Uganda SME's Demand Special Oil Fund

13-March-2012

Sections of Uganda's small and medium enterprises want government to set up a special fund from the oil revenues to offer trade finance to those firms that might want to explore the opportunities in the industry.

According to a Uganda Investment Authority survey, small and medium enterprises continue to complain that the limited availability of cheaper credit has denied them the chance to explore opportunities in the oil and gas sector.

"All the SMEs surveyed in the study are willing to invest in the sector but what is hindering some is the access to credit and the high cost of capital. Government should set up a special loan scheme from the revenue it gets from oil so that the local SMEs can get access to cheaper capital" said Rebecca Nalumu, the Head of Research at UIA.

The study was conducted in four districts of Kampala, Hoima, Buliisa, and Gulu. It points out that Uganda's SMEs are still operating in the informal sector, which limits their competitiveness against multinational oil and gas companies. Nalumu points to the huge demands, such as technical expertise, needed in the formal sector. Uganda has so far discovered about 2.5 billion barrels of oil.

A lot of attention has been placed on the downstream sector, where Ugandans are expected to benefit.

The ministry of Energy and Mineral Development has already drafted a local content study to show how Ugandans can take advantage of the oil and gas sector.

It is not clear whether Ugandan companies will fully exploit the opportunities in the oil industry, especially now that one of the bills tabled before Parliament gives the oil companies to work with those firms that meet acceptable standards.

Simon Kizito of Makerere University department of Agri-Business and Natural Resources advised SMEs to form partnerships in order to take advantage of the opportunities in the sector.

"The problem with Uganda's SMEs is that most of them want to operate solely. This has created bottlenecks in accessing business incentives from government especially in terms of training them on how to run their enterprises," he explained.

The Observer Newspaper