Why most businesses in Uganda die in infancy

In Uganda and especially with the mushrooming shopping malls, hardly a day passes without a new business being started. Based on that, many people and research reports have concluded that Ugandans are an enterprising lot.

The Global Entrepreneurship Monitor Report 2004 indicated that over one in every three adult Ugandans is engaged in some form of entrepreneurial activity, resulting in Uganda being ranked the second most entrepreneurial country in the world. However, the study also showed that the rate of failure of businesses in Uganda was also one of the highest in the world, citing that for every business that was started nearly one other closed.

This means that there is high formation rate of new enterprises but also high failure rate of newly formed enterprises. Likewise, a casual look at Newspapers in Uganda indicates that a number of businesses are being put under receivership. Therefore, it is one thing to start a business and another to sustain it.

This is in agreement with Charles Ocici’s (2008) observation that Ugandan entrepreneurs face very high business failure rates, with the majority of businesses failing to make it through their first year of operation. According to him, just a handful of businesses make it to third year.

The above is also in agreement with findings of a survey report by Charles Tushabomwe-Kazooba (2006) titled “Causes of Small Business failure in Uganda” that the startup factors posed a greater threat than those that are encountered once the business has been established. As such, business people who successfully negotiate the initial startup hurdles have greater chances of future success in their businesses. But the question that arises is if Ugandans are truly enterprising why the high rate of business failure?

Experience from the filed and research findings from discussion held with business consultants in Kampala indicate that many people in Uganda have attempted to start a career in business without the slightest idea of what it entails. They estimated that about 80% of Ugandans ended up in business by accident with little or prior preparation partly due to high unemployment levels, copy and apply syndrome, and unplanned retirement or retrenchment. Although some easily learn on the job, others spend a lifetime in business without learning even the basics of business management or learn too slow to cope with the ever-changing business environment.

The Ministry of Finance, Planning and Economic Development (2007) attributes high rates of business failure to the lack of entrepreneurial skills, limited access to information on market opportunities and high quality and affordable business development services and lack of finance, adequate technical and management support services .

From personal experience, poor customer handling is also partly to blame for business failure in Uganda. One therefore, wonders why Ugandans continue to be poor at handling customers yet several studies have found that it costs about five times as much in time and money to attract a new customer, as it does to retain an existing one (Naumann 1995).

Lastly, many Ugandans are at first not aware of the extent of their entrepreneurial ability and they don’t carry out a market survey to determine the viability of the venture. They start businesses to just exploit what initially looks like a potentially profitable business opportunity only to realize later that they do not have what it takes to become an entrepreneur.

It is with this view in mind that the efforts of government and the private sector must be placed on the development of entrepreneurial behaviour if businesses are to succeed.


Ambrose Bugaari
Specialist in Enterprise Development