A couple of years into running his new digital marketing company, Ethan Clerk Bampaire was already struggling to keep up in a fast-congesting industry. But when the Covid-19 pandemic hit, it meant closing shop altogether.
Every single one of his clients left, starting with their biggest from China, where the virus originated.
“Unfortunately for us in situations like a pandemic, one of the first expenses that companies can afford to cut off is marketing; so we lost everyone,” Bampaire recounts.
Yet, as big a setback as it was, he did not quit. The pandemic in fact, ended up opening the door for the new start-up that he’s currently running.
Having worked for a long time with Small and Medium Enterprises (SMEs) at his old company and noticing how they struggled to meet marketing costs, Bampaire figured out how simple automation could give such small companies the same service at a significantly lower price.
And so in 2021, Campaignity Technologies Ltd was born. Working with a team of four colleagues, he built a product that could automatically generate social media content and graphics for clients, at a small fee of Shs 75,000 a month.
Last year, the team started developing a second product Neexa, an AI-powered sales agent. Harnessing Open AI technology, the tool is capable of interacting with clients, explaining product details, negotiating with and enticing them to buy.
It is also trained to handle objections and concerns just like any human salesperson.
Unfortunately, despite a promising start, the journey has not been without turbulence and the company growth rate, Bampaire says, is still disappointing.
A recent steep rise in the prices of essential goods such as food and fuel has been a drain not just to him personally, but the company itself; driving up the day-to-day expenses, while also making some customers think twice about spending.
“We are not moving at the pace we were hoping to,” Bampaire told ChimpReports from his office at the Innovation Village in Ntinda, a Kampala suburb.
“The expenses have gone way up. For instance if you were paying Shs 500,000 for a service, it stops to make sense when prices for food go up, so you have to increase. The people I was paying Shs 80,000 for transport allowance I am now paying Shs 100,000.”
In the wake of the Covid-19 pandemic which caused global economic dislocation and supply chain problems, Uganda like many other countries around the world was hit by a severe increase in inflation.
Inflation
And although the Bank of Uganda has been confident about the projected inflation drop (from 10.7% last year to 7.2% in April 2023), prices for essential goods have remained relatively high.
A recent study by research organization Twaweza and data from Uganda Bureau of Statistics (UBOS) have shown a significant rise in prices of common commodities including fuel, which has a knock-on effect on company expenditures on raw materials and intermediate goods.
Other essentials like food, building materials and other inputs have also seen a sustained rise in prices, the report says.
For Brian Duke Woniala, a goat farmer in Mukono district, the jump in fuel prices translated into higher costs for nearly all of his farm inputs as well as wages for his part-time workers.
Woniala, who quit his journalism job in 2020 to start the farm, says this ate deep into his profit margins, forcing him to cut down on the number of workers at the farm, where he also rears over 400 rabbits.
“The salaries had to go up right away because they (workers) also have lives and have to meet their basic needs,” he told Chimpreports in an interview.
“The cost of feeds also went up because we are not growing them here, and they have to be transported. All of this started eating up on the profits because the prices for farm products did not increase. It is usually the middlemen who raise the animal prices, taking advantage of the situation; but the farm gate prices tend to stay the same.”
Fuel prices
Fuel prices have recently dropped from Shs 6500 in November last year to just below Shs 5000 in early May, thanks in part to the easing in the Russia –Ukraine conflict, and the recently opened Lake Victoria route that brings in over 4.5million liters from Kenya daily.
However, experts are still warning that prices for essential commodities are unlikely to return to the pre-pandemic levels.
Dr Brian Sserunjogi from Makerere University Economic Policy Research Centre (EPRC) in a recent report, warned that the prices of several commodities and services will continue to increase tremendously because for the most part, the cause is well beyond government’s regulatory control.
Farmers such as Woniala spend significantly on inputs such as farm restocking with improved breeds, seedlings, fertilizers and pesticides.
Bank of Uganda’s 2022 annual report, indicated that on-farm activities constitute the highest number of SMEs in Uganda which comprise most of the agricultural sector. The report described agricultural SMEs as the country’s “engine of job creation.”
Tax Burden
At SMEs such as Bampaire’s, inflation and expensive essentials haven’t been the only headwinds to contend with over the past two years.
With the Uganda Shilling, like many other currencies experiencing depreciation pressures amid the Russian conflict and related sanctions, Ampaire’s troubles became much more pronounced.
“When we are buying things like credits from Open AI, Ads for our customers for Facebook and Google, we use US dollars. So, even if the charges didn’t change, a weaker Shilling means that we have to pay more, while maintaining prices for the services in local currency,” he says.
Then came taxes. Like all the other entrepreneurs and business owners we have spoken to for this story, Ampaire has little niceties talking about the Uganda Revenue Authority (URA) and the country’s tax system. First, he does not think of the authority as transparent.
“I love paying taxes,” he says. “I would love to be part of the people that contribute greatly to this country’s economy; but the problem is that we are paying all this money and we are still taking loans for every project that we undertake. The roads, the salaries, everything. How is a small business like mine paying all these taxes and we still have potholes everywhere?” he wonders.
“As a start-up, if I have to meet these obligations, I would want the government to support me. When I get started, I haven’t even found my product market fit yet; even something like withholding tax that URA is demanding, or NSSF, or any of these endless hoops can determine whether or not I will be open tomorrow.”
Similar sentiments are shared by Mr. Woniala, who in his own salty comments, questions the tax body’s purpose and work methods.
Despite running back to back public campaigns and outreaches to educate the masses about its work, there is now a recorded decline in URA’s popularity in the public at least going by a May 2022 report from Twaweza East Africa.
The study report indicates that only 13% of Ugandans (down from 33% in 2019) think that URA’s tax rates are fair. It also found that Ugandans are more likely to disagree than agree with the views that taxes collected by the tax body are spent wisely.
But more worrying perhaps, is the fact that only 53% of Ugandans, (down from 69%) say they would happily pay taxes without any enforcement.
It is however not all doom and gloom; some private sector players we interviewed, have expressed knowledge of issues that are beyond URA’s functions and control such as service delivery and setting tax rates. Some have also underscored the importance of paying taxes as a driver for national development.
Jacob Etunganan, who is involved in the business of selling renewable energy technologies, says Ugandans will tend to jump on every opportunity to evade their civic duty of paying taxes.
Etunganan notes for instance that when his organization, SNV Uganda petitioned for tax waivers on solar energy, some dealers saw the opportunity to also demand waivers on other solar related products such as batteries and wires.
“I think that the government made the right decision to maintain the taxes on batteries and wires because these can also be imported for cars, and electric wiring that is not necessarily solar-related,” Etunganan told ChimpReports in an interview.
Cries
Our efforts to reach URA for a comment on this report were fruitless as several of our calls went unanswered.
However, other players such as the Private Sector Foundation Uganda (PSFU) are advising the government to pay keen attention to the cries coming from SMEs about burdensome taxes and processes.
“We have endeavored to engage with the Government to abandon taxes which are deemed unfair and hurting young and small businesses,” said Francis Kisirinya, the PSFU Deputy Executive Director in an interview.
“But as you know, we are not policy makers; we can only raise issues with the government and tell them that there is a problem with this and the other tax. We have met with everyone from URA, to Parliament to (Ministry of) Finance.
But in the meantime, Kisirinya advises small business owners and startups to make use of the available support that has been provided by PSFU and government.
The body has for instance convinced the government to open up the Small Business Recovery Fund (SBRF) which now has over Shs 200 billion available in banks like Post Bank and dfcu.
The funds, he says, are available at 10% interest with favorable grace periods, but still remain largely untapped thanks in part to lack of awareness and the requirements.
Government has also launched the Business Development Services Framework, which is providing guidance to SMEs on things like skills development, record keeping, planning, paying taxes, marketing and grants.