1 SMEs are engines of growth Prof Charles G. Kwesiga Executive Director Uganda Industrial Research Institute EMRC Agribusiness Forum Cape Town, South Africa June 2009 Uganda Industrial Research Institute A Lead Agency in Industrialization of Uganda

2 Map of Uganda * Based on Purchasing Power Parity Calculation Facts about Uganda Population:Approx. 27Million Total Area:236,000 Sq. Km Land Area:199,710 Sq Km Location:East-Central Africa GDP * (est 2004):$39.4 Billion Uganda Industrial Research Institute A Lead Agency in Industrialization of Uganda

3 SMEs in development In developing countries: SMEs are the engines of growth and are responsible for most jobs, products, tax revenues, welfare, and development.

4 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.

5 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 n Indonesia: Recognizing the potential of SMEs as engines of growth, ADB is increasingly seeking to address policy and financial constraints inhibiting SME development n 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) n 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, 1 st VP at EBRD.

Attributes of SMEs n Tightly managed, decisions are quickly made n SMEs bring out innovation, create jobs n Increase productivity, competition, and high value added activities n Flexible, able to explore new ideas n Important for acceleration of change in economies in transition

SMEs contributions to national economies n Employ higher per capita investment n Assist towards increasing investment n Big role in generating entrepreneurship and creativity n A good training ground for skill development and management skills n Provide back-up service for large industries Seow (1989)

SMEs and economies in transition n Greater utilization of local raw materials n Employment generation n Encouragement of rural development n Development of entrepreneurship n Mobilization of local savings n Self employment n Opportunities for training (managers and semi-skilled workers) n Regional balance, because of even spread of investments

Challenges faced by SMEs n Lack of financing n Lack of entrepreneurship and managerial skills n Scarcity of skilled manpower n Enabling environment for investment in SMEs is absent n High mortality rate of SMEs n Financial indiscipline n Inadequate infrastructure n Poor implementation of policies n Overbearing regulatory and operational environment n 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 1 st 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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