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Mubs 2003 Gem Uganda Document Transcript

  • 1. GLOBAL ENTREPRENEURSHIP MONITOR GEM UGANDA 2003 EXECUTIVE REPORT Thomas Walter Waswa Balunywa Peter Rosa Arthur Sserwanga Stefanie Barabas Rebecca Namatovu
  • 2. Principal Sponsors European Union Bank of Uganda Co-Sponsors SPEAR MOTORS LTD.  Copyright Thomas 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 2
  • 3. Preface The experience of countries like Taiwan and Singapore shows that a nation does not need to own plentiful natural resources to prosper economically. It is people that are a country’s greatest resource, and when they possess a spirit of enterprise and are exposed to opportunity incentives and a conducive environment, they will become prosperous. How far have Ugandans developed such a spirit of enterprise? Until now we have had to rely on observation and anecdotal evidence to answer this question. We are aware of many successful entrepreneurs who have made 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 they have been responsible for (tea factories, shopping malls, hotels, entertainment complexes, many types of manufacturing, and banks). Yet these entrepreneurs appear an elite few. Most Ugandans still live in abject poverty. It is not uncommon for Ugandans to think of themselves as lacking an entrepreneurial culture. Most highly 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 becoming successful business men and women. This again illustrates how little we actually know about the state of entrepreneurship 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 Global Entrepreneurship Monitor to conduct a survey of entrepreneurship in Uganda. The Global Entrepreneurship Monitor 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 of entrepreneurship 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 that the economic environment and public infrastructure still need to be improved before entrepreneurship can be fully exploited to serve national reconstruction and economic development. The findings are of value not just for academics, but for all policy makers and practitioners interested in the development of Uganda. E. Tumusiime-Mutebile Governor, Bank of Uganda 3
  • 4. 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 4
  • 5. 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 5
  • 6. Abbreviations BOU Bank of Uganda COMESA Common Market for Eastern and Southern Africa DANIDA Danish Agency for International Development DFID Department for International Development DR Democratic Republic EAC East African Community EFC Entrepreneurial Framework Condition GDP Gross Domestic Product GEM Global Entrepreneurship Monitor GOU Government of Uganda GTZ Gesellschaft für Technische Zusammenarbeit (German Technical Co-operation) ILO International Labour Organisation KfW Kreditanstalt für Wiederaufbau (German Bank for Reconstruction) LC Local Council LRA Lord’s Resistance Army MFPED Ministry of Finance, Planning and Economic Development MSE Medium-Scale Enterprise MUBS Makerere University Business School NEPAD New Partnership for Africa’s Development NRM National Resistance Movement OECD Organisation for Economic Cooperation and Development PAF Poverty Action Fund PC Personal Computer PEAP Poverty Eradication Action Plan PMA Plan for the Modernization of Agriculture PSFU Private Sector Foundation Uganda R&D Research & Development SIDA Swedish International Development Agency SME Small and Medium Enterprise TEA Total Entrepreneurial Activity UBOS Uganda Bureau of Statistics UGX Uganda Shilling UNHS Uganda National Household Survey USAID United States Agency for International Development USSIA Uganda Small Scale Industries Association UWEL Uganda Women Entrepreneurs Association Ltd. Country Codes AR Argentina AU Australia BE Belgium BR Brazil CA Canada CL Chile CN China DE Germany DK Denmark ES Spain FI Finland FR France GR Greece HK Hong Kong HR Croatia IR Ireland IS Iceland IT Italy JP Japan NL Netherlands NO Norway NZ New Zealand SE Sweden SG Singapore SI Slovenia SW Switzerland UG Uganda UK United Kingdom US U.S.A. VE Venezuela ZA South Africa 6
  • 7. 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 the Bank of Uganda - without your financial support Uganda’s participation in GEM 2003 would not have been possible. We are further indebted to the European Union for approving to sponsor GEM Uganda @ MUBS in 2004 and 2005. ♦ Our co-sponsors: Spear Motors Ltd. and Makerere University Business School – your financial 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 of entrepreneurship in Uganda and our respondents of the adult population survey for their willingness to answer all our questions. ♦ The Uganda Bureau of Statistics for their essential assistance in designing the sample for the adult population survey, specifically Atai Imelda, Muwonge James, Mayinza Seth N., Tamusuza Tony. ♦ Dr. Stephen Haslett (Director and Associate Professor, Statistics Research and Consulting Centre, Massey University, New Zealand) for his professional statistical advise on sampling methods 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) for his 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 survey and introducing them to our field staff. ♦ The field teams who excelled carrying out the expert interviews and the interviews of the adult population survey. ♦ The GEM coordination team at London Business School and Babson College for their professional support and their special effort to integrate GEM Uganda 2003 into the global consortium. 7
  • 8. Executive Summary What is the Global Entrepreneurship Monitor (GEM)? GEM originated in September 1997 as a research programme run jointly by London Business School in the UK and Babson College in the USA. Teams from each country who participate in the GEM programme undertake entrepreneurship research based on a core set of standardised measuring instruments 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 includes comparisons 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 of working age about their entrepreneurial intentions and activities. To investigate the entrepreneurial climate in Uganda, secondary economic reports and statistics were analysed, and supplemented with interviews of 36 experts on the economy of Uganda. What is the level of entrepreneurial activity in Uganda, and how does it compare to other countries? • Uganda has the highest TEA (Total Entrepreneurial Activity) index (29.2) among all GEM countries, signifying that 29 out of 100 Ugandans – almost every third Ugandan - is engaged in some 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 all 31 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 that inspired 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. The average 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 developed countries. This implies that the processes and effects of entrepreneurship may be different in such countries. Previous GEM research has identified “necessity” entrepreneurship being much higher in developing countries, and “opportunity” entrepreneurship lower than in developed countries. The Ugandan data, however, suggest that the processes are more complex, as: ♦ Opportunity entrepreneurship is also very high, and indeed, higher than the index for necessity entrepreneurship. ♦ There are marked regional differences in rates of entrepreneurial activity. The Eastern districts show spectacularly high rates of activity, whilst the Western districts reveal low levels. High rates in the East are unexpectedly higher than thos in the Southern and Central districts dominated by Kampala. 8
  • 9. ♦ In groups where education and income is high, the rate of opportunity entrepreneurship is exceptionally high by world standards. With access to more opportunity, Ugandans are even more entrepreneurial. ♦ Up to a third of Ugandans feel that they are selling products that are relatively new and innovative 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 all GEM 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 driven entrepreneurship. When GROWTH in per capita GDP is considered, both necessity and opportunity indices show significant correlations (measured in local currency). • Another complex problem is how far economic growth is caused by entrepreneurship and how far entrepreneurship feeds off economic growth. It is possible that it is the entrepreneurs with large amounts of capital (the mainstream habitual or portfolio entrepreneurs) who have the greater role in creating wealth and development. Smaller scale entrepreneurs are more likely to distribute 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 each country. For each framework condition the report provides a summary overview, followed by an analysis of 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 towards encouraging entrepreneurship, this has not gone far enough or has been sufficiently well targeted to needs. In terms of international comparisons, Uganda is still underdeveloped in terms of physical infrastructure, commercial infrastructure and the development of human capital and knowledge. Most serious of all, the number of international capitalist entrepreneurs thriving in Uganda are few, R&D is almost non-existent, and indigenous corporations have failed to proliferate yet. A strong entrepreneurial spirit 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 be inevitably tentative until the evidence from subsequent years is available for comparison, and for this reason strong recommendations are not offered as they would be premature. The first year’s results show, however, that there is nothing wrong with the entrepreneurial spirit of the people of Uganda. They are the world’s most entrepreneurial people to date. How this translates into economic development and poverty alleviation remains a fundamental, but still open, question. The report has shed some light on these complex issues, and hopes to build upon this knowledge in future years. 9
  • 10. Introduction Why does Entrepreneurship matter in economic development? The causes of economic development have been much debated. The dominant view, propounded by neo-classical economists, is that economic development is largely a function of capital and labour. To increase development, an economy must invest in capital and labour (financial and physical infrastructure, health, education, skills and training). In this view, the economy is seen to be generally balanced (in equilibrium) changing slowly and at a relatively constant rate as investment in capital and labour improves. For countries starting at a low level of development, a great deal of investment is needed before a country can “take off” and become a fully-fledged mature capitalist economy. This is likely 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). Countries who relied on steady state growth (including the US and the UK) ran into economic difficulties as conditions changed. The multinational corporations, the traditional sources of jobs and wealth, were no longer performing well. A period of (often) traumatic reconstruction was forced on many countries. This continued into the 1990s as large state or parastatal organizations in former communist countries were exposed to competitive market forces. The realization that small or new firms were an important ingredient in economic development was released in the 1970s. At that time the small firms sector was the only one contributing significantly to the creation of new jobs, and even today all economies contain a significant small firm sector in which small firms are proportionally the great majority of all businesses. The special importance of small firms to developing countries was recognized as early as the late 1940s, when India invested heavily in promoting smaller firms. Developing countries have few indigenous corporations, and multinationals as a source of jobs have proved to be unreliable, as peripheral multinational branches tend to be an early candidate for closure when times get hard. The protection and development of small firms have come to be regarded as especially vital. Small or new firms are started by entrepreneurs, not systems or governments. To have a 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, is their role in the commercialisation of new knowledge. Most of the world’s great and small inventions have been 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 bulb was not developed by a committee, quango or innovation unit, but by Thomas Edison, an inventor entrepreneur. The list of inventor/entrepreneurs is very long, and all have radically transformed economy and society. Most inventions have led to significant new multiplier effects. For example how many applications and services have arisen from the PC? Baumol (2003) attributed most of the spectacular rise in economic development in the last fifty years to the partnership between inventors/entrepreneurs and capital, chiefly in the form of corporate organization and finance. People in developing countries, such as Uganda, can become disheartened that all the innovations seem to come from abroad. In terms of development, however, entrepreneurs also play an important role in transferring and diffusing the benefits of innovation to their home countries. Most of the benefits from new innovations, even in developed countries, are “transfer” developments from the source of original innovation. This process is simply more obvious in developing countries. Finally there are indications that inventions are beginning to take off in developing countries where a science and technology base has been 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 of entrepreneurship is often overlooked in this model, research has now established that entrepreneurship may 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. 10
  • 11. What is The Global Entrepreneurship Monitor? Uganda participated in the Global Entrepreneurship Monitor (GEM) for the first time in 2003. The aim of GEM is to create an annual assessment of entrepreneurial activity across countries as well as to explore factors, which are responsible for differences in entrepreneurial rates. A greater understanding of these factors is essential in order to develop policies that can enhance entrepreneurial activity and economic growth. The Global Entrepreneurship Monitor (GEM) originated in September 1997 as a research programme run jointly by London Business School in the U.K. and Babson College in the USA. Teams from each country who participate in the GEM programme undertake entrepreneurship research based on a core set of standardised measuring instruments and methodologies. Teams can supplement this core research with more 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 includes comparisons with other nations. Additionally, one international document (the GEM Executive Report) is produced, which summarizes findings across all the participating countries. GEM enables countries, for the first time, to compare themselves not just in terms of conventional OECD indicators of economic growth, but also in terms of entrepreneurial performance. It is this that makes GEM such an exciting new set 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 countries participating in GEM grew year on year and has increased to over 30 in 2003. The increasing participation of developing countries has widened the scope of GEM considerably, and has introduced new problems of comparability and interpretation of the core data. At the same time, as new countries are added, 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 different views of what entrepreneurship is, but also the same people may use different definitions when researching entrepreneurship in different economic and social contexts. Three main types of definitions are 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 achievement motivation, opportunism, goal orientation, creativity, a feeling of being in charge, leadership, persistence and a high need for independence or autonomy. An “entrepreneur” is thus a person, either born or socialised in such a way that he or she possesses many of these traits in abundance. It follows that these qualities may be necessary for success not just in a small business context, but also in large businesses and the public sector. The entrepreneur is thus likely to be encountered in many walks of life. In this type of “person centred” definition, a person, once an entrepreneur, will keep acting entrepreneurial wherever he or she goes. Logically many people will also never be entrepreneurs, as they do not possess these qualities 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 just listed remain an essential component of success. The main difference is that they are not permanently linked with a person. They just manifest themselves while the entrepreneurial process or event is taking place. 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 of their lives. Under this definition anyone can potentially act entrepreneurial. 11
  • 12. • 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 to the formation of business enterprises. This is one of the most neutral definitions of entrepreneurship as it does 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 entrepreneurial activity. The GEM definition is thus of the third type, and concentrates on business formation. It is important to keep this firmly in mind when interpreting the GEM statistics. Entrepreneurial activity is the creation of new businesses. If a nation shows a low level of entrepreneurial activity, for example, it does not automatically mean that its people do not possess “entrepreneurial qualities” in the sense of definitions 1 and 2. It merely means that the number of new firms started is comparatively low. A low level of entrepreneurial 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 from definition 3. What is the GEM-model? A GEM model for entrepreneurship and economic development has been constructed by the central Babson/London Business School team. It is essentially an empirical model that looks at both the established and the entrepreneurial sector and illustrates the relationship between them. GEM specifically examines the strength and influence of the entrepreneurial sector on the economy. GEM is committed to empirically explore this model, and seeks to develop it further in the light of new evidence from the country studies. Figure 1 illustrates the GEM conceptual model. The GEM conceptual model specifies two distinct but complementary mechanisms for national economic growth, both being subject to a country’s social, cultural and political context. The first one describes the influence of the general national framework conditions (the general economic environment in a specific country) on the established firms, which contribute to the national economic growth. The second important mechanism for national economic growth is the impact of business churning, which is determined by a country’s entrepreneurial framework conditions. They influence the individual’s perception of entrepreneurial opportunities as well as the entrepreneurial capacity (skills and motivation) to act on such opportunities. 12
  • 13. 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 research agendas 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, the Ugandan sample consisted of only 1015 respondents as the survey had to be done in a very short period of 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 demographics and procedures). The respondents were questioned about their entrepreneurial activity as well as about their assessment of 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 about these activities. The main problem with administering the questionnaire was that of language. Ugandans speak a number of diverse languages. Many people speak English well (it is the official language of Government and commerce in Uganda, and a majority of schools teach in English), but only a minority could speak English to 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 local language. 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 was Luganda (228). This diversity of language introduced problems of validity, but the interviewers were carefully trained to tease out what the question is really asking for. For example the Adult Population Survey GEM 2003 Q1d states: “You have, in the past three years, personally provided funds for a new business started by someone else, 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 what these are. Nevertheless it is possible to convey reasonably accurately whether money had been given to someone else to help them start a new business. In this way, the Uganda team is confident that the essential questions in GEM have been delivered satisfactorily, even though much work remains to be done to further research validity problems. Problems of validity may be more extreme for Uganda, but are nevertheless 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. 13
  • 14. 2. Country Expert Interviews In Uganda 36 experts on entrepreneurship were chosen by reputation and referrals concerning their knowledge of one of the entrepreneurial framework conditions. Our experts consisted of 22 professionals and 14 entrepreneurs. “Professionals” have acquired expertise on entrepreneurship as academics, bankers, consultants, or politicians. “Entrepreneurs” in contrast have a history of practical experience in entrepreneurship. These experts were interviewed about factors that limit and contribute to entrepreneurship 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 topics like entrepreneurial opportunity, capacity and motivation, intellectual property rights and women entrepreneurs. 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 credible sources (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 to ensure 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 three main parts: Part I Entrepreneurial activity in Uganda This section deals with the results of the Adult Population Survey indicating how entrepreneurial 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 way it is linked to economic growth. Part III Assessment of Uganda’s entrepreneurial climate The results of the Expert Questionnaires and Expert Interviews are the contents of this part, describing the state of the Entrepreneurial Framework Conditions in Uganda. 14
  • 15. Part I Entrepreneurial activity in Uganda The Adult Population Survey As just indicated, the GEM definition of entrepreneurship focuses on the start-up of new firms and ventures. The more people participate in new venture formation, the more entrepreneurial the country. In order to measure this, GEM has compiled three measures of entrepreneurial activity based on the information from the Adult Population Survey: 1. Start-ups: the percentage of adults who have engaged in any activity to start a business in the past 12 months, expect to be a full or part owner, and have not paid salaries or wages for more than three months. 2. New firms: the percentage of adults who are actively involved in a new firm as full or part owner and manager, 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 a business (informal venture capital). The first two indicators are used to compute an index of Total Entrepreneurial Activity: the TEA index. The percentage of start-up entrepreneurs and new firm entrepreneurs are added, adjusting for double counting (adults who fit in both categories are counted only once) and “don’t know” answers to various screening questions (for further details see GEM global report 2003 or www.gemconsortium.org). This measure 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 of developing countries. Total Entrepreneurial Activity (TEA) Figure 2 displays the confidence intervals for the TEA index in the different GEM countries. As only a sample of a population can be interviewed the calculation of average scores always bears the risk of not representing the population properly. For this reason a confidence interval of 95% was selected to represent the TEA, indicating that the real TEA rate in the population lies somewhere on the vertical line drawn 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 out of 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 into consideration the overlap of the confidence intervals. Uganda far outstrips many of the world’s largest economies. Argentina as the country with the third highest TEA only reaches a value of 19.7, the United States 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 31 GEM countries in 2003 is 8.8. 15
  • 16. Opportunity and necessity entrepreneurship GEM distinguishes between entrepreneurship motivated by a good business opportunity and entrepreneurship motivated by necessity – the absence of any other work opportunities. Other common expressions for this distinction are “push versus pull entrepreneurship” or “replication versus innovation entrepreneurship”. 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 by opportunity and 44% by necessity. Uganda is again closely followed by Venezuela, which has a TEA opportunity of 16.1 (58%) and a TEA necessity of 11.6 (42%) (Figure 3). It is striking that the rates of opportunity entrepreneurship are higher than the rates of necessity entrepreneurship in all of the GEM countries except China. In developing countries like Uganda and Venezuela we expected higher necessity 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 in Figure 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, only reaches a score of 9.7 but out numbers Uganda in terms of start-up activity (19.2). Like the TEA scores both 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 the trend in most other GEM countries – only one third has a higher new firm than start-up rate. 16
  • 17. Demographic characteristics of entrepreneurs As Figure 5 indicates, males are more involved in entrepreneurial activity than females across all GEM countries, Uganda ranking 23rd (out of 31) in terms of male prevalence (61%). 17
  • 18. Figure 6 gives a more detailed impression of Ugandan entrepreneur’s characteristics in terms of gender and age. All measures for entrepreneurial activity (TEA, TEA opportunity, TEA necessity, start-ups and new firms) are higher for males between 18 and 44 years whereas between 45 and 54 years, women seem to be more engaged in entrepreneurial activity than men. Above that age, men and women are almost equally active – especially in necessity entrepreneurship - women this age seem to be particularly involved in new firms. Business angels 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 (Figure 7). However, a closer look at the amount of money provided (Figure 8) shows that more than 50% of business angels provided less 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 this could contribute to their lower rankings on the international scale. Uganda’s high score still gives evidence of the support for entrepreneurs in this country. The majority of Ugandan business angels provided funds for relatives or friends: 63% gave money to a close family member, 11% to other relatives, and 22% to friends or neighbours - only 1% provided funds for a work colleague and 3% for a stranger. Only half of the business angels (54%) received a share in the business in return for their investment. Others probably never saw any return, which can also explain the 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). 18
  • 19. Part II Interpreting the nature of entrepreneurial activity in Uganda, and how far or in what way it is linked to economic growth Uganda in 2003 is the most entrepreneurial country in the world so far, on all measures employed by GEM. 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 as entrepreneurial as Germany and Singapore (each accredited with post war economic miracles); and nearly ten times as entrepreneurial as Italy, Japan and France. How can this be true? What do these figures mean? After all Uganda is one of the world’s poorest countries in terms of annual per capita income. Can Uganda be dismissed as untypical or a statistical aberration, or do its trends of entrepreneurial activity provide important clues on how entrepreneurship links in with economic development? 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 following propositions 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 in Uganda than in countries where entrepreneurship really does boost wealth creation – it is a survivalist mechanism 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 most entrepreneurial 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 are meaningless The survey, conducted in house, was rigorous in its sampling framework, and its interviewer training and procedures were of a high standard. These were set up to counteract some of the validity problems encountered in administering the survey in different languages and different standards of education. We feel that the results are meaningful and a reasonably accurate reflection of rates of entrepreneurial activity 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 is repeated in 2004. That entrepreneurship is quite a different type of phenomenon in Uganda than in countries where entrepreneurship really does boost wealth creation – it is a survivalist mechanism based on “necessity”, not “opportunity” The GEM model is underpinned by a well argued belief (See Wenneckers and Thurick, 1999; Reynolds et al., 2001) that entrepreneurship is an important driver of economic growth. If this is true, it follows that the higher the level of entrepreneurial activity in a country, the higher should be its rate of economic growth. 19
  • 20. In the early years of the GEM project, when participating countries were almost exclusively from developed countries, GEM’s TEA was used as a robust benchmark of relative entrepreneurial performance between countries. In Scotland, for example, it is widely believed that its economy is lagging behind other European nations, and that lack of entrepreneurialism is a major cause. In promoting this view, 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, a country reports a high TEA value, there is a hint of pride in this fact. The Australia 2001 report, for example, stated that “Australia retained its place, established last year, among the countries with the highest levels of entrepreneurial activity.” (GEM Australia 2001:7). As developing countries started to participate in GEM, it became apparent that the TEA scores reported for developing countries were considerably higher than those for developed countries. In 2001 Mexico was the first country to have a TEA of (just) over 20, and as more developing countries began to participate in 2002, this trend became more pronounced. In 2002, eight out of the top ten TEA scores were from developing countries (Thailand, India, Chile, Korea, Argentina, Brazil, Mexico and China). The top score in 2002 was Thailand’s 18.9. In 2003, six of the top ten are from developing countries, headed by 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 an absence of preferred employment opportunities, whilst the latter is voluntary and motivated by the “pursuit of perceived opportunities” (Reynolds et al., 2001:56). If large numbers of people in developing countries are driven by poverty and lack of jobs to seek an income through some form of self employment or business start-up, we logically would expect a high rate of “necessity” entrepreneurs. In this sense, the TEA then just becomes a proxy measure for “poverty” rather than entrepreneurial dynamism. It would merely indirectly reflect the relative rates of employment between countries. The low TEA scores for most developed countries compared to developing ones would mirror the large discrepancy in available and recorded jobs between the two kinds of economies. Reynolds and colleagues, however, point out that the relationship between entrepreneurship and economic 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 in every participating country, even in Uganda. Indeed developing countries also have the highest rates of both types of entrepreneurial activity. The main difference is in the RATIO1 of opportunity to necessity entrepreneurial activity, which is much lower in developing countries. Denmark for example, appears to have 14.4 entrepreneurs motivated by opportunity to 1 motivated by necessity, whilst Uganda has just 1.3 to 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. 20
  • 21. Table 1: TEA comparisons and the Opportunity/Necessity Ratio in 20033 Country TEA TEA TEA O/N Ratio Opportunity 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 been analysed in previous years. Reynolds et al. (2001) identified a strong significant correlation between the rate of necessity entrepreneurial activity and various measures of economic growth. Table 2 shows our analysis 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 TEA measure has been harmonised (i.e. the few responses that indicated both opportunity and necessity entrepreneurial activity were only counted once). The O/N Ratio is computed using 14 decimals therefore rounding differences can occur. 21
  • 22. between the O/N Ratio and GDP growth indicates that high proportions of opportunity entrepeneurship are found in countries with low growth rates. Further, the tble shows that the higher a nation’s per capita income, the lower the TEA necessity score and the higher the O/N Ratio. In terms of growth in per capita income, the relationships are much more moderate but still significant in respect of the O/N Ratio. The O/N Ratio seems to be a relatively good indicator of the quality of a nation’s total entrepeneurial activity in terms of economic development and wealth creation respectively. However, we will investigate this relationship more in depth in the next GEM cycle. Table 2: TEA and GDP per capita GDP Measure TEA TEA TEA O/N Necessity 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 by looking at their distribution within Uganda. As Table 3 shows, necessity entrepreneurial activity is prominent in both rural and urban areas, but it is significantly more frequent in urban areas. This might appear a strange result but it should be noted that despite having a lower income many rural inhabitants are settled on traditional lands and may have better lifestyles than many urban people. In both urban and rural areas, however, opportunity entrepreneurial activity is narrowly the majority form and is well represented. Two other results stand out from these figures: 1 The large variation in TEA scores by region and language of survey. When Uganda appears in country comparisons, it implies that all Ugandans behave roughly in the same way. From an entrepreneurial perspective, however, they differ widely according to region and culture. It could be 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 their distance. 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 samples were 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 number of available entrepreneurial opportunities. In contrast the low rates from the west reflect the fact that trade opportunities are low in that sector of the Congo and Rwanda border, and that people’s attitudes 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 of education, the necessity rate declines sharply, and the opportunity rate shows a dramatic increase. A staggering 62% of Ugandans who have completed University or College are engaged in some form of entrepreneurial activity (mostly of the opportunity kind) and so are 58% of those earning more than UGX 166,000 a month (roughly USD 80). This shows that given education and capital, Ugandans are indeed incredibly entrepreneurial. 22
  • 23. Table 3: Structural TEAs in Uganda Number TEA TEA TEA4 Necessity Opportunity Rural / Urban Rural 813 12.17 16.45 27.82 Urban 139 19.04 20.56 37.67 Region Central 229 10.55 22.08 30.89 North 205 10.82 10.92 22.29 East 285 20.16 25.46 43.03 West 233 9.25 7.21 16.93 Parish Ayipe (north) 98 8.25 4.14 12.39 Mvara (north) 26 20.66 11.56 32.22 Pamitu (north) 81 10.75 18.99 31.13 Gulama (central) 82 11.31 15.28 24.13 Kabigi (central) 78 6.11 29.73 34.12 Kagugube (central) 18 15.83 24.48 40.68 Kazo(central) 20 15.62 22.21 39.17 Naguru (central) 31 13.29 19.39 29.59 Kamukuzi (west) 21 13.62 18.76 32.72 Katookye (west) 109 15.70 7.22 22.92 Mabungo (west) 103 1.58 4.89 7.45 Kwapa (east) 117 18.72 25.42 44.14 Namakwekwe (east) 20 26.50 23.25 49.75 Nangambo (east) 129 21.08 24.72 42.53 Monthly income (UGX) Under UGX 60,000 716 12.76 11.31 22.51 UGX 60,000 to less than 166,000 139 17.51 36.05 53.11 More than UGX 166,000 56 12.61 41.68 58.45 Education Completed primary school or less 598 13.96 11.81 25.48 Completed O-Levels or less 198 17.32 21.79 35.11 Completed A-Levels or less 39 4.20 10.57 14.77 Some college or university, not completed 52 1.63 26.95 33.08 Completed 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 or services. Competition between them is reputed to be extremely fierce, and many new entrants will contribute to displacement rather than job or wealth creation. Competition is not always as intense as at first appears, as apparently similar products can service different markets and customers (Kodithiwakku and Rosa, 2002). However in the main, there is no doubt that much competition is cut throat. The scope for 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 and services, asked to both starting businesses as well as new and established businesses. Table 4 below demonstrates that a surprising amount of innovatory activity underpins the products of start-ups as well 4 See footnote 3, Table 1. 23
  • 24. as new and established businesses in Uganda. Substantial minorities of entrepreneurs indicated that their products were unfamiliar, that their competition was low or non existent, and that their product was unavailable a year ago. This shows that new opportunities (i.e. new to Uganda or their home area) do confer important advantages and are keenly sought after. Further analysis showed that the distribution of innovatory or less competitive products and services tended to be accessed more by opportunity than necessity motivated entrepreneurs, although the difference was not large. This again reinforces the fact that entrepreneurship is a positive rather than a negative 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 or services 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 24
  • 25. Overall, therefore, we conclude that Uganda is not dominated by “necessity” entrepreneurship but is a country, like many others, where “necessity” and “opportunity” entrepreneurship co-exists to form complex relationships with economic growth. The main difference between Uganda and other countries is that both forms of entrepreneurship are very high. When Ugandans manage to better their circumstances (through income or education) they are even more entrepreneurial in seeking opportunities. 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 The Ugandan economy has risen from the ashes of a ruined economy in the 1970s, in which GDP growth was at times negative. The country basically stood still for 15 years, and only began to recover from the years of war and economic neglect in the mid 1980s. Since then Uganda has experienced a rapid rise in GDP, ranging from 4% to 11% per year. The following factors can be specially isolated as having been particularly important factors in boosting economic growth. Not all of them are directly related to growth through 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 cohort of international habitual entrepreneurs who have played a dominant role in reconstructing industry in Uganda in the last decade. 6. The decision to welcome back international companies and an increase in direct investment by such companies. 7. The pouring of aid into Uganda since the mid 1980s, reaching a climax in the mid 1990s. The aid itself, is not the full picture. There has also been the spending power of thousands of overseas aid consultants 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. Have entrepreneurs contributed to the growth, or have they fed off the growth generated by primary mechanisms 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 the experienced habitual entrepreneurs (whose capital can run into $ millions). Their activities have not been founded on pure innovation (like the Bill Gates or Jerry Yangs of this world). As such their contribution to pure wealth creation is less clear. They have rather acted like transfer agents, transferring from developed countries business formulae and imported goods to Uganda. They have exploited the fact that such innovations are new to or highly underdeveloped in Uganda. These prominent entrepreneurs have built hotel chains, leisure complexes, have founded banks, manufacturing industries, insurance companies, tea estates and private schools, which have contributed immeasurably to the development of Uganda, as they were not there before at any scale. Their activities have set off multiplier effects, and their example has been noted by upcoming Ugandans who are increasingly taking up the challenge of entrepreneurship. They too are beginning to delve in the unfamiliar and new. They have undoubtedly profited from the opportunities created by the influx of money through mechanisms such as aid and government 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 has rather been to redistribute the wealth created by taking advantage of the new opportunities being thrown up by the primary drivers of wealth in the economy, rather than being primary drivers of the growth. The smaller scale entrepreneurs have played a full part in helping to translate the wealth into jobs and to develop Uganda. 25
  • 26. Entrepreneurship as a mechanism for wealth creation is not that effective – despite being the most entrepreneurial country in the world so far, Uganda is still one of the poorest! An academic writer in the “Monitor”, one of Uganda’s daily national newspaper, wrote an article on December 5th 2003. His argument, voiced by a growing number of Ugandans, is that the Government of Uganda has enthusiastically pursued free market policies, applied the advice of the World Bank and the IMF, has encouraged entrepreneurship, has radically privatised state organizations and functions, has deregulated as much as it can, cut the civil service and produced tax incentives for businesses - yet Uganda remains poor. Figures could be produced to show that there has been a dramatic fall in poverty and rise in GDP per capita in the last ten years, and that consumer spending and affluence is steeply on the rise in many parts of the country. Yet many people are still very poor, and faced with overseas role models in Uganda which are drawn from the more affluent parts of the West, expectations are high (few Ugandans have seen poor Whites in Europe or America). Entrepreneurship seems to be the primary mechanism through which people are trying to better their own lives, even when they are employed in good jobs. With human and financial capital still grossly underdeveloped, however, it will take time to meet expectations. It is very difficult for an entrepreneur without much education or with low levels of finance to become aware of or have the know how and resources to exploit sophisticated market opportunities, such as internet cafes or shopping malls. Until basic education, infrastructure and capital levels improve, the impact of entrepreneurship is bound to be muted, no matter how enthusiastically it is pursued. Without entrepreneurship, 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 tortoise knows that though it walks slowly it moves a long way quite quickly. Its progress just tends to go unnoticed. 26
  • 27. Part III Assessment of Uganda’s entrepreneurial climate The expert interviews and questionnaires The purpose of this section is to investigate Uganda’s entrepreneurial climate. An exploration of the factors associated with entrepreneurial behaviour supplement the more descriptive findings of the Adult Population Survey. GEM identifies 9 entrepreneurial framework conditions which are essential for entrepreneurial development in a country. In the following we will discuss each of the 9 framework conditions and present our findings. These will be supplemented with findings on specific and/or additional 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 of experts see Appendix I, for a list of the framework conditions see Appendix II). The experts were asked for their assessment of the top 3 limiting and the top 3 contributing factors to entrepreneurship as well as for 3 recommendations on how to improve entrepreneurial activity in their country. The interviews were supplemented by a detailed questionnaire. The discussion of each entrepreneurial framework condition is structured as follows: 1. Framework Condition A brief definition of the respective framework condition 2. Context in Uganda A description of the respective framework condition in Uganda 3. GEM Uganda 2003 Expert Feedback A summary of the number of experts that named the specific entrepreneurial framework condition as a limiting factor, a contributing factor or gave recommendations how to improve this framework condition. 4. Uganda 2003 in an International Comparison A comparison of Uganda’s scores with the average scores for all GEM countries. The experts were asked to rate their agreement to a variety of statements on the framework conditions on a scale ranging from 1=’completely false’ to 5=’completely true’. The results have been converted to a scale ranging from -2 to 2, representing a score of 3=’neither true nor 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 or encourage 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 to macroeconomic 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 a showcase for economic reform and post-conflict recovery in Africa. This recovery has been achieved through three fundamental government policies. 27
  • 28. First, the government provided a reasonable level of internal peace where previously large-scale violence had existed. At household level, this has allowed for a gradual shift from subsistence production to market-based activities. At macroeconomic level, it has led to a stabilisation of the economic environment including significant improvements of fiscal management. Second, it rescinded predatory taxation, removing implicit taxation on exports by liberalising the foreign exchange rate and coffee marketing. This made recovery in export crops possible, particularly for coffee and 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 not dramatically erode. The stable currency and orderly macroeconomic management especially allowed households to transform income into productive investment and physical assets. 28
  • 29. Reforms were focused on the following areas: • Financial sector, • Expenditure control, tax policy reforms and the overhauling of the tax administration to raise domestic 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 private sector from playing its central role as the engine of economic growth, the bulk of which were and still are related 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. The following 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 and development finance institutions, micro finance institutions, financial services for small and medium-scale enterprises); • Commercial justice sector reforms (reforming key institutions, improving the legal environment, formulation of business-friendly laws and regulations, training commercial lawyers); • Institutional reforms (dealing with corruption, reforms in public procurement, simplifying administrative procedures – deregulation, institutional framework for investment and export promotion, improving tax administration); • Export promotion through removing current sector specific impediments (removing anti- export bias, export finance and guarantees, legislation and quality standards in processed food 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, sustainable environmental management). Besides this, government policies target the promotion of a regional and international economic integration. • Within the East African Community (EAC) Uganda is involved in creating a common trade regime based on the principle of free internal trade and common external tariffs. Progress has also been achieved in the harmonisation of the Monetary and Fiscal Policies in the region, 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), which aims at coordinating activities of African countries that support economic growth and can lead to poverty alleviation. • Uganda’s government is also committed to the global SMART partnership dialogue, which aims at improving domestic and foreign direct investments in Africa. This includes strengthening regional cooperation but also reflects on achieving a favourable positioning of African countries within global trade and investment arrangements (WTO). • Additionally, Uganda participates in global agreements such as the USA-lead African Growth and Opportunity Act (AGOA) or the EU lead Everything But Arms (EBA) initiative, which ensure Sub-Saharan countries preferential duty and quota treatment for exports to the respective markets, plus special access for a number of export products. 29
  • 30. Due to heavy donor support, government policies in Uganda are also very much influenced by foreign interests (IMF, World Bank, EU and national agencies such as DFID, USAID, DANIDA, SIDA, GTZ/KfW to name only a few). Foreign aid has significantly contributed to the improvement of living conditions in Uganda 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 project support, which sums up to roughly 50% of the Ugandan budget being donor funded. In addition to this fiscal dependency, these so called “donor economies” can also create dependencies and motivational problems. Just as direct investments can lead to a welcomed contribution to economic growth, they can at the same time hinder the development of indigenous knowledge and experience, which has negative effects on motivation. Donor funding can lead to distortions in the market that create unwanted competitive advantages for those who manage to raise funds. After achieving a considerable level of economic activity and welfare, Uganda’s economic policy stands at a crossroads and must consider shifting from “merely” exploiting the potentials of recovery-growth to achieving real development in an evolutionary sense. Thus, in order to sustain the high growth rates of the last years the level of entrepreneurial quality will have to improve significantly. This may call for a well balanced mixture of open-market economy and protectionism in order to enable the indigenous Ugandan entrepreneurs to progress and enhance their learning curve. Uganda’s government policies will have to shift from quantity oriented growth to quality oriented development. In the past few years economic growth has slowed down, but more importantly, a number of political problems remain, which adversely affect economic growth. These include Uganda’s intervention in Eastern Congo, which has also distorted relationships with Rwanda, the Ugandan Government’s continued difficulties in concluding the 17-year old conflict with the Lord’s Resistance Army (LRA) rebels in the north, overspending on the military budget, delay on deciding an optimal time to move to democratic, 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 life and the growth of the Ugandan economy. However, there is much more work to be done before development 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% of the Ugandan population still lives in poverty and that there is a slight increase in 2002/03 compared to the constant decline of poverty over the past few years. Under this objective all government policies and programmes are to be designed to complement the overall Poverty Eradication Action Plan (PEAP). Many initiatives within PEAP are financed through the Poverty Action Fund (PAF), which accounts for over 30% of the overall government budget and is protected from any budget cuts. Direct measures focus on poverty reduction through achieving high economic growth rates and put a private sector-led growth strategy at the forefront of the action plan. 30
  • 31. This also includes the Plan for the Modernisation of Agriculture (PMA), the National Programme for Good Governance and other sector specific plans. Indirect measures concentrate on poverty reduction through redistribution, which mainly involve public expenditure as well as access to and quality concerns of public services. Some areas have exhibited positive progress in achieving PEAP targets, whereas key challenges remain in others. In particular the annual rate of economic growth has fallen below the PEAP target of 7% per annum since 1999 (Figure 13). High rates in population growth additionally limit the growth in per capita real income, which is still below the PEAP target of 5% per annum (Figure 14). Low food crop prices, on the one hand, have significant adverse implications for the income of the 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 consumers and have to spend a high proportion of their expenditure on food. The absolute Per Capita GDP in the fiscal year 2002/03 was UGX367,951 (approx. USD200). 31
  • 32. 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 and contributing factors. It was the most nominated framework condition in respect of recommendations to improve the overall entrepreneurial conditions in Uganda. Government Policy as a limiting factor: • The regulatory burden and administrative bureaucracy associated with entrepreneurship is perceived 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 the average perception of this framework condition by all participating GEM countries in 2003. 32
  • 33. Ugandan experts were slightly below the international average on most measures. Survey responses supported 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 of government – national, regional and municipal. Also examined are the accessibility and quality of government programmes, the availability and quality of government human resources and their ability to administrate 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 the Ugandan government and that government has identified a private sector-led growth strategy as the most important 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 of entrepreneurship. Programmes under the Plan for Modernisation of Agriculture (PMA) are meant to boost agricultural productivity across the board. Areas, where government and donor programmes (projects) for the PMA have 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 in certain key export areas through strategic interventions. For this purpose it has developed the Strategic Exports 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 tons of oil equivalent terms per annum. The energy sector is still underdeveloped and continues to place a big burden on the country’s resources, mainly in terms of depletion of natural resources through excessive dependency on biomass, which provides 90% of the national energy supply. Government has launched the 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 at upgrading the skills of the workforce, mainly in order to improve industrial productivity and thus demand for agricultural products. A key measure for 2003/04 is implementing the Business, Technical and Vocational 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 has developed programmes to reduce transaction costs including commercial law reform, contract enforcement 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. 33
  • 34. Uganda’s government is committed to coordinate and integrate its own interventions with those of the donor community. As we have already mentioned, the donor community contributes approximately 50% to the government budget and therefore has a very significant impact on the implementation of projects and programmes under this framework condition - not only because of their financial contribution but to a large extent also through their contribution of intellectual capital (expatriates, consultants, research findings, etc.). In addition these experts also create an important demand for products and services in the Ugandan market. Due to the presence of a large number of projects and programmes, it is not possible to highlight all of them in this paper. The most comprehensive overview is given on over 1,000 pages of the Public Investment Plan of Uganda, which is published by the Ministry of Finance, Planning and Economic Development. We will only mention a few donor programmes/projects directly aiming at the promotion of entrepreneurship 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 Foundation Uganda (PSFU). • Enterprise Uganda is an institution designed to support the government of Uganda in realising its objective of promoting the development of SMEs to become the main vehicle for expanding production, providing sustainable jobs and enhancing economic growth. The idea is to create a one-stop programme, which provides an integrated and comprehensive range of business support services for existing and start-up SMEs using a hands-on approach. It is being promoted by a consortium of local and international donors including UNDP Uganda, UNCTAD and the Government of Uganda. • USAID runs projects such as the Investment in Developing Export Agriculture (IDEA) which seeks to strengthen the value chain for non-traditional high and low value crops; the Support for Private Enterprise Expansion and Development (SPEED) which addresses micro, small and 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 was the third most nominated framework condition in respect of recommendations to improve the overall entrepreneurial 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. 34
  • 35. EFC 2: Government Programmes in an International Comparison Figure 16 illustrates the average expert perception of Government Programmes in Uganda compared to the 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. Survey responses supported the qualitative feedback that government programmes were well designed, but information 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 growing firms, 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 aimed at helping individuals and/or enterprises to access financial services. A number of projects are being put in place to assist business development. The Private Enterprise Support Training and Organizational development activity (PRESTO), for instance, is expanding rural credit through local financial institutions and tackling policy and regulatory constraints to business development. The European Development Fund’s micro-project scheme is now reaching some of the most disadvantaged Ugandans through grants to build infrastructure in rural communities where development was hampered by the protracted civil wars before1986. It is also giving loans to individuals to start up businesses ranging from metal working to mushroom growing. It extends to six regions countrywide, offering credit to those who cannot meet the terms and high interest of commercial banks. Commercial banks dominate the financial system, accounting for about 80% of financial assets. There is an urban bias and most of the foreign commercial banks operate in Kampala and a few bigger towns, but not in the country-side. This is one of the main reasons why banks play a limited role in financing rural investments and growth. The general problem is the chronic lack of long-term finance. Private sector lending 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 urban sector and rural areas and high transaction costs. Thus 50% of commercial banks’ private sector credit is given 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 in the financial sector, they are still relatively high. Most of the households in Uganda cannot easily access the facilities offered by commercial banks. This has necessitated the emergence of Micro Finance Institutions (MFI). MFIs aim at strengthening households by providing credit to finance new economic activities and adopt new technologies to help raise incomes, and use group dynamics to improve access and lower the costs of credit. In some cases, MFIs mobilise savings, providing households with financial 35
  • 36. reserves that can be used to smooth consumption. In the past, regulatory restrictions were preventing MFIs from taking savings deposits from their clients, but a Micro Finance Deposit Taking Bill was drafted to remedy this, enforcing Bank of Uganda to supervise their operations. This new category of MFIs is called Micro Finance Deposit Taking Institutions (MDI). Many research findings suggest that micro finance has been successful in providing micro-scale working capital and helping poor households to survive, but less successful in boosting growth businesses which could accelerate the reduction of poverty through job creation. In Uganda, there is no special legal provision for leasing companies and the existing leasing company operates 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 African Development Bank (EADB) are the two leading institutions in this area. The insurance sector is still underdeveloped, and is supervised by the Uganda Insurance Commission. It is characterised by low levels of insurance appreciation by the public. There is a 34% level of insurance brokering where more than 60% of the broker business is under the control of one broker, professional loss assessment services are just improving recently, actuarial services are absent and insurance services are concentrated in urban areas. Whereas most companies meet the statutory capital requirements, the level of capital still requires enhancement to enable the companies to take more sizeable risks, uplift their retention as well as providing social insurance. In 1997 the Uganda Securities Exchange (USE) was developed with the intention of availing equity capital to Ugandan firms. The USE is still an infant and rudimentary market and most Ugandans have scanty information about operations on this market and a very obscure picture of what happens there. To date 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 where efforts both from government and private investors would benefit the entrepreneurship development in Uganda. 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 fourth most nominated framework condition in respect of recommendations to improve the overall entrepreneurial 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. 36
  • 37. EFC 3: Financial Support in an International Comparison Figure 17 illustrates the average expert perception of Financial Support in Uganda compared to the average 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 supported the qualitative feedback that Financial Support was improving but still far behind the desired level. Especially the lack of long-term financial capital that would enable to utilise growth potential was highlighted as a priority area by most experts. EFC 4: Education and Training GEM investigates the extent and quality of training in starting or managing small, new, or growing businesses in the educational and training system at all levels –from primary school to postgraduate courses. 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 literacy rate being lower at 63% while the male literacy rate is at 77%. There are quite significant rural-urban differences, 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 Universal Primary Education Policy has increased enrolment in the primary section from 2.9 million in 1996 to 7.3 million pupils in 2003. However, it is claimed that the quality of education has declined, especially in the rural areas due to increased enrolment. Key indicators are e.g.: a pupil/classroom ratio of 94:1 and a pupil/teacher ratio of 54:1. The ability for Ugandan entrepreneurs to maximise returns from economic reforms is constrained by lack of technical, managerial, accounting, marketing and sales skills in order to respond more efficiently to the new incentives and opportunities. Education programs that teach skills which enhance international competitiveness 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 to adaptation of new technologies and innovation, necessary to support a vibrant private sector and critical for raising the standard of living. Government is spending 31% of the total discretionary expenditure on education. There are efforts to promote positive attitudes to self employment and awareness of this career option. There are efforts to incorporate entrepreneurship education and training in the curriculum of all levels of education from pre-primary to tertiary institutions. The National Curriculum Development Centre has designed the entrepreneurship syllabus for general secondary education. 37
  • 38. 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 a key measure for 2003/2004. To date there are 144 public and about 600 private training service providers and an unknown number of apprenticeship and enterprise based training programmes operating in Uganda. The higher education sub-sector is not yet properly integrated into government’s overall education policy although it is growing at a high rate with over fifty institutions of higher learning and many programmes of study. The institutions include 16 licensed universities (of which 12 are private) and more than fourty other tertiary institutions. Of the over 75,000 students only 15% are enrolled in the critical sciences and technology disciplines. Although entrepreneurship education is being encouraged and supported by the government, only very few 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 the second most nominated framework condition in respect of recommendations to improve the overall entrepreneurial 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 mainstream education 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 of internships, apprenticeships or on-the-job trainee programmes. Education and Training as contributing factor: Three experts stated that there have been some improvements in the education system in respect of entrepreneurship such 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 the average 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). Survey responses supported the qualitative feedback that entrepreneurship education and training has not been integrated into the education system adequately. The qualitative feedback also clearly brought out that the Ugandan education philosophy in general discourages entrepreneurship or self-employment rather than to encourage this as a recognised career option. 38
  • 39. 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 for Entrepreneurship was ranked 5th as limiting and at the same time 8th as contributing entrepreneurial framework category. Figure 19 illustrates the survey responses to questions relating specifically to the Capacity for Entrepreneurship. Ugandan experts were again below the international average on all measures (except question 4). Survey responses supported the qualitative feedback that most Ugandans do not have sufficient capacity for entrepreneurship. The majority of entrepreneurs in Uganda have little education, cannot keep proper books of accounts, have no advisors, and often end up in losses. Ugandan businessmen have to grapple with 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 commercial opportunities, 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 of Research and Development activity in Uganda. Uganda has a number of stand-alone research organizations like Centre for Basic Research (CBR), Makerere Institute of Social Research, National Agricultural Research Organization (NARO), ACCLAIM, Media Associates, IMPACT Associates, to mention but a few. Additionally, most of the business organizations operating in Uganda have a research and development function (Unit), which generates either new ideas necessary for competing in the liberalized markets or deals with specific business problems at hand. 39
  • 40. At the National level, a lot of research work has been done on mineral exploration. Data and information regarding the nature and distribution of these resources is available through the Ministry of Energy and Mineral Resources. Government has invested heavily in remote sensing and geographical information system (GIS) data interpretation in traditional fields of geological research and related investigations of a regional scale. However, the general public is not aware of its existence, due to limited transfer of research knowledge from the ministry to its stakeholders. The trade and industry sector has little formalized research. A lot of research work in this sector continues to be conducted by individual companies to solve their particular research problems. USAID/IDEA and other international agencies have sponsored research and helped train Makerere University staff, investors and entrepreneurs. UNIDO has been working with women entrepreneurs in developing foods and 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. Studies on small and micro enterprises in Uganda exist. However, reports cannot easily be accessed, even though such studies would be particularly relevant to promote entrepreneurship development in Uganda if they 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 and fisheries. It has 9 research institutes and 11 Agricultural Research Development Centres (ARDCs). It has good facilities and some 700 high quality researchers of whom 200 hold PhD’s. There thus appears to be an adequate human resources capacity to handle agricultural research. NARO works continuously with farmers, extension staff, NGOs, and many local, regional and international organizations and universities to support its activities. Although NARO works closely with its stakeholders to commercialise research, its success 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 biotechnology risk assessment and management (Kyetere and Blackie, 2000). However it is only recently after decentralization that focus has shifted to dissemination and application of research results. Public-private partnerships for increasing funding and acceptance for biotechnology research and development in Uganda are still missing. This seriously limits product development and commercialisation. Market growth and development of biotechnology innovations largely depend on the public’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 our experts. However, two experts mentioned R & D Transfer in their list of recommendations to improve the overall entrepreneurial conditions in Uganda. Recommendations on improving R & D Transfer: • Create appropriate interfaces to disseminate research findings to existing and potential entrepreneurs. • Policies and incentive systems that provide an enabling environment for public private partnerships 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 average perception of this framework condition by all participating GEM countries in 2003. 40
  • 41. Ugandan experts were quite significantly below the international average on most measures. Survey responses supported the qualitative feedback that government programmes were actually quite well designed, 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 Property Rights (IPR) in Uganda. Experts perceived the status of IPR in Uganda significantly below the international average on ALL measures. These survey responses support the qualitative feedback that respect for IPR is more or less non existent in Uganda. This is probably mainly due to the fact that there are almost no Ugandan patents, copyrights, and trademarks that could be protected but only foreign ones. EFC 6: Commercial and Professional Infrastructure GEM investigates 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 businesses. EFC 6: Commercial and Professional Infrastructure Context in Uganda There are a number of professional accounting, legal and consultancy services available mainly in the capital city, Kampala. However, these professional services are strongly influenced by foreign investors such as PriceWaterhouseCoopers or KMPG and are not affordable for the majority of entrepreneurs in the country. Smaller service firms are characterised by lack of experience in commercial matters as well as poor governance and ethical standards. We have already mentioned the commercial justice sector reforms (reforming key institutions, improving the 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 the respective policies. 41
  • 42. The problem of insufficient market information has been partially solved by the establishment of the Uganda Investment Authority, Uganda Commodity Exchange, Uganda Securities Exchange and the improved coverage of both in the print and electronic media. Nevertheless, access to these institutions is still 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 framework condition. It ranked 7th in respect of recommendations to improve the overall entrepreneurial conditions in Uganda. 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 in Uganda compared to the average perception of this framework condition by all participating GEM countries in 2003. Ugandan experts were significantly below the international average on all measures except for banking services. Survey responses supported the qualitative feedback that good commercial and professional services were available but not affordable for the majority of Ugandan entrepreneurs. Central issues are governance, ethics and law enforcement. 42
  • 43. 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 low average incomes with almost 40% of the population living in poverty. Less than 5% of the Ugandan population earns above UGX400,000 per month (USD200), which explains the low purchasing power of consumers and the little wealth the vast amount of Ugandan entrepreneurs (29.2% of the adult population) can expect to create. Internationally, Uganda has made substantial progress to attain impressive and above average international 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 was nominated 10th in respect of recommendations to improve the overall entrepreneurial conditions in Uganda. 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 market activities significantly, however, smuggling is common due to unpredictable and bureaucratic export 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 the average 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 except concerning the anti-trust legislation were Uganda scored significantly below average. Survey responses supported the qualitative feedback that especially external Market Openness was an extremely important issue due to the small and illiquid domestic market and the land-locked situation of Uganda. However, the overall 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 bribing and smuggling. 43
  • 44. In addition, Figure 24 illustrates the survey responses to questions relating specifically to the availability of entrepreneurial opportunities. The existence of business opportunities was perceived above the international average on all measures except concerning the availability of information to assess business opportunities. Survey responses support the qualitative feedback that Uganda offers a rich pool of unexplored 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 that can 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 in the 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 44
  • 45. 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 in Uganda. 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 Uganda compared to the average perception of this framework condition by all participating GEM countries in 2003. Ugandan experts were below the international average on all measures. Survey responses supported the qualitative feedback that Access to Physical Infrastructure was still a serious constraint to private sector growth 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 individuals to 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 in different parts of the country. Bantu speakers predominate in the southern and central areas, whilst Nilotic speakers predominate in the North. Nilo-Hamitic speakers can be found in the North East. Many Ugandans also speak a limited amount of Kiswahili, which is spoken throughout the neighbouring EAC countries 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 are over 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 fact a complex mix of cultural norms and values, subject to forces of change led by education, which do not support simple categorizations into “masculine”, “collectivist”, “patriarchal”, “anti-women” and so on. With 45
  • 46. many Ugandans being at least partially influenced by traditional and conservative social attitudes, it is not surprising that many apparently liberalizing and modernising policies are being resisted. Of these the most noticeable is gender equality. Efforts by the current government to improve women’s position in society 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 the desire by most people to improve their lives. Education is highly valued, and so are the skills needed to participate fully in the modern economy. Expectations are growing as people are becoming increasingly exposed to the flood of imported western consumer goods, to lifestyle role models on radio and TV, to advertising, 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 framework condition. It was ranked 8th in respect of recommendations to improve the overall entrepreneurial conditions 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 to the average perception of this framework condition by all participating GEM countries in 2003. Ugandan experts were very close to the international average on all measures. 46
  • 47. Figure 27 illustrates survey responses to questions relating specifically to the social legitimacy of entrepreneurship (motivation) in an international comparison. Survey responses, quite significantly in contrast to the qualitative feedback through interviews, indicate a Social Legitimacy of Entrepreneurship above the international level on all measures. Figure 28 shows survey responses to questions relating specifically to women entrepreneurs. Experts perceived the situation of women entrepreneurs in Uganda to be below the international average on all measures except for the encouragement measure, which may indicate a positive shift in attitude towards women 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 many experts are involved in autonomous start-ups (69% compared to 27%) and 46 times as many in starting a business for their company (46% compared to 1%). There is almost the double amount of business owners among Experts than in the Adult Population (64% compared to 35%) and almost 4 times as many business angels (47% compared to 13%). Ugandan Experts also see more good opportunities for starting a new business within the next 6 months than the Adult Population (84% compared to 64%), and are more convinced of having the knowledge, skill and experience to start a business (94% compared to 87%). The Experts are also less likely to keep away 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 convinced than the Experts that most Ugandans consider a new business a desirable career choice (86% compared to 75%) and consider media stories about successful entrepreneurs to be more frequent (78% compared to 69%). The same proportion of Experts and Adult Population believe that those with successful new businesses have a high level of status and respect (86%). 47
  • 48. Table 5: Entrepreneurial Scorecard (comparison of 31 countries) Uganda’s Uganda’s Lowest Average Highest score 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 48
  • 49. Outlook It may appear to be a contradiction that Uganda has such a high rate of entrepreneurial activity (both necessity 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 amounts of investment and capital growth to improve economic growth in a country such as Uganda that was so underdeveloped in the early 1980s, and that improvement would take a very long time. Entrepreneurship appears to have accelerated this process. There has been a great deal of growth in entrepreneurial activity 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. There has 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 decipher exactly how entrepreneurship has fuelled development and economic growth in Uganda is difficult and complex, and remains a challenge. We are confident, however, that without its entrepreneurs, far more people would be suffering today. The Government has played a key role in this revival, with policies geared towards increasing enterprise and reducing poverty. The experts have been critical that these have not gone far enough, and many recommendations were made, as we outlined in part III of the report to improve matters further. It is hoped that debate in the future will be clarified by the research carried out by GEM Uganda @ MUBS. 49
  • 50. References Abrahamsson, 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 of Strathclyde. Bitarabeho, J. (2003): Curbing Corruption and promoting Transparency in Local Governments, The Experience of Bushenyi District, Uganda, a paper presented as part of the World Bank’s open and Participatory Government Programme at the Local Level, World Bank Institute, Washington DC. Farstad, H. (2002): Integrated Entrepreneurship Education in Botswana, Uganda and Kenya, World Bank Publication, 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 draft report. Kodithuwakku, S. and Rosa, P. (2002): The Entrepreneurial Process and Economic Success in a Constrained Environment, 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 Resource Capacity, a paper presented on a regional workshop organized by ACTS, Nairobi-Kenya, 6-8 December 2000. Mboijana, S.A. (2003): Coping with Economic and Technological Change: The Ugandan Experience, a paper presented 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 Support Private 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 and Investment 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, November 2003, Entebbe. UBOS (2003c): Uganda National Household Survey 2002/2003, Report on the Labour Force Survey, November 2003, 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 Business Economics, Vol. 13, pp. 27-55. 50
  • 51. Appendix I GEM Uganda 2003 Country Experts Baguma, David Micro Finance Union Batuma, John Managing Director, Banapo Wines Ltd. Bekalemesa, John Muhaise Partner, Ernst and Young Clarke, Dr. Ian Chief Executive Officer, Kampala International Hospital Kaahwa, Abel R. Executive Director, Uganda Industrial Research Institute Katabula, Musisi Stephen Managing Director, Kira Mixed Farm Kawaga, Francis Managing Director, Mikolo Rental Enterprises Ltd. Kayanja, Pastor Robert Rubaga Miracle Centre Kiapi, Palia Paul Advocate, Kampala Attorneys and Solicitors Kigozi, Dr. Maggie Executive Director, Uganda Investment Authority Kisimbo, A. Country Manager Uganda, Kenya Airways Kitakule, Sarah Executive Director, UWEL Kiwanuka, Dr. Mathias Managing Director, Nsambya General Clinic Lokeris, Hon. Peter Minister of State for Karamoja affairs, GOU Luboga, Christine Managing Director, Chrisame Designe Luyinda, Vincent Managing Director, Vinco Ltd. Mathale, Victor Counsellor Economic, South African High Commission Kampala Mugambe, Kenneth Assistant Commissioner, MFPED Munene, Prof. Dr. J.C. Makerere University, Institute of Psychology and MUBS Mwesigye, Fred Commissioner, Ministry of Trade and Tourism Nunumisa, Beenunula Eyenunula Managing Director, Forex Africa.com Ltd. Nyakaana, Joseph Advocate, Kampala Attorneys and Solicitors Ocici, Charles Executive Director, Enterprise Uganda Okecho, Dr. Willibrord Centenary Rural Development Bank Pageau, Annie Director, Naturaleaf Sabamuwe, Zukula Proprietor, Juice Packaging Sematimba, Peter President, Super FM Sembuya, Chris Managing Director, Sembule Group of Companies Sentamu, Richard Proprietor, Water Packaging Settala, Rashid Territory Manager, Pfizer Consumer Health Care Sonko, Sarah Managing Director, All Flowers Wild Day Care Centre Ssenyondo, Vincent Executive Director, USSIA Turyahikayo, Godfrey Commissioner, Ministry of Energy Wamala, Daniel Managing Director, Luwero General Merchandise Waniala, Nimrod Executive Director, Private Sector Foundation Uganda Wavamuno, Gordon Managing Director, Spear Group of Companies Table 6: Characteristics of Uganda Country Experts Gender 83% male, 17% female Age 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 51
  • 52. Appendix II Entrepreneurial Framework Conditions (EFC) EFC 1: Government Policy the extend to which regional and national government policies in terms of taxes, government regulations 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 all levels of government - national, regional and municipal. EFC 3: Financial Support the availability, accessibility and quality of financial resources for new and growing firms, including grants 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 the educational 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, and whether 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, thus preventing 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 of conducting business or economic activities. 52
  • 53. Appendix III 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 to 952. Weights were calculated for each respondent to represent the demographic characteristics of the Ugandan population as provided by the Ugandan Bureau of Statistics. Table 7 provides both weighted and un-weighted demographics of our adult population sample. In the following description we will refer to the 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, only 0.02% 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 age increases, 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 of 4% 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% post boxes, 2% landlines and 2% Internet services. 34% had access to other communication facilities, mainly L.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 49.8 Female 56.7 50.2 Age 18-24 26 33.0 25-34 33.6 30.1 35-44 19.1 19.7 45-54 8.7 10.5 55-64 6.4 6.7 Ethnicity White 0.2 0.0 Black 99.8 100.0 Education Completed primary school or less 62.5 63.3 Completed O-Levels or less 21.9 21.0 Completed A-Levels or less 5.1 4.1 Some college or university, not completed 4.3 5.5 Completed college or university 4.4 4.0 Employment Status Employed full-time 10.5 7.8 Employed part-time 3 2.6 Self-employed 25.5 26.3 Employed full-time and self-employed 1.7 0.7 Employed part-time and self-employed 3.1 3.8 Retired 2.1 0.7 Not employed 54.1 58.0 Communication Facilities Landline 2.7 1.9 Mobile 19.7 14.8 Internet Access 1.3 1.9 Post-box 14 15.3 Other 32.2 34.2 None 43.9 44.2 Annual Household Income Under UGX 720,000 (USD360) 72.7 75.2 UGX 720,000 to less than 2,000,000 (USD1,000) 13.5 14.6 UGX 2,000,000 to less than 10,000,000 (USD5,000) 7.3 5.2 UGX 10,000,000 to less than 50,000,000 (USD25,000) 0.8 0.6 UGX 50,000,000 or more 0.2 0.1 53
  • 54. Appendix IV Sampling of Uganda’s Adult Population 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 conducted across all regions they were included and weighted accordingly. The method employed in most GEM countries 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 with probability proportional to size in each of Uganda’s four regions (north, east, west, central), leaving out certain areas where the security situation was too unstable. One parish was sampled per subcounty, one subcounty per county, and one county per district with probability proportional to size (see Table 8). In each parish several enumeration units were covered. As the Ugandan Bureau of Statistics provided detailed maps of number, location, and composition of households in each parish a representative sample of working aged Ugandans could be attained by taking 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 the Ugandan Bureau of Statistics as a group of people who normally eat together; in cases of ambiguity only those, who ate together the previous day were included. A total of 640 households were sampled in rural areas (80 per parish) and 360 in cities (120 in Kampala as the main urban area and 60 in one parish in each of the other three regions). The following method was employed to choose a respondent in a selected household at random: the family members were numbered according to their age, assigning number 1 to the oldest and the highest number to the youngest household member. The respondent was selected according to a random number chosen from a random number table: the second oldest person was selected if the random number chosen was a two, the fifth oldest if the random number was a five. If the selected person was not available 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 Rural 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 60 Central Kampala Kampala CC Kawempe Div Kazo 60 Urban Central Kampala Kampala CC Nukawa Div Naguru1 60 Eastern Mbale Mbale Mun. Northern Div Namokwekwe 60 Western Mbarara Mbarara Mun. Kamakuzi Kamakuzi 60 Northern Arua Arua Mun. Arua Hill Mvara 60 54
  • 55. Contacts Address: GEM Uganda @ MUBS Makerere University Business School Nakawa Campus Plot M118 Port Bell Road PO Box 1337 Kampala Uganda Telephone No.: 041 222911 Email: gemuganda@mubs.ac.ug Uganda Website: www.mubs.ac.ug Global GEM Website: www.gemconsortium.org 55
  • 56. GEM Uganda ResearchTeam ♦ Thomas Walter Dean of the Faculty of Commerce, Makerere University Business School and the Team Leader of GEM Uganda @ MUBS. ♦ Waswa Balunywa Principal of the Makerere Business School and Senior Researcher of GEM Uganda @ MUBS. ♦ Peter Rosa Director of the Centre for Entrepreneurship, University of Sterling, Scotland (visiting Researcher and Consultant at Makerere Univeristy Business 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, Makerere Business School and Researcher of GEM Uganda @ MUBS. 56
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