Revival with Cash Flow: Restoring Local Partnerships and Small Businesses in Uganda
The meat sector in Uganda plays a significant role in the country’s economy, accounting for 17% of agricultural GDP, with cattle rearing, along with dairy production, acting as key components of the segment.[1] The industry has created opportunities for many of the nation’s SMEs, such as local beef suppliers, to play a crucial role in the value chain, providing products to local buyers. As SMEs support the growth of the sector, they also contribute to the country’s economic development and job creation. Last year, we learned of the challenges faced by Classic Cuts , the role AGC’s partner played in their business revival, and the lessons learned from this remarkable turnaround story.
“AGC’s partner came at a time when I needed them most,” explains Ssabiti Eric, owner of Classic Cuts Butchery in Kampala, Uganda. As a small meat trading company, Classic Cuts faced key challenges sustaining working capital while trying to manage their business. Despite 15 years of experience in the industry and a loyal client base, Classic Cuts endured strains all too familiar for SMEs in emerging markets – delayed payment periods from their buyers and pressing supplier debts.
During a visit to Kampala, Uganda, AGC’s Co-CEO Sudha Bharadia explored the Classic Cuts processing unit and learned of the small business’s biggest challenges. “I grew to a place where I could not sustain the clients. That is when I went to AGC’s partner,” Ssabiti explained. Serving a large client base in the food and hospitality sector, Classic Cuts grew demand from the likes of hotels, restaurants, and supermarkets. They also expanded the supply of their meat products to the region of Southern Sudan.
However, their working relationships with clients became strained as a result of their buyers waiting long periods to make their payments. Ultimately, this went on to affect the strategic relationships Ssabiti managed to foster with farmers, weakening the competitive edge of product prices and their business model. The ripple effect of these outcomes is not uncommon for small businesses like Classic Cuts. SMEs drive 95% of sub-Saharan Africa’s GDP, yet they often struggle to access credit. This isolation from market opportunities forces small businesses to devote more time and resources to seeking financing rather than focusing on innovation and growth. [2]
AGC’s partner has come in and they’ve been a very big help.
– Ssabiti Eric.
Ssabiti describes a cycle where the large hotels they supply often have lengthy credit periods, creating cash flow pressure and the need for working capital. “I think they [the buyers] are working on the assumption that you have the capital to sustain that period of time, and if you don’t have that capital, then they won’t work with you,” Ssabiti explains. “They will pay in a month’s time and sometimes spread it out over three months. But AGC’s partner has come in, and they’ve been a very big help,” he adds. Classic Cuts began their relationship with AGC’s partner four years ago as the strains from lack of capital compounded and caused the loss of clientele. Since then, Classic Cuts has managed to recover their customer base and now manages over 30 partnerships with food service and hospitality buyers.
Rather than relying on traditional banks that require collateral, AGC’s partner provides small businesses with seamless financing options to acquire the capital they need. That has proved to be a crucial turning point for Classic Cuts’ future. With their small team of three members in production and 20 people total, Classic Cuts aspires to continue sustaining the relationships they’ve recovered in the market now that they have had funding available. Leveraging their strategy, Classic Cuts currently has a competitive edge over five other companies operating in the same sector. By buying direct from farmers, Classic Cuts can keep their prices for their products lower and supply to companies more competitively, which Ssabiti calls “cutting out the middle man.”
Classic Cuts’ revival is a shining example of AGC’s mission in action: Creating market opportunity for SMEs and allowing them to thrive through access to working capital. With our funding support, Classic Cuts now has the ability to focus on strategic methods to develop their business and deliver services to their clients, free from the burden of trying to source capital and await payments from buyers.
[1] Food and Agriculture Organization of the United Nations. Monitoring and Analysing Food and Agricultural Policies. Accessed Dec. 16, 2024. https://www.fao.org/in-action/mafap/success-stories/how-mafap-is-helping-to-boost-uganda’s-dairy-and-beef-sectors/en#:~:text=The%20live stock%20sector%20represents%2017,Ugandan%20households%20owns%20some%20cattle
[2] World Economic Forum. Why Africa’s SMEs need more than money to ensure their growth. Accessed Dec. 16, 2024 https://www.weforum.org/stories/2023/07/why-priming-africa-s-smes-for-growth-is-about-more-than-money/
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