KAMPALA, Uganda — Ugandan micro, small, and medium enterprises are demanding tax relief and broad policy reform, arguing that current contradictory regulations and high gadget costs are stifling digital adoption critical for economic growth. The demands were made during a High-Level MSME Digital Economy dialogue in Kampala.
John Walugembe, president of the Federation of Small and Medium-sized Enterprises, said MSMEs are the bedrock of the Ugandan economy, contributing over 70% of the gross domestic product and employing more than 90% of the population. Despite this foundational role, Walugembe noted, only 32% to 33% of MSMEs have adopted digital technology, according to a 2023 federation study.
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Walugembe outlined three major obstacles to digitalization: a lack of basic digital literacy, poor network coverage, and the high cost of gadgets. He focused heavily on the need for legislative change. “The excise duty on mobile phones is self-defeating,” Walugembe said. “Digital transformation cannot happen without cheap mobile phones, especially smartphones. The starting point must be for policymakers to allow smartphones to enter the country tax-free.”
He stressed that digital literacy is the most significant challenge, noting that even smartphone users often utilize only basic functions. Walugembe said that policy implementation is another critical failure, suggesting less than 20% of existing policies are ever executed. He called for painful policy adjustments, including reducing mobile money transaction charges and reopening the Facebook social media platform, which he called an “important marketplace for many MSMEs.” “If we are serious about the digital transformation agenda, we need to make painful policy changes and adjust measures that may generate short term revenue but are detrimental to our long term goals,” he said.
Richard Ndahiro, regional technical specialist for Eastern Southern Africa for the United Nations Capital Development Fund, said the biggest gap lies in the business value proposition of digital solutions. Businesses will only invest if they see a direct increase in income, such as improved access to finance or better market reach. “Once a business sees an increase in income, spending 100,000 shillings on a smartphone is no longer an issue,” Ndahiro said. He agreed that the challenge is shifting from infrastructure and device cost toward capability—the skills to use digital services effectively. “If we do not train them now, it will be too late in five years,” he concluded.
The need for better skilling was echoed by Michael Niyitegeka, executive director of Refactory Academy, who recommended moving beyond basic training to offer “bespoke tech solutions that address the real-world complexities MSMEs face.”
James Beronda, director of the Uganda Communications Universal Service and Access Fund, or UCUSAF, called for collaboration among organizations.
“If we are doing digital literacy training for small businesses at UCC, and FSME is doing the same, why do we work in silos, yet we can leverage each other’s strength for greater impact,” Beronda said. In a discussion on artificial intelligence, Carol Kyazze Kakooza cautioned that AI is merely an “automation of the pattern of your system.” “If you’re doing rubbish, it will give you rubbish,” she said.
