Good African: Why ambition is bad for small firms in Uganda

  

Minister for Finance Maria Kiwanuka displays the 2012/13 National Budget at Parliament FILE PHOTO.

By Bernard Tabaire
 

In Summary

Mr Rugasira summed up the three-hour debate with an impassioned defence of his sense of entitlement – if that is what it came to. He said the government can, and should, target specific winners just like South Korea did with Samsung, and China with Huawei. Referencing the pension sector fraud, he wondered why it is so easy for “nincompoops” to steal Shs100b and it is so hard for the government to set up an SME fund of the same magnitude.

Do black Ugandan entrepreneurs suffer from a misplaced sense of entitlement to support from the government? What is the proper role of the government in spurring the private sector, especially the SME part of it?

Those two questions were at the heart of the March 28 debate that launched Mr Andrew Rugasira’s fine book, A Good African Story: How a Small Company Built a Global Coffee Brand. It was a debate like no other I have seen in Uganda. It was sharp, disciplined and full of oomph.

Well, Mr Rugasira, founder of the Good African Coffee Company, to prove that Africans can do business and compete with the best in the world, is sharp and disciplined. It is evident in the book. It was also evident in the ‘trap’ he set ahead of the debate. He lay on cup after cup of coffee in the foyer of the Sheraton’s ballroom. Just what you need to get your guests hyper so they can turn in a sublime conversation.

Inside the ballroom, a panel chaired by Dr William Kalema and made up of central bank deputy chief Louis Kasekende, Prof. Mahmood Mamdani, Dr Sam Sejjaaka of Makerere University Business School, and the author got the evening going.

Dr Kasekende was frank. He said SMEs are better off focussing on a specific stage instead of attempting to operate across the value chain like Good African is doing. This way they build expertise in the specific area and become dominant players, more like Chinese firms are doing – making specific components of particular products owned by foreign companies such as Apple. SMEs operating across the value chain, he said, run into trouble competing against rich multinationals in the juicy foreign markets. He said Good African’s struggle to raise money as a start-up is a reflection of the commercial banks’ love for those enterprises that are already running. But, besides, commercial bank loans are bad for start-ups. Better to find long-term loans or go for equity.

The government cannot fund start-ups because its rightful business is to provide public goods. Even if the government wanted, it does not have the money because of Ugandans’ low savings rate. Besides, the government should not be picking winners and losers in the private sector because the whole thing would become a vehicle for political patronage.

Dr Sejjaaka, agreeing with Mr Rugasira’s book, dismissed Uganda’s policymakers as clueless people who have never run even a kiosk. He said White boys from the IMF and World Bank do their thinking. It was a cheap shot. And he contradicted himself, however, when he chastised Mr Rugasira for blaming colonial policies 50 years after independence.

That contradiction attracted the lonezinger of the evening. Prof. Mamdani, speaking next, quipped that if indeed white boys are still working as consultants within the Ugandan bureaucracy, then Uganda is indeed still a colonised country.

He declared Dr Kasekende’s words music to his ears. The government – he said as he picked up on the book’s argument in the first part about how black Ugandan entrepreneurs’ problems date back to
colonialism’s favouring of Indian businesses – should support an entrepreneurial class not individuals. Prof. Mamdani argued that indigenous entrepreneurs like Mr Rugasira, whose father owned a classroom chalk factory, have a sense of entitlement because they are indigenous, “not for any other reason”. He declared that to be “racial thinking,” attracting spirited push-back from the audience members who said there is nothing wrong with entitlement if it is about doing the right thing moreover inside one’s own country.

For Mr Rugasira to insist that the government supports his business because he is “sure to save society” amounts to seeking political solutions to personal problems and seeking governmental solutions to problems of the market. “Entitlement leads to corruption,” the professor said.

As in the book, Prof. Mamdani rooted his talk in the Africanisation programme – which he says failed – that started in the 1950s through the expulsion of Asians in 1972. He rejected the idea of having private sector people, a class whose primary motive is profit, setting government policy that affects all of society. Dr Kasekende agreed, adding that the problem in government is governance and leadership, not the absence of private sector people.

Mr Rugasira summed up the three-hour debate with an impassioned defence of his sense of entitlement – if that is what it came to. He said the government can, and should, target specific winners just like South Korea did with Samsung, and China with Huawei. And, yes, the government can set up an SME fund. Referencing the pension sector fraud, he wondered why it is so easy for “nincompoops” to steal Shs100 billion and it is so hard for the government to set up an SME fund of the same magnitude.

You want to join the debate? Pick up the book from Aristoc, read it preferably in the company of a strong cup of Good African Coffee, and let a thousand coffee plants bloom.

Mr Tabaire is a media consultant with the African Centre for Media Excellence.