Entrepreneurship funds not enough

By Emmanuel Keith Kisaameh

Government should not be tempted to throw money  at a problem and think of it as a solution

Unemployment is without doubt a leading development challenge in Uganda, engulfing people from all age brackets and making the fight against it noble.

With the recent Makerere University graduation in mind, it is depressing that with 11,000 graduates (Makerere alone), our job market only accommodates approximately 20% of the youth who leave the education system annually, not to mention the millions that are uneducated or drop out for several reasons.

Employment outcomes are indeed intertwined with poverty. Uganda Bureau of statistics estimates that 21% of Ugandans below the poverty line are actually employed (working poor). The realities of a headline inflation that stands at 25.7% imply that the plight of the working poor let alone unemployed could not be harder.

We all concur that it is vital to get the unemployment situation in this country sorted. The streak of disagreement however regards the modus operandi to be undertaken and frankly, some of the present policy plans cause a great deal of consternation.

When several youths recently threatened a nude strike while questioning what had become of the Shs 44.5 billion entrepreneurship funds proposed in the 2011/12 budget, it was clear something was not right. At the beginning of February, the Shs 25 billion youth venture capital fund was disbursed already past the halfway mark of the financial year. What remains unknown is whether the disbursement yielded to pressure or followed a well-hatched plan.

In judicious investment spending, it is clear that for a project to be deemed successful, it follows a well-hatched plan and ultimately yields a quality product. This begs the question, how effective will the entrepreneurship fund be in the fight against unemployment? Pardon the skepticism but similar schemes have not offered much to write home about. Take the “entandikwa” scheme for example and majority of Ugandans will give you volumes of consternations, ranging from politicization of the scheme to unclear modes of implementation.

Ultimately, the only way an economy can flourish is to become more productive. So while the entrepreneurship fund is a stride in the right direction, it should be noted that it’s merely an enhancing factor for job creation and not actual job creation. Availing capital funds in commercial banks, creation of dedicated work space in Kampala markets and business skills clinics as proposed in the fund’s utilisation are simply pieces in the solution puzzle. It is logical to conclude that that this might not even help millions of uneducated, semi-literate and worse-still unemployed people in rural Uganda – a lot more is required. The agonizing reality about entrepreneurship funds is they often encourage “rent-seeking” economic activity all the while terming it as job creation. Rent-seeking does not mean what landlords do, in economic sense it is defined as anything that allows you to make money without producing anything of value (or providing other people with incentives to do so). One makes money without necessarily adding to the marginal productivity of their economy. In general, all forms of interventions where jobs are created or preserved for no reason other than keeping people busy are rent-seeking in nature.

Meeting the unemployment challenge transcends merely creating jobs to actually sustaining them and giving them a competitive edge. Consequently, for the Entrepreneurship Fund to be more effective, it has to be complemented with efficient allocations elsewhere to generate jobs across various sectors. That said, with plans for next financial year’s budget underway, it is imperative that our policymakers put the limited resources in our economy to optimal utilisation by investing more in primary growth sectors that have trickle down effects such as agriculture – these have overtime demonstrated capacity to employ many Ugandans.

Indeed it is time to re-orient tax-holidays towards local investors to boost their ability to employ more people. Not only do foreign investors repatriate profits back to their economies but have the competition field skewed in their favour all the while employing locals at very poor working conditions and remuneration. This will not repel investors as feared because foreign investment is more attracted to an economy by the low cost of production as opposed to tax holidays.

Therefore, while efforts like entrepreneurship funds are good, they are not stand-alone solutions and their effectiveness is dependent on several complementary actions. Government should therefore not give in to the temptation of throwing money at a problem while thinking of it as a solution.

The writer is a researcher with the Advocates Coalition for Development and Environment – ACODE