3 February 2012

Uganda: Youth Fund Is a Useful Start

Photo: New Vision
Finance Minister Maria Kiwanuka.


The launch, by government, of a Shs25 billion venture capital fund to support youth entrepreneurship is a useful initiative. Uganda has one of the highest youth unemployment figures in the world with job-creation lagging significantly below the 300,000 Ugandans who join the labour force every year.

Combined with a majority young population and one of the highest population growth rates in the world, the need to create opportunities for Uganda's young, restless and unemployed cannot be gainsaid.

However, while the youth venture capital fund is a good start, it is a small drop in a raging ocean of economic inequality and uncertainty. For starters, while the Shs25 billion might appear to be a useful sum, is less than what government plans to spend on hosting the upcoming Inter Parliamentary Union for only a few days.

While loans of up to Shs25 million will be made available to qualifying youths, the figure, in real terms, represents a per-capita allocation of about Shs150,000 to each of the youths who will join the labour force this year - hardly a game-changing sum.

Similar loan schemes like Entandiikwa and Bonna Bagaggawale have failed because they were political vote-winning schemes and not economic ventures. They carried an in-built high political price of going after defaulters and it is not clear whether the risk-management measures built into the latest scheme, such as partnership with more ruthless commercial banks, will trump political considerations when the loans are due around the next election.

While the venture capital fund will address, to a small extent, the lack of access to capital, more obstacles remain to enterprise and doing business in Uganda. Some of them, such as inadequate power and transport infrastructure, are big-ticket items, which require massive regional investments over many years.

Others, such as the high cost of registering businesses or property and the enforcement of contracts can be reformed through overnight legislation and the cutting of bureaucratic red tape and would unshackle the entrepreneurial spirit of Uganda's youths.

Having overseen the Uganda Registration Services Bureau before joining cabinet, and having run a start-up business for many years, Finance Minister Maria Kiwanuka will need no conversion to the need to reduce the cost of doing business. She will also realise that those reforms are easier to push through than find money from political pork-barrel projects to grow the venture capital fund.

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