Business intelligence for emerging markets
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Uganda’s unexplored, thriving private sector

Uganda’s unexplored, yet thriving private sector

Tech, competition, and what needs to be done to boost entrepreneurship

In collaboration with Digest Africa

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Uganda is not the first country one thinks of when looking at innovation in Africa.

A multiplicity of trends is signalling that a fast and far-reaching transformational process is happening but this change is often hidden in plain sight.

The country is experiencing the development of a competitive private sector led by a convergence of established and emerging players, especially the telecom industry, technology giants, and several locally-born companies tapping into the gig economy and offering the large informal sector additional sources of income. The public sector seems to be lacking a long-term, unified vision when it comes to facilitating business creation, but the vibrancy of the ecosystem shows a positive direction.

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Meet the facilitators

The recalcitrance and the limited budget of the public sector means that the private sector has had to step in and provide for the absence of a supportive framework. In this process, telecom companies have been a key player in laying an initial foundation, especially the mobile and technology sector. MTN Uganda, being the leading mobile operator in the country, has had a crucial role in the creation of a basic digital framework upon which it rolled out a now-widespread mobile money network.

Africell and Airtel have not been involved to the same extent in the innovation space but their role in dragging internet prices down has been crucial to broaden the consumer base and democratise a whole range of services from ride-hailing to last mile delivery and e-commerce.

Telecoms’ involvement in the start-up ecosystem also includes awards and apps competitions rewarding innovators and entrepreneurs. However, this has not come without some criticism for “stealing” innovations, as many apparently benevolent companies have been accused of supporting start-ups only to plunder their business models or innovative elements and crowd them out of the market.

Similarly, the dramatic plunge in handset prices produced a spike in the smartphone penetration rate over the past few years and now Ugandans, as in many other African countries, can order a $75 Tecno smartphone on Jumia. Cheaper phones and data are a gateway to opportunity as more and more people, from farmers to drivers, are carrying out their businesses via phone. Reducing the cost of communications automatically results in a multiplication of activity.

The start-up scene

The Ugandan start-up scene has been rapidly expanding in half a decade, often filling important gaps in the industry and society.

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Perhaps the most evident - because of its capillary presence in urban centres - is the bike ride-share industry, which saw the entrance in the market of international giants such as Uber and Taxify. These find themselves competing against SafeBoda, who is the leader in the market, with over 1500 riders, as well as the vast number of informal, independent bodas flocking in the streets of Kampala.

Also, e-commerce is not new in Africa and Jumia Group, the largest e-platform on the continent who has raised over USD 750 million in funding in less than a decade, is well established in Uganda. Formerly known as Africa Internet Group, the company owned by Germany’s Rocket Internet and backed by giants such as MTN, Goldman Sachs, CDC Group, Axa, Milicom, Orange Group has been central to populising e-commerce in the country. The growth of digital purchases also facilitated the rise of last mile and food delivery sector, which, aside from Jumia Food, counts now with companies such as Yum DeliveriesHello Fresh Uganda and, since early 2018, Simba Food.

The growth of this industry across fast-growing markets characterised by the quick adoption of new technology and the bypass of traditional frameworks is a worldwide phenomenon that has begun to attract huge players. The e-commerce clash of titans in Southeast Asia, for instance, is now between companies of the like of Google, Baidu, Alibaba, and Tencent.

Further, the launch in spring 2017 of Zuckerberg-backed Andela, who decided to make Uganda its third market after Nigeria and Kenya last year, represents a significant milestone for the country because of the company’s gravitas and prestige across the continent and beyond.

Finally, in fintech, Cellulant - that raised over US $40 Million earlier this year, has already become a significant player in the market, while saving startup Mazima Retirement Plan and Xente are two examples of local companies with strong potential and high growth rate. 

Market competition: scramble for the lion’s share

From mobile operators to fintech startups, a structured market is quickly taking shape and its buoyancy results in several benefits for consumers, as the competitive playing field implies that companies strive not only on a price level but posit to offer better services, from customer assistance to safety.

A clear example of this trend is the battle between “boda boda” hailing companies who are now forced to renounce to a good chunk of revenues through promotions - pricing remains a sensitive ground, especially in the face of large companies competing with the locals. For instance, SafeBoda, market leader in bike ride-sharing, offers discounts in order to challenge market entry strategies based on slicing prices implemented by companies such as Taxify. However, the race has now moved to the level of providing passengers’ helmets, flexible payment options, and tracking and rating systems via mobile apps.

MTN Mobile Money station and SafeBoda riders by Kanjokya Street, Kisementi

MTN Mobile Money station and SafeBoda riders by Kanjokya Street, Kisementi

New innovation clusters are boosting the tech ecosystem

The tech ecosystem is a leading driver in this growth process.

In March 2018, the GSM Association released a report mapping the tech hubs (that is, those organisations such as incubators, accelerators, coworking spaces, and hybrid innovative centres, who nurture and invest in entrepreneurs from idea stage to market launch) across Africa and Asia and, according to this, the Ugandan ecosystem has registered 25% growth since 2016.

This is no rhetoric. Walking around Kisementi, one of the upscale districts of Kampala, the buzz in tangible. Around Acacia Mall, dozens of men in suits are discussing business or talking on their smartphones, surrounded by an army of boda bodas offering a ride. Off the main road is also a player who recently entered the coworking scene: Tribe Kampala, with a cosy outdoor café filled with youngsters at their laptop.

Likewise, along Kanjokya Street, an endless row of hubs and organisations such as WitU (Women in Technology Uganda), Hive Colab, as well as several NGOs like Innovation for Poverty in Action, colour the sides of the street. The renovation of the area also attracted the headquarters of major start-ups such as Andela and SafeBoda.

Ten minutes boda ride West of Kisementi, in Nakasero, one finds Outbox, an incubator who boasts partnerships with Google for Entrepreneurs and MTN. Outbox is home to prestigious companies such as Ensibuuko, who recently made it to the news for raising conspicuous amounts of funding. Outbox also collaborates with UNFPA, UKAID, and the Ugandan government to organise an initiative called UpAccelerate.

2018 also saw the rebranding of Design Hub Kampala - previously known simply as The Hub Kampala- a gargantuan warehouse turned into a hipster-looking coworking space that has come to be a new significant player in the scene.

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Finally, the convergence between industry players, officials, and investors is evident at The Innovation Village, one of the major entrepreneurial ecosystems in the country and East Africa, who partnered with Liquid Telecom and facilitated the formation of the Kampala Angel Investors Network, Uganda’s first dedicated investors’ community. CK Japhet, the hub's cofounder, recently set up The Bureau which, according to some insiders, is set to lead on the creation of the largest innovative cluster in Uganda, which shall be able to provide entrepreneurs with all the necessary support to develop their ventures. The Bureau will host teams of legal and fiscal experts, represent a focal point for investors, and run innovation programmes.

The buzz around entrepreneurship and the rapid development of the scene also translated in the institution of a number of startup accelerators, i.e. programmes devoted to preparing companies for expansion or market launch. Among these, Growth Africa and Unreasonable East Africa, two sector-agnostic programmes among the most prominent in East Africa, followed by Inccelerate, which targets idea-stage projects and was launched this year by Enstartup, and Makerere University-based Imuka Ventures. 

Persistent boundaries to entrepreneurship

Fostering a culture of entrepreneurship and developing of a thriving business landscape comes with a set of challenges. These could be categorised as micro and macro levels – the former referring to the personal limits of entrepreneurs and strategic matters, and the latter to broader, often framework- or government-related issues.

First, a widespread challenge consists of managing to survive while building a company at early stage. Entrepreneurs are often young people who lack a financial buffer able to push them through the initial phases of their ventures and the supportive framework for entrepreneurs, especially at the level of designing a company, is not mature enough. Thus, for many aspiring entrepreneurs, aside from a limited group of wealthy middle-class people and foreigners, the choice to set up a business quickly becomes a question of survival.

Yet, self-sustainability during the early-stages of the business is not the only boundary to successful entrepreneurship in Uganda. Maria Auma, founder of Blue Luxury Investments, an SME investment fund – and one of the rare female founders in the industry – explains that many entrepreneurs actually lack a mid to long-term roadmap or a structured strategy allowing them to scale.

At a systemic level, there is an evident lack of funding, due to both the underdevelopment of the financial and the concentration of pools of money in specific environments. In regard to the start-up realm, the angel and venture capital ecosystem is only beginning to take off, with the setting up of funds such as Akili VC and Leapfrog Ventures’ new seed fund dedicated to Sub-Saharan African start-ups .

Additionally, the apparent lack of local success stories prevents local and foreign investors from moving the so-badly-needed risk capital in the country. Beyond the usual suspects, South Africa, Nigeria, Kenya, funding to start-ups in countries has been scarce. Uganda, where total funding averaged USD 16 Million – USD 20 Million shorter than its smaller neighbour Rwanda, which counts a fifth of the population.

Finally, regulators seem to not necessarily aligned with the process of business creation and this results in a legal and procedural apparatus that is not able to nurture entrepreneurship.

The way forward: easing pro-business regulation and multiplying the support framework for early-stage ventures

A healthy way ahead for Uganda’s market development is dependent on the convergence of multiple players, an effort to skill the population for tomorrow’s job market, and including the informal sector in the overall economy.

Co-authored by Dario Giuliani, Founder and editor

Peter Malinz,  CEO Digest Africa