KAMPALA, UGANDA — Ugandan Small and Medium Enterprise (SME) owners must prioritize maintaining a substantial cash buffer as their primary tool for both survival and growth, according to Grace Semakula, Chief Executive of SBG Securities.
Speaking at the October Masterclass hosted by the Stanbic Business Incubator Limited (SBIL), Semakula stressed that cash reserves should be treated as a strategic asset, not just idle money.
“Internal cash is the cheapest and most flexible form of finance,” Semakula advised. “You must build buffers in good times to weather downturns.”
Learning from Crises
Semakula, whose firm SBG Securities is a subsidiary of Stanbic Uganda Holdings Limited (SUHL), used the recent COVID-19 lockdown as a prime example of why liquidity is critical. He highlighted that maintaining cash during a crisis allows businesses to not only survive the emergency but also to rethink models and capitalize on new market positioning.
He pointed to global tech giant Apple, which entered the 2008 global financial crisis with over $25 billion in cash reserves and no long-term debt.
“It’s disciplined cash flow management and profitability focus gave it a competitive edge, allowing it to avoid external financing, bolster investor confidence, and capitalise on opportunities others could not,” he noted.
Semakula urged SMEs to adopt a similar focus on resilience and minimizing reliance on expensive debt.
Diversify Reserves with Unit Trusts
To prevent this critical cash buffer from losing value due to inflation, Semakula recommended diversification, specifically highlighting the Stanbic Unit Trust, which launched last year.
The investment advisor noted that while entrepreneurs face significant inherent risks, diversifying through unit trusts can effectively reduce these risks and support growth opportunities.
Catherine Poran, Chief Executive of SBIL, echoed the sentiment, expressing optimism that SMEs would embrace a broader financial strategy.
“Diversification is key to building resilient businesses,” Poran said. “By exploring new investment avenues and broadening their financial strategies, SMEs can better manage risks and position themselves for sustainable growth in an increasingly competitive market.”
SBIL provides operational training and market access support to SMEs, collaborating with SBG Securities, which specializes in brokerage and investment advisory.
