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SMEs are engines of growth

Prof Charles G. KwesigaExecutive Director

Uganda Industrial Research Institute

EMRC Agribusiness Forum

Cape Town, South Africa

June 2009

Uganda Industrial Research InstituteA Lead Agency in Industrialization of Uganda

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Map of Uganda

* Based on Purchasing Power Parity Calculation

Facts about Uganda

Population: Approx. 27MillionTotal Area: 236,000 Sq. KmLand Area: 199,710 Sq KmLocation: East-Central AfricaGDP* (est 2004): $39.4 Billion

Uganda Industrial Research InstituteA Lead Agency in Industrialization of Uganda

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SMEs in development

In developing countries:

SMEs are the engines of growth and are responsible for most jobs, products, tax revenues, welfare, and development.

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SMEs in development (contd.)

In developed countries:

SMEs play a vital role in acting as suppliers to large corporations, as well as carrying out innovations for new products and processes.

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What is an enterprise ?

Entrepreneurs/enterprises are entities that provide a new product or service, or develop methods, procedures, or technologies to produce or deliver existing services more optimally (i.e. lower cost, better quality, improved environment, etc)

Global implications of SMEs

Indonesia: Recognizing the potential of SMEs as engines of growth, ADB is increasingly seeking to address policy and financial constraints inhibiting SME development

UK: “SMEs make up a half of all jobs in the UK, and account for half of our GDP, yet the significance of the SME sector is often overlooked.” A report by B2B international.

Global implications of SMEs (contd)

Romania: Volksbank Romania, a subsidiary of Austria Volksbank, secured a facility of Euro 10 million from EBRD and the European Commission to provide loans to local SMEs, “an important sector in any successful private economy.”

“The bank is committed to promoting the growth of this important sector in the region, and the EBRD is pleased to work with Volksbank to help develop these engines of growth.” Noreen Doyle, 1st VP at EBRD.

Attributes of SMEs

Tightly managed, decisions are quickly made

SMEs bring out innovation, create jobs Increase productivity, competition, and

high value added activities Flexible, able to explore new ideas Important for acceleration of change in

economies in transition

SMEs contributions to national economies

Employ higher per capita investment Assist towards increasing investment Big role in generating entrepreneurship and

creativity A good training ground for skill development

and management skills Provide back-up service for large industries

Seow (1989)

SMEs and economies in transition

Greater utilization of local raw materials Employment generation Encouragement of rural development Development of entrepreneurship Mobilization of local savings Self employment Opportunities for training (managers and

semi-skilled workers) Regional balance, because of even spread of

investments

Challenges faced by SMEs

Lack of financing Lack of entrepreneurship and managerial skills Scarcity of skilled manpower Enabling environment for investment in SMEs is

absent High mortality rate of SMEs Financial indiscipline Inadequate infrastructure Poor implementation of policies Overbearing regulatory and operational environment Restricted market access Prof Chibundu

What must be done with sub-saharan Africa SMEs?

We need to address the challenges highlighted above and take to heart the following words by Africa’s 1st Citizen:

“The knowledge required to create wealth…..is not lacking, what is lacking in sub-saharan Africa is the will to turn this knowledge into practical innovations.” H.E. Kofi Annan

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CONTACT US

Nakawa Industrial Area

Plot M 217

P.O. Box 7086

Kampala

Tel: + 256-41-286- 245 / 124

Fax: + 256-41-286- 695

E-mail: mail@uiri.org / uiri@utlonline.co.ug

Website: www.uiri.org

Uganda Industrial Research InstituteA Lead Agency in Industrialization of Uganda