Merry Christmas to you all from Nakabugu in Uganda!
So, we concluded blog series 1, the ‘false dichotomy – employees running personal micro-enterprises’ with a question: What fails private micro-enterprises in Uganda? On this 25th Day of December 2016, and as many of you look forward to the new year, perhaps there is a lesson or two in this blog that you may want to take away with you into 2017.
This is not your scholarly piece – we rarely want to play professorial at the Effectiveness lab. What we bring to your doorstep is context, a deep search for practical solutions, albeit from an effectiveness/efficiency lens. We want to keep it real and practical – and also, as Ugandan as Uganda can be
So as we delve into this second blog series, and one that ends our 2016 work, we want to flag upfront that this particular blog is grounded in hands-on experience from Uganda and to a certain extent East Africa micro-enterprise start-ups; as well as start-up failure pain that budding entrepreneurs suffer. Many start-ups aren’t viable – and if they are, it’s short lived. Perhaps, this is reading you were not looking out for on Christmas day – but sadly, it is the truth.
So, what fails individual micro businesses in Uganda and perhaps East Africa?
In the spirit of ‘keeping it simple stupid’ [KISS] we revert to the basic principles that are used to shape and operate an enterprise, big or small. Start-up dreams quickly move from wishful thinking to fact i.e. how to access the four factors of production – land, capital, labour, and entrepreneurship.
For you to run a viable and sustainable enterprise, you need: land or in the digital world a place to work even if it’s a small study room in your apartment; capital to make the necessary investments i.e. buy a laptop or tablet for your work; labour – we are aware that in a digital and increasingly networked world, labour and entrepreneurship are at times intertwined.
Our experience from Uganda is that micro-enterprises run by individuals, especially those in formal employment, have access to land or other physical spaces, capital (not considering how capital is acquired), and the knack for enterprise. The latter three-factor combination is enough to facilitate a successful business start-up. However, the Achilles heel for start-ups in Uganda is the fourth factor of production labour. In our experience, it’s labour that undermines microenterprise long-term survival.
Even more shocking is the inability by many entrepreneurs and wannabes, to decipher that labour is perhaps the number one factor of production that is likely to undermine enterprise sustainability in Uganda. To our dismay, we see many working class Ugandan’s continuing to invest their meagre earnings and other hard earned resources in the new microenterprises, but without taking a step back to ask certain fundamental questions:
- What is the success rate of personal business start-ups especially for the working class in Uganda? [Word of caution – you don’t need UBOS statistics for this – do a simple check-in with peers, and there will be many in your office that are running side enterprises – it is a practice that is ingrained in the Uganda working class]
- What are the underlying causes of the success and failure of private micro-enterprise start-ups?
- Is investment in personal micro-enterprise a prerequisite for success?
- What would happen if all the different micro-enterprise investments by the working class in Uganda were channelled into the Uganda or East Africa stock exchange markets, a professional real estate sector, etc.?
Uganda’s employees and the micro-enterprise enigma:
Let us start on a learning note: many Asian run small businesses are directly run by family members – moreover family members that have opted out of formal employment. On the other hand, Ugandan small businesses are run by ‘other’ employees, mostly non-family members, allowing the proprietors to keep their formal jobs. Why is that the case?
- Ugandan’s are not naturally entrepreneurial – really? Do you believe that Asians in Uganda were born with some particular enterprise DNA?
- Ugandan’s are not exposed to situations, and early enough, where we learn entrepreneurship skills – we stumble upon enterprise later in adult life and never properly invest time to learn what it takes to run a successful business. A near authentic proposition, or we think at the Effectiveness lab
- Ugandan’s, specifically the working class, have heard it easy – we can always get a job, mostly low paying, but find ways subsidise up our small salaries – really? There may be truth in this – i.e. that jobs that aren’t viable on paper are sustainable in practice … we do the ‘dealing’ and somehow come up on the other end of the tunnel. Some people have called Ugandan’s magicians – that we make 10 dollars a month, but survive on 100 – how do we make the extra 90? Well apparently, it’s our ”magic”, not so?
- Ugandan’s can’t let go of their jobs – as the minuscule national economy is not big enough for enterprises to thrive in – is Ugandan micro-enterprise phoney? That external factors are so weighed against entrepreneurs and success will elude many
Is our problem as simple as, needing to learn proper enterprise skills and to be less risk averse?
Well, not really – we believe that it is near impossible to run a micro-business from afar and without direct owner management. White collar workers should either take the plunge and run the business themselves, and give it all it needs to succeed; or invest their money in other businesses that are professionally managed – i.e. buy shares on the stock exchange, simply saving money and accumulating a significant quantum [yes, it is not impossible (think of Village Savings and Savings Associations [VSLA] as your miniature model] and make life-changing investments, etc.
As we go into 2017, let us learn something – other people, and not your nuclear family, can’t manage your micro-enterprise for you – it’s either you or burst.
Indeed the bad habit above creates a labour challenge for micro-enterprise management in Uganda, and perhaps East Africa. A start-up may have all the other three factors of production – however, if your labour is not right, the business will never succeed. It is on the latter point that many Ugandan’s and indeed other East African individual micro-enterprise owners have stumbled. And we share the reasons for the stumble below:
- The labour you are employing to run your small business is not as committed to the business as you – your business is not their business. Yet in a minuscule economy like Uganda’s, micro-enterprise success requires ownership-grit
- The labour pool in Uganda is contaminated by toxic human values – stealing permeates business management in Uganda – at least you won’t steal from yourself
- Productive labour, be it for a small or large business, requires appropriate skilling. Many Ugandan micro-entrepreneurs, unable to pay for suitably skilled staff, hire poorly skilled labour – the consequences are obvious i.e. very little to zero productivity – a caveat: skilled labour is at times the most corrupt and laziest [lack focus and commitment]
Go into 2017 committing to bring effectiveness and efficiency to your personal investments. Stop wasting your money.