001a): Medium-Term Competitive Strategy for the Private Sector (2000-2005), Making Institutions SupportPrivate Sector Growth, Kampala.

MFPED (2001b): Poverty Eradication Action Plan (2001-2003), Vol. 1, February 2001, Kampala.

MFPED (2002): Public Investment Plan 2001/02 – 2003/04, Kampala.

MFPED (2003a): Uganda Poverty Status Report, 2003: Achievements and Pointers for the PEAP Revision, Kampala.

MFPED (2003b): Background to the Budget – Financial Year 2003/2004, June 2003, Kampala.

Reinikka, R. and Collier, P. (Eds.) (2001): Uganda’s Recovery, The Role of Farms, Firms, and Government,Fountain Publishers, Kampala.

Reynolds, P.D.; Camp, S.M.; Bygrave, W.D.; Autio, E. and Hay, M. (2001): The Global Entrepreneurship Monitor,2001 Executive Report, London Business School and Babson College.

Snyder, M. (2000): Women in African Economies: From Burning Dun to Boardroom, Business Ventures andInvestment Patterns of 74 Ugandan Women, Fountain Publishers, Kampala.

UBOS (2002): 2002 Uganda Population and Housing Census, Provisional Results, November 2002, Entebbe.

UBOS (2003a): Statistical Abstract, September 2003, Entebbe.

UBOS (2003b): Uganda National Household Survey 2002/2003, Report on the Socio-Economic Survey, November2003, Entebbe.

UBOS (2003c): Uganda National Household Survey 2002/2003, Report on the Labour Force Survey, November2003, Entebbe.

UBOS (2003d): Key Economic Indicators, 50th Issue: Fourth Quarter 2002/03, September 2003, Entebbe.

UBOS (2003e): A Report on the Uganda Business Register, 2001/2002, January 2003, Entebbe.

UBOS and ORC Macro (2001): Uganda Demographic and Health Survey 2000-2001, December 2001, Calverton.

Uganda Investment Authority (2000): Report of the Task Force of the Financial Services Sector, Kampala.

Wavamuno, G.B.K. (2000): The Story of an African Entrepreneur, Wavah Books Ltd., Kampala.

Wenneckers, A.R.M. and Thurick, A.R.(1999): Linking Entrepreneurship and Economic Growth, Small BusinessEconomics, Vol. 13, pp. 27-55.

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Baguma, David Micro Finance UnionBatuma, John Managing Director, Banapo Wines Ltd.Bekalemesa, John Muhaise Partner, Ernst and YoungClarke, Dr. Ian Chief Executive Officer, Kampala International HospitalKaahwa, Abel R. Executive Director, Uganda Industrial Research InstituteKatabula, Musisi Stephen Managing Director, Kira Mixed FarmKawaga, Francis Managing Director, Mikolo Rental Enterprises Ltd.Kayanja, Pastor Robert Rubaga Miracle CentreKiapi, Palia Paul Advocate, Kampala Attorneys and SolicitorsKigozi, Dr. Maggie Executive Director, Uganda Investment AuthorityKisimbo, A. Country Manager Uganda, Kenya AirwaysKitakule, Sarah Executive Director, UWELKiwanuka, Dr. Mathias Managing Director, Nsambya General ClinicLokeris, Hon. Peter Minister of State for Karamoja affairs, GOULuboga, Christine Managing Director, Chrisame DesigneLuyinda, Vincent Managing Director, Vinco Ltd.Mathale, Victor Counsellor Economic, South African High Commission

KampalaMugambe, Kenneth Assistant Commissioner, MFPEDMunene, Prof. Dr. J.C. Makerere University, Institute of Psychology and MUBSMwesigye, Fred Commissioner, Ministry of Trade and TourismNunumisa, Beenunula Eyenunula Managing Director, Forex Africa.com Ltd.Nyakaana, Joseph Advocate, Kampala Attorneys and SolicitorsOcici, Charles Executive Director, Enterprise UgandaOkecho, Dr. Willibrord Centenary Rural Development BankPageau, Annie Director, NaturaleafSabamuwe, Zukula Proprietor, Juice PackagingSematimba, Peter President, Super FMSembuya, Chris Managing Director, Sembule Group of CompaniesSentamu, Richard Proprietor, Water PackagingSettala, Rashid Territory Manager, Pfizer Consumer Health CareSonko, Sarah Managing Director, All Flowers Wild Day Care CentreSsenyondo, Vincent Executive Director, USSIATuryahikayo, Godfrey Commissioner, Ministry of EnergyWamala, Daniel Managing Director, Luwero General MerchandiseWaniala, Nimrod Executive Director, Private Sector Foundation UgandaWavamuno, Gordon Managing Director, Spear Group of Companies

Table 6: Characteristics of Uganda Country Experts

Gender 83% male, 17% femaleAge Average: 46 years

Education 25%: vocational or technical training

86%: university or college degree

14%: graduate scholarly work

1990: average year of the last attained degree

Experience in areas connected Average of 10 years of work in the current organization

to entrepreneurship Average of 9 years of work in current job

Areas of expertise Average of 14 years of work in the entrepreneurial sector

19% technology intensive, 33% low or medium intensive

31% manufacturing, 67% service business

31% high growth rate, 28% low growth rate

31% urban, 39% rural

36% international, 44% home oriented

Appendix I GEM Uganda 2003 Country Experts

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EFC 1: Government Policy

the extend to which regional and national government policies in terms of taxes, governmentregulations and administration discourage or encourage new and growing firms.

EFC 2: Government Programmes

the presence, accessibility and quality of direct programmes to assist new and growing firms at alllevels of government - national, regional and municipal.

EFC 3: Financial Support

the availability, accessibility and quality of financial resources for new and growing firms, includinggrants and subsidies, equity, seed and debt capital.

EFC 4: Education and Training

the extent and quality of training in starting or managing small, new, or growing businesses in theeducational and training system at all levels – from primary school to postgraduate courses.

EFC 5: R & D Transfer

the extent to which national research and development leads to new commercial opportunities, andwhether or not R&D is available for new, small, and growing firms.

EFC 6: Commercial and Professional Infrastructure

the availability, accessibility, quality and cost of commercial, accounting, and other legal services,institutions and general sources of information that allow or promote new, small, or growing busi-nesses.

EFC 7: Market Openness

the extent to which commercial trading arrangements are stable and difficult to change, thuspreventing new and growing firms from competing with and replacing existing suppliers, subcon-tractors, and consultants.

EFC 8: Access to Physical Infrastructure

the accessibility and quality of physical resources such as communication, transportation, space,rent and natural resources for new and growing firms.

EFC 9: Social and Cultural Norms

the extent to which existing social and cultural norms encourage individuals to try new ways ofconducting business or economic activities.

Appendix II

Entrepreneurial Framework Conditions (EFC)

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APS demographics

The sample consisted of 1015 respondents aged 18 to 95 years. Those above 64 years were not in-cluded in the analyses as they do not belong to the active labour force, thus reducing the sample size to952. Weights were calculated for each respondent to represent the demographic characteristics of theUgandan population as provided by the Ugandan Bureau of Statistics. Table 7 provides both weightedand un-weighted demographics of our adult population sample. In the following description we will refer tothe weighted demographics as these are representative for the Ugandan population.

The weighted sample consisted of 50% men and 50% women. Almost all respondents were Black, only0.02% were of white origin. The modal class in terms of age (the class with the highest number of re-spondents) was 18 to 24 years, constituting 33%. The number of respondents decreases as the ageincreases, the group of the 55 to 64 years old only providing 7% of the sample.

The majority of the respondents (63%) had a primary level education or less, a very small percentage of4% held a university or college degree. Most respondents (58%) were not employed and 26% were self-employed.

Of the respondents, 44% did not have any communication facilities, 15% used mobile phones, 15% postboxes, 2% landlines and 2% Internet services. 34% had access to other communication facilities, mainlyL.C. chairmen or a friend’s phone. In terms of income a majority of 75% had an annual income below$360, only 0.1% earned more than $25.000 a year.

Table 7: APS Demographics

Unweighted Weighted

Gender Male 43.3 49.8Female 56.7 50.2

Age 18-24 26 33.025-34 33.6 30.135-44 19.1 19.745-54 8.7 10.555-64 6.4 6.7

Ethnicity White 0.2 0.0Black 99.8 100.0

Education Completed primary school or less 62.5 63.3Completed O-Levels or less 21.9 21.0Completed A-Levels or less 5.1 4.1Some college or university, not completed 4.3 5.5Completed college or university 4.4 4.0

Employment Status Employed full-time 10.5 7.8Employed part-time 3 2.6Self-employed 25.5 26.3Employed full-time and self-employed 1.7 0.7Employed part-time and self-employed 3.1 3.8Retired 2.1 0.7Not employed 54.1 58.0

Communication Facilities Landline 2.7 1.9Mobile 19.7 14.8Internet Access 1.3 1.9Post-box 14 15.3Other 32.2 34.2None 43.9 44.2

Annual Household Income Under UGX 720,000 (USD360) 72.7 75.2UGX 720,000 to less than 2,000,000 (USD1,000) 13.5 14.6UGX 2,000,000 to less than 10,000,000 (USD5,000) 7.3 5.2UGX 10,000,000 to less than 50,000,000 (USD25,000) 0.8 0.6UGX 50,000,000 or more 0.2 0.1

Appendix III

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Rur

alU

rban

The sample of the GEM Uganda 2003 Adult Population Survey consisted of 1015 individuals aged 18 -64. The sample was composed for 1000 individuals but as 15 additional interviews had been conductedacross all regions they were included and weighted accordingly. The method employed in most GEMcountries are telephone interviews but due to the relatively low coverage in Uganda face to face inter-views were conducted.

In order to assure a representative sample of the Ugandan population, two districts were selected withprobability proportional to size in each of Uganda’s four regions (north, east, west, central), leaving outcertain areas where the security situation was too unstable. One parish was sampled per subcounty, onesubcounty per county, and one county per district with probability proportional to size (see Table 8). Ineach parish several enumeration units were covered.

As the Ugandan Bureau of Statistics provided detailed maps of number, location, and composition ofhouseholds in each parish a representative sample of working aged Ugandans could be attained bytaking a designated sample of households and selecting one adult per household at random. The respec-tive L.C. chairmen were very helpful in locating the selected households. A household is defined by theUgandan Bureau of Statistics as a group of people who normally eat together; in cases of ambiguity onlythose, who ate together the previous day were included. A total of 640 households were sampled in ruralareas (80 per parish) and 360 in cities (120 in Kampala as the main urban area and 60 in one parish ineach of the other three regions).

The following method was employed to choose a respondent in a selected household at random: thefamily members were numbered according to their age, assigning number 1 to the oldest and the highestnumber to the youngest household member. The respondent was selected according to a randomnumber chosen from a random number table: the second oldest person was selected if the randomnumber chosen was a two, the fifth oldest if the random number was a five. If the selected person was notavailable two callbacks were made before another household was chosen randomly.

Table 8: GEM Uganda 2003 - Adult Population Sample

Region District County Sub County Parish Sample Size

Central Masaka Bukommasimbi Butenga Kabigi 80

Central Mukono Buikwe Najja Gulama 80

Eastern Tororo Tororo Kwapa Kwapa 80

Eastern Muyuge Bunya Mpungwe Nangambo 80

Western Kabale Ndorwa Kyanamira Katookye 80

Western Kisoro Bufumbira Nyarusiza Mabungo 80

Northern Arua Kobolo Kuluba Ayipe 80

Northern Nebbi Okoro Paidha Pamitu 80

Central Kampala Kampala CC Central Div Kagugube 60Central Kampala Kampala CC Kawempe Div Kazo 60Central Kampala Kampala CC Nukawa Div Naguru1 60Eastern Mbale Mbale Mun. Northern Div Namokwekwe 60Western Mbarara Mbarara Mun. Kamakuzi Kamakuzi 60Northern Arua Arua Mun. Arua Hill Mvara 60

Sampling of Uganda’s Adult Population

Appendix IV

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Contacts

Address: GEM Uganda @ MUBSMakerere University Business SchoolNakawa CampusPlot M118 Port Bell RoadPO Box 1337 KampalaUganda

Telephone No.: 041 222911

Email: gemuganda@mubs.ac.ug

Uganda Website: www.mubs.ac.ug

Global GEM Website: www.gemconsortium.org

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GEM Uganda ResearchTeam

♦ Thomas Walter Dean of the Faculty of Commerce, Makerere University BusinessSchool and the Team Leader of GEM Uganda @ MUBS.

♦ Waswa Balunywa Principal of the Makerere Business School and Senior Researcher ofGEM Uganda @ MUBS.

♦ Peter Rosa Director of the Centre for Entrepreneurship, University of Sterling,Scotland (visiting Researcher and Consultant at Makerere UniveristyBusiness School since 1998) and Senior Researcher of GEM Uganda@ MUBS.

♦ Arthur Sserwanga Lecturer and Research Assistant in the Faculty of Commerce,Makerere Business School and the Researcher of GEM Uganda@ MUBS.

♦ Stefanie Barabas German Research Fellow and Project Manager of GEM Uganda @ MUBS.

♦ Rebecca Namatovu Research Assistant in the Faculty of Commerce, MakerereBusiness School and Researcher of GEM Uganda @ MUBS.

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