Perhaps nothing is more revealing about the business-enabling environment of a country than the ability to start one’s own business. Thousands of people around the world have innovative ideas and dreams of running their own enterprise, yet in many countries those dreams are never realized as the legal constraints are often too burdensome, too difficult to understand, or too expensive. Even for those businesses that overcome the often onerous and costly requirements of registering and licensing their businesses, markets are frequently dominated by large enterprises or state entities that make it impossible for other businesses to consider entering the market. These same constraints can similarly face international investors and prevent them from effectively doing business in a country.
This chapter provides an in-depth examination of the challenges to effectively starting a business. It reviews not only the legal framework for registering and running a business in Uganda, but also looks at the implementing institutions, the supporting institutions, and the social dynamics that either promote or constrain business growth. With input from small, medium, and large enterprises operating in Uganda, the chapter examines questions that confront new businesses, including the following:
· What assistance is provided to fledgling small businesses or international investors considering Uganda?
· Why do businesses choose to register legally or why do they opt to remain in the informal sector?
· Do the social dynamics and culture in Uganda generally promote the spirit of entrepreneurialism?
· Do fledgling businesses entering markets face competitive obstacles that inhibit the decision to start a business?
The private sector in Uganda consists of micro, small, and medium enterprises, with an estimated 800,000 such entities in the country. Micro-enterprises and SMEs contribute an estimaed 20% of Uganda's GDP and employ approximately 1.5 million people. [1] Notwithstanding certain improvements in the administrative requirements for starting a business in Uganda, businesses – particularly small enterprises – continue to face a generally hostile atmosphere. Procedures for registering businesses and acquiring business licenses can be daunting and expensive, especially for those businesses located outside of the capital. A general lack of vocational and entrepreneurial skills, along with resistance to forming joint ventures, further constrains the emergence of successful new businesses and a healthy private sector.
The BizCLIR indicator scores for Starting a Business in Uganda is relatively negative, with each of the four areas reviewed – legal framework, implementing institutions, supporting institutions, and social dynamics – falling in the “moderately negative” range. Strengthening in this area is warranted across the board, with the most pressing issue being access to the formal sector and greater understanding about the benefits of joining the formal sector.
[1] Private Sector Foundation of Uganda, Private Sector Platform for Action (April 2008) at 7-8
