University of Southern California Dissertations and Theses

Planning Institutional Change For Economic Growth: A Study Of The Effect Of Public Institutions On The Rise Of Indigenous Entrepreneurs In East Africa

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Planning Institutional Change For Economic Growth: A Study Of The Effect Of Public Institutions On The Rise Of Indigenous Entrepreneurs In East Africa

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Content This dissertation has been
microfilmed exactly as received
69-5052
HIGIRO-SEMAJEGE, Festo, 1934-
PLANNING INSTITUTIONAL CHANGE FOR ECONOMIC
GROWTH: A STUDY OF THE EFFECT OF PUBLIC
INSTITUTIONS ON THE RISE OF INDIGENOUS
ENTREPRENEURS IN EAST AFRICA.
University of Southern California, PhJD., 1968
Economics, general
University Microfilms, Inc., Ann Arbor, Michigan
PLANNING INSTITUTIONAL CHANGE FOR ECONOMIC GROWTH
A STUDY OF THE EFFECT OF PUBLIC INSTITUTIONS ON
THE RISE OF INDIGENOUS ENTREPRENEURS
IN EAST AFRICA
by
Festo Higiro-Semajege
A Dissertation Presented to the
FACULTY OF THE GRADUATE SCHOOL
UNIVERSITY OF SOUTHERN CALIFORNIA
In Partial Fulfillment of the
Requirements for the Degree
DOCTOR OF PHILOSOPHY
(Economics)
August 1968
UNIVERSITY O F S O U T H E R N C A LIFO R N IA
T H E GRADUATE SC H O O L
UN IV ER SITY PARK
LOS ANG ELES. C A LIFO R N IA 9 0 0 0 7
This dissertation, written by
Festo Higiro-Semajege
under the direction of A . i s . . . Dissertation Com
mittee, and approved by all its members, has
been presented to and accepted by The Gradu
ate School, in partial fulfillment of require
ments for the degree of
D O C T O R OF P H IL O S O P H Y
Dean
Date Augu s t , 1968
DISSERTATION COMMITTEE
-jChairman
'(Qo- JUL .
TABLE OF CONTENTS
Page
LIST OF TABLES................................... v
LIST OF CHARTS......... viii
Chapter
I. THE PROBLEM AND ITS IMPORTANCE ........... 1
Introduction
The Problem
Hypothesis
Methodology
Definitions of Special Terms
A General Note on the Sources
of Information
Organization of the Remainder- -
of the Dissertation
II. INSTITUTIONAL FRAMEWORK AND ENTREPRENEURIAL
FUNCTION IN THE DEVELOPING ECONOMIES OF
EAST AFRICA........................... 16
Introduction
Definitions
Kinds of Entrepreneurs
The Entrepreneur and the Environment
Problems Faced by the African
Entrepreneur
Favorable Institutional Changes
African Reaction to the New Changes
Proposals for Improving the Situation
Concluding Statement
III. THE ROLE OF NATIONAL TRADING CORPORATIONS IN
STIMULATING EAST AFRICAN ENTREPRENEURSHIP . 61
Introduction
The Kenya National Trading Corporation
Credit Schemes
The Uganda National Trading Corporation
Credit Schemes
Concluding Statement
Chapter Page
IV. NATIONAL DEVELOPMENT CORPORATIONS AND THEIR
INFLUENCE ON ENTREPRENEURSHIP IN EAST
AFRICA..................................... 108
Introduction
Establishment, Goals and Organizational
Structure
Stimulation of Entrepreneurship
The System of Subsidiaries and Associate
Companies
Diversification of Investment Resources
Attracting Foreign Capital and Technicians
The Development Finance Companies:
Associates
Planning and Coordination
Concluding Statement
V. ECONOMIC PLANNING AND ITS EFFECT ON INDIGENOUS
ENTREPRENEURSHIP IN EAST AFRICA ........ 166
Introduction
The General Organization of Economic
Planning
Coordination
Provision for Economic Institutions to
Stimulate Indigenous Entrepreneurship
Concluding Statement
VI. EFFECT OF THE EAST AFRICAN COMMUNITY ON THE
SPIRIT OF ENTREPRENEURSHIP............... 201
Introduction
The Size of the Market
Volume of External Trade
Inter-State Trade
Balancing Industrial Growth in the Region
Regional Economic Planning and Coordination
Concluding Statement
VII. SUMMARY AND CONCLUSIONS.................... 239
Summary
Conclusions
BIBLIOGRAPHY ..................................... 258
APPENDICES 269
Page
APPENDIX A. National Trading Corporation Qualifying
Requirements for Credit Scheme .... 271
APPENDIX B. Uganda National Trading Corporation:
Subdistributors of Commodities Over
Which the Corporation Has Exclusive
Monopoly to Import and Distribute ... 276
APPENDIX C. Distribution Appointments of African
Traders by Kenya National Trading
Corporation . . .................... 278
APPENDIX D. National Development Corporation of
Tanzania: Schedule of Investments,
31st December, 1965 283
APPENDIX E. Development Finance Company of Uganda,
Ltd.: Participation in Investments,
Position in April 1967 .............. 285
APPENDIX F. Development Finance Corporation of
Tanzania Investments in 1966: Loans
and Equity......................... 287
APPENDIX G. Development Finance Company of Kenya
Investments in 1966: Loans, Shares
and Equity......................... 289
APPENDIX H. Subsidiaries and Associate Companies of
National Development Corporation of
Tanzania, 1966 ..................... 291
APPENDIX I. Subsidiaries and Associate Companies of
Uganda Development Corporation, 1966 . 294
APPENDIX J. Subsidiaries and Associate Companies of
Industrial and Commercial Development
Corporation, 1967 . 297
iv
LIST OF TABLES
Table Page
1.' Africanization of the Distribution of Sugar in
Kenya........................... 65
2. Kenya National Trading Corporation Import-
Export Value for 1965-66 73
3. Uganda National Trading Corporation Import
Values, July-December 1967 99
4. Uganda National Trading Corporation Exports to
Rwanda and Congo, January-December 1967 . . . 100
5. Commercial Loans Received Between November 1964
and June 1965 ............................. 118
6. Commercial Loans Approved and Issued, and
Commercial Credit Guaranteed, 1964-1966 ... 120
7. African Business Promotion Performance Record . 121
8. Uganda Development Corporation, Small Industries
Development Fund: Performance Record .... 124
9. Industrial and Commercial Development Corpora
tion: Assistance Given by Small Industries
Revolving Loan Fund, 1963-64 126
10. Small Industrial Loans Approved and Issued,
1960-1966 128
11. Classification of Small Industries and the
Loans Issued by Small Industrial Loans,
1960-1965/66 131
12. Uganda Development Corporation Scholarship
Expenses, 1959-1966 ........................ 133
13. National Development Corporation Investment
Commitments, 1965 .......................... 139
v
Table Page
14. Tanzania National Development Corporation
Investment Spread, 1966 ......... 141
15. Uganda Development Corporation: Development .
of Group Resources and Investment Growth,
1960-1966 ................................. 144
16. Industrial and Commercial Development Corpora
tion: Investment Growth, 1960-1966 ......... 145
17. Uganda Development Corporation, Ltd.: Annual
Profits for the Group, 1953-1966 155
18. Uganda Development Corporation, Ltd.: Total
Capital Employed, 1953-1966 ............... 156
19. Uganda Development Corporation, Ltd.: Employ
ment Expansion, 1960-1966 ................ 157
20. Estimated Expenditure for Small Industry and
Commerce................................. 185
21. Costs of the Education Program in Uganda . . . 197
22. The Size of the East African Market......... 206
23. External Trade of East Africa, 1966 .......... 209
24. Value of East African Imports, by Section and
Principal Countries, 1966 ............... 211
25. Value of Principal Domestic Exports, by
Principal Country, 1966 ................... 212
26. Value of Interterritorial Trade, 1962-1966 . . 215
27. Value of Interterritorial Trade by Principal
Commodity Groups: Uganda Exports to Kenya
and Tanganyika........................... 217
28. Value of Interterritorial Trade by Principal
Commodity Groups: Tanganyika Exports to
Kenya and Uganda......................... 218
29. Value of Interterritorial Trade by Principal
Commodity Groups: Kenya Exports to
Tanganyika and Uganda ..................... 219
vi
Table Page
30. Uganda National Trading Corporation: Subdis
tributors of Commodities Over Which the
Corporation Has Exclusive Monopoly to Import
and Distribute........................... 276
31. Distribution Appointments of African Traders
by Kenya National Trading Corporation .... 278
32. National Development Corporation of Tanzania:
Schedule of Investments, 31st December, 1965 283
33. Development Finance Company of Uganda, Ltd.:
Participation in Investments, Position in
April 1967 . ......... . . .......... 285
34. Development Finance Corporation of Tanzania
Investments in 1966: Loans and Equity ... 287
35. Development Finance Company of Kenya Invest
ments in 1966: Loans, Shares and Equity . . 289
36. Subsidiaries and Associate Companies of
National Development Corporation of Tanzania,
1966 291
vii
LIST OF CHARTS
Chart Page
I. Typical Organizational Structure of the
National Development Corporations .......... 113
II. Planning and Implementation Organization . . . 168
vii-i
CHAPTER I
THE PROBLEM AND ITS IMPORTANCE
Introduction
Today, economists and national leaders in East
African regions are preoccupied with a search for the means
and techniques of generating a faster rate of economic
growth. Among the bottlenecks that have impeded economic
growth, the worst, by far, is the lack of skilled human
resources and the almost total absence of indigenous entre
preneurs. A realistic attack on this problem must take
into account the fact that initiation or rejection of
entrepreneurship depends upon many factors, especially upon
the economic "climate,” i.e., the type of environment or
institutional framework in existence in the particular
region.
This study undertakes to answer some of the ques
tions that pertain to the growth of entrepreneurship in East
Africa:
1. How does the institutional framework affect
entrepreneurial spirit and activities?
1
2. How do the existing institutions affect the
growth of entrepreneurship in the region?
3. Is it possible to make feasible plans for
setting up the requisite economic institutions?
If so, how can this be done?
In general, this study has accepted the economic
classification outlined by Elliott:
. . . economic planning may be distinguished in
relation to (i) establishing requisite technolog
ical and institutional conditions for economic
development; [and] (ii) fostering more rapid
development in relatively underdeveloped areas. 1
Timing, coordination and definition of each institu
tion should be clearly expressed in a series of Five-Year
Development Plans. And, in order to achieve economic
development in a smooth and rapid manner, there must be an
integration of economic institutions within the national
goals so as to establish an "optimum regime." In the words
of Tinbergen, "In the wider setting of the problem of
optimality we want to know how all institutions, including
those of planning, must be chosen." This calls for
detailed study of the existing economic institutions so as
to be able to determine criteria for future planning.
^John E. Elliott, "Economic Planning Reconsidered,"
Quarterly Journal of Economics, Vol. LXXII, No. 1, February
1958, p: 55. ------------
2
Jan Tinbergen, Central Planning (New Haven: Yale
University Press, 1964), p. 81.
3
The Problem
Need for the Study
This study comes at a time when institutional
changes are taking place in East Africa with unprecedented
rapidity. Numerous economic institutions are being set up
in this region, but many emerge in a haphazard manner.
Lack of forward planning and coordination has led to much
duplication of services and waste. Establishment of an
economic institution is a costly undertaking. It requires
both money and skilled personnel. A great need exists for
a study of the structure and operation of major institutions
to provide insight into the problems of planning and coordi
nation.
Statement of the Problem
The objective of the study was (1) to assess the
effect of public institutions on the growth of indigenous
entrepreneurs in East African regions, and (2) to derive
from the findings a proposal for long-term planning of
suitable institutions for the stimulation and training of
entrepreneurs in East Africa.
Scope of the Problem
This research focuses on the influence of selected
public institutions on entrepreneurs in East Africa. It
is not interested in making comparisons of the relative
contribution to economic growth of private versus public
enterprise. Only certain leading public institutions were
selected for study here. These institutions were the
following: The National Trading Corporations, National
Development Corporations, the National Planning Agencies,
and the East African Community. In all cases, emphasis was
placed on planning, coordination, and other services
engineered to stimulate Africans to enter commercial and
industrial activities. The scope of the dissertation was
delimited in major ways: First, by an emphasis upon entre
preneurship as a strategic dimension in economic develop
ment; second, by a focus upon the impact of selected public
institutions on private, indigenous entrepreneurship; and
third, by a comparative analysis of the effects of these
institutions on the East African economy.
Hypothesis
One hypothesis was formulated for the study. It
was postulated that, given a reasonable minimum amount of
capital and tangible encouragement by appropriate economic
institutions, entrepreneur-groups would be attracted and
would grow in number and volume. It was expected that
these conditions would lead the region into industrial
modernization and into a high rate of self-sustaining
economic growth.
Such an hypothesis presupposes that conditions of
law and order, of security and of national cohesion exist
and will continue to exist. In the case of East Africa as
an economic region, one must expect a slow rate of economic
development to take place at first, since the Africans have
had few if any opportunities to take part in the commercial
and industrial life of the region prior to the achievement
of political independence. Although there were a great many
potential entrepreneurs in the area, the existing colonial
institutional framework formerly inhibited them from ventur
ing forth and exercising their talents fully. Credit
facilities, for example, were not available to them. The
little education that they could obtain stressed only
clerical and theological training, to the exclusion of any
substantial training in commerce or industry.
The new economic institutions now being formed are
already making available many training and apprenticeship
opportunities which hitherto have not existed, and many
Africans are likely to take advantage of them. Lewis
observes succinctly:
What is fundamental to growth is the seizing of
opportunities. Thus growth may accelerate either
because new opportunities come into existence or
because institutional changes now permit opportuni
ties to be seized which already existed, or both.3
3
William A. Lewis, The Theory of Economic Growth
(Homewood, 111.: Richard D. Irwin, Inc., 1955), p. 147.
Once a considerable number of Africans begin to seize the
new opportunities, it can be anticipated that the dawn of
economic growth will appear on the horizon.
Methodology
This study has made use of several different
research approaches: (1) the gathering of statistical
evidence pertinent to the problem, (2) personal interviews
with specialists and businessmen, (3) case studies, and
(4) a review of related literature and original sources.
Statistical Evidence
Statistics were collected, and statistical tables
compiled. The evidence was analyzed as it appeared to
support or reject the writer's hypothesis, expectations and
tentative conclusions.
Interviews
Hundreds of personal interviews were held with
businessmen, economic planners, industrialists, and govern
ment officials who deal with commercial and economic devel
opmental affairs. These interviews were supplemented by
attendance at traders' meetings. It was at these meetings
that the African businessmen revealed most clearly their
aspirations, problems and basic limitations.
Case Studies
Selected commercial and development corporations,
economic planning bureaus, and the East African Community
were treated as case studies to assess their effects upon
the growth of indigenous entrepreneurs in the three states
of the Community.
Review of Related Literature
Annual, quarterly and monthly reports published by
the selected Corporations formed an important source of
information. These were supplemented by articles in profes
sional journals, particularly those dealing with explora
tions in entrepreneurial history and economic development
and cultural change, as well as a number of books on related
subjects.
Definitions of Special Terms
Most terms are clearly defined in the text, but
certain terminology is used in a special sense in this
report and needs clarification at this point.
The East African Community. The East African
Community was established at the end of 1967 by a treaty
signed by the heads of government of Tanzania, Uganda and
Kenya. The Community comprises the three partner Sovereign
States.
8
The Community. The shortened term, The Community,
-refers to the East African Community.
Region. In this report, the term region refers
specifically to the land area covered by the East African
Community.
Authority. The term Authority, when used with
reference to the East African Community, is a body
comprising the three presidents of the Partner States of
Tanzania, Uganda and Kenya.
The Treaty. The abbreviated term, Treaty, refers to
the Treaty for East African Cooperation, which was signed on
June 6, 1967 by the three presidents of the Partner States.
Tanganyika or Tanzania. Tanganyika became the
United Republic of Tanzania after the unification of
Zanzibar and the mainland Tanganyika.
The Bank. The Bank refers specifically to the East
African Development Bank.
Parastatal institutions. An organization can be
considered to be parastatal, or quasi-governmenta1, (1) if
it was financed wholly or in part from government funds,
(2) if its articles of association include any provision
for partial or complete government control; or (3) if it was
brought into existence by virtue of specific legislation
designed to further particular governmental interests and/or
obj ectives.
A General Note on the Sources of Information
In general, the study has relied upon two major
kinds of information: (1) that obtained from an exhaustive
review of the related literature, and (2) information
obtained from interviews with persons qualified to speak
authoritatively about the problem.
The Literature
Literary sources dealt, in the main, with three
aspects of the problem: (1) the entrepreneur and institu
tional change, (2) parastatal development corporations, and
(3) development planning.
The entrepreneur and institutional change. Most
pertinent sources were: articles in the Economic Develop
ment and Cultural Change Journal, published by Chicago
University Press; articles appearing in Explorations in
Entrepreneurial History, a journal published by Harvard
University; Joseph A. Schumpeter's Theory of Economic
Development (Cambridge, Mass.: Harvard University Press,
1934); E. E. Hagen's On the Theory of Social Change: How
Economic Growth Begins (Homewood, 111.: Dorsey, 1962);
William A. Lewis' The Theory of Economic Growth (Homewood,
10
111.: Richard D. Irwin, 1955); and David C. McClelland's
The Achieving Society (New York: D. Van Nostrand, 1961).
Parastatal development corporations. Official and
governmental publications such as the Five-Year Development
Plans of Uganda, Kenya and Tanzania contributed valuable
information to the investigation, as did special Presiden
tial Committee reports on cooperative or parastatal insti
tutions; annual reports of the various parastatal corpora
tions; publications of the United Nations Economic Commis
sion for Africa; East African Common Services Organizations
(Kampala: Government Press, June 1967); and the Treaty for
East African Cooperation.
Planning. Most helpful sources in the area of
economic planning proved to be John E. Elliott's article on
"Economic Planning Reconsidered," Quarterly Journal of
Economics (LXXII:1, 1958), and an as-yet unpublished book by
the same author on Comparative Economic Systems; E. C.
Hagen's Planning Economic Development (Homewood, 111.:
Richard D. Irwin, 1963); Jan Tinbergen's Central Planning
(New Haven: Yale University Press, 1964); William A. Lewis'
Development Planning (New York: Harper and Row, 1966);
I. A. Evenko's Planning in the USSR (Moscow: Foreign
Languages Publishing House, 1962), propounding the more-or-
less official theory of the Soviet government; and George
Macesich's Yugoslavia, The Theory and Practice of
11
Development Planning (Charlottesville: University of
Virginia Press, 1964).
Other helpful sources consisted of the following
official publications: The Ministry of Economic Planning,
Uganda1s Second Five-Year Plan, 1966-1971 (Entebbe:
Government Printer, 1966); The Ministry of Economic
Planning, Tanganyika1s Five-Year Plan, 1964-1969 (Dar es
Salaam: Government Press, 1964); and the Ministry of
Economic Planning, Development Plan, 1964-1970 (Nairobi:
Government Press, 1964).
Interviews
Of even greater value to the completion of the
study were the personal interviews held with persons in
authority. At the beginning of the study, while the writer
was in Washington, D.C., it was possible to interview a
group of economists who had served on the International
Bank for Reconstruction and Development, an economic
mission to East Africa. The writer was able to read drafts
of reports as they were being compiled. Special mention
should be made of the assistance rendered by Messrs. Otto
Maiss, N. Carter, Bruno Scheltema, C. Bruce, and Iddi
Simba. The latter was then one of the Executive Directors
of the International Bank for Reconstruction and Develop
ment, representing East Africa.
While in East Africa the writer traveled in Kenya,
12
Tanzania and Uganda. The following persons were particu
larly helpful:
Mr. W. Kalema, Minister of Commerce and Industries
in Uganda
Mr. Mwai Kibaki, Minister of Commerce and Industries
in Kenya
Mr. D. Omari, Secretary General of the East African
Common Services Organization
Mr. Mtei, Governor of the Central Bank of Tanzania
Mr. E. Kironde, Chairman of the Uganda Electricity
Board
Mr. S. Nyanzi, Chairman of the Uganda Development
Corporation
Mr. C. Kahama, Chairman of the National Development
Corporation of Tanzania
Mr. Wanjui, Chairman of the Industrial and Commer
cial Development Corporation of Kenya
Mr. P. Kinyanjui, General Manager of the Kenya
National Trading Corporation
Mr. Wakiro, General Manager of the Uganda National
Trading Corporation
Mr. J. D. Ogilvie, Administrative Manager of the
State Trading Corporation of Tanzania; formerly
General Manager of Dalgete Company, East Africa
Mr. C. J. Stephenson, Manager of the Development
Finance Company of Tanzania
Mr. Sebagereka, Head of the East African Income Tax
Department
Mr. Mwiraria, Head of the East African Statistics
Department
Mr. Mwiraria, Head of the East African Statistics
Department, East African Common Services
Organization
13
Mr. Mwicigi, Under Secretary, Economic Advisory
Unit of the East African Common Services
Organization
Mr. James Gitau, Ministry of Planning and Develop
ment of Kenya
Mr. Ilet, Chief Economist, Central Planning Bureau
of Uganda
In addition, interviews were held with more than 500 oper
ators of small businesses. The writer also attended
meetings of African traders on numerous occasions.
Organization of the Remainder
of the Dissertation
This study is reported in seven chapters, each of
which is divided into subsections.
In Chapter II, the problem of entrepreneurship in
East Africa is explained and defined, and the types of
entrepreneurs are classified. Problems which inhibit the
growth of entrepreneurs in East Africa are discussed, with
particular emphasis on the importance of operational
capital. Community-centered adaptive and innovative
entrepreneurs are explained as being ideally suited to
contributing to the economic growth of the East African
states.
Chapter III contains a detailed discussion of the
role of the National Trading Corporations in stimulating
African enterprise. Credit schemes and the monopoly
- 14
feature of the trading corporation are examined in detail.
The role of trading corporations in introducing Africans
to wholesale and retail business is treated with special
reference to its growth potential.
In Chapter IV interest is focused on the efforts
being iriade for the Africanization of commerce and industry.
Extensive discussion is centered on the subsidiaries and
associate companies and their apprenticeship and other
training programs.
In Chapter V the current Five-Year Development
Plans are reviewed to assess their provisions and policies
proposed for the stimulation of entrepreneurship in East
Africa. A brief note on the machinery of planning and
implementation is followed by a more detailed exposition of
the specific provisions which pertain to the encouragement
and training of indigenous entrepreneurs. These provisions
include sources of operational capital, loans and credit
facilities, small-scale industries, establishment of public
development and trading corporations, and the expansion of
formal and technical education.
Chapter VI discusses the function and role of the
East African Community in encouraging regional stability,
enlargement of the market, and development of possibilities
of industrial specialization and of interterritorial trade.
The common market, the transfer tax, and the East African
Development Bank are explained. The influence of the
Economic Planning and Consultative Council on fiscal
coordination and harmonization of monetary policies is
examined in such a way as to assess the possibilities of
regional planning.
Chapter VII, the concluding chapter, contains a
brief summary of the study and presents the observations
and conclusions derived from the findings..
CHAPTER II
INSTITUTIONAL FRAMEWORK AND ENTREPRENEURIAL FUNCTION
IN THE DEVELOPING ECONOMIES OF EAST AFRICA
. Introduction
The entrepreneur, the businessman who carries out
new combinations and puts them into practice, performs the
role of catalyst to the nation's economy. He is essential
to sustained economic growth. Where this element is absent,
even if there is abundance of natural resources in the form
of land, minerals and other forms of capital, the economy
will remain stagnant and people will continue to live in
poverty. The entrepreneurial function, however, will not be
realized unless there is a favorable institutional frame
work. Some institutions are inhibitive to entrepreneurial
activity, while others are conducive to growth. Parker
states this idea succinctly, as follows:
In economic, as in literary life, one can see
the spirit of enterprise struggling for adequate
institutional forms through which to express itself;
one may distinguish institutions which restrain and
stifle creative activity; and one may find instances
in which institutions seem to form a specially
16
17
successful instrument for individual self expres
sion. 1
In the case of East Africa, there are as yet no
sizable numbers of indigenous entrepreneurs. Economic
institutions are just now being established, and this is
the critical period when new institutions must be well
planned in order to survive. These institutions must arouse
the entrepreneurial spirit and at the same time must serve
as training grounds for potential leaders who will play the
major role of industrializing and modernizing the region.
Just as there are many different types of institu
tions , there are also a diversity of entrepreneurs. In the
present chapter the entrepreneur is defined and classified,
and the conditions or environment that determine the quality
of the entrepreneur are examined. Indeed, special interest
is focused on the African entrepreneur, his limitations, and
the opportunities which accompany contemporary institutional
changes.
Definitions
Two terms occupy key positions in any discussion of
the institutional framework and entrepreneurial function in
the developing economies of East Africa. They are "insti
tution" and "entrepreneur." Let us define them in terms of
^W. N. Parker, "Entrepreneurial Opportunities and
Response in the German Economy," Exploration in Entrepre
neurial History, 7:1:35, October 1965.
18
their precise impact on the problem.
Institution. In common usage, this term has many
meanings, but in this study it is limited to one of the
definitions given in Webster's International Dictionary of
English Language. There, an institution
. . . is an established society or corporation; an
association of persons or organizations that
collectively constitute a technical unit in a study;
a significant and persistent element; an [organiza
tion] in the life of a culture that centers on a
fundamental human need.
Institutions may also be regarded as sets or clusters of
organizations and policies, related to each other by a
dominant common purpose. In this sense, for example, the
organizations and policies which link the saver, the
investor and the entrepreneur (e.g., securities, markets,
banks, insurance companies, savings and loan associations,
credit unions, cooperatives, etc.) could be considered to
comprise a community's capital mobilization of financial
institutions.
Entrepreneur. An entrepreneur can be defined as a
leader who has the special talents of vision, initiative,
creativity, the will and the ability to carry out Inew
combinations and to make innovations, regardless of opposi
tion. He is willing to take chances, often on the basis of
intuition rather than on observable facts. He may or may
not invent new things, but he is able to put other people's
inventions into practical economic uses. He may have (but
often does -not have) personal capital, and he depends upon
loans and credit to carry out his innovations.
Schumpeter, who popularized the concept, defines
the entrepreneur as the individual whose function it is to
carry out new combinations or "enterprises," a rather self-
centered character who does not rely upon tradition and
whose task, in fact, "consists precisely in breaking up the
2
old and creating a new tradition." Cole says that the
nature of the entrepreneurial function is
. . . the utilization by one productive fae-tor of
the other productive factors for the creation of
economic goods; the motive or result being an
increase of profit or an accession or shift of per
sonal power, or the growth or survival of the
business as a unit.3
All this boils down to one central determining
factors--that an entrepreneur is a leader, a pioneer who
not only sees far ahead how new combinations or new organi
zations can be formed, but, given the opportunity, is able
to put his vision into practical use for the satisfaction
of human wants. His visions are put into practical appli
cation through the process of innovation. Innovations may
take the form of a new product, an improvement in service,
2
Joseph A. Schumpeter, Theory of Economic Develop
ment (New York: Oxford University Press, 1961), p. 74.
^Arthur H. Cole, cited by Charles Wilson, "The
Entrepreneur in Industrial Revolution in Britain,"
Explorations in Entrepreneurial History, 7:3:131, February
1955.
or a new organization, such as a merger, the opening of a
new market, or the introduction of a cooperative society in
an area. Innovation also implies the exploitation of
inventions, the reorganization of an industry, the revolu
tionizing of the pattern of production, or, in the case of
developing countries, the adaptation of new or different
methods of production or organization. In the case of the
latter, the methods or structures may be borrowed from
foreign countries which have reached a more advanced stage
of development. In essence, the entrepreneur perceives his
function to be that of getting things done in new forms;
and the entrepreneur himself must be the type of leader who
has both the will and the magnetic dynamism to attract a
substantial following into his business, or in support of
his platform.
Kinds of Entrepreneurs
There are so many different types of entrepreneurs
that one might almost say that no two are at all similar.
There is no distinct class in the social scale that could
be called the "entrepreneur class." Moreover, an entrepre
neur may do a number of other things, as well; and, once his
innovation has succeeded, the same entrepreneur may become
a manager of a business or a president of a company. Any
attempt to group entrepreneurs can be, at bestry only an
approximation.
2 1
Schumpeter was able to distinguish three groups,
classified on the basis of differences of motivation:
first, "there is the dream and the will to found a private
Kingdom, usually, though not necessarily, also a dynasty."
Second is the group of entrepreneurs who have "the will to
conquer; the impulse to fight, to prove oneself superior to
others, to succeed for the sake not of the profits but of
success itself." Third is the group of individuals who
experience the "joy of creating, of getting things done, or
simply of exercising one's energy and ingenuity, even at
the expense of destroying old patterns of thought and
action.
Entrepreneurs may also be classified according to
environment and the community into which they are found;
they may also differ in the way they operate, given certain
circumstances. In this report, five groups of entrepreneurs
are distinguished:
The innovating entrepreneur.^ The innovator is
characterized by aggressive assembling of information, his
capacity for analysis of results deriving from novel com
binations of factors. These men are generally aggressive
^Schumpeter, op. cit., pp. 93-94.
Yale Brozen, "The Determinants of Entrepreneurial
Ability," Social Research, 21:340, Autumn, 1954.
in experimentation, and they are quick to put attractive
possibilities into practice.
The adaptive entrepreneur. These men are charac
terized by readiness to adopt innovations inaugurated by
the first group.
The imitative entrepreneur. The imitators are
characterized by great caution and skepticism. They may
imitate when it becomes perfectly clear that failure to do
so would result in a decline in the relative position of
the enterprise.
The ritualist entrepreneur, or the drone. This
type of entrepreneur is characterized by refusal to make
changes in production methods, even at the cost of severely
reduced returns in comparison with other producers. In
fact, this group falls into what may be called the "ritual
istic" type--strictly a creation of colonial days. These
are men who will faithfully perform routine clerical or
ministerial functions, but whose lives are essentially
imitative. They have too little initiative to meet modern
problems or complex situations. Hagen says, "The ritualist
is addicted to order and routine, and his meekness masks
£
an inner compulsion." He fears change and lacks the
g
E. E. Hagen, On the Theory of Social Change: How
Economic Growth Begins (Homewood, 111.: Dorsey, 19b2),
p. 42.
23
pioneering spirit.
The community-centered or cooperative entrepreneur.
This group is the same as the group of innovators in
certain respects--in attitude, in approach, and in the way
he solves problems. He is innovative, aggressive and crea
tive. But he has an added vital quality--he is capable of
influencing considerable segments of the population. The
community-centered entrepreneur seeks to accumulate wealth
or power for the community through his individual action;
as a by-product, he may and very likely does accumulate
wealth or power for himself. The motivation of the
community-centered entrepreneur is accurately described as
. . . quasi-tribal, to further the ends of the
community; the individual seeks to grow, not so
much in the reflection of his wealth, a private
good, as in the prestige of the cohesive unity,
a social good.7
For this kind of person, national goals come first and he is
intensely convinced that the goals can best be attained
through communal effort.
Clearly, in order for any state to realize a high
rate of self-sustaining economic growth, it is necessary to
have a large proportion of the innovating and adaptive,
creative kind of entrepreneurs. Considering the African
economies at their present stage of development, the
community-centered entrepreneur is most suitable. Several
^Gustav Ranis, ''The Community-Centered Entrepreneur
in Japanese Development," Explorations in Entrepreneurial
History, 8:2:81, December 1955.
24
factors point to this conclusion. In the first place,
the countries are just beginning to build their national
identities, and at present the only recognizable institution
is the Government. Second, the number of persons who would
be classed as "the educated elite" is so small that their
maximum usefulness could only be achieved when acting in
unison. In order to achieve this goal, the Government
(which employs most of these "elite") would have to play
the roles of both capitalist and entrepreneur.
The Entrepreneur and the Environment
The entrepreneurial function depends upon the
economic environment existing in the region. Many distin
guished economists, historians, anthropologists and social
scientists have observed this phenomenon, but they attach
differing explanations. Marx Weber emphasizes the religious
implications, saying that the Calvinistic Protestant ethic
was based on the prosperity ideal, and when men and women
adhered to the religion, worked hard, and were frugal and
honest, they developed into an entrepreneur group. These
were the men who were responsible for the industrial
revolution in the Western world.
Shintoism, a rather nationalistic and patriotic
religion, is said to have exerted the same influence in
Japan. It, too, emphasized hard work, discouraged luxury
and waste, and portrayed the Japanese as chosen persons who
25
must give all their talents to the glorification, security
and prosperity of their nation.
McClelland, in his famous n-Achievement thesis,
concluded that rapid economic development results when a
community, drawing upon its mores and background, produces
a substantial number of people with high achievement
quotients. He even maintained that the basic reason for
the great Soviet economic growth in recent years has been
the presence of a determined and high-achievement class of
entrepreneurs:
. . . acting as though in response to the short
supply of the elites who had high n-Achievement and
entrepreneurial spirit, the Russians centralized
their economic activities ... so that the entre
preneur served as the nucleus.8
In other words, the Soviet state acted as a capitalistic
institution and the comprehensive planning and coordination
were the institutional tools by which the few entrepreneurs
extracted higher communal returns.
What seems to be a logical interpretation is that
the institutional framework must be such that a significant
number of people are motivated to become entrepreneurs.
There must be incentive to work with the expectation of
achieving higher returns, individually or communally.
A community in which material prosperity is looked down
upon cannot be expected to produce a good entrepreneurial
^David C. McClelland, The Achieving Society
(New York: D. Van Nostrand, 1961), p. 419.
26
spirit. A society which believes in myths, believing that
prosperity will drop from somewhere in the heavens, does
not inspire its people to work hard and to better their
standards of living.
A community will also either encourage or discourage
innovation and the development of entrepreneurial abilities,
depending upon whether the interpersonal relationships are
particularistic or universalistic. In a society which is
particularistic, the choice of the person who is to perform
a job is based on who the person is, rather than on what he
can do or how efficient he is. In many cases, this will
mean family or tribal status. Such a community is non-
rational in attitude, and inhibits the entrepreneurial
spirit. In a universalistic society, on the other hand,
the criteria used in appointing persons to a job or election
to an organization are germane to the purposes for which
the selection is made, and no person is barred from posses
sing or acquiring the necessary qualification. This is
what is called a rational community. It is a community in
which the objective and subjective order of action is
expected to be united. Choices or appointments to official
positions, or decisions as to who should receive capital in
the form of loans, are expected to be made on the basis of
reason and in terms of attaining maximum performance lead
ing toward an avowed end.
27
There is no doubt that, in order to encourage the
entrepreneurial spirit, the institutional framework and
community ideals must be rational and universalistic; more
over, the choice of personnel must be based on efficiency or
potential profitability.
- Now, with respect to the East African communities
under study here, the situation is encouraging. Contrary to
the general belief, Africans on the whole support a prosper
ity ethic. This is revealed in many East African proverbs.
Take, for example, the Baganda saying, "Atanafilwa tafuna,"
which means literally that profit is a result of risk. The
Banyarwanda say, "Imana igira aho imanira," or "Imana ifasha
uwifasha," which means that God helps only those who help
themselves. Another indicative proverb in the same language
is: "Bukunda ukize," meaning that people love and respect
the rich, i.e., the more prosperous you are, the more
friends you will have, and vice versa. Another emphasis on
hard work is expressed by, "Ushaka inka aryama nkazo,"
meaning that discomforts must be expected in the search for
wealth. The Luo say, "Chiemo biro luya," meaning that food
comes with sweat. Indeed, this spirit is shown in the fact
that thousands of Africans travel hundreds of miles in
search of jobs, striving to better their living standards.
It is this inborn attitude which gives hope that, once
appropriate institutions are established and more opportuni
ties are made available, many Africans will be ready and
28
eager to develop their entrepreneurial talents.
This is not to say that there are not a great many
institutional limitations that must be overcome. The chief
barriers are two: "the colonial mentality" and a lack of
financial institutions suited to the African situation. The
"colonial mentality" affects, particularly, the educated and
the army of civil servants with deadly effect. During the
colonial days, the African had no avenue into the business
world open to him. He had neither the capital nor the
training--nor did he have any kind of encouragement. The
only openings which held any promise of status were to work
as a clerk, an interpreter, a clergyman, or a houseboy.
Even worse, Africans were never put in positions of
responsibility. In their first contacts with modern ways,
Africans were employed in foreign-managed plantations, mines
and commercial establishments. Their next contact was the
paying of taxes to forfeign-dominated governments. In every
case they were denied any way of developing a strong sense
of loyalty, either to their foreign employers or to other
Africans. Foreign businessmen and their enterprises, as
well as their business skills, remained behind closed doors
to the potential African entrepreneur.
Colonial administrations, moreover, set a poor
example in their negative attitude toward business, and the
dignity of using their hands to work with. Colonial
administrators simply did not work with their hands; and
29
yet they lived on a conspicuously lavish scale'. 1 They
regarded all businessmen with condescension, regardless of
race. They appeared to attach great importance to such
social activities as recreation--English games, cricket and
other status undertakings.
The net result was that most young people aspired
to work in the government; they, too, looked down upon any
non-white-collar job. Imitative rather than creative
mentality prevailed. What is even worse, these people
developed a consumption capacity which was out of all
proportion to their productive capacity. The adverse effect
on the economy has been that the rate of increase in
consumption now exceeds the productive capacity. The large
number of Mercedes Benzes seen in Kampala is a case in
point. In such circumstances, imports may continue to
exceed exports quite indefinitely, and the country may
continually face balance of trade deficits. The dangerous
practice of piling up loans may become irresistible and
unavoidable. Should this happen, the country may forever
remain poor,1 humiliated, and self-enslaved.
This is not to say that there are no potential
entrepreneurs. It only indicates that the institution can
either inhibit entrepreneurial activity or encourage it.
It is, in fact, like having oil under the ground without
anyone being aware of its presence. The entrepreneurial
talent must be tapped, or else it will remain dormant.
30
Furthermore, the entrepreneurial activity may be pointed in
the wrong direction, depending upon the institutional frame
work and the attitude of the community. The keen interest
in clerical jobs and in the priesthood during colonial days
are good examples. The thousands of Africans who sit around
the fire are like the untapped oil underneath the poor sandy
Arab villages.
Problems Faced by the African Entrepreneur
It is well at this point to consider some of the
advantages and disadvantages which the East African must
face as a businessman in his own country. Since some of
the problems he will encounter are uniquely associated with
this part of the world, perhaps the discussion of the dis
advantages should come first.
Lack of Operational Capital
Even if the prospective entrepreneur should possess
the correct attitude toward business activities and should
receive encouragement from state institutions, there would
still remain a crucial deterrent--lack of accessibility to
operational capital. No matter how many potential entre
preneurs or great projects are available, the intended
innovations will remain in the idea stage unless there is
capital waiting to be put to use. In other words, unless
the prospective entrepreneur has ready access to capital,
31
the entrepreneurial spur to economic growth is seriously-
stifled.
One of the universal shortcomings of entrepreneurs
is that, with very few exceptions, they lack sufficient
capital. They must depend upon loans and credits. In East
Africa, where commercial banks do not have confidence in
African businessmen, the African cannot participate in the
existing credit system. No wonder, therefore, that the
number of indigenous entrepreneurs in this region is negli
gible. Yet there is evidence that there are many Africans
who do possess the entrepreneurial talent to succeed. At
this early stage in the economic history of East Africa, all
that the African lacks is his own accumulated wealth. There
are no African relatives or friends who have operational
capital, and no institutional system has been developed
9
whereby credit can be obtained.
The industrial revolution in England, it should be
observed, was not the result of any miracle. In fact, it
should not even be referred to as a "revolution,1 1 for it
occurred as a natural development because the environment
was conducive to creative enterprise. There were many
o
It was interesting to note that every person
interviewed during the course of this study reported that
the worst problem encountered was the lack of operational
capital. The colonial law preventing banks from extending
credit to Africans was considered to be largely, if not
wholly, responsible for the African backwardness in commerce
and industry today.
32
sources of capital, just waiting to be used. Entrepreneurs
borrowed from wealthy landowners and relatives; club members
borrowed from each other or they borrowed from family and
friends; and members of the same church would lend to each
other. As the monetary economy expanded, private bankers
and blacksmiths lent money to local businessmen. Later on,
the Bank of England supported many other smaller banks, and
credit was extended to many individuals and societies. The
state, too, played an important role in encouraging enter
prise by granting patents, charters and other privileges to
those who produced worthwhile products. As is well known j
the state provided transportation, and established stable
and unified currency. Thus, the fortunate combination of
state participation and private sources of capital (lent on
easy terms) fostered the entrepreneurial spirit so success
fully that the country became the pioneer of modern indus
trial growth. Its capital, London, served as the pivot of
the money market of the world.
Examples of the significance of credit as a stimu
lant to entrepreneurial activity can be seen in practically
all of the developed countries of the world. It is even
said that the rapid industrial growth of the United States
owed much to the poor banking system operating at the time.
In Japan, one of the major inducements to entrepreneurial
activity was the state's provision of easy credit to indi
viduals , either in selling operating plants at very low
33
prices or in charging very low interest rates to those who
could assume management of plants and other industrial
firms. The same can be said of the Soviet Union. The
scarce capital was channeled through the Gosbank to all
projects which had greater economic returns, as far as the
Central Planning Bureau was concerned. As it turned out,
most of the capital was put into heavy-industry projects.
The element of risk and trial-and-error did not differ from
that experienced in England. The only difference was that
in England the private capitalist, or banker, bore the risk,
while in the Soviet Union the state capitalist bore the
risk. In this respect, managers and planners played the
role of the entrepreneur, and the risks were shared by the
whole community.
The importance of the availability of capital as a
prime requisite for implementation of the entrepreneurial
function is universally recognized. It makes no difference
whether the entrepreneur is an individual, a group or a
motivated Central Planning Board, nor does it matter how
the capital is obtained. What does matter is that capital
is available, and that suitable institutions exist through
which the money can be utilized effectively. In other
words, the entrepreneurial function will expand only if
capital is available and easily obtainable. By the same
token, capital will increase as entrepreneurial activities
expand. In essence, then, the entrepreneurial function and
ing that the entrepreneurial function varies directly with
the availability of capital, while the increase of capital
is a direct function of the entrepreneurial activity.
Where: E is entrepreneurial function, e the additional
entrepreneur, K is capital, I investment, N employment,
and GDP is the gross domestic product.
Horizontal arrows show general direction, while
vertical arrows indicate increase or expansion. The +
sign indicates additional increase above the initial
size.
This means that, when capital is suitably channeled, the
entrepreneurial function rises. As the entrepreneurs invest
the available capital into various projects, through their
innovations, more capital-creating goods are produced. The
increase in the supply of operational capital encourages
even more people to play the part of entrepreneurs. More
innovations appear, and investment expands even further.
The level of employment rises in response to the expansion
of investment. The net result is a general rise in the
gross domestic product.
institutions enables the efficient entrepreneur to assume
greater debt position, and he can engage in a larger amount
Thus, E = f(K,e)
In brief, the availability of funds from financial
35
of productive investment. Schumpeter observes this point
clearly and emphatically in these words: "The structure of
modern industry could not have been erected without it
[credit]; it makes the individual to a certain extent inde
pendent of inherited possession. . . . Talent in economic
life rides to success on debt."^
It is not possible to exaggerate the importance of
financial institutions and their effect on the growth of the
entrepreneurial function. Yet this is the element which has
been lacking in Africa for a long, long time. Whatever
plans can be devised to encourage the entrepreneur must take
into consideration the creation of and mobility of capital.
Consideration must be given at this point to some
factors that are crucial to the entrepreneurial function.
It has been observed that during the industrial revolution
in Britain, credit to the entrepreneur was extended mainly
on the basis of confidence, friendship or acquaintance. It
was the capitalist who took the risk, while the entrepreneur
merely tried out his innovations. If he succeeded, the
capitalist got his money back, plus a high rate of interest,
and the entrepreneur received the profit. If he failed,
however, it was the capitalist who incurred the loss.
It is no wonder, therefore, that the foreign bankers
in East Africa hesitate to lend money to the Africans. The
10
Schumpeter, op. cit., p. 70.
36
foreign commercial banker had no cultural basis upon which
to build confidence in the African. The two did not--and
still do not--share anything in common, clubs, church,
family, or area of residence. This lack of common basis
has engendered other serious and fundamental problems. The
African did not* and does not even today, consider the
Asian or the European a part of'his society. Consequently,
he has not developed a sense of competition with foreign
businessmen. He has resigned himself to an acceptance of
the foreigner's image of him--one of smallness; he has also
accepted the idea that big business is a responsibility of
the European and the Asian.
It is important to note, too, that educational
growth through adaptation has been blocked. Normally,
people in a community learn from each other--they want to do
as the "Joneses do." But this is only possible when people
visit each other in their homes and share interests in
social activities. Once a sense of competition develops
those few members who rise above the general standards of
living emerge as natural leaders. In the effort to catch
up, many other members of the community work harder, thus
increasing their productive capacity, and enjoying a general
rise in the standard of living.
At present, the only Africans who can develop a
spirit of competition with Asians and Europeans are the
more educated Africans, and they are wary of taking chances.
They find that government jobs are more secure and less
exacting than private enterprises. Some of the more
educated Africans do try to go into business on a part-time
basis, but this is no way to become a success as an entre
preneur. In the first place, civil servants have to conceal
their activities in private business; yet any single busi
ness enterprise requires constant attention by the person
directly sponsoring and promoting the investment. If the
business involves acquiring goods on credit, it is impera
tive that the company providing the goods have complete
confidence in the person who runs the business.
Lack of Standard Securities
The question of security also poses an important
barrier. A security problem was created mainly by the
failure of indigenous and expatriate businessmen to under
stand each other. The African would show cattle, coffee,
trees, and palm as securities, but no foreign banker in his
right senses would accept any of them. Such securities are
worthless to the banker, but the African values them most
dearly. Thus cultural barriers have exerted a negative
influence on credit creation in East Africa.
Insufficiency of Banking Facilities
The situation is made even more difficult by the
fact that there are very few banks in the region. Unless a
person lives in one of the few cities, or in a larger town,
38
he has no place to deposit his savings. Under these circum
stances, thousands of people still keep their money in the
ground; in many cases, the money is lost unless it is used
' at once to buy more goats, cows or drinks. During the
summer of 1967, for example, in a village near Kampala,
Uganda, £600 which had been buried in the sand was found to
have been eaten up by ants. In any case, a substantial
amount of money does not get into the general flow through
banks, and the net savings for the country are kept con
stantly low. Consequently, the use of money is limited,
and the banks so far have had little commerce with potential
African entrepreneurs. ---
Lack of Experience
African businessmen are new in the field, and they
lack experience. Such vital commercial skills as bookkeep
ing, pricing, buying, stock control, banking, insurance and
loan facilities are lacking. An extremely high percentage
of those interviewed for this study showed that they do not
keep accounting books. Many of them are satisfied with a
cheque book, a pile of receipts, and invoices often held
together with a piece of wire. In place of annual balance
sheets, most African traders merely look at the monthly
bank statements. They have the idea of net profit, but this
is so vague that steps are often taken to expand the
business in response to temporary or seasonal good returns.
The expansion measures are then taken without careful calcu
lation and usually lead to a decline in profits, if not to
serious losses or bankruptcy. A typical example is one
company in Western Uganda which showed a net profit of Shs
20,000 one year. Immediately, three lorries were bought,
and the staff was expanded. Since then, the company has
been running at a prohibitive loss.
The Problems of Specialization
Associated with lack of experience is the failure to
specialize and to make businesslike plans. Most African
traders attempt to run a greater number of businesses than
they can operate efficiently or profitably. A trader who
starts with one shop will often go into transport business,
buy a farm, open a bar, build a posho or flour mill, and
soon find himself "riding off in all directions," a "Jack
of all trades and master of none." In Kabala there is one
businessman who runs a large carpentry shop in which he
employs more than 20 carpenters; he is also a sub-agent for
beer distribution, is building a small bar, and carries on
a fishing business some 150 miles away. Now, because it is
impossible to attend to all these businesses at the same
time, he has employed a number of assistants. But assist
ants are often dishonest, and the turnover is so rapid that
none of them is able to develop any lasting skills on the
job. True, this man is making some little profit, but there
is no doubt that he could double or triple his profits if
he would operate more efficiently or specialize in just one
of the enterprises. This is a good indication, though, that
the African has the entrepreneurial talent--all he lacks is
the technical skills and the experience. Like many other
African entrepreneurs, this man has never asked for or
received a loan, nor has he made use of the overdraft bene
fits available from existing institutions.
Unfair Competition
Foreign entrepreneurs, on the other hand, are
treated differently--especially the European and Asian
expatriates. They have access to capital and so have become
the backbone of the East African economy. They are in
wholesale, retail and other commercial ventures; they are
the bankers, miners, food processers, manufacturers and
plant managers who practically run the economic life of the
region. It cannot be denied that these people have made a
contribution to the economy of the region. Nevertheless,
the presence of the foreign entrepreneur and his monopoly
of all commerce and industry has exerted an inhibiting
effect on the African entrepreneur. The African has no
claim to personal wealth, so cannot compete with the foreign
businessman who enjoys the favor of the banks and who has
accumulated great wealth.
41
The African trader, thus, must contend with the
unfair advantage held by the rich, well-established
expatriots who are in a position to reduce their profits, or
even to take losses temporarily whenever they wish to drive
the Africans out of trade. "There are many instances where
established Asian traders sell goods below factory prices so
that they may discourage an African trader who dares to
11
compete with them." Some local- factories have been known
to give special hidden discounts to established Asian
traders, but not to Africans. There are instances in which
Asian traders charge lower-than-factory prices. The African
trader must buy his goods from an expatriate wholesaler in
town who charges him a very high price. When he returns to
his village shop, he must charge a higher price in order to
make up for the transportation and make some small profit.
It doesn't take long for the people in his village to
discover the difference in price and to make trips of their
own to buy in town from the Asian or European shops where
prices are lower. Inevitably the African village shopowner
loses his market.
The competition with Asian and European traders
becomes even more unfair when the African trader attempts
to rent a shop in town. He finds he cannot obtain a
11
P. K. Kinyanjui, General Manager of Kenya
National Trading Company, in a speech delivered at Park
land s, Kenya, March 3, 1967.
42
location on any of the main streets. Instead, he must go
off to some inaccessible location and pay excessive rent
for it. Sooner or later he finds that if his shop begins
to show a profit, he will be subjected to rigorous pressure
to get out of the business. His wealthy Asian landlord can
afford to close the shop completely, rather than leasing it
to African traders. An example of this was seen in the
Rift Valley District of Kenya where an Asian closed five
different shops and completely refused to lease them to
Africans. Under these circumstances, many would-be African
businessmen fail to get established in commerce or industry,
not because they lack the talent, but because the prevailing
conditions completely block their efforts.
Disparity of Size between Private
and Public Sectors of the Economy
The East African economy is based mainly on private
enterprise. Roughly 90 per cent of the economy of Kenya and
Uganda is in private hands. Wholesale and retail trade,
imports and exports, manufacturing industries, and commer
cial banks are privately owned and run chiefly by expatriate
entrepreneurs. The same was true in Tanzania until March
1967 when, under the Arusha Declaration, all major produc
tive industries, commercial companies, and commercial banks
were nationalized. Even so, a very high percentage of
commerce and industry (some 60 per cent) is owned and run
by private companies.
43
Production in the public sector is engaged in by-
business and manufacturing enterprises which use the
organizational form of the parastatal corporations. These
are the National Development Corporations, the National
Trading Corporations, Coffee and Lint Marketing Boards, and
the Common Services Corporations (the airlines, harbors,
and railroads). In East Africa as a whole, only about one
fifth of the economy may be- said to be under the public
sector.
Favorable Institutional Changes
Since the achievement of political independence,
there have been some favorable movements that point toward
encouraging and stimulating the African entrepreneurial
activity. In the first place, the law forbidding commercial
banks from extending credit to Africans has been abolished.
The law may still be valid in spirit and practice, but the
Africans have at least won the right to apply for loans.
A more fundamental positive step has been the estab
lishment of parastatal institutions whose main purposes are
(1) taking part in investment, and/or (2) extending credit
to African businessmen. In each of the member states of
the East African Community there are a number of parastatal
corporations which make funds and technical advice available
to interested African businessmen. Chief among these
institutions are the following:
44
(1) The Uganda Development Corporation (UDC), a
holding company for 52 subsidiary and associate
companies. It was launched in 1952 with a
capital of £6.4 million, wholly owned by the
Government of Uganda.
(2) The Industrial and Commercial Development
Corporation (ICDC), a holding corporation for
more than a dozen subsidiary and associate
companies. It was established in 1954 by the
Government of Kenya. Its main object is to
facilitate the industrial and economic develop
ment of Kenya.
(3) The National Development Corporation of Tanzania
(NDC), now a holding corporation for 52 subsidi
ary and associate companies.
(4) The State Trading Corporation of Tanzania, a
recent amalgamation of the major corporations
which were nationalized early in 1967.
These holding corporations issue loans and credits
to individual entrepreneurs, and to other smaller companies.
They also represent their respective governments when ques
tions of partnerships with foreign investment corporations
are at issue. Good examples of such partnerships are the
Development Finance Corporations which are operating in
each member state. These finance corporations are the chief
45
channels through which foreign capital is drawn to East
Africa. Major partners are the governments, the Common
wealth Development Corporation (U.K.), the West German
Development Company, and the Finance Company of Netherlands.
For every £1 contributed by each government, £3-are contrib
uted by the foreign company, and the whole amount is
invested entirely in local enterprises.
Of the many subsidiary and associate companies, the
National Trading Companies in Kenya and Uganda are by far
the best instruments for encouraging African entrepreneurs
to enter commerce and industry. These companies were formed
with the primary purpose of reducing the expensive expatri
ate middlemen. They import or buy local manufactured goods
and, in most cases, sell on credit and at lower prices to
African distributors and wholesalers. The Kenya National
Trading Corporation, for example,, has been able to put more
than 91 per cent of the sugar distributed into the hands of
African traders. Similar rapid trends are taking place in
soap, Nyanza textile products, beef by-products, pangas
rice, shovels and galvanized pieces, among others. The
Uganda National Trading Corporation merely gives a guarantee
for a limited amount to an African trader who uses the
guarantee to obtain goods from an Asian or European whole
saler. In this way, Africans are able to take an active
part in retail and semi-wholesale business. Through this
arrangement a substantial number of African entrepreneurs
46
are running profitable businesses, especially as distribu
tors of locally-manufactured products.
In furnishing operational capital, the commercial
banks still follow strict rules with regard to securities.
The foreign banks are still in the majority, and their
attitudes toward Africans have not changed materially. In
Uganda there is a National Commercial Bank, the majority of
whose clients are Africans, and this institution has been
of great help in lending money to them. In Tanzania there
are the National Cooperative and Development Bank, the
National Cooperative Bank, and the National Development
Credit Agency. These cater chiefly to small business
enterprises run by Africans, individually or in small
cooperatives. Now, with nationalization, all commercial
banks are state-owned. In Kenya small loans are issued
mainly through the ICDC, the Ministries of Commerce and
Industry, and the Ministry of Cooperatives. All of these
efforts are pointed in the right direction. A substantial
minority of Africans are beginning to make use of the
financial institutions.
Cooperative movements constitute another step in
the right direction. Through "co-ops," Africans organize
themselves in their villages, and pool their funds to hire
or buy services and goods which none of them could afford
alone. The pooling of funds is particularly significant
because it increases the saving-and-investment ratio.
Moreover, these associations are excellent training grounds
for those who have not had the opportunity to go to formal
training centers. In a later chapter it is seen that
through cooperative associations many men and women are
acquiring beginning business skills. In particular, they
are getting into the habit of saving and investing. And,
as they organize themselves, the potential leaders naturally
exhibit those skills which, given encouragement and finan
cial support, will later become the community-centered
entrepreneurs of the community.
On the training side, in addition to several tech
nical and business training centers, there is a Management
Training and Advisory Center in each country. The center is
partly sponsored by the International Labor Organization and
partly by the respective governments. The experts are
provided by the international body to give instruction and
consultations with established firms. These specialists
are able to locate local counterparts to understudy them in
management skills, and to prepare themselves to work with
African businessmen who need advice.
48
African Reaction to the New Changes
In spite of the many unfavorable conditions they
must surmount, some African entrepreneurs have been notably
successful. Mention should be made of such men as Mr.
*
Basudde of Uganda, active in coffee processing and export;
Mr. Kawalya-Kagwa, who now runs well over ten enterprises
ranging from growing tead, manufacturing sugar, and export
ing vegetables wholesale to London; Mr. Bushuyu of Kabale
who started ten years ago with 300 Shs. and is now making a
monthly turnover of 10,000 Shs.; the three men who with an
initial capital of 45,000 Shs. (equivalent to about £2,250
or $6,750) started the Lagum Distributor Company in Nairobi
only three years ago and are now enjoying an annual turnover
of more than 5 million Shs. with a net profit of about 20
per cent importing all sorts of farm tools from Denmark and
exporting farm produce; the Ankole Industrial Traders
Company which started in June of 1962 with assets of £7,000
dealing in nytil, beer, soap and sugar, and now makes annual
sales of more than £90,000 in cloths alone; the Kigezi
African Wholesale Company, launched in 1963 with a capital
of some £85,000 and now making annual sales of £690,000;
the East Acholi Wholesale Kitgum, dealing in crocodile
skins, which began with capital of 46,000 Shs. and now has
annual sales of 1,200,000 Shs.; the Karamoja African Whole
sale Company, Moroto, launched in 1966 with £3,000 to deal
in sugar and beer, now making annual sales of £30,000; the
D. N. Macharia Provision Stores in Nairobi, which, start
ing with a capital of £2,500 now has monthly sales of
£5,000; the Simba Trading Company in Nairobi, whose capital
of £1,000 is now making £10,000 each month; among many
others (see Appendix A). These small African companies have
all shown rapid expansion. With all of them, the major
contributing factor was the help and encouragement received
from the parastatal institutions, especially the National
Trading Corporations and Development Corporations. The
contributions of these state corporations to the stimulation
of entrepreneurs is discussed in greater detail in the
chapter which follows.
Proposals for Improving the Situation
Many suggestions have been offered for the improve
ment of the entrepreneurial climate in East Africa. For
the most part, these pertain to such matters as developing
apprenticeships, improving the attitudes of bankers,
creating willingness of states to provide initial capital,
and making realistic plans for the innovations and strate
gies which must accompany the necessary changes in the
national economy.
Apprenticeships
Beyond a doubt, the African is well endowed with
entrepreneurial talent. What he lacks is the industrial
50
and commercial skills to enter successfully into entrepre
neurial activities. It is also clear that the parastatal
institutions are beginning to see the value of stimulating
Africans to enter business as a career.
Most persons who are knowledgeable about business .
contend that the best way to acquire commercial skills is
to "learn by doing." "On-the-job training" cannot be
duplicated in the classroom. In England, in the United
States and in Japan the most common way of getting started
has been to join the main industrial stream through appren
ticeships. In fact, after the Meiji revolution in Japan,
the Japanese government sent hundreds of young men to
Western countries to join leading firms and work as
apprentices. Outstanding specialists from Western nations
were also employed as teachers and, as soon as a sizable
number of Japanese had learned the skills they needed, the
instructors were dismissed. Through this simple method of
apprenticing promising young men to local and foreign firms,
Japan was able to accumulate a large number of skilled
entrepreneurs. For their part, the English, prior to the
industrial revolution, had to learn banking skills from
Holland. And the Chinese imported Russian technicians as
instructors, at the same time sending thousands of appren
tices to Russia. In each instance, there was a concerted
and well-planned effort to borrow technical and commercial
know-how.
51
East African states will undoubtedly be no excep
tions . Not for long will the Africans be content to rely
solely upon the traditional formal educational system, or
upon the few technical centers that have been instituted.
A program of apprenticeships must be initiated. It appears
that training will be limited at first to local firms,
since few foreign firms have indicated willingness to take
on "black" apprentices, especially if their training would
qualify them to return immediately to their homelands and
become entrepreneurs in a competitive market.
It was noted earlier that the Asians and Europeans
have formed the backbone of the East African economy. It
was also observed that at present the unsophisticated
African cannot compete successfully with the we11-entrenched
expatriate businessmen who, because of historical incidence,
have accumulated wealth and can dominate their enterprises.
Nevertheless, it is these same businessmen who must play
the role of instructor to the young Africans who are
desirous of making a profound contribution to the develop
ment of the East African economy. This cannot be done
unless the government establishes an apprenticeship program
in which every form, shop owner, wholesaler and banker
takes several young Africans as apprentices. The number of
apprentices would depend on the size of the enterprise and
the diversity of activities. There would have to be a
small tax allowance. The student's formal education would
range from completion of the eighth grade to college or
university education. Student apprentices would be expected
to learn everything possible within a limited length of
time. As soon as one has acquired some entrepreneurial
skills and is qualified to establish his own business, the
government and banks would extend him credit. Should this
scheme be implemented, it is expected that the gap between
the expatriate and the African could be bridged in a rela
tively short time. More importantly, the cultural barrier
would be penetrated when these young apprentices have
learned to work in close contact with the expatriates.
It is quite likely that not all foreign businessmen
will welcome such a proposal, for African entry into
commerce and industry could threaten to reduce fat profits
and cut into market monopolies. Perhaps this foreign
reaction will not happen, but the proposed apprenticeship
program would certainly create a larger body of people who
had acquired industrial skills and disciplines and stood
ready to compete and introduce new goods and services in
the marketplace. On the other hand, the program would also
raise the productive capacity of the country. This would
seem to be the next logical step forward in finding a posi
tive solution to many of the financial and social problems
which confront any nation beset by poverty, and living .
under the threat of disruption of the entire economy.
53
The Bankers 1 Attitude
Efforts to increase the number of skilled entrepre
neurs must be matched by improving financial facilities
whereby they can easily obtain credits for trying out their
proposed innovations. What seems to be vital in the case of
East Africa is that the bankers, both local and foreign,
have developed an unfortunate attitude toward Africans as
businessmen. It seems clear that they base their credit
practices on New York and London standards; this, in turn,
bars millions of potentially fine African entrepreneurs from
getting started in the business world. It is imperative
that some new criterion be established for determining
required securities for lending money to Africans. It
should be the duty of the commercial banks in the area to do
extensive research so as to find out the type of securities
and other loan criteria appropriate to the specific East
African environment. Indeed, the establishment of special
ized banks, such as cooperative banks and credit agencies,
would help. In order to get substantial support for such a
venture, a concerted and unified effort would have to be
made by all the financial institutions in East Africa.
A State Capitalism
It might be asked whether the establishment of these
proposed economic institutions would best be left to private
individuals or to groups, assuming that the market forces
would determine the general trends. The answer to the
54
question must be a resounding No. In the first place, it
is true that many Africans have the entrepreneurial talent,
but there are extremely few who have acquired the requisite
skills and commercial know-how; second, the Inability of
the Africans to compete successfully with the established
expatriates would result at once in an imbalance of estab
lished monopolies, and eventually in civil disturbance.
Should this happen, there would be more loss than gain.
It is essential, therefore, at this stage that the
States take the initiative. There must be a deliberate,
well-coordinated plan regarding the establishment of the
necessary economic institutions, each at the right time.
The government must not only ensure security and provide
transportation and communication facilities; it must also
play the role of capitalist and entrepreneur, at the outset.
During the initial stages of economic development (i.e., at
the time when there are no people who have accumulated
adequate amounts of capital), the State must assume the
initial risks. Then, when enough people have acquired the
skills, the know-how, and the managerial abilities, gradu
ally the government would sell some of the firms or other
enterprises to individuals or groups, at low prices.
The government must be committed to undertake the
crucial task of directing political enthusiasm toward a
plan for economic development. The proposed institutional
changes would have no effect if there were no popular
55
enthusiasm in the country. The people must be educated and
attracted to take part in the program. They must realize
the extent of their responsibility for helping to raise the
standard of living of all. To rise out of their poverty,
will take much hard work and great sacrifice, but they must
be willing to pay the price for economic development.
Admittedly, this will require widespread support and a
united will in the whole community. Lewis aptly remarks:
Popular enthusiasm is both the lubricating oil
of planning, and the petrol of economic development,
... a dynamic;fprce that almost makes all things
possible. Even the most backward country will
progress rapidly if its government knows how to tap
this dynamic factor.12
Planning Strategy
In essence, one must conclude that the great need is
for economic planning--the structuring of programs that will
bring all elements together into good working relationships.
Planners may have to place emphasis on a strategy change, or
on an institutional framework that stimulates indigenous
entrepreneurship and "permits them to challenge traditional
13
output/quality mixes and production coefficients."
Planners must study the savings investment trends, as well
as the existing and possible future trends in those economic
12
W. A. Lewis, The Principles of Economic Planning
(London: Dennis Dobson, 1949), p. 12b.
13
Gustav Ranis, Planning for Resources and Planning
for Strategy Change (New Haven: Yale University Economic
Growth Center, Paper No. 67, 1967), p. 36.
56
institutions which can render accelerated, sustained and
rapid development with a minimum of waste and needless
duplication of services.
Concluding Statement
The entrepreneur and the entrepreneurial function
is the most fundamental and indispensable element in
economic development. The question as to how this element
can be aroused or .created has not as yet been clearly
demonstrated or theorized. Schumpeter considered the
entrepreneur to be an autonomous variable in his economic
model. According to him, an entrepreneur can spring up
from any social class in any country, be he peasant or
nobleman, poor or wealthy. He must be a visionary, yet a
practical man. He may be insecure or he may be satisfied
with the status quo. But Schumpeter was unable to specify
clearly which laws govern the wave-like emergencies of the
entrepreneur.
Other theorists have indicated that entrepreneurs
are people who have high achievement ideals. McClelland
suggests that these ideals are acquired during childhood
from stories, legends and proverbs. His theory is that an
entrepreneur could be created by devising stories and games
that would prepare children to aspire for greater achieve
ment when they grow up.
57
In support of an "n-achievement" theory is the
proposition offered by such men as Marx Weber that religious
ideals and teachings create high achievement in entrepre
neurs because the emphasis is on a prosperity ethic. The
danger that people are likely to believe in heavenly rewards
and so abstain from amassing any of the world's goods--that
they will stop short of high achievement--can be avoided by
emphasizing the belief that God will receive only those who
have accumulated wealth on earth. This is where some of
the Bantu proverbs with their admonition that "Iman ifasha
uwifasha" ("God helps those who help themselves") imply a
prosperity ethic.
. There is yet another thesis commonly associated with
Toynbee, the historian, that in any society there is a small
group of persons who recognize and respond to a challenge.
Once these leaders have the will, the dynamism and power to
pull the rest of the community along with them, they become
successful and positive, both as individuals and as a group.
The challenge may be in the form of external or internal
danger to the group. This theory does not suggest how the
challenge can be created to stimulate entrepreneurial
talents. It seems that a society would have to wait for
such a chance to come along, so that the discontented and
insecure could be triggered into action and become the
leaders of the rest of the community.
58
All of the theories point to one central factor--
that the entrepreneur forms a small and dynamic minority
which acts like "cells in a charged battery." They vital
ize and set the whole community into motion. However, the
entrepreneur will have little effect unless he can obtain
operational capital, and unless the institutional framework
is conducive to economic development.
It has been noted that there is sufficient evidence
of the existence of a prosperity ethic in the traditional
philosophy of life in all parts of East Africa. It was
observed that the indigenous African businessman does
possess entrepreneurial talent. What is lacking is commer
cial and industrial skills. It was also seen that the
chief cause of "African backwardness" in business has been
the.discouraging colonial policy, the uncooperativeness of
commercial banks, the cultural barriers which have prevented
Africans from learning by contact, and the unfair competi
tion carried on by expatriate businessmen.
An entrepreneur was seen to be a leader, character
ized by vision, the pioneering spirit, and the dynamism to
carry through in spite of obstacles. He does not neces
sarily possess personal wealth or capital. East Africa has
a store of potential entrepreneurs, especially among the
educated class. The "elites" have good incomes and live on
a comparatively comfortable scale. But they have to live
on a minute island in a vast ocean of poverty. The masses
59
of the poor have accepted the leadership of the elite, and
expect fruitful direction from their leaders. If the
leaders are to maintain their privileged status, they must
accept the responsibility of leadership toward prosperity
for all. And for this to be done, they must be community-
centered in their thinking, so that as entrepreneurs they
consciously act as the vanguard of their communities.
East African economy rests almost wholly in the
hands of foreign businessmen. Yet, these are the only
people in East Africa available to play the teacher's role.
They must be made to organize apprenticeship schemes. The
East African who aspires to a career as an entrepreneur
must take advantage of the knowledge of foreign specialists
in commerce and industry, and learn how to develop the
nation's resources. In this way, the gap will be bridged
in a relatively short time, especially if the young educated
men and women can seize the opportunity.
The challenge is great, and response is urgently
needed. The theory presented here is that positive response
has to start by establishing an appropriate institutional
framework. The State must assume the role of capitalist.
It has to create the preconditions for the implementation
of entrepreneurial function. Communication and transporta
tion facilities have to be increased; research and informa
tion must be made available to all who are able to benefit
by them. More significantly, the mobility of capital must
60
be ensured. This will require that the government undertake
the initial capital risks, influence the direction of indus
tries so as to prevent waste, promote the training of
technicians, and mobilize the whole community into a well-
motivated and hard-working society.
To be effective, all these actions must be done by
deliberate planning and a coordinated scheme in which only
those institutions which have the potential of effecting
large sectors of the economy will be established first.
This is to suggest that economist planners should not be
content with merely planning for sources and leaving
institutional changes to take their own courses uncontrolled.
There must be clear-cut planning for strategy change in the
interest of increasing efficiency and eliminating overlap
ping and waste. The National Trading Corporations, the
Development Finance Companies, the Eastern African Common
Market and other specialized financial institutions are
movements in the right direction. The following chapters
will examine the influence of these established institu
tions on the entrepreneur activity.
CHAPTER III
THE ROLE OF NATIONAL TRADING CORPORATIONS IN
STIMULATING EAST AFRICAN ENTREPRENEURSHIP
Introduction
National trading corporations have been established
in each of the three major East African regions with the
primary purpose of stimulating, promoting and encouraging
Africans to enter into commerce and industry. The Corpora
tions were founded with the realization that without public
support, Africans, individually or in partnerships, could
not survive the intense competition from Asians and
Europeans who for years have dominated commerce and industry
in this part of the continent of Africa.
This chapter undertakes to examine the goals, the
structures, the credit policie%and other commercial activ
ities of the corporations. The chief purpose is to see how
these activities affect East African entrepreneurs.
Comparisons are also made of policies and structures of the
two largest national corporations: the Uganda National
Trading Corporation (UNTC) and the Kenya National Corpora
tion (KNTC). Finally, an effort is made to provide a
61
62
foundation for the subsequent consideration of the problem
of planning and coordinating the activities of the national
trading corporations.
For the sake of clarity, each corporation is treated
separately, and then comparisons are made at the end of the
chapter.
The Kenya National Trading Corporation
Organization and Objectives
The Kenya National Trading Corporation (KNTC) is a
subsidiary of the Industrial Commercial and Development
Corporation (ICDC), owned wholly by the Kenya Government.
It was established in April 1965 through the initiative and
leadership of the Minister of Commerce and Industries, with
a small capital of £10,000.
The following objectives of KNTC give some indica
tion of the corporation's attempts to encourage and stimu
late African entrepreneurs. Among the major objectives are
the following:
1. To promote the participation of African
businessmen in the field of commerce by
providing wholesale credit facilities.
2. To participate in export and import trade by
channeling imported goods through African
traders.
63
3. To act as an export agent for certain goods in
those cases where State trading countries with
which Kenya has trade agreements require such
an arrangement.
4. To assist in lowering the living costs of the
majority of Kenya people by lowering prices of
essential consumer goods.
5. To establish and maintain an efficient and equi
table distribution network for essential food
stuffs and other commodities.
Under the leadership of Mr. Peter Kenyanjui, the
Company has been operated by a handful of young Kenyans.
It has expanded with great economic success and is introduc
ing many African entrepreneurs into commerce.
The Corporation is becoming the chief instrument for
the Government's policy of encouraging wholesale trade. To
date, it is the sole wholesale distributor of certain
commodities, especially those which are consumed mainly by
low- and middle-income Africans.
Through a program of selecting able Africans to act
as agents and distributors of selected crops and other
products, many Africans are enabled to enter trade. This
means that the Africanization of commerce is getting under
way. In the past, African businessmen had to pay cash for
whatever supplies they purchased. Very few Africans were
64
able to get the ready cash, and even fewer could obtain bank
loans. Moreover, prices were so high that no African could
make any sizable profit. Very often there were more losses
than gains. Under such circumstances, the African entrepre
neur was frustrated and his initiative was stifled. The
Corporation hopes to change this picture through its planned
credit schemes.
A good example, is the success with which KNTC has
introduced Africans to the wholesaling and distribution of
certain commodities, especially sugar. In August 1965, the
Ministry of Commerce and Industries directed the Kenya
National Trading Corporation to take over all the sugar
distribution and to Africanize the sector within a minimum
of time. The results are displayed in Table 1.
These figures show the tremendous success of the
Kenya National Trading Corporation insofar as the African
ization of the sugar wholesale market and distribution is
concerned. From Table 1 it is clear that there was an
increase in African participation from 28.9 per cent to more
than 91 per cent in just eleven months. There has been
comparable success with other commodities, such as maize,
meal, wheat flour, soap, matches, beer, certain textiles,
secondhand clothes, and cooking oil, particularly.
65
TABLE 1
AFRICANIZATION OF THE DISTRIBUTION OF SUGAR IN KENYA
Race
August 1965 30th June 1966
Number of
Distributors
Per Cent
of Trade
Number of
Distributors
Per Cent
of Trade*
African 81 28.90 205 91.08
Asian 80 57.92 15 3.86
European 11 5.48 7 1.45
Arab 6 1.89 8 0.96
Mixed 9 5.81 7 2.65
187 100.00 242 100.00
*Figures taken from a speech by Mr. P. Kinyanjui before the
Africa Club, Nairobi, on September 14, 1966.
66
Credit Schemes
Before the Kenya National Trading Corporation was
founded, very few Africans had ever taken part in wholesale
or retail business. The key handicap was that whoever
attempted to go into business was forced to purchase goods
with cash. The African had no access to overdraft facili
ties ; he could not get loans from any of the banks; and
under these conditions the African faced a hopelessly
frustrating barrier.
In order to change this situation, the Kenya
National Trading Corporation introduced a credit system
that was well-nigh ideal for the Africans. Under this
scheme, the approved African distributor was given a number
of bags of sugar or rice. He did not have to pay any cash
down. He merely signed for the goods he had taken, on
premise to sell them as quickly as possible, pay back the
money to the KNTC, and retain his profit. As soon as the
distributor paid what he owed, the Corporation issued him
more bags for further sale. Toward the end of 1966, KNTC
had issued commodity loans of up to £50,000.
This scheme made it possible for a substantial
number of Kenyans to get into wholesale and retail business.
A good number of them are making substantial profit.
(Appendix C lists some of the traders aided by the KNTC.)
67
Information about Prospective Distributors
At this juncture the question arises as to how
African distributors are appointed. The procedure goes as
follows:
Kenya National Trading Corporation sends circulars
to District Commissioners and Trade Development Officers in
each district for recommendation of traders who they think
have the financial capacity and management ability to sell
a particular product in that area profitably. Trade
Development Officers are also asked to complete forms
enclosed with the questionnaire giving such information as
name of the business; business address; bank; form of
business; whether a solo trader, a partnership, or a limited
company; type of business; whether wholesale or retail;
capital invested; value of fixed assets; value of stock of
goods held; monthly turnover; cash available; number of
employees; storage space; transport, and other pertinent
information.
Preliminary Application for Goods
Once the above information is received at KNTC
headquarters, application forms are sent to those traders
who, on the basis of recommendations and information avail
able, display the greatest potentialities for success. The
potential trader fills out the forms showing the amount of
goods required, the possible value to be purchased monthly,
68
-the trading area, and the nearest KNTC depot from which the
goods can be collected. This information is forwarded to
District Development Officers who make recommendations to
the District Commissioner. The District Commissioner
endorses the applications and passes them on to the KNTC
Officer at headquarters. The purpose of this preliminary
fact-finding stage is to investigate whether there is suffi
cient demand and market for a particular product. Further
more, it is the business of the district officers and Trade
Development Officers to know the number of local distribu
tors so that in their confidential recommendations they can
indicate whether the number of distributors exceeds the
local demand or whether added distributors are needed.
Double-Checking by KNTC
Field Officers
The Kenya National Trading Corporation goes farther
than accepting the reports from the traders, the Development
Officer, and the District Commissioner. A double-check is
carried out to verify the authenticity of the information
obtained from the various sources. This is done by sending
the Corporation's officers into the field. These investiga
tors take a random sample of about 60 per cent of the
traders in each district. The information which the KNTC
officers gather from the field is then correlated with the
information already obtained in each trader's file.
Bank Reports
With regard to the financial standing of applicants,
KNTC requests confidential reports from various banks. Once
again, the bank statements and the individual financial
statements are compared. In this way KNTC is able to assess
not only the applicant's finances, but also whether he is
creditworthy.
Assessment of Market Possibilities
and Limitations
For fear of oversupply, undersupply, or cut-throat
competition among the African traders, KNTC makes use of
information obtained from questionnaires to establish the
market trends of the area. Supply and demand schedules for
particular commodities are established. These schedules
serve as guideposts for KNTC officials in allocating
distributors to different locations. When it is found that
the demand is greater than the possible supply requested by
applicants, the distributors are advised to take more of
the commodity than they had originally requested. On the
other hand, if the supply is likely to exceed the local
demand, fewer applications are approved and whenever neces
sary the distributors are given a fixed quota.
It may be noted here that prices are mainly fixed
primarily by the usual market mechanism. Governments,
however, may intervene in certain circumstances. Common
instances are the prices of raw cotton, coffee, and tea,
70
all of which are fixed annually by marketing boards and
approved by the Government.
Appointment of Distributors
After thorough screening of the potential distribu
tors and a satisfactory estimation of the size of the
market, the Management Committee of KNTC appoints successful
applicants as distributors.
The appointed distributors are then sent official
order forms on which the traders fill out their immediate
requirements, purchases and relevant sale contracts which
bind them to take delivery of the goods made available to
them. The firm orders and contracts are returned to KNTC
headquarters^ accompanied by the trader's check or other
recognized legal tender acceptable to the Corporation. The
goods are then transported by the traders to their areas
for distribution and sale.
Two very important purposes are served by this
seemingly lengthy screening process: (1) it is sound
commercial practice and (2) the training and education are
of great value to the trader. The traders have to keep
books of accounts and stock records; they must at any time
be able to present their monthly sales and cash flows; they
must have a properly conducted bank account; and they have
to possess or rent satisfactory storage facilities as well
as having reliable means of transport--both essential to
71
the smooth and economical operation of a wholesale business.
Commercial Activities of KNTC
Kenya National Trading Corporation is not only
aiding Africans to get started in commerce* It also oper
ates as any other commercial corporation does whose primary
purpose is to make a profit. The Corporation has a unique
monopoly feature.- Whenever KNTC decides to incorporate a
crop or commodity into its business, the government declares
a monopoly for the Corporation. In this way the Corporation
originally was able to acquire a monopoly in the distribu
tion of sugar. In 1966, a total of 1,132,752 bags of sugar
with a value of £7,500,000 were handled by the corporation.
The monthly average consumption for the year was in the
range of from £650,000 to £700,000. For this particular
year, the Corporation earned a £99,000 commission on sugar,
while the sub-agents earned nearly £200,000.
Rice was the second crop to be imported and dis
tributed by KNTC. In its first year 4,000 tons were
purchased and distributed by African agents, for which a
net profit of £113,000 was realized by the Corporation.
The Corporation also handles some textiles; but
this line is still too complicated for Africans to operate
efficiently. Nevertheless, the Africans distributed
imported khaki drill, khangas, and secondhand clothes,
making a total turnover valued at about £500,000.
72
Similar successes were made in the distribution of
blankets and such other items as soap and vegetable oil.
The Corporation is also handling selected hardware, mainly
galvanized pipes, shovels, and door bolts. In addition to
these items, KNTC is now purchasing and distributing through
African agents such items as cotton, gunny sacks, tetron
suiting material, Chinaware, nylon raw materials, beef-by-
products, and canned fruit. Each of these has brought an
appreciable economic profit.
The Corporation itself is giving an excellent
example of an African-run Corporation engaging in large-
scale import-export transactions. During its first year of
operation in 1955-66, the Corporation handled the commodi
ties listed in Table 2.
In this table it is seen that the Corporation
handled business worth about £10,000,000 during the 1965—66
year. Such an amount realized in a single year is a sign
of success, especially when one considers that the Corpora
tion started with an initial capital of only £10,000. It
may be stated here that even though the figures for 1966-67
were not available at the time the writer was in Nairobi,
it was known that a net profit of more than £150,000 was
being made for the year.
The significance of this success is twofold: (1) it
signifies that the Corporation is making a remarkable profit
in its first year of operation, and (2) it gives ample proof
TABLE 2 73
KENYA NATIONAL TRADING CORPORATION IMPORT-EXPORT VALUE
FOR 1965-66
Quantity Value in £
Export:
Coffee
Tea
Sisal
Cotton
Import:
Rice
Textile: Second-hand
clothes
Khaki drill
Nylon raw material
Khangas
Ready-to-wear
Miscellaneous
Local Distribution:
Sugar
Textile nylon
Beef by-product
Miscellaneous
875 tons
1,000 tons
187 tons
8,623 bales
Total value
4,100 tons
510,739 pieces
2,110,588 yards
100,500 scores
850 pieces
1,132,750 bags
304,875
382,945
16,269
306,361
1,010,450
368,391
107,541
250,919
334,033
189,627
4,400
350
Total value 1,255,261
7,582,080
85,000
20,810
1,100
Total value 7,688,990
74
of the great potential of the African as a good businessman.
The Government, too, should be encouraged over having
initiated these Corporations to promote different commodi
ties, for these commodities earn revenues for the country
and form an ideal training ground for young African entre
preneurs'.
The training of entrepreneurs does not end at home.
The Corporation so far has imported from and exported to the
U.S.A., United Kingdom, France, Czechoslovakia, Australia,
Canada, India, Pakistan, United Arab Republic, China, Japan,
and Holland. Representatives of the Corporation have been
able to make business contacts in all these foreign capitals.
These contacts and the insights they furnish about how
business is run in other countries provide an excellent
training ground for the KNTC officers. This kind of "on-
the-job training" makes it possible for KNTC to accumulate
a number of young skilled entrepreneurs who eventually will
take up their own business ventures. In fact, it would
seem that the Corporation might well adopt a deliberate
policy of training a surplus of officers so that at any time
some of them could be advised to leave the Corporation and
to start a business on their own. Indeed, such people would
undoubtedly be given state support, at least during the
initial stages through extending credit, free consultative
services, and other necessary economic and advisory
assistance.
75
The Uganda National Trading Corporation (UNTC)
Purposes and Policies
The Uganda National Trading Corporation (UNTC)
succeeded the African Business Promotion Company by an act
of the Parliament in 1966. According to the National
Trading Act, the Corporation was founded to perform the
following functions:
- 1. To engage in commerce and trade.
2. To organize and effect exports and imports of
all such goods and commodities as the Board
may, with prior approval of the Minister, from
time to time determine, and the purchase, sale
and transport of the general trade in such
goods and commodities in Uganda or elsewhere,
3. To promote or aid in promotion of, subject to
proper and adequate safeguards to be determined
by the Board, any person being a citizen of
Uganda in trade and business.
4. To do all such other things as are incidental
or conducive to the attainment of the above
objects.
These goals, like those of the Kenya National
Trading Corporation, can be summarized by saying that the
main purpose of the Corporation is to try to break the
existing monopoly exercised mainly by Asians and Europeans
76
in the import-export business and in wholesale trade,
thereby enabling African businessmen to assume their right
ful role in the commercial and industrial sectors of the
country.
As mentioned earlier, the Uganda National Trading
Corporation did not start from scratch, as did the Kenya
National Trading Corporation. UNTC succeeded the earlier
African Business Promotion organization. Because of its
more extensive activities, the Corporation was granted an
additional working capital of £35,000. Most of the officers
of the original ABP continued to work for NTC. Similarly,
all the credit, assets and liabilities of ABP were trans
ferred to NTC.
Like the Kenya National Trading Corporation the
Uganda National Trading Corporation's chief functions are to
reduce the number of middlemen between the manufacturer or
the importer and the African wholesaler or retailer. In its
efforts to achieve this goal, the Corporation does some
import and export of certain lines for which it has a
monopoly. It has also established a number of loan and
credit schemes which qualified African entrepreneurs can
obtain to enable them to take part in the government-
sponsored commercial activities.
The Corporation so far has acquired a monopoly to
distribute rice, salt, ghee, onions and saucepans. Effec
tive as of March 8, 1968, the list has been expanded to
77
include imported beer and spirits, wines, cement, Ugil
shirts, fishnets, soap, cottonseed oil, groundnut oil,
steel windows and hoes. The list will undoubtedly be
expanded even more as time goes on.
The Corporation also serves as the chief clearing
house for the government. During the second half of 1967,
the Uganda Government appointed NTC to handle and to
distribute consumer goods imported from Russia and China as
part of a £1 million grant. Goods from Russia include
cars, oil products, ferrous rolled metal, textiles, news
print, tires and tubes, domestic appliances, soaps, washing
products, among others. Imports from China by a similar
agreement include textiles, light industrial products,
metal, foodstuffs, chemicals, machinery, instruments, arts
and crafts. In return for these imports, Uganda, through
the National Trading Corporation, exported coffee and cotton
to the two countries.
Handling of imported as well as locally-manufactured
goods has necessitated the acquisition and/or construction
of depots for storage and distribution-center purposes. The
Corporation already has built depots in Kampala, Mbale and
Gulu. Other depots are planned for Tororo, Soroti, Arua,
Hoima, Kasese and Jinja. And, given the necessary funds,
the aim is to have a depot in every major town.
In its activities of importing and exporting goods,
the Corporation has exerted a direct positive effect on the
78
African entrepreneur. In the first place, the African is
able to get goods at a reasonable price and thus has a
better chance of making a profit. Second, the building of
depots in each district should reduce transport expenses,
in which case the African businessman for the first time
should be in a position to compete with his Asian and
European counterparts.
It is planned that by the end of 1968, the Corpora
tion will be operating twelve depots. In each of these
depots there will be field officers, showrooms and stores.
When these depots are completed, it will be possible for
the Corporation to supply thousands of rural African traders
with the goods they need locally and at fair and proper
wholesale prices.
Under this arrangement, the long-endured, needless
and expensive middlemen should be reduced to a minimum.
Currently the African retailer purchases his supplies,
perforce, from his wealthier Asian competitors, and pays an
inflated price. The African semi-wholesaler gets the
supplies at a price that leaves very little margin for
profit. By the time he sells his stock to his fellow
African mini-retailer the latter has little chance of making
any profit. If he puts the price a little higher, the
customers soon find out that the prices are lower at an
Asian shop nearby, and they flock to the latter's shop,
leaving the African retailer with no customers. Even if the
79
Asian shop happens to be within a distance of five miles,
the Africans consider it worth the trouble to walk the
distance to save a few cents. This is the most common
reason for the failure of most Africans to maintain their
shops.
Should the NTC scheme get off the ground, the
African in rural areas should be able to purchase his
supplies at prices that are even lower than those the Asian
pays, since it is understood that the Corporation charges
for handling could be covered within a 5 per cent profit
margin. In this way the African entrepreneur will become
more competitive, and will be able to make enough profit to
expand his business.
African Wholesale Companies
A line of strategic importance with respect to the
building up of business skills and arousing entrepreneurial
outlook among African folk is the Corporation's policy of
initiating and encouraging the establishment of African
wholesale companies. It is the Corporation's purpose to
help the formation of at least one wholesale company in
each district. These companies consist of groups of
African traders who reside in the area. The wholesale
companies are not a part of NTC. But, once one is estab
lished, it becomes the agent and main distributing center
for goods that come under the monopoly of the Corporation.
80
The wholesale companies, in turn, are supposed to sell to
African retailers at a reasonable price.
The establishment of wholesale companies provides
yet another important training ground for budding entrepre
neurs. Each company is a separate entity. It has its own
directors, shareholders and a whole organization comparable
to any other company. When individuals or groups of small
businessmen band together to form a larger company. This
is a step toward acquiring commercial skills for all those
involved in the consolidation. These men and women soon
get into the habit of buying shares, and this is one of the
best ways of saving and directing funds to profitable
investment activities. Moreover, the very fact of being a
share-holder gives a man a feeling of responsibility. Such
a feeling encourages members to work harder for the success
of-the company. What is more important, the member traders
form the nucleus of their own wholesale company. Each of
them soon realizes that when he sells goods purchased from
his own company, he is making a double profit, one for his
own small shop and the other for the wholesale company of
which he is a shareholder. The chain reaction extends even
if these companies make a profit, the National Corporation,
too, makes a profit and is able to expand its aid to more
African entrepreneurs.
Among its many services, the NTC also aids in the
formation of wholesale companies by giving free legal
81
advice and by helping to draft constitutions. In the
absence of the Corporation, potential wholesale company
owners would be forced to pay high fees to various private
law firms. Indeed, as is seen in a later part of this
report, the Corporation provides technicians to perform
preliminary economic calculations; occasionally, its field
auditors are made available to African traders on request.
Sub-Pis tributor s
In addition to encouraging and initiating wholesale
companies, NTC appoints sub-distributors among individual
traders and companies. There are more than 36 of these
sub-distributors (see Appendix B). The Corporation dis
tributes commodities for which it has a monopoly to the
sub-distributors in such a way that some of the companies
take all of the commodities, while others take one or two
of the commodities. The reason for this seems to be that
where there is a large and well-established wholesale
company it can take all the commodities. On the other hand,
in an area where there are several equally small companies
each is given one or two commodities. A good example of
this is seen in the case of Karamoja African Wholesale
Company, Ltd., which has a monopoly on the distribution of
salt, ghee, rice and onions, while the Gulu wholesale
Traders, Ltd. distributes only ghee.
One major defect in the sub-distributor scheme is
that the Corporation requires the sub-distributors to pay
in cash before they can take goods. This requirement puts
a heavy limitation on the African traders. Most African
traders cannot afford to purchase enough stock. Those who
try, begin by taking a very small amount of supplies only
to find that after the whole stock is sold there is little
profit. What is even worse, the African often turns to the
Asian to borrow cash to pay for the goods. Since the Asian
can get overdraft or loans from banks, he gives the money
to the African to buy and sell the goods on condition that
the latter act as an agent. In this way, the African,
supposedly the owner of a shop, earns only a monthly
commission and the Asian pockets the whole profit.
Credit Schemes
Since 1964, when the African Business Promotion was
founded, five different credit schemes have been utilized
to help the African businessman. A total of some
£1,060,000 has been guaranteed, of which £1,041,000 was
actually issued. This fairly large sum was loaned to
African traders under the following schemes: credit guar
antee, bills discounting, hire-purchase, confirming and
bank loan guarantees. A word of explanation about these
schemes will show how each one operates.
83
Credit guarantee. The credit guarantee scheme is a
device to help the African trader to acquire sufficient
stock to carry on his business. It also helps to make the
selected traders creditworthy under the NTC guarantee.
1
Under this scheme, on approved application, an African
trader or small group of African businessmen is given a
guarantee of a certain amount of money. Having signed the
agreement, the trader is given a letter of introduction from
NTC to the nearest wholesaler of his choice. The letter
states the maximum sum of money which the NTC guarantees for
30 to 60 days, to cover the cost of supplies issued to the
trader. For this, the Corporation charges only a one per
cent commission.
Once the retailer or small wholesale African company
receives the goods, he is supposed to sell them as fast as
possible, pay back the money to the company from which he
obtained the goods, and take more supplies if he wishes. If
he fails to pay in time, the wholesale company charges the
NTC. The Corporation pays the wholesaler and takes steps to
see that the money is recovered. So far, defaults or
written-off bad debts have been a very small percentage.
This, however, does not tell the whole truth, i.e., that a
relatively high percentage fail to pay on time and that,
^Requirements for qualifying for credit guarantee
are discussed more fully in a later section of this chapter.
84
although the money is recovered eventually (either through
repayment in small installments, or through the sale of
securities), the fact remains that annoyance and inconveni
ence are caused by failure to pay at the agreed time.
A good illustration of this inconvenience is that of the
144,154.65.Shs. issued to 50 defaulting companies, only
28,406.95 Shs. has-^actually been received and the balance of
115,747.70 Shs. is being recovered at a slower rate. The
officer in charge of the NTC credit section was confident
that most of the money would be recovered. Nevertheless,
even taking into account the current amount of default,
which is about 6 per cent of the total amount issued under
the credit guarantee scheme, the situation looks encourag
ing.
Two questions now arise: What causes the African
traders to fail to pay back the loans on time? And what
are the real as well as the possible effects? The causes
for failure are basically of three main characteristics:
inflated prices, dead-stock or slow-moving goods; and unfair
competition.
The African retailer or small wholesaler company
takes his credit guarantee to an Asian wholesale company.
The Asian company, on the pretext that the goods are to be
supplied on credit, sells them to the African at a very
much higher or exaggerated price. The African has no other
alternative but to take the goods. He hopes that he can
85
put the price even higher and be able to pay back the loan
in time and also to extract some profit. Soon the trader
finds himself sliding backward, for the prices he is charg
ing are too high for the people in his neighbourhood to pay.
In sheer frustration, he must embark on a long-range pro
gram of delayed repayments.
Worse still, there are usually many Asian shops in
the same neighborhood. These men are not happy to see an
African intruder in their midst. Since the Asian is able to
get supplies at a lower wholesale price, the retailer can
afford to charge a much lower price than the African. As
soon as the customers realize the difference in prices, they
buy where the price is lower. The African trader begins to
lose business. He is in a dilemma: if he lowers his prices
he will take heavy losses; if he keeps his initial prices,
there will be no demand. In this way, foreign businessmen
place him under conditions of unfair and ruthless competi
tion that virtually slams the door against the African in
unprotected retail and wholesale businesses.
Coupled with inflated prices and unfair competition
is the problem of dead-stock. Practically every African
the writer interviewed gave instances of Asian wholesale
companies that issue goods for which they know there is no
demand. Once the goods are taken away, the trader cannot
dispose of them within the 30 or 60 day limit, no matter
how hard he tries. Obviously, he cannot pay on time.
86
The wholesale company which issued the goods makes its claim
to NTC which, according to agreement, has to pay in cash.
This practice of unloading "dead-stock" on the
unsuspecting African trader has had far-reaching effects.
In the first place, NTC must spend its meagre capital in
paying off the credit guarantee. In the final analysis, the
position of the Corporation is turned into that of agent for
the existing Asian and European wholesale companies. These
companies make good profits while NTC incurs losses. In
consequence, the Corporation cannot extend credit to as many
traders as it'needs to.
It seems that in actual operation, the credit
guarantee scheme is rather defective and that a revision is
called for. Instead of guaranteeing credits, the Corpora
tion should select a small number of goods, either imported
or manufactured locally. The Corporation should then be
given exclusive rights for distribution throughout the
country. The approved African wholesale companies would
then be supplied with the goods on credit.
Assuming that the Corporation would select goods
which are quick to sell and which are in high demand by
Africans, the Corporation could charge a proper uninflated
wholesale price, and the traders would have a much better
chance of disposing of the goods quickly and paying back the
loan on time. Even in cases of inevitable delays, the
Corporation would not incur such exorbitant losses as it
does now, since there would be a one-channel process.
Moreover, it would be possible for the Corporation to get
goods on credit from the manufacturers and supply them on
credit to the African wholesale distributors at a low
price. The latter, in turn, would dispose of the goods to
African retailers. Having purchased the goods at low
prices the retailers could also charge a relatively lower
price. This would draw in many African customers. With a
marked increase in effective demand, the retailers would be
able to make profit with which to expand their purchases
from the wholesalers. And the more the retailers buy, the
more the wholesalers will demand from NTC, and the more the
Corporation will be able to expand its credit facilities to
African traders.
It must be observed also that, if one can safely
assume that the wholesalers will choose to sell the goods
to retailers at a reasonably low price, the latter could
also sell the goods to their customers at a lower price.
This would mean that more Africans would be able to afford
the goods they now must do without because they cannot
afford to pay today's prices. Once the prices of goods are
within the means of the majority of the population, the
result will be an expanded effective demand, an increase in
profits for both retailer and wholesaler, and a financially
healthy National Trading Corporation.
88
Bills -discounting scheme. A second and very impor
tant credit scheme is known as the bills-discounting scheme.
This is a device to help African traders who are interested
in offering tenders for supplying materials to hospitals,
schools and colleges, prisons and other institutions.
Usually payments from such institutions are prohibitively
slow. No African trader can afford to buy goods or food
stuffs to supply, say, a hospital for the first month. His
funds are limited. When payment is delayed and he cannot
get an overdraft from any bank, he fails to continue supply
ing to the institution. And immediately his tender is taken
up by another company, usually by an Asian company.
Under the bills-discounting arrangement, NTC pays
90 per cent of any account to an African trader who produces
a certified delivery note or invoice. The institutions
which buy the supplies make direct payment to the Corpora
tion. When the money is received, NTC deducts 1.25 per
cent of the remaining 10 per cent as their commission and
the trader takes home the remaining 8.75 per cent.
In this way tendering becomes almost a cash-down
business. The African trader has the crucial requirement
for operational capital and he can maintain continuous
supplies to the satisfaction of his customer as well as the
sources of his supplies. Practically every trader inter
viewed in Uganda was appreciative of the scheme, and all
wished to see it extended to other lines of business,
89
especially to building and construction, a much more profit
able line, and one which so far is tightly monopolized by
the Asians and Europeans.
Confirming scheme. The confirming scheme is a
device to encourage and give aid to the few African traders
who are entering the import business. Most of these
Africans are not known outside the capital city of Uganda,
Kampala. Foreign exporters in London, New York, Tokyo,
Moscow, Paris or Peking would hesitate to accept an order
from an unknown African. This is partially due to the fact
that Africans are so new to the import trade that very few
of them understand the intricacies of foreign trade. They
cannot afford to pay the customary agency fees in foreign
capitals, and they lack sufficient securities to guarantee
payment on delivery.
To reduce these deficiencies, the African importer
passes his orders through NTC. The Corporation makes
contacts with its foreign agencies for the particular goods.
The order is made, and the Corporation guarantees payment on
delivery. Once the goods arrive, they are issued to the
trader on 60-day credit terms. Here again, the trader is
able to sell the imported goods without having to pay cash
down. The Corporation charges a 2 per cent commission and
a small interest is also paid to the bank which provides the
initial capital.
90
The number of Africans helped under this scheme is
understandably very small. Only seven individuals and
companies have made use of these facilities since 1964.
A total of £7,250 has been guaranteed, of which £5,471 was
actually issued, and £554 (or 10 per cent) is being recov
ered slowly. The latter item is not written off as a bad
debt, but was not paid within the required time.
The confirming scheme should lead to profitable
trade. If the African traders are well advised, and they
import fast-selling goods, they should be able to charge
competitive prices and make good profit without exhausting
their meagre capital. Indeed, it should be the duty of the
NTC officers to make local demand studies for various
products, and to advise the African importers concerning
purchases that would be profitable or not.
Hire-purchase guarantee. Under the hire-purchase
guarantee, NTC helps African businessmen to acquire trucks
or lorries which are essential to the progress of their
business. The Corporation acts as a guarantor in the hire-
purchase agreement, and finance companies extend credits.
The trader buys the vehicle at a low rate of interest and
is allowed to pay in easy installments. Before the trader
can be given the guarantee, however, he must pay at least
25 per cent of the value of the vehicle in cash, or trade
in another vehicle which is worth the required down payment.
So far, the Corporation has guaranteed credits
amounting to £94,915, of which £7,485 (about 8 per cent) is
under default. Defaults in this case often result from
accidents when the vehicle is involved in a collision or
poor handling. In every case the owner's expenses have
risen at a higher rate than his profits, and he has failed
to pay his installments. When this has happened, the
company which financed the purchase of the vehicle has
claimed its payment from NTC. The Corporation pays, and
then must try to recover the money through legal means or
by selling the trader's securities at auction. The 8 per
cent default rate, however, is not a total loss to the
Corporation, for most of the money is eventually recovered.
Moreover, considering the poor roads in some sections of
the country and the low general level of education attained
by the drivers, the present rate of default is to be
expected. The fact remains that these delays in payments
discourage the Corporation from expanding its credit facil
ities more liberally to African businessmen.
Commercial bank loans. In some special and excep
tional circumstances the Corporation acts as a guarantor of
loans made by the Uganda Commercial Bank to African traders
The trader must first be highly recommended by NTC official
and he will be considered only if other credit facilities
cannot suffice. Very few African traders have been helped
92
in this way, but it is nevertheless an indication of what
the Corporation can do to expand credit and loans to
Africans. This system enables a greater number of African
traders to become creditworthy so that eventually they might
be able to obtain loans from other banks, or even become
eligible to use the bank's overdraft facilities. Of even
greater importance, these loans would gradually reduce NTC's
burden of being the exclusive source of credit to the thou
sands of would-be entrepreneurs in Uganda.
Requirements and Qualifications
for NTC Credit Schemes
The four credit facilities (credit-guarantee, hire-
purchase, bills-discounting, and confirming scheme) are
extended to traders who qualify by fulfilling the following
r equir ements:
1. Credit-guarantee. A trader can qualify for this
facility if: (a) he has been in business at least one year;
(b) he is keeping his books well and shows a simple balance
sheet; (c) he shows a monthly turnover of at least 35 per
cent of stock in-trade, and the value of the stock is not
less than 4,000 Shs.; and (d) he has tangible securities in
the form of land, buildings or personal guarantee by a
person of high standing. In the case of corporate companies
life insurance policies must be held by all the directors
as additional security; and all major assets, such as build
ings and machinery, must be covered by insurance policies.
93
In this connection, several points command special
interest. The requirement that a trader must have been in
business for at least a year gives recognition to the need
of Africans for more experience as entrepreneurs; it also
indicates that many African entrepreneurs are just getting
started in commerce. At present, if a longer period of
experience were required, very few Africans could qualify.
On the other hand, a period of less than a year would be too
short to guarantee minimum efficiency.
A second point refers to the security requirement
which calls for a property or life insurance policy. This
requirement has a very important educational value, in that
African traders are beginning to insure not only their lives
but their valuable premises as well. This is valuable to
them in two ways: it encourages savings, and it gives both
borrower and lender a feeling of greater security.
A further point of significance is that, even if a
trader does not have insurance or other tangible securities,
he still can get a credit-guarantee if he is introduced by
a person of high standing in his community.
2. Hire-purchase guarantee. Under this type of
guarantee, the applicant must convince NTC officials that
he is a prospective transporter of his or other people's
goods. This he does by producing a copy or copies of
contracts. He is asked to outline fully all the activities
on which the vehicle is to be employed. The applicant must
94
raise 35 per cent of the cost of the vehicle before his loan
can be considered by.the corporation. And the vehicle is
not allowed to go out of the shop unless it is covered by a
comprehensive insurance policy for a minimum period of 18
months.
Similar to the credit-guarantee scheme, the hire-
purchase guarantee demands tangible securities: the owner
must have a life insurance policy, and the premises where
the vehicle is kept must all be insured.
3. Bills-discounting scheme. In order to qualify
for this scheme, the prospective applicant must be a man of
integrity and must show evidences that he is a supplier to
recognized institutions, such as prisons, hospitals, schools
and hospitals. And these institutions must support the
applicant in writing.
4. Confirming scheme. To obtain credit under this
scheme, an African trader would be venturing into imports
from abroad. He has to raise 20 per cent of the initial
payment and be able to finance the expenses involved in
opening a letter of credit. The goods to be imported must
not include those under the monopoly of NTC. Furthermore,
the prices must be low enough, and the market for the goods
must indicate sufficient local demand. As in the other
types of credit guarantees, there must be tangible securi
ties, including insurance policies and/or a guarantee by a
known person of high standing.
95
These requirements have significant implications.
They offer a form of training through practice. Would-be
African traders are required to form good habits of saving
by buying insurance, and by having to finance up to 25 per
cent of the initial cost of purchases. The trader, thus,
must choose to sacrifice certain luxuries in favor of
accumulating the money he needs for his business ventures.
The requirement that he be introduced by a man of high
standing in the community is a feature that creates in him
a sense of integrity among the businessmen.
We have already noted that these credit schemes have
enabled a number of Africans to enter the field of retail
and wholesale trade. The number of Africans who have
entered the field of commerce is still very small; never
theless, it is on an upward trend. In all, the NTC has so
far extended credits under different schemes amounting to
almost 23 million Shs. Before this, in its three years of
operation, the African Business Promotion put more than
20 million Shs. worth of business into the hands of the
Africans through short-term financing schemes. The schemes
being continued by the NTC are showing substantial success.
Since 1958, when only about 18 per cent of the nation's
retail business was handled by Africans, it is estimated
that today the ratio has risen to 42 per cent, representing
trade worth some £23 million; and the figure is steadily
rising. These trends are encouraging, particularly where
96
we reckon that barely ten years ago the volume of trade in
the African hands was almost nil.
Other Services
The Corporation plays another fundamental role in
offering various services which could be grouped as training
and commercial discipline. There is a trade supervisor in
each district whose chief responsibility is to advise
district businessmen on technical problems. He convenes
traders' meetings, explains the policies of the Corporation,
and helps those who want to form joint companies or whole
sale companies. The supervisor also functions as the
coordinating officer between the traders and Corporation
headquarters. The Corporation also employs a small number
of field auditors whose services are available to traders
who invite them. These auditors, it appears, would be more
useful if all traders who utilize the Corporation's facili
ties were compelled to have their books audited annually.
Probably of even more fundamental importance are the
seminars which the Corporation organizes. Occasionally
seminars are held for traders at District headquarters.
In these seminars, specialists (including those from the
United Nations) teach such subjects as industrial law,
human relations, financial management, budget control,
marketing and sales techniques, elementary bookkeeping and
other relevant topics. Average attendance is between 40
and 50 businessmen.
As a supplement to all these services, the Corpora
tion publishes a monthly bulletin which deals with many
subjects of interest to trader s^. Articles range from the
activities of the Corporation, to such matters as the
techniques of starting a shop, how to run a hotel, how to
prepare a balance sheet, how to detect slow-selling or fast-
selling lines, various credit systems and the advantage of
credit facilities, how customers are best handled, advertis
ing techniques, and related topics. The bulletin also
publishes a monthly summary of trade reports, pointing out
such things as the major exports and their prices, and the
balance of payments situation of the country. These publi
cations are supplied free of charge and are written in a
style that any trader who had completed six years of school
could read and understand.
Commercial Activities
The Corporation, UNTC, undertakes business activi
ties for small commercial firms, and engages in import and
export enterprises. The imports comprise mainly such
consumer products as ghee, butter, salt and rice. Its
exports consist largely of commodities which are manufac
tured locally. Chief among these are sugar, hoes, cement,
gypsum, textiles, Ugil shirts, matches, iron-sheets, Uganda
batis, steel rods and steel bars, waragi (local spirit of
the vodka class) and other items.
: The major imports are summarized in Table 3, which
!lists the commodities} the countries of origin, and the !
I I
lvalue of the commodities.
I |
i Imports amounting to more than 6 million Shs. were
|made during the first half-year the Corporation was in
existence--a truly remarkable record.
On the export side, the Corporation's chief market
is Congo and Rwanda. The leading export commodities are
locally-manufactured sugar, cement, hoes, salt and pangas.
|As is shown in Table 4, in its first nine months of opera
tion the Corporation's exports reached a value of over
2 ^
6 million Shs. It is seen in this table that only four
'major commodities account for most of Uganda's exports for
this period. But the total volume of exports to Congo,
Rwanda and Burundi reached about 6.5 million Shs. Other
goods not shown in Table 4 included gypsum, textiles, Ugil
shirts, matches, iron-sheets, Uganda batis (iron-sheets), i
i
steel rods and steel bars, and waragi.
There can be no doubt that the volume of trade
between Uganda and Congo-Rwanda could have been larger if
it had not been for the military troubles which disrupted
the Eastern Congo. Once the region returns to normal, NTC I
I should expect to enlarge its exports.
■ - - |
■ 2 '
National Trading Corporation, "National Trading
Corporation Exports," Monthly Bulletin No. 10 (Kampala:
Government Press, 1967), p. 3. During the last ten months j
of 1967, NTC exports to Rwanda, Burundi and Congo amounted I
to more than. £323 ,700 ........ .........
TABLE 3
UGANDA NATIONAL TRADING CORPORATION IMPORT VALUES,
JULY-DECEMBER 1967
i
Commodity
Country of
Origin
Total Value,
July-December 1967
Value in Shs.
i
!Pure Ghee Substitute Holland 260,080
Butter Ghee Kenya 282,600
I Butter Ghee Tanzania 141,300
Kimboga Ghee Kenya 513,165
Salt Aden 350,500
;Rice Cambodia 4,440,000
Rice India 84,040
1 Total 6,071,685
Source: Files of the Uganda National Trading Corporation,
Kampala, July-December 1967.
100
TABLE 4
UGANDA NATIONAL TRADING CORPORATION EXPORTS TO
RWANDA AND CONGO (K) , JANUARY-DECEMBER 1967
Commodity
Main Export to Rwanda
^ & and Congo (K)
January-December 1967
Value in Shs.
Sugar 1,078,005.00
Hoes 429,200.00
Cement 327,975,00
Salt 212,100.00
Pangas (big knives) 6,000.00
Total 2,053,280.00
Source: National Trading Corporation, "National Trading
Corporation Exports, Monthly Bulletin No. 10
(Kampala: Government Press, 1967), p. 3.
101
These activities of import-export enterprises have
had some positive influence on the African traders. In the
first place, the few Africans who are engaged in the trade
are making appreciable profits. In the second place, and
possibly the most important is that these people are being .
exposed to valuable training in international business
transactions. The value of this training also applies to
the NTC officials who are doing most of the transactions,
because these are young men, most of whom have acquired
university degrees, or the equivalent in actual commerce,
economics and business experience. These men, too, are
getting first-hand experience in the skills of commercial
management. One can assume that, as the Corporation expands
its activities, more opportunities will be available to more
young officers to join the Corporation. In time there
should be an accumulation of men and women who have acquired
industrial skills. From this pool it can be expected that
some entrepreneurs will have the requisite knowledge to
branch off and open up their own enterprises.
To date, it may be observed, the Corporation is not
exerting the influence that was expected of it. It seems
that its purchasing policies are not engineered to the
maximum stimulation of African entrepreneurs. This is so
mainly because the Corporation pays cash to the manufac
turers. In turn, the private traders must pay cash to the
Corporation before their orders can be approved. This
102
requirement puts a heavy limitation on the amount of pos
sible African participation in the business. In fact, in
Uganda exporters are almost exclusively Asians and
Europeans. The only exception is a very small, indeed
negligible, number of Africans who belong to the Uganda
National Traders Association. The Association takes part
in the export business so the few Africans do have some
small share in the trade. There is no doubt that if the
Corporation's purchasing policy were different, many more
Africans would enter the import-export business.
Concluding Statement
National Trading Corporations are some of the major
post-independence economic institutions in East Africa.
The Corporations have influenced*, the African entrepreneur
in two major areas: (1) through direct financial assistance
in various forms of credit and loan facilities; and (2)
through education. The latter consists of many forms, such
as offering workshops and training courses periodically,
initiating habits of saving, arranging for people to learn
on the job, encouraging such commercial activities as
organizing wholesale companies, and coming into contact
with import and export problems.
The Corporations were founded by the respective
governments to promote the participation of African
103
businessmen in the field of commerce by providing wholesale
and credit facilities. This has been probably the most
strategic development for improving the economy of East
African nations since the end of colonial rule. Neverthe
less, to date, African businessmen have had very limited
access to commercial banking and credit facilities. In
order to change this situation, a number of credit schemes
have been devised. In Kenya, successful applicants are
given credit in kind. This scheme has been successfully
employed in the distribution of a number of basic commodi
ties, such as sugar, more than 90 per cent of which is now
in African hands. In Uganda a number of credit schemes
have been devised--the credit guarantee, the confirming
scheme, the hire-purchasing scheme, and the discounting
scheme. Each is aimed at assisting Africans to participate
in commercial activities. A substantial minority of
Africans have utilized the facilities to start a good
number of small African wholesale and retail companies.
The credit guarantee scheme in Uganda appears to be in need
of revision. The scheme places the African entrepreneur in
the position of agent for the European or Asian wholesale
companies with which he deals, which means that the foreign
wholesaler pockets most of the profits, while the benefits
which accrue to the African are small. Wholesalers devise
other sharp practices, as well, for seeing to it that the
African shopkeeper cannot dispose of his goods in time to
repay his loansr ,The Corporation must pay his obligation,
and the businessman becomes one of the defaulters. Under
this system, neither the businessman nor the National
Corporation benefits. In spite of certain imperfections,
however, there is no doubt that the credit schemes have
stimulated and encouraged African entrepreneurship.
One of the key features of the National Trading
Corporations is their monopoly privileges. The government
decides on the type of commodities which are to be dis
tributed exclusively by the Corporation throughout the
country. Such a decision is usually made by the Minister
of Commerce and Industries, and the Corporation does the
implementation. Once the decision is made, any businessman
who wants to sell the goods must apply through the National
Corporation. As a matter of policy, only Africans are
allowed to act as agencies or sub-distributors. This policy
has encouraged many African entrepreneurs to take part in
commercial activities. The monopoly feature is aimed at
enabling Africans to obtain goods at low competitive terms.
In both Uganda and Kenya the list of commodities included
under monopoly distribution is growing larger and larger.
This policy of monopoly acquisition is so strategic
that it requires long-term planning. This requires, as an
initial step, a careful study of the types of goods which
can easily be handled by African entrepreneurs. Then, more
complicated lines of trade should be studied, and put on the
waiting list. At the same time, would-be African business
men should be surveyed, and given training for specific
lines of trade. As soon as a number of African businessmen
have acquired and demonstrated some skills, more compli
cated lines of trade can be made available to them, utiliz
ing the NTC's distribution monopoly. With a long-term plan
and a systematic scheme of acquiring monopoly distribution
of fast-selling goods, all done steadily, step by step, a
greater number of entrepreneurs can be expected to enter
commercial and industrial activities.
Purchasing policy is another feature which is in
need of revision. At present, the National Trading Corpora
tions must pay cash down for any commodities they receive
from manufacturing firms. This means that all African
sub-distributors must also pay cash to NTC before their
orders can be approved. Very few African businessmen have
the cash to pay for all the goods they need. And so, the
African trader makes arrangements for delayed payments to
the wholesaler, who turns out to be an Asian. Unable to
meet his payments on time, the African then becomes merely
an agent for the Asian--and the purpose of the law is
defeated.
It seems that one solution to the problem would be
for the National Trading Corporations, themselves, to get
the supplies from the manufacturing firms on credit terms.
The distributors would make better profits; in turn, the
106
Corporations through commission charges would accumulate
more capital which it could use to expand its activities in
the stimulation of African entrepreneurial participation.
Indeed, the National Trading Corporations have
become significant commercial institutions. They are engag
ing in import and export enterprises, and in the distribu
tion of locally-manufactured goods. The two corporations
have already shown an over-all profit, and there is every
reason to believe that they will expand their activities
and exert a powerful influence on the national economy.
The deeper value of their success lies in the example which
the Corporations are setting for the African entrepreneur,
demonstrating the value of education, planning and personal
integrity.
On the whole, if one should be asked whether the
National Trading Corporations are achieving their goal of
promoting the participation of Africans in commercial enter
prises, the answer would be, without qualification, Yes.
Considering the small capital available to the Corporations
and the short period since their foundation, the number of
Africans who have entered commerce through the help of the
Corporations is encouraging.
In brief, the National Trading Corporations perform
a twofold role in improving entrepreneurial activity among
Africans: (1) they serve as catalysts, and (2) they furnish
training grounds for acquiring commercial skills. The role
of catalyst is performed by giving financial assistance
under various credit schemes. With respect to their second
role, they perform a vital training function by organizing
courses, offering free consultant services, and organizing
and promoting African wholesale companies. There is no
doubt that these corporations have a great potential for
the stimulating entrepreneurship in East Africa. What is
badly needed before the Corporations can expect maximum
results is planning both the long-term and short-term
coordination of their various functions and activities.
When this is done, there will be less waste, more profit,
and greater participation by Africans in commercial and
industrial enterprises.
CHAPTER IV
NATIONAL DEVELOPMENT CORPORATIONS AND THEIR INFLUENCE
ON ENTREPRENEURSHIP IN EAST AFRICA
Introduction
In each of the three partner states of the East
African Community there is a national development corpora
tion which is wholly owned by the respective state. The
corporations share the common basic goal of facilitating
the industrial and economic development of the countries
through the initiation, assistance, and expansion of indus
trial and commercial enterprises. The three corporations
are the Uganda Development Corporation (UDC), founded in
1962; the Industrial and Commercial Development Corporation
(ICDC) of Kenya, founded in 1964 to succeed the Industrial
Development Corporation (IDC) which began operations in
1955; and the National Development Corporation (NDC) of
Tanzania, established in 1965 to succeed the Tanganyika
Development Corporation (TDC), formed in 1962.
In their efforts to reach the expressed objective
of facilitating and promoting economic development in their
regions, the Corporations fulfill several roles, acting as
108
109
catalysts, as injectors, and as educators.^ As educators,
the Corporations assist in the formal and practical training
of young nationals preparing to invest in small-scale or
large-scale industries. The over-all emphasis is on assist
ance to small-scale industries and on making loans and
credits available so as to stimulate indigenous entrepre
neurship; as investors, they contribute to the increase of
national income through a diversity of investments in their
subsidiary and associate companies.
In this chapter are examined the structure, organi
zation, credit and loan policies and role in stimulating
small-scale industries of the Corporations. Toward the end
of the chapter, attention focuses on the problems of plan
ning and coordination.
Establishment, Goals and
Organizational Structure
Each of the National Development Corporations was
established by the state through an act of parliament or
legislative ordinance. The Uganda Development Corporation
~ h?he catalyst role: This is done by assisting other
companies to make maximum contribution, creating new enter
prises, giving consultative services to small firms, making
market studies, and providing other technical knowledge.
The injector role: This consists of providing the
necessary finances to subsidiaries, buying shares and
issuing loans to both small firms and large firms, and
attracting foreign capital.
The educator role: Training in entrepreneurship is
given through apprenticeship and on-the-job training, and
through scholarships given to young members of their staffs
to go abroad to acquire technical skills..
(UDC), the oldest of the three, was established in 1952 by
a special ordinance known as "The Uganda Development
Corporation Ordinance, 1965." The Industrial and Commercial
Development Corporation (ICDC) was established in 1954 under
the title of Industrial Development Corporation. The
National Development Corporation (NDC) was established by
act of parliament in July 1962, its name having been the
Tanganyika Development Corporation. The change in name in
1964 to NDC was in accordance with political changes occur
ring when Zanzibar joined the mainland.
Goals
In general, the primary purpose of these Corpora
tions is to initiate and promote economic growth within the
respective countries. The UDC was established to facilitate
the industrial and economic development of Uganda by promot
ing, assisting, financing, establishing, and managing
various commercial and industrial undertaking. The chief
objective of the Tanzania National Development Corporation
is to
. . . facilitate and promote the economic develop
ment of Tanganyika; [it may also] facilitate and
promote the participation of other persons and
bodies in the economic development of Tanganyika.^
The chief object of the ICDC is to "facilitate the
industrial and economic development of Kenya by initiation,
2
National Development Corporation, 1966 Report
(Dar es Salaam: Government Press, 1966), p. 6.
Ill
assistance or expansion of industrial, commercial or other
Socialism the Corporation's stated business aim is as
follows:
ICDC will help African industrialists and traders
to expand their operations in order to participate
more fully in the development of this country;
ICDC will assist in the construction of shopping
centers and industrial estates;
Private money should be made available for
investment through loans to ICDC;
ICDC is to promote the over-all Africanization
of industry and commerce.^
The goals of these Development Corporations empha
size the stimulation of indigenous entrepreneurial activi
ties . The ICDC policy of constructing shopping centers and
industrial estates is geared to assisting Africans to be
able to rent subsidized shopping premises. The loans and
credits are mainly available to Africans who could not
otherwise obtain these facilities from commercial banks.
Indeed, the objective of ultimate Africanization of industry
and commerce seems to be the core of all East African devel
opment corporations. This objective is stated clearly in
their development plans which cite the revised Kenya Five
3
Industrial and Commercial Development Corporation,
Report for 1965/66 (Nairobi: Government Press, 1966),
p. 'TX T .------------
3
undertakings or enterprises in Kenya."
According to the Sessional Paper No. 1 i African
4
Ibid
112
Year Plan of 1966. This Plan describes the main objective
of the National Development Corporation to be:
... to make marginal projects economic and to
assist and promote those projects which would form
a spearhead of Africanization of the industrial
and commercial sectors of the economy. . . .
Where possible, ICDC financial participation will
take the form of loans, so that ownership of the
enterprises will rest with those who manage them.
. . . The entrepreneurs will still have the option
to buy up ICDC shares as their firms progress and
they have accumulated savings of.their own.5
Organization
Generally the organizational structure of the three
Corporations is the same. On the top is the Board of
Directors, a body which varies from five to twelve members
and is responsible for policy making. Directors are
appointed by the Minister of Commerce and Industries.
Immediately under the Board is the General Manager who is
directly concerned with general running and day-to-day
business decisions of the corporation. There are then such
operational divisions as Finance and Accounts, Investment
Management, Development, Secretarial, and Small Industry
and Marketing sections. Chart I exhibits the general
outline of the Uganda Development Corporation.
Although the general organizational patterns of the
three Corporations are similar, there are slight
5
The Ministry of Economic Planning, The Five-Year
Development Plan of Kenya (1964/70) (revised edition;
Nairobi: Government Press, l9bb), p. 242.
113
CHART I
TYPICAL ORGANIZATIONAL STRUCTURE OF THE
NATIONAL DEVELOPMENT CORPORATIONS
Marketing
Section
Small
Industry
Section
Development
Division
Secretarial
Division
Investment
Management
Division
Board of Directors
General Manager
Finance
and
Accounts
Division
114
differences, especially in the case of the ICDC, which has
created special departments for such functions as loans,
technical services, extension service, a project feasibility
section and an industrial estate section. A project feasi
bility section is also included in the National Development
Corporation's organizational structure. This section is, in
fact, a type of planning unit within the corporation. The
section has the responsibility of receiving proposed invest
ment projects, making feasibility studies, and recommending
to the board of directors whether or not the project justi
fies the proposed investment. In short, this section does
not provide a coordinated plan for the whole corporation.
The counterpart of the project-feasibility section
in the National Development Corporation is the development
division, which receives proposals either from the govern
ment or from one of the Corporation's subsidiaries or
associates, sifts the projects, makes feasibility studies,
and finally makes recommendations. It is observed that
none of the Corporations has instituted a planning division.
With no special division to do the planning, whatever is
planned must be done on the spur of the moment. Little is
done to achieve coordinated plans for either long-run or
short-run enterprises. The small-industries section is
responsible for receiving loan applications from entrepre
neurs of small businesses. This section examines them for
technical suitability and then makes its recommendation to
115
the UDC board for approval or rejection. In Kenya, this
responsibility is carried on by the loans department of the
ICDC.
Each of these corporations has a system of subsidiaries
and associate companies which give the Corporation its
distinguishing features. Subsidiary companies may be owned
only partly by the Corporation. In the case of partner
ships, the Corporation owns at least 51 per cent of the
shares. In the case of associates, the Corporation may own
up to 49 per cent of the shares, but no more. It is through
these subsidiaries and associates that the Corporations
contribute most in various investments, and this is where
they exercise the roles of injector and catalyst, as is
seen in a later part of this chapter.
Stimulation of Entrepreneurship
Stimulating the spirit of entrepreneurship among
Africans is essentially the key goal of development corpora
tions. This was clearly evident in speeches and reports of
most of the officers surveyed in this study. Among the
chairmen and general managers of the corporations who were
interviewed was Mr. Smei Nyanzi, Chairman of UDC, who
stated: "The most important long-term objective is the
development of latent entrepreneurship among as wide a
116
section of the community as possible." Mr. J. B. Wanjui,
Executive Director of the ICDC, in an interview, expressed
the view that the basic purpose of the Corporation was to
arouse indigenous entrepreneurship. He felt that the major
bottleneck so far had been the lack of qualified entrepre
neurs, rather than the lack of money or capital.
The 1963/65 report of the Industrial and Commercial
Development Corporation states:
Many of the companies assisted have had problems
of technical and management know-how and have also
suffered from lack of entrepreneurship spirit. In
the future, therefore, the Corporation, in making
loans, will pay greater attention than it has in the
past, to stimulating the spirit of entrepreneurship
by educating African entrepreneurs in the field of
industrial management and in technical s k i l l s .7
Credit Facilities
In their efforts to put their major objective into
practice, the three development corporations have devised a
number of credit and loan schemes. Let us take the ICDC
first. Between 1961 and 1964 the Corporation provided
loans to small industries totaling £23,199. In 1965, loans
of £51,000 were issued to small industries. In 1966, these
loans totaled £76,833. Thus, for the years from 1961 to
£
S. Nyanzi, in a speech on "The Role of Small
Business in a Developing Country" (Kampala: November 1967),
p. 2. (Unpublished.)
7
Industrial and Commercial Development Corporation,
"Reports and Accounts," Annual Report 1965/66 (Nairobi:
Government Press, 1966), p. TT~.
117
1966, a total of £141,343 was put into the hands of African
businessmen.
This may appear to be a large sum, but it is actu
ally very small considering the great number of applicants
who made formal application. Table 5 gives an indication
of how small the loans were in relation to the demand, the
amount offered being only £45,000.
Table 5 reveals that about one third of the appli
cants were approved. The main reason for this small figure
is that many applicants lacked managerial skills and others
were located in areas where the demand for the proposed
goods was too small to warrant a commercial loan. Further
more, when one takes into account that these applicants
came from the whole of Kenya, the total of 139 successful
applicants is woefully small. One must also reflect upon
the implications of the fact that ignorance on the part of
the businessmen was the major cause for failure to obtain
loans.
During the following year, however, the picture
changed. The number of applicants in 1966 was 335 instead
of 139 who applied in the previous year. Of the 335 appli
cants , 108 were approved for cash payment to the suppliers
of goods and 17 applicants were approved for assistance
partly by cash payments and partly by giving credit guaran
tees to suppliers. It is encouraging to note that within a
relatively short time the number of Africans who come up
118
TABLE 5
COMMERCIAL LOANS RECEIVED BETWEEN
NOVEMBER 1964 AND JUNE 1965
Province
Applications
Received
Number
Approved
Number
Rejected
Number
Deferred
Nairobi 20 7 7 6
Western 9 4 4 1
Central 25 12 8 5
Rift Valley 25 7 14 4
Nyanza 25 7 13 5
Eastern 28 8 15 5
Northern 2 2 - -
Coast 5 3 2
—
Total 139 50 63 26
Source: Industrial and Commercial Development Corporation,
"Commercial Loans Received Between November 1964
and June 1965," Industrial and Commercial Develop
ment Corporation Annual Reports, 1963-1965
(Nairobi: Government Press, 1965), p. 2 ~ .
119
for loans increased by about four times and the amount of
approved loans are increasing accordingly. There was an
increase of nearly 390 per cent of approved loans during the
1965/66 financial year compared to the previous year.
Table 6 shows the upward trend in the amounts of loans
approved and issued to African businessmen.
This table shows a tremendous upward trend in the
amount of loans approved and issued to African businessmen.
In each case there was an increase of more than four times
the amount issued during the previous year. It appears
that in the commercial sector the task of arousing African
interest in commerce and industry is on a steady course
toward success. It can be expected that in the near future,
whatever bottleneck is encountered will be a shortage of
loan funds, rather than of competent entrepreneurs. On the
other hand, it may be assumed that more and more African
businessmen will be achieving credit worthy status, in which
case they will be eligible for loans and possibly for over
drafts from commercial banks.
In the case of the Uganda Development Corporation
the efforts to interest Africans in commerce were delegated
to a separate department known as the African Business
Promotion, or ABP. The performance of this promotion in
issuing loans to Africans is summarized in Table 7. In
mid-1967, APB was changed into a separate corporation known
as the National Trading Corporation (NTC), which was
120
TABLE 6
COMMERCIAL LOANS APPROVED AND ISSUED, AND
COMMERCIAL CREDIT GUARANTEED, 1964-1966
(in £)
Approved Issued
Financial
Year
Annu
ally
Accumu
lated
Annu
ally
Accumu
lated
COMMERCIAL LOANS:
1964/65 28,500 28,500 14,328 14,328
1965/66 110,687 139,187 73,611 87,938
COMMERCIAL CREDIT
GUARANTEED:
1964/65 2,000 2,000
1965/66 7,000 9,000 —
- —
Source: Industrial and Commercial Development Corporation,
"Loans and Credits," Industrial and Commercial
Development Corporation Annual Reports, 1966
(Nairobi: Government Press, 1966) , p. 1 5 " !
TABLE 7
AFRICAN BUSINESS PROMOTION PERFORMANCE RECORD
January
1965
December
1965
October
1966 1967
CREDIT GUARANTEES:
Number of credit guarantees 14 194 324 268
Total value £10,175 £74,475 £126,800 £85,460 (issued)
Amount operative 4,375 42,325 72,572
Tea guarantees - 110 110
Default on all guarantees Nil -
Less recovered from sale of assets -
710
531
179
1,549
n.a.
n.a.*
n.a.
Credit-guarantee commission received 13 117 n.a.
Income to date
27 . 525 1,564
CONFIRMING:
Number of confirming approved 4 11 13 7
Total value £6,000 £11,750 £13,750 £7,250
Amount operative 2,284 3,709 4,752 5,471
Commission received Nil 551 411 n.a.
Defaults Nil Nil Nil 3
DISCOUNTING:
Number of traders discounting operative 1 35 48 n.a.
Amount operative £507 £19,581 £24,839
Commission received 3 64 n.a.
Commission and interest received to date 29 669 2,148
HIRE-PURCHASE SCHEME:
Number of guarantees on vehicles - - 22
30
Total value - £41,898 £94,915
Commission received - - 2,090 (39 applicants)
*n.a. = figure not available
Source: Files of African Business Promotion, 1965-66. Note: the title of African
Business Promotion was changed to National Trading Corporation during the
second half of 1967.
122
discussed fully in the preceding chapter.
Inspection of Table 7 reveals an upward trend in
issued loans similar to that experienced by ICDC. The.
number of credit guarantees increased frorti 14 in 1965 to
324 in 1966, with a value rise from some £10,000 to more
than £100,000. The confirming scheme rose from £6,000 to
£13,750, and the value of the discounting scheme rose from
£507 to £24,839. The exact figures for 1967 were not avail
able, but there are indications that the general trend was
a corresponding rise in both the number of applicants and
the amount of money guaranteed or issued.
Small Industries
Aiding the growth of small industries is another
strategic activity of the Development Corporations.
Africans are merely beginning to be introduced to industrial
organizations, and it is right that they should start with
small and simply-structured industries, with the hope of
being so successful that they will be able to go up to
larger and more complex industries. As in the case of the
commercial credits and loans, the general trend is toward
an increase in both the number of small industries and the
amount of loans issued or guaranteed by the Corporations,
as part of their assistance to small African-owned indus
tries. These industries range from food processing, hunting
and fishing, electrical engineering, to the manufacture of
123
footwear and hairdressing.
Table 8 shows that during the period 1965-66, the
Uganda Development Corporation was giving assistance to 64
different small industries to the amount of £98,051. The
loans are administered by the Small Industries Development
Fund.
The kinds of industries that were assisted give some
insight into the stage that has been reached by present-day
Africans. The largest number were issued to manufacturers
of food products. This is the type of industry which the
African can understand easily, and one in which he can earn
some profit in a relatively short time. Next is carpentry.
This industry does not need much formal education nor does
it require large sums of money to operate. The carpenters
make fast-selling parts, especially such building materials
as doors, windows, and simple chairs. Next in order is
tailoring. Again, this enterprise does not require higher
formal education, and sewing machines are not prohibitively
expensive. Moreover, there is an ever-increasing demand
for simple shirts, dresses, and trousers, now that more
people are earning higher incomes.
Another industry with a fairly large number of
entries is block making. This is in the building sector,
and the number of buildings being constructed annually is
on a sharp increase. Here again the required capital is
small. What is needed is clay soil, a supply of water, and
TABLE 8
U G A N D A DEVELO PM ENT CORPORATION, SM ALL INDUSTRIES DEVELO PM ENT FUND:
PERFO R M ANC E R EC O R D
Num
Number of
Organizations
Amount
of Loans
Advanced Number Number
Amount,
of Loans
Written
Number
of Loans
Repaid
Amount
(£) of
Loans Out
ber Industry Code Single Others
<£)
Existing Failures off (£) in Full standing
2 Agriculture 010 2 2,776 2 1,376 1,224
6 Forestry,
Hunting and
Fishing
021
-099
5 1 10,444 4 2 9,044
2 Mining 122 1 1 3,750 2 2,921 1 170
10 Manufacturing of
Food Products
200
-219
5 5 21,524
OO
2 454 11,212
1 Knitting 232 1 1,180 1
•
565
1 Manufacture of
Footwear
241 1 2,780 1 2,158
5 Tailoring 243 5 3,936 1 4 1,557 109
9 Carpentry 250 7 2 6,885 5 4 1,073 1 5,184
1 Cane Weaving 260 1 450 1 450
2 Printing 280 2 1,012 2 988
1 Tannery 292 1 370 1 350
9 Carpentry 250 7 2 6,885 5 4 1,073 1 5,184
1 Cane Heaving 260 1 450 1 450
2 Printing 280 2 1,012 2 988
1 Tannery 292 1 370 1 350
2 Manufacture of
Chemical
Products
312
-319
1 1 1,175 2 1,000 1
4 Block Making 331 2 2 8,214 3 1 15 7,258
2 Pottery 339 1 1 2,186 2 1,535
2 Light Engineering 350 2 550 2 190
1 Electrical
Engineering
370 1 94 1 47
4 Boat Building 381 1 3 4,133 3 1 1 419
3 Repairing Motor
Vehicles
384 3 3,777 2 1 1,487 1 1,408
3 Construction 400 2 1 21,887 2 1 4,750 1 2,487
1 Petrol Retailing 612 1 443 1 332
1 Transportat ion 714 1 235 1 235
1 Hair Dressing 845 1 250 1 27
64 46 18 98,051 36 28 16,638 6 43,387
Source: Files of the Development Division of the Uganda Development Corporation, Kampala, 1966. For the
year 1965-1966.
125
a few wooden frames. Those in the industry, given suffi
cient financial assistance and the necessary training,
could well develop into local building contractors. Better
still, they could become both builders and real estate
brokers. It is interesting to observe that a few Africans
are endeavoring to manufacture chemical products. This
industry received £1,175 which is one of the large shares.
In Kenya the same industry received aid of more than £4,000,
which was about 4 per cent of the total loans issued.
In Kenya, the Industrial and Commercial Development
Corporation aids small industries through a Revolving Loan
Fund. During 1963/64 more than 21 different small indus
tries were given financial and consultative services. The
firms listed in Table 9 indicate the magnitude of the
Revolving Loan Fund.
Table 9 shows a substantial increase both in the
number of industries and in the amount of loans issued by
the Revolving Loan Fund. In June 1963 only fourteen indus
tries were served, while by June 1965, just two years later,
the number had risen to forty-five. The capital value had
increased by about £40,000. The figures for 1966/67 were
not available but it is understood that the number was
double that for 1965. An interesting diversity of indus
tries is displayed in Table 9, including such enterprises
as dry cleaning, timber milling, bakeries, and radio
manufacturing.
TABLE 9
INDUSTRIAL AND COMMERCIAL DEVELOPMENT CORPORATION: ASSISTANCE GIVEN
BY SMALL INDUSTRIES REVOLVING LOAN FUND, 1963-64
(in £)
Assistance given
Industry -----------------------------------
______________ June 1963 June 1964___ June 1965
1 . Angina 93 62 33
2. Thika General Workshop 936 891 758
3. Elijah Muoyi 902 729 738
4. Nduata Saw Mills 3,278 3,399 3,522
5. New Bakery, Ltd. 1,520 1,282 1,098
6. Muya Muoka
894 942 997
7. Sheriff Abdulla Sabin 316 223 245
8. Wagathanga Kiganda Co.
1,045 1,066 1,163
9. Kiragati Saw Mills 953 980 1,346
10. Karatina Timber Saw Mills 616 1,038 897
11. Mbuni Dry Cleaners, Ltd. 3,638 3,338 2,898
12. Matathia Saw Mills 1,089 1,338 1,414
13. African Radio Manufacturing Co. 268 1,327 3,879
14. Mugumo Manufacturing Co., Ltd. 906 944 1,025
15. Albert Chubuga - 474 512
16. African Diesel Injection Service -
995 1,300
17. Fort Hall Paper Mills -
312 3,678
18. Jonah Gichuhah - 499 581
19. Kenya Rubeni General Mills Co. -
259 380
20. Umoja Manufacturing Co. 712 783
21. Nahashon Gakwa and Co. -
2,459 2,360
22. Babu Kaman - - 814
23. Githae Kigum - - 386
18. Jonah Gichuhah -
19. Kenya Rubeni General Mills Co.
-
259 380
20. Umoja Manufacturing Co. - 712 783
21. Nahashon Gakwa and Co.
-
2,459 2,360
22. Babu Kaman - - 814
23. Githae Kigum - - 386
24. Umoja Enterprises, Ltd. -
- 1,000
25. Ramongi Furniture House
- 628
26. Mbooni Timber Mill Supply -
- 1,266
27. Maendereo ya Wanawake
- -
435
28. Mi s s Sal ome Wambui
- - 973
29. Nairobi Typewriter Sales
- - 5,380
30. Timothy Joseph Kaman
- - 314
31. Gideon Waweru
- - 668
32. Wangoma Ogwani and Co.
_
- 683
33. Jared Wachira Macharia - - 507
i
34. Joseph Matibo Muoki - - 496
35. Jonah Kaman Macharia - -
989
36. Usaf Haji Abd. - -
1,015
37. Muiru General Stores
- - 1,000
38. Stephen Mwanaki - -
983
39. Meru Bakers
- - 1,008
40. Romanus M. Kihame and Co.
- -
954
41. Lagarus Kibaru Runyenjes
- -
954
42. Gesima Power Mills Co. - -
949
43. Christopher Nabangole - -
499
44. Felix R. M. Kitonga - -
1,004
45. Mbuni Dry Cleaners, Ltd. - -
1,933
Total amount of loans issued 16,454 23,199 54,541
Source: Industrial and Commercial Development Corporation, "Small Industries
Revolving Loan Fund,1 1 Annual Report, 1964~65 (Nairobi: Government
Press, 1965), p. 9.
126
127
It is encouraging to observe the steady increase in
the number of small industries during the past six years,
and this means a corresponding increase in the number of
African entrepreneurs brought into the business and crea
tive mainstream. Furthermore, the amount of money which
passes through African hands in the industries is a vital
educational tool, as well as an effective weapon. Now that
more Africans begin to understand the various ways of
monetary transactions and the techniques of making one
shilling produce at least three more, then the government
can be sure that a new generation of industrially-minded
people has been born in East Africa.
Table 10 exhibits the amount of money that has been
handled by African entrepreneurs through the Small Indus
tries Loans of ICDC. This table indicates a tremendous
increase in the amount of financial capital which has been
put into African-owned and operated small industries.
Approved loans increased from £2,000 to more than £50,000,
the accumulated amounts rising from £2,000 to some £109,000.
Similarly, the amount actually issued annually increased
from £100 to £84,000.
Inspection of these figures reveals two interesting
and important facts. In the first place, the fact that
barely £100 was issued in the form of loans in 1961 means
that very few Africans were engaged in industrial activi
ties either because there were no opportunities or because
128
TABLE 10
SMALL INDUSTRIAL LOANS APPROVED AND ISSUED,
1960-1966
(in £)
Financial
Year
Loans Approved Loans Issued
Annually Accumulated Annually Accumulated
1960/61 2,000 2,000 129 129
1961/62 14,500 16,500 8,829 8,958
1962/63 8,650 25,150 8,812 17,770
1963/64 6,625 37,775 7,240 25,010
1964/65 26,910 58,685 16,975 41,985
1965/66 50,257 108,942 41,959 83,944
Source: Industrial and Commercial Development Corporation,
"Small Industrial Loans," Industrial and Commer
cial Development Corporation Annual Reports, 1960-
1966 (Nairobi: Government Press, 1966), p. 10.
129
the men were ignorant and had neither experience nor talent—
possibly both. On the other hand, such a tremendous
increase in just five years indicates that all that was
lacking was opportunity, and not talent. In fact it is
patently evident that the entrepreneurial potential has been
there all along, and that its existence was covered over by
ignorance, lacking only the opportunity to show itself.
This is not to contend that all Africans have the requisite
industrial skills to engage successfully in business
ventures.
Indeed, it must be realized that the principle
behind these loans is to arouse African interest in commerce
and industry with the particular purpose of giving them
practical training in industrial techniques. This is well
expressed in an ICDC report which states:
The Corporation in advancing loans is now able
to pay greater attention than in the past to stimu
lating the spirit of entrepreneurship by educating
African industrialists in the field of industrial
management and Industrial Skills.8
A question may now be raised as to what lines of
industries the Africans are entering. The answer to this
question will make it possible to postulate possible future
trends. In order to answer the question we shall attempt a
classification of the industries which are receiving aid
from the development corporations. For the sake of
8Ibid.
130
simplicity we shall use a table compiled from the Kenya
Small Industries, assisted by the Industrial and Commercial
Development Corporation.
Table 11 shows three outstanding lines: (1) metal
working, engineering and electrical products which account
for almost 50 per cent of all the loan assistance; (2) food
industries, comprising about 16 per cent; and (3) saw mill
ing and wood products which account for about 14 per cent
of the total capital provided in loans by the Small Indus
tries Loan Fund. The basis for emphasizing these lines is
clear. The demand for food products is certain to continue
expanding. The people who are engaged in this industry may
develop to be managers of larger food-processing and packing
companies, and some may organize large supermarkets in the
growing cities. Saw milling and wood products is another
line where a large number of people can be employed and the
trade is simple enough to be easily comprehended. Modern
house construction is expanding so rapidly that those in
the trade should be able to make profits and accumulate
sufficient capital to expand into more complex enterprises.
There is no question about the strategic position of metal
working, engineering, and electrical products as a major
growth industry. This class of industry requires relatively
more capital and it also requires higher level of prelim
inary formal education. But it has great educational value
insofar as the acquisition of industrial skills is
131
TABLE 11
CLASSIFICATION OF SMALL INDUSTRIES
BY SMALL INDUSTRIAL LOANS,
AND THE LOANS
1960-1965/66
ISSUED
Loans Issued
Type of Industry Amount in £ Per Cent
Food 17,050 15.5
Textiles, Clothing, Fibres 6,849 6.5
Footwear, Leather, Hides and Skins 2,250 2.0
Saw Milling and Wood Products 14,685 13.5
Chemicals 4,250 4.0
Mineral Products (non-metallic) 6,750 6.0
Metal Working Engineering and
Electrical Products 54,108 49.5
Miscellaneous Products 3,000 3.0
Total 108,942 100.0
Source: Industrial and Commercial Development Corporation,
Small Industries, Industrial and Commercial
Development Annual Report, 1960-19bb and Annual
Report 1965-6b (Nairobi: Government Press, T9£6) ,
pT 13^
concerned.
Formal Training
To supplement practical training the development
corporations have devised formal educational schemes whereby
scholarships are given to promising young Africans to
acquire needed technical skills. Some trainees go abroad
to various advanced countries where they spend several
years attending formal technical courses. Once these
trainees complete their courses they return to their respec
tive countries, but are not obligated to join the Develop
ment Corporation.
During 1964-65, for instance, of the fifty trainees
who completed courses with the support of the UDC, 43 per
cent took employment with the corporation and its subsidi
aries. This means that 57 per cent of the qualified men
and women in different industrial techniques joined other
private firms. Of those who completed their courses in
1966, 75 per cent joined UDC or UDC subsidiaries and asso
ciates. The Corporation may not like to see that those
whose education it financed failed to join it, but the
country benefits because these people either attempt to
establish their own small industries where they apply their
acquired skills, or are employed by other firms which
otherwise could not afford to finance the required training.
Like any other investments, large sums of money are
133
spent annually on these technical trainees by the Corpora--
tions. For the last eight years, the UDC has been spending
appreciable amounts of money each year on scholarships, as
is displayed in Table 12. If one goes back as far as 1959,
the Corporation has spent about £132,000 on scholarships.
These figures show that up to 1962 only a few thousands were
spent on the training scheme. But in 1963 the amount of
money invested in manpower training shot up to over £30,000
and it has since remained at that level.
TABLE 12
UGANDA DEVELOPMENT CORPORATION SCHOLARSHIP EXPENSES,
1959-1966
(in £)
Year Amount
1959 3,857
1960 2,944
1961 2,155
1962 4,421
1963 31,457
1964 30,000
1965 30,000
1966 30,000
Source: Uganda Development Corporation, "Scholarship
Expenses," Annual Reports of Consecutive Years
1959-1966 (Kampala: Government Press, 1959-
1966).---
134
The other Corporations, the Industrial and Commer
cial Development Corporation and the National Development
Corporation of Tanzania, have not developed comparable
scholarship programs. Nevertheless, in both countries
several institutions are offering courses in industrial
skills. In 1965 the Kenya Industrial Training Institute
was opened at Nakuru. This institute is supported and run
by the Governments of Kenya and Japan. In April 1966, the
first group of 60 students completed their courses in
industrial management; some joined the ICDC and its
subsidiaries, while others went into other private, non
governmental firms.
Of even greater importance to the stimulating of
the entrepreneurial spirit is the high percentage of those
who completed their training who aspired to open up their
own private businesses. From those who graduated in 1966,
the Industrial and Commercial Development Corporation
received applications for financial assistance for 21
different projects. A relatively large number of the
projects were approved, which indicates that the Corporation
had more confidence in the trained men. It seems likely
that, as years go by and more and more men gain industrial
skills through such institutions, there will be an accumula
tion of entrepreneurs who have acquired the requisite skills
for industrial management. Since these will be more
eligible for assistance from development corporations and
135
from commercial banks, it can be hoped that a group of
highly skilled entrepreneurs will be growing up in the
country. Once this happens, it can confidently be said
that economic growth has begun in East Africa.
In addition to the specialized industrial training
centers similar to the one at Nakuru, there is a Management
Training Advisory Center in each country. These centers
are partly financed by the United Nations and the concerned
governments. The United Nations provides qualified
personnel who have had long experience in industrial and
commercial management. The Uganda, Kenya, and Tanzania
governments select young educated men to understudy the
expatriates in their specialized technical skills. These
centers periodically offer courses to businessmen on shop
management, bookkeeping, industrial engineering, marketing
and sales, entrepreneur training, supervisory training,
metal engineering, electrical engineering, automotive
engineering, woodworking technology, and mobile workshop
■ *
training.
136
The System of Subsidiaries and
Associate Companies
Each of the three national development corporations
has a number of subsidiary and associate companies. A sub
sidiary company may be entirely owned by the Corporation,
or the Corporation may own a minimum of 51 per cent of the
company's shares. As for an Associate Company, the Corpor
ation may own not more than 49 per cent of the shares. It
is through this system of subsidiary and associate companies
that the Corporations are able to assume their greatest
role--that of injector catalyst. This is done by providing
capital in the way of buying shares and diversifying
investments through feasibility studies and approving
different projects. The associates and subsidiaries are
also chief attractors of foreign capital into East Africa.
Of even greater value, these companies provide ideal oppor
tunities for training on the job for potential indigenous
entrepreneurs.
By the end of 1966, the Uganda Development Corpora
tion had a total of 46 subsidiaries and associate com
panies, of which ten were associates and thirty-six were
subsidiaries. The companies fell into eight divisions:
agriculture; banking, finance, and commerce; building
materials; food products and beverages; hotels and tourism;
milling and mining exploration; other industries, including
chemicals, textile, and steel; and property companies.
137
By the same year (1966) the National Development Corporation
of Tanzania had 52, of which 23 were associates and 29 were
subsidiaries. Appendix H shows that at the end of 1965 NDC
had 25 companies, 12 of which were subsidiaries. The
figures given in Table 36 also show that NDC had issued
loans to the value of £922,388, while the total value of
the Corporation's share of reserves and equity holdings in
these companies was more than £9,700,000. The ICDC of
Kenya, on the other hand, had only 14 member companies.
These companies are well coordinated with the parent
Corporation. UDC provides a good example of precise coordi
nation. Here the Chairman of the Board of Directors is
also the Chairman of the Boards of all other 46 member
companies. At the same time, senior members of the UDC
take part as members of the Board of Directors for the
subsidiaries and associates. In this way, a smooth flow of
information is promised. The other two Corporations (NDC
and ICDC), until recently, were much smaller. At the time
they were visited they were in the process of coordinating
their activities on lines similar to those of the UDC,
A glance at the subsidiaries and associates of
these Corporations indicates that they furnish diversifica
tion of the economic activities in the region. To cite a
few examples: (1) in agriculture there are tea companies,
livestock companies, ranching; (2) in finance there are
banking companies, holding companies, and development
138
finance companies; (3) in building there are cement and
asbestos manufacturing companies; (4) in food products,
there are distilleries, meat packers, milk processors,
grain milling, fish marketing companies, and tobacco
processing; (5) in tourism there are hotels and National
Park lodge companies; and (6) in mining there are such
internationally known companies as the Williamson Diamond,
Ltd., Copper Mining of Kilembe, and diamond cutting at
Iringa. The list extends to metal and enamelling, steel,
textile, chemical, garment, paper and fishnet manufacturing
and hundreds of others.
Diversification of Investment Resources
It was desired to determine just how the National
Development Corporations have achieved such a great diver
sification of investments through their associates and
subsidiaries. This is done partly by buying shares and
partly by offering loans of short- and long-term duration
to support approved and economically sound projects.
Table 13 shows the NDC investments for 1965, and gives an
indication of the spread of its investments.
Table 13 shows that the largest share of NDC invest
ments went into mining. This is understandable, since the
Williamson Diamond Mines has for a long time been one of the
major sources of foreign exchange. The other sectors of
greatest importance were agriculture and agricultural
139
TABLE 13
NATIONAL DEVELOPMENT CORPORATION
INVESTMENT COMMITMENTS, 1965
1965 Total
Investments Investments
Inherited and and
Sector Investments Commitments Commitments
(Per cent) (Per cent) (Per cent)
Mining 59 14 41
Agriculture 18 16 17
Agricultural
Processing 15 16 15
Hotels and Tourism 4 10 7
Textiles - 12 5
Finance 2 13 6
Miscellaneous 2 19 9
Total 100 100 100
Value £4.7 mill. £3 .2 mill. £8.0 mill.
Source: National Development Corporation, "Investment
Commitments, 1965," Annual Report, 1965
(Dar es Salaam: Government Press, I9b5).
140
processing, hotels and tourism, textiles, and finance.
Since 1966 the trend has been toward greater diver
sification and a wider spread of investments. During 1966
the NDC made investments in 21 projects worth nearly £8
million, with a spread shown in Table 14. This table indi
cates that agriculture and agricultural processing still
take the lion's share of the investment funds. This time,
however, mining took a relatively small share, while finance
and textile received a substantially larger share of the
Corporation's investment fund. In the textile industry,
two new companies were started: the Mwanza Textiles, Ltd.,
and the Friendship Textile Mill, Ltd. The Mwanza Textiles,
Ltd. is to be run and operated by NDC and the Victoria
Federation of Cooperative Union which holds 40 per cent,
and the Amenital Company which represents promoters, con
sultants and managing agents, the Sodefra of Paris, and
Textilconsult of Vaduz. Two French banks, the Credit
Lyonnais and Banque Francaise du Commerce Exterieur,
extended a credit of just over £3 million for a period of
ten years with a two-year moratorium. The Mill is expected
to begin production at the end of 1968 with a capacity of
24 million square yards per annum, its total initial cost
being estimated at £4 million.
The Friendship Textile Mill, also established in
1966, is to be operated by NDC and the Government of the
People's Republic of China under a loan agreement. The
141
TABLE 14
TANZANIA NATIONAL DEVELOPMENT CORPORATION
INVESTMENT SPREAD, 1966
Sector
Number of
Projects
Investments
(in Shs.) Per Cent
Agriculture 4 2,387,640 15.3
Agricultural Processing 7 4,100,340 26.3
Mining 1 600,000 3.9
Hotels and Tourism 3 1,090,000 7.0
Textiles 2 3,020,000 19.3
Finance 1 3,500,000 22.5
Miscellaneous 3 890,020 5.7
Total 21 15,588,000 100.0
Source: Tanzania National Development Corporation,
"Investments," Annual Report 1966 (Dar es Salaam:
Government Press, 196b,).
142
mill was expected to begin production in 1967. The produc
tion capacity is expected to be 24 million square yards per
annum but the cost will be about £2.5 million. The two
companies illustrate the.role of the developing corpora
tions in attracting both foreign capital and foreign
technicians.
Another clear sector has taken a substantial share
of investment fund— this is the sector of finance. Here is
an indication of the emphasis on encouraging small industry
and the tendency to issue loans to the associate and sub
sidiary companies when they display a serious need.
The number of subsidiaries in NDC has increased
from 12 to 19 companies, while associates have increased
from 13 to 18 companies. The sum of £110,500 was spent in
issuing loans to approved projects carried on by the sub
sidiaries. At the same time over £1,218,000 was spent on
shares of various subsidiary companies. During the same
financial year the Corporation invested £6,615,542.5 in
loans to associate companies while it invested a total of
£3,825,757 in shares.
The Uganda Development Corporation's diversifica
tion of investments is clearly indicated by the number of
its subsidiaries and associate companies. The list is
growing larger annually. It is not necessary at this point
to enumerate all the approved projects, loans and shares
the Corporation has in each of the companies. It will
143
suffice to show the magnitude of investments by going back
to 1960 and seeing how the Corporation deploys its
resources, and the growth of its investments. Table 15
shows the resource deployment and the growth of investments.
This table also reveals that the Corporation's investments
have increased steadily and that the amounts are substan
tial. The investments have risen in six years by about
£5 million. This amount of operational capital is appre
ciable, especially when one considers that the corporation
is a public institution and that this is not a wealthy
country.
The trend of steady investment increase is also
shown in the case of the ICDC, where in six years the volume
increased from £343,018 to £1,012,556, an increase of almost
£700,000. The same trend is seen in the spread of invest
ment among all sectors. ICDC figures are displayed in
Table 16, which shows that ICDC investments in activities
other than the Development Finance Company of Kenya,
consisted of 23 per cent in equity, 49 per cent in the form
of loans to large and medium size projects, 13 per cent in
loans to small industrial projects, and 15 per cent in
loans to private local traders.
It is particularly important to note the increase
of loans to small industries, which rose from about £8,000
to £65,000 in just six years. This is an indication that
the policy of assisting African entrepreneurs in their
144
TABLE 15
UGANDA DEVELOPMENT CORPORATION; DEVELOPMENT OF
GROUP RESOURCES AND INVESTMENT GROWTH,
1960-1966
(in £)
Year
Deployment of
Resources Investments
1960 8,253,000 7,475,000
1961 8,407,000 8,006,000
1962 8,507,000 8,441,000
1963 8,757,000 8,874,000
1964 8,969,000 9,190,000
1965 9,658,000 10,640,000
1966 10,207,000 11,590,000
Source; Uganda Development Corporation, "Investment
Growth," Annual Reports (Kampala: Government
Press, 1960-1966).
TABLE 16
INDUSTRIAL AND COMMERCIAL DEVELOPMENT CORPORATION:
INVESTMENT GROWTH, 1960-1966
(in £)
Investment 1960/61 1961/62 1962/63 1963/64 1964/65 1965/66
Equity Participation (excl. DFCK) 127,000 127,000 103,000 103,000 103,000 117,682
D.F.C.K. Shares - - -
50,000 100,000 500,000
Large and Medium Size Loans 216,018 197,475 267,375 280,724 269,562 253,531
Small Industries Loans - 8,038 16,153 22,102 37,535 64,510
Commercial Loans
- - - -
13,824 76,833
TOTAL 343,018 332,513 386,528 455,826 523,921 1,012,556
Source: Industrial and Commercial Development Corporation, "Investment Growth,
1960-66" (Nairobi: Government Press, 1966).
145
efforts to enter industrial enterprises has been successful.
Another significant item is the 15 per cent share of loans
that were issued to private traders in commerce. This type
of loan was not issued prior to 1964/65. The increase from
£14,000 to £77,000 is very impressive, by all standards,
and indicates that greater numbers of Africans are entering
commerce and industry, and that with proper training they
are able to plan and implement economic projects.
Attracting Foreign Capital and Technicians
Another strategic feature of the Development Corpo
ration in as far as creating entrepreneurial spirit is their
attraction of foreign capital and foreign technicians. This
is done mainly through the associate companies and by the
subsidiary companies and direct recruitment of skilled
technicians.
To cite a few examples: The Tanganyika Instant
Coffee Company, Ltd., which has a capacity of 700 tons of
instant coffee per annum, is receiving technical assistance
from J. Lyons and Company, Ltd. The Company has trained a
Tanzanian staff for the factory at their establishment in
England. With the Tanzania Diamond Cutting Company at
Iringa there are experienced cutters from Brazil and
Belgium. These are now training an increasing number of
Tanzanians. Toward the end of last year, the company was
147
employing 180 cutters, and it is expected that in a couple
of years there will be a sufficient number of skilled local
diamond cutters to fill the needs of the company.
In the textile industry, an appreciable number of
technicians work in the Uganda Nyanza Textile Company and
the two companies in Tanzania. The Mwanza Textile, Ltd. is
receiving both its mill and technicians from France.
Experienced consultants and technicians will be coming from
the Sodefra of Paris and the Textilconsult of Vaduz. The
Friendship Textile Mill, Ltd. is employing 80 Chinese
technicians under whom 1,900 Tanzanians are learning their
skills.
In Uganda, where the textile industry was estab
lished many years earlier, a substantial number of Africans
have already acquired skills. Expatriate engineers and
others with specialized skills are still needed, but it is
easy to foresee that in the near future there will be
enough skilled African textile employees to carry on the
job without outside personnel.
What seems to be required, especially in the tex
tile industry, is for the governments to follow a policy
similar to that of the Japanese during the Meiji regime.
The Meiji government imported from France both the machinery
and the skilled technicians they needed to carry on the silk
industry. The technicians were given local employees to
train as assistants. These trainees were well informed of
148
the government's plan of having them replace the foreign
technicians as soon as possible. The trainees knew that
they must do their best to watch and learn every skill.
This led to the eventual Niponization of the silk and
textile industries.
In a chipboard project, the NDC is hiring techni
cians from West Germany. In a tannery project, the Corpora
tion has obtained Swedish technicians from Aktiebolaget
Ehrnbergs and Sons, Laderfabrik Company. The Mtwara Casten
Company is operating in conjunction with the Casten Company,
Ltd. of Japan. The Japanese Company has provided finances
to buy the machinery and technicians to play a leading part
in the operation of the machines.
The East African Motor Assemblies, Ltd., which is to
be established in Dar-es-Salaam, is to be run by foreign
skilled technicians supplied by several large companies:
the Benbros Motors, the British Motor Corporation, and
others. The Assemblies Company will be dealing mostly in
commercial vehicles, tractors and agricultural implements.
Kenya companies have drawn both foreign capital and
foreign technicians. The Kenya Canners, Ltd. was formed in
1948; but in 1965 a majority of its shares were acquired by
the California Packing Corporation of San Francisco. The
California Corporation provides executive and technical
management of the company. The company is canning pineapple
at Thika in Kenya, mainly for export. The ordinary shares
149
of Kenya Toray Mills, Ltd. are held by several Japanese
companies--the Toyo Rayon Company, Ltd., Mitsui Company,
and Chori Company. The company is processing, finishing,
and printing imported loomstate nylon fabrics. Production
started on a small scale in 1965 with the expectation of
weaving and printing over 10 million linear yards of
synthetic fabrics (other than rayon) each year. The East
African Cables, Ltd., a subsidiary of ICDC, is wholly owned
by Enfield Cables, Ltd. of England. This company is manu
facturing a wide range of electric cables in Nairobi. The
total capital cost of the project when completed is esti
mated at £245,000, of which the Development Finance Company
of Kenya is committed to provide £90,000 in a secured loan.
It should be mentioned that in Uganda there are
such companies as the Steel Corporation of East Africa,
Ltd.; the Associated Match Company; the Associated Paper
Industries, Ltd.; the Uganda Fishnet Manufacturers, Ltd.;
and the Development Finance Company, all of which should
add significantly to the gross domestic product (GDP) of
the country and to the accumulation of local industrially
skilled men and women. These are but a few of the many
companies which have attracted large sums of foreign capital
and great numbers of foreign technicians into East Africa.
150
The Development Finance Companies: Associates
As one example of how the National Development
Corporations attract and draw foreign capital into the
region we take "Development Finance Companies" which are
found in each State. The Development Finance Corporations
form arrangements whereby several foreign governments and
development institutions cooperate with the East African
governments through their National Development Corporations
to provide financial assistance to various economic proj
ects in the region. The major partners in this venture are
the Commonwealth Development Corporation representing the
U.K.; the West Germany Development Corporation together
with ICDC or NDC(T) or UDC; and the Nederlandse Overzeese
Financierings Maatschappij N.V. The Netherlands participa
tion is very recent; it is now a shareholder with the
Development Finance Corporations of Kenya and Tanzania.
The main objective of the Development Finance
Corporations in these cooperative undertakings is ". . .to
create an internationally-based development organisation
operating on commercial lines to supplement the efforts of
g
the Government to bring about economic development."
These companies support the expansion enterprises in agri
cultural industries, tourism and hotel investments. They
g
Development Finance Company of Kenya, Annual
Reports and Statement of Account 1965 (Nairobi:' Government
Press, I%5), p. 3.
151
do this mainly by issuing long-term and medium-term loans
to profitable projects. They do not invest in infrastruc
ture projects such as schools, hospitals or roads, nor do
they issue short-term loans to refinance existing projects.
The minimum loan that the Development Finance Company (DFC)
will issue is £10,000, and the maximum £30,000.
The key feature of these companies is the attrac
tion of investment capital from foreign sources. The
partners contribute equally to the DFC pool, one pound (£1)
from Kenya, Uganda or Tanzania, bringing three pounds (£3)
into the country. Thus, three East African pounds (£3)
draws nine or twelve foreign pounds (£9-12) into the whole
region.
An actual example will illustrate: the Kenya Devel
opment Finance Company was incorporated in 1963 with
authorized capital shares of £2 million. Toward the end of
1965 the three' shareholders had paid £1.5 million. Kenya's
(ICDC) contribution of £0.5 million had drawn an additional
£1 million. When in 1967 the Netherlands Corporation
joined, every £1 Kenya contributed brought in £3; this
means that the £1 million from Kenya has now attracted £3
million into the country for investment purposes.
The Tanganyika Development Finance Company, Ltd.
started in 1962 with £1.5 million, each shareholder con
tributing £500,000 to the Development Finance Corporation.
In 1966 the company was able to invest £755,500 in 21
152
projects and the total amount committed to investments was
£1.28 million (see Appendix G). The Company made it pos
sible to embark upon two major projects which are to cost
over £5 million; it also invested in the Tanganyika Port
land Cement Company, Ltd. in which the initial operational
capital is £2 million.
The Development Finance Company of Uganda, incor
porated in 1964, started with a capital of £1,501,500. And
the whole sum was contributed equally by the Uganda Devel
opment Corporation and the other two shareholders.
Taking two recent years, say 1964 and 1965, more
than £3.5 million operational capital was drawn into East
Africa from foreign sources through the Development Finance
Companies. And as can be seen in Appendices E, F and G,
the Development Finance Companies of Kenya, Tanzania and
Uganda in 1966 invested a total of about £8 million pounds,
of which more than £5 million was contributed by foreign
financial and developmental institutions.
No doubt the amount of operational capital drawn
through the Development Finance Companies in cooperation
with the National Development Corporations is appreciable.
The companies, moreover, are providing a crucial link
between East Africa and foreign firms. Each of the com
panies employs at its local headquarters a number of men
and women who have amassed a great deal of experience and
skills in a diversity of enterprises. These men form the
153
link between the overseas firms and the local business
activities. They also do the feasibility studies, planning,
and market forecasting for all the projects that are brought
to their attention.
It must be mentioned that these companies conduct
training programs which have had a far-reaching effect on
the general economy of the countries. From these programs,
t '
a number of East Africans have been selected to understudy
the senior officers at the local headquarters. A high
percentage of them are sent to overseas headquarters where
they come into close contact with international business
transactions and with characteristic complexities. So far,
the number of East Africans who have completed the training
is small, but the training schemes are on an accelerated
basis these days, and there is strong hope that in the very
near future there will be a substantial number of local men
who have acquired the requisite industrial skills.
General Contribution to
the National Economy
The Development Corporations, in addition to diver
sifying investments and attracting foreign capital into
East Africa, also have added substantially to national
economies. This is evident in the growth of employment and
the mounting wage fund, the gross-turnover profits made,
and the capital employed. For illustrative purposes, the
154
Uganda development figures are utilized. The figures dis
played in Table 16 indicate the extent of contribution to
the national economy of key financial elements. Tables 17,
18 and 19 mirror the general upward trend in all aspects of
UDC1s development.
In Table 17 it is seen that during the last ten '
years (from 1956 to 1966) the gross profit increased by
more than £2 million. During the last seven years (1960-
1966), the amount of turnover increased by some £16 million.
This jump in turnover from £8 million to £22 million indi
cates that the Corporation is expanding its activities as
well as its net production. Table 18 shows the steady
increase of capital employed--almost doubling itself in ten
years (£6.7 million to £12 million). Similarly, the total
shareholder interest doubled during the same period, from
£6 million to £10 million-plus. Of particular importance
here is the fact that the Uganda Government provided the
capital, and that the government is the shareholder. What
is of even greater significance is the fact that the profits
are reinvested so that operational capital keeps accumulat
ing steadily.
In Table 19 it is seen that the number of people
employed by the Corporation during the past five years has
more than doubled, from 10,000 to 21,000. The wage bill
has also increased from £1.6 million to £3.9 million--also
155
TABLE 17
UGANDA DEVELOPMENT CORPORATION, LTD. :
ANNUAL PROFITS FOR THE GROUP,
1953-1966
(in £)
Year
Gross Profit
Before Tax
Net
Before Tax
Achieved Gross
Turn-over
1953 199,750 69,432 -
1954 268,777 114,246 -
1955 424,832 263,049 -
1956 467,099 314,347
-
1957 614,026 407,211 -
1959 822,316 440,846 6,836,000
1960 939,788 554,939 7,962,100
1961 1,008,805 550,891 8,434,000
1962 1,254,749 662,006 9,812,449
1963 1,344,457 695,312 10,897,744
1964 1,847,042 1,126,369 15,620,183
1965 2,490,527 '1,706,389 21,003,506
1966 2,592,510 742,697 22,450,767
(Net Profit
after Tax)
Source: Uganda Development Corporation, "Annual Profits,"
Annual Reports 1953-1966 (Kampala: Government
Press, 1955-1966).------
156
TABLE 18
UGANDA DEVELOPMENT CORPORATION, LTD.:
TOTAL CAPITAL EMPLOYED, 1953-1966
(in £)
Year
Total
Shareholder
Interest
Long-term
Loans
Total
Capital
Employed
1953 5,095,559 2,914,125 8,009,684
1954 5,170,143 2,500,000 7,670,143
1955 5,411,188 1,130,000 6,541,188
1956 6,186,589 511,005 6,697,594
1957 6,506,973 19,906 6,526,879
1958 7,497,000 19,735 7,516,735
1959 7,863,117
-
7,863,117
1960 8,252,539 - 8,252,539
1961 8,407,248 70,900 8,478,148
1962 8,506,760 $0,000 8,596,760
1963 8,756,776 264,700 9,021,476
1964 8,969,495 927,098 9,896,593
1965 9,657,435 1,564,604 11,222,039
1966 10,207,025 - 12,066,482
Source: Uganda Development Corporation, "Capital
Employed," Annual Reports, 1953-1966 (Kampala:
Government Press, 1953-1965; .
\
157
TABLE 19
UGANDA DEVELOPMENT CORPORATION, LTD.:
EMPLOYMENT EXPANSION, 1960-1966
Year
Number of
Employees
Total Wages
(in £)
1960 10,089 1,569,100
1961 11,300 1,758,000
1962 14,162 2,117,658
1963 14,376 2,552,573
1964 15,319 2,788,956
1965 18,279 3,437,853
1966 20,777 3,920,695
Source: Uganda Development Corporation, "Employment,"
Annual Reports (Kampala: Government Press,
1960-T9W.----
158
more than double.'*'® Considering the large size of employ
ment it is particularly interesting to learn that almost
all of the lower grades of staff have been Africanized and
that at the Head Office the staff is also becoming almost
entirely Africanized. In his Annual Report, the Chairman
of UDC declared:
We have achieved great success in Ugandizing
the lower grades of staff and our efforts are now
concentrated on providing competent and qualified
personnel to take over the higher positions appear
ing in the Group. In some cases, this will mean
employing counterpart staff to understudy expatri
ates, particularly in the technical field.H
In order to implement this policy, a number of experts are
being recruited and employed on short-term contracts.
These experts are employed mainly to do the training and to
devise programs in which the maximum number of Ugandans on
the staff can acquire needed industrial skills on a
training-on-the-job basis.
Considering the growing numbers of the men and
women employed by the three National Development Corpora
tions, this feature of training on the job is of fundamental
importance for developing skilled indigenous entrepreneurs.
One can foresee a time in the near future when these
■*"®The National Development Corporation of Tanzania
in 1966 employed 11,359 people, and the wage bill was
52,991,178 Shs.
11
Chairman, Uganda Development Corporation,
"Reports and Accounts," Annual Report, 1966 (Kampala:
Government Press, 1966), p. b.
159
Corporations will be able to accumulate men who have both
the skills and the industrial discipline. It is from these
trainees that the governments hope to find those with enough
promise to be able to undertake private enterprises, either
individually or as community-centered entrepreneurs.
Planning and Coordination
The internal structures of the National Development
Corporations comprise the divisions of finance and accounts,
investment management, development and secretarial services.
None of the three Corporations has a division for planning.
Each of the four major divisions does its own type of plan
ning, often on the basis of expediency. There is no provi
sion for coordinated and precise planning for the Corpora
tions . This often leads to internal as well as external
growth problems which face the Corporation, without proper
arrangements being made in advance to solve them.
Some type of planning is found in the development
division. Here the small industry section receives appli
cations for loans from entrepreneurs of small businesses all
over the country. This section is responsible for examining
the projects, making some feasibility studies, and either
approving or rejecting applications. There are also
projects which are proposed by larger firms, especially
those of the subsidiary and associate companies. These
160
projects are treated on their individual merits, as they
are received. Most of the projects require extensive
feasibility studies and engineering appraisals. Market
possibilities have to be studied carefully, taking into
consideration geographical distribution, questions of
accessibility of resources, and the availability of opera
tional capital, as well as the skilled and technically-
qualified personnel in the area. Indeed, answers to a host
of questions must be found before a project can be presented
to the Chairman and the Board of Directors for their final
approval.
The number of projects which are presented to the
Corporations for investigation is so large that not all can
be studied at once, nor can all be approved. Each Corpora
tion receives at least twenty projects for which nothing can
be done, other than to advertise them and try to interest
private firms, foreign or local, who can afford to invest
in them. Some potentially profitable projects cannot be
considered simply because the Corporations are not able to
meet the limits of time and personnel.
None of the three Corporations has established any
specific long-term or short-term policies. The three
Chairmen, when interviewed, agreed that the lack of forward
planning is a setback to faster progress of the Corpora
tions. There is certainly need for a planning unit which
would coordinate various projects and prepare financial
161
forecasts and projections for all the subsidiary and
associate companies. Such a unit would make it possible
for the Corporations to pioneer in taking a more active
role in investigating and proposing the best lines where
investment is indicated.
Each of the Corporations is well coordinated inter
nally; but there is very little inter-coordination between
the three. With the exception of an occasional informal
meeting between members of staff there is no set policy for
joint action among the three Corporations. Yet all three
see the advantage of establishing a clear link so that they
could share experiences and learn from each other. Such
coordination would always show the Corporation planners
which projects might be competing for the same market and
those that would complement each other.
Concluding Statement
The three National Development Corporations are
now the key growth points in the development of East
African economies. They were established as public economic
institutions to stimulate entrepreneurial spirit among
indigenous people and to develop industries in the region.
These objectives are being implemented through the
Corporations' assumption of the roles of injector, catalyst,
and educator.
162
The Corporations are wholly owned by the govern
ments of Uganda, Kenya, and Tanzania. Each Corporation
comes tinder the jurisdiction of the Minister of Commerce.
He appoints the Board of Directors and the Chairman of the
Board. The Board is responsible for policy decisions,
while the Chairman or the General Manager is responsible
for the day-to-day operations of the Corporation. The
Corporations can enter into partnerships with other
corporations, foreign or local.
The organizational structure of each corporation
consists of four main divisions: finance and accounting,
responsible for all financial matters; investment manage
ment, dealing with all decisions which require the
Corporation's participation in financing projects in the
country; development, which assumes responsibility for
making feasibility studies and recommending new projects
on the basis of economical soundness and profit potential;
and secretarial services, responsible for both secretarial
and legal affairs of the Corporation.
The Corporations have a system of establishing
subsidiary and associate companies. This is their crucial
feature, because most investments are diversified, the
subsidiaries and associates being engaged in different
commercial or industrial enterprises. The Corporations
provide the needed operational capital in the form of
loans, equity and shares. They also provide the advantages
163
of large-scale economies, both internal and external, to
the small companies. This is done through making experts
and skilled officers available at a relatively low cost per
unit of service.
The subsidiaries and associates also form the ideal
sites for the "on-the-job" training of local entrepreneurs.
Each company employs a substantial number of East Africans,
and practically all of the companies, under the direction
of the parent Corporations, have adopted apprenticeship
programs and offer scholarships to some of the more promis
ing members of the staff to go abroad for first-hand
training in a more advanced setting. In addition, these
companies (especially the UDC and NDC) are initiating
schemes of employing skilled technicians from developed
countries on short-contract terms to devise programs for
providing on-the-job training. These training schemes are
devised to develop numbers of skilled East Africans who can
run complicated commercial and industrial enterprises on
their own.
The Corporations have added a section for small
industries. Efforts of this section are directed toward
assisting the African entrepreneurs. Each Corporation has
a Small Industries Revolving Loan Fund from which short
term and long-term loans are issued to African entrepre
neurs who come up with economically promising projects.
There has been a rapid growth both in the number of
164
Africans who apply, and in the number who receive financial
assistance. In this area, the Corporations are playing the
role of catalysts. More and more, East Africans are being
drawn into the commercial and industrial communities. In
addition to the provision of loans, the Corporations are
building industrial estates in the larger towns. These
estates are rented to the African entrepreneurs at a cost
which they can afford so that they are able to compete with
the better-established European and Asian businessmen.
It should be observed that these Corporations now
play a very important role as commercial and industrial
institutions. They accumulate profits, diversify invest
ments, and, above all, attract operational capital from
foreign sources. Each Corporation is expanding its employ
ment rolls; projects show steady increase; and the general
public has confidence in them.
What is lacking (and the need for correction is
urgent) is the creation of a planning unit within the
Corporations. Currently, it is the responsibility of the
development division to do whatever must be done in making
feasibility studies for projects which are brought in by
private firms applying for loans. But, to date, there are
no facilities for making precise forward plans in terms of
either financial or investment trends. What is more, there
is no formalized coordination among the three Corporations,
or between them and other economic institutions in the
countries. These Corporations have great potential for
stimulating indigenous entrepreneurship as well as for
making much greater contribution to the growth of national
economies. Nevertheless, for these goals to be achieved
there must be coordination and clear planning so that waste
will be minimized and profit maximized.
CHAPTER V
ECONOMIC PLANNING AND ITS EFFECT ON INDIGENOUS
ENTREPRENEURSHIP IN EAST AFRICA
Introduction
The institution of economic planning has existed
for many years in different forms in East Africa. Prior to
independence, planning was concerned chiefly with public
budgets and the appraisal of some projects. Post-independ
ence planning, on the other hand, is carried on in a more
comprehensive manner so that both the public and private
sectors are considered, as well as most major factors that
affect the general economic growth of the countries.
The central question in this chapter is to deter
mine the extent to which post-independence plans, especially
current plans, propose and emphasize the creation of
economic institutions which are conducive to the stimulation
of entrepreneurship.
It has not been the writer's purpose to examine
planning techniques in any detail. Instead, the emphasis
is on organizational structure, planning units, coordina
tion, implementation processes, and the extent to which the
166
167
institutional framework promotes industrial discipline and
skills.
The General Organization of Economic Planning
It has been seen in the preceding chapter that
planning machinery and coordination is basically the same
in Uganda, Kenya, and Tanzania. For the sake of clarity
and over-all comparison, any major differences observed are
described as the discussion proceeds in the present chapter.
For convenience the writer makes use of Chart II on plan
ning and implementation organization. This chart was drawn
by the Ministry of Planning of Tanzania, but it is the most
recent and representative description available of planning
machinery and coordination in the three countries.
Planning Commissions
The highest authority in the planning machinery of
Uganda is the Planning Commission which recommends policy
decisions to the Cabinet. This Commission consists of the
Ministers of Finance, Commerce and Industries, Agriculture
and Cooperatives, Education, Community Development, Infor
mation and Tourism, the Chairmen of the Uganda Development
Corporation and the Uganda Electricity Board, and.the
Director of Planning. The President is the Chairman of the
Planning Commission. The parallel organ in Tanzania is the
Economic Committee of the Cabinet (ECC). It is the pinnacle
168
CHART II
PLANNING AN D IMPLEMENTATION ORGANIZATION
DEVPLAN
PARASTATALS
SECTORAL RELA
TIONS COMMITTEE
PRIVATE SECTOR
NATIONAL ECONOMIC
AND SOCIAL COUNCIL
VILLAGE DEV. COMMITTEES
MINISTERIAL PLANNING UNITS
REGIONAL DEVELOPMENT COMMITTEE
ECONOMIC COMMITTEE OF THE CABINET
DISTRICT DEVELOPMENT COMMITTEES
PROJECT EXECUTING OFFICERS
Source: Tanzania Ministry of Economic Affairs and Development
Planning, A Mid-Term Appraisal of the Achievements under
the Five Year Plan, July 1964 - June 1969 (Dar es Salaam:
Government Press, 1967), p. 9.
169
of the planning and implementation hierarchy, and is the
country's highest policy-making authority on economic and
social matters. In Tanzania, this body comes under the
Chairmanship of the President. In Kenya there is also a
Development Committee' of the Cabinet. Unlike the other
two, this committee is chaired by the Minister for Economic
Planning and Development; the Minister for Finance serves
as Vice-Chairman. The Committee includes all the Ministers
with portfolios most closely related to economic develop
ment, and all other Ministers are free to attend meetings
of the Committee.
In all cases, the function of the Committee or
Commission is to advise the Cabinets on planning for the
economic and social development of the country. The Commit
tees approve all development projects and schemes in the
plans, control development funds, and are responsible for
any other development matters which relate to development
programs. Where the President is the Chairman of the
Commission, as in Tanzania and Uganda, decisions reached
automatically become the law of the country. This is an
important feature, because all Ministries do their best to
implement the recommendations.
^"The terms Committee and Commission are used
interchangeably.
170
Central Planning Agency
Generally there is a Central Planning Agency in the
Ministry of Planning and Economic Development, which acts
as a Secretariat to the Planning Commission. Its functions
cover the elaboration of development plans, manpower
planning, policy advising, organization of technical
assistance, cooperation with the Ministry of Finance in the
mobilization and organization of the program of foreign
finance, collection of statistical data, and carrying out
of studies relevant to development planning.
National Economic and Social Council
Next in the planning hierarchy is the National
Economic and Social Advisory Council, known in Tanzania as
the Sectoral Relations Committee. This Committee is
concerned primarily with coordinating the Central Planning
Agency with the private sector of the economy. This
Committee keeps the government informed of the progress and
problems which the private sector faces. In Uganda, the
Council or Committee is in close contact with the Ministry
of Agriculture, Forestry and Cooperatives, and the Ministry
of Commerce and Industry. The Council is expected to
coordinate its activities with such parastatal institutions
as the Uganda Development Corporation (UDC) and the Uganda
Electricity Board (UEB), and with the National Development
Corporation (NDC) in Tanzania and the Industrial Commercial
Development Corporation (ICDC) in Kenya.
171 '
Ministerial Planning Units
Current plans are to create a small planning unit
in each Ministry. Where a full planning unit is not
feasible, there is usually an officer who is conversant
with the planning problems of the Ministry. The Ministerial
Planning Units are the main producers of the planning
material. The Planning Units are responsible for:
(a) Reviewing and evaluating development projects
and schemes to be carried out by their Ministry;
(b) Incorporating projects and schemes into a
balanced sectoral development program or plan
of their Ministry for medium and short-term
periods;
(c) Elaboration and recommendation of policies,
instruments of economic policies, and such
legal or other means, measures, and mechanisms
as may be required for the implementation of
the Ministry and the development program;
(d) Preparation of quarterly and annual progress
reports on the implementation of the Ministry's
development program.
Other Ministerial Planning Units should play a very
crucial part in the planning and implementation of national
economic plans. The general observation at the moment,
however, is that the Units were not very efficient mainly
because of lack of sufficient skilled personnel.
172
Regional, District, and Village
Development Committees
In order to bring politicians, the people, and
civil servants together as planning teams, Regional,
District and Village Development Committees were estab
lished at -the commencement of the current five-year plans.
These Committees bring rural matters (economic as well as
social) to the Central Planning Agency. At the same time,
they disseminate information from the center to the
regional communities.
The Regional Committee, as it is known in Tanzania,
or the Provincial Development Committee, as it is titled in
Kenya, is known as the District Planning Committee in
Uganda. In Tanzania the Chairman of the Committee is the
Regional Commissioner who is at the same time the govern
ment's political representative. Other members include
divisional heads, constituency members of Parliament,
leading personalities in the private sector, and other
local personalities. In Kenya, the composition is on
similar lines; but here they are a step higher because
there is a Provincial Planning Officer in each Province who
acts as secretary to the Committee. In Uganda, Regional
Committees have an economist who is employed by the
Ministry of Planning and Economic Development. The econo
mist acts as Secretary to the Committee.
This Regional/District (or Provincial) Planning
Committee carries out the following functions:
(a) Preparation of programs and plans for the
development of their districts. This is done
on the basis of the general projection and
allocation of national resources received from
the Ministry of Planning and Economic Develop
ment. They have to be within the scope of
available local financial resources;
(b) Working with the Land Boards, and devising land
policies which support implementation of
national development plans;
(c) Preparation of medium and short-term estimates
of local financial resources, and submission of
estimates to the Ministry of Regional Adminis
trations and the Ministry of Planning and
Economic Development;
(d) Preparation of annual progress reports on the
implementation of plans and on general economic
performance in the District.
In Kenya and Tanzania, there is a District Develop
ment Committee which is directly under the Provincial
Development Committee. Below this is the Village Committee,
especially important in Tanzania where the chairman is also
the Chairman of the Tanzanyika National Union in the area.
It should be noted that political leaders of the ruling
parties in Kenya and Tanzania play key roles in the Village
Planning Units. They are responsible for communicating
Presidential messages and national economic growth ambi
tions to the small illiterate and semi-literate villager in
the country. The village political party leader has not
yet played an active role in Uganda as he has in Kenya and
Tanzania.
Coordination
As was seen in the organizational chart (Chart II),
planning machinery in each State is well coordinated. The
machinery provides channels through which information is
communicated in both directions. A few weaknesses have
arisen in the system, mainly because the governments,
especially in Kenya and Uganda, have no direct control over
the private sector. In many cases private enterprises are
suspicious of government interference and they do not pro
vide the information that is required or requested.
Another source of weakness is lack of education, especially
among the regional and village members of the planning
units.
It should be added, however, that most of the
officers interviewed for this study in the Ministry of
Planning felt that coordination between Ministries was
based on personal relationships. There is no set time or
rule which ensures regular and continuing contacts.
Coordination between the Central Planning Bureau and the
• _ ' 175
parastatal institutions is extremely tenuous. The con
cerned institutions are called in only when there is a
sizable project which involve large sums of money to be
borrowed from a foreign government or a foreign development
bank. Although some efforts have been made to bring the
private sector into the planning machinery, coordination in
this area is still very poor, especially with respect to
actual planning and implementation.
Provision for Economic Institutions to
Stimulate Indigenous Entrepreneurship
Tanzania
In his introduction to the Five-Year Development
Plan, 1964-1969, President Nyerere declared that the worst
bottleneck in the national economy was lack of indigenous
skilled personnel and that the country would have to rely
for a long time upon foreign countries to supply personnel
for commerce and industries, as well as for other areas
where high-level skills are required.
The Plan estimated that three categories of person
nel would be required, as follows:
Class A: 3,200 individuals, trained for occupations
normally requiring a university degree, e.g.,
doctors, engineers, and graduate secondary
school teachers.
176
Class B: 9,500 Individuals, educated and/or trained
for occupations normally requiring two years
of post-secondary education, e.g., engineer
ing . technicians , physiotherapists, laboratory
technicians and some teachers of elementary
grades.
Class C: 16,000 individuals, educated for occupations
normally requiring a secondary school educa
tion, e.g., skilled office workers, middle-
management personnel, skilled modern crafts
men dealing with precision metal working and
electrical machinery.
The gap between the required manpower and the
actual supply was expected to be closed by 1980. Reaching
this long-range target, it was planned, would require the
expansion of primary and secondary, university and tech
nical training centers. The appraisal of the plan states
that the mid-term targets in most cases have been exceeded,
and that the Government was so optimistic it could safely
say:
If this rate of achievement is sustained, the
Government1s ambitious long-range Plan Policy of
full self-sufficiency at all skill levels by 1980
will be met.2
o
Ministry of Economic Affairs and Development
Planning, Mid-Term Appraisal of the Achievements under the
Five-Year Plan, Ju" ~ 1969 (Par es Sa'laam:
Government Press
177
Formal education. While great emphasis was placed
on formal secondary and university education, the Tanzania
plan also encouraged apprenticeship in business and indus
tries. At the time the plan was drafted, the Ministry of
Labor had already provided training services in training -
within-industry techniques and that annually some 750
people involved in on-the-job training, half of whom were
in the private sector. A Business Training Institute,
organized in 1963, was recommended for expansion so that it
could concentrate its intake mainly on the private sector.
There is also the Dar-es-Salaam Technical College which
enrolls an average of 1,100 employed persons in evening
classes. College courses include commercial subjects as
well as city- and guild-type courses, with an increase in
enrollments. In addition to these, the Extramural Depart
ment of the University College at Dar-es-Salaam enrolls
almost 1,500 young men and women annually, the majority of
whom take courses slanted toward commercial and industrial
careers. Popular courses are Economics, Accounting, Money
and Banking, Elementary Statistics, and English.
The cooperative movement. The cooperative movement
in Tanzania is on a much higher level of development than
it is in the other two countries. The current development
plan provides for an expansion of 10 per cent of the total
value of wholesale and retail trade in the country. The
178
movement called for expansion into larger commercial and
industrial activities. This is being implemented with
vigor.
Realizing the stringent need for trained personnel
to run the cooperatives, the Plan provided for establishing
an International Cooperative College. This was done, and
the College was built at Moshi. Courses given at the
College include marketing, secretarial techniques, union
inspectorate, and some advanced courses in banking and
consumer credit. The College's annual intake was planned
to be 372 persons, including 35 from other countries. The
intake at present far exceeds the planned target.
The Plan also reorganized and expanded the then-
existing Cooperative Bank (since changed to the National
Cooperative and Development Bank) . The new bank has two
sections: (1) The Cooperative Bank, which is responsible
for loans and credits only to cooperative societies; and
(2) the National Development Credit Agency, which plays the
part of an ordinary commercial bank but with a special bias
in favor of small African entrepreneurs. (It may be
mentioned here that cooperative societies have now moved
into processing, marketing and even some industries such as
textiles. Thus, a firm foundation has been built for
community-centered entrepreneurs in the country.)
Training on the job receives special emphasis.
This is to be accomplished through parastatal institutions
179
(chiefly the National Development Corporation, the National
Housing Corporation, and the National Cooperative' and
Development Bank). With the Arusha Declaration, the role
of these parastatal institutions has been expanded into all
aspects of the national economy. Additional parastatal
bodies have been established, the major one being the State
Trading Corporation. This corporation plays a leading role
in all import and export enterprises, and in all aspects of
on-the-job training in commercial skills.
In this connection it should be repeated that the
Arusha Declaration emphasizes the spirit of self-help and
encourages community-centered entrepreneurship. The
Declaration calls for hard work and abhors exploitation of
one individual by another. It stresses the importance of
industriousness as a means for economic development, and
rejects the idea of calling on foreign companies to come
and establish themselves in Tanzania. The spirit of the
Declaration is that whatever industries can spring up
should be run and supported by the Tanzanians as communal
enterprises. The Declaration discourages private entre
preneurship of the Schumpeterian or auto-centered type.
180
Kenya
Commercial opportunities. One of the stated goals
of the Kenya Government in the Five-Year Development Plan,
1964-1970, is to
. . . establish ways of organizing economic activi
ties ... [so that] new institutions will be
created and existing institutions given new emphasis
where these serve to develop and utilize the best of
indigenous habits, traditions and attitudes. . . .3
These institutions are primarily intended to arouse
maximum participation of the Africans in every sphere of
the nation's economy. The Government expressed a determi
nation to ensure that adequate economic opportunities were
open to the Africans and that Africans have the education,
training, and resources to develop given opportunities.
The government, furthermore, realized beyond any doubt, and
very correctly indeed, that "without greater African par
ticipation to broaden the base of the economy, little
„4
significant growth can take place."
In other words, the government's policy, incorpo
rated in the Five-Year Plan, was to create economic
opportunities for all citizens. So that Africans could
take full advantage of these opportunities, the government
planned to make financial resources available in the form
of loans and credits. Going even further, the government
3
Ministry of Economic Planning, Development Plan,
1964-1970 (Nairobi: Government Press, 1964), p. 27.
^Tbid., p. 41.
181
decided to encourage people to participate in apprentice
ships , management training courses, vocational schools, and
adult education; and offered agricultural and management
advice to as many Africans as possible. The government,
moreover, determined to stimulate entrepreneurship by
providing loans so that capable Africans could establish
their own businesses.
It is stated in the Plan that "loans programmes in
Agriculture, Industry and Commerce will provide trained
Africans with the capital necessary to expand or to estab-
lish enterprises of their own."
In order to arouse more African participation in
commerce and industry, the Plan added the following
measures:
(1) The cooperative movement was to be reorganized
so that by 1970 the movement would be self-
supporting.
(2) A major institution, the Industrial Development
Corporation, already discussed in detail under
the new name of Industrial and Commercial
Development Corporation (ICDC), was prepared to
advise Africans on business opportunities.
A small Industries Loan Department was added to
ICDC to initiate a loans program for African
traders.
^Ibid., p. 42.
182
In its efforts to Africanize Commerce and Industry,
three approaches were adopted:
(1) The government was to encourage African-owned
manufacturing organization by providing training
in management and technical skills.
(2) Africans were to be aided in commerce through
the provision of loans and advice, in order to
improve the channels of distribution to African
consumers and promote outlets for African
manufactures.
(3) Africans would be encouraged to enter large-
scale ventures as they gained the knowledge and
commercial experience required to manage such
complicated enterprises.
The Plan recommended that industrial loans to
Africans be handled by the Industrial Development Corpora
tion. The primary emphasis was to encourage Africans to
enter small-scale industries and commercial ventures. But
to do this, the Corporation had to expand its staff,,
increase the volume of loans, and employ more skilled
personnel to give continuous advice to loan recipients.
This is done through what is known as the Industrial Exten
sion Services, whereby the skilled personnel go to village
centers and supervise loan recipients.
It was estimated that by 1970 the Industrial Devel
opment Corporation (now the Industrial and Commercial
183
Development Corporation) should have amassed sufficient
capital to meet an annual loan requirement of £50,000,
without additional capital from the Government. Assuming
successful implementation of the small-industry programs,
it was hoped that by 1970 more than 200 new small industrial
ventures will be established, employing about 2,000 persons.
Traders1 loans. To further the interests of
small-scale African traders, the Industrial Development
Corporation (now the ICDC) was given the responsibility to
administer a loan fund for small traders. The Plan recog
nized that there was
. . .a need for a new programme to help larger and
commercially successful traders who have more sub
stantial credit needs but are unable to secure
commercial bank credit on their own.°
It was recommended that the Corporation attempt to
secure loans for traders from commercial sources and, where
necessary, to guarantee repayment. Initially it was esti
mated that the Corporation would need £25,000 annually; but
that the sum could extend to £40,000 if the plans were
successful.
The Plan went even farther and prepared for the
training of successful African managers and entrepreneurs.
For this training the Government established the Small
Industry Research and Training Center at Nakuru, by joint
^Ibid., p. 82.
184
action of the Kenya Government and the Japanese Government.
At this center students are trained in management and tech
nical subjects. Those who successfully complete their
courses are eligible to obtain loans from ICDC to support
the establishment of new small industries or to improve and
expand existing ones.
The Plan, too, provides for the establishment of a
chain of shops known as Peoples1 Shops (Naduka ya Wananchi),
to function as main outlets for the manufactures of African
industries. Thirty such outlets were proposed, and it was
hoped that with centralized management, efficient distribu
tion, and rapid turnover, the result will be the lowering
of prices charged to the final consumer. These stores were
to be managed by a trading company operating under the
aegis of the Industrial Development Corporation. The
proposed trading company evolved into the Kenya National
Trading Corporation, which was discussed in Chapter III.
The Plan did not go into detail of how the trading company
would work, except to mention that the company would be the
sole managing agent for all the shops and that it would
also engage in importing and exporting activities. The
magnitude of the Small Industry Program and its impact on
the effort to stimulate African entrepreneurship is shown
in Table 20.
TABLE 20
ESTIMATED EXPENDITURE FOR SMALL INDUSTRY AND COMMERCE
(in £)
1964/65 1965/66 1966/67 1967/68 1968/69 1969/70 Total
I.D.C.:
Industrial loans 39,000 39,000 49,000 49,000 49,000 46,000 271,000
Traders1 loans 25,000 25,000 25,000 40,000 40,000 40,000 195,000
Operating deficit 18,000 17,000 17,000 13,000 10,000 6,000 81,000
82,000 81,000 91,000 102,000 99,000 92,000 547,000
Less:
Internally-generated
funds (7,000) (14,000) (20,000) (28,000) (37,000) (45,000) (151,000)
Loan guarantees
(traders) (25,000) (25,000) (25,000) (40,000) (40,000) (40,000) (195,000)
Government contribution 50,000 42,000 46,000 34,000 22,000 7,000 201,000
Nakuru Centre 25,000 25,000 25,000 - - - 75,000
Peoples' Shops
(Feasibility Study) 1,000 1,000
TOTAL— GOVERNMENT 76,000 67,000 71,000 34,000 22,000 7,000 277,000
TOTAL— GOVERNMENT
PLUS I.D.C. 108,000 106,000 116,000 102,000 99,000 92,000 623,000
Source: Ministry of Economic Development and Planning, Second Five-Year Development
Plan, 1964-1970 (Nairobi: Government Press, 1967), p. 83.
Note: This table shows that the expenditure on industrial loans will accumulate by
about seven times the amount at the commencement of the plan. The same rate
of accumulation will take place in traders’ loans. The total public expendi'
ture on these projects will accumulate by about six times (from £108,000 to
£623,000) at the end of the plan period.
H
00
Ol
186
Cooperative movement. A major method of arousing
greater African participation in economic activities', out
lined in the Five-Year Development Plan, was the initiation
of a cooperative movement. At the time the Plan was
drafted, there were 540 cooperative societies in Kenya.
It was anticipated that toward the end of the plan period
the movement would expand to an annual turnover of £30
million. The Plan provided for expanding cooperative enter
prises in the fields of credit, farming, wholesale, retail
trade and industry.
The Plan recommended a complete reorganization of
the cooperative movement in the interest of greater effi
ciency. Each district was to have a Cooperative Union.
The district Union was to act as a banker for all societies,
provide a centralized bookkeeping service, determine terms
of service for and appoint all graded employees of socie
ties, exercise control over financial affairs of the
societies, arrange for staff training, and examine and make
recommendations concerning all new applications for cooper
ative society registration.
Heading the movement was to be a National Federa
tion of Cooperatives, with responsibility for uniting all
registered cooperative societies in Kenya. To date, the
Federation has had to supply advice to members on the
operation of cooperative societies; it has also advised the
Government on ways and means of strengthening the
187
cooperative movement in the country. ^
To ensure greater efficiency, more training of
cooperative members was recommended, and the Department of
Cooperative Training at the Kenya Institute of Administra
tion was expanded. Training teams were trained and put
into the field at regional levels first. These teams are
equipped with the necessary information and teaching mate
rials to instruct members of the role of their cooperatives
in the development efforts of the country.
Realizing the importance of the movement, the
government was prepared to spend over £44,000 on training
and other services on cooperatives. But the government, in
return, required that it be given control over the movement.
All the district unions have to work through the Commis
sioner for Cooperative Development. The government also
reserves the power to require primary societies to affiliate
with the district union. Of even greater importance, the
government expects to "assume a greater role in supervising
cooperatives on financial and managerial matters."^
The chief function of the cooperatives is to
encourage members to save their money and subscribe to their
share by investing in the common pool. In this way members
will develop good habits of investing their money in produc
tive projects. The experience also provides training in the
ways of industrial organization. The result, it is hoped,
^Ibid., p. 85.
188
will be the creation of a community of industrial-minded
and disciplined people--whether it is an urban or a rural
community.
Formal education. Education receives one of the
highest priorities in the current Development Plan. The
main objectives in fostering education are to:
(a) Provide universal education through primary
school.
(b) Ensure enough places at the secondary and
higher levels to educate those with recognized
abilities.
(c) Organize the educational system to meet the
O
manpower needs of the country.
These objectives mirror the seriousness with which
the government intends to create educated citizens. The
target of universal primary education was not intended to
be reached during the plan period, but fees were to be
reduced at a gradual rate. It is to be hoped that the
great number of boys and girls who will pass through the
primary schools will provide a source from which industry,
farming and higher education institutions will draw.
Secondary education was also to be expanded and some levels
were targeted for increases as high as 90 per cent.
8Ibid., p. 101.
189
In the secondary schools category are the special
technical schools which offer general as well as technical
education. In these schools, students specialize in
industrial management and engineering courses. The Plan
recommended that this training be expanded by building two
more schools. The Plan also provided for establishing a
vocational training school for women. The school had to
allow for boarding facilities. The women who enroll take
typing, bookkeeping and other advanced clerical courses.
The annual intake was planned to be 240 women. These two
areas are the ones most urgently needed for industrial
management, and this applies not only to Kenya but to the
whole of East Africa.
At the university level, facilities to increase
intake at the Makerere, Nairobi, and Dar-es-Salaam campuses
of the University of East Africa were to be expanded.
Similarly, teacher-training colleges were planned to provide
teachers for the large number of students.
In support of these educational programs, the
country was prepared to invest nearly £10 million in educa
tion. The combination of this investment and that in the
promotion of small-scale industries is a massive effort in
the right direction. The small-scale industries and the
Industrial and Commercial Development Corporation are
combining to provide facilities for on-the-job practical
training in business skills. These institutions, in turn,
190
depend upon the formal educational institutions for better-
trained men and women able to go on to more complex indus
trial enterprises. It may be expected that by the end of
the plan period, the manpower shortage will be substantially
reduced. What is lacking in the plan, so far, is emphasis
on apprenticeships. Undoubtedly, that phase of the educa
tional effort will soon be incorporated in forthcoming
Plans.
Uganda
Commercial opportunities. Indigenous entrepreneur
ship was recognized in the current Uganda Five-Year Devel
opment Plan to be a fundamental and crucial factor in the
industrialization of the nation's economy. In fact, the
lack of indigenous African entrepreneurship was the most
serious drawback to the industrialization program. The
Ministry observed: "Another unsatisfactory aspect of
industrial growth in the past has been the almost total
Q
absence of participation of African entrepreneurs." It was
further maintained that sustained economic growth will be
achieved only when and if there is a sufficient supply of
skilled indigenous entrepreneurs. This was succinctly
written into the plan:
Q
Ministry of Economic Planning, Work for Progress,
Uganda's Second Five-Year Plan, 1966-1971 (Entebbe:
Government Press, 19bb;, p. 77. "
191
Since sustained industrial advance will, in the
long run, have to depend on Ugandan entrepreneur
ship, a crucial test of industrialization policy-
wili be the speed at which such entrepreneurship
develops.10
Several approaches were recommended for developing
entrepreneurship and speeding up industrialization, such as
(1) encouraging the development of small-scale industries,
(2) expanding facilities for formal and technical education,
and (3) strengthening the cooperative movement.
Aid to farmers. In order to encourage small-scale
industries and better farming, several credit schemes were
devised for farmers. It was planned that by 1971 more than
150.000 farmers would be receiving short-term credit loans
ranging from 200 to 300 Shs. This money was to be spent
for simple farming tools and fertilizers. During the same
period about 5,000 farmers would be receiving loans up to
2.000 Shs. in medium-term credit repayable over two years.
At the same time, it was estimated that about 4,500 larger-
scale farmers would be receiving loans of up to 5,000 Shs.,
repayable over several years. The Uganda Commercial Bank
was empowered to issue the loans to farmers who were
approved by the Cooperative Societies in their localities.
The Plan also recommended the expansion of "exten
sion" services. This service employs well-trained special
ists in agriculture and veterinary techniques to visit
10Ibid., p. 83.
farmers and give them needed technical advice on ways of
increasing the productivity of their lands. There is an
extension worker for every 1,000-1,500 farmers. In addi
tion, the Plan provides intensive formal training for young
farmers who have reached the school-certificate level.
Short courses are occasionally given to farmers in their
villages. The Agricultural Colleges at Bukalasa and Arapai
and the Entebbe Veterinary Training Institute are to be
expanded; and a new Cooperative College is proposed. These
efforts are all directed toward the goal of improving the
skills of farmers and eventually increasing the efficiency
of farmers and the incomes from agricultural enterprises.
Indeed the philosophy behind lending support to
small farmers is that in the long run some Africans will
accumulate enough capital to go a step higher. Some may
expand their agricultural enterprises, while others may go
into commercial and industrial ventures. In other words,
agricultural enterprises can form a springboard since the
majority of the working men and women are engaged in rural
farming.
In the commercial and industrial sector, African
entrepreneurs were given encouraged chiefly through the
Uganda Development Corporation with the cooperation of
small-scale industries. The Uganda Development Corporation,
having been since 1952 the main public agency for the
development of industries, was appointed to continue its
193
role oil pioneering new industries. The Plan recommended
that the Corporation remain the chief agency for accelerat
ing the rate of industrial growth in the country.
Small-scale industries. Promotion of small-scale
industries was regarded correctly as the key to the develop
ment of managerial and technical skills.. Indeed, at this
stage in the country's development, the small-scale industry
program should be expected to do much to produce the Ugandan
industrialists of the future. The current plan put greater
emphasis on small-scale industries and recommended a more
coordinated and centralized program in order to increase
productivity not only in physical returns but also in
stimulating the highest entrepreneurial activities. Thus,
the current Five-Year Plan states:
For the future, it is proposed to embark on a
vigorous, well-conceived and unified programme of
action greatly to increase the volume of production
from small industry. This is considered to be the
surest way of promoting Africans' participation in
industry, and thus preparing them to play the
dominant role that they must play in this field in
the future.11
In order for a corps of industrial entrepreneurs to be
developed, the Plan proposed that easy credit facilities be
provided, extension services be expanded, more technical
training and advice be made available to African business
men, more marketing service research into industrial
X1Ibid., p. 90.
194
possibilities be conducted, and consulting services be
provided concerning industrial sites that are most suitable.
The program of small industries was set up under a
centralized institution, originally known as the African
Business Promotion Company within the Uganda Development
Corporation. Later, in 1967, it became the National Trad-
12
ing Corporation, Ltd.
In addition, the Plan provided for creation of the
Management Training and Advisory Center whose main duty is
to train small-scale industrial entrepreneurs in new tech
niques and in modern business management methods. The
Center is supported jointly by the Uganda Government and the
United Nations.
As in the Kenya Plan, the Uganda Plan called for
the government to set up a number of industrial estates for
small-scale industries, these estates to charge low rentals
for workshop buildings and other services.
It was recommended that the creation of a cadre of
efficient and progressive African traders to play a leading
role in commerce be accelerated. The government was to
provide increased financial assistance, while the National
Trading Corporation was to play the part of teacher in
aiding Africans to set up wholesale companies. Consumer
Cooperatives were also to be expanded, especially in urban
12
Discussed more fully in Chapter II, and in
Appendices A and B.
195
centers.
Formal education. On top of all this the govern
ment determined to expand facilities for primary, technical,
secondary and university training programs. Primary-grade
enrollments in government-aided schools were to be
increased by 40 per cent while the total increase for all
schools, including private schools, was to be 75 per cent.
For secondary education, the Second Five-Year Plan was to
exceed the First Five-Year Plan by 50 per cent. Emphasis
was to be placed on science subjects, rather than on the
arts. More than £8 million was to be spent on the expan
sion of secondary schools. At the university level, while
the First Five-Year Plan had enrolled 940 undergraduates,
the current target of the Second Plan is for 2,400 students
to be attending universities by the end of the plan period
in 1971.
Teacher-training facilities for both primary and
secondary teachers were also to be expanded by more than 50
per cent. And the output of graduate teachers from the
University of East Africa was to be increased accordingly.
Probably the measure of greatest impact on the
nation's immediate commercial requirements is the provision
for the expansion of admissions to the Uganda College of
Commerce. At this College, young men and women who have
attained the School-Certificate level of education, or its
equivalent, take courses in stenography, secretarial
196
science, business accounting and other relevant courses.
By 1971, the College is expected to enroll a total of 1,000
students, half of them on a part-time basis. Facilities
for courses in such technical skills as carpentry, brick
laying, etc., were expected to increase the annual enroll
ment from 900 to 1,500 persons by the end of the plan
period. Extension officers in the Agricultural Coopera
tives were also to be increased from 440 to 2,040 individ
uals, during the same period.
Indeed, the government has underwritten a heavily-
funded educational program. The capital investment was
estimated to be £18,500,000, with an increase in recurrent
expenditure by the Central Government and local authorities
from £7,597,000 in 1965-66 to £13,399,000 in 1970-71.
Details are shown in Table 21.
Obviously, the government's commitment to the long-
range goal takes into account its belief that the educa
tional returns are so fundamental to the sustained economic
growth of the country, that the program is well within the
cost. During the ten-year period from 1960 to 1971, it is
planned that there will be a sixfold increase in secondary
school enrollments, the number of children in primary
schools will be doubled, and university enrollments will
increase by six times. At this rate, Uganda will have
eliminated the manpower shortages which up till now have
been the most serious obstacle to her economic growth.
TABLE 21
COSTS OF THE EDUCATION PROGRAM IN UGANDA
(in £)
Capital
1966/71 Level
Recurrent
1965/66
Recurrent
1970/71
2,000,000b Primary 4,04l,000a 5,628,000
6,500,000 S.1-S.4 1,620,000 3,005,000
1,500,000 S.5-S.6 158,000 366,000
2,000,000 University 1,100,000 2,600,000
3,500,000 Grade II and III Teacher-training 505,000 597,000
200,000 Grade V Teacher-training 170,000 250,000
500,000 Technical schools 120,000 210,000
1,300,000 Farm schools 61,000 280,000
500,000 Uganda Technical College 229,000 300,000
500,000 Uganda College of Commerce 28,000 163,000
18,500,000 TOTAL
Less Secondary and other fees^
TOTAL RECURRENT
8,062,000
465,000
8,597,000
13.399.000
13.399.000
Excluding fees; all other include fees where paid.
bIn addition to this, there is the value of community work on school building--
probably £2,000,000.
p
The higher figure for recurrent costs, assuming intensive use of school buildings.
^Fees for secondary level have not been included for 1970/71 as future fees are
currently under review.
Source: Ministry of Economic Planning, The Second Five-Year Development Plan,
1966-1971 (Entebbe: Uganda Government Press, 1966),,p. 144.
197
198
Concluding Statement
All three Development Plans discussed in this
chapter reflect their governments1 interest in encouraging
the creation of industrial and commercial-minded communi
ties in East Africa. This is obvious in the detailed plans
to support small-scale industries by establishing institu
tions which are responsible for issuing credit and loans to
those Africans who are unable to. obtain these services
elsewhere.
Development Corporations were planned to provide
facilities for on-the-job training. These are the Uganda
Development Corporation, the Industrial and Commercial
Development Corporation, the National Development Corpora
tion, and other parastatal institutions. Cooperative
movements are also committed to creating business-minded
and industrially disciplined communities.
With respect to formal education, all three Plans
call for very high percentages of increase in admissionsand
enrollments, from primary through university levels.
Commercial and vocational schools are to be expanded by
more than 50 per cent. It is from a formally-educated
citizenship that a skilled and intelligent body of entre
preneurs can be expected to come, prepared to take their
place in the economic life of the nation.
What is lacking in the plans is provision for
apprenticeships. What seems to be needed most urgently now
199
is a supply of men and women who have developed commercial
and technical skills. These skills are best acquired
through apprenticeship experiences, it was shown in Japan
and in other earlier-developed countries. The East African
countries need now a program of apprenticeship that can
absorb the large number of qualified young people who are
graduating from primary and secondary schools.
A common defect of the Plans is that, while forward-
looking proposals are made, little is done to study the
details and offer practical ways of implementing such a
proposition. For example, the Kenya Plan simply mentions a
need for a national trading corporation, and the Uganda
Plan does the same, but nothing more. The Plan should
conduct surveys and studies in an effort to point the way
toward the type of planning ahead for such major institu
tions .
Planning as an institution seems to be well defined,
with the Planning Commission as the highest authority, and
going down the ladder to the village planning units.
Coordination during the plan-drafting period appears to be
excellent; however there seems to be a lack of continuity
during the implementation period.
There is complete lack of inter-territorial Plan
ning coordination. Yet this would save waste in certain
areas. Some institutions, notably the Vocational and
Cooperative Colleges, could be operated more economically if
200
the three countries pooled their funds. In fact, some of
the industries, too, could operate more economically if a
three-nation joint operation were established, or if the
one country that took the lead in a certain industry were
established as the coordinator for that industry in all
three countries rather than duplicating organizations for
the many meagre markets that now exist. Such coordination
could be carried out by the Consultative and Planning
Institution established under the East African Community.
This proposal is discussed later.
It was observed that on the whole, the three Plans
are succeeding in their efforts to provide for and encour
age the speedy growth of a business-minded cadre. While
all three are similar in structure and basic purpose, there
are slight differences in approach and emphasis. The Kenya
and Uganda Plans are stimulating a mixture of the auto
centered entrepreneur in small-scale industries, and the
community-centered entrepreneur working through parastatal
institutions. In Tanzania, with the publication of the
Arusha Declaration, emphasis was immediately changed to the
creation of nothing short of community-centered entrepre
neurship. Given time and stability, the whole region of
the East African Community can be counted on to accumulate
a substantial number of skilled entrepreneurs to play the
role so vital to the economic growth of their respective
countries.
CHAPTER VI
EFFECT OF THE EAST AFRICAN COMMUNITY ON
THE SPIRIT OF ENTREPRENEURSHIP
Introduction
The East African Community exerts a far-reaching
impact upon the economic, political, social and cultural
progress of the whole of East Africa. The Community was
established by a treaty signed by the Presidents of the
three Partner States of the United Republic of Tanzania,
the Sovereign State of Uganda, and the Republic of Kenya
on June 6, 1967. Although the Community was launched on
the first day of December 1967, this agreement was mainly
an act of confirmation, legalization, and formalization of
economic cooperation which had been in operation on
different levels of integration since 1917.
At the beginning, a Free Trade Zone was established
between Kenya and Uganda; in the 1930's it became the East
African High Commission, this time with Tanganyika as a
third member to the pact. With the achievement of political
independence early in the 1960's, the Commission was
changed to the East African Common Services Organization
201
202
succeeded by the East African Community, as it is known
today.
Under these arrangements the three countries formed
a common market with a common external tariff, common excise
duties, free movement of capital and labor, and free move
ment of goods. Until 1966, the East African Currency Board
issued common currency for the three member states.
A common Legislative Assembly discusses and enacts legisla
tion on affairs exclusively related to regional institu
tions. There have been developed "self contained" or
self-financing institutions serving on a regional basis.
These pertain to the airways, the railways and harbors, the
posts and telecommunications, and such other non-self
financing institutions as the University of East Africa and
several research institutions. Until the establishment of
the Community, however, the common market operated infor
mally on the basis of mere agreement between the presidents.
But now the Treaty provides a legal and constitutional
basis for the workings of the Community. The final source
of power is the three presidents who form the Authority.
The presidents are assisted by three ministers of cabinet
rank who serve the Community rather than a single country,
and several councils.
It is not the purpose of this chapter to discuss in
detail the problems of economic integration in East Africa.
Rather, it is an attempt to examine those institutions
203
within the Community which have a direct or indirect bear
ing on the development and growth of entrepreneurship in
the region. Of major concern are such matters as the size
of the market; the volume and direction of trade; the
harmonization of monetary policies; and the balancing of
industrial growth, which involves the transfer tax, the
Development Bank, and the provisions made by the Treaty for
regional coordination and planning.
The Size of the Market
The importance of the size of the market in stimu
lating the spirit of entrepreneurship in economic develop
ment cannot be overemphasized. Adam Smith maintained that
the extent of the market limits the division of labor, and
thus the size of the market is the ultimate check on the
development of high productivity. Practically all other
economists agree with his contention. Chenery, after a
detailed study of various patterns of industrial growth,
concludes:
Limitations on market size are an important
factor in preventing normal growth of developing
countries by being unable to make the production
of investment and intermediate goods where
economies of scale are especially important.1
-t
Hollis B. Chenery, "Patterns of Industrial
Growth," American Economic Review (September 1960),
pp. 624-5ZT
204
He lays special emphasis on the creation of regional trad
ing arrangements which tend to increase market size as a
means of promoting development, in accordance with the
normal pattern of industrial growth.
The formation of the East African Community was
chiefly aimed at meeting this crucial requirement of the
size of the market. The Community covers 680,000 square
miles, an area equal to the entire area covered by the
2
European Economic Community countries, plus Spain. How
ever, the population of the East African countries adds up
to about 30 million people, which is slightly more than
one-eighth the population represented in the European
Economic Community.
Most African countries are too small, both in area
and in purchasing power, to support a plant of reasonable
size. In this connection, A. J. Brown made the following
observation:
... A country like Uganda, for instance, with an
expenditure on manufactures other than food, drink
and tobacco of only 1/200 for 1/300 of that of the
United Kingdom, is too small a market to support a
plant of economic size in most industries.3
Along similar lines, the Raisman Commission found that the
East African consumption of manufactures, excepting food
2
This is more than twice the land area of
California, Oregon and Washington combined.
A. J. Brown, "Economic Separation versus a Common
Market in Developing Countries," Yorkshire Bulletin of
Economic and Social Research, 13 (November 1961), 94.
and drink, was probably between one-sixtieth and one-
eightieth of the output of such goods in the United Kingdom;
and that, in some cases, the ratios varied between one
\
twelfth in the case of cotton goods to less than one-one
hundredth for newsprint and paper products. The implication
of these ratios is:
There are a limited number of manufacturing
industries of which the whole East African market
could support several establishments of efficient
size, a probably large number in which it could
just about support one or two such establishments,
and a large number in which it could not yet
absorb the output of one establishment of a size
consistent with reasonable technical efficiency.^
This conclusion suggests that, as a unified market, a number
of sizable plants could be supported if the whole region
were consolidated. This means that any attempt to dupli
cate plants in the region by each country trying to build
its own plant out of sheer economic blindness would merely
waste money.
Table 22 makes clear the relationship of the size
of the effective demand of the Partner States and the whole
region. The money income of the whole market is more than
twice as great as that of Kenya alone, and more than three
times as great as that of either Uganda or Tanganyika.
An even stronger argument in favor of the common-
market is the great industrial potential which the region
Colonial Office, Report of the Economic and Fiscal
Commission (Sir Jeremy Raisman, Chairman) (London: Her
I t f a jesty1 s—Office, February 1961, CMND 1279), p. 8 .
206
TABLE 22
THE SIZE OF THE EAST AFRICAN MARKET
(in millions of dollars)
Country
c l
Population
(thousands)
Money
Income'3 Money0
Kenya 8,676 477 629
Tanganyika 9,560 346 523
Uganda 7,016 315 437
Total 25,252 1,138 1,589
^Estimated population, 1962.
^Gross domestic product, 1961.
cGross domestic product in 1961 multiplied by ratio of
money income to total income in 1959.
Sources: Population: East African Statistical Department,
Economic Statistical Review, No. 6, March 1963,
p. 4.
Ratio of money income to total income: Colonial
Office, Report of the Economic and Fiscal Commis
sion (Sir Jeremy Raisman, Chairman) (London: Her
Majesty's Stationery Office, February 1961,
Comnd. 1279, p. 16.
207
\
possesses. The Raisman Report contends that, when East
Africa is considered as a whole, "the rate of growth of
real output is impressive; more than 20 per cent in the
five-year interval since 1952-54.""* This is indeed a very
high rate by any standard, even for the most advanced of
countries. This growth rate is likely to rise as more
industries spring up and incomes rise.
Brown, a member of the Raisman Commission, esti
mates the importance of the East African market for
potential local industries by comparing it with Britain.
In his calculation, Uganda's money income is about one-
one hundred ninetieth that of the United Kingdom, whereas
the East African market, with two-fifths the population of
Britain, has only one-fiftieth the money income. He then
estimates that either Uganda or Tanganyika on their own
could hope to develop--for their internal markets alone--
the types of industry which account for from 35 to 40 per
cent of British manufacturing output. The East African
market, on the other hand, could support industries of a
type which accounts for from 70 to 80 per cent of the
British output. Brown may have been guilty of some over
estimation of the possibilities, because comparable British
firms can rely on the external economies of outside
"*Ibid. , p. 19.
£
Brown, o£. cit., pp. 38 ff.
208
services which may not be available in East Africa. The
fact remains, however, that the unified market contributes
to a better growth potential and, therefore, is more
attractive to industrialists i
Volume of External Trade
Table 23 shows the external trade of East Africa
for Kenya, Uganda and Tanganyika. These figures indicate
that the net import value of the whole region, £219.6
million, is about twice that of Kenya, £112.4 million, and
about three and one-half times that of Tanganyika, £64.3
million, and over five times that of Uganda, £42.9 million.
The volume of the region's exports, £214, is even more
indicative of the importance of the regional market which
is more than three times as large as any of the Partner
States. Clearly, the integrated East African market
commands a substantially larger market for industrial goods
than the market of any one of the three countries, sepa
rately.
It is also observed that trade is seriously uneven
between the outside and each of the Partner States. Kenya
imported goods worth £112.4 million but exported goods
worth £62.3 million, a deficit of about 50 per cent of her
total trade; Tanganyika imported £64.3 million but exported
£84.6 million, showing a large surplus. Uganda imported
TABLE 23
EXTERNAL TRADE OF EAST AFRICA, 1966
(in £m)
I m ports E x ports
Area and
Country
East
Africa Kenya Tanganyika Uganda
East
Africa Kenya Tanganyika Uganda
STERLING AREA:
Total 98.1 49.7 27.9 20.5 88.0 22.5 45.0 20.5
U.K. 73.3 37.8 20.0 15.5 48.9 13.5 23.1 12.3
Hong Kong 4.7 1.8 1.6 1.3 9.0 0.4 6.9 1.8
New Zealand 0.2 .08 .06 .01 1.4 0.4 0.5 0.5
% of Total 44.7 44.2 43.4 47.8 41.1 36.1 53.1 30.6
DOLLAR AREA:
Total 18.0 11.8 4.2 2.0 35.9 7.5 8.4 20.0
U.S.A. 16.8 11.3 4.0 1.7 28.6 5.4 6.1 17.0
Canada 1.2 0.5 0.3 0.3 7.3 2.1 2.2 3.0
EEC Total 45.8 21.3 13.9 10.6 35.9 14.5 13.2 8.2
EEC Total 45.8 21.3 13.9 10.6 35.9 14.5 13.2
EFTA
(excl. U.K.)
Sweden 2.3 1.3 0.5 0.5 3.4 1.8 1.0
Denmark 1.6 0.7 0.5 0.4 2.1 0.3 1.0
Norway 1.6 0.6 0.9 0.1 0.4 0.2 .01
Switzerland 1.3 0.5 0.3 0.5 0.3 .01 0.2
Austria 0.8 0.5 0.2 0.2 0.1 0.1 -
Others Total 45.5 21.5 14.2 6.8 44.1 11.7 15.6
Japan 9.2 2.7 4.1 2.3 9.8 1.8 4.8
China
(Mainland) 7.4 1.9 3.7 1.7 5.5 0.9 3.4
TOTAL 219.6 112.4 64.5 42.9 214.0 62.3 84.6
Source: External Trade of East Africa, 1966,. East African Statistical Department,
Economic and Statistical Review (Nairobi: Government Press, June 1967).
8.2
0.6
0.9
16.8
3.3
1.2
67.1
210
£42.9 million and exported £67.1--another large surplus.
The trade between the region and the outside, on the other
hand, is better balanced, with £219.6 million in imports and
£214.0 million in exports, leaving a small deficit of £5.6
million.
These tables bring out two significant facts. In
the first place, East Africa, taken as a unified region,
presents a sizable market whose effective demand attracts
the establishment of medium and large-scale industries.
Second, the balanced trade (in imports versus exports)
creates an atmosphere which is conducive to a continuous
increase in volume. These two facts indicate that regional
economic cooperation has created an environment which
attracts businessmen and industrialists from more developed
countries. It is the influence of such people, and the
companies they establish in East Africa, which bring the
Africans into contact with modern industrial activities,
techniques and standards, and commercial skills.
Table 24 displays the imports by sectors and by
principal countries. Manufactured goods form the largest
segment (close to 70 per cent) of the total regional
imports. The chief imports are seen to be machinery,
transport equipment, and other manufactured articles.
Table 25 shows that the main exports from the region are
agricultural and farming in type. Agricultural products
consist mainly of coffee, tea, sisal fibre, cotton, and
TABLE 24
VALUE OF EAST AFRICAN IMPORTS, BY SECTION AND PRINCIPAL COUNTRIES, 1966
(£ million)
Countries of
Origin 0 1 2 3
S.I.T.C. Section
8 9 Total
% of
Total 4 5 6 7
U.K. 2.1 0.6 0.5 0.6 0.09 7.1 14.5 40.5 5.5 1.8 73.3 33.4
Germany 0.6 0.05 0.3 0.1 0.21 2.9 4.4 8.7 1.1 0.02 18.4 8.4
U.S.A. 6.6 0.2 0.09 0.5 0.68 1.0 2.2 4.3 1.4 -
16.8 7.7
Iran (Persia) 0.01 - -
10.1
- 0.02 0.05
- - 10.1 4.6
Japan 0.02 - 0.2 - -
0.08 6.2 2.2 0.5 0.01 9.2 4.2
Others 10.29 0.75 2.21 4.3 1.72 5.7 34.65 17.2 7.3 7.47 91.8 41.8
Total 19.62 1.6 3.3 15.6 2.7 16.8 62.0 72.9 15 .0 9.3 219.6 100.0
7 o of Total 8.9 0.7 1.5 7.1 1.2 7.7 28.3 33.2 7.2 4.2 100.0
5 = Chemicals
6 = Manufactured goods classified chiefly
by materials
7 = Machinery and transport equipment
8 = Miscellaneous manufactured articles
9 = Commodities and transactions not
classified according to kind
Source: East African Statistical Department, "East Africa, Value of Imports by M
Section and Principal Countries, 1966," Economic and Statistical Review £
(Nairobi: Government Press, June 1967).
Column headings:
0 = Food and live animals
1 - Beverages and tobacco
2 ~ Crude materials, inedible
except fuels
3 = * Mineral fuels, lubricants and
related materials
4 = Animal and vegetable oils and
fats
TABLE 25
VALUE OF PRINCIPAL DOMESTIC EXPORTS,
(in £ millioi
Principal
Domestic United
Country Exports Kingdom
West
Germany U.S.A.
Nether
lands Canada Sweden
KENYA
Coffee, not roasted 1.5 6.8 3.0 1.8 1.1 1.6
Tea 5.6 .04 .7 .5 .7
-
Sisal fibre and tow .5 .3 .1 .4 .3 .06
Meat and meat preparations 1.5
- - - - -
TANGANYIKA
Cotton, raw .89 1.6
-
.4
Coffee, not roasted 1.1 1.9 4.1 .7
Sisal fibre and tow 2.9 1.0 .3
1.1
Diamonds 9.0 - -
-
UGANDA
Coffee, not roasted
Cotton, raw
7.7
1.0
.5
1.8
13.5 1.6
1.0
Copper, unwrought - -
3.1 -
Tea 1.9 -
.2 .2
Source: "Value of Principal Domestic Exports, by Principal Country, 1966," Economic ai
Government Press, March-June, 1967).
212
TABLE 25
IMESTIC EXPORTS, BY PRINCIPAL COUNTRY, 1966
(in £ million)
Canada Sweden Japan India Italy Spain
China
Main
land
Hong
Kong Total
Per cent
of Total
Domestic
Exports
1.1 1.6 .06 18.8 32.3
.7
- -
8.7 15.1
.3 .06 .3 3.3 5.7
3.2 .6 2.6 6.8 17.5 22.1
.4 - .2 15.1 19.2
.4 .1 .4
-
11.7 14.8
- - - - 9.0 11.4
1.6 .6
• •
.05 .3 34.8 52.7
1.0 1.6 1.8 1.5 .01 15.3 23.3
- .5 - - - 5.8 8.7
.2 - - m
.
3.2 4.8
)66," Economic and Statistical Review (East Africa Statistical Department) (Nairobi:
213
meats, with some minerals (especially diamonds) from
Tanganyika and copper from Uganda among the exported.
The kinds of imports and exports are indicative of
the low level of economic development in the region.
Regional imports include manufactured goods while the bulk
of exports are made up of agricultural products. Table 24
indicates that the greatest amount of trade is between the
United Kingdom (from which East Africa imported manufac
tured goods worth £60.5 million), Germany (£14.2 million),
U.S.A. (£7.9 million), and Japan (£8.9 million). Table 25
shows that the same countries are the principal markets for
the East African agricultural exports.
This direction of trade should give hope for rapid
stimulation of entrepreneurship. These principal countries,
with which East Africa trades, are the vanguards of the
philosophy of private enterprise. In these countries the
entrepreneur (whether acting alone or in groups, as in the
case of the Japanese community-centered entrepreneur of the
Meiji era) is highly respected. It is to be hoped that the
Partner States of the East African Community will have the
vision to utilize the trade contacts with these foreign
businesses to impart industrial and commercial skills to a
larger number of indigenous entrepreneurs. The current
urge for Africanization of commerce and industries is a
move in that direction, but there needs to be more concise
planning and preparation.
Inter-State Trade
214
The other fundamental dimension of the East African
community is the growth of inter-state trade. The impor
tance of inter-state trade was realized by the three
governments, to the extent that all trade restrictions were
removed. Thus, article 9, paragraph 2, of the Treaty for
East African cooperation states:
Each of the Partner States shall grant full and
unrestricted freedom of transit through its terri
tory for goods proceeding to or from a foreign
country indirectly through that territory to or from
another Partner State; and such transit shall not be
subject to any discrimination, quantitative restric
tions , duties or other charges levied on transit.7
Already the volume of trade between the three
Partner States has been increasing at a very high rate.
Although other factors enter into the picture, there is no
doubt that the existence of the Common Market has contrib
uted most to the growth of inter-state trade. Table 26
shows that between 1961 and 1966, the volume of exports
from Kenya to Tanganyika increased from £8.9 million to
£13.3 million; from Kenya to Uganda they more than doubled
(from £7 million to £15.6 million); from Tanganyika to
Kenya exports increased from £1.8 million to £3.8 million;
and from Tanganyika to Uganda from £0.4 million to £1.00
million. The volume of Uganda exports to Kenya increased
from £5.1 million to £0.3 million; and her exports to
^Treaty for East African Cooperation (Nairobi,
Kampala, Uganda: Government Printer, June 6, 1967), p. 6.
215
TABLE 26
VALUE OF INTERTERRITORIAL TRADE, 1962-1966
(£ million)
Year
KENYA TANGANYIKA UGANDA
to
Tanganyika
to
Uganda
to
Kenya
to
Uganda
to
Kenya
to
Tanganyika
1961 8.9 7.0 1.8 0.4 5.1 1.7
1962 10.0 7.3 2.0 0.4 5.4 1.7
1963 10.4 9.4 2.9 0.5 6.2 2.0
1964 13.3 12.6 4.1 1.0 7.3 2.4
1965 14.1 15.3 4.6 1.3 7.1 2.6
1966 13.3 15.6 3.8 0.8 7.3 3.1
Source: East African Statistical Department, "Value of
International Trade, 1962-1966," Economic and
Statistical Review, March-June 19F7 (Nairobi:
Government Press, 1967).
216
Tanganyika increased from £1.7 million to £3.1 million.
This increase in the volume of trade between the
Partner States is a very significant indication of the
improvement of integration and the stimulation of entrepre
neurial activities. The increase in volume of trade
strengthens the bonds between the states, and enables both
local and foreign businessmen to make profits.
An even more encouraging sign is seen in the fact
that the bulk of the principal commodities traded between
the three countries is made up of manufactured goods and
processed agricultural products. In Table 27 it is seen
that Uganda exports goods worth over £7 million to Kenya
and to Tanganyika £3 million. The largest share is made up
of manufactured goods, food, live animals, beverages,
tobacco and chemicals. These are also the groups of
products which show steady increase. Table 28 shows that
in Tanganyika manufactured goods also form the largest
share of the exports to her partners, even though
Tanganyika's trade is the smallest of the three. Kenya,
with the largest export trade to her neighbors (see Table
29), exports chiefly manufactured goods and articles,
chemicals, foods, and live animals. The rapid rate of
increase in the volume of inter-state trade is likely to
rise even faster when provisions of the Treaty are
implemented.
TABLE 27
VALUE OF INTERTERRITORIAL TRADE BY PRINCIPAL COMMODITY GROUPS:
UGANDA EXPORTS TO KENYA AND TANGANYIKA
(£ million)
UGANDA EXPORTS TO
Kenya Tanganyika
Commodity Group 1964 1965 1966 1964 1965 1966
Section 0--Food and Live Animals 2.9 2.0 1.6 0.2 0.2 0.4
Section 1--Beverages and Tobacco 1.0 1.0 0.6 0.5 0.3 0.2
Section 2— Crude Materials, inedible 0.1 0.2 0.2 0.04 0.05 0.06
Section 3--Mineral Fuels, Lubricants, etc. 0.4 0.4 0.4 - - -
Section 4--Animal and Vegetable Oils and Fats 0.8 1.0 0.7 0.1 0.07 0.05
Section 5— Chemicals 0.4 0.6 0.8 0.3 0.3 0.08
Section 6--Manufactured Goods, etc. 1.8 1.8 2.8 1.2 1.6 2.2
Section 7--Machinery and Transport Equipment - - 0.01 0.01 - 0.01
Section 8--Miscellaneous Manufactured Articles 0.05 0.1 0.2 0.07 0.06 0.1
Section 9--Commodities and Transactions n.e.s.
- - - - - -
Total 7.3 7.1 7.3 2.4 2.6 3.1
Source: East African Statistical Department, "Value of Interterritorial Trade by h
Principal Commodity Groups," Economic and Statistical Bulletin (Nairobi: ’ "J
Government Press, 1967).
t
TABLE 28
VALUE OF INTERTERRITORIAL TRADE BY PRINCIPAL COMMODITY GROUPS:
TANGANYIKA EXPORTS TO KENYA AND UGANDA
(£ million)
Commodity Group 1964
TANGANYIKA EXPORTS
Kenya
1965 1966 1964
TO
Uganda
1965 1966
Section 0--Food and Live Animals 1.1 1.4 0.8 0.3 0.3 0.2
Section 1--Beverages and Tobacco 0.4 0.5 0.4 0.01 0.2 0.01
Section 2--Crude Materials, inedible 0.3 0.2 0.4 0.02 0.01 0.03
Section 3--Mineral Fuels, Lubricants, etc. 0.01
- - - -
Section 4--Animal and Vegetable Oils and Fats 0.3 0.5 0.4 0.2 0.3 0.1
Section 5--Chemicals 0.08 0.06 0.09 - - ■ -
Section 6--Manufactured Goods, etc. 1.3 1.4 1.2 0.4 0.4 0.4
Section 7--Machinery and Transport Equipment - - 0.06
- . - 0.04
Section 8--Miscellaneous Manufactured Articles 0.5 0.4 0.4 0.1 0.09 0.04
Section 9— Commodities and Transactions n.e.s. - - 0.01
- - -
Total 4.1 4.6 3.8 1.0 1.3 0.8
Source: East African Statistical Department, "Value of Interterritorial Trade by
Principal Commodity Groups," Economic and Statistical Bulletin (Nairobi:
Government Press, 1967).
TABLE 29
VALUE OF INTERTERRITORIAL TRADE BY PRINCIPAL COMMODITY GROUPS:
KENYA EXPORTS TO TANGANYIKA AND UGANDA
(£ million)
KENYA EXPORTS ' TO
Tanganyika Uganda
Commodity Group 1964 1965 1966 . 1964 1965 1966
Section 0--Food and Live Animals 2.7 2.7 2.6 3.2 3.5 3.4
Section 1— Beverages and Tobacco 1.7 1.2 0.9 1.3 0.6 0.5
Section 2— Crude Materials, inedible 0.09 0.2 0.2 0.1, 0.4 0.3
Section 3--Mineral Fuels, Lubricants, etc. 1.5 2.9 2.2 1.1 2.3 2.4
Section 4--Animal and Vegetable Oils and Fats 0.07 0.1 0.05 0.06 0.1 0.08
Section 5--Chemicals 1.7 1.5 1.9 1.3 1.7 1.9
Section 6--Manufactured Goods, etc. 2.9 3.0 3.9 3.4 4.0 3.9
Section 7--Machinery and Transport Equipment 0.09 0.1 0.2 0.09 0.2 0.2
Section 8— Miscellaneous Manufactured Articles 2.4 2.3 1.5 1.9 2.6 2.8
Section 9--Commodities and Transactions n.e.s. 0.09 0.1 0.05 0.03 0.04 0.06
Total 13.3 14.1 13.3 12.6 15.3 15.6
Source: East African Statistical Department, "Value of Interterritorial Trade by v h - 1
Principal Commodity Groups," Economic and Statistical Bulletin (Nairobi: ^
Government Press, 1967).
Expansion of manufacturing industries is fundamen
tal to an increase in the supply of indigenous entrepre
neurs . Manufacturing plants draw most of their employees
from villages and schools, but these employees must acquire
some skills on the job. The vast majority of these people
soon get into the habit of fitting into the routine of
"work and wages." But a few men and women will use the
skills they learn and will begin to save so they can open
up their own small business enterprises. Already there are
a number of areas in East Africa which can be described as
industrial "growth pockets." Such, for example, are:
Jinja in Uganda where several manufacturing industries are
started, mostly in textiles, copper smelting, and brewer
ies; Kampala, where there are also several small and
medium-scale industries; Tororo, where there is a large
cement factory. Kenya also has such pockets in Nairobi,
Mombasa, Nakuru, and Kisumu. Tanganyika has such pockets
in Dar-es-Salaam, Moshi, Mwanza, and Bukoba. It may be
noted that a cluster of growth pockets is found around the
shores of Lake Victoria--an area which has a great poten
tial for developing into the future industrial complex of
East Africa.
221
Balancing Industrial Growth in the Region
The Treaty for East African Cooperation was signed
at a time when the common market was on the brink of disin
tegration. Dissatisfaction and conflicts had developed,
especially on the part of Tanzania and Uganda who felt that
Kenya was monopolizing the lion's share of market profits,
while the other two received very little. At that time,
manufacturing industries had developed and clustered in and
around Nairobi. Tanzania and Uganda merely served as
markets for Kenya's goods. As a result, Uganda and Tanzania
have always been in debt to Kenya. Table 29 shows that
Tanzania has consistently had deficits of about £9 million,
and that Uganda has maintained a deficit of about £7
million.
Several factors have contributed to this imbalance
of industrial growth. In the first place, Kenya had a
large number of white settlers who played the entrepre
neurial part in establishing industries and commercial
centers. These foreign traders had easy access to credit
and other financial services. In the second place, Nairobi
commands a geographically central position. Third, Nairobi
was the seat of the East African common services organiza
tion. All the headquarters of the common service corpora
tions, the airways, railways, harbors and the posts and
telecommunications were in Nairobi. And practically all
the major private companies and banking corporations in the
222
region had their headquarters in Nairobi. These factors
created a snowball effect in attracting industries and
commercial enterprises to Nairobi.
Several actions were taken to equalize the benefits,
but in vain. In 1961 a Distributive Pool was instituted,
as recommended by the Raisman Report. The pool was intended
to provide an independent source of finance for the common
services; and to achieve a fiscal redistribution between
the Partner States to compensate for the inequitable- opera
tion of the common market. Each country paid into the pool
a fixed percentage of its revenues from income taxes,
excise duties and customs. Half of the receipts go to the
EACSO and the other half is paid in equal amounts to the
three countries. As Kenya's revenue is higher than the
other two, Kenya pays more to the pool.
The fiscal redistribution through the pool did not
appear satisfactory to the Tanganyika or to Uganda. In
1964 the Kampala Agreement was signed with the aim of
distributing equitably the manufacturing industries among
the Partner States. But the agreement was never imple
mented. The following year Tanzania decided to quit the
East African Currency Board and established a national
central bank in Dar-es-Salaam. Soon Kenya and Uganda
followed suit. The move to split the currency was, indeed,
a big blow to the working of the common market and there
was danger of a complete breakup of the common market.
223
Under these circumstances the Treaty for East African
Cooperation saved the common market by providing institu
tional changes geared to a better balancing of industrial
growth and a fair distribution of the gains. Two new major
institutions were created: the Transfer Tax and the East
African Development Bank. There are also mechanisms for
the harmonization of monetary policies, and for the coordi
nation of development plans.
Transfer Tax
The transfer tax is one of the key devices for
bringing about a balance in the industrial growth of the
region, and for stimulating entrepreneurship in the whole
of East Africa.
Article 20, paragraph 1, of the Treaty states:
As a measure to promote new industrial develop
ment in those partner states which are less
developed industrially transfer taxes may, with aim
of promoting industrial balance between partner
states, be imposed.°
The only Partner State which is in deficit in its
total trade in manufactured goods with the other two
Partner States can impose a transfer tax on manufactured
goods which are transported to that state originating from
one or both of the other two. A transfer tax will be
imposed upon manufactured goods of similar description
being manufactured or about to be manufactured within three
8Ibid., p. 7.
224
months of the imposition of the tax. The industry in the
imposing state must also have a capacity to produce not
less than 15 per cent of local consumption or the output
value of £100,000. There is a further limitation that a
country cannot impose transfer taxes on a value of imports
greater than its deficit in the preceding year with the
country whose goods it is taxing.
Although fixing a transfer tax depends on the
discretion of the state imposing the tax, it may not exceed
50 per cent of the external tariff on the product. And for
many products the maximum rate of transfer tax is 15 per
cent of the value at its point of entry into the importing
country.
The transfer tax system is a temporary device. No
transfer tax can be imposed for longer than eight years.
The whole system will be appraised on its merit and effec
tiveness every five years and the system will be revoked
after fifteen years from its date of establishment.
At this juncture it may be asked how the transfer
tax is likely to affect industrial growth in East Africa.
In the first place, a fair redistribution of the gains from
the common market is possible and the less developed coun
tries will receive additional revenue. In this case
Tanzania and Uganda will impose transfer taxes on Kenya
goods, and, to a lesser extent, Tanzania will impose some
taxes on Uganda manufactured goods.
225
Looking at the patterns of trade in 1966, for
example, as is shown in Table 26, Tanzania would impose
transfer taxes on Kenya manufactured goods up to a maximum
of £9.5 million; and on Uganda's goods to a maximum of £2.3
million; Uganda may impose a maximum tax of £8.3 million on
Kenya for manufactured goods imported during the year.
Because these figures are absolute maximums, the actual
amounts of the taxes would be much less, since transfer
taxes may only be imposed in the country where a similar
product is being manufactured and when the country is in
deficit and/or when the goods are expected to be produced
within three months of the imposition of the tax. What is
significant here is that the transfer system makes it
possible for the less-developed Partner States to earn an
additional revenue which can be used to open up new
industries.
The transfer tax system encourages the opening up
of new industries and the expansion of existing facilities.
Uganda and Tanzania are thus placed in the fortunate posi
tion of being assisted in starting completely new indus
tries, and expanding into new business lines. Businessmen
in Uganda and Tanzania now know that if a new industry is
established and can satisfy an appreciable demand, it can
enjoy some amount of monopoly for a considerable period of
time. Moreover, if a firm can be started in either of the
two countries, it is sure of protection, provided it can
226
reach a capacity which accounts for at least 15 per cent of
the local demand. Kenya businessmen, too, are encouraged
to expand their already medium-scale industries in order to
maintain their competitive position. Indeed, Kenyans are
also challenged to open up new business lines.
The possibilities of a monopoly, a wider, market,
expectation of protection and anticipation of free competi
tion when local industries and firms have reached a certain
capacity, should be key incentives to entrepreneurial
activities. Entrepreneurs must have operational capital
and the Treaty provides for the establishment of a Develop
ment Bank to supplement the already-established financial
institutions in the region.
The East African Development Bank
In an effort to balance and speed up the rate of
industrial growth in the region, the East African Develop
ment Bank was set up. Among other objectives, the purpose
of the Bank was primarily to:
(a) Provide financial and technical assistance to
promote industrial development of the Partner
States.
(b) Give priority to industrial development in the
relatively less industrially developed Partner
States, thereby endeavoring to reduce the
substantial industrial imbalances between them.
(c) Further the aims of the East African community
by financing, wherever possible, projects
Ill
designed to make the economies of the Partner
States increasingly complementary in the indus
trial field.9
The Bank's initial subscribed capital is £10
million, of which £6 million will be subscribed by the
three Partner States in equal shares. The remaining £4
million may be subscribed by approved institutions, but the
Partner States cannot have less than 51 per cent of the
total shares. The Bank was started in January of 1968 with
its headquarters in Kampala, the capital of Uganda.
The major role of the bank is to reduce imbalance
in industrial growth. To this goal, Tanzania and Uganda
will each receive 38.75 per cent of the total sum of loans,
guaranteed or otherwise invested by the Bank. Kenya will
receive the remaining 22.5 per cent. This arrangement is
likely to reduce the current tendency for industrial growth
to be concentrated in Kenya.
It should be noted that for the Bank, the term
"industry" is defined in such context that it means only
manufacturing, assembling and processing industries asso
ciated with agriculture, forestry and fishing. The build
ing, transport and tourist industries are not to be
included.
In its operations, the Bank will invest or finance
only projects that are economically sound and technically
^Ibid., p. 68.
228
feasible. It will also maintain a reasonable diversifica
tion of investments. The Bank will undertake to spread its
finances so as to support complementary industries wherever
this is possible. There is evidence to support hope that
it is possible to build sound and complementary projects in
the region. According to the United Nations experts,
Uganda could produce steel and copper because the country
has sufficient supplies of the cheap natural resources
needed for these industries; Tanzania could concentrate on
tires and coal distillation; and Kenya could concentrate on
wood and wood distillation. These are but a few of the
many possible industries that can be added to the list, as
the Bank and its staff begin their feasibility studies, the
results of which will be available to the Partner States
and to other interested public institutions.
The Bank is expected to promote investment opportu
nities in the area covered by the Community. This will be
done through economic studies conducted by economic and
investment departments of the Bank. It is true, indeed,
that the Bank does not now have enough funds to finance or
lend to all the feasible projects which are sure to apply.
The Bank, however, once it creates a good reputation, will
be in a position to attract additional funds from other
institutions, and even from foreign financial bodies.
As to the effect of the Bank on entrepreneurship,
the mere fact that it will provide additional funds to the
229
less developed economies of Tanzania and Uganda means that
businessmen in these countries will have greater opportuni
ties to enter the commercial and industrial markets. It is
likely to stimulate greater entrepreneurship in Uganda and
Tanzania. Since the Bank will be dealing mainly with the
States and with large public corporations, it is quite
likely that the trend will be toward the encouragement of
community-centered entrepreneurs in the region.
It is too early to predict with certainty just what
the full effect of the Bank will be. It is certain that,
with sufficient funds and a competent staff, the implementa
tion of the Bank's Charter should bring about a greater
diversification of investments, a better balance of comple
mentary industries, and closer ties between the Partner
States. It can also be confidently expected with the
establishment of diversified industries that many more
people will have opportunities to acquire industrial skills
and to enter the business world as entrepreneurs.
The Common Services Corporations
There are also other institutions which affect the
economies of the whole region and influence the rise of
entrepreneurship. These are the common services corpora
tions- -the East African Railways Corporation; the East
African Harbors Corporation; the East African Posts and
Telecommunications Corporation; and the East African
230
Airways Corporation. Before the Treaty, all these corpora
tions were headquartered in Nairobi and the railways and
harbors were administered as a single corporation.
Under the Treaty, the corporations have been
decentralized. Nairobi is now the headquarters of the
airways and railways corporations; the Harbors Corporation
has moved its headquarters to Dar-es-Salaam; and Kampala
becomes the headquarters of the Posts and Telecommunica
tions Corporation. This is one of the measures taken to
establish equitable distribution of gains.
These corporations have been operating for many
years as regional services for East Africa. They have
matured to the extent that the East African Airways
Corporation, for example, has paid for all of its planes,
including its transcontinental jets. The corporations
conduct their business according to commercial principles;
they are not only self-financing, but they make substantial
annual profits. And, like the Bank, or the Transfer Tax,
the corporations maintain the principle of equitable bene
fits among the Partner States.
Each corporation has a board of directors with a
membership of six and a director-general who directs the
corporation affairs. The directors and other top and
medium-level staff members are appointed on the basis of
experience in commerce, industry, finance, administration
or technical experience,. or personal or educational
231
qualifications. While there has not been time as yet for
East Africans to have acquired these qualifications, there
is a policy to Africanize most of the posts. In order for
this to be accomplished, hundreds of young East Africans of
School Certificate level and beyond who are serving the
corporations are understudying expatriate experts and many
others are acquiring the needed skills by working and
studying. In the long run, one of the chief contributions
of the corporations is expected to be the creation of a
cadre of men and women who have developed industrial disci^
pline. Among such people there is no doubt that some will
play the part of entrepreneur in the economic life of East
Africa.
Regional Economic Planning and Coordination
The Treaty for East African Cooperation provides
some measures for planning, coordination and harmonization
of monetary and fiscal transport policies, and for coordi
nating national economic development plans. These measures
are essential to the success of the institutions and to the
economic growth of the whole region.
232
Harmonization of Monetary
and Fiscal Policies
Although each country has its own central bank, the
three currencies are at par and they are, in most respects,
a single currency. According to the Treaty, . . the
Partner States endeavour to harmonize their monetary poli
cies to the extent required for the proper functioning of
the Common Market and fulfillment of the aims of the
Community. Notes and transactions move freely between
the countries and no commission is charged for exchanging
currencies. Under the Treaty, the three governors of the
central banks are required to meet at least four times a
year. The governors meet to "consult, and to coordinate
and review their monetary and balance-of-payments poli-
11
cies." In practice, so far, the governors are in constant
contact with each other, either by telephone or in actual
conferences in the intervals between the regular meetings.
A good illustration of the value of the monetary harmoniza
tion arrangement occurred at the time of the devaluation of
the pound sterling in 1967; it should be recalled that the
largest portion of the East African foreign exchange
reserves were tied to EnglandTs currency. During the
crisis, the three central bank governors, and the three
ministers of finance held an all-night conference in
10Ibid., p. 2 1.
n ibid.
233
Nairobi, and decided unanimously not to devalue the East
African shilling. This does not mean that the losses or
gains were identical, but the total effect on the Community
as a whole turned out to be beneficial for all.
No special provision is made for clearing; however,
net balances are settled in mutually-acceptable currency,
and, since the settlements are made at frequent intervals,
it is not likely that large outstanding balances will be
involved. In their over-all policy on clearings, the
Partner States agree "to pursue an economic policy aimed
at ensuring the equilibrium of its over-all balance of
12
payments and confidence in its currency."
A fortunate provision of the Treaty declares that
fiscal incentives in the field of industrial development
are to be "harmonized," and that the Partner States "shall
use their best endeavours to agree upon a common scheme of
13
fiscal incentives toward industrial development," which
are to be applied in their countries. A Tax Board is
established to be responsible for assisting in the study of
and correlation between taxes managed and collected by the
Community, on the one hand, and the taxes collected and
managed directly by the treasuries of the Partner States
on the other. The Board also gives assistance in matters
12Ibid.
13Ibid., p. 12.
234
pertaining to fiscal planning. The intention of the Treaty
is to bring about harmonization of commercial laws. Trans
port policies are already well coordinated under the direc
tion of the Communications Council of the Community.
Coordination of Economic Plans
Considering the number of institutions created
within the Community and the economic activities and goals
that are formulated for it, a regional planning scheme is
highly necessary. To this end, an economic consultative
and planning council was established. The council is
responsible for assisting the national planning of the
Partner States by consultative means, and for advising the
Authority concerning the long-term planning of common
services.
Prior to the launching of the Community there was
an Economic Advisory Unit (EAU) attached to the Treasury of
the East African Common Services Organizations. The unit
was responsible for licensing industries operating on the
regional basis. It made fact-finding and feasibility
studies to decide whether there was a sufficient market for
one or two similar industries in the three countries. The
unit also made such special studies as the problems of
changing over to the metric system and other questions on
which the Partner States needed advice. But there was no
coordination or planning on a regional basis.
235
Under the new arrangements, regional planning and
coordination are placed on a more systematic, consistent,
and continuing basis. The Economic Consultative and Plan
ning Council has been charged with the task of advising how
to coordinate the developmental plans of the Partner States.
The Council is not expected to act as a central planning
bureau. Rather, its role is that of an adviser, a role
thought to be fundamental to smooth industrial operations
in East Africa.
It is too early to know what procedure will be
worked out between the three national planning bureaus and
the planning council. It seems, however, that when the
next five-year development plans are being drafted, the
council will have access to the first drafts and, on the
basis of thorough study, the council will be in a position
to make recommendations to the planning commissions for
final drafts. It is expected that the recommendations will
take into account the projects which are suitable for
regional action and those which might create conflict or
waste due to excessive duplication. It is also hoped that
complementary industries suitable to the region will be
specifically pointed out, with due regard to maintaining
the balance in locating the industries. Indeed, it is
expected that the economists in the national planning
bureaus and those in the planning council will keep in
close and continuous contact in their efforts to coordinate
236
and harmonize the development plans for the whole region.
A further specific duty of the planning council is
to advise the Authority upon the long-term planning of
common services. This is probably the area where planning
and coordination is most crucial. The common services to
be coordinated, it will be recalled, consist of the follow
ing four major corporations: the railways, the airways,
posts and telecommunications, and the harbors. To this
list should be added the East African Development Bank.
These corporations comprise a large portion of the economies
of the Partner States. Even though each corporation is
advised to have its own planning unit at its headquarters,
an over-all planning council is essential to coordinate the
several plans, and to consult with them on long-term prepa
rations for the stage-by-stage expansion of their activi
ties . The planning council will be a most valuable service
to the Development Bank. The Bank will be financing a
variety of projects in East Africa and the chief goal is to
balance out industrial growth. This requires an intimate
and detailed knowledge of the levels of industrial develop
ment, the availability of major natural resources, and the
capacity and potential of each country. These responsibil
ities fall within the purview of the council and there is
no doubt that the Bank will benefit from its utilization of
the council1s findings.
237
But it should be kept in mind that the Planning
Council is not a central planning bureau. Its role is that
of consultant and coordinator. Creation of the Council is
a good step toward regional economic planning, and, for the
first time, there is hope that at last a solution may be
found to end the conflicts arising over the equitable loca
tion of industries.
Concluding Statement
The East African Community has given a continuity
and improvement to the long-established economic coopera
tion existing between Uganda, Kenya and Tanzania which
dates back more than half a century. The chief goal of the
Community is to create an atmosphere of regional stability
in which a faster rate of industrial growth can be nurtured.
The growth of new industries coupled with a desire to
Africanize its commerce and industry will give encouragement
and stimulation to the growth of entrepreneurship in the
region.
The establishment of the Community makes available
a substantial and attractive market. Inter-state trade
shows a high rate of increase, both in volume and in diver
sity of products. The bulk of trade is made up of manufac
tured goods, giving an indication that the countries are
becoming more interdependent. Moreover, the manufacturing
238
industries are acting as training grounds for young men and
women who want to acquire industrial skills.
Measures to ensure a balance of industrial growth
among the three member states and to give each a fair share
of the gains include a system of transfer tax, a develop
ment bank, and the decentralization of the common services
corporations. There are also provisions for harmonization
of monetary and fiscal policies among the Partner States.
An economic consultative and planning council was
established to coordinate national development plans and to
advise the Authority on coordination and long-term planning
for the common services corporations. In a sense, there is
now a beginning of regional economic planning which is
likely to solve existing conflicts over the distribution of
industries. The bank and the transfer tax system will help
to open up new and complementary industries which, in
combination with the common services corporations, should
provide employment and training opportunities and stimulate
the growth of indigenous entrepreneurship in all of East
Africa. Indeed, it is expected that if the Community is
successful in implementing the objectives of the present
Treaty, it will bring about closer relationships between
the three countries and may eventually lead to a political
federation among them.
CHAPTER VII
SUMMARY AND CONCLUSIONS
This study was undertaken with the conviction that
the entrepreneur is the most fundamental and crucial factor
in economic growth. At the same time it was realized that
the institutional framework of a community can either
encourage or stifle entrepreneurial activities in the area.
It was found that indigenous entrepreneurs were almost non
existent in East Africa during the past seventy-five years.
With the recent achievement of political independence, the
East African Governments have instituted a number of public
corporations whose primary goal is to promote industrial
growth in the region. In this study an attempt was made to
define the entrepreneur, his functions, and the specific
problems he faces in East Africa. Case studies were made
of selected major public institutions, with the purpose of
determining the effect of these institutions on the growth
of indigenous entrepreneur groups in the region.
239
240
Summary
It was observed in Chapter II that the entrepreneur
has been defined in many ways: a business leader, a crea
tor, an innovator, a decision-maker, a coordinator, a
planner, a dreamer who often relies on intuition rather
than on observable facts, a self-made man who will not be
tied to tradition or status quo, a man who has the vision
and the dynamism to attract and lead other people.
The entrepreneurial function was seen to be the
utilization by one productive factor of other productive
factors for the creation of economic goods. The entrepre
neur in this sense is the agent who combines land, capital
and labor to produce goods and services in an attempt to
satisfy human wants. He makes decisions about what to
produce, how much, how many employees to hire and other
relevant matters. In short, the entrepreneurial function
is to be found in the skilled businessman around whom the
process of economic growth gravitates.
Entrepreneurs fall into many different classifica
tions: the innovating or aggressive, the adaptive, the
imitative, the ritualist and the community-centered or
cooperative entrepreneur. Of these types, the innovative,
the adaptive, and the community-centered entrepreneurs were
found to be ideal for the present level of economic
development in East Africa.
- - 241
It was noted that a prosperity ethic existed among
the East African tribes, as is evidenced in their proverbs
and in the fact that thousands of East Africans travel
hundreds of miles in search of jobs and higher monetary
wages. This quality should lead them easily to develop an
entrepreneurial attitude. The institutional framework that
existed in these countries for the last seventy-five years
was inhibitive to the growth of indigenous entrepreneurs.
The African was barred from ordinary financial services.
He could not get credit from commercial banks and he had
no accumulated wealth of his own. There were other prob
lems, such as lack of standard securities, insufficient
banking facilities, and lack of skills and experience;
worse still, the African faced unfair and ruthless competi
tion from the well-established and favored European and
Asian industrialists and merchants.
With political independence, a favorable institu
tional framework has been established, and the African
reaction so far has been extremely encouraging. Many
Africans are seizing new opportunities in commercial and
industrial fields. It was recommended that Government take
more steps to mobilize public enthusiasm; and that appren
ticeship programs be started.
In Chapter III it was noted that national trading
corporations were established primarily to stimulate,
promote and encourage Africans to take part in commercial
242
enterprises. This is being done by making operational
capital available through several credit schemes, appoint
ment of distributive agents, supporting and training
businessmen to open up and run wholesale companies, provid
ing free business consultations, and training many business
men in the fundamental commercial skills.
Four main credit schemes have been developed:
1. The credit guarantee, in which a retailer is
given a guarantee by the National Trading Corporation for a
fixed strnn of money. With the guarantee, a retailer obtains
supplies from a recognized wholesale company. He is
expected to dispose of the goods and pay the company within
a maximum period of sixty days. This scheme is helping
many people, but is in need of some revision before it will
realize its full potential.
2. Bills-discounting, in which the National Trad
ing Corporation helps Africans who are engaged in tender
business. The corporation pays on receipt of invoices; in
this way, the businessman works almost on a cash-down basis.
This scheme is enabling a number of Africans to maintain
their tenders.
3. The confirming scheme. Here Africans who are
interested in import and export enterprises make orders
through National Trading Corporations which, in turn, place
the orders with foreign manufacturers. In this way, the
small African trader benefits from the services of those
243
overseas members of the corporations and their staff of
experienced and knowledgeable experts in international
transactions.
4. Hire-purchase guarantee. Under the hire-
scheme, the corporation enables promising African business
men to buy trucks or lorries without which they could not
operate their businesses.
It was observed that before an application for
credit or loan can be approved, the applicant must furnish
proof that he has been in business for at least one year;
he must have a life insurance policy, must have a bank
account, and should know enough about the business to show
ability to plan ahead. These requirements are intended to
force potential entrepreneurs to acquire the requisite
commercial skills as fast as possible.
Other strategic approaches include the appointment
of subdistributors and the organization of district whole
sale companies. National trading corporations are often
given monopolies for the distribution of certain selected
consumer goods. The corporations appoint subdistributors
to take the goods and sell them in their village communi
ties . At the same time, the corporations help groups of
African businessmen to organize wholesale companies.
Wholesale companies act as larger distributors. Both
wholesalers and subdistributors get their supplies of
monopolized goods through the corporation. The underlying
244
goal here is the elimination of the long line of expensive
middlemen, and thus to lower prices and make it possible for
businessmen to make a profit. The number of subdistributors
and wholesale companies is multiplying at a high rate, in
spite of the fact that the programs were initiated only two
years ago.
To supplement these commercial activities, the
corporation organizes seminars for traders at each district
headquarters. The seminars include such subjects as indus
trial law, financial management, budget control, marketing
and sales techniques, elementary bookkeeping, and human
relations. Monthly bulletins are also published on similar
subjects. From the results, there is no doubt that the
national corporations are on the right track as far as the
promotion of indigenous entrepreneurship is concerned.
In Chapter IV it was noted that there are three
major national development corporations: Uganda Development
Corporation, Industrial and Commercial Development Corpora
tion, and National Development Corporation. All three were
established with the expressed goal of facilitating and
promoting industrial and economic growth in their respective
countries.
These corporations place major emphasis on stimu
lating and promoting indigenous entrepreneurship in line
with their common policies of (1) helping African industri
alists and traders to expand their operations in order to
245
participate more fully in the development of their coun
tries ; (2) promoting the over-all Africanization of industry
and commerce; and (3) assisting and promoting those projects
which would form a spearhead of Africanization of the indus
trial and commercial sectors of the economy, making loans
to stimulate the spirit of entrepreneurship, and educating
African entrepreneurs in management and technical skills.
In interviews with business and industrial leaders
in East Africa all expressed the conviction that the most
important long-term objective of the corporations was the
development of latent entrepreneurship throughout as wide a
cross section of the community as possible.
The corporations are stimulating entrepreneurship
in four major ways.
1. Promoting small-scale industries. The corpora
tions extend credit and loans to Africans who show aptitude,
talent and ability of running a business. These financial
facilities are channeled through the Small Industries
Revolving Loan Fund. Loans issued during the past two
years have more than quadrupled, the result being a sharp
increase in the number of small industries being opened up.
The industries include food processing, carpentry, block
making, boat making, tailoring, manufacture of footwear,
manufacture of radios, timber milling, among others. These
industries have two features in common: they do not
require large sums of money for initial capital and
246
advanced formal education is not a necessary prerequisite.
2. Providing on-the-job training facilities. The
Development Corporations provide ideal facilities for the
practical training of different industrial and commercial
skills. The corporations also carry on training programs
for promising young men and women on their own staffs to
provide opportunities to observe and to grasp many tech
nical skills. This is furthered through a system of about
130 subsidiary and associate companies. These companies
specialize in a diversity of businesses and many large and
medium-scale industries, including agriculture, textiles,
hotels and tourism, mining, steel and copper, chemicals,
finance, banking, insurance and a variety of manufacturing.
These subsidiaries and associates employ thousands of
people. And with the new move toward Africanization there
is added impetus for companies to plan deliberately for
practical training of young staff members.
3. Promoting contacts between indigenous entrepre
neurs and international business firms. One of the most
far-reaching educative activities of the development
corporations is their program in which African members of
the staff come in contact with foreign businessmen. The
subsidiary finance companies have brought in staff members
from England, West Germany, and Netherlands who are experi
enced in international finance and happy to turn their
skills to the education of promising East Africans. Some
247
Africans are also sent abroad where they gain first-hand
information. The corporations expect that trained Africans
will eventually be qualified to succeed the expatriate
staff members, to be employed by private firms, or to open
up their own small industries. The economy has already
received unexpected benefits in that the subsidiary and
associate companies have attracted not only experts from
abroad, but a great deal of foreign capital which has been
urgently needed for industrial development in the country.
4. Formal training. To supplement the practical
vocational training, the corporations have developed formal
educational programs. Scholarships are awarded to promis
ing young Africans to go abroad to acquire industrial and
commercial skills. This training is believed to be an
important investment, and the corporations are spending
large sums of money on it. The Uganda Development Corpora
tion, for example, invests an annual sum of £30,000 on the
program. There are also local technical centers supported
jointly bv the corporations and governments, where young
people enroll for courses in shop management, industrial
engineering, marketing and sales, entrepreneur training,
supervisory training, metal engineering, electrical engi
neering, automatic engineering, woodworking technology
and mobile workshop training.
What is lacking in all of these programs is coordi
nation and forward planning. Each corporation or subsidiary
248
works on a day-to-day basis; in many cases, training
programs do not begin until an acute scarcity of skilled
employees arises.
In Chapter V the Institute of National Economic
Planning was seen to be well coordinated. The planning
commission, often under the chairmanship of the president,
is at the pinnacle of the decision-making hierarchy, fol
lowed by several planning committees, and, at the bottom,
the village leaders.
The Five-Year Development plans have recognized
that entrepreneurship is the fundamental and key factor in
industrialization, and that the participation of African
entrepreneurs is essential to healthy economic growth.
In order to create the desired cadre of efficient
and trained African industrialists, commercialists and
business decision-makers, the following policies and lines
of action were provided for in the plans: (1) expansion of
loans and credit facilities, (2) establishment of public
trading and development corporations, (3) encouragement of
small-scale industries, -(4) an expanding cooperative move
ment, (5) establishment of people's shops, and (6) expansion
of formal education.
On the whole, these national development plans
provide many facilities designed to create a pool of
qualified persons with the requisite skills for industrial
249
and commercial employment. The plans, so far, await
specific and coordinated provisions for apprenticeship
programs.
Chapter VI was devoted to an examination of the
possible effects of the recently organized East African
Community on the spirit of entrepreneurship in the region.
The Community serves a large market covering 680,000 square
miles and with a population of some 30 million. There are
no trade restrictions between the three Partner States
which have protected the region by imposing a common
external tariff. The community, moreover, has created
political and monetary stability, and an atmosphere which
is conducive to entrepreneurial activities.
The volume of external trade is large and is
increasing rapidly. Moreover, the unified market shows a
good balance between total imports and exports trade
balance, a factor which is attracting foreign business and
capital into the region.
Trade between the three Partner States is increas
ing at an even higher rate than that of external trade,
indicating a growing interdependence within the Community.
The bulk of internal trade consists of manufactured goods.
The manufacturing plants, with their long-range educational
value to the manpower needs of the region, have developed a
number of "growth pockets," attractive to would-be entre
preneurs .
250
The transfer tax system and the development bank
have been a double benefit to the region, contributing to
the balance of industrial growth and providing additional
capital for opening up new industries. By means of the
transfer tax, Tanzania and Uganda (the two countries that
were being swamped by Kenya's market monopoly) are now
enabled to earn revenue which is used for industrial invest
ment in their countries. The bank gets its capital from a
pool contributed by the three Partner States, and expects
to attract foreign capital into East Africa. The bank will
help to further boost the economies of Tanzania and Uganda
by investing 38.75 per cent of its total operational capital
in each of the two countries and the remaining 22.5 per cent
in Kenya. The bank will also encourage the formation of
complementary industrial projects. Altogether, the two new
institutions of the bank and the transfer tax will support
new industries, and these, in turn, will create more oppor
tunities for indigenous entrepreneurs.
The common services corporations (the airways, the
railways, the harbors, and the posts and telecommunications)
have been decentralized, now that they are self-financing.
They employ thousands of people, and a great many of them
(especially those at management levels) are getting
promoted to positions where they gain experience in
handling problems of planning and decision making.
251
The regional planning, and the harmonization of
monetary and fiscal policies, contribute greatly to stabil
ity in the region. This is creating an atmosphere conducive
to higher-level business aspirations and an environment that
should stimulate entrepreneurial activities.
Conclusions
Efforts are being made in East Africa to promote
industrial growth as fast as possible. Many economic
institutions are being established. Capital can be obtained
but the absence of indigenous entrepreneurs is a serious
bottleneck. New institutions recently created are exerting
a positive influence in stimulating the spirit of entrepre
neurship, but there is as yet no clear long-term plan
directed at the growth of entrepreneur groups and their
future relation to public corporations.
Entrepreneurship is fundamental to economic growth
in any democratic society. The entrepreneur contributes
business vision, ability to adapt and to seek out innova
tions, creativity and dynamism.
Among the many types of entrepreneurs, those best
adapted to the needs of East Africa, at its present level
of economic development, are the community-centered,
adaptive and innovative entrepreneurs.
252
There is yet no clear theory as to how entrepreneurs
can be developed. It is true, however, that the institu
tional framework of the region can encourage or stifle
entrepreneurial activities. In East Africa the appalling
scarcity of indigenous entrepreneurs is partly if not
totally the result of the colonial mystique which prevailed
during the past seventy-five years.
At this juncture, if one should ask whether the
current institutional framework is conducive to entrepre
neurial activities, the answer would be in the affirmative.
The development and trading corporations, the development
plans and the community all give encouragement, stimulation
and support to the growth of entrepreneurial activity in
the region.
These institutions are combining to provide train
ing grounds for industrial skills. They are also providing
financial support and other encouragement to prospective
traders qualified to open up small industries. These
policies are arousing the interest of many Africans in
entering commerce and industry.
In spite of these activities, there are no specific
long-range plans for the rise of entrepreneurs. The devel
opment and trading corporations appear to operate on a
day-to-day basis. Little is known about what the next
steps should be, after the initial stage of awakening
entrepreneurial interest and enthusiasm. Even the Five-
Year development plans merely mention the importance of
indigenous entrepreneurship, and, after providing for loan
and credit facilities and recommending the establishment of
specific institutions to encourage entrepreneurship, the
matter is dropped. No proposals are offered for long-term,
step-by-step action, nor any planning for the direction to
be taken when the. successful entrepreneurial parade gets
started..
The prospects are very good that in the near future
there will be thousands of Africans who will have acquired
the industrial skills needed to undertake the entrepre
neur's role.
As to the future, with the rise of entrepreneurial
groups and the continuing expansion of public corporations,
two opposite trends are possible:
(1) If there are forward plans the public corpora
tions can be limited to specific areas while room is left
for exploration by the skilled entrepreneurs. Moreover, a
policy of encouraging capable entrepreneurs to buy shares
in the public corporations with the goal, say, of eventu
ally owning a small part of the subsidiary companies can be
put in force.
(2) In the absence of a long-term plan, the public
corporations may impose serious limitations on private
entrepreneurial activities. Entrepreneurs who have been
sponsored by the corporations cannot hope to compete
effectively with the large public corporations. Moreover,
the corporations are likely to expand the areas over which
they have established a monopoly. This would not encourage
the small private entrepreneurs. Indeed, it would be a
negative aspect in efforts to realize a fast rate of
economic growth.
The- other area which does not seem to be suffi
ciently emphasized in all the new endeavors to stimulate
entrepreneurship is apprenticeship. It is common knowledge
that the best way to acquire commercial and industrial
skills is to learn on-the-job. It is also known that most
developed countries had some form of apprenticeship. East
Africa is not going to be the exception. The current
approach of depending on public institutions should be
supplemented by apprenticeship in private firms. These
private firms can be given some tax allowance to take in a
number of Africans for a period of time. If such a program
is enforced, together with the public corporations, there
can be no doubt that soon East Africa would have a large
number of skilled entrepreneurs.
It may be said, in conclusion, that so far the
beginning is very good. The institutional framework which
is being created is conducive to entrepreneurial activi
ties. The new institutions are providing greater opportuni
ties in commerce and industry to Africans than at any other
time in the past. And there are positive signs that as
soon as many Africans acquire commercial and industrial
skills, they will be able to put their entrepreneurial
talents to work for the betterment of self and community.
This is - the time when long-term planning and coordi
nation are needed for the stimulation of indigenous entre
preneurs. The areas of expansion for public corporations,
and for exploration by private entrepreneurs, would be
demarcated at successive levels of development within a
long-term plan. The proposed planning structure would
encompass a three-stage approach:
(1) Public corporations would have planning units
responsible for manpower and training programs.
(2) National planning bureaus would coordinate
plans of private firms and public corporations, and draft
a national manpower and training program, with apprentice
ship programs.
(3) The Economic Consultative and Planning Council
of the Community would then coordinate the national plans
into a regional map of general policy and practice. In
general, the stimulation and training of entrepreneurs
through public and private concerns would enable the
corporations and existing private firms to serve as spring
boards for the rise of indigenous entrepreneurs.
In short, a long-term plan based on a three-stage
approach should bring about the emergence and growth of
indigenous entrepreneurs to play a crucial role in the
industrialization and modernization of the East African
economy.
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257
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APPENDICES
269
APPENDIX A
NATIONAL TRADING CORPORATION QUALIFYING
REQUIREMENTS FOR CREDIT SCHEME
270
APPENDIX A
NATIONAL TRADING CORPORATION QUALIFYING
REQUIREMENTS FOR CREDIT SCHEME
From: Assistant Manager, To: Chief Executive Manager
Credit, Finance
and Training
Kampala
20th November, 1967
QUALIFYING REQUIREMENTS FOR NATIONAL TRADING
CORPORATION'S FOUR SCHEMES
A. CREDIT-GUARANTEE SCHEME:
a. The applicant must have been in business for not
less than one year.
b. The applicant must be in possession of reasonably
well kept books of accounts. Companies or Partner
ships should produce the latest Balance Sheets,
duly certified by qualified Accountants.
c. The applicant should have an average monthly turn
over of not less than 35 per cent of the stock-in-
trade. In any case, the value of the stock should
not be less than 4,000/-.
d. The applicant should be able to offer tangible
security in the form of land, building(s) or
personal guarantee of a person of high standing.
The Life Insurance should be additional to other
securities and, in case of corporate bodies,
directors must also themselves give personal
guarantees. In any case, the value of securities
should not be less than the amount applied for.
In the case of companies, both the goods and the
shop building must be covered by an insurance
policy.
271
272
e. After being recommended for the facility, the
applicant should be required to submit a Monthly
Return showing the latest position in regard to:
i. Total value of goods taken from a supplier(s).
ii. Amount of money paid to the suppliers after
the first 60 days.
iii. The outstanding amount in arrears (if any).
Failure to do so should lead to immediate withdrawal
of Credit Guarantee.
f. The suppliers should be required to notify the
Corporation or its representative (in up-country)
immediately the trader with the credit-guarantee
defaults, rather than wait for two or more months
as has been the case hitherto.
B. HIRE-PURCHASE SCHEME:
a. The applicant should be a prospective transporter of
his own goods or somebody's goods. He should also
produce a copy or copies of contracts, if so
employed.
b. The applicant should supply details of costings at
the time of applying. These should be closely
scrutinized before acceptance.
c. Activities on which the vehicle is to be employed
should be fully outlined.
d. The applicant should be in a position to raise the
initial percentage of 35 per cent.
e. A comprehensive insurance policy must cover the
Hire-Purchase Agreement period or 18 months, which
ever is the shorter.
f. In addition to vehicle as security, other tangible
securities should be offered, in the form of cash
deposit in the bank, land/buildings insurance policy
or personal guarantee by a person of high standing.
In case of corporate bodies, directors must also
themselves give personal guarantees.
g. The applicant should prove that he has taken out an
insurance policy of his own (life insurance).
273
h. Unless prior arrangements are made with the finan
ciers for deferment of payments of an instalment,
National Trading Corporation is to direct financiers
to effect seizure of the vehicle on default of two
consecutive instalments.
i. The applicant will have to undertake to get the
vehicle inspected every six months (by a recognized
vehicle valuer) and will be required to put down
fees for the inspection and valuation on being
informed that his application has been accepted.
If the inspection and valuation of the vehicle
reveals that the value of the vehicle is below its
book-value, the Corporation may repossess the
vehicle.
j. In case of a bus operator, the applicant should be
expected to produce a letter from the Transport
Licensing Board, specifying the route he will be
operating on.
C. BILLS DISCOUNTING SCHEME:
a. Applicant must be a well recognized businessman of
high standing and integrity.
b. Applicant must be dealing with recognizable Govern
ment bodies or institutions, such as schools and
colleges. He must also be able to produce written
documents supporting his contract.
c. In order to ensure that money payable to the
Corporation was not paid to African businessmen
after their invoices had been paid, the Management
should write to heads of departments or institu
tions asking them to see that payment was made to
the Corporation under the deed of assignment.
D. CONFIRMING SCHEME:
a. The applicant must put down 20 per cent and meet
expenses involved in opening a Letter of Credit.
b. The scheme must be confirmed to purchase of goods
not handled by the Corporation.
c. The prices must be competitive and the commodity
salable.
Forecasts of marketability must support the
application.
The applicant should offer a tangible security in
the form of land/building insurance policy or
personal guarantee of a person of high standing.
APPENDIX B
UGANDA NATIONAL TRADING CORPORATION: SUBDISTRIBUTORS
OF COMMODITIES OVER WHICH THE CORPORATION HAS
EXCLUSIVE MONOPOLY TO IMPORT AND DISTRIBUTE
275
APPENDIX B
TABLE 30
UGANDA NATIONAL TRADING CORPORATION: SUBDISTRIBUTORS OF COMMODITIES
OVER WHICH THE CORPORATION HAS EXCLUSIVE MONOPOLY
TO IMPORT AND DISTRIBUTE
(in £)
Net Assets
Average
Gross
ABP
or NIC Annual
Region Company Status Began Original Present Stock Assistance* Sales
EASTERN REGION:
1. Karamoja: Karamoja African
Wholesale Co., Ltd (Moroto) Public
2. Teso: Teso African
Wholesale (Soroti) Public
3. Mbale; Bugishu Wholesale
Company, Ltd. Public
4. Tororo: Tororo United
Traders Co., Ltd. Public
1966 60,000 59,630 60,000 100,000 600,000
1965 60,000 92,500 1,350,000 10,000 1,404,000
1965 50,000 6,000 200,000 30,000 2,600,000
1964 21,000 1,860 1,560,000 100,000 3,900,000
NORTHERN REGION:
5. Lango: Lango Wholesale
Traders Co., Ltd.
6. Kitgum: East Acholi
Wholesale Co., Ltd.
7. Bunyoro: Uganda
Agahikaine, Ltd.
8. Toro: Uganda African
Wholesale Co., Ltd.
Public 1964 41,680 80,000 1,500,000 50,000 1,435,000
Public 1965 46,000 134,000 1,138,000 20,000 1,200,000
Public 1964 210,000 260,000 1,000,000 1,200,000
Public 1964 74,500 793,000 900,000 12,000 852,000
7. Bunyoro: Uganda
Agahikaine, Ltd.
8. Toro: Uganda African
Hholesale Co., Ltd.
Public 1964 210,000 260,000 1,000,000 1,200,000
Public 1964
9. Toro: Bwambale & Co., Ltd. Private 1950
10. Ankole: Muhumuza & Co., Ltd. Public 1963
11. Ahkole: Ankole African
Independence Traders, Ltd. Public 1962
12. Kigezi: African Hholesale
Co•, Ltd.
BUGAND REGION:
13. Masaka: Sabiti Lubega Private
14. Masaka: Katwe Masaka Stores Partner- 1954
ship
15. Masaka: Kugumikiriza Store Private 1955
Public 1963
16* Masaka: Agali Awamu Co.,
Ltd.
17. Toro: Joseph R. Mainuka
(Kasese)
18. Tunyoro: J. tf. B. Masigwa
and Sons (Maslndi)
Private 1949
Family 1950
74,500 793,000 900,000 12,000 852,000
150 268,000 1,656,000 50,000 170,000
150,440 120,000 360,000 1,800,000
140,000 80,000 72,000 40,000 1,800,000
Private 1963 170,000 {225,300 1,200,000 . 20,000 1,380,000
80,000 960,000 Confirming 1,000,000
400 92,000 54,000 - 432,000
700 76,500 40,000 20,000 624,000
100,000 200,000 57,000 20,000 33,600
3,000 66,000 240,000 20,000 12,000,000
150,000 72,000 24,000
* ABP ■ African Business Promotion; NTC « National Trading Corporation
Note: The figures shown are estimates and may be out of date by now. In many instances the companies
or individuals were reluctant to reveal trade statements, either because no proper accounts or
balance sheets were kept, or for other unstated reasons. The available figures indicate the
volume of trade handled by the companies. It may be assumed that figures not available would be
similar, on the average, to those shown.
N3
* v J
O '!
APPENDIX C
DISTRIBUTION APPOINTMENTS OP AFRICAN TRADERS
BY KENYA NATIONAL TRADING CORPORATION
277
APPENDIX C
TABLE 31
DISTRIBUTION APPOINTMENTS OF AFRICAN TRADERS BY KENYA NATIONAL TRADING CORPORATION
(in £)
Value of Value of
Maize Wheat Value of
Meal Flour Soap
Name of Trader____________ Capital Assets Turnover Order_____Order_____Order
NAIROBI DISTRICT:
1. Ali Mohamed Sheik & Bros. 5,000 3,000 10,000 2,300 14,500 5,000
2. Muiru General Store 3,000 1,000 45,000 6,350 5,808 3,332
3. Riruta Center Store 4,045 1,045 4,000 1,000 660
-
4. Lamrogag Wholesalers 3,000 5,000 10,000 6,070 3,700 7,250
5. Friends General Store 1,000
-
2,500 1,060 1,060 1,250
6. Mbuni Dry Cleaners, Ltd. 10,000 7,500 2,500
_
9,000
7. Karuri Wholesalers 9,750 6,650 2,500 9,600 17,095 17,645
8.
9.
Riteta Provision Store
Nandi Railway African
200 38 3,000 3,870 3,870 7,013
Co-op. Society, Ltd. 5,000
-
12,250 1,353 450 465
10. E. H. Njoka & Sons 4,000 700 3,000 6,000 4,100 -
11. Gathiga K.G. Store 2,275 9,250 3,000 4,100 4,719 3,678
12. Umoja General Store 1,290 70 3,100 2,210 923 861
13. Ndunduri General Store 2,100 700 1,250 640 1,540 745
14. Muthetheiru Provision Store 2,000 500 2,900 5,175 1,796 468
15. Simba Trading Co. 5,000 2,000 1,000 5,510 2,270 381
16.
17.
Pilot Wholesale Store
Kenda African Wholesale
3,000 5,000 10,000 2,250 1,850 1,500
& Retail 1,310 400 6,000 1,230 419
18. Kariuki Grocery Store 9,750 500 8,800 13,050 7,582 2,678
19. Mamboleo Trade Services 1,250 100 2,500 2,625 1,390 3,695
20. Masii Store 375 500 3,000 7,825 16,700 4,788
21. Lagum Distributors, Ltd. 5,400 8,743 15,000 3,388 1,098 1,998
22. Dagoretti Country Store 13,045 30,245 10,000 2,500 1,310 227
23. Lema General Store 2,500 85 3,200 1,600 3,860 993
24. General Provision Store 2,750 500 2,500 6,150 7,840 3,241
25. Mahandara Estate G. Store 2,500 900 4,000 7,100 3,700 1,238
& Retail 1,310
18. Kariuki Grocery Store 9,750
19. Mamboleo Trade Services 1,250
20. Masii Store 375
21. Lagum Distributors, Ltd. 5,400
22. Dagoretti Country Store 13,045
23. Lema General Store 2,500
24. General Provision Store 2,750
25. Mahandara Estate G. Store 2,500
26. Sofhia Provision Store 1,000
27. Masii Provision Store 1,250
28. Mugori Provision Store 2,000
29. Muthithu General Store 1,000
30. Nzina Trading Co., Ltd. 7,000
31. Gewathi Variety Store 600
32. Peter N. Mwangi Store 1,000
33. Bete Trading Stores 2,500
34. Kenya Provision & Green
Grocer Store 1,500
35. New Mzuri Store 1,500
36. Garrison Kamau & Co. 388
37. Wamunyu Commercial Store 4,250
38. Mikame General Store 2,500
39. Nairobi Traders Coopera
tive Society 400
40. Wagathanji Provision Store 2,550
41. Peter Makauu 1,052
42. Kagai, Ltd. 2,000
43. Kabuku Commercial Store 1,500
44. Teresia Kjeri 700
45. Karima Othayo Provision
Store 750
46. New Nyandarua General Store 1,000
47. New Xigumo Trading Co. 500
48. Nuti Wholesalers, Ltd. 1,250
49. Malinga General Store 2,050
50. Muiringi Provision Store 400
51.
M. Gikonyo 5,000
52. Kambaa & Bros. Wholesaler 2,500
53. John Mwangi 2,000
54. Joseph Nginyo 750
400 6,000 1,230 419
-
500 8,800 13,050 7,582 2,678
100 2,500 2,625 1,390 3,695
500 3,000 7,825 16,700 4,788
8,743 15,000 3,388 1,098 1,998
30,245 10,000 2,500 1,310 227
85 3,200 1,600 3,860 993
500 2,500 6,150 7,840 3,241
900 4,000 7,100 3,700 1,238
322 4,000 3,340 6,250 415
250 1,400 456 94
-
400 1,750 1,335 855 1,101
1,250 1,500 1,600 375 4,145
3,500 1,500 7,900 2,115
-
750 600 , 2,650 2,025 2,495
8,800 2,200 5,035 5,364 3,950
1,250 1,000 770 400 1,132
50 1,500 2,147 1,166 1,169
500 800
- -
-
350 2,250 1,350 500
—
1,750 2,000 8,350 5,650 3,215
875 1,500 4,110 1,250 -
1,750 1,500 1,553 2,000
50 1,750
510
300 1,200
299 1,950 1,100 218 214
250
—
2,600 3,325
10,212
3,900
-
1,682 3,015 2,030
250 300 2,850 5,455 13,215
300 250 14,200 1,215 1,121
250 450 241 500
150 200 ' 2,260 4,820 1,535
225 125 548 738 716
1,600 400 163 500 100
100 - 2,700 200
-
1,500
_
5,490
- —
8,378 375
-
1,000 400 724 919 49
450 200 1,540 2,815
-
278
TABLE 31 (continued)
DISTRIBUTION APPOINTMENTS OF AFRICAN IRADERS BY KENYA NATIONAL TRADING CORPORATION
(in £)
Name of Trader Capital Assets Turnover
Value of
Maize
Meal
Order
Value of
Wheat
Flour
Order
Value o:
Soap
Order
RIFT VALLEY:
55. Thomson's Fall Trading Co. 1,500 1,000 1,200 450 500 450
56. Jogoo General Stores 1,400 3,500 2,500 440 300 350
57. Goodwill Trust, Ltd. 2,000 100 7,000 620 1,335 107
58. Shrikisha Co. 7,500 6,159 4,750 327 1,107 1,000
59. Kajiado Stores 15,000 5,000 6,250 1,449 1,196
-
60. Turbo Grocers 5,000 2,875 13,500 - - -
61. Kigera Produce Store 2,500 5,600 5,000 98 701
_
62. Londiani Store (Agencies?) 2,500
-
3,000 793 400 258
63. Karangae Ole Kesier 200 20 4,000 84 265
-
64. Kipsigis Co-operative
Society 22,750 7,795 27,500 325 1,050 7,575
65. Kitete Young Grocers 2,500 500 500 823 1,044 985
66. Trans. Nzoia Wholesalers 5,000 1,250 6,000
wm
500
67. J.K.A. Yatorr 150 159 250 105 1,020 785
68. Joseph K. Cherop 2,825 2,570 225 865 505 50
69. Peter Mwaura 1,390 120 450 428 165 250
70. Kamau Nganga 750 300 225 - -
300
71. H.W. Kibinge 1,640 1,390 400 34 83
72. Furah Store 900 1 3,125 200 50 50 50
73. Wanandi Trading Co. 45 150 19 22 63 250
74. Morrison and Sons 450 100 250 740 270
-
75. Njenga Njoroge 100 250 200 - 500 250
76. Masai Store, Ltd. 10,000 4,900 1,500 1,700 500
77. Alice Kahaki & Co. 1,250 2,500 1,500 1,020 1,920
-
78. Andrew Kagombe 1,250 2,250 1,050 429 157 820
79. Alex N. Oloo 400 100 600 250 250 300
76. Masai Store, Ltd. 10,000 4,900 1,500 1,700 500
-
77. Alice Kahaki & Co. 1,250 2,500 1,500 1,020 1,920
-
78. Andrew Kagombe 1,250 2,250 1,050 429 157 820
79. Alex N. Oloo 400 100 600 250 250 300
EASTERN PROVINCE:
80. Joel Maingi 250 7,500 1,500 245
- 90
81. Peter Makau 1,250 5,000 2,300 893 196 141
82. United Wholesalers 2,000 1,950 1,150 1,600 1,750 3,625
83. Kibari Rungeye 2,500 4,100 1,500 500 250 300
84. Mohamed & Ali 3,750 750 2,050 450 450 725
85. Stephen M. Kisilu 150 3,750 500 340 445 1,500
86. Mwanza and Bros. 4,000 7,600 1,250 500 500
87. William Kimulu 7,500
-
1,250 680 480
-
88. Lawrence Kairanja & Bros. 4,500 7,500 1,933 840 5,140 1,302
89. Salim Ahmed & Bros. 5,000 2,500 ' 2,000 1,079 91 499
90. Karava General Store 1,200 1,100 1,500 340 430 1,000
91. N.M. Maluli 1,500 1,500 750 300 200 500
92. Maundu Ndetu 780 400 1,500 150 350 30
93. Njeru Ngonge 2,000
-
956 99 134 880
94. Kyambati Mareli 1,000 3,250 4,000 5,300 3,000 2,525
95. Massi Special House & Bros. 1,500 4,500 5,000 1,910 690 260
96. Kalawa Flour Mill &
General Store 1,600 800 12,000 600 700 1,250
97. Kitemange Ndema 2,500 2,500 5,000
- - -
98. Sunny Musila (Kangundo
Bros.) 11,190 4,250 5,000 1,500 1,500 2,500
99. Mutemi Mwinzi 2,500
-
5,000 580 230 1,000
100. Kairanja Mukindira & Co. 2,500 250 6,000 210 280 500
101. L.M. Lili 150 1,379 3,000 1,910 945 1,190
102. John Kilu Mosa & Bros. 12,500 10,750 8,600 2,620 1,175 400
103. Kitui Wanch Traders & Co. 2,250
-
2,500 1,305 540 550
104. Ukambani Distributors 500
-
3,750 1,000 1,000 1,500
105. Benson K. Kamba 6.5 - 15,000 1,737 759 1,000
106. Mbugua Njoroge & Co. 250 20 3,350 1,980 725 168
107. Kitango Trading Co. 1,000 550 3,000 500 500 -
108. Msungi Mwanzia & Co. 10,000 14,500 3,000 1,000 500 1,800
109. Kitui Commercial Store 375 7,500 4,000 200
_
500
110. Samuel Kamuli Kingoo 2,000 3,600 7,500 378 - 70
279
TABLE 31 (continued)
DISTRIBUTION APPOINTMENTS OF AFRICAN TRADERS BY KENYA NATIONAL TRADING CORPORATION
(in £)
Value of Value of
Maize Wheat Value of
Meal Flour Soap
Name of Trader___________ Capital Assets Turnover Order_____Order_____Order
EASTERN PROVINCE (continued):
111. Mutia Nzomo & Bros. 1,300 5,050 2,800 4,678 3,152 1,300
112. Shariff Mohamed Noor 1,000 6,000 600 1,693 1,898 538
113. D. L. Mutisa 7,500 13,500 5,000 250
-
100
114. Masii Store 1,500 4,000 2,500 396 315 500
115. Makului Bus Transport
Services, Ltd. 7,650 18,280 7,250 1,248 565 10
116. Musau Mwamia 25,000 17,250 10,000 1,995 662 400
117. Samuel Musila 2,000 4,750 17,500 296 160. 50
118. Kimani Kimango Bros. 750 21,500 6,000 792 204 114
119. Musau Mwamia & Co. 1,500 1,750 20,000 4,000 1,000 1,000
120. Wanamuchi Aguuli 1,000 4,000 3,500 800 448 229
121. Embu Distributors, Ltd. 570 16,525 3,000 1,045 875 1,552
122. Issa Adam 900 9,100 4,500 77 975 790
CENTRAL PROVINCE:
123. Uplands Trading Co. 5,250 5,250 15,000 2,175 770 400
124. Haji A. Sheikh Ali 5,000 5,500 7,500 3,858 2,037 5,000
125. M. Andrea & Co. 1,000 8,750 4,250 2,000 -
3,000
126. 'Kiambu Clothing & Grant
Enterprises 250
-
3,000 1,500 500 750
127. Chuchu Watatu & Charles
Kigwi 5,000 7,050 2,500 1,000 200 500
128. Feed & Seed Supply Co. 750
-
3,800 1,000 300 1,100
129. Nganga Kamau 1,250 3,750 2,500 1,830 990 705
130. Kagaa Transport Co. 4,250 -
5,500 808 1,501 1,302
131. Kikuyu General Store 500 2,750 822
325 22
132. Moses & Bros. 1,750 1,000 2,500 535 365
-
128.
129.
130.
Feed & Seed Supply Co.
Nganga Kamau
Kagaa Transport Co.
750
1.250
4.250
3,750
131.
132.
133.
134.
135.
Kikuyu General Store
Moses & Bros.
Uhuru General Shop (
Premier General, Shdp
Mwangi Mbothu 1
500
1,750
500
3,500
5,355
1,000
2.500
1.500
6,600
136.
137.
138.
139.
140.
Wahinya Kangere
Samuel Kimani
Waiyaki Kimuthia
Tinganga Cash Store
Nganga Kamithi
1,500
600
500
50
3,300
3,410
785
7,270
1,900
141.
142.
143.
144.
145.
Kigomo General Merchandise
Wenyenji Wamatu
Gatundu Provision Store
Kihungi Kamau & Sons
Geoffrey Mwangi Gakumo
900
1,750
1,000
150
250
1,200
1,100
300
75
45
146. Mbogo Mwangi 250 1,750
WESTERN PROVINCE:
147.
148.
149.
150.
Christopher Nabangwa
Mohamed Waziri
Erastus Simiyu Butula
Mohamed Salimu
1,050
3.000
3.000
500
26
1,100
1,500
200
151.
152.
153.
Reuben Wanyonyi
Reuben Lavai
William Ligabo
600
1,000
5,500
750
1,580
50
NYANZA:
154.
155.
156.
157.
158.
Gesima Power Mills Ltd.
Fountain Service Store
Posho Trading Corp., Ltd.
E. 0. Josiah
Wangoma Ogwai & Co.
4,052
5.500
5.000
1.500
3.000
9,428
5.500
5,000
12,300
5.500
159.
160.
Okwiny & Sons, Ltd.
Bondo Associated Traders,
Ltd.
6,500
3,000
7.000
3.000
3,800 1,000 300 1,100
2,500 1,830 990 705
5,500 808 1,501 1,302
2,750 822 325 22
2,500 535 365
-
6,000 1,750 1,250 800
2,500 742 490
-
1,750 685 122 -
1,250 823 125 150
1,000 1,800 450 600
750 200 50 150
600 6,533 1,000 5,475
600 500 100 750
600 550 210
1,000 3,109 2,599
-
900 279 302 153
1,250 600 550 727
1,000 300 150 -
2,100 200 422 238
1,500
-
670 675
1,750 175 439 489
1,500 750 1,360 4,000
750 165 500 1,000
750 164 273 567
1,000 125 500 500
500 330 105 421
21,497 473
-
475
12,000 1,500 500 1,000
5,000 1,000 200
-
8,000 300 200 500
5,000 2,000 500 1,000
5,000 300 -
200
3,750 1,000 582 1,780
280
TABLE 31 (concluded)
DISTRIBUTION APPOINTMENTS OF AFRICAN TRADERS BY KENYA NATIONAL TRADING CORPORATION
(in £)
Name of Trader Capital Assets Turnover
Value of
Maize
Meal
Order
Value of
Wheat
Flour
Order
Value o:
Soap
Order
NYANZA (continued):
161. Silas Abong'o 400 10,500 3,000 1,000 500 300
162. Nasu Ali 2,500 2,600 2,500
- - -
163. Yala River Wholesalers 5,000 5,600 7,500
- - -
164. Matara Trading Co. 1,500 11,500 10,000 4,500 4,000 1,000
165. United Land Water
Transport 10,000 20,000 10,000 4,500 4,000 1,000
166. Roya Enterprises, Ltd. 3,500
—
2,500 1,500 500 3,000
167. Patroba Anyugi & Co. 250 —
2,500 — —
3,800
COAST
168.
REGION:
Mbololo Hill Provision
& Canteen 4,500 5,350 3,000 9,685 500
\
2,500
169. S.K. Fondo 6c Sons 5,950 5,750 3,000 5,475 1,250 1,250
170. T.M. Mohammed & Sons 7,000 10,200 2,500 1,000 500 750
171. Coast Region Distributor 1,000 1,550 10,000 4,500 200 W
172. M&lindi General Store 3,750 850 5,000 8,000 200 7,500
173. Kaloleim Farmers Cooper
ative Society, Ltd. 7,000 3,250 7,500 10,000 5,000 2,500
174. Taifa General Agencies 2,500 3,100 12,500 25.000
81,120
-
25,000
175. A. Dossa Jee 6c Sons
-
17,050 15,000 1,870 2,860
176. A1 Haji Sheikh Said
Bin Hamud 5,000 3,700 4,750 254 423 284
177. Mwanake Kala 6c Sons 1,600 56,750 14,000 4,709 581
*
178. James Kitsno 3,250 1,900 3,000 2,500 2,600 1,500
179. Kwale Distributors 2,000 1,000 4,000 1,975 845 500
180. Islam Ali Bros. 5,000 5,000 7,500 9,000 1,375 1,590
176. A1 Haji Sheikh Said
Bin Hanrud 5,000 3,700 4,750 254 423 284
177.
Mwanake Kala & Sons 1,600 56,750 14,000 4,709 581 -
178. James Kitsno
3,250 1,900 3,000 2,500 2,600 1,500
179.
Kwale Distributors 2,000 1,000 4,000 1,975 845 500
180. Islam Ali Bros.
5,000 5,000 7,500 9,000 1,375 1,590
181> Haji Elias & Yusufu
& Sons 5,000 2,000 3,750 3,900 1,000 1,770
182. Rumwe Provision Store 100 100 3,000 1,458 1,900 8,839
183. Felix R.M. Kitonga 7,500 2,500 6,000 745 1,470 337
184. D. M. Kioko
750
-
750 1,500 750
-
185. E. L. Musumuli
10,000 11,300 2,150 400 500 120
186. Kuria Wathome 1,250 2,500 1,000 2,502 1,500 2,500
187.
Coast Product Develop Co. 1,500 1,912 2,250 55,700 28,875 500
188. Mwai Karani
700 1,200 1,900 1,380 450 1,500
189.
Omar Saleh Baahandi 125 2,063 750 130 122 50
190. Joseph M. Mwanyangu
500 2,000 2,000 350 350 500
191. Moka Ngure 500 750 1,500 250 250 500
Note: Data obtained from the Kenya National Trading Corporation, June 1967.
ro
o o
APPENDIX D
NATIONAL DEVELOPMENT CORPORATION OF TANZANIA:
SCHEDULE OF INVESTMENTS, 31st DECEMBER, 1965
282
APPENDIX D
TABLE 32
NATIONAL DEVELOPMENT CORPORATION OF TANZANIA: SCHEDULE OF INVESTMENTS,
31st DECEMBER, 1965
(in £)
Equity Capital Dividend Loans
■ 1 .
Name of Company
Issued
Share
Capital
Percentage
Holding of
Issued
Capital
Nominal
Value of
Paid up
Shar~
Holding
Last
Dividend
Paid to
NDC
(Net Tax)
Loans Made
to
31st Dec.,
1965
SUBSIDIARY COMPANIES
NDC Agricultural Department
(Ranches) 779,955* 100 779,955 137,952
New Africa Hotels, Ltd. 100 100 100
(1)
-
Tanzania Wildlife Safaris, Ltd. 30,000 100 30,000 - 20,000
Tanzania Finance Co., Ltd. 2,070 100 2,070 - -
Intrata, Ltd. 100,000 90 90,000 7,935
-
Bukoba Tea Co., Ltd. 72,000 86 62,000
(2)
-
Lake Manyara Hotels, Ltd. 40,000 85 34,000
-
12,000
Northern Dairies, Ltd. 8,400 83 7,000
(2)
-
Nyanza Salt Mines, Ltd. 150,000 81 122,000 - -
Tanganyika Instant Coffee
Co., Ltd. 70,000 79 55,000
(2)
_
Tanganyika Meerschaum
Corporation, Ltd. 115,000 56 64,232 4,645 70,000
Tanganyika Packers, Ltd. 686,635 51 350,184 84,045
-
ASSOCIATED COMPANIES
Williamson Diamonds, Ltd. 600,000 50 300,000 750,000
-
Ralli Estates, Ltd. 250,000 50 125,000 48,003 - '
ASSOCIATED COMPANIES
Williamson Diamonds, Ltd. 600,000 50 300,000 750,000 -
Ralli Estates, Ltd. 250,000 50 125,000 48,003 - '
Tanganyika Tegry Plastics, Ltd. 117,500 49 78,500
(1)
45,000
Tanganyika Development Finance,
Ltd. 375,000 33 125,000
_
Tanita Co., Ltd. 150,000 40 60,000 - 374,260
Sisi Enterprises, Ltd. 40,000 25 10,000
(2)
-
Tanganyika Portland Cement
Co., Ltd. 400,000 20 80,000
(1)
100,000
Sikh Saw Mills (T), Ltd. 254,728 15 39,490
(1)
11,017
E.A. Industrial Promotion
Services, Ltd. 84,640 1 1,000
_
Kilosa District Development Board - - - - 16,704
Nguvumali Farmers Co-operative
Union, Ltd.
_ — . . _
29,100
Kahama Nzega Igembasabo
Co-operative Union
_ — —
74,355
Tanganyika Tobacco Board - - -
I
4,
326,028 2,415,531 894,628 922,388
NDC's. Share of Reserves 7,285,683
Total Value of
equity holding*
NDC
9,701,214
*Not strictly share capital— in process of being
formed into separate limited Company.
(1) These Companies have made profits which have
not yet been appropriated.
(2) These Companies are just starting operations.
Source: National Development Corporation, Annual Reports and Accounts, 1965
(Dar es Salaam: Government Press, 1966).
SUMMARY:
Total Equity Holdings 9,701,214
Total Loans 822,388
10,623,602
283
APPENDIX E
DEVELOPMENT FINANCE COMPANY OF UGANDA, LTD.
PARTICIPATION IN INVESTMENTS,
POSITION IN APRIL 1967
284
285
APPENDIX E
TABLE 33
DEVELOPMENT FINANCE COMPANY OF UGANDA, LTD. :
PARTICIPATION IN INVESTMENTS,
POSITION IN APRIL 1967*
Company
Equity + Loans
(in £)
A. New Commitments During the First Quarter•
1. Dalai Textile Mills, Ltd.
2. Uganda Fishnet Manufactures, Ltd.
3. African Ceramics Company, Ltd.
4. Domestic Appliances, Ltd.
5. East African Batteries (U) , Ltd.
6. Uganda Food Products, Ltd.
55.000
25.000
37.000
18.000
68,000
20,000
223,000
B. Investments
1. Nyanza Textile Industries, Ltd.
2. Uganda Cement Industry, Ltd.
3. Uganda Consolidated Properties, Ltd.
4. Agricultural Enterprises, Ltd.
5. East African Distilleries, Ltd.
6. Fit-Rite Manufacturers, Ltd.
7. Universal Pharmaceutical Industries,
8 . United Garment Industry, Ltd.
9. Uganda Blanket Manufacturers, Ltd.
250.000
100.000
950.000
25.000
90.000
43.000
Ltd. 20,000
25.000
100.000
1,614,000
TOTAL A + B 3,837,000
*Source: These figures were still in confidential file when
the writer obtained them.
Development Finance Company of Uganda, ManagerTs Quarterly
Report 6/4/67 (Kampala, Uganda: The Company, 19b7).
APPENDIX F
DEVELOPMENT FINANCE CORPORATION OF TANZANIA
INVESTMENTS IN 1966: LOANS AND EQUITY
286
APPENDIX F
287
TABLE 34
DEVELOPMENT FINANCE CORPORATION OF TANZANIA INVESTMENTS
IN 1966: LOANS AND EQUITY
(in £)
1. Tanzania Litho, Ltd. 707000
2. Tanganyika Enamelware Factory, Ltd. 17,500
3. Lake Manyara Hotels, Ltd. 45,000
4. East African Motor Assemblies, Ltd. 25,000
5. Mwananchi Development Corporation 22,000
6. Mount Carmel Rubber Factory 23,000
7. New Mwanachi Ocean Products, Ltd. 20,000
8. New Arusha Hotel, Ltd. 100,000
9. Tanzania Millers, Ltd. 200,000
10. National Cooperative Center- 150,000
11. Tasini Textiles, Ltd. 90,000
12. Kibo Match Corporation, Ltd. 60,000
13. Kilimanjaro Textile Corporation, Ltd. 183,000
14. Lonvent Manufacturing Company, Ltd. 10,000
15. Tin Air Charters (T), Ltd. 25,000 *
16. Kibo Paper Industries, Ltd. 70,000
17. Razorblade (T), Ltd. 12,500
18. Imara Plywood, Ltd. 45,000
19. Simba Plastics Company, Ltd. 12,500
20. Tanganyika Magnestite Mines, Ltd. 55,000
21. Tanzania Packaging Industries, Ltd. 90,000
TOTAL 1,275,500
Source: Development Finance Company of Tanzania, Annual
Report and Statement of Accounts 1966 (Dar es
Salaam: Government Press, 196b).
APPENDIX G
DEVELOPMENT FINANCE COMPANY OF KENYA INVESTMENTS
IN 1966: LOANS, SHARES AND EQUITY
288
289
APPENDIX G
TABLE 35
DEVELOPMENT FINANCE COMPANY OF KENYA INVESTMENTS
IN 1966: LOANS, SHARES AND EQUITY
(in £)
INVESTMENTS
1. Pan African Foods, Ltd. 45,000
2. Panafric Hotels, Ltd. 210,000
3. Cassaman Brown and Co., Ltd. 54,000
4. Sokoro Sawmill, Ltd. 25,000
5. Kenya Toray Mills, Ltd. 100,000
6. Kenya National Asseriace Co., Ltd. 425,000
7. Kenya Canners, Ltd. 130,766
8. Midco Textiles (E.A.), Ltd. 61,000
9. Kenya National Mills, Ltd. 225,000
10. Windmill Fertilizers, Ltd. 20,000
11. East African Cables, Ltd. 90,000
12. Kisumu Cotton Mills, Ltd. 190,000
13. East African Sugar Industries, Ltd. 255,000
14. Chernelil Sugar Company, Ltd. 375,000
2,166,766
COMMITMENTS
1. L. G. Harris and Company (E.A.), Ltd. 25,000
2. Kenya Hotel Properties 200,812
3. United Textile Industries, Ltd. 60,000
4. Integrated Timber Industries, Ltd. 45,000
2,497,578
Source: Development Finance Company of Kenya, Annual Report
and Statement of Accounts 1966 (Nairobi"! Govern-
ment Press, 196b).
APPENDIX H —
SUBSIDIARIES AND ASSOCIATE COMPANIES OF NATIONAL
DEVELOPMENT CORPORATION OF TANZANIA, 1966
290
APPENDIX H
SUBSIDIARIES AND ASSOCIATE COMPANIES OF NATIONAL
DEVELOPMENT CORPORATION OF TANZANIA (NDC) 1966
TABLE 36
NDC
Holding
A. Agriculture
Bukoba Tea Co., Ltd. 90
Kwamtili Cocoa Estates, Ltd. Loan
Lime Products Development Co., Ltd. 74
New Mwananchi Ocean Products, Ltd. 42
Ralli Estates, Ltd. 50
Ranching Department 100
B. Agricultural Processing
B.A.T. (Tanzania), Ltd. 60
Coastal Dairy Industries, Ltd. 100
Mtwara Cashew Co. , Ltd. 50
Northern Dairies, Ltd. 66
Sikh Saw Mills, Ltd. 24
Tanganyika Instant Coffee Co., Ltd. 80
Tanganyika Packers, Ltd. 51
Tanita Co., Ltd. 40
Tanzania Extract Co., Ltd. 49
Tanzania Tobacco Processing Co., Ltd. 50
Tembo Chipboards, Ltd. 80
C. Textiles
Friendship Textile Mill, Ltd. 100
Mwanza Textiles, Ltd. 40
Tanzania Bag Corporation, Ltd. 50
D . Mining
Mkomazi Mining, Ltd. 25
Nyanza Salt Mines (Tanzania), Ltd. 81
Williamson Diamonds, Ltd. 50
291
292
TABLE 36 (continued)
SUBSIDIARIES AND ASSOCIATE COMPANIES OF~NATIONAL
DEVELOPMENT CORPORATION OF TANZANIA (NDC) 1966
NDC
Holding
Name of Company Percentage
E. Hotels and Tourism
Furaha ya Visiwani Hotels, Ltd. 49
Hallmark Hotels (Tanzania), Ltd. 30
Kilimanjaro Hotels, Ltd. 100
Lake Manyara Hotels, Ltd. 100
Tanzania Wildlife Safaris, Ltd. 100
F. Finance
Industrial Promotion Services, Ltd. 20
Tanganyika Development Finance Co., Ltd. 25
Tanzania Finance Co., Ltd. 55
G. Industrial
Kilimanjaro Breweries Co., Ltd. 60
Mwanachi Tractor and Vehicle Assemblers, Ltd. 24.5
National Printing Co., Ltd. 100
Tanganyika Meerschaum Corporation, Ltd. 56
Tanganyika Portland Cement Co., Ltd. 50
Tanganyika Tegry Plastics, Ltd. 49
Tanzania Breweries, Ltd. 51
Tanzania Diamond Cutting Co., Ltd. 75
H. Miscellaneous
Mwananchi Engineering and Contracting Co., Ltd. 60
Mwananchi Trading Co., Ltd. 60
National Small Industries Corporation, Ltd. 80
Sisi Enterprises,Ltd. (Drive-in-Cinema) 25
Tanzania Cashew Machines, Ltd. 50
Tanzania Elimu Supplies, Ltd. 70
Tanzania Publishing House, Ltd. 50
Source: National Development Corporation, Annual Report and
Statement of Accounts (Kampala: Government Press,
1967).
APPENDIX I
SUBSIDIARIES AND ASSOCIATE COMPANIES OF
UGANDA DEVELOPMENT CORPORATION, 1966
293
APPENDIX I
SUBSIDIARIES AND ASSOCIATE COMPANIES OF
UGANDA DEVELOPMENT CORPORATION, 1966
AGRICULTURE
Agricultural Enterprises, Ltd.
The Ankole Tea Company, Ltd.
Bugambe Plantation Company, Ltd.
Kigezi Plantation Company, Ltd.
The Muzizi Tea Plantation Company, Ltd.
Mwenge Tea Company, Ltd.
Salama Estates-, Ltd.
Lango Development Company, Ltd.
Uganda Livestock Industries, Ltd.
Acholi Ranching Company, Ltd.
The Bunyoro Ranching Company, Ltd.
Teso Ranching Company, Ltd.
BANKING, FINANCE AND COMMERCE
Uganda Development Bank, Ltd.
Uganda Development Banking, Ltd.
Uganda Development Holdings, Ltd.
Uganda Crane Industries, Ltd.
Development Finance Company of Uganda, Ltd.*
BUILDING MATERIALS
Uganda Cement Industry, Ltd.
The Universal Asbestos Manufacturing Company
(East Africa), Ltd.
FOOD PRODUCTS AND BEVERAGES
East African Distilleries, Ltd.
Solutea, Ltd.
Uganda Meat Packers, Ltd.
The Uganda Milk Processing Company, Ltd.*
The Uganda Fish Marketing Corporation, Ltd.*
*Associate Companies
294
295
APPENDIX I (continued)
HOTELS ANIL TOURISM
State Hotel, Ltd.
Uganda Hotels, Ltd.
National Park Lodges (Uganda), Ltd.
Uganda Wildlife Development, Ltd.
MINING AND MINING EXPLORATION
Kirembe Mines, Ltd.
Kilmex, Ltd.*
Sukulu Mines , Ltd. *
OTHER INDUSTRIES
The Uganda Metal Products and Enameling Company, Ltd-
Nyanza Textile Industries, Ltd.
Tororo Industrial Chemicals and Fertilizers, Ltd.
United Garment Industry, Ltd.
Steel Corporation of East Africa, Ltd.*
Associated Match Company, Ltd.*
Associated Paper Industries, Ltd.*
The Childington Tool Company (East Africa), Ltd.*
PROPERTY
Uganda Consolidated Properties, Ltd.
Kulubya Property Company, Ltd.
Uganda Development Properties, Ltd.
Source: Uganda Development Corporation, Annual Reports and
Statement of Accounts, 1966 (Kampala: Government
Press, 1967). -----------
APPENDIX J
SUBSIDIARIES AND ASSOCIATE COMPANIES OF INDUSTRIAL
AND COMMERCIAL DEVELOPMENT CORPORATION, 1967
296
APPENDIX J
SUBSIDIARIES AND ASSOCIATE COMPANIES OF INDUSTRIAL
AND COMMERCIAL DEVELOPMENT CORPORATION, 1967
1. East African Industries, Ltd.
2. Block Hotels, Ltd.
3. Development Finance Company of Kenya
4. Kenya National Trading Corporation, Ltd.
5. First East African Unit Trust Managers, Ltd.
6. Sportsman's Arms Hotel
7. Kenya Cammers, Ltd.
8. Kenya Casews, Ltd.
9. East African Packaging Industries, Ltd.
10. Kenya National Parks
11. African Diatomite Industries, Ltd.
12. Pulp and Paper Company of East Africa, Ltd.
Source: Industrial and Commercial Development
Corporation, Annual Report and Statement
of Accounts, 196b (Nairobi: Government
Pres s, 1967).
297

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Creator Higiro-Semajege, Festo (author)

Core Title Planning Institutional Change For Economic Growth: A Study Of The Effect Of Public Institutions On The Rise Of Indigenous Entrepreneurs In East Africa

Degree Doctor of Philosophy

Degree Program Economics

Publisher University of Southern California (original), University of Southern California. Libraries (digital)

Tag economics, general,OAI-PMH Harvest

Language English

Contributor Digitized by ProQuest (provenance)

Advisor Elliott, John E. (committee chair), Berkes, Rose N. (committee member), Pollard, Spencer D. (committee member)

Permanent Link (DOI) https://doi.org/10.25549/usctheses-c18-650760

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