New findings from Uganda’s Ministry of Trade, Industries and Cooperatives show that there exists a high digital divide, low technology adoption and business registration among Micro, Small and Medium Enterprises (MSMEs) with more than half of the businesses surveyed across the country (53.4%) lacking access to either a smartphone or a computer for modern business operations.
Furthermore, only 9.8% of the businesses have access to both a smartphone and a computer, which is crucial for leveraging the full potential of digital technologies.
Although 35.5% of the businesses have access to a smartphone, this figure remains relatively low compared to the global average, through slightly higher than the national average standing at around 22 30%; this low access hinders ability to access digital services, communicate with customers, and perform basic business functions on the go.
The low adoption of software tools, such as accounting software, further limits MSMEs’ potential to enhance efficiency, accuracy, and transparency in their operations.
The report is based on a nationally representative survey of 3,062 MSMEs and in-depth interviews with 300 MSME owners by the Ministry of Trade, Industries, and Cooperatives, in partnership with the Mastercard Foundation, IPSOS, Ichuli Institute, and other partners, launched the State of Entrepreneurship in Uganda 2024—a landmark report offering a comprehensive assessment of Uganda’s entrepreneurial landscape.
The report further reveals that the Information and Communication sector has the highest access to mobile phones or computers (93.3% with smartphone or computer access), software usage for operations (66.7%), and access to necessary technology (53.3%). On the other hand, the Agriculture, Forestry, and Fishing sectors have the lowest levels of access and utilization across all three categories.
This indicates that technology adoption and utilization are influenced by the nature and requirements of the sector. Therefore, it is evident that access to technology, particularly smartphones and computers, is the primary factor driving the Technology Entrepreneurship Index among MSMEs.
Younger age groups, male-owned businesses, and those with higher levels of education are more likely to have access to and utilize technology in their businesses. In contrast, businesses owned by individuals with disabilities and smaller enterprises with fewer employees face greater challenges in adopting and utilizing technology.
Furthermore, the sector-specific analysis reveals that technology adoption and utilization vary significantly based on the nature and requirements of the industry. The Information and Communication sector stands out with the highest levels of access and utilization, while the Agriculture, Forestry, and Fishing sector lag behind in all three categories.
In terms of gender, the male-owned businesses have slightly higher levels of access to mobile phones or computers compared to female-owned businesses (49.0% vs. 57.0% with no access). Male-owned businesses also have higher software usage for operations (10.6% vs. 6.0%) and access to necessary technology (28.3% vs. 21.6%) (See Table 23). This indicates that male-owned businesses are more likely to adopt and utilize technology compared to female-owned businesses
Across education levels, access to mobile phones or computers has increased significantly with higher levels of education, with 83.5% of those with no education having no access compared to only 24.6% of those with university/tertiary education. Software usage for operations and access to necessary technology also increase with higher levels of education. This suggests that education plays a crucial role in technology adoption and utilization among businesses.
With regards to the number of employees in the business, access to mobile phones or computers, software usage for operations, and access to necessary technology increase with the number of employees.
Businesses with 10 or more employees were recorded to have the highest levels of access and utilization across all three categories. This suggests that larger businesses are more likely to adopt and utilize technology compared to smaller businesses.
Hence, the study underscores the urgent need to bridge the digital divide among MSMEs by focusing on improving access to smartphones, computers, and other necessary technologies.
The authors of the report suggest that policymakers and stakeholders should prioritize initiatives that target underserved groups, such as businesses owned by individuals with disabilities and smaller enterprises, to ensure inclusive growth and equal opportunities in the digital economy.
Moreover, sector-specific interventions and support mechanisms need to be designed to address the unique challenges and requirements of each industry, fostering innovation, competitiveness, and resilience in an increasingly technology-driven business landscape. are highlighted as a significant technological advancement that simplifies financial transactions, reduces the reliance on physical cash handling, and enhances overall financial management practices.
Netflix Strikes $82.7 Billion Deal to Take Over Warner Bros., Redefining the Global Entertainment LandscapeBusiness registration
The national entrepreneurship index of business registrations shows that 61 percent of the businesses were not registered. Regarding location, registration is driven by Kampala, which has the highest proportion of registered MSMEs at 45.1%. The highest non-registration rates of business were found in the Eastern (70.2%), followed by Western (63.4%) regions.
The data also reveals significant variations in formal business registration across the top 10 sectors in Uganda. Wholesale and retail trade, the largest sector, has a high proportion of unregistered businesses (35%) compared to registered ones (27%). Similarly, Accommodation and food service activities and Agriculture, Forestry, and Fishing have higher shares of unregistered businesses relative to their registered counterparts.
In contrast, Human Health and Social Work Activities and Financial and Insurance Activities have higher registration levels compared to their unregistered segments. The data suggests that larger sectors tend to have higher informality rates, while more established and regulated sectors have better registration levels, highlighting the need for targeted interventions to promote business formalization.
Entrepreneurs expressed frustration with the complexity and high costs associated with the registration process, which act as major deterrents. Business owners expressed frustration by the inefficiency and delays in the registration process, corruption is a pervasive issue, with many realizing that bribery is almost a prerequisite for navigating the registration process smoothly.
Views collected from business owners reveals a divergence of opinion.
A motel business owner based in Wakiso District says, “My friend told me that the process needs a lot of money which I have not got. I don’t remember the amount, but it is like UGX 1,000,000.”
“Mine is still in the process and it’s very costly and time consuming. Everyone says the same, it takes a lot of time and money.” Male, Youth Makindye, Kampala.
The views on cost of registration are supported by a recent study by EPRC (2024), whose findings established that the key reasons why informal businesses in Uganda do not want to register include poor perceptions about high registration costs (non-registered businesses believed registration fees are UGX 224,967 at URA, UGX 168,238 at URSB, and UGX 50,113 at local authorities), annual tax payments (perceived average of UGX 357,019), and compliance costs (UGX 91,454 for URA and UGX 47,108 for local authorities).
Additional factors were the perceived lengthy registration process (average of 9 days for URA and URSB, 3 days for local authorities), distance to registration points (16.6 km to URA vs 2.7 km to local authorities), expected benefits of remaining informal such as lower operating costs (22%), flexibility (19%), and non-exposure to third parties (58%), as well as the absence of supportive policies and laws to reduce informality.
Despite the perceptions and experiences shared by some entrepreneurs regarding the high costs associated with business registration, it is important to note that obtaining a Tax Identification Number (TIN) from the Uganda Revenue Authority (URA) is free of charge. Additionally, the official registration fees at the Uganda Registration Services Bureau (URSB) are relatively affordable, with costs not exceeding UGX 24,000 for a sole proprietorship and UGX 60,000 for a limited company.
Younger entrepreneurs cited a lack of knowledge and understanding of the registration process as a significant barrier. The process is seen as lengthy and complex, discouraging many from formalizing their businesses.
Older business owners tend to emphasize the bureaucratic inefficiencies and corruption that complicate the registration process. In rural regions, the difficulties often involve traveling long distances to access registration offices and higher associated costs.
Urban business owners, while having better access to registration offices, still face challenges like bureaucratic delays and higher fees. Smaller enterprises frequently highlighted the disproportionate tax burdens and the procedural complexity relative to their limited resources. While these businesses sometimes manage to navigate the registration process, it often comes at a significant cost and effort.
These facts highlight the need for better communication and awareness-raising initiatives to ensure that entrepreneurs have accurate information about the registration process and associated costs, helping to dispel misconceptions that may deter them from formalizing their businesses.
