Reasons as to why many start-ups are short lived in Uganda dominated panel discussions during the 2022 Uganda Innovation Week hosted by Startup Uganda at Mestil Hotel Nsambya.
The three-day event which started on Tuesday this week was collectively sponsored by several players in Uganda’s innovation space, which among others included; United Nations Capital Development Fund (UNCDF), National Social Security Fund (NSSF), Mastercard Foundation, Youth Startup Academy, International Trade Center (ITC) the French Embassy, Konrad Adenauer Center and Response Innovation Lab.
The event tailored around the theme; “Uganda’s Entrepreneurial Ecosystem, Unlocking the Missing Links” attracted a large number of investors, entrepreneurs, high-end personnel from the academia and a vast number of development partners.
Major areas of deliberation included how to stimulate women participation in entrepreneurial endeavors, but most importantly, how to end a vicious cycle of collapse for young businesses in Uganda.
We therefore delve deep into various reasons as to why there are high attrition rates of young businesses in Uganda as discussed at the forum, something that is threatening a favorable ecosystem to perpetuate the country’s socio-economic transformation, and what needs to be done to end this sad scenario.
It should of course be noted that the NSSF Managing Director Mr. Richard Byaruhanga while launching the Hi Innovator seed funding initiative in May 2021 attributed high attrition rates for SMEs to a number of reasons like inadequate governance practices, inadequate adoption of technology to scale, inadequate access to expertize and limited access to funding.
While addressing participants, Mr Patrick Ayota, the Deputy Managing Director for NSSF attributed this vicious cycle of collapse for young ventures to inconsistencies in business plan formulation and implementation by their owners.
In that regard, NSSF in partnership with Mastercard Foundation launched a fully-fledged women Hi-innovator seed funding initiative that will aid up to 100 women owned business to grow into sustainable enterprises.
The Hi-Innovator program addresses all the above challenges, and the event was also aimed at creating awareness among Ugandan citizens about this impressive intervention by NSSF, which aims to tackle cut-throat challenges for entities in the innovation space.
Besides, Mr. Richard Zulu, the chairperson for Startup Uganda and Chief Executive Officer for Outbox Uganda contended that limited access to markets is a major reason as to why many young start-ups fail to stand the taste of time.
“Many young businesses struggle to get into markets largely because they fail to build the connections they need to access those markets, meaning where they sell their products to and, I am not just talking about retail, but also wholesale markets as well,” said Zulu.
“The other is internal, and I believe to me governance comes to play, where entrepreneurs do not separate themselves from from the business. They see the income and operations in business similar to how they operate as individuals,” he added.
Mr. Zulu contended that poor record keeping stops these young ventures from growing because they cannot establish formal relationships with clients, customers, distributors and suppliers and that the more they cannot do that, the limited their growth is.
He however supplied a ray of hope, by revealing that as key players in the ecosystem, they are working with the Ministry of Trade, Industry and Cooperatives to see how regulatory incentives for young businesses can be harnessed, through a regulatory impact assessment.
“So we are undertaking a regulatory impact assessment, to determine whether we need an act for young businesses to address these very things you are talking about.”
Startup Uganda and Outbox, according to Mr. Zulu are also working with the Ministry of ICT and National Guidance to develop a business processes outsourcing policy as a way of how indigenous business can sell products and services to external companies.
Vianah Kamakune, a business and investment analyst working for Hive Colab Uganda, an entity that helps start-ups scale and also be ready for investment also weighed in on the matter.
She attributed the high rate of start-ups collapse in Uganda to imitation and duplication of products that are already on the market by young enterprises, failure to build internal systems within start-ups and short-sightedness of the owners, which leads to poor planning.
“Duplication of what already exists, we generally have people who look at a startup that is doing something, and someone without changing anything, or creating any innovation around it decides to create the very same product another person is creating, with a mindset that i am going to make money, I am going to get grants, and that is a detriment to some of the businesses that start that way,” Ms. Kamakune said.
As a remedy, she advocated for government policy change which perpetuates an enabling environment suitable for nurturing start ups, and also extending incentives like tax holidays to young enterprises.
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