BUSINESS IN UGANDA

Business refers to any economic activity carried out with an aim of making profits
through satisfaction of human wants.
It can also be defined as any economic activity that is done with an intention of
making profits through satisfaction of human wants.
Businesses in any locality tend to be of different categories and therefore it is
important to note that their differences are brought by a number of factors.
Factors that make businesses in any locality to differ
 The goods they sell where different businesses deal in the selling of different
goods. Some sell industrial goods, others sell agricultural goods.
 The services they offer or provide. Some businesses involve in transport
services while others deal in salon services etc.
 The means of production or production techniques they use. Some businesses
use more of capital in the production while others use more of labour to
produce goods and services.
 The raw materials used in the production of goods. Where some businesses
use agricultural raw materials, others use minerals as their raw materials.
 The location of the business or the place where the business operates from
since not all businesses can operate in every locality.
 The time of operation since different businesses operate at different periods of
time, e.g. seasonally, annually etc.
 The clients they serve. Different businesses serve different purpose and
therefore different clients are served by different businesses.
 The amount and type of energy or power they use in facilitating their
production of goods and services.
Factors that determine the size of businesses
 The amount of capital invested within the business. Micro and small
businesses tend to invest little or limited capital into businesses while large
businesses invest in a lot of capital to start and operate such businesses.
 The amount of labour employed by the business / number of paid employees.
Large and medium businesses tend to employ a relatively large number of
workers compared to small and micro businesses.
 The level of technology used. Large firms tend to use more of capital intensive
technology in their production process while small and micro businesses tend
to use labour intensive technology and other outdated means of production.
 The volume of sales of the business over a given period. Where small and
micro businesses tend to have low sales, large and medium businesses tend to
produce and sell in large amounts.
 Size of the market served by the business. Small and micro businesses tend to
serve a limited number of customers unlike the medium and large businesses
which serve a large size of the market.
 Level of specialization in the business. There is a high degree of specialization
especially in large businesses yet there is no specialization in small micro and
small businesses.
 Level of profits made by the business. Other factors kept constant, large
businesses tend to generate more profits compared to small and micro
businesses since what is invested determines the rate of returns.

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  The size of premises occupied by the business. Usually large-scale businesses
tend to occupy a large space compared to medium, small and micro
businesses.
 Amount of power or energy used by the business. Large businesses tend to use
a lot of energy units in their production process than the medium, small and
micro businesses.
 Registration of the business. Micro and small businesses do not necessarily
require registration to start and operate them while medium and large
businesses require an individual to first register before starting it.
N.B; Therefore, using the above factors, businesses can be divided into the
following sizes; -
1) Micro
2) Small
3) Medium
4) Large
Micro businesses. These are businesses which are very small i.e. they operate at a
very small scale of production and they have got the following features;
 They require very little capital to start.
 They use simple technology and techniques of production.
 They usually employ the services of their proprietors/ owners and sometimes
assisted by the family members.
 They usually have low volume of sales over time.
 They do not have fixed premises to operate from.
 They do not have to be registered in order to start and operate them but simply
get a trading license from local authorities.
 They tend to only serve the local market.
 They tend to use little or no energy to facilitate their production processes.
Businesses under this category include, hawking, bicycle repairing, roadside sellers,
shoe shinning etc.
Small businesses. These are businesses which operate on a small scale from fixed
premises and are permanent in nature. They have the following features;
 Usually employ workers not exceeding 20 and most of them may be family
members.
 They require little capital to be started.
 Their periodical sales are relatively greater than those of micro businesses.
 They use some basic and simple technology in their production processes.
 They are generally easy to start and operate since they may not require formal
registration before they commence.
 They use little power and energy in the production process since it is always
used for lighting, freezing etc.
 They usually operate from fixed premises or structures.
 They tend to produce mainly for the local market.
N.B; Businesses under this category include retail shops, small bakeries, millers,
saloons etc.
Medium businesses. These are very well established businesses which may employ
up to 100 workers. They have the following features;
 They operate from well established and permanent premises.

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  They use advanced technology so as to produce goods and services at a
relatively large scale.
 They require a lot of capital to be started and operated always up to 500M
Ugandan shillings.
 They tend to produce for the local market and the surplus may be exported.
 They require relatively large amounts of energy or power to facilitate their
production processes.
 Their volume of sales tends to be high and their level of profits is also high.
 They have to be registered before their commencement.
 They tend to employ a relatively large number of workers of between 20-100
employees to facilitate the production process.
N.B; A large number of businesses fall under this category include big bakeries, milk
processors, soft drinks, mattress manufacturing factories etc.
Large businesses. These are businesses that are well established and operate\ on a
large scale employing more than 100 workers. They have the following features;
 They require huge amounts of capital to be started and operated which is
always over 500M Ugandan shillings.
 They produce in large quantities using specialized techniques of production.
 They operate from permanent and well-established premises.
 They produce for both domestic and foreign markets.
 They usually employ a large number of people over 100 workers who are
always possessing high skills and highly trained.
 They use a lot of energy or power since most of their activities depend on
power.
 They tend to use advanced levels of technology, which is usually capital
intensive, and also sometimes labour intensive to a small extent in some
businesses.
 Registration of the business is a pre-requisite before it commences e.g. a
limited liability company.
N.B; Various examples of such businesses in Uganda include Kakira sugar works,
Kinyara sugar works, Hima cement factories, Mukwano industries, Roofings Uganda
limited etc.
Importance of businesses
Businesses are very important to their owners and families, communities in which
they are located, the government as well as other businesses. They are important in
the following ways;
 They are a source of income to the owners especially after selling off their
products.
 They provide goods and services needed by their customers.
 They add value to the local produce and convert some resources into products
demanded by customers.
 They provide employment to people.
 They bring goods and services nearer to people by transporting them, stocking
them etc.
 They make use of local resources, which would have been left idle like lime
for cement, wood for timber and paper etc.
 They provide market for people’s produce. For example, coffee processors
buy farmer’s coffee etc.

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  They pay taxes to the government thereby providing revenue needed for
providing social services like roads, hospitals, schools etc.
 They contribute to community social and economic development programs.
 Businesses that deal in the exportation of locally produced goods generate
foreign exchange to the country.
Challenges of businesses
Businesses experience a number of challenges in the course of conducting their
operations such as the following;
 Raising capital for financing operations.
 Accessing enough market.
 Inadequate raw materials.
 Poor infrastructure e.g. bad roads etc.
 Insecurity, e.g. wars, robberies, theft etc.
 Customers’ changing fashions and tastes.
 Lack of appropriate storage facilities especially for perishable products.
 Competition from other businesses.
 Lack of skilled manpower to manage the business operations.
BUSINESS ASSOCIATIONS IN UGANDA
A business association is a group of businesses which voluntarily come together and
agree to work together towards achieving their common businesses objectives. such
objectives include, to meet their needs and protecting their business interests which
they can not do on their own unless they unite.
Examples of business associations in Uganda include;
 Uganda Manufacturers Association (UMA)
 Uganda National Chamber of Commerce and Industry
 Uganda National Farmers Association
 Uganda Women Entrepreneurs Association
 Northern Uganda Manufactures Association
 Uganda Small Scale Industries Association
Objectives of business associations
These vary from one association to another, however, the common ones to most
business associations include;
 To look for market for the produce of their members both in local and foreign
markets.
 To source and access raw materials for their members.
 To access better production techniques for their members.
 To enable their members access and providing training facilities and
programs.
 To access financial and technical support from banks and other support
institutions and government on behalf of their members.
 To support individual members in times of need.
 To develop and transmit improved and better production and management
systems to members.
 To advocate on behalf of their members to the government for better working
environment e.g favourable taxation policies, political stability etc.

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 Membership of business associations
Membership within different business associations in voluntary. It involves businesses
paying the entrance fee and some other periodical fee which is usually on an annual
basis. These business associations tend to attract membership from businesses which
are in the same line of production e.g.;
1. Uganda National Farmers Association. This draws majority of its members
from;
 Farmers dealing in cash crops and livestock production.
 Agro processing businesses such as food processors, meat processors
etc.
 Agricultural inputs and service providers such as buyers and
transporters dealers in fertilizers.
2. Uganda National Chamber of Commerce and Industry. This draws majority of
its members from traders, industrialists in the country, importers and importers
exporters.
3. Uganda Manufacturers Association. It draws its membership from;
 Service providers to big companies such as banks and other financial
institutions.
 Large industries e.g. Kakira, Kinyara, Mukwano, Bata shoe company,
Nile breweries etc.
 Large coffee processors etc
4. Uganda Small Scale Industries Association. Draws its membership from small
scale industries such as;
 Carpenters
 Metal fabricators
 Electricians etc
Services rendered by business associations
 They provide information on the market opportunities available and the
various trends in the market.
 They help in negotiating and securing local and foreign markets for the
members’ produce.
 They look for sources of raw materials for their members in some businesses
at cheaper costs.
 They carry out advocacy campaigns on behalf of their members with the
government for better investment climate.
 They provide moral and material support to members especially in times of
danger.
 They avail and provide training programs for members within the business so
as to make them attain better business skills.
 They negotiate and secure financial and technical support services from
financial institutions and government.
 Identify appropriate production techniques for businesses belonging to these
associations.

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TYPES OF BUSINESSES
These include agribusinesses, trading businesses, service businesses and
manufacturing businesses.

1. AGRIBUSINESSES
These are businesses whose operations involve production and selling of agricultural
products for profits.
Types of agribusinesses
1. Crop production. This includes businesses that are engaged in the production
and selling of both food and cash crops. On a large scale or small scale for
profits.
2. Livestock production. This involves the businesses that deal in the rearing and
selling of different animals for their meat and other animal products.
3. Poultry keeping. This is type of agribusiness, which deals in the rearing, and
selling of different domestic birds for their meat and other bird’s products.
4. Agricultural support businesses. These are businesses which deal in the
provision of support services to agricultural activities e.g. provision of
fertilizers, drugs etc.
5. Apiculture. This involves the keeping of bees for honey in order to sell and get
profits.
6. Floriculture. This involves entrepreneurs growing flowers for sale.
7. Aquaculture. This is the growing of rearing of fish in various fishponds in
order to get profits.
Requirements for agribusinesses
 Availability of land where a number of agribusinesses such as crop
production, livestock farming, etc are to be carried out.
 Capital. Since they are driven by a desire to make profits, they have to use
capital to invest in acquiring requirements for the business.
 Labour or human resource which is needed in tilling the land, looking after
animals, spraying, harvesting etc.
 Good storage facilities where to keep the surplus before selling them.

Importance of agribusinesses
Agribusinesses play an important role in the lives of their owners, community and the
government as explained below;
 They contribute towards community development programs. This is done
through providing voluntary services and facilities to community e.g. giving
out free food to the needy.
 They provide market for the products of other businesses such as buying
equipments e.g. hoes, tractors etc that leads to the development of these
businesses.
 They provide employment opportunities to the members of the society such as
those employed in cultivation, harvesting etc.
 They help in production of food, which is essential for human life.
 They act as sources of government revenue through paying taxes, which is
used to finance other sectors.

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  They make use of some wastes such as coffee husks, animal and birds’ wastes,
which would otherwise pollute the environment.
 Agricultural products are exported to generate foreign exchange to the
country.
 They also provide raw materials to various industries of the economy e.g.
cotton for textile, tobacco for cigarettes etc.
Challenges to agribusinesses
There are a number of challenges faced by agribusinesses and these include the
following;
 Limited market for their products which in most cases leaves the entrepreneurs
stuck with their produces and causes them a lot of losses.
 Pests and diseases which attack and affect crops and animals causing damages
and poor yields since they expensive to control.
 Limited capital to be invested in the business.
 Poor storage facilities which leads to damage of the outputs after harvesting,
fish may go bad due to lack of refrigeration materials.
 Natural hazards like unreliable rainfall, storms and other weather changes,
which affect animals and crops and reduce productivity.
 Infertile and poor soils which leads to poor yields and make the farmers incur
a lot of costs in effort to make them productive.
 Competition from other producers and products which reduce on the market
and lower prices.
 Inadequate support services like poor transport routes, which makes producers
fail to market their produces.
 Seasonality of the business which leaves entrepreneurs out of business for a
number of months in a year.
 Communal land ownership where some people who are willing to use the land
are lacking it while those owning it are not utilizing it.
 Price fluctuations which discourages farmers from producing when prices are
low while when prices are high, farmers tend to over produce also leading to
price reduction.
 Production of poor quality output due to poor breeds of animals and crops.
 Most agricultural products have a long gestation period.
Ways of overcoming the challenges faced by agribusinesses.
 Undertaking thorough market survey to ensure that their products will have
market at profitable prices.
 Employing modern farming techniques that help them increase output,
maintain soil fertility and control pests and diseases.
 Getting information on market behaviors and trends to ensure that they
produce products that are on demand.
 Practicing irrigation or planting fast maturing crop varieties which do not
require a lot of water to grow and mature before the rains run out.
 Studying weather patterns and acting accordingly.
 Providing agricultural extension services to farmers such training them on how
to use modern farming methods.
 Government should provide agric credit or loans to farmers after serious
sensitization on how to use these loans only for agricultural activities.

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 There is need to encourage infrastructural development such as construction of
roads especially in rural areas so as to facilitate the movement of agricultural
products.
 Diversification of agricultural activities where farmers are encouraged to
reduce on over dependency of one agricultural activity but deal in a variety of
them.
 Introducing new breeds of seeds and animals which leads to increased output
but low costs.
 Introducing agro based industries so as to add value on the agricultural
products so as to improve on the quality and make them competitive on the
world market.
2. MANUFACTURING BUSINESSES
These are businesses that process raw materials to make products.
They may also be defined as businesses which transform raw materials into
intermediate or finished products. These businesses process new products by
adding value to the existing ones e.g. using timber to produce various furniture
products etc.
Types of manufacturing businesses
1) Agro-processing business. These deal in the use of agricultural products or
raw materials to produce different products like juice, food, cooking oil
from agricultural products like simsim, sunflower, maize, mangoes etc e.g.
BIDCO in Jinja, Mukwano Group of Companies etc.
2) Beverage manufacturing businesses. These make different drinks like soft
and alcoholic drinks e.g. soda, beer, water etc. examples of such include
Century Bottling Company, Rwenzori mineral water, Coca- Cola
Company etc.
3) Metal fabricating businesses. These are businesses which use different
types of metals to make products like windows, doors, chairs, iron sheets,
tables etc. examples of such businesses include Roofing Ug. Ltd,
Sembuule Steel Mills, Steel Rolling Mills Jinja etc.
4) Plastic manufacturing businesses. These are business which deal in the
production of plastic products such as cups, plates, polythens, dust bins
etc. examples of such industries in Uganda include Mukwano Group of
Companies, Nice House of plastics, Tic plastics Nalukolongo etc.
5) Extractive manufacturing businesses. These are businesses which deal in
the production of several items after extracting different raw materials
from the environment e.g. brick making from clay, furniture from timber,
basket weaving etc. examples include Hwan Sung, Uganda clays, Lweza
Clays etc.
6) Chemical manufacturing businesses. These are businesses which produce
a variety of drugs, industrial chemicals, soap, fuel etc from mixtures of
chemicals. Examples in Uganda include Mukwano Group of Companies,
Quality Chemicals, Uganda Pharmaceuticals Ltd etc.
7) Textile manufacturing businesses. These are businesses which mainly use
cotton, polyester and other materials to produce clothes.

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 Importance of manufacturing businesses
 They provide market for the local produce since most of them use these
products as their inputs especially agro-based businesses
 They act as a source of income to the owners and their families.
 They provide employment to people/community since many of them serve as
labour within these businesses.
 They provide goods required by the society and other businesses. They
generate government revenue through paying taxes which in turn is used to
finance other sectors.
 They recycle some waste products and put them to use which wood otherwise
have polluted the environment.
 They add value to the local raw materials and products before selling them.
They are a source of foreign exchange to the economy since most of them
produce in plenty and the surplus is exported.
 They reduce on the burden of over dependency on imported manufactured
products since they are domestically produced.
 They contribute to community development programs by providing donations
especially to the needy.
 They improve on food security some of the food products produced by agro
processing industries can be stored for a long period of time.
 They improve on people’s skills of creativity.
Challenges of manufacturing businesses
 Limited skilled manpower used to operate some production technologies,
which forces businessmen to hire expensive foreign experts thereby
increasing on the costs of production.
 Stiff competition especially from imported manufactured goods which are
usually of high quality and sold at relatively cheaper prices thereby reducing
on the demand for their products.
 Limited or inadequate capital to invest in acquisition of better means of
technology required to improve on the business operations.
 Poor technology which does not suit the business environment of the country
there by reducing profitability and efficiency.
 Limited market to absorb all that is produced caused by low-income levels
and stiff competition with imported goods.
 Inadequate support services e.g. poor roads, water and electricity which are
lacking in some parts of the country.
 Unreliable sources of raw materials which are not constant forcing some
businesses to operate seasonally.
 Unfavourable government policies such as unfair taxation policies. This
discourages foreign and domestic investors.
Ways to overcome the above challenges
 Conducting thorough market surveys before entrepreneurs start businesses so
as to ensure that they venture into businesses whose products have high
demand on the market.
 Investing, financing and encouraging research and development so as to come
up with new products that can meet customers’ needs and out compete others.

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  Locating businesses in areas where they can easily access support services
such as good roads to facilitate the movement of their products.
 Advertising and promoting their products so that they attract new customers
and even maintain the old ones.
 Providing credit facilities to the businessmen so as to finance their business
activities.
 Improving on the quality of the products so as to make them more
competitive, capturing a large market and meet international standards.
 Establishing good relationship with their customers and ensuring that they are
always satisfied with their products.
 Forming and joining business associations e.g. Uganda Manufacturers
Association so as to improve and increase on their bargaining power.
 Government should provide grants and subsidies, fair taxation policies, giving
tax holidays to investors.
 Encouraging regular training of staff so as to ensure that they acquire skills of
managing business operations.
 Saving and re-investing the profits into business so as t ensure adequate
working capital to run and operate business.
 Keeping and using up-to-date information and data on customers’ tastes and
preferences and consumption habits so as to ensure that the businesses cope up
with the changes and trends in the market.
3. SERVICE BUSINESSES
These are businesses that provide invisible and intangible products which satisfy
customers’ needs or wants.
Types of service businesses

TYPE OF SERVICE NEEDED TYPE OF BUSINESS

Beautification  Barber shops
 Salons
 Bridal agencies
Food and drinks  Restaurants
 Take away
 Bars
Transport  Taxi business
 Boda- boda
 Bus service
 Commercial goods transporters
Health  Pharmacies
 Clinics
 Nursing homes
 Hospitals
Education  Nursery, primary and secondary
schools
 Technical and vocational
institutes
 Colleges of commerce
 Universities
Utilities  Water suppliers

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  Power suppliers
 Telephone network businesses
Technical services  Motor vehicle garage
 Motor cycle garage
 Electricians
Entertainment  Beaches
 Cinema halls
 Disco clubs
 Theatres
Financial services  Banks
 Micro finance institutions
Tourism  Hotels
 Lodges
 Camping sites
 Tour and travel agencies
 Suppliers of tents etc
Security  Private security companies

Benefits /importance of service businesses

 They provide information to different people in the economy by
communicating through the medias and this may be geared towards
community development programs.
 They provide employment opportunities especially those who provide services
to those in need e.g. radio presenters, nurses, teachers etc.
 Banks and micro finance institutions provide financial services which are
important for the operations of the businesses e.g. giving them credit facilities,
protecting their money etc.
 They promote good health through providing health facilities to the workers
hence leading to increased productivity of workers.
 Security services provide a condusive and stable business environment thereby
attracting investors to invest their funds in such areas.
 Transport and communication services help to link up different parts of the
country thus leadding to easy movement of goods and people from one place
to another.
 Service businesses generate government revenue through paying taxes which
is used for financing other sectors of the economy.
 They generate income to their owners which makes them to attain a higher
standard of living.
Challenges of service businesses
 There is difficulty in maintaining high quality of services being rendered.
 Retaining staff. Some employees after acquiring the training in these services,
they leave and join other rival businesses or even start and operate their own
similar businesses.
 Bad debts. This comes about after providing credit facilities to their regular
and known customers and they fail to meet/ repay these debts.
 Inadequate skilled manpower to execute the various business activities
especially those skilled in providing services.
 Inadequate capital that is required to carry out massive investment.

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  Unfavourable government policies in form of high taxes imposed on these
businesses which limits their expansion.
 Poor technology used by such businesses which reduces their productivity.
 High costs of production incurred especially on inputs due to their
competitiveness thereby reducing on the profitability of the businesses.
Measures to overcome challenges faced by service businesses in Uganda
 Provision of credit facilities to entrepreneurs of service businesses so as to
increase on their capital base and finance their operations.
 Forming and joining business associations so as to increase on their bargaining
power and also pool their resources to increase on their investment.
 Conducting thorough market survey before starting and operating a business
so that they invest in businesses which provide services that are needed or
wanted by the people.
 Proving staff with good working conditions so that they can render high
quality services demanded by customers.
 Favourable government policies should be encouraged such as reduced taxes,
promoting political and economic stability.
 Avoid selling on credit and where inevitable, secure legal undertaking so that
customers with debts must pay.
4.TRADING BUSINESSES
These are businesses which deal in the buying and selling of goods for profits.
Examples of such businesses include supermarkets, retail shops, wholesalers, etc.
Channels of distribution in trading businesses

Producers

Wholesalers

Producer’s retail outlet Small-scale retailers Large-scale retailers

Final consumers

Types of trading businesses

1. Retail trading businesses. These are businesses which deal in the selling of
goods to the final consumers in small quantities. These businesses are usually
located nearer to the customers. They mainly buy their stock from wholesalers
though some buy directly from the manufacturer/ producers. These retail-
trading businesses can either be small-scale retailers or large scale retailers
depending on their scale of operation.

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 Advantages of retail trading businesses
 A retailer often offers credit facilities to his customers.
 They are easy to start since they require limited capital.
 They bring goods nearer to the people.
 They avail goods and services to consumers at lower prices.
 They serve as a link between the final consume and the wholesaler and
producers.
 Offer a variety of goods to customers.
 Assist the producer and wholesaler in carrying out market research since they
are always in direct contact with customers.
Disadvantages of retail trading businesses
 They sell their products at relatively high prices than wholesalers.
 The lifespan of the business depends on the life of the owner.
 They avail consumers with limited goods for use since they always purchase
in limited amounts due to limited capital.
 There are little profits due to selling in small quantities and also due to limited
capital.
2. Wholesale trading businesses. These are businesses which sell their products
in large quantities or in bulk. Customers are mainly retailers or consumers that
buy in bulk like schools.
Advantages of wholesale trading businesses
 They assist manufacturer in carrying out market research.
 They usually sell goods at relatively lower prices to consumers.
 They serve as a link between the producers and the retailers and even
sometimes the consumers.
 They transport goods on behalf of the producers, retailers and consumers since
they bring goods nearer to the people.
 Wholesalers play an important role of keeping prices stable.
 They tend to stock in large quantities which enables them to supply goods
throughout the year.
 They generate government revenue through paying taxes.
 They provide storage facilities on behalf of the producers since they own a
number of warehouses.
Benefits of trading businesses
 They avail goods to customers in all quantities.
 They provide a variety of goods to customers thereby making them to exercise
their choices.
 They generate revenue to the government through paying taxes.
 They are sources of income to their owners thereby leading to improved
standards of living.
 They provide employment opportunities to various people.
 Trading businesses dealing in the exportation of goods act as a source of
foreign exchange to the country.
 They advertise producers’ products thereby making consumers aware of the
available products on the market which also increases on the market for such
goods.

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 Challenges faced by trading businesses
 The expiry of some goods before they are sold thereby leading to big losses to
the business.
 Unfavourable government policies e.g. over taxation which increases
operating costs.
 Lack of continuity of the business especially when the proprietor dies.
 High and increasing poverty levels among the local population which reduces
on the demand for some goods on the market.
 Poor infrastructural development such as poor roads which increases on the
transport costs due to inaccessibility of the roads.
 Limited capital for investing, expansion of such businesses.
 Unforeseen uncertainties e.g. theft, robbery, fire outbreaks.
 Political instabilities which make some areas risky for business operations.
Measures to overcome the challenges of trading businesses
 Provision of credit facilities which increases on their operating capital.
 Encouraging and promoting political stability.
 Development of infrastructure in form of roads to reduce on the transport
costs.
 Creating a favourable trading environment by the government through
reducing on the taxes.
 Entrepreneurs should carry out a thorough market survey so as to trade in
goods which re highly demanded to avoid losses.
 Forming and joining business associations so as to increase on their bargaining
power.
END

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