Role Of Small Scale Businesses In The Provision Of Employment To The Labor Force

Project and Seminar Material for Accountancy / Accounting

Role Of Small Scale Businesses In The Provision Of Employment To The Labor Force

Table of Content

Preliminary Page(s)

  • Declaration
  • Approval
  • Dedication
  • Acknowledgement
  • Table Of Contents
  • List Of Tables
  • List Of Figures
  • Acronyms

Chapter One:

1.0 Introduction

  • 1.0 Background
  • 1.1 Statement of the Problem
  • 1.2 Objectives of the study
  • 1.2.1 Specific objectives
  • 1.2.2 Research questions
  • 1.3 Purpose of the study
  • 1.4 Scope of the study
  • 1.5 Significance of the Study

Chapter Two:

2.0 Literature Review

  • 2.0 Introduction
  • 2.1 Definition and nature of SSBs
  • 2.2 Advantages Of Small Scale Businesses
  • 2.3 Nature And Categorization Of Activities Of SSBS In Masaka Trade Center
  • 2.4 Reasons For Small Scale Enterprenuerial Businesses In The Area Of Study
  • 2.4.1 Government Policies
  • 2.4.2 Trade liberalization policy
  • 2.4.3 Foreign Aid Donations
  • 2.4.4 Low start-up capital
  • 2.4.5 Population growth
  • 2.5 Challenges Faced By Small Scale Businesses
  • 2.5.1 Poor Infrastructure
  • 2.5.2 Financial Problems
  • 2.5.3 Improper business Feasibility
  • 2.5.4 Lack of Managerial Knowledge
  • 2.5.5 Poor Educational Background or Lack of Education
  • 2.5.6 Out-Dated Technology
  • 2.5.7 Poor Marketing Strategy
  • 2.5.8 Increasing Competition
  • 2.6 Solutions Undertaken To Enhance Small Scale Businesses
  • 2.6.1 Traditional guarantee Associations
  • 2.6.2 Financial sector development
  • 2.6.3 Diversification and markets expansion
  • 2.6.4 Corporate governance
  • 2.6.5 Human and Cultural Capital Development
  • 2.7 Conclusion

Chapter Three:

3.0 Methods And Procedures

  • 3.0 Introduction
  • 3.1.1 Research design
  • 3.1.1 Study area and Target population
  • 3.1.2 Sampling method
  • 3.1.3 Sample size and sample selection
  • 3.2.1 Key Informants
  • 3.2.2 Focus groups
  • 3.2.3 Data Collection
  • 3.2.4 Observation
  • 3.2.5 Questionnaire
  • 3.4 Editing
  • 3.4.1 Coding
  • 3.5 Problems encountered during the field research

Chapter Four:

4.0 Data Presentation And Interpretation Of Findings

  • 4.0 Introduction
  • 4.1 Background information of respondents
  • 4.2 The different classifications and activities of the Small Scale Businesses
  • 4.3 The challenges that limit the contribution of small scale businesses towards development:
  • 4.4 The impact of employment opportunities provided by the SSBs to household welfare: 33

Chapter Five:

5.0 Conclusions And Recommendations

  • 5.0 Introduction
  • 5.1 Conclusions of the study
  • 5.3 Areas For Further Research
  • References
  • Appendices

Chapter One


1.1 Background Of The Study

Small scale enterprises are a major component of the Ugandan business sector that sustained the economy through the hard times when all the different sectors of the economy were in disequilibrium. In 1986, Uganda undertook economic reforms through the IMF/World Bank funded Structural Adjustment Programs (SAPs). Like in many developing countries these reforms were meant to change the Economy from an inefficient, import dependent economy to one that is more diversified, efficient and export oriented (Ajibefun and Daramola, 2003).The small scale businesses had a role to play in support of the production and import sectors to achieve the goals of the SAPs at the time.

In Uganda, Small Scale Businesses have been a critical source of support to the struggling economy that formerly depended on the agricultural sector and remittances. The Small Scale Businesses (SSBs) led to an increase in the employment levels to 70% of the non farm labor force, thereby contributing to 80% of the manufactured output and 20% of total Gross Domestic Product (World Bank 2009). This reduced poverty amongst the people in the rural and urban areas of the country which encouraged government to undertake more action in support for such investments since they needed less capital per job created, offering a rather inexpensive way of accommodating the labor force for equitable wealth distribution.

The Government of Uganda (GoU) introduced several economic measures to restructure the economy as a way to increase the role of both the public and private businesses. The deregulation of the economy was aimed at altering the incentive structures faced by the small scale sector. Such policies include the payment and trade liberalization, interest rate liberalization, and appropriate pricing of public goods and the reduction of government involvement to enhance production and performance. Most of these policies directly and indirectly affect producers and employees in an economy.

The GoU is currently centered on minimizing its intervention in economic activities so that it encourages private sector participation for increased production and incomes thereby leading to economic self sufficiency and reliance. The efficient role played by the small scale businesses in the utilization of resources as labor has led to poverty reduction for broad based economic growth.

The large informal sector which is mostly comprised of the small scale businesses offer great potential for employment generation therefore a good target for policy to eradicate poverty. By creating employment opportunities for the unskilled labor, they could increase incomes as a way to reduce poverty. However this potential can only be achieved if the small scale businesses highly absorb the labor force to boost production.

According to the Background to Budget 2008/09, Uganda’s economy was composed of the Small Scale Business sector that were categorized into wholesale and retail trade estimated to be 46%, manufacturing at 31% as restaurants and Hotels constitute 7% during Financial Year (FY2007/08).Small Scale Businesses have played a great role in the provision of employment opportunities to the labor force since they are many in numbers, owned and operated with low volumes of working capital.

In many developing countries, the growth of Small Scale Businesses (SSBs) is a wide spread concern due to their contribution to Economic growth and Development because they compose the larger informal sector that is significant in the provision of employment in an Economy. It should be noted that Small Scale Businesses are highly diverse in terms of division of labor through which they create opportunities for productive work that leads to an increase in the labor participation rate thereby contributing to poverty reduction, economic growth and development.

According to the Uganda Bureau of Statistics (UBOS 2007), between 2002 and 2006, the proportion of workers in self employment increased from 13% to 22% for the non agriculture activities in which the employment population ratio for men increased overwhelmingly to 82% compared to 79% for women thereby enabling more people to find jobs in SSBs not only out of the need to increase and diversify incomes but in the face of reducing Poverty through employment provision. It was reported in 2006/2007 by Uganda Bureau of Statistics (UBOS) that the total number of businesses registered in Kampala was nearly 26,000 of which those employing 5 or more persons were 17,084 hence showing a growth of over 60% of Small Scale Businesses.

The Government of Uganda (GoU) with the support of International development partners as the World Bank through the Foreign Direct Investments (FDI) to promote the informal sector as a way to reduce unemployment (a key variable for measuring the performance of an Economy). This has led to the influx of unemployed work force to Kampala which is the major trade center in the country; households increased their willingness to participate in the labor market by setting up Small Scale Businesses to meet the social and economic responsibilities associated to their families leading to competition.

It is against this justification that Small Scale Businesses in Shauriyako Trade Center have been set up to provide substantial and sustainable employment opportunities trigger development and economic growth.

1.1 Statement of the Problem

Small Scale Businesses are competitive and dynamistic nature. This makes them a fundamental cause for Economic growth and Development through their contribution to income redistribution, and Unemployment reduction in developing economies. However, there are no clear indicators that unemployment rates have reduced.

Unemployment consistently remains a key concern that needs the attention of major economic decisions to focus on the promotion of small scale businesses activities.

1.2 Objective of the study

The study attempted to examine the nature of SSBs that provide employment to the labor force in Masaka town trading centre in Masaka District.

1.2.1 Specific objectives
  1. To identify the different activities of the small scale businesses in which the labor force is employed.
  2. To identify how the SSBs contribute to development and growth of developing economic.
  3. To identify the size of businesses that provides employment to the labor force.
1.2.2 Research questions.

The study investigated the following questions;

  1. What reasons have led to the growth of Small Scale entrepreneurial businesses in the region of study?
  2. What challenges have limited the activities of the Small Scale Businesses in their role to provide employment opportunities?
  3. Is there space for the expansion of the SSBs?

1.3 Purpose of the study

The purpose of the study is to identify the various activities in which the Small Scale Businesses absorb the labor force.

1.4 Scope of the study

The study was confined to Small Scale Businesses since they engage the labor force in various activities that require little capital to sustain the possibility of retail, wholesale shops, hardware and general merchandise, restaurants to mention but a few as a way to reduce unemployment levels

The study focused on the reasons for the growth of SSBs towards the provision of employment to the labor force.

Through this the role of SSBs with the support of government and other International partners is recognized thereby encouraging small scale trade for employment and improved household earnings.

1.5 Significance of the Study

The study shall help the policy makers to recognize the importance of Small Scale Businesses and industries in the provision of employment to the labor force for economic development. This shall further guide them to make trade policies to enhance the performance SSBs as regards their activities to accommodate the mushrooming population that is attributed to high birth and fertility rates as well as rural urban migration within the country.

To students and other scholars who intend to widen their knowledge in the study of the role of Small Scale Businesses, this study shall be a basis of reference since it focuses on the causes of the establishments, how the unique characteristics of the Businesses have facilitated their role in the provision of employment, challenges they face and the solutions that are being undertaken to harness their activities.

Chapter Five

Conclusions And Recommendations

5.0 Introduction

This chapter involves a summary of the findings, discussions, and recommendations that are based on the objectives, the problem statement, and well as the recommendations are based on the findings.

5.1 Conclusions of the study.

Findings revealed that majority of the different classifications and activities of the businesses were tied shop businesses that operated at a small scale, were managed by own boss and support staffs, had their source of startup capital from own savings, and do not provide opportunities to a great number of the people since they mostly employ less than 5 people compared to the labor force available.

The study revealed that most business owners had challenges that hindered their business operations, taxes and other regulations. Problems in the context acquisition of licenses for registration, duplication of products have been attributed to competition. This has culminated into the widening of markets, emphasizing of the Traditional Guarantee Associations as MTA, PSF, 360 Network and USSIA so as to focus on the issues that hinder trade and business operations.

That small scale business mostly improve incomes and welfare of individuals, from their businesses knowledge or skills and business partners, competition for jobs associated with social responsibilities encouraged most business people to start businesses, the kind of activities engaged in by the businesses have enabled them to absorb labor force through the provision of employment opportunities.

The study revealed that most people owners used own savings as a startup capital for their businesses hence operating at a small level with a structural hierarchy of own boss and support staffs thus leading most businesses to be tied shop businesses with less than 5 employees. Despite the challenges faced by the small scale businesses as taxes and other regulations, competition from similar operations, transportation costs, efforts have been undertaken to increase the role of such businesses in the provision of employment to the labor force.

5.2 Recommendations

Small scale businesses need to employ professionals to manage their businesses this will improve on their performance since these will establish and strengthen the internal controls as regards financial resources to reduce on mismanagement and misappropriations. It is through this that small businesses whose startup capital is based on own savings will easily access financial institutions for loans to enhance their business operations towards employment provision.

Small scale business operators should widen their markets so as to reduce competition this should be done by integrating market information into the planning process because marketing is the life blood of a competitive marketplace as it is driven towards the needs and desires of customers in the production decisions. This should be done with the help of the Government through tax exemption strategies for investment and direct financial support to small scale businesses.

Government should introduce motivation incentives in support of the small scale business operations for examples increased salaries, wage tax holidays and other non-monetary rewards. This would improve on the performance of businesses towards development and employment provision.

The decision makers of the small scale businesses should adopt the best form of organization that can address the following issues with help of updated technology;

  1. The life and continuity of the business
  2. The operating flexibility of the employees
  3. The ease and expense of making the business recognized
  4. The ease with which capital can be acquired to support business operations
  5. The ability to control the business without jeopardizing other activities in which they are involved

Government should involve draft policy frameworks for small scale businesses that focus on the legal and regulatory conditions, capacity building in support of improving the business environment to increase competition and promote the private sector. Emphasis should be on enabling accessibility through the development of better infrastructure in form of roads for transportation, administrations buildings as well as communication systems.

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