The 2021 Poverty Status report has revealed that many Ugandan households start businesses to diversify income sources. The economy and informal labour market are more diversified in urban areas than in rural areas.
The report is the third in a series under the National Development Planning cycle, guided by the theme: ‘Jobs, informality and poverty in Uganda: Insights on performance before and during COVID-19’. The theme is consonant with Uganda’s medium-term aspirations of increasing average household incomes and improving the quality of life of Ugandans as expounded in Vision 2040. It is also cognizant of the challenges imposed by informality and the coronavirus pandemic (COVID-19).
According to UNHS 2019/20 Report, 2.8 million households operate non-crop farming businesses that engage about 4.9 million people (52 per cent males and 48 per cent females). Regarding location, 60 per cent of the enterprises were in rural areas and the majority 95 percent) were sole proprietorships, with only 19 per cent of the people working as paid employees.
The major source of finance for starting businesses was own savings (81 per cent). The major enterprises were in trade (47 per cent) and manufacturing (21 per cent).
According to the report, informality remains a major feature of Uganda’s private sector in general and household enterprises in particular. Informality denotes a situation in which firms and workers operate outside legal and regulatory frameworks.
The Uganda Bureau of Statistics (UBOS) (2018b) defined informal enterprises as those that employ less than five people and are not legally registered with Uganda Registration Services Bureau (URSB) or with Uganda Revenue Authority (URA) for tax purposes.
“This does not necessarily mean that informal businesses are illegal. However, informal enterprises are less likely to comply with government regulations such as registration with authorities, payment of taxes, social security contributions and labour laws. The informal economy includes own-account workers (self-employed with no employees), employers (self-employed with employees) in their own informal sector enterprises, and contributing family members. Other informal sector workers include itinerant traders, roadside sellers, luggage transporters and bodaboda riders,” reads an excerpt from the report.
The proportion of Uganda’s urban population has been rising over the years. Data from 2019/20 UNHS show that the proportion of the urban population increased from 24.5 per cent in 2016/17 to 26.6 per cent in 2019/20.
The report further notes that the Kampala Metropolitan Area and new cities such as Jinja,Mbarara, Arua, Mbale, Gulu and Lira are business hubs with many informal businesses.
“The plethora of informal sector enterprises and lack of a regulatory framework imposes governance challenges in building orderly and sustainable urbanization. Consequently, congestion, crime, poor working conditions and the demand for social services are increasingly becoming urban governance issues,” reads the report in part.
Challenges in urban governance and labour market outcomes, according to the report influence the welfare of informal sector workers in that those who work in the informal sector are more likely to be adversely affected by low wages and poor working conditions.
“This is because the informal sector often operates without adherence to labour laws. The magnitude of informal employment is reflected in the findings of the Urban Labour Force Survey 2015,” report explains
According to the International Labour Organization (ILO), informal employment comprises own-account workers and employers employed in their own informal sector enterprises, contributing family workers, members of informal producers’ cooperatives and domestic workers.
In the 2017 National Labour Force Survey, (2018) considered employees to be informally employed if there was no provision for pension or national social security contribution, paid annual or sick leave. Enterprises were considered informal if they were not registered by Uganda Registration Services Bureau (URSB) as a business or were not registered by the Uganda Revenue Authority (URA) for value-added or income tax.
Ms Elsie G. Attafuah, the UNDP Resident for Uganda in the foreword noted that the findings in the report confirm that eradicating poverty in all its forms will not be guaranteed solely by raising the incomes of the poor.
“This is because poverty is multifaceted with several interlinked dimensions such as education, water and sanitation and hygiene, and employment which are all critical in enlarging the freedoms and opportunities for the most vulnerable. I therefore commend the Government’s efforts to develop a Multidimensional Poverty Index for Uganda to compliment this Report, for deeper understanding of the poverty situation in Uganda,” she said.
According to the MoFPED Permanent Secretary, Ramathan Ggoobi, the Report explores Uganda’s structural transformation agenda, which is hinged on transforming the livelihoods of households from low to high-productivity activities and sectors, while minimizing vulnerabilities to poverty at the same time.
“This is in tandem with various international development frameworks such as the global 2030 Agenda for Sustainable Development (2030 Agenda) and its 17 Sustainable Development Goals, to which Uganda is a signatory,” he said.
Ggoobi noted that over the last decade, Government of Uganda has sustained investment in the economy’s productive base.
“These infrastructure investments have mainly been in energy; roads; and the information, communication, and technology sectors targeted to support agro-industrialization. These investments have had a positive impact on the economy, leading to a rise in average incomes. Per capita gross domestic product rose from US$824 in 2016/17 to US$964 in 2019/20. However, these gains in economic growth are threatened by high fertility rates that translate into pressures on the environment and household savings for investment. This situation is compounded by the increasing climatic changes affecting agricultural production, from where 6 per cent of the population derives their livelihood,” he explained.