sector. The 2:1 ratio of employment in microenterprise vs. SMEs and larger businesses therefore strictly applies to the retail trade and hotels and restaurants component of non‐traded sector, although that is component absorbing the bulk of the workforce that would otherwise be employed in manufacturing or in commercial agriculture and agribusiness.

According to UBR 2010, Uganda had some 7,800 small and medium sized wholesale and retail outlets and nearly 5,000 small and medium sized hotels and restaurants, which between them employed about 120,000. This dwarfed the combined 11,000 strong workforce that the two dozen large wholesale and retail outlets and about as many large hotels the country then had, but was also only one‐ third of the number of those working in micro retail outlets and eating and drinking places. Just as happened within the manufacturing sector, all three size categories of businesses had expanded relatively rapidly as did their workforce since 2001, when there were only about 3,000 small and medium sized trading outlets and even fewer small and medium sized hotels and restaurants. But nothing matched the pace of expansion of the number of those working in micro retail outlets and small eating and drinking places, which increased almost three‐fold over the decade.

# 2.4.4. Reallocation across business age groups

How did the shifts in employment from the traded sector to the non‐traded sector and from SMEs and larger businesses to microenterprises come about? Was the first of these the outcome of redeployment of existing capital from traded activities to non‐traded activities or was it that firms stayed put in their respective original business lines but more of new investment was going to non‐traded activities than to the traded sector? Did the second kind of shift involve the downsizing of existing businesses or did it merely mean that average scale at start up decline over time? The answers to these questions are likely to have strong bearing on whether or not the inter‐sectorial employment shifts we just described raised aggregate labor productivity.

Table 5 provides part of those answers.<sup>16</sup> Unlike the case with the number of persons engaged on which there are relatively few missing observations in UBR 2001 or in UBR 2010, a large number of enterprises on UBR 2010 did not report the date on which they had started operating. We need therefore be cautious in interpreting the information in the table always bearing in mind that the picture might be different from what we are describing here if the response rate for the age variable were as high as that for the number of workers.

The table shows that about 55 percent of all businesses on the register were startups, which we define as those that had been in business for less than 5 years. These accounted for 43 percent of all employment in the non‐subsistence economy. Another 15 percent were “young incumbents” by which we mean those that had been in business for at least five years but for not more than 10 years. Between

> 16 See also Annex Tables 5 and 6 which provide the breakdown of employment by enterprise count by age group for each single digit ISIC industry.

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