Effectiveness of entrepreneurial capacity building in Uganda: A case study of the improved charcoal stove sector
This abstract is from a previous field research placement that saw an MSc student from Edinburgh University work with Ugandan SME Green Bio Energy during Summer 2016 to conduct field research for their MSc dissertation.
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A case study of the improved charcoal stove sector
A number of African countries whereby people can struggle to get everyday access to basic needs, are on top of the international agenda to achieve development and eradicate extreme poverty while protecting the environment. 93% of the population in Uganda burn firewood, charcoal and crop residues in inefficient traditional stoves to meet their everyday basic needs of cooking and water heating (MEMD, 2015). In an effort to reduce deforestation and constant inhalation of smoke, the Ministry of Energy and Mineral Development (MEMD) in Uganda is embedded in a Public Private Partnerships (PPP) with international donors, to implement programmes that empower entrepreneurs to increase the production and distribution of improved charcoal stoves (ICSs), while fighting poverty. Non-governmental organisations are also committed to assisting enterprises to grow in capacity.
To try to find out if the current system of entrepreneurship empowerment is helping Uganda to escape poverty, empirical research was conducted in the country, using participatory observation and semi-structured interviews. As a result, three related situations that can challenge the overall effectiveness of the programmes were found:
- Lack of legislation in the sector creates a gap between formal and informal firms. Informal firms produce inexpensive stoves that look like ICSs, making really difficult for formal firms to compete in price. Despite the poor quality of the non-ICS, people often wants to pay less as they can not afford a more expensive stove, especially if both look alike.
- Grants and loans to help firms to build capacity are targeted to growth the firm’s infrastructure,
i.e. new machinery, trucks, kilns, warehouses. However, the requisites to get a grant do not
demand the assurance of good working conditions and salaries above the poverty line. Additionally, selection processes are generally based on the effectiveness of a paper proposal to address specific requirements. In many cases, proposals are made by experts that know what has to be projected, although, in reality, the firm does not have the capacity to achieve what has been proposed.
- The firms get money to spend on infrastructure, however, due to informal competition, they have to sell the ICSs at a very low cost, reducing their profits almost to cero. This condition leaves the firm with low cash flow that directly affects salaries and the capacity to purchase protective equipment among other things.
The country is trapped in a vicious circle. Programmes are in place to tackle environmental and
health problems while fighting poverty. Funds are given to firms for infrastructure growth, increase production and sales. Low cash flow forces the firms to pay low salaries. People earn less that US$1.90 per day, a condition that does not allow them to escape poverty. Further research needs to be done among other sectors before generalising, however, this is an example of what is happening in the country and why people can not afford a more expensive stove. They end up buying a non-ICS, therefore, environmental and health problems are not being tackled and the country is not escaping from poverty.
MINISTRY OF ENERGY AND MINERAL DEVELOPMENT. (2015). Uganda’s sustainable energy for all initiative – action agenda. [Online] Available from: http://www.se4all.org/sites/default/files/Uganda_AA_EN_Released.pdf [Accessed: 03-05-2016]
Pictures: Laura Jimenez