Small and medium-sized enterprises call for stronger agribusiness value chains

Small and medium-sized enterprises call for stronger agribusiness value chains
John Walugembe, the Executive Director of the Federation of Small and Medium Enterprises.

The main source of foreign cash needed by Uganda, which is related to fuel and oil, is probably going to keep putting pressure on the local currency and, consequently, the economy, which is of great concern to small and medium-sized businesses.

"Global crude oil prices should not move upwards, even as Kenya continues to disrupt earlier plans by the Uganda National Oil Company UNOC to undertake direct importation of the essential fuel products using Vitol,"  says Executive Director John Walugembe of the Federation of Small and Medium Enterprises.

Presidential signing of the Petroleum Supply (Amendment) Act, 2023 into law took place last year. This law will give the Uganda National Oil Company (UNOC) exclusive rights to import petroleum products into the country.

It was expected that UNOC would buy fuel from Vitol EC Bahrain. UNOC had approached Vitol to propel a $500 billion enterprise that they think can provide  $2.2 billion to buy the 2.5 billion liters of refinery fuel meant for Uganda.

Since then, Kenya's government has put a stop to the agreement, raising concerns that it will deprive the country of $385 million in investment in Kipevu Oil Terminal 2 in Mombasa, which opened last year, and $170 million in gasoline

jetty in Kisumu.

"The Central corridor of Tanzania still having the challenges in terms of pricing, security of supply, and lowering the unit cost down to the consumers, are thorny issues which we expect needs to be addressed so as not to inflict more expenses on local actors in Uganda," adds Walugembe, a well-known trade and investment consultant.

Noting that since governments have only recently recovered from the Covid-19 relief interventions, “ on-going conflicts in some regions of the world, like Russia and Ukraine, and the on-going Israel-Palestine conflict in Gaza, are contributing to some distortions within the broader global economy, most notably inflation, " he says.

With this particular concern still unresolved, the global economy remains fragile.

Capital flight is more common in developing nations like Uganda because portfolio investors prefer to invest in their home market, which may among other things offer more profitable returns.

"These institutional investors are tempted to leave markets like ours if other markets, like the US, are offering superior interest rates that appeal to them. In  any case, if fresh investments are not drawn in, the long-term impact on the Ugandan shilling might not improve, according to Walugembe.

Citing declining donor funding and diaspora remittances that are less than pre- Covid levels despite having yet to fully recover from an average of 1.4 billion dollars.

As in the current budget for this financial year 2023/2024, the on-going budget process for the upcoming financial year stays at 52 trillion shillings.

The government's budget aim and top priority continues to be the full monetization of the economy through commercial agriculture, industrialization, increasing and extending service delivery, and broadening and extending service access.

As evidenced by the government's efforts to boost household incomes and encourage the expansion of small and medium-sized businesses, about two trillion shillings have been spent on the Parish Development Model (PDM) in the current fiscal year, 2002–2024.

This pilot program aims to eradicate poverty by improving the lives of 39% of  the people who live in extreme poverty. The Federation of Small and Medium Enterprises states that the parish Development Model must be improved in order to streamline the other pillars beyond manufacturing.

“In addition to stepping up on the other pillars, such as efficient production, storage, processing, and marketing, the Federation contends that it is critical to fully address these operational problems in order to enjoy the intended production-side rewards,” emphasises the business climate expert.

Walugembe, cautions, “the overemphasis on the financial inclusion pillar cannot serve as a means to an objective in and of itself. For example, who are the ultimate beneficiaries, are the funds being spent effectively, and if not, what are the sanctions!”

It is crucial to improve the quality of services provided in the social service sectors of health and education while also making sure that millions of Ugandans can pay and benefit from them in the long run.

Given that the projected budget assistance is three trillion shillings, the government expects to receive 29 trillion shillings in revenue in the upcoming fiscal year 2024–2025.

"There is a need to focus on the value chains by encouraging people to add value, improving marketing, and actually ensuring the products are of standard, such as the diary and coffee sectors where this resurgence is taking place," the head of the small and medium enterprises federation says.

Additionally, according to Walugembe, "there is need to scale-up supper farms that can buy from producers being actors across the value chain, including strengthening the cooperative model" in order for the agribusiness industry to take off.

"We need to know that the goods being created are being marketed, not only used as mainstays for the time being.”

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