Why Ugandans Fear to Register Businesses

Very many small business owners fear to register their enterprises

When Kibira Bbossa registered his metal fabrication company back in 1992, he knew he needed to act smart to keep it afloat the unfavorable business environment.

Cut all unwise expenditures and keep tax collectors at bay. He therefore tagged Uganda Revenue Authority as one of the core enemies of his business and ensured they were closed out.

His trick worked wonders until recently when his now flourishing enterprise won a juicy contract from government.

He needed all basic documentation and certification from the Registrar of Companies. Upon visiting the Registrar, he was required to first clear 15-year tax arrears,  which he had no option but to heed.

Worryingly, majority of Uganda’s emerging small and medium enterprises (SMEs) have followed suit and declined formalizing, in fear of paying taxes to URA.

Mr Bossa is the current chairperson of the Federation of Informal Sector Uganda Chapter and an executive at Katwe Small Scale Industry Development Association (KASSIDA).

KASSIDA today boasts of over 800 member enterprises, and employs more than 4000 workers. Out of the 800 however, only 56 are formally registered and thus the rest operate ‘illegally’.

“Our people fear registering their businesses majorly because they don’t want to pay taxes,” Bossa told our reporter. “Some of them don’t even realize that their businesses might be below URA’s minimum taxable income threshold.”

The enterprises, majorly owned by semi illiterates also lack basic business documentation, and certification.

Uganda Registration Services Bureau (URSB) underscores the unfortunate reluctance by most Ugandan SMEs to formalize.

URSB’s Mercy Kainobwisho, told Chimpreports that despite being open and emphatic to business registration, many entrepreneurs have remained adamant.

“We have carried out a lot of sensitization but compliance is not improving. People don’t seem to realize that remaining informal keeps them less competitive and disfavored in the expanding local and regional markets,” she said.

As a way of arresting this negative trend, Uganda Investment Authority (UIA) recently unveiled an apprenticeship program in which fresh university graduates are linked to SMEs in downtown Kampala to put into practice their acquired skills in a number of areas.

The program which was piloted in June this year, with 100 graduates has entered its second phase.

Another 70 graduates completed their training at Makerere University last Friday and will be allocated to various enterprises in Kampala.

The youths are attached to SMEs to provide a number of services which include book keeping, business management, customer care, sales and marketing which are largely lacking in these enterprises.

UIA Managing Director Dr Frank Sebowa says the program not only benefits entrepreneurs by encouraging them to formalize their businesses, but also introduces the youths to the working environment.

“Our Jua Kali’s have benefitted a great deal. Most of them lack proper financial records, which are critical for borrowing purposes. Others due to lack of accounts, can’t differentiate between business revenue and profit,” he said.

One of the apprentices, Joan Nalubega who has participated since June told Chimpreports about her experience with the SME she was attached to in Katwe.

“I realize now that most entrepreneurs make a lot of money, but they can neither manage it not easily multiply it. They are comfortable with the small successes they make and so they remain stagnated.”

The apprenticeship program according to Sebowa, will be rolled countywide next year taking in about 5000 graduates.


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