Mbarara Gatsby Business Park, Mbarara, Uganda
Small and medium-sized enterprises (SMEs) are central to driving economic growth and job creation in poor countries but numerous blockers blight the potential for entrepreneurs to deliver. While a great deal of attention has focused on the enabling environment – poor regulatory and fiscal conditions – one of the major blockers to growth remains simple bricks and mortar. Across Africa, millions of small and micro businesses are paying high rents in return for small, inaccessible, dangerously cramped premises with little security of tenure.
For example, small–scale entrepreneurs and manufacturers are often forced to move entire operations at short notice since landlords favour larger companies with the cash flow to pay a year’s rent up front. Meanwhile, local banks exacerbate the problem by refusing loans to small-scale entrepreneurs, forcing the latter to pay rent out of profits and impeding investment and growth.
This is very much the story in the southern Ugandan town of Mbarara. Except here a business park developer and a community of entrepreneurs have come together to provide an occupancy solution aimed at the 500 or so SMEs engaged in manufacturing and industrial services in the centre of Mbarara.
In 2004, Gatsby Mbarara Workspace – a spin-off of the Uganda Gatsby Trust founded by the Sainsbury Family Trust, worked with James Monk and David Irwin to develop a business plan that would address these issues and provide a sustainable solution. Following a visit to Mabrara in November 2004. In 2005 they approached the Business Linkages Challenge Fund (BLCF) with a commercial proposal to invest in the phased development of a business park. Prelet or anchor tenants for the initial phase were to be drawn from members of Mbarara Gatsby Enterprise Club – a network of 60 small businesses engaged in textiles, carpentry, leather, handicrafts, metal works and food processing. The companies – the majority of which were renting poor quality space in the centre of town– had already contributed funding
towards the cost of financing the land for the park.
In response to the proposal, the BCLF agreed match funding of £120,000 on the grounds that key funding criteria had been met in terms of both risk sharing and the business linkages forged between developer, target tenants and the local authority. In turn, Gatsby Mbarara Workspace leveraged BCLF sponsorship and the owner’s start-up capital to secure a discounted £341,000 loan from the East African Development Bank to meet the cost of construction.
Gatsby Mbarara Workspace’s intention is to generate a commercial rate of return after loan repayments and running costs have been met. Would-be tenants provide this income stream as mortgage repayments – rather than rent – providing them with a credit history that will allow them to borrow from the local banks in the future.