Why do some Ugandan businesses fail?

Many people start businesses because of the attractiveness of self-employment. However, sustaining the business is the most difficult part. One of the reasons why

Many people start businesses because of the attractiveness of self-employment. However, sustaining the business is the most difficult part. One of the reasons why businesses are failing is lack of good people with passion and the zeal it requires to drive business growth. Some employees have a mindset of poverty and negative mentality. They think by working they are making the business owner to succeed. They forget that they need to put in their best foot forward so that the business succeeds which is good for their careers.

Most staff have a mindset of public service, even when they have never worked there. Because public service gets money from tax payers, their problem is how to spend it not how to make it.

When they make mistakes and cause huge financial loss to the country, no one holds them accountable. They go away with it easily. If that public service mindset crops into the private sector, the staff becomes a none performer because he or she thinks life is so easy and that one can get away with mediocre work. In the private sector, when you make a loss, you pay. This is why businesses that fail to pay up their obligations file for bankruptcy. In the public service, you will never hear of any Ministry declared bankrupt. When a Ministry has financial hiccups, they will go to parliament, ask for more money even when the earlier allocated funds were poorly spent.

Another reason for business failure is poor governance. Everybody uses the term poor governance. But there is a reason why the human being has the head at the top with the eyes to provide long term view. Equally, every business needs a board of directors to act as the Head for the business.

Of course, often the cost of governance is high. Some entities set up board of directors for window dressing. For an effective board, there must be clear separation of powers. The owner is independent of the board, and top management is independent of the owner and the board. Each level has got authority and exercises their mandate. For example, the owner has to appoint the board, in return the board appoints the CEO.

If you look at our Uganda government structure, the owner of the country, the ‘citizens’ appoints the members of Parliament, which in turn must appoint the CEO or the President; who then is empowered to recruit own team (Cabinet) to run the country. However, the lack of separation of powers makes this structure fail to deliver good results.

What happens in Uganda, the citizens appoint the CEO (the President) through universal adult suffrage. The citizens also appoint the Members of Parliament. The President then appoints the Cabinet, which in the corporate world is like the top management team (TMT).

In this era of the politics of political parties and party positions, it becomes very difficult for Parliament (which assumes the role of the Board) to be independent of the executive; the President and his Cabinet. Although there is resemblance of good governance, in reality the systems cannot work effectively to hold the leaders accountable.

Be it as it may, after appointing the Ministers, there is need to review the government structure to make it aligned to the new realities or priorities. The first reality check is whether the people appointed genuinely deserve such positions?  For the systems to work, the Board (Parliament) gives a scorecard or targets to the chief executive (President) against which she /he will be evaluated. The Citizens of the Republic of Uganda need to set and give clear scorecard targets to the Parliament, who then must give the same scorecard to the President and the overall leader of the country. The President must then be held accountable for the scorecard targets.

However, Parliament which represents the citizens (owner) does not come up with the targets for the President. And accordingly, the President does not provide clear targets to the Ministers (Directors) so appointed. Whether the President does good work or doesn’t, nobody will notice. No clear reports of what has to be achieved and by when.

The same thing happens in business. Governance and the lack of right people are the main causes of business failure.

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