Ethiopia is the third fastest developing economy in the world. The Two-digit growth over the past consecutive years is sufficient enough to explain how fast the country was going in terms of economic development. The mall and medium industrial sub sector which has spurred the economies of many advanced economies of today, although relatively young in Ethiopia, is making a contribution to the economy.
Small scale industries are not only indispensable for economic development in Ethiopia but also have a good prospect to become a strong capacity for the country’s industrial sector. Many favorable and conducive factors exist for rapid development of small scale industries especially in rural and semi urban areas of Ethiopia. Small scale industrial sub sector will have a lot to contribute to the growth of larger industries in the country.
The country enjoys diverse topographic and climatic conditions. These consist of a high central plateau ranging from 1,800 to 3,000 meters above sea level, a rift valley that divides the country from North to South with altitudes ranging from 1,000 to 1,800 meters and lowland plain areas. The temperatures range from less than 10oC in alpine areas to 35oC higher in lowland areas. All these will have their own contribution to the expansion of small scale industries in diverse sectors.
The large population of the country which is estimated to be more than 70 million will provide a better opportunity for small scale industries in term input supply and market access. Moreover, the existing banking system and the growing tele-communication infrastructure will provide opportunities for setting up of new industrial bases in the country.
Rapid industrialization is a most pressing need for many countries in Africa. Similarly in Ethiopia small scale industries will serve to achieve the purpose of economic and social progress. The development of small industries will also have vital roles in achieving the socio-economic objectives of balancing the regional development especially in rural, semi-urban areas of the country.
During the past two decades, Ethiopian small enterprises have received special attention including in most of the developing states.
Small scale industries in their nature possess certain special features. They are run with a relatively small capital, are labor intensive, adopt optimal technology, and can be operated in rural and less developed areas. They are also flexible in operation and are market oriented. Hence they serve as instrument to equitably distribute the economic wealth of the country. They also play a role in mobilizing resources, economizing capital, making possible rapid increase in production, export, employment and entrepreneurship.
Foreign Direct Investment (FDI) flow to the country has continued to generate billions of US dollars. The large majority of investment projects in industrial sector have become a strong support to the economy.
The country features numerous business opportunities in the small scale industry sub-sector. The increasing influx of foreign investors will further enhance the industry sector development.
Manufacturing and agriculture sectors are becoming the main focus areas of the investors. _Available data show that the government so far, has preserved 3.4 million hectares of land for investors who are interested to be engaged in modern farming.
United Nations Reports clearly stated that the small enterprises/industries occupy a strategic position in the Ethiopian economy. They play a vital role in fulfilling the socio-economic objectives of the nation. They have emerged as a powerful tool in providing relatively large employment, equitable wealth distribution and removal of regional economic disparities.
The African continent has gone through a remarkable decade of economic transformation. According to the Africa Economic Survey Report 2011 which was released by the African Development Bank on June 6, 2011, the past decade of development in Africa has been particularly dynamic, and in relation to this Ethiopia’s performance was impressive. According to some analysts, since the late 1990s, Africa enjoyed unprecedented economic growth that reached six percent in the second half of 2000s, which resulted in fall of poverty level at a rapid pace. This strong economic performance was due, in no small part, to the rise of China and the other emerging economies, whose demand for raw materials was a boon for the resource-rich African continent. More so was as a result of the fact that the continent started to utilize its potential. In this respect the role of small enterprises was significant. As a result, Africa is now becoming more integrated in the world economy and its partnerships are diversifying, revealing unprecedented economic opportunities.
Although the export sector in Ethiopia is still dominated by primary products mainly agricultural, the industry sector is also supplying its share for the export growth. Some of the areas in which the industry is engaged in include food, sugar, beverage, textiles and garment and chemicals. Cement is also becoming significant industry. It is, however, no denying that industries in the country are concentrated around Addis Ababa, and heavily dependent on agricultural inputs. That implies there is a need to work more ahead. Especially when it comes to providing inputs for large scale industries, small scale industries can serve the purpose. Small scale industries in turn can benefit from the abundance of raw materials such as agricultural products, and in return provide sufficient inputs for large scale industries. Given the abundance in agricultural products there is also a huge opportunity for the growth of Small entrepreneurship specially in agro and agro based small scale industries in rural and semi urban areas.
Along with Small scale industrial development, the industrial zone designation concept is regarded another big potential to nurture and nurse the small scale industrial units. With a view to achieving this, the government has been introducing various incentives and concessions from time to time. Programmes set to achieve the Millennium Development Goals will also have much to benefit from the growing small scale industries.
There are evidences suggesting that the lesson of industrial zone designation was drawn from developed and developing countries such as India, China, South Africa, Brazil, UK, USA, Russia, Japan, Etc. The objective is to promote the small scale entrepreneurship. Industrial zones provide, economic or physical infrastructure including public utilities such as road, electricity and telecommunication, and social facilities such as education, health and housing facilities which are basic not only to run businesses but also to human development. This are factors attracting investors to a certain country. In Ethiopia industrial zones are believed to be powerful tools for ensuring rapid industrialization.
In general small scale industries are offer better prospects for economic growth. However these industries are not without challenges. In countries like Ethiopia these industries face problems such as inadequacy of financing, lack of technical and managerial skill, lack of efficient and modern equipment, shortage of regular supply of power, difficulties in marketing, less demand for output and lack of infrastructural facilities among others. Of course these are at the same time problems that can be addressed if their significant role is recognized.