SMALL SCALE BUSINESSES AND THEIR ROLE IN THE PROVISION OF EMPLOYMENT TO THE LABOR FORCE

SMALL SCALE BUSINESSES AND THEIR ROLE IN THE PROVISION OF EMPLOYMENT TO THE LABOR FORCE

Background of the Study

Small-scale businesses are an important part of Uganda's economic sector, and they helped the country get through difficult periods when all of the economy's sectors were in disarray (Brown, 2000). Uganda began economic reforms in 1986 with the help of IMF/World Bank-funded Structural Adjustment Programs (SAPs). These reforms, like those in many other developing nations, were intended to transform the economy from one that was inefficient and import-dependent to one that was more diversified, efficient, and export-oriented (Ajibefun and Daramola, 2003). Small firms played an important role in assisting the manufacturing and import sectors in achieving the SAPs' aims at the time.

Small Scale Businesses have been a lifeline for Uganda's faltering economy, which was previously reliant on the agriculture industry and remittances. Small Scale Businesses (SSBs) contributed to a growth in employment levels to 70% of the non-farm work force, accounting for 80% of manufactured output and 20% of overall GDP (World Bank 2009). This decreased poverty in the country's rural and urban areas, encouraging the government to take greater action in favor of such investments because they required less capital per job produced, providing a relatively low-cost method of accommodating the labor force for fair wealth distribution.

The Government of Uganda (GoU) has implemented a number of economic reforms in order to expand the role of both public and private firms in the economy. The goal of economic deregulation was to change the incentive structures that the small-scale industry faced. Payment and trade liberalization, interest rate liberalization, proper pricing of public goods, and less government engagement to improve production and performance are examples of such policies. The majority of these policies have an impact on producers and employees in the economy, both directly and indirectly.

The GoU is now focused on limiting government economic interference in order to stimulate private sector engagement in order to enhance output and revenues, resulting in economic self-sufficiency and independence. The efficient function of small enterprises in utilizing resources as labor has resulted in poverty reduction and broad-based economic growth (Sha, 2019).

The enormous informal sector, which is primarily made up of small enterprises, has a lot of potential for creating jobs and is thus a viable target for poverty-eradication policies. They might decrease poverty by increasing wages by generating job options for unskilled workers. However, this potential can only be realized if small enterprises absorb a large portion of the work force in order to increase productivity (Daniel, 1999).

According to the Background to Budget 2008/09, during the Financial Year (FY2007/08), Uganda's economy was made up of the Small Scale Business sector, which was divided into wholesale and retail commerce (46%) and manufacturing (31%), as well as restaurants and hotels (7%).

Because they are numerous, owned and run with minimal amounts of working capital, small scale businesses have played a significant role in providing job possibilities to the labor market.

The rise of Small Scale Businesses (SSBs) is a widespread issue in many developing nations because of their contribution to economic growth and development as part of the wider informal sector, which is important in the provision of employment in an economy. Small Scale Businesses, it should be mentioned, have a wide range of labor divisions through which they generate chances for productive employment, resulting in a rise in the labor participation rate, and therefore contributing to poverty reduction, economic growth, and development.

According to the Uganda Bureau of Statistics (UBOS, 2007), the proportion of workers in self-employment increased from 13% to 22% for non-agricultural activities between 2002 and 2006, with the employment population ratio for men increasing overwhelmingly to 82 percent compared to 79 percent for women, allowing more people to find jobs in SSBs not only to increase and diversify incomes but also to reduce poverty. The Uganda Bureau of Statistics (UBOS) stated in 2006/2007 that the total number of enterprises registered in Kampala was approximately 26,000, with 17,084 of those employing 5 or more people, indicating an increase of over 60% for Small Scale Businesses.

The Government of Uganda (GoU) is promoting the informal sector as a strategy to reduce unemployment with the help of international development partners such as the World Bank through Foreign Direct Investments (FDI) (a key variable for measuring the performance of an Economy). This has resulted in an influx of unemployed workers to Kampala, the country's main trade center; households have increased their willingness to participate in the labor market by establishing Small Scale Businesses to meet the social and economic obligations of their families, resulting in increased competition (Abiin, 2010).

Small Scale Businesses at Shauriyako Trade Center were established in response to this justification in order to give considerable and long-term job possibilities that would spur development and economic prosperity.

Statement of the Problem 

Small businesses are inherently competitive and dynamistic (Abiin, 2010). As a result of their contribution to income redistribution and the lowering of unemployment in emerging nations, they are a key driver of economic growth and development (UBOS, 2007). However, there are no conclusive signs that unemployment has decreased. Unemployment is a persistent issue that requires the attention of significant economic choices to be directed toward the growth of small-scale company activity.  

1.2 Objective of the study

The study attempted to examine the nature of SSBs that provide employment to the labor force in Shauriyako trading centre in Kampala District.

1.2.1 Specific objectives

1. To identify the different activities of the small scale businesses in which the labor force is employed.
2. To identify how the SSBs contribute to development and growth of developing economic.
3. To identify the size of businesses that provides employment to the labor force.

1.2.2 Research questions.

The study investigated the following questions;

1. What reasons have led to the growth of Small Scale entrepreneurial businesses in the region of study?
2. What challenges have limited the activities of the Small Scale Businesses in their role to provide employment opportunities?
3. Is there space for the expansion of the SSBs?

1.3 Purpose of the study 

The purpose of the study is to identify the various activities in which the Small Scale Businesses absorb the labor force.

1.4 Scope of the study 

The study was confined to Small Scale Businesses since they engage the labor force in various activities that require little capital to sustain the possibility of retail, wholesale shops, hardware and general merchandise, restaurants to mention but a few as a way to reduce unemployment levels

The study focused on the reasons for the growth of SSBs towards the provision of employment to the labor force. Through this the role of SSBs with the support of government and other International partners is recognized thereby encouraging small scale trade for employment and improved household earnings.

1.5 Significance of the Study 

The study shall help the policy makers to recognize the importance of Small Scale Businesses and industries in the provision of employment to the labor force for economic development. This shall further guide them to make trade policies to enhance the performance SSBs as regards their activities to accommodate the mushrooming population that is attributed to high birth and fertility rates as well as rural urban migration within the country.

To students and other scholars who intend to widen their knowledge in the study of the role of Small Scale Businesses, this study shall be a basis of reference since it focuses on the causes of the establishments, how the unique characteristics of the Businesses have facilitated their role in the provision of employment, challenges they face and the solutions that are being undertaken to harness their activities.

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