EMYOOGA GOVERNMENT SHOULD NOT LET A GOOD THING DIE

Last week what was known anecdotally was confirmed when the coordinator of Operation wealth Creation (OWC) General Salim Saleh wrote to the microfinance minister calling for an audit of the Emyooga programme.

The Emyooga program was launched last year as a way to get seed money to artisans and Small & Medium Enterprise (SME). The way the program was designed was that funds would be availed to organized groups and SACCOs for onward lending to their members. The idea as I understood it, was to create a revolving fund, that the monies government had given would be used over and over again by members well into the future, if well managed.

No surprise to many of us, corruption set in and now enough people are crying foul as to put the whole program into jeopardy.

A few years ago government tried another such program and attempted to channel the money through the banks. This initiative run into trouble too because the banks insisted on certain criteria, which locked out many of the potential beneficiaries. Anyone who knows anything about the banking knew this was bound to happen. Commercial banks, which all our banks are, are not set up for startup capital financing making them the worst conveyors of this money.

So then government passed it through the gender ministry and while they claimed to be good at disbursing money the default rate on the loans was more than 30 percent.

Emyooga is the most recent iteration of this effort to help our small businessmen.

Clearly the intention is good but the execution is horrible...

In a text book economy, the means of financing business go from friends, fools and families to angel investors to business support organisations to venture capitalists to commercial banks and then the capital markets come somewhere near or at the end

In Uganda we have friends, fools and family and then a gap all the way to commercial banks. That’s a problem because from angel investors to venture capitalists, these forms of finance are often willing to share the risk with the business and provide vital hand holding along the way, helping the entrepreneur to grow along the journey.

This mentoring is critical for any business. Unlike all that the inspiration books tell you, you need more than persistence and determination to survive and thrive in business, you need the help of people who have already done the journey or with expert skills in finance, marketing, sales, human resource management among others to help you along.

The Chinese say if you want to climb a mountain, study all the routes to the top and then ask someone who has already been there.

Because our commercial class was gutted in the 1970s, by Amin’s ill-advised expulsion of the Asians, the local businessman cannot sustain his business beyond its fifth birthday. The discipline of doing business is best taught by example than from the text books...

So the Emyooga funds are a good opportunity to provide patient or at least inexpensive capital for our budding business people. But also it can be extended to train and mentor them as well.

The truth is the biggest problem of our businessmen is not a lack of capital, but a lack of organisation in their businesses, hence their inability to meet the earlier banking requirements to access funds. When you are organized the funds will come. So who will help our businesses get organized?

That is where governments come in. I believe strongly that government should not be in business, it should stick to ensuring the environment is conducive for business. However, governments have been useful in opening new markets and once developed leaving it to the private sector to get on with.

We have our own examples here but the one which pops to mind is the fish industry. In the 1980s government financed the setup of a fish factory in Masese in Jinja. While – as expected it collapsed spectacularly, it had the effect of showing the private sector the potential of the sector and now fish exports are one of our biggest forex earners.

While government will always stumble and stutter in its effort to get financing to small businesses, the outcome of their clumsiness – hopefully, would be that the private sector will see an opportunity there and rush in to fill.

But before the private sector does that government would have to get over itself, recognise it cannot do it – despite its best intentions and call in the people who can, offer the appropriate incentives, step aside and watch as the sector is transformed...

The hiccups the project is experiencing were expected, that will take the government a long time to recognize the error of its ways too is expected, but the day of reckoning is fast approaching and government’s hand will be forced to do the right thing.