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Urban areas in Uganda are increasingly facing competition for their resources in the face of rising population. More than one out of
every five Ugandans are residing in urban areas and the urban population is expected to triple in next two decades. Most of the urban
population resides in GKMAa region challenged with unemployment and inadequate opportunities. Enhancing firm performance in
urban areas offers a promise for jobs and local revenue to boost city development. Local governments and city council need to create
mechanisms that address firm constraints and harness the factors that drive firm competiveness, growth and transition. Potential
opportunities lie in collaborating with financial institutions to provide affordable credit, improving taxation procedures, establishing of
business spaces for the small firms and influencing vocational schools to impact relevant skills.
Improving the growth and transition of small and medium enterprises in the Greater Kampala Metropolitan Area. 1
POLICY BRIEF NO. 83, APRIL 2017
revenue. The fact that MSMEs account for majority of the firms Kampala Area conducted by EPRC and in the London School of
in Uganda5 could easily help the country achieve these benefits Economics (LSE) with support from the World Bank.6 The study
especially since they are labor intensive and create employment interviewed 80 micro, small, medium and large firms in Kampala,
with relatively low levels of investments. They are also effective Mukono and Wakiso districts. In addition, the study interviewed
in the utilization of simple and affordable technologies which Ministries Departments and Agencies (MDAs) and private sector
are easy to adapt and transfer. However, firms in urban cities agencies from the above localities.
face several market failures which constrain their performance
growth, and transition. This brief highlights these constraints Constraints to business operations
and interventions needed to address firm deficiencies and
enhance their competitiveness to promote more sustainable local The table below presents the various major barriers experienced
development of GMKA. by small, medium and large firms which increase the cost
of doing business affecting their productivity and growth in
The study GMKA. In addition to these firms cite poorly regulated market
unable to detect the quality of products on the market, poor
This brief examines constraints to small and medium firms entrepreneurship skills, crime and theft from employees and a
business operation in the GKA. It is based on a qualitative study lack of raw materials which affect production.
titled Barriers to firm expansion and transition in Greater
2 Improving the growth and transition of small and medium enterprises in the Greater Kampala Metropolitan Area.
POLICY BRIEF NO. 83, APRIL 2017
Improving the growth and transition of small and medium enterprises in the Greater Kampala Metropolitan Area. 3
POLICY BRIEF NO. 83, APRIL 2017
needs of business. The fact that reputable and attract more into higher levels of value
Recent Policy Briefs technical schools are located in GMKA addition. Other investments that are needed
Absorption and Implementation Constraint offers an opportunity for the city councils include good road networks throughout the
to Ugandas National Development Plan to link up with these institutions and create city to facilitate easy access to markets of
(NDP) appropriate programs needed for the market. raw products and materials.
No. 82 April 2017
Corti Paul Lakuma and Musa Mayanja But this demands that council ally with
Lwanga Ministry of Education and Sports, Ministry Establishing of industrial parks for small
Challenges of Mobilising Resources to
of Science and Technology (Responsible businesses can help alleviate the land
Finance Ugandas National Development for designing these education curriculum) problem and garner increased productivity
Plan (NDP) and Ministry of Finance (which funds the and therefore increased expansion.
No. 81 April 2017
Corti Paul Lakuma and Musa Mayanja implementation of the curriculum). Within these spaces, rents are cheap
Lwanga and infrastructure such as electricity
Has Foreign Aid Improved Health
City councils need to continuously advocate and transportation are easily established.
Outcomes in Uganda? Evidence from Panel more investments in infrastructure services Achieving this will require city councils to
Microdata particularly electricity distribution and collaborate with MDAs like the Ministry
No. 80 March 2017
Tonny Odokonyero and Robert Marty
reductions in costs of supply. Aside from Of Lands and Urban Development that
working with UMEME, councils will need to regulates spaces within urban centers,
About the Author work with Electricity Regulation Authority UMEME that distributes electricity and the
Annette Kuteesa is a Research Fellow
(ERA) to ensure constant supply of electricity Ministry Of Water, Natural Resources and
at the Economic Policy Research Centre, at affordable prices. Cheaper services will Environment.
Kampala, Uganda. most likely drive up production of firms
Paul Lakuma is a Research Analyst at
the Economic Policy Research Centre,
Kampala, Uganda.
4 Improving the growth and transition of small and medium enterprises in the Greater Kampala Metropolitan Area.