How the budget will support entrepreneurs and innovators

How the budget will support entrepreneurs and innovators

In the days that led to the national budget reading this June, the government made a number of statements on the economy and what it was trying to do to reduce the brunt of the COVID-19 impact as well as high commodity prices. Big sections of the public eagerly waited to hear the interventions that would be brough forward to ease Ugandans out of these unusual times.  

For innovators and entrepreneurs who are part of the private sector, the national budget was seen as an opportunity to boost business and support growth.  

These innovators and entrepreneurs are a crucial part of Uganda’s economy especially now that there are efforts to attain a speedy recovery from the pandemic and fully monetize every aspect of the economy.  

While delivering the Shs48.1 trillion budget speech, the Minister for Finance Planning and Economic Development, Matia Kasaija, outlined government interventions to accelerate economic recovery, revitalize businesses activities and intensify investment in the productive sectors of the economy through enhancing agro-industrialization, light manufacturing, digital transformation and commercialization of oil and gas.  

To analyze the impact of the budget on the innovation and entrepreneurial ecosystem, The Innovation Village together with Standard Chartered Bank recently held a post-budget breakfast to steer entrepreneurs’ interest in the budget allocations, intervention and business recovery programs.  

In FY2021/2022, government allocated Shs358.5 billion to Science, Innovation and Transfer. This figure, however, dropped to Shs274.4billion in FY2022/2023 

For Digital transformation, which is a key aspect to any innovator today, government allocated Shs124.2billion compared to Shs134.9billion in FY2021/2022. 

Speaking during the event, Moses Kaggwa, the Director Economic Affairs at the Ministry of Finance, Planning and Economic described the FY2022/23 budget as a pro-people, business and innovation-oriented budget since it focuses more on interventions that have direct impact on citizens and private sector capitalization.  

“In FY2022/23, government will focus on implementing fiscal and monetary measures to boost aggregate demand, operationalizing small businesses recovery funds, capitalizing Uganda Development Bank to offer low interest credit and strengthening private sector capacity as a way of revitalizing business activity,” he said.  

For the first time in many years, government has not introduced new taxes but instead, has amended some, a move that Kaggwa believed should incentive startups to keep building on their solutions. 

“Government has put in place a favorable tax regime for start-ups, innovators and MSMEs by first of all not introducing any new taxes. Entrepreneurs dealing in agricultural products, medical equipment, pulp, commercial farming and information technology have been exempted from tax. Policies on tax deduction and Value Added Tax exemption have been placed on expenditure on scientific research, supply of financial services and a 25% start costs in opening a business for the next two years,” Kaggwa explained.  

Commenting on the budget, Arthur Mukembo, Future Lab Studio Lead at The Innovation Village said it was critical for entrepreneurs to contextualize government’s priorities and interventions as articulated within the budget and create infrastructure as well as platforms that support recovery.  

“Opportunities embedded within the budget start right from the budget theme which is Full monetization of the economy through commercial agriculture, Industrialization, Expanding and Broadening services and Digital Transformation. For entrepreneurs, this means identifying and mapping out inefficiencies across key sectors, value chains, understanding how these inefficiencies affect end users and leveraging on the unique insights and monetary interventions to build solutions that solve these inefficiencies,” Mukembo said.  

With ecosystem builders such as The Innovation Village dedicated to supporting entrepreneurs to align to key government priority areas and leverage technology to solve challenges, it emerged that players like banks are seeking collaboration to support innovators to build a new future.  

Moses Rutahigwa, Head, Consumer, Pivot and Business Development at Standard Chartered Bank Uganda said, ““We believe that supporting MSMEs to grow is important. The banking sector has been on the edge for a long time. Imagine an entrepreneur beginning to run their business and they borrow at 18 per cent. As banks we have a role to play to improve the cost of capital.” 

He, on the other hand, urged entrepreneurs to create scalable ideas to incentivize financial institutions to provide this affordable credit.  

While the budget may seem perfect, innovators like Julius Naika, Founder and Chief Executive Officer of Famunera insist that the interventions offered by the budget are far from being realistic for entrepreneurs. Citing the Parish Development Models (PDM), Naika said the funds allocated in PDM of Shs100billion per parish is very insufficient for an average of 50,000 to 300,000 people living within a parish. He also said, instead of grouping individuals with different interests into Savings and Credit Cooperatives, the government needs to give priority to already existing groups, consult local innovators playing in that space, revise the allocation and find means to increase the allotment.  

Adding her voice to Naika’s, Jane Nalunga, Executive Director of SEATINI described the budget as “a usual budget for unusual times.” She barely saw the light at the end of the tunnel unless the PDM addressed issues along the entire production value chain.  

 “The flagship of the budget is the PDM. The major challenge is that Uganda is not tapping into various markets due to lofty standards, lack of proper research on infiltration strategies and produce on the assumption that there is a market. The PDM needs to address the entire value chain from production to market linkages. Entrepreneurs need to actively get involved into the budget preparation cycle to negotiate for better tech transfers, trade opportunities, e-commerce policies and joint ventures,” she said.  

Allan Ssenyondwa, Project Manager, CERRRP at Private Sector Foundation Uganda (PSFU) called for private sector representation in policy formulation and spoke with enthusiasm about government’s objective to monetize the economy. However, he believes a lot of work around production is yet to be done.

“We need to look at production and the market. There is enough market. The challenge is, are we producing? We have the challenge of rising commodity prices. We need to aggregate all our products, standardize them so we can feed local & international markets,” Ssenyondwa said, adding, “Uganda needs to re-organize itself and take on the world-wide markets aggressively. During our negotiation for the Africa Continental Trade Free Area (ACTFA) and Democratic Republic of Congo trade, we found out that Uganda is largely dominated by SMEs which makes it extremely hard for business to expand to other markets. Therefore, we need to accelerate our business growth and ramp up production to sustain larger markets.”