Strategic Plan | 2020 -2025 Strategic Plan | 2020 -2025 UNLEASHING THE POWER OF UGANDA’S MICRO, SMALL & MEDIUM ENTERPRISES UNLEASHING THE POWER OF UGANDA’S MICRO, SMALL & MEDIUM ENTERPRISES TABLE OF CONTENTS FOREWORD BY THE CHAIRPERSON OF THE BOARD OF DIRECTORS 1 REMARKS BY THE EXECUTIVE DIRECTOR 2 SECTION 1. INTRODUCTION 4 1.1 The History of the Federation of Small and Medium-Sized Enterprises-Uganda 4 1.2 Vision, Mission and Core values of FSMEU 4 1.3 The Purpose of Developing this Strategic Plan 4 1.4 The Process of Developing the Plan 5 SECTION 2. SITUATION ANALYSIS 6 21 Review of the Strategic Plan for 2017-19 6 2.2 External Environment Scan 7 2.3 MSME sector Analysis 8 2.4 SWOT Analysis of FSMEU 10 2.5 Stakeholder Analysis 11 SECTION 3. STRATEGIC FRAMEWORK 12 3.1 Theory of Change 12 3.2 Strategic Priorities 14 3.3 Strategic Objectives 15 SECTION 4. IMPLEMENTATION STRATEGIES 19 SECTION 5. PLAN IMPLEMENTATION 18 5.1 Implementation plan 18 5.2 Organizational structure 22 5.3 Risk Management 23 SECTION 6. FINANCING STRATEGY 24 6.1 Budget summary 24 6.2 Financing strategy 26 6.3 Financial sustainability 26 SECTION 7. MONITORING AND EVALUATION 27 7.1 Monitoring and Evaluation Plan 27 We are living in turbulent times. The coronavirus pandemic appears to be the largest public health crisis in living memory. In addition, it has generated an economic crisis of epic proportions, which is putting the livelihoods of many women and youth at risk, through increased redundancy and unemployment. In Uganda, Micro, Small and Medium Enterprises because of their higher levels of vulnerability and lower levels of resilience have been severely impacted through: a drastic and sudden loss of demand, disruption of supply chains, reduced consumer confidence and reduced access to credit. In this strategic plan, the Federation of Small and Medium-Sized Enterprises-Uganda sets out its plan over the next five years, to support the resilience and recovery of these micro, small and Medium-Sized businesses. It is a bold and clear plan that outlines where we are going, how we’ll get there and what it means for you, our members and stakeholders. The plan also addresses some of the gaps that were identified in the last one, as well as, emerging issues, such as digitalization. More than 15,000 voices helped to shape this plan. Through a robust engagement and planning process, we heard from staff, micro and small businesses, policy makers, young people, women entrepreneurs, board members, donors and the academia. In building this blueprint for the future, we remained true to what we heard and hope you see your voice reflected here. Moreover, we are committed to receiving your ongoing input and feedback as we journey through this plan and its priorities together.The consultants, who facilitated the process of preparing this this strategic plan have done a fantastic job. Our special thanks to them and our Secretariat, with whom they closely worked. On behalf of the Federation of Small and Medium-Sized Enterprises-Uganda, we would like to thank all those who shared their wisdom, thoughts and vision in the development of this strategic plan. We asked challenging questions, you answered and we were inspired. Together, we are creating the Federation of the future. As an entity that represents businesses, we must not cease to innovate in serving our members. 1 FOREWORD BY THE CHAIRPERSON OF THE BOARD OF DIRECTORS Strategic Plan | 2020 -2025 Chairman Board of Directors Daniel Musitwa Ssubi REMARKS BY THE EXECUTIVE DIRECTOR i) To build a healthy entrepreneurial ecosystem and advocate for a conducive business environment for the growth of MSMEs ii) To increase the competitiveness of micro, small and medium enterprises (MSMEs) in Uganda, by addressing constraints in financing, entrepreneurship, technical skills, value chains, and access to markets iii) To support the post COVID-19 recovery and resilience of MSMEs iv) To increase the institutional capacity of FSMEU to effectively serve Micro, Small and Medium-Sized Enterprises v) Promote the inclusion of women, youth and other marginalized groups in the organization. In this strategic plan, FSMEU sets out four strategic priorities for the next five years: 2 Strategic Plan | 2020 -2025 I am pleased to introduce to you the strategic Plan for the Federation of Small and Medium-Sized Enterprises-Uganda, for the period 2020-2025. This strategic plan comes at a critical time for the Micro, Small and Medium-Sized Enterprise sector in Uganda, at which the COVID-19 pandemic is wreaking havoc on the businesses and livelihoods of many people, pushing millions into extreme poverty. There is no doubt that FSMEU has a pivotal role to play in building the resilience and supporting the recovery of these businesses. This strategy therefore, outlines our plan to support the resilience of our members, in line with our mandate of ensuring that micro, small and Medium-Sized businesses become the engine of growth of our economy and create decent jobs for our young people. Since joining FSMEU, as the Executive Director, I have listened to the needs and concerns of our members, in order to better understand how we can help them to succeed. Thankfully, as an entrepreneur, myself, it has not been a difficult task, since I know what it takes to start, manage and grow a business. The process of formulating a new Strategic Plan for FSMEU has given us the opportunity to take stock of past successes and failures and to determine our vision in the light of challenges ahead. Through this consultative process, we have found that over the last few years, FSMEU has cemented its position as the umbrella body for all MSMEs in Uganda. We have also determined that the support that FSMEU is offering to MSMEs in: Policy Advocacy, Training, Business Development Services, Market Access support, is working. However, much more remains to be done. This strategic plan will be rolled out into annual operational plans, which are the roadmaps to reach our strategic goals. In annual reports, the secretariat will also report on the progress that has been made. Furthermore, the plan represents the concerted efforts of our members, our government colleagues, our development partners and our staff, whose valuable input has been incorporated in this document. Let me thank them for their valuable contributions. In particular, I would like to thank the Board of Directors for approving this document and agreeing to oversee its implementation. I am sure that with the collaboration of our members, staff and stakeholders, the vision we have set out here will be translated into milestones of which we can be proud. 3 Strategic Plan | 2020 -2025 Executive Director John K. Walugembe The Federation of Small and Medium Enterprises-Uganda (FSME) was established as an umbrella body for Micro, Small and Medium Enterprises in Uganda to play a pivotal role in creating a robust and conducive business environment for small and medium businesses in Uganda. It is a not-for-profit membership association for Micro, Small and Medium Enterprises in Uganda, registered as a company limited by guarantee. It was pioneered by a group of entrepreneurs in 1990 and formally incorporated as a company limited by guarantee in 2017. Since its founding, it has grown from strength to strength. Presently, it has an excess of 112,500 members nationwide. What makes our association unique, is our independence from Government, special interest groups and big business. We only speak for the MSME owners/Managers; whose interests we represent. That is why our Board of Directors is made up of MSME owners/managers from all over the country. The Federation works with both the public and private sectors to ensure that there is a conducive and fair environment for running Small and Medium sized businesses in Uganda, through amplifying their voice on different issues. We do this through lobbying on their behalf. In addition, we provide them with opportunities for networking, offer them business advisory services and training. In this way, we unlock their potential and ensure that they contribute to employment creation, innovation and economic growth. 1.2 Vision, Mission and Core values of FSMEU To be and remain the largest apex organisa- tion promoting and protecting the interests of small and medium sized business owners in Uganda. VISION To equip SMEs for success and growth through ensuring that there is a conducive environment for business and access to quality business develop- ment services. MISSION Business Advocacy, Entre- preneurship, Start up advisory services, Busi- ness Incubation, Business Networking, SME Online Market Portal’ Trade Missions, Trade fairs and Exhibitions CORE AREAS Strategic Plan | 2020 -2025 4 INTRODUCTION INTRODUCTION SECTION 1: 1.1 The History of the Federation of Small and Medium-Sized Enterprises-Uganda • Guide the operations of FSMEU in the coming five years and ensure that the limited resources of the organization are put to optimal use. • Explain to partners and other stakeholders what FSMEU intends to do over the next 5-year period. In addition, this document will be used as a tool for fundraising, guided by the planned activities embedded in the document. For this reason, it will be shared with current and prospective donors. • Continue to serve as a guiding benchmark for the achievement of FSMEU strategic goals and objectives • Meetings with the Executive Director and senior management of FSMEU to gain an in-depth understanding of the issues and desired direction; • Review of relevant literature including but not limited to: The FSMEU Profile, the FSMEU strategic plan for 2017-2019, the FSMEU Annual Reports and the FSMEU activity reports. • Key stakeholder consultations involving field visits and interviews; • Stakeholder validation workshop involving Board members, development partners, staff and civil society organization representatives; • Presentation and discussion of the draft plan to ensure all major views, inputs have been catered for. 1.2 The purpose for developing this strategic plan is to: 1.3 The Process of Developing the Plan Strategic Plan | 2020 -2025 5 2.1 Review of the Strategic Plan for 2017-19 SITUATION ANALYSIS SITUATION ANALYSIS 6 Strategic Plan | 2020 -2025 In 2017, FSMEU developed a strategic plan to guide its operations for the 3-year period from 2017 to 2019. The overall goal of the strategic plan was to ensure that FSMEU consolidates its position as the premier umbrella body for all Micro, Small and Medium Enterprises in Uganda and effectively represents their interests with Government and other stakeholders. The plan had five strategic objectives, namely: Towards the end of 2019, after completing the third year of the strategic plan, FSMEU contracted a consultant to review its plan, in order to document the achievements realized and identify the challenges encountered. Overall, the following achievements were identified: (i) To broaden the membership base in order to represent the whole spectrum of micro, small and medium industries and supportive service enterprises (ii) To strengthen FSMEU’s governance structures and the secretariat’s capacity to deliver on its mandate (iii) To lobby and advocate for the interests of the micro, small and medium sized enterprises (iv) To offer integrated, quality and demand-driven services to members to improve on their competitiveness (v) To promote greater inclusion and participation of women and youth in USSIA’s programs and activities (i) The membership of FSMEU increased from 13,000 to over 25,000 individual enterprises and 145 associations with a combined membership of 112,500. (ii) The capacity of the secretariat to execute its mandate has been improved by the recruitment of a new Membership Officer, two accountants, three MSME Advisors and two Program Officers (iii) New partnerships have been forged with the Uganda Communications Commission, Uganda Development Bank, the International Labor Organization and the Private Sector Foundation Uganda, among others. (iv) FSMEU has made tremendous progress is cultivating a good relationship with key Ministries, Departments and Agencies. Moreover, there has been a noticeable improvement in the visibility and public perception of FSMEU and its work in promoting MSME development (v) FSMEU also made notable strides in strengthening its governance structures through the establishment of more regional branches and offices. SECTION 2: 2.2 The External Context Strategic Plan | 2020 -2025 7 Similarly, the National Development Plan III through its Private Sector Development Programme seeks to support productive activities, decent job creation, entrepreneurship, creativity and innovation and encourage the formalization and growth of Micro, Small and Medium-Sized Enterprises for inclusive growth. Therefore, NDP III seeks to lower the cost of doing business, promote local content in public programmes, strengthen the enabling environment, enforce standards, unlock investments in strategic economic sectors and strengthen the institutional and organizational capacity of MSMEs to drive growth. Uganda’s Vision is, “ A transformed Ugandan Society from a Peasant to a Modern and Prosperous Society within 30 years”. In order to build a strong and vibrant industrial base, government intends to prioritize the development of micro, small and medium sized enterprises, particularly in the agriculture, ICT and manufacturing sectors , among others. (i) The lingering inability of offer services to MSMEs at a commercial and cost recovery basis (ii) The limited digital transformation among MSMEs in the COVID-19 era (iii) The inability of FSMEU to support its members to access affordable financing without necessarily relying on commercial partners (iv) The failure to undertake effective advocacy at the local level. (v) The failure to sufficiently diversify FSMEU’s funding sources (vi) FSMEU still lacks sufficient This strategic plan is guided by the following national legal and policy frameworks: Vision 2040 The National Development Plan III The Private Sector Development Strategy The National Strategy for Private Sector Development seeks to increase the competitiveness of the private sector and enhance its contribution to economic development. The strategy seeks to support the formalization of MSMEs through the provision of Business Development Services, increased access to credit and enhanced factor productivity. Inspite of the above achievements, a number of challenges where identified by the consultants: Strategic Plan | 2020 -2025 8 The MSME Policy The Vision of the MSME Policy is to create a critical mass of viable, dynamic and competitive MSMEs, significantly contributing to socio-economic development. Specifically, the policy seeks to: provide an enabling environment through policy, legal and institutional coordination, promote research, product development and innovation, promote product standards for quality assurance, promote access to markets, increase access to finance and credit and enhance entrepreneurship and vocational skilling. The COVID-19 pandemic impact on MSMEs MSMEs have been disproportionately affected by the COVID-19 crisis. These are some of the ways in which MSMEs are being negatively impacted: -Sudden loss of demand and revenue – The lock-down, quarantine, travel restrictions, market lock downs, the ban on public transport and social-distancing measures have led to a fall in consumer spending. Businesses that rely on physical spaces and interpersonal interactions, such as: restaurants, supermarkets, markets, hotels, tour operators, bars, gyms are experiencing a severe drop or zero sales. Reduced sales are likely to result in a cash flow crunch for these businesses. -Supply chain disruptions- Many micro and small businesses import inputs or products for sale. These are suffering from shortages of key raw materials. -Liquidity shortages - Due to diminished cash flows, many micro and small businesses are struggling to pay their employees and meet their financial obligations. Moreover, the heightened uncertainty is leading to a reduction in access to credit, as financial institutions are less sure of the businesses’ ability to pay back loans. -Staff Shortages- Staff are staying home due to fear of catching the virus, lack of public transportation or the curfew measures. SMEs in critical sectors of the economy are therefore struggling to operate at full capacity, due to these staff constraints. Uganda’s Private Sector is dominated by Micro, Small and Medium-Sized Enterprises (MSMEs) which number approximately 1,100,000 and employ close to 2.5 million people. This accounts for close to 90% of all non-farm private sector employees. 2.3 MSME sector Analysis Table 1: MSMEs by size Source: Census of Business Establishments (UBOS, 2010/11) 9 Strategic Plan | 2020 -2025 Ministry of Finance, Planning and Economic Development. (2017). The National Strategy for Private Sector Development. Ministry of Trade, Industry and Cooperatives. (2015). Uganda Micro, Small and Medium Enterprise Policy. MSME size No. of MSMEs Share per category 1-4 employees 428,000 93.5 5-9 employees 19,027 4.1 10 employees 10,979 2.4 458,106 100 Most MSMEs are located in Kampala Business District (45%), Central Region (21%), Western (14%), Eastern (13%) and Northern (7%). MSMEs play a very important role in the socio-economic development of the country. They are a source of local innovation and help in the manufacturing of commodities using local resources that would have otherwise remained idle . They help boost domestic savings and investments and thereby encourage the participation of people at the bottom of the pyramid in the socio-economic development of the country. MSMEs also help to develop a pool of a skilled and semi-skilled labor force which is critical in Uganda’s industrialization agenda. MSMEs also help to cultivate and nurture entrepreurial and managerial skills. However, due to internal inefficiencies and constraints in the business environment, their contribution is below their potential. First, the cost of doing business is still high. For instance, an MSME needs to go through 13 procedures to register a new company. Secondly, MSMEs still lack access to affordable finance, with interest rates averaging 20%. Moreover, inefficiencies still exist in accessing timely and affordable electricity, water, ICT and transport. Most importantly, many businesses have internal weaknesses, leading to the collapse of at least 3 of every five businesses that are started, before their 2nd birthday. MSMEs therefore need a lot of nurturing if they are to contribute to inclusive growth and job creation Lorem ipsum 10 Strategic Plan | 2020 -2025 2.4 SWOT Analysis of FSMEU Strengths Weaknesses • FSMEU is legally registered and is well recognized as the umbrella body for Micro, Small and Medium-Sized Enterprises in Uganda • FSMEU has a broad membership of over 112,300 members countrywide • FSMEU has a diverse and representative Board of Directors from all regions of Uganda • FSMEU has a quali fi ed and competent staff • FSMEU has a presence in all districts of Uganda • FSMEU owns a number of assets countrywide that are integral to its fi nancial sustainability • FSMEU is well recognized by government as the premier representative of the MSME sector in Uganda • FSMEU is not fi nancially sustainable since it is still dependent on donors and membership subscriptions • FSMEU still lacks physical footprint in all the districts in which it has members. • FSMEU is not as visible, as it should be • FSMEU is not adequately staffed to be able to effectively meet the needs of its members and stakeholders. • FSMEU also suffers from colossal expectations from MSMEs who look at it as a big brother Opportunities Threats • Government is prioritizing working with the private sector, as a strategy for inclusive growth and job creation • There is a lot of interest in the role that MSMEs can play in creating jobs for young people • The African Continental Free Trade Area (AfCTA) provides MSMEs in Uganda, with opportunities to reach new markets • The COVID-19 pandemic and the negative impact that it is having on businesses and the economy • Changing donor priorities, due to the impact of the pandemic back home • Competition among private sector associations for resources and for clout Strategic Plan | 2020 -2025 11 2.5 Stakeholder Analysis Ministry of Trade, Industry and Cooperatives (MTIC) Office of the President Office of the Prime Minister Ministry of Finance, Planning and Economic Development (MFPED) Ministry of Local Government (MOLG) Ministry of Gender, Labour and Social Development (MGLSD) Ministry of East African Community Affairs (MEACA) Ministry of Information and Communications Technology and National Guidance The Uganda Communications Commission The National Information and Technology Authority District Local Governments Uganda Investment Authority (UIA) United Nations Capital Development Fund (UNCDF) Private Sector Foundation Uganda (PSFU) United Nations Industrial Development Organization (UNIDO) International Labour Organization (ILO) The World Bank/International Finance Corporation (IFC) Uganda National Council of Science and Technology (UNCST) Uganda Industrial Research Institute (UIRI) Uganda National Bureau of Standards (UNBS) Uganda Revenue Authority (URA) Makerere University Directorate of Industrial Training (DIT) Enterprise Uganda Management Training and Advisory Centre (MTAC) Uganda Manufacturers Association (UMA) Federation of Uganda Employers (FUE) Uganda National Chamber of Commerce and Industry (UNCCI) National Union of Disabled Persons of Uganda (NUDIPU) National Union of Women with Disabilities (NOWODU) Uganda Export Promotion Board (UEPB) Uganda Women Entrepreneurs Association (UWEAL) In developing our strategic plan we have identified a number of stakeholders who have been pivotal and will continue being so in helping us achieve our strategic objectives. It is the intention of this plan to deliberately increase FSMEU’s involvement with all our stakeholders both in government and in the donor community. STRATEGIC FRAMEWORK STRATEGIC FRAMEWORK SECTION 3: 3.1 Theory of Change FOCUS AREAS WHAT WE DO for SME competitiveness Enhance Market access Promote productivity, technology and innovation Grow our membership base Promoting EntreprenuershiP Support COVID-19 recovery and resiliance of MSMES and human capital developement M o r e j o b s W o m e n and youth e c o n o m i c e m p o w e r m e n t economic growth poverty alleviation O U R T H E O R Y O F C H A N G E 12 Strategic Plan | 2020 -2025 W H A T M A K E S F S M E U U N I Q U E W H A T M A K E S F S M E U U N I Q U E ? speaking Country wide presence Broad Independence from Government Working with SMEs to create jobs We unlock the poten al of SMEs base for Strategic Plan | 2020 -2025 13