A regression model to enhance the profitability of local construction contractors in Uganda

Abstract

Doubtlessly, the principal goal of every construction business is to maximise its profitability. Short of adequate profitability, firms can neither attract outside capital nor survive in the long run. Amidst enormous opportunities for Uganda’s construction sector, local construction contractors (LCCs) continue to collapse in quite a short period. This study investigated the profitability of LCCs in the Greater Kampala Metropolitan Area. A survey was conducted to collect primary data from forty-seven local construction companies registered with Uganda National Association of Building and Civil Engineering Contractors (UNABCEC) and secondary data were collected from their audited books of accounts covering a period from 2016 to 2018. Thirty-five valid responses were received, representing a response rate of 74%. Data from questionnaires and financial statements were coded and entered into a statistical package for social scientists (SPSS) version 25, analysed using Relative Importance Index (RII), statistical correlation, and regression analysis. The study findings indicated that the LCCs' profitability is not satisfactory compared with the recommended industry profitability ratios. The results also showed a strong relationship between timeliness of payments, cost of finance, competitive bidding environment and the profitability of LCCs in Uganda. A regression model was then developed to enable LCCs to enhance profitability and minimise business failure.