TEACHER’S GUIDE
Subject: Entrepreneurship
Education
Unit: 2
Class: S.2
Topic: Businesses
in Uganda
Introduction
This unit focuses on businesses in Uganda. It
discusses the meaning of business, the forms and types of business
organizations, their sizes as well as the importance of businesses to their
owners. The Unit concludes with an introduction to Business Associations in Uganda.
Main Content and Concepts to Emphasize
- Meaning of business
- Types of businesses
- Forms of business organizations
- Size of businesses
- Importance of businesses
- Business Associations in Uganda
By the end of
this topic, students should be able to:
(a)
Define the term business
(b)
Identify the types of businesses
(c)
Identify the different forms of
business organizations
(d)
List the factors used to
determine the size of businesses
(e)
Discuss the importance of
businesses
(f)
Identify Business Associations
in Uganda
Teaching/Learning Materials, Activities
and Guidance
- Markers
- Flip charts
A business
refers to any economic activity which is carried out with a desire to make
profit. Examples are the buying and selling of produce, hair dressing services,
running a restaurant, growing maize, etc. Doing business involves exchanging
goods and services for money (or at times for other goods or services) with a
view to making profits. Businesses involve two main parties; the
producer/seller of goods and services (business persons or entrepreneurs) and
the customers (the buyers of goods and services). These two parties agree to
exchange value; one party agrees to receive the goods and services and the
other party agrees to pay for them on agreed terms and conditions. The payment
may be in monetary terms or may be by way of exchange of goods for goods, goods
for services, or services for services. Furthermore, the payment may be
executed immediately or at a later date.
The businesses
that one can do are many and varied. The difference in these businesses arises
out of many factors that include:
- The goods they sell
- The services they provide
- The means of production that they use e.g. labour, machines, etc
- The raw materials they use to produce their goods
- The location of a business or place where they operate from
- The time they operate
- The clients they serve
- The power or energy used
1. Agri-businesses
These are
businesses which produce agricultural products. Examples of agribusinesses include
crop, livestock, piggery and poultry farms. Agribusinesses are businesses whose
operations involve production and selling of agricultural products for profits.
Other agribusinesses are those that provide support services and inputs like
agricultural extension services. However, for any agricultural activity to be
called an agribusiness, it must be producing with the aim of selling and making
profit. The scale or size of operations of agribusinesses is very wide. A
village youth who grows tomatoes for sale in the nearby market is doing
agribusiness. On the other hand, a large tea plantation that covers a very big
area and employs very many workers is also in agribusiness. Furthermore, a zero
grazing farmer who keeps one or two cows producing milk for sale and a farmer
with many diary cows are all in agribusiness.
1.1 Types of agribusinesses
Agribusinesses
fall into many different types, which are largely derived from their products
or what they do. The common types of agribusinesses in Uganda include
the following:
a) Crop production
In this type of agribusiness, the businesses are engaged in the
production and selling of crops like bananas, tomatoes, coffee, cotton, maize,
cabbages, simsim, sorghum, millet, cassava, tea, flowers, tobacco etc. This
type of agribusiness may be carried out on a large scale (like in case of tea
and sugar production) or on a small scale like in the case of a village youth
engaged in the growing and selling of tomatoes.
b) Livestock production
In this type of agribusiness, the businesses are engaged in the
rearing and selling of different animals for their meat and other products like
milk, hides and skins, etc. In Uganda,
the animals commonly reared by such businesses include cattle, goats, sheep,
pigs, rabbits, etc.
c) Poultry keeping
In this
type of agribusiness, the businesses concentrate on rearing and selling
different types of birds for their meat, eggs, skins and feathers. In Uganda, the
birds commonly kept include chicken, turkeys, ducks, ostriches, guinea fowls
etc.
d) Agricultural support
businesses
In this
type of agribusiness, the businesses provide support services to
agribusinesses. Such businesses provide extension services, inputs like
fertilizers, drugs, etc. However, it should be noted that businesses falling
into this category may also fall into other categories of businesses like
trading, services and manufacturing.
e) Other types of agribusinesses
In addition to the above major types of agribusinesses, there are
also other types of agribusinesses, which are becoming important in Uganda. These
include apiculture (keeping of honey bees for honey), mushroom growing,
horticulture (growing of flowers), fish farming, crocodile farming, etc.
2.
Manufacturing businesses
Manufacturing
businesses are those which transform or process raw materials and make products
that are significantly different from the inputs. They do this by changing the
form of their raw materials/inputs or add value to them. Examples of
manufacturing businesses include carpentry workshops, pottery, mat and basket
weaving, tailoring, welding, making cars, saucepans, etc. Other manufacturing
businesses process agricultural products to produce different products, for
example, milling factories, food processing and packaging, etc. An individual
making pots, baskets, carpets or tablecloth for sale is in the manufacturing
business. Similarly, carpenters, brick makers, local welders, milk processors
and maize millers are all engaged in manufacturing businesses.
2.1 Types of manufacturing businesses
Manufacturing
businesses can be grouped into different types depending on their inputs,
processes or products. The commonest types of manufacturing businesses in Uganda include:
a)
Agro-processing businesses,
which use agricultural products to make different products like foods, juice
drinks, etc. or extract cooking oil and other products from agricultural
products like simsim, sunflower, cotton seeds, groundnuts, etc. Other examples
of such businesses include grain millers, coffee processors, etc.
b)
Beverage manufacturing
businesses, which make different drinks like soft and alcoholic drinks such as
beer, water etc. Examples of such businesses in Uganda include Century Bottling Company,
Crown Bottlers, Nile Breweries, Bell Breweries, Rwenzori Mineral Water, Wavah
Water, Highlands Natural Mineral Water, e.t.c.
c)
Metal fabricating businesses, which
use different types of metal to make products like windows, doors, chairs,
tables, beds, furniture, water tanks, bicycles e.t.c. Examples of such
businesses in Uganda include Sembule Steel Mills, Uganda Baati, TUMPECO Ltd,
e.t.c.
d)
Chemical manufacturing
businesses, which produce human and animal drugs, industrial chemicals, soap,
different fuels, etc. Examples if such businesses in Uganda include Uganda Oxygen
Ltd, Mukwano Group of Companies, Uganda Pharmaceuticals, Nakasero Soap Works, Quality
Chemicals Ltd, e.t.c.
e)
Plastics manufacturing
businesses, which make plastic cups, basins, jerycans, tarpaulins and others.
Examples of such industries in Uganda
include Mukwano Group of Companies, Nice House of Plastics, Multiple Industries,
etc.
f)
Textiles manufacturing
businesses, which make clothes.
g)
Extractive manufacturing
businesses like brick making, stone quarrying, basket weaving, timber and
timber products manufacturing businesses, which use timber to produce different
products such as furniture.
3. Service businesses
Businesses which
provide services to their customers are known as service businesses. They do
this by using the specialised skills of their owners and workers. Examples of
service businesses include travel agencies, hair and beauty saloons,
barbershops, motor vehicle repair garages, secretarial and computing service bureaus,
restaurants, hotels, lodges, transport companies, communication companies,
consultancy firms, hospitals and clinics, radios and televisions, banking etc.
Some entrepreneurs usually start service businesses basing on the technical
skills they possess. In case an entrepreneur does not possess the required
skills for the service business, he/she has got to hire workers with the
required skills.
4. Trading
businesses
Businesses which deal in buying and selling
of goods/merchandise are known as trading businesses. Examples of trading
businesses include kiosks, hawking, market vending, grocery shops, retail
shops, supermarkets, wholesalers, etc.
Student
Activity 2
1. Ask students
to choose any agribusiness and:
(a)
List what they would require to
start it.
(b)
Explain the benefits they would
enjoy from doing it.
(c)
Describe the challenges they are
likely to face and how they will over come them.
2. Ask students to
identify the most needed services in their communities and for each, to
indicate the technical skills that they would require to provide them.
3. Ask student
to discuss the challenges they are likely to face in their service business.
A business form is
characterized by its ownership, its management, who shares the profits or
losses, who takes final decisions, in other words, who determines its destiny.
Selecting a legal form of a business enterprise is one of the most important
decisions which an entrepreneur has to make. This decision is important because
the choice of ownership form will affect the rights, duties and obligations of
the owners as well as the tax liability. The major forms of business organizations
include:
This is the commonest form of micro
and small scale ownership in Uganda.
A sole proprietorship is a type of business entity which legally has no
separate existence from its owner. A sole proprietorship essentially means a
person does business in his/her own name and there is only one owner. The owner
receives all profits and bears all losses.
Advantages
- Simplicity, i.e., it is easy to establish and dissolve the business no documents are needed and no legal formalities are required.
- Quick decision making, i.e., a sole proprietor need not consult anybody in deciding his/her business affairs.
- A sole proprietor is his/her own boss. He/she is not controlled by anyone as he/she is the owner.
- High secrecy; he/she has no obligation to publish his/her books of accounts and the business secrets are known to him/her alone.
- In case the business succeeds, he/she enjoys all the profits alone since he/she has no co-workers to share the profits.
- Direct motivation. There is a direct relationship between efforts and rewards since no body shares the profits of the business. The sole proprietor has the incentive to work hard.
- A sole proprietor has full control over his/her business as there is no outside interference. In this case, business operations may be carried out easily.
- Personal touch. A sole proprietor can maintain personal contacts with his/her clients/employees. This helps him/her to maintain good relations with customers.
- Flexibility. In the absence of government control, there is complete freedom for action; there is no room for difference in opinion and no problem of coordination.
Disadvantages
- In the event that the business makes a loss, a sole proprietor bears all the risks and losses alone.
- A sole proprietor can raise limited financial resources; hence the size of the business may remain small.
- Since the proprietor is alone, he/she may be overworked.
- Unlimited liability. The liability of a sole proprietor is unlimited, i.e., in case of a loss, his private assets can be sold to pay off the business creditors.
- Uncertain business life. The life of the business depends upon the life of the owner since he/she works alone.
- A sole proprietor manages the business by him/herself and does not benefit from the input of other entrepreneurs.
A partnership is a type of business entity
in which partners share with each other the profits or losses of the business
undertaking in which all have invested. Partners share profits equally unless
stated otherwise in the terms of agreement or the partnership agreement.
Advantages
- Ease of formation. It is easy to form as there are no cumbersome legal formalities required.
- Large financial resources, as a number of partners contribute to the capital of the enterprise.
- Specialization; it enables the pooling of abilities and the judgement of different partners with varying skills.
- Flexibility of operations; it enjoys sufficient flexibility in its day-to-day operations. The nature of the business can be changes whenever the partners desire.
- Protection of minority interests; no basic changes in the rights and obligations of partners can be made without the unanimous consent of all the partners.
- The capacity of the firm to survive is higher than that of a sole proprietorship, i.e., the business can continue even after the death of one partner.
Disadvantages
Advantages
- Limited liabilities, i.e., shareholders of a company are liable only to the extent of the face value of shares held by them.
- Large financial resources; it facilitates the collection of huge financial resources due to a big number of shareholders.
- Continuity; a company enjoys uninterrupted business and life. As a corporate body, it continues to exist even if all its members die.
- Transferability of shares; a member of a public limited company can freely transfer his/her shares without the consent of other members.
- Professional management; due to its large financial resources, it can employ expert managers with the required skills which leads to profitability.
- There is a considerable scope for growth and expansion due to its vast financial resources.
- Public confidence. A company can acquire public confidence since its operations are regulated by the government under the Company’s Act.
- It is a separate legal entity, i.e., it is separate from the owners, and hence can sue and can be sued on its own.
Disadvantages
- It is difficult to form as a number of documents have to be presented to the Registrar of Companies.
- Excessive government control in the form of rules and regulations, submission of periodic reports, all which reduces the efficiency and flexibility of the business.
- Lack of motivation and personal touch as there is a distinction between ownership and management in such companies.
- Delay in decision making; there are many levels of management, which result in unnecessary bureaucracy.
- Conflicting of interests; since there are many people involved, there is a possibility of having conflicting of interests, for example between management and shareholders. This is likely to retard growth and expansion of the business.
- Lack of secrecy as it is required to disclose and publish a lot of information on its operations.
- Political interference; for instance the government may influence the election of top management, even though this may be contrary to the wish of the members.
Advantages
- Easy to raise a relatively large sum of money to start a big business.
- Enjoys limited liability facility.
- The business will benefit more people who will be sharing profits realised by the co-operative.
- The business is free to employ managers with relevant experience and qualifications.
- Shares control of the business.
Disadvantages
- Loss of personal interests in the business.
- Everyone will have to accept ideas and decisions of the Board of Directors.
- Diminished personal direct responsibility on part of the members.
Businesses vary
in size and they can be categorized into different sizes according to how they
measure against some factors or indicators commonly used in determining
business sizes. The commonly used factors in determining the sizes of businesses
are:
- The amount of capital invested in the business
- The number of paid employees
- The technology used
- The volume of sales over a given period of time
Using the above factors or indicators, business can be divided into
the following sizes:
a) Micro businesses
These are businesses which are very
small. They require very little money to be started. They require very simple
technology to operate. They usually employ the services of their owners who may
be assisted by one or two people usually family members. Their sales are
usually low. They may not need fixed premises to operate from but where they do,
they may be housed in temporary structures. They do not have to be registered before
they commence operations but may have to obtain operating licences from the
local authorities. In some cases they may have to register with the relevant
local associations such as the hawkers association, ‘boda-boda’ drivers
association, etc., before they commence operations. Examples of micro
businesses in Uganda
include kiosks, hawking, groceries, bicycle repair, roadside vending, etc.
Their target is the local market or the travelling community transiting through
the area.
b) Small scale businesses
These businesses operate from fixed
premises that are of a permanent nature e.g. shops. They employ family labour
(including extended family) but the total number of people employed may not
exceed 20 people. They require little capital to be started. Their periodical
sales are relatively higher than those of micro businesses. They may use some
basic and some technology in their production systems. They are generally easy
to start and operate and may not require formal registration. Examples of small
businesses include shops, bakeries, millers, etc. The relatively well
established small businesses may produce for export either directly or through
large businesses. However, the majority of small businesses produce for the local
market.
c) Medium sized businesses
These are very well
established businesses, which may employ up to 100 people. They operate from
well-established and permanent business premises. They use advanced technology
and produce on a relatively large scale. They require a lot of capital to be
started and such businesses are formally registered as limited liability
companies. These businesses may be producing for the local as well as the export
market. Examples of such businesses include big bakeries, milk processing and
packaging businesses, coffee hulling factories, mattress manufacturing
factories, e.t.c.
d) Large sized businesses
These are businesses which are large.
They may employ more than 100 people. Their production methods are specialised
and automated and they produce in large quantities. They require a lot of
capital to be started. However, in most cases, they result from medium sized
businesses growing and becoming large. They operate from well-established and
permanent business premises. They may be producing for both local and foreign
markets. Examples of large businesses in Uganda include Kakira Sugar Works,
Mukwano Industries, Tea Estates in Western and Eastern Uganda, Roofing Ltd,
etc.
Student Activity 4
1. List the factors used to determine the
size of businesses.
Businesses play an important role in our
lives. Most of our lives are supported by and revolve around businesses. The
goods and services we use, the houses we live in, the transport services we
use, the medicines we use and many others are all produced or provided by
businesses.
Businesses produce goods and services
that either meet the needs or solve problems of their customers, e.g., treating
sick people, providing transport services etc. Other businesses are started in
order to use what the people are producing, e.g., cotton or coffee buying and
processing businesses, milk collection and processing businesses, etc. Other
businesses like tourism, mining, fishing are started to make use of the
existing natural resources.
For whatever reasons businesses may be
started, businesses are important to their owners, families, the communities in
which they are located, the government and other businesses. Generally,
businesses are important because of the following reasons:
·
They are a source of income to
their owners
·
They provide employment to
people
·
They produce goods and services
needed by the people
·
They bring services and
products nearer to the people
·
They provide market to the
people’s produce
·
They make use of local
resources
·
They add value to local produce
and resources
·
They contribute to community
social and economic development programmes
·
They pay taxes to the
government, which are used to provide social services to the people
·
They use things that would
otherwise have been useless or harmful to man and the environment
Challenges facing businesses in Uganda
Businesses in Uganda face a number of challenges.
These include:
·
Raising capital
·
High taxes and tariffs
·
Inadequate raw materials
·
Poor infrastructure e.g. bad
roads, inadequate power supply
·
Insecurity e.g. wars, floods
·
Price fluctuations due to inflation
·
Changing of fashions and tastes
·
Inadequate storage facilities
especially for perishables goods
·
Lack of complementary resources
·
Population shifts e.g.
migrations
·
Uncertainties i.e. fear of
business survival for long
Student Activity 5
1. From
the findings of Student Activity 1, ask students to answer the following
questions:
(i) How is business important to
their owners?
(ii) How is business important to
you as a learner?
(iii) How is business important to
your parents or guardians?
(iii) How is business important to
your community or the country?
2. Discuss the challenges facing businesses in Uganda and
suggest their possible
solutions.
1.
Meaning of Business Associations
Business associations are formed by
businesses, which voluntarily come together and agree to work together to
achieve their common objectives. The common objectives, which compel businesses
to form associations, include meeting their needs and protecting their
interests, which they cannot do either on their own (individual entities) or
which they can do better when they are united and many.
2.
Examples of Business Associations
There are many business associations in
the Uganda
and some of these may be operating at the parish or sub-county level. Others
are formed at the level of the district while others may be formed at the
national level. Some business associations formed at the national level usually
open branches at regional or district level while others may go lower to
sub-counties and parishes. Examples of business associations in Uganda include the
National Chamber of Commerce and Industry, Uganda Manufacturer’s Association,
Uganda National Farmer’s Association, Uganda Co-operative Alliance, Uganda Women
Entrepreneurs Association, Uganda Taxi Drivers Operators Association (UTODA),
Northern Uganda Manufacturers’ Association, Uganda Small Scale Industries
Association, the Association of Chinese Businesses in Uganda, Kampala City
Traders Association (KACITA) etc.
3.
Objectives of Business Associations
The objectives of business associations
vary from one association to another. There are however, objectives which are
common to most business associations and these include:
·
Securing or accessing local and
foreign markets for their members’ products
·
Sourcing or accessing raw
materials for their members’ businesses
·
Accessing better production
technology for their businesses
·
Accessing and providing
training facilities and programmes for their members
·
Accessing financial and
technical support from banks and other business support institutions and
government
·
Supporting individual members
in time of need
·
Developing and disseminating
improved and better production and management systems among members
·
Advocating on behalf of their
members to the government for a better environment that is conducive for
business operation like investment incentives, favourable tax policies,
monetary and general economic policies, political stability and social order.
4.
Membership of Business Associations
Membership to business associations is in
most cases voluntary. Businesses pay entrance and periodical (usually annual) fees
to gain and retain their membership. Business associations tend to attract
membership from businesses which are in the same business line. For example:
Uganda Farmers Association draws the
majority of its members from:
·
Farmers dealing in crop and
livestock production
·
Agro processing businesses like
millers, food processors
·
Agricultural inputs and service
providers like produce buyers and transporters, fertilizers and drug suppliers
Uganda
National Chamber of Commerce and Industry on the other had draws the bulk of
its membership from:
·
Traders and industrialists
·
Importers
Uganda Small Scale Industries Association
draws its membership from small-scale industries like:
·
Carpenters
·
Metal fabricators
·
Food processors
·
Electricians, etc
Uganda Manufacturers Association draws
its membership from:
·
Large industries like Kakira
Sugar Works, Mukwano Group of Companies, Bata Shoe Company, Picfare Industries,
Nice House of Plastics
·
Large coffee processors like
Hajj Nsamba Coffee processors, Zigoti, Kyagulanyi Coffee Processors, etc.
·
Service providers to big
companies like banks, clearing agents, Uganda Coffee Development Authority,
Uganda Investment Authority
·
Other business associations
like Uganda Small Scale Industries Association
5.
Services rendered by Business Associations
The services provided by business
associations vary from one association to another and may also vary from time
to time in line with the changes that are taking place in its members
operations as well as their operating environment. However, business
associations render or strive to render services, which help their members
achieve their business goals and also achieve the objectives for which they
were formed. Examples of services rendered by business associations to their
members include:
·
Providing information on market
opportunities and trends
·
Negotiating and securing local
or foreign markets for the members’ products
·
Sourcing or accessing raw
materials for their businesses
·
Identifying appropriate and
better production technology for their businesses
·
Developing and providing training
programmes for member staff
·
Negotiating and securing
financial and technical support services from financial institutions, business
support institutions and government
·
Providing material and moral
support to members
·
Developing better production
technologies and management systems for members
·
Carrying out advocacy campaigns
on behalf of members with the government for better investment incentives, tax
policies, monetary and general economic policies that are conducive for their
operations
Student Activity 6
1. Ask
students to choose and visit a business association that is familiar to them
and:
(a) Explain its importance to its members
(b) Find the objectives of the business
association
(c) Find the membership of the association
(d) Find the services rendered by the
business association to its members
References:
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