How Standards Can Turn MSMEs into Large Enterprises

By Deus Mubangizi

There seems to be an under estimation of the impact of small enterprises on the economy, and the small enterprises seem to underestimate the impact of standards on their potential to grow into large enterprises.
Yet with appropriate strategies that support quality improvement, Small and Medium Enterprises (SMEs) or to be more precise, Micro, Small and Medium Enterprises (MSMEs) have great potential to grow and turn Uganda into a middle income country faster than we think.

In Uganda and in many other countries, MSMEs are the biggest employers, employing more people than the Large Enterprises and Government combined.  According to the Ministry of Trade, Industry and Cooperatives (MTIC), MSME Policy 2015, Micro, Small and Medium Enterprises are the engine of growth for national economic development.
MSMEs, which are found virtually everywhere, at every street, every trading centre and even in villages, include retail and wholesale shops, supermarkets, agricultural farms, manufacturers and processors, metal and carpentry workshops, hotels and restaurants, transporters, private schools, private health service providers and many others. Many are engaged in value-addition to agricultural and other raw materials while others are engaged in services.

My focus is on MSMEs engaged in manufacturing and value-addition, but the analysis equally applies to MSMEs engaged in other services.
Whereas the MSMEs employ many people, there is a general weakness of stunted growth and high failure rate. Most MSMEs are said to collapse before their 5th birthday. Many analysts have attributed this problem mainly to lack of access to finance. Whereas this is true, it does not fully explain the problem, especially for MSMEs engaged in small scale manufacturing.

The main cause which analysts seem to have ignored is the problem of poor quality products and services, arising from failure by MSMEs to embrace quality standards.
This quality problem may be much bigger than we think because while many in the manufacturing and value-addition sector are keen to take their products to the market for sale, they are usually reluctant to submit the same products to Uganda National Bureau of Standards (UNBS) for laboratory testing and certification.

Many MSMEs talk of quality as an advertising and sales gimmick but without seriously addressing quality issues. Quality is defined in standards and therefore one can only fully understand the quality attributes of a product such as durability, palatability, compatibility, performance, safety, suitability for use, and others if one acquires and implements the relevant standards.

Poor quality will exterminate an enterprise

We all need to understand that producing and selling substandard products is not sustainable due to the following factors;

– Consumers today are looking for quality and safe products.
– Manufacturing substandard products, will make consumers lose confidence in the products hence an effect of no repeat customer, that is if they are not harmed by the product and sue the company.
– Manufacturing substandard products may lead to closure of industry by authorities whose mandate is to protect consumers.

Nevertheless, some enterprises have taken quality standards seriously and have greatly improved the quality of their products.

Quality Pays

In Uganda, quality is demonstrated by submitting ones products to UNBS for laboratory tests and acquiring a UNBS quality mark. Some of the benefits of product certification are;

To the Manufacturers

  • The Q-Mark notified in the East African Community and COMESA thus easing entry into regional and foreign markets.
  • The product is presented with better image in both national and international markets.
  • Favored for bulky purchase from government, non-governmental organizations and international bodies since these institutions rely on UNBS certified products for their purchases.
  • Improvement in process control since the product certification audit includes technical audit of the production process and product quality.
  • Winning consumer confidence and good will.

To the Consumers

  • Eases identification of quality products on the market, making purchase decisions
  • Elimination of the need for exhaustive inspection as well as retesting the product which saves time, labour and money.

Quality improvement is not magic

Quality improvement for MSMEs is not very difficult but requires concerted effort and consistency. The first step is to approach standards experts at UNBS who will explain the required standards and give guidance on quality improvement.

The key quality control requirements include: good hygiene practices, inspection of raw materials, control of the production processes, equipment calibration, proper labelling and packaging, testing of product samples in UNBS labs or any other recognised labs, keeping appropriate quality records, training workers, and control of non-conforming products among others. When an enterprise implements the above, the products will meet quality standards and therefore qualify to on applying to UNBS for certification, however small the enterprise is, it will get the certification.

Government support
For MSMEs to embrace quality standards, government is providing support especially in training and advisory services as well as certification through UNBS and its parent Ministry of Trade, Industry and Cooperatives (MTIC). These two institutions have been preparing for this task and have both established departments responsible for MSMEs.

And as luck would have it, the current Minister of Trade, Industry and Cooperatives, Hon. Amelia Kyambadde is an ardent supporter of MSMEs and is the one who pushed for establishment of MSME departments in both UNBS and the Ministry. With support from the Ministry’s QUISP program and Trademark East Africa (TMEA), more than 50 MSMEs have already been supported to achieve the UNBS Quality certification Mark which was awarded to them by Hon. Amelia Kyambadde. These are MSMEs that were committed in attaining quality standards and they were supported so that they can serve as examples to others. More MSMEs are being supported by the various government program and TMEA to acquire UNBS certification. The UNBS budget was also boosted with 1.5 Billion shillings to improve capacity to certify MSMEs. Although much more needs to be done, this government support should encourage more MSMEs to embark on quality improvement and get certified.

If many micro and small enterprises take up the mantle and pursue quality improvement in the next few years, they should be able to grow into medium and large enterprises.  This means that the list of 1000 top taxpayers that URA publishes every year may increase to 10,000 or even 100,000. When this happens, the enterprises will be employing more Ugandans, consuming more of our local raw materials, using more utilities and paying more taxes. With such growth, I am confident that Uganda will be propelled into the middle income status. And yes, it’s possible in the next 5 years!

The writer is the Manager of the Testing department at Uganda National Bureau of Standards.