Business Environment is the sum or collection of all internal and external factors that affect an organization’s operations. The Situation with COVID 19 has affected the business environment by partially slowing down globalization due to restrictions on trade and movement. With Globalization, SMEs had the opportunity to trade in different geographies. However, it did little to stimulate local demand for local produce. Developing countries struggle with Trade deficit because the local business community is unable to supply quality products at good prices capable of competing with foreign goods and services. The global slowdown of trade presents an opportunity for developing countries like Uganda to stimulate local demand and production. To do this, we need to address the political, social, and economic barriers!
The high cost of doing business among developing countries limits the ability of SMEs to compete with imported products and services. SMEs face challenges in form of high transactional costs, high financing costs, and administration costs. This limits the ability of SMEs to produce at scale because they can’t afford the capital. Prices of products and services produced locally are higher than those from foreign markets. Before we create new policies to solve this, more effort is needed to share what has already been done and getting this information out to the SMEs that need it. A lot of the incentives available to SMEs are not communicated effectively creating a usage gap.
Need for Value chain integration from producers to consumers. A value chain is a string of players responsible for the delivery of a product or service from raw material to selling it to the final consumers. In order to stimulate local demand, producers and suppliers need to work together with the intention of promoting local products and services. Different industry players need to aggregate their members in their value chain and intentionally collaborate to explore how they bring more local products to the market as compared to imported products. This for them is a much cheaper option as compared to the cost of importing.
The need to invest more in local markets as compared to exporting capital will help bridge the financing gap for domestic SMEs. An improved ratio of domestic capital and Foreign Direct Investments will boost sector production and reduce the rate of business failure due to the lack of financing. Both government and the private sector need to realize that the Balance of Payments (BOP) can be improved if we focused on developing local SMEs and improve their capacity to compete locally and internationally.
Thank you for reading!
By Edirisa Sembatya
MD Finding XY
SEED Uganda Representative