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Small Scale Garment Manufacturing in Ethiopia Business Plan

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A Systems View Across Time and Space

• Open access
• Published: 29 June 2020

Growth of micro and small scale enterprises and its driving factors: empirical evidence from entrepreneurs in emerging region of Ethiopia

• Hayelom Abrha Meressa 1  

Journal of Innovation and Entrepreneurship volume  9 , Article number:  11 ( 2020 ) Cite this article

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The purpose of this study was to examine micro and small scale enterprises’ growth determinants operating in Benishangul-Gumuz Regional State of Ethiopia as emerging region.

Design/methodology/approach

The study adopted an explanatory research design with arrangement of primary data collection via a cross-sectional survey questionnaire followed by mixed research approach. The sample of this study was 220 enterprises determined by Yamane’s formula and selected using proportional stratified random sampling technique.

The result of regression analysis revealed that initial investment, access to land, access to finance, location, sectoral engagement, market linkage, and business experience are significant in explaining growth in one hand. On the other side, however, gender, education, ownership, formal recording, and financial management practice are found to be insignificant variables in determining enterprises’ growth.

Research limitations/implications

More evidence is needed on micro and small scale enterprises’ growth determinants before any generalization of the results can be made. In addition, the empirical tests were conducted only on 220 entrepreneurs since 2018. Therefore, the results of the study cannot be assumed to extend beyond this group of entrepreneurs to different study periods.

Practical implications

The study might help the entrepreneurs in addressing the factors affecting growth to take actions toward developing their performance and in turn contribute to employment, export participation, poverty alleviation, and women empowerment.

Originality/value

This paper adds to the literature on the determinants of micro- and small-scale enterprises’ growth. In particular, it tests the impact of initial investment, access to land, access to finance, location, sectoral engagement, market linkage, business experience, education, ownership structure, and financial management practice on growth of enterprises.

Introduction

To date, extensive evidence shows that growth of micro and small scale enterprises (MSSEs, hereafter) is a critical ingredient in sustainable development of developing economies (Mbugua et al. 2013 ). In Ethiopia, the importance of this sector is noticed on different documents like industrial policy, MSSE development strategy, and the growth and transformation plans I and II to accelerate growth and reduce poverty (Esubalew and Raghurama 2017 ). However, both the level of unemployment and quality of jobs remain a concern although growth and transformation through the promotion of the sector have been robustly underscored in various development plans of the country (Tarfasa et al. 2016 ). Moreover, operation and growth of these enterprises have been persistently challenged by numerous factors; even a significant number of enterprises in different parts of the country have collapsed and goes out of operation (Seyoum et al. 2016 ; Fissiha 2016 ).

So as to curb challenges of unemployment and identify growth determinants, a detailed and regular study at country, regional, and firm level is important to provide result-oriented and sustainable support to the sector (Woldeyohanes 2014 ; Abay et al. 2014 ; Fissiha 2016 ). For this reason, quite a number of studies have been carried out in different parts of the country to identify growth determinants. This includes the studies made by Tefera et al. 2013 ; Abay et al. 2014 ; Adem et al. 2014 ; Feleke 2015 ; Debelo et al. 2015 ; Aynadis and Mohammednur 2014 ; Leza et al. 2016 ; Tarfasa et al. 2016 ; Alemayehu and Gecho 2016 ; Fissiha 2016 ; and Seyoum et al. 2016 to mention a few. However, most of the studies provide neither consistent findings nor address MSSEs’ growth determinants in the emerging regions of the country like Afar, Gambela, Somalia, and Benishangul-Gumuz Regional State. To the best of the researcher’s knowledge, too limited studies were conducted in Benishangul-Gumuz. The first one is a study made by Abebe et al. ( 2016 ) that assessed the challenges and performances of MSSEs in a descriptive way neglecting inferential statistics. Secondly, a research was made by Abara and Banti ( 2017 ) which analyzed the role of financial institutions on growth of only 57 sampled enterprises using percentage change in assets as proxy of growth. Besides, this study incorporated only access to credit, firm size, and firm age to investigate growth influencing factors, ignoring more of growth constraint variables discussed in the literature.

In the same vein, apart from the Ethiopian context, empirical studies have been carried out in different parts of the world to identify the factors that affect MSSEs’ growth. However, evidences in developed and developing countries revealed inconclusive findings with regard to the determinants. Although the impact and magnitude of variables on firm growth vary from country to country, region to region, and firm to firm, there are many common factors considered as growth determinants in literature of small business. To mention a few, initial investment, firm location, sectoral engagement, access to land, business experience, gender of owner, motivation of owner, education, market linkage, proper record keeping, financial management practice, and access to finance are among others. These variables were collected from studies made by Zhou and de Wit 2009 ; Loewe et al. 2013 ; Tefera et al. 2013 ; Abay et al. 2014 ; Adem et al. 2014 ; Feleke 2015 ; Debelo et al. 2015 ; Aynadis and Mohammednur 2014 ; Nganda et al. 2014 ; Leza et al. 2016 ; Tarfasa et al. 2016 ; Alemayehu and Gecho 2016 ; Fissiha 2016 ; and Seyoum et al. 2016 through systematic review. Consequently, the above backdrop suggests at least three reasons why additional research in the area of MSSEs is needed in the context of Ethiopia in general and Benishangul-Gumuz in particular as a developing region.

First, growth of MSSEs has been persistently challenged by numerous factors; even a significant number of enterprises in different parts of the country have collapsed and goes out of operation. Undoubtedly, small businesses in Benishangul-Gumuz are no exception to this. Second, despite the fact that past empirical studies of different countries have identified the common factors associated with small business growth, the influence and magnitude of each factor vary from one arena to the other which provide inconsistent findings that cannot be generalized and needs further research. Third, in the context of Ethiopia, existing studies on growth determinants mainly focus on the developed regions and less evidence is documented in emerging regions of the country in addition to mixed results that leave research gap.

Therefore, against this background, the purpose of this study was to examine the growth of micro and small scale enterprises and its driving factors operating in Assosa Zone, Benishangul-Gumuz Regional State of Ethiopia. The novelty of this paper is that it incorporated demographics, firm specifics, and external factors so as to fill the gap in the scant MSSEs’ growth literature as an emerging region unlike the existing studies made by Abebe et al. ( 2016 ) and Abara and Banti ( 2017 ). Most importantly, the paper tried to answer the question of what factors influence growth of micro and small scale enterprises in Benishangul-Gumuz Region using regression analysis. The remainder of this paper is structured as follows: Section 2 discusses about review of related literature. Section 3 is about research methodology followed by Section 4 that presents empirical results and discussion. Finally, Section 5 provides the conclusion and thereafter forwards the recommendation.

Literature review

In the existing literature of micro and small business, many empirical studies have been conducted on enterprises’ growth determinants, covering various scopes using different sample firms and methods globally. However, findings of many studies with regard to the variables influencing growth of firms produced numerous factors with different impact on growth. To identify the most commonly used variables as growth determinants, a concentrated and careful systematic review of literature was carried out on relatively recent empirical studies. Accordingly, the author reviewed studies conducted by Victoria et al. 2011 ; Tefera et al. 2013 ; Emmanuel et al. 2013 ; Assefa et al. 2014 ; Abay et al. 2014 ; Nganda et al. 2014 ; Aynadis and Mohammednur 2014 ; Debelo et al. 2015 ; Nathan et al. 2015 ; Wolde and Geta 2015 ; Nathan et al. 2015 ; Fissiha 2016 ; Alemayehu and Gecho 2016 ; Tarfasa et al. 2016 ; Leza et al. 2016 ; Kahando et al. 2017 randomly. Thereafter, fourteen frequently used variables namely initial investment, enterprises’ location, access to land, business experience, gender of owner, enterprises’ sectoral engagement, motivation, education, market linkage, technology adoption, access to finance, record keeping, ownership structure, and financial management practice were collected from the studies. The detail review on the nexus between each variable and firm growth is, therefore, discussed below to develop a clear conceptual framework.

It is believed that firms located in urban areas tend to grow faster as compared to those located in rural areas because urban firms have access to a large market of consumers with high purchasing power compared to firms operating in rural areas (Tefera et al. 2013 ; Nathan et al. 2015 ). Moreover, enterprises located in urban areas have access to public infrastructures that comprise water, electricity, serviceable roads, telecommunication, electronic media, and postal services which are all crucial for business start-up, development, and growth irrespective of its size (Ahmad et al. 2012 ; Loewe et al. 2013 ; Abay et al. 2014 ; Wolde and Geta 2015 ). In other words, it means that firms that operate in an environment with poor infrastructure which constitutes the inability to access market, communication, power, and water and barrier to entry and hinder competitiveness grow slowly than their counterparts with better infrastructure (Oppong et al. 2014 ; Debelo et al. 2015 ).

Business experience

An enterprise’s age has a significant effect on growth for the reason that older firms have more experience and a superior financial position to execute their business activities than their counterparts relatively (Afande 2015 ; Leza et al. 2016 ). Moreover, older firms are more likely to grow faster than younger firms because of the social capital they have gathered over time through experience (Nathan et al. 2015 ). Therefore, business experience and firm growth have a positive relationship, that is, as the age of an individual firm increases, the firm growth also increases (Fissiha 2016 ).

Initial capital

It is noted that enterprises that started their operation with a higher initial investment are more likely to grow than their counterparts which started operation with a relatively smaller initial investment (Tefera et al. 2013 ). In line with this, a study made by Fissiha ( 2016 ) on the determinants of MSSEs’ growth in Ethiopia, the case of Bahirdar City found positive relationship between initial investment and growth.

In Ethiopia, it is believed that manufacturing and construction sectors grow faster compared with other sectors for the fact that the country’s industrial development concern is on manufacturing sector (Tarfasa et al. 2016 ). In addition, manufacturing especially metal and wood working and construction tend to be more successful than other sectors in the Ethiopian context. This might be related to skill and experience of the sectors (Assefa et al. 2014 ).

Access to land

Evidently, business operating in premises allotted by government agencies had better chance of survival compared to those set up in privately rented premises (Leza et al. 2016 ).

Male-owned and/or managed firms have better growth than female-owned and/or managed firms (Nganda et al. 2014 ). A number of justifications have been argued as to why female-owned firms grow slowly than male-owned firms. This may be due to the fact that women owners of firms in some countries have greater problems regarding innumeracy, illiteracy, and lack of business skills. Besides, women are more risk-averse and belong to less growth-oriented networks (Loewe et al. 2013 ). In addition, it could be because of women’s concentration in small growing sectors, for example, trading and service (Gebreeyesus 2007 ).

Motivated entrepreneurs always demonstrate high level of creativity and innovation and show high level of management skills and business know-how. Indeed, they are transformational in nature and use failure as a tool and springboard for success (Nyang’au 2014 ). Therefore, growth prospects of firm owners with lower or negative type of motivation, such as unemployment is lower (Alemayehu and Gecho 2016 ).

Education is presumably related to knowledge and skills, motivation, self-confidence, problem solving ability, commitment, and discipline. Higher education is expected to increase the ability to cope with problems and seize opportunities (Papadaki and Chami 2002 ). The role of education on growth is explained through its effect on exposure to new information and processing that could have positive impact on production and distribution of goods and services (Leza et al. 2016 ). In addition, it is believed that operators with higher educational qualification are expected to make better quality decisions to manage a firm in a way that reduces the likelihood of failure (Victoria et al. 2011 ). Therefore, firms owned and managed by entrepreneurs with higher formal education experience higher growth than their counterparts (Yeboah 2015 ).

Market linkage

Firms can have forward linkage with customers or other resellers and backward linkage with their raw material suppliers to get the needed materials to produce goods or services (Debelo et al. 2015 ). The absence or low supply of raw materials may increase the cost of production and bring other drawbacks like stagnation, low quality of products, and poor performance among others (Emmanuel et al. 2013 ). This is to mean that adequate supplies of raw materials ensure good growth of firms and unavailability of raw materials can be barrier for growth. Therefore, market linkage and enterprises’ growth have positive relationship (Amentie et al. 2016 ).

Record keeping

Accounting statements are used as to bring information to managers, business owners, and external users of the financial aspect of business entities to make decision (Mutua 2015 ). Therefore, availability of accounting information is important for business planning, organization, and control function of firms (Abdul-Rahamon and Adejare 2014 ). In addition, relevant accounting information could help the stakeholder of firms to make wise decisions to reduce uncertainty in decision-making. Therefore, a regular and organized record keeping practice enables enterprises to calculate profitability by clearly determining sales and expenses and helps to mitigate faults associated to production, marketing, and purchasing decisions (Lakew and Birbirsa 2017 ). Moreover, record keeping is essential for an entrepreneur to know what is happening in their business, how much has been sold, what the costs are, what activities are profitable, whether selling prices leave a suitable margin against cost, and so on (Ntim et al. 2014 ). To conclude, record keeping is expected to have a positive effect on growth.

Information and communication technology

Information and communication technology (ICT) adoption captures the use of modern technological products/services like websites, on-line sales, and computerized production system (Nathan et al. 2015 ). Accordingly, it is believed that enterprises that use ICT grow faster than their counterparts because using ICT can improve and strengthen customer relationships, enhance firm image, enhance information exchange, and enable them to compete with other firms (Papadaki and Chami 2002 ; Anga 2014 ). Moreover, having a social network is a valuable asset that can help an entrepreneur to obtain access to information as well as resources like credit. Social networks can play higher role in helping entrepreneurs to overcome obstacles related to transaction costs, contract enforcement, and regulation (Wolde and Geta 2015 ).

Financial management practice

In business finance, firms are established to operate into the foreseeable future. Business enterprises are able to survive based on the business experience of their operators, not surprisingly; financial management practice is at the heart (Attom 2013 ). Although lack of financial resources is the biggest problem in MSSEs, good financial management practice is most important and unquestionable, because inefficiencies in financial management result in poor financial performance and eventually lead to firm failure (Jennifer and Dennis 2015 ). Firms may fail if they do not manage their business like business, irrespective of their size. It is believed that better financial information means better control and therefore improve chance of success. Thus, enterprises should adopt and use sound financial management practices so that failure of businesses can be prevented (Gawali and Gadekar 2017 ).

Access to credit

Availability of credit ensures smooth operation of firms as it injects working capital. Thus, the likelihood of failure of firms is low if there is access to finance (Victoria et al. 2011 ). MSSEs which have access to finance grow better than those which have shortage of capital (Leza et al. 2016 ). In other words, enterprises with limited debt financing growth potential is lower than those enterprises having access to debt financing (Abay et al. 2014 ).

Ownership structure

Ownership structure of firms affects their growth through the degree of risk-taking. The key argument is that sole proprietors are usually risk-averse and more often prefer investing in low-risk items attracting low rates of return comparing to partnership. On the other hand, however, partnership firms are risk-takers who can start even risky business that attract high rates of return and drive their growth (Nathan et al. 2015 ). This is to mean that the spirit of belongingness and the need to increase earning is very high when the number of owner increases relatively in many business firms (Alemayehu and Gecho 2016 ). In addition, benefits associated with the presence of partners may include better capital, functional expertise, and a broader range of management experience comparing with sole proprietor firms (Papadaki and Chami 2002 ). Therefore, MSSEs owned by partnership may have better growth compared with those privately owned enterprises (Tarfasa et al. 2016 ). Finally, the following conceptual framework (Fig. 1 ) was developed based on the above detail review to show the relationship between MSSEs’ growth and its driving factors.

Conceptual framework developed by the researcher based on empirical literature discussed above

Research methodology

Paradigm and study design.

The design of research is shaped by researchers’ mental models or frames of references that they use to organize their reasoning and observations (Bhattacherjee 2012 ). Therefore, any design can be selected by researchers based on the nature of research problem and questions to address the problem (Creswell 2012 ). Accordingly, researchers could choose among different types of possible research designs depending on purpose of the research, method of data collection,time dimension, and research approach as an architect chooses among the possible building designs depending on the purpose of the building, method of construction, time of construction, and other relevant factors (Gebru 2010 ). The current study, therefore, employed a mixed explanatory cross-sectional survey research design with primary and secondary data.

Data type and source

The study used both primary and secondary data. The primary data were collected from selected micro and small enterprises in Assosa zone in 2018 G.C. Besides, secondary data were collected from documents available in Assosa zone micro and small enterprises agency and records of enterprises under investigation.

Data collection instruments

The main data gathering instruments used in this study were both open- and close-ended questionnaires to collect primary data and document review to collect secondary data, respectively.

Construction of questionnaire

The questionnaire was prepared in the English language from the available literature (Abay et al. 2014 ; Adem et al. 2014 ; Alemayehu and Gecho 2016 ; Leza et al. 2016 ; Tarfasa et al. 2016 ). Moreover, reliablity and validity of the instrument was also checked. Reliability is the degree to which the measure of a construct is consistent, and validity examines how well a given measurement scale is measuring the theoretical construct that it is expected to measure. Reliability can be checked using test-retest measurements of the same construct administered to the same sample at two different points in time. Besides, validity can be assessed based on correlational coefficient of pilot test data in quantitative research (Bhattacherjee 2012 ). Accordingly, prior to the commencement of the actual survey, the survey instrument was first reviewed by lecturers of accounting and finance department in Assosa University for validity and then pre-tested to evaluate its suitability on 30 piloted entrepreneurs from Assosa and Bambasi weredas. Thereafter, a test-retest method was used to examine the reliability of the instrument. To this end, the instrument was administered twice to the same group of subjects at an interval of 2 weeks and gave a correlation coefficient of 0.812 that indicates high reliability of the instrument for the fact that coefficient of 0.5 and above is deemed reliable (Kothari 2004 ).

Population, sample size, and sampling technique

There were a total of 491 enterprises operating in Assosa Zone according to the MSSEs’ agency data during 2018 G.C. Accordingly, the target population of this study comprised all these enterprises. To this effect, an appropriate sample size was determined from these active enterprises using a simplified formula which is developed by Yamane ( 1967 ).

where the level of precision = 5%

Therefore, a representative sample of 220 enterprises was included in the study. As far as there is heterogeneity within the enterprises in terms of location and sector, stratification was carried out to create homogenous groups from the target population. The stratification technique was based on enterprises’ location and sectoral operation. As a result, the enterprises were grouped into manufacturing sector, construction sector, service sector, agricultural sector, and trade to create operational homogeneity in each group. After stratification, proportional random sampling technique was applied to select sample elements from each stratum. The proportional sample of enterprises, considering their sectoral heterogeneity and heterogeneity in geographical location is depicted in Table 1 .

Variable measurement and model specification

While specifying an empirical model, identification of dependent and independent variables with their measurement is a matter of no choice. Cognizant of this, the dependent variable of the current study is growth of MSSEs. Besides, initial investment, location of MSSEs, enterprise’s sector, access to land, MSSEs’ age, gender of owner, motivation of owner, owner’s education, enterprise’s linkage, ICT adoption, and access to finance were the independent variables included in the empirical model.

Empirical studies provide different proxies for growth of micro and small enterprise. Among these, total asset, sales, employment size, profit, and capital are mostly known (Tefera et al. 2013 ). These measures depend upon the ease of availability of the data and good judgment of the researcher. In view of this, employment growth is mostly used in MSSEs’ growth literature in Ethiopia since MSSEs are looked from employment creation perspective and data on employment size is easily available (Gebreeyesus 2007 ; Tefera et al. 2013 ; Abay et al. 2014 ; Tarfasa et al. 2016 ; Fissiha 2016 ; Leza et al. 2016 ). However, the safe way of measuring growth is to have comprehensive measures than relying on a single indicator (Alemayehu and Gecho 2016 ). Accordingly, employment and capital growth rates were considered as best fitted measures of enterprises’ growth to align with industrial development strategic plan of the country and MSSEs’ definition criteria. The list of variables and their measurement is depicted in Table 2 .

In most growth-related studies, both multiple linear regression model and binary logistic regression model could be applicable. In Ethiopia, for instance, Alemayehu and Gecho ( 2016 ); Abay et al. ( 2014 ); Feleke ( 2015 ) and Tefera et al. ( 2013 ) used binary logistic regression model in their studies. However, Adem et al. ( 2014 ); Leza et al. ( 2016 ); Tarfasa et al. ( 2016 ); and Fissiha ( 2016 ) used multiple regression in their studies. Therefore, both logistic and multiple regressions could be used in growth-related studies. On the one side, multiple linear regression could be chosen if the growth measure, used as the dependent variable, takes a continuous measure. On the other hand, binary logistic regression model could be used if the growth measure, used as the dependent variable, takes a discrete measure. In the current study, the following general multiple linear regression model was specified consistent with that of Adem et al. ( 2014 ); Leza et al. ( 2016 ); Tarfasa et al. ( 2016 ); and Fissiha ( 2016 ) since enterprises’ growth is considered as a continuous variable.

ENGR i = ßo + ß 1 IIN i + ß 2 LOC i +ß 3 ACL i +ß 4 MAG i + +ß 5 GOW i + ß 6 SECT i + ß 7 MOW i +ß 8 OEDU i +ß 9 ENLN i +ß 10 ICTAD i +ß 11 ACFN i + ß 12 EOWNP i + + ß 13 RECFT+ ß 14 FMPRAC + e

EGR = Enterprise’s growth

IIN = Initial investment

LOC = Location of MSSEs

ACL = Access to land

MAG = MSSEs’ age

GOW = Gender of owner

SECT = Enterprise’s business sector

MOW = Motivation of owner

OEDU = Owner’s education

ENLN = Enterprise’s linkage

ICTAD = Technology (ICT adoption)

ACFN = Access to finance

EOWNP = Enterprise’s ownership

RECFT = Recording financial transaction

FMPRAC = Financial management practices

e = Error term

i = 1, 2, 3 …. n , where n is the number of firms

ß = Multiple regression coefficients to be estimates

Empirical results and discussion on the growth driving factors

As means of data analysis, both descriptive and multiple regression analysis based on ordinary least square (OLS) estimation were applied. To do so, STATA software version 13 was used for statistical treatment. The data for this study were obtained from the micro and small scale enterprises survey, 2018. Preliminary results of the study were analyzed using simple percentages and present in the form of tables and figures. The study targeted 220 questionnaires; however, 206 questionnaires were successfully filled and returned (93.6%) and the remaining questionnaires were with no full information for the purpose of analysis as shown in Table 3 .

The result of the survey indicates that male-owned enterprises were 67.35%, while only 32.55% were female-owned businesses enterprises. The participation of women is lower relative to men though the sector is expected to increase women empowerment. This may be due to the attitude of society and cultural norms that considered men as superior and leaving a role to women to bear more family responsibility at home rather than engaging themselves in business. This could, therefore, be a challenge to the sector in the study area.

With regard to motivation of enterprises’ owners, almost 68.83% of the entrepreneurs joined the business by their choice which could be considered as prospect and the remaining 31.17% of the owners joined their business because of lack of alternative as of the 2018 survey. This could be considered as best prospect for the enterprises for the fact that motivated entrepreneur are ready to accept different risks and put mechanisms of risk management program either to prevent, mitigate, or cope with existed risks using mixed tools of proactive and financing alternatives.

Table 4 revealed that majority of the enterprises, i.e., almost 64.1% of the enterprises, finance their businesses internally from their own source. This implies that the proportion of enterprises that finance their business through borrowing from financial institutions is found to be not easy despite the fact that finance is indispensable for expansion of business for any sector. This signifies that the supply of credit to these enterprises is below their demand. In fact, it seems that access to finance appears to be a very severe or major obstacle as reported by the majority of micro and small enterprise owners. Those entrepreneurs with access to formal finance even did not obtain the loan as per their request; rather, institutions provide credit below the request of entrepreneurs. Therefore, there are problems of accessing to credit and inadequacy even for the accepted requests which could be considered as challenge for the firms.

According to Fig. 2 , 45% of the sampled enterprises were engaged in the agricultural sector followed by the construction sector (22%), while the remaining 18, 11, and 4% were operating in the service, trade, and manufacturing sectors, respectively.

Sectoral engagement of enterprises. Source: author’s computation based on firm survey (2018)

Figure 3 revealed that 40% of the sampled enterprises were operated in Assosa Wereda, 16% in Bambasi, followed by enterprises in Menge Wereda (14%), while the remaining 24% shared equally (8% each) were operating in Oda, Homosha, and Kurmuk. The least 6% were located in Sherkole Wereda.

Operational location of enterprises. Source: author’s computation based on firm survey (2018)

Besides, almost 58.93% of micro and small scale enterprises have weak formal recording of economic transactions though the sector’s development strategy recommends the enterprises to establish a financial record keeping system in the case of new enterprises or present audited financial reports in the case of existing enterprises. Therefore, this could be a challenge for the enterprises.

With regard to educational status of enterprises’ owners, about 41.7% of the sample respondents were TVET graduates, 28.3% of the respondents completed secondary school, 23.6% of them were with education in elementary/informal, and 6.4% were university graduates as described in Fig. 4 . Thus, higher percentage covers TVET which is a prospect to the enterprises. In addition, this supports micro and small scale enterprise development strategy as long as the directions provided in Ethiopia’s industrial development strategy give mandate to TVET colleges in order to provide industrial extension services for the development of skilled human resources and technology.

Educational status of entrepreneurs. Source: author’s computation based on firm survey (2018)

Evidence suggested that majority of the respondents in the survey operated their businesses from rented houses (almost with a percentage of 56.41), while the remaining percentage indicated owners who rented their premises from the government. Thus, this is a challenge for the owners of the enterprises.

With regard to market linkage, 85.63% of the respondents had no or weak formal and well-organized linkage among themselves and with other institutions. The rest (14.37%) of the entrepreneurs had developed organized linkage among themselves and with other stakeholders. In addition, the study addressed enterprise linkage with research and training institutions and linkage of enterprises among themselves, i.e., forward and backward linkage with customers. Accordingly, majority of the respondents revealed existence of weak linkage with their customer including forward and backward linkage. Results of open-ended question revealed that most of the enterprises purchase important inputs for their production and operation and sold their products and services for their customers through their own efforts without formal backward and forward linkage market. Thus, for the majority of the enterprises, linkage is their challenge.

Figure 5 reveals that majority of the respondents (47.08%) were in the age range of 25–35 years followed by those in the age less than 25 years (28.16%). Indeed, almost 75.24% of the entrepreneurs are in their prime productive and reproductive ages. This character, thus, could be considered as a prospect of the sector since studies advocate that those younger entrepreneurs have better motivation, energy, and commitment to work and are more inclined to take risks that could bring higher return than aversing the risk of business. The rationale behind this description is that older entrepreneurs are likely to have achieved their initial ambitions in their productive years. The rest 22.33 and 2.43% were in the age range of 36 to 45 and with age more than 45 years, respectively. The result also indicated that the sector is meeting one of the objectives of the government by creating employment opportunities for the youth since most of the entrepreneurs are young and a productive labor force. And such a productive workforce is, indeed, believed to be an engine for development of the region in particular and of the country in general though this prospect by itself may not bring the required outcome without the other means.

Age distribution of entrepreneurs. Source: author’s computation based on firm survey (2018)

Figure 6 reveals that majority (55.11%) of the respondents had operated their businesses for a period of fewer than 3 years followed by 24.76% with business experience that ranges between 4 and 5 years, while those who had been in operation for more than 5 years shared the least percentage (only 20.13%) as of the chart depicted in Fig. 6 . Therefore, majority of the enterprises are at their start-up stage experiencing many challenges.

Enterprises’ business experience. Source: author’s computation based on firm survey (2018)

The analysis of descriptive statistics makes a discussion about prospects and challenges of enterprises. Determining the factors that may significantly contribute to enterprises’ growth, however, goes beyond the descriptive analysis that requires employment of econometric analysis. Econometrically, therefore, the study used multiple linear regression analysis to identify factors that significantly influence the extent of growth of the enterprises. To this end, capital and employment growth were proposed to be used as means of micro and small scale enterprises’ growth measurement. However, there is no variation in employment growth in the enterprises during the study period. In all of the enterprises, there is neither increment nor decrement in the size of employment. Therefore, only capital growth determinants are discussed in the regression analysis.

Diagnostic tests for classical linear regression model assumptions were carried out first before starting discussion on the OLS regression output to explain the influencing factors of enterprise growth. Accordingly, the first assumption required in classical linear regression model that is normality assumption was checked to conduct single or joint hypothesis tests about the model parameters. Indeed, Shapiro-Wilk test was used to test the normality distribution of error term with null hypothesis that residuals are normally distributed. The result of this test shows Prob > z = 0.20039 which is statistically insignificant, indicating that the residuals are normally distributed supporting the null hypothesis. In addition, multicollinearity test was carried out. The assumption here is explanatory variables are not correlated with one another. The severity of the problem of multicollinearity across the independent variables can be examined in terms of the variance inflation factors (VIF). According to Gujarati ( 2003 ), variables are considered as highly collinear if the VIF exceeds 10. In this research, the result of VIF for each explanatory variable included in the regression model is very low (less than 3), suggesting that there is no severe multicollinearity problem in the estimated model. Therefore, multicollinearity between the explanatory variables is not considered to be a problem here.

The other assumption of the classical linear regression model is that the regression model used in the analysis is correctly specified. If the model is not correctly specified, the problem of model specification error or model specification bias will be encountered (Gujarati 2003 ). Thus, model specification with regard to omission of variables can be formally tested using Ramsey’s RESET test, which is a general test for misspecification of functional form (Brooks 2014 ). Accordingly, Ramsey RESET test was performed for model specification with null hypothesis that the model has no omitted variables and its result was statistically insignificant supporting the null hypothesis ( Prob > F = 0.2528). In addition, Breusch-Pagan/Cook-Weisberg test for heteroscedasticity was used with null hypothesis that variance of error is constant. To this end, the result of the test was statistically significant, indicating existence heteroscedasticity (Prob > χ 2 = 0.0005). Assuming homoscedastic disturbances when heteroscedasticity is present, however, can lead to biased statistical results. Therefore, to ensure validity of the statistical results, problem of heteroscedasticity was controlled using robust standard error.

Evidence of the regression output, depicted in Table 5 , revealed that enterprises which started their business operation with higher initial investment grow faster than their counterparts which started their business operation with relatively smaller initial investment, as far as money is created from money and lower money creates lower and higher investment brings better return. However, financial resources to entrepreneurs at their establishment or initial stage are the major obstacles in doing business as discussed in the descriptive statistics. In line with this, the current study is consistent with the research findings of Ahiawodzi 2012 ; Tefera et al. 2013 , and Fissiha 2016 . On the other side, the finding of this study contradicts with that of Gebreeyesus ( 2007 ) that indicated negative impact of initial capital on growth suggesting fast growth of enterprises with lower initial capital than those with higher capital.

The study confirmed that enterprises with better access to land as working premise grow faster than their counterparts. However, many of the micro and small scale enterprises in the region suffer from lack of appropriate land for operation although this factor is among the main determinants of upgrading for most enterprises. This means that micro and small scale enterprises’ owners who want to upgrade are particularly hindered by access to land as a working premise though the enterprises’ owners decide the expansion of their business. The finding of this study is consistent with that of Loewe et al. ( 2013 ).

The evidence of the study revealed insignificant effect of gender on growth of enterprises though there is an argument that favors growth of man-owned enterprises than woman-owned for the fact that women have dual, i.e., domestic and productive, responsibility than men. Therefore, the evidence of the study did not provide confirmation that female entrepreneurs face more difficulties than male entrepreneurs in upgrading their enterprises in the region.

The Stata output revealed that access to finance influenced positively and significantly the capital growth at 5% significant level. This implies that enterprises with access to finance grow better than credit-constrained enterprises. However, majority of the enterprises face various challenges in securing debt finance. Poor lending procedure and lack of collateral were found as principal reasons for not acquiring finance according to evidence of entrepreneurs from open-ended questions. This may be due to the fact that the formal financial institutions are in fear of micro and small scale enterprises for several reasons including lack of track record of financial transactions, irregular record keeping, and high cost involved in serving unorganized enterprises. Evidence of the current study is, therfore, consitent with the research finding of empirical study made by Abay et al. ( 2014 ) with the title of “External factors affecting the growth of micro and small enterprises in Ethiopia” with a special focus on enterprises operated in Shire Indasselassie Town of Tigray Regional State. This evidence is also consistent with a study made by Leza et al. ( 2016 ) on determinants of employment growth of micro and small enterprises in the Wolaita Zone, southern nations, nationalities, and people’s region of Ethiopa.

The capital growth of enterprises was negatively affected by their age at less than 1% significant level though positive association was expected between business experience and growth of enterprises. This reveals that value growth of newly established micro and small scale enterprises is better than early established firms. This may be due to the argument that older firms might have problems in adapting their strategies to changing market conditions, whereas new firms may not in order to have higher growth. The evidence of the study is consistent with that of Gebreeyesus ( 2007 ) and with the research carried out by Leza et al. ( 2016 ) on the determinants of employment growth of micro and small enterprises in Wolaita Zone, Ethiopia.

Location of enterprises was also included in the econometric model to see whether or not it is correlated with the capital growth of micro and small scale enterprises. More specifically, whether or not the capital growth of enterprises located in Assosa Wereda differs from those operating in other weredas. The regression result revealed that micro and small scale enterprises located in Menge Wereda grow faster than the enterprises in Assosa Wereda. On the other side, however, the enterprises located in Oda Wereda and Sherkole Wereda grow slower compared with the enterprises in Assosa Wereda. This finding could be related to the availability of different services, infrastructures, and inadequate market linkage, as long as the presence or absence of which can affect the enterprise’s capital growth.

Enterprises’ sector was also included in the model to see whether or not it is correlated with the capital growth of micro and small scale enterprises with special reference to the manufacturing sector. It was expected that micro and small scale enterprises engaged in manufacturing sector tend to grow faster than other sectors in the Ethiopian context. This hypothesis was developed by considering the vision of industrial development plan that focused on building an industrial sector with the highest manufacturing capability in Africa which is diversified, globally competitive, environmentally friendly, and capable of significantly improving the living standards of the Ethiopian people by the year 2025 by providing special support for the sector. In line with this, a particular emphasis is given to the promotion of micro and small scale enterprises by means of providing special support to those enterprises that engaged in the manufacturing sector followed by the construction sector in order to achieve the objectives of micro and small enterprise development policy and strategy and in line with the growth and transformation plan. However, an empirical result of this study failed to support this expectation; rather, trade and construction sectors grow faster than the manufacturing sector not as expected.

In addition to the above discussion, evidence of the regression output indicates absence of significant effect of entrepreneur’s motivation, adoption of technological services, and proper recording of financial transactions and financial management practice on growth of enterprise though the study conceptualized their influence based on literature. As of the regression output, linkage of micro and small scale enterprises affects capital growth positively. The implication here is that enterprises with higher linkage with different organizations at trade exhibition and bazaar by presenting their goods and services and then exchanging their addresses with potential and actual customers grow faster than their counterparts. With regard to market, these business firms can have forward linkage with customers or other resellers and backward linkage with their raw material suppliers to get the needed quality and quantity of the materials which in turn helps to produce quality goods or services that could satisfy the customer’s needs and wants which in turn improves their growth potential in capital. The rationale behind is that if customers are satisfied, they buy frequently the enterprise’s product and promote it which could increase the enterprise’s product sales and its capital growth. On the contrary, as discussed in the descriptive statistics, most micro and small scale enterprises under study have weak linkage with market as well as with government sectors though the variable has positive influence on capital growth.

To capture ownership effect on the growth of micro and small scale enterprises, ownership structure of firms was included in the study to investigate whether or not an enterprise ownership by private or by associations has influence on growth. The finding seems to suggest no evidence on the nexus between ownership structure of enterprises and capital growth.

Owners’ education was supposed to determine the enterprises’ capital growth with special reference to TVET in that TVET graduate entrepreneurs grow faster. Education being the basic human endowment could enhance the promoters’ access to new information and their ability to process such information resulting in efficient production and distribution of goods and services. However, the regression output of the empirical evidence in the current study failed to show significant effect of education on capital growth.

Conclusion and recommendation

This paper provides new empirical evidence on micro and small scale enterprises’ growth influencing factors based on the data acquired from 206 entrepreneurs in Benishangul-Gumuz Regional State of Ethiopia using regression analysis. The result of regression output revealed statistically significant evidence of seven explanatory variables out of 14 variables in determining micro and small scale enterprises’ growth at 10% of significance level. To this end, initial capital, access to land, access to finance, firm location, sectoral engagement, market linkage, and business experience were significant in one hand. On the other side, however, gender, education, ownership structure, record keeping, financial management practice, and information and communication adoption are found to be insignificant variables.

Evidently, the regression output revealed that enterprises which started their business operation with higher initial investment grow faster than their counterparts which started their business operation with relatively smaller initial investment. In addition, enterprises with better access to land as working premise grow faster than their counterparts. In the same vein, the evidence revealed that enterprises with access to finance grow better than credit-constrained enterprises though majority of the enterprises face various challenges in securing debt finance from formal institutions. However, the finding revealed that the growth of newly established micro and small scale enterprises is better than that of early established firms. The regression result also revealed that enterprises located in Menge Wereda grow faster than enterprises in Assosa Wereda. On the other side, however, enterprises located in Oda Wereda and Sherkole Wereda grow slower compared with enterprises in Assosa Wereda. With regard to market linkage, enterprises with higher linkage with different organizations through trade exhibition and bazaar grow faster than their counterparts.

The findings of this study, therefore, suggest that enterprises with lower capital growth should take actions for better improvement of their growth and their contribution for the regional as well as national economy by means of creating strong linkage with customers, preparing a formal recording of economic transactions, and improving financial management practice for easy access to finance. In addition, the findings of the paper suggest entrepreneurs to organize exhibitions and bazaars in urban centers at regional, zonal, and wereda levels to have better market share which is important for capital growth. With regard to finance, micro and small enterprises’ policy and strategy suggests micro finance institutions to be the sole providers of saving and credit services to the sector. However, micro finance institutions by themselves are in limited finance in general. The worst limitation is in micro finance institutions in Benishangul-Gumuz. Therefore, the policy should reconsider financing strategy of the sector as long as finance is a life blood for business operation. Moreover, along with literature contribution, the present study contributes to the ongoing debate in MSSEs’ literature through its investigation on determinants of growth in emerging region.

It should be noted, however, that this paper used cross-sectional data of 206 firms and the findings may not be able to make generalization to other firms over a period of time. Therefore, it is believed that future panel surveys and availability of other data may necessitate corresponding revisions of growth determinant factors in order to have a comprehensive solution for the growth-constraining factors of small business.

Availability of data and materials

The data that support the findings of the study can be obtained from the author based on request.

Abbreviations

Micro and small scale enterprises

National Bank of Ethiopia

Micro Finance Institutions

Technical and vocational education and training

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Meressa, H.A. Growth of micro and small scale enterprises and its driving factors: empirical evidence from entrepreneurs in emerging region of Ethiopia. J Innov Entrep 9 , 11 (2020). https://doi.org/10.1186/s13731-020-00121-9

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• Assosa Zone
• Constraints
• Micro and Small Enterprises

50 Best Business ideas in Ethiopia You Can Start Today

By: Author Tony Martins Ajaero

Home » Africa

Do you want to you start a business in Ethiopia? If YES, here are 50 best small scale business ideas and investment opportunities in Ethiopia you can start.

The economy of Ethiopia is growing stronger with each passing day. This has led to an increase in business opportunities in the country. We have compiled for you a list of the top 50 business ideas that you could consider to make the most of the present economic boom.

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Best Business ideas in Ethiopia

1. agriculture and food processing.

This is an important industry in Ethiopia. Accounting for over 85% of employment for the people of Ethiopia, agriculture is vital. There are different types of crops that can be grown in the country ranging from cereals to fibre crops and flowers, to teas and coffee plantations, etc.

Forestry is also an important resource in the country along with fisheries. Also, commercial processing of produce and raw materials gotten from agriculture provides an opportunity for business in Ethiopia.

2. Manufacturing Industry

The Ethiopian economy today provides excellent opportunities in the manufacturing industry, especially in the clothing and textile sector. Other top rising manufacturing sectors to invest in include food and beverages, leather, metallurgy, electronics and so on.

Although, you may require a considerable amount of capital to start a manufacturing firm, it is one of the most lucrative businesses to venture into. Most of the top entrepreneurs out there are owners of successful manufacturing companies and plants.

3. Real Estate

This industry is growing at an alarming rate in Ethiopia. The construction and real estate industry is increasing in demand in all parts of the country.

A simple drive around the country’s capital city Addis Ababa will show you a large number of luxurious apartments and villas occupying previously empty landscapes. This industry is growing every day, providing opportunities for new business aspirants.

4. Vending machines

Most people in Ethiopia are always on the move and would not like to waste precious time in the process of buying things. This has led to an increase in the demand for vendors and their machines.

A vending machine for the sale of small items like drinks, snacks, water, milk, juice, newspapers, cigarettes, etc. can be installed in different strategic places to meet the immediate needs of people on the go. This is a splendid business idea for busy places like a bus terminus, schools or colleges or even a busy residential area in Ethiopia.

5. Milling Plants (Wheat and Maize)

There is a rise in the demand for wheat and maize flour in the country. This is due to the increase in population in Ethiopia.

This has led to an opening for local business opportunities for Ethiopian people. Whether the grains are brought for milling by the customer, or the mills produce flour in large amounts and it is packaged and sold to wholesalers and retailers, this business is quite viable.

6. Event management and Party planning

There is never a dearth of parties in Ethiopia. Several events ranging from company events, religious and entertainment events to weddings, birthdays, etc. take place all the time all around the country. But planning for these events are usually stressful and time consuming.

The organizers of these events may not have the chance to do the planning and would need other people to do it for them. Event planners are usually well paid depending on the size of the event or party. Planning these events can give you an impressive income yearly.

7. Consultancy

If problem solving comes easy to you or friends and colleagues often come to you for assistance or help on certain areas, then you could have a business opportunity in your hands. You can offer your services to people at a stipulated rate.

Companies and business organizations need persons known as consultants, to help them achieve their visions and missions. Even average individuals need help too. All these people and bodies will be willing to pay a fee to somebody that can help them realize their organizational or personal goals.

8. Schools and Colleges

In Ethiopia, the demand for schools and colleges outweighs the supply. There are thousands of school students that take national exams in the country yearly but only a small amount of these students get the admissions they seek. Establishing a school with quality equipment, facilities and seasoned and experienced teachers is sure to meet the demands of these eager students.

9. Coaching

You can make good money in Ethiopia by coaching students. If you are excellent in a certain subject area, then you can coach students or people needing help on that subject area for a fee. You can do this online by creating an online website for yourself, or face to face by meeting your students at their homes or a designated venue.

10. Garbage Collection

Garbage collection services in Ethiopia are not very efficient. This service can now be provided by private individuals and nongovernmental bodies. You can collect and dispose garbage for residential homes. This can be done for them at a particular rate per month.

There are thousands of homes in Addis Ababa and other cities in Ethiopia where you can collect refuse from and help them properly dispose it. The problem of proper waste disposal is a serious one in the country; you can turn that into an income spinner for you.

11. Janitorial Services

Cleaning is something that should be done regularly. Commercial buildings and residential homes should be regularly maintained. In Ethiopia, a lot of companies and government bodies now contract their cleaning needs to cleaning firms.

These buildings can be cleaned for a monthly fee by you. You can charge higher fees with bigger buildings and vice versa!

12. Government Contractors

All you have to do is register a company and be on the lookout for tenders in daily newspapers and print bulletins. A lot of people have won government contracts worth millions to supply various government needs and supplies. This is an excellent business idea for good income in Ethiopia.

13. Solar panel sales and Repair

Ethiopia gets a high amount of sunshine. You can explore this to your benefit by learning how to make, install and repair solar panels. Although this is a technical sector that needs a lot of hardwork, skills and patience, it is also a viable sector.

However, If you have no interest or love for technology, then this business idea is not for you. It requires the investment of technologically inclined persons and it is a lucrative business.

14. Repair of Mobile devices

Another technical business sector is in mobile phones. You can also learn and acquire excellent phone repair skills. These skills can in turn be used to generate income for you by providing phone repair services for your clients.

15. Agric Value Addition

As stated earlier, the Ethiopian economy is growing very fast and this fast growth is also in the agricultural sector. There is always a demand for food and it has made the agribusiness an extremely viable idea. You can make money for yourself by value addition to agricultural products for example; you can turn milk into yoghurt, cheese, etc. and many other value-added products.

16. Bakery and Fast foods

Everyone loves baked goods. From corn flour to wheat flour and other forms of flour, Ethiopians love them all. This alone is enough to make you consider dabbling into the baking industry. It is essential however that you get all the information needed before going into the business. This sector is lucrative and open for all types of people regardless of gender.

17. Poultry

This might sound easy and simple but it really isn’t. It involves the full use of farming and entrepreneurial skills to make it possible. Before starting, you have to determine your proposed market and the type of poultry you want to go into.

Poultry business has two main parts; firstly, Broilers, where the chickens are grown mainly for meat, and secondly, Layers, where the chickens are grown for egg production.

18. Private lesson teachers

You can teach children after school. Several parents out there are busy and cannot afford the fees of home teachers. You can seize this opportunity to organize after school lessons and charge at rates lower than the normal home teacher rates.

This can serve as a way for you to make cool money. Also, you can choose any particular expertise area of yours to teach on.

19. Gardening and Landscaping

You can convert your client’s plain backyard into a spectacular view. Though it requires a lot of creativity and training but it also gives good pay. To do this business, you will have to learn a lot and research well to produce the best results for your clients every time. It is a very lucrative business once you have understood the basics and gained expert knowledge of it.

20. Advertising campaign developer

Creating and building contents for your clients is a good way to make money. You can plan and execute beautiful media campaigns, create online content, apps, email distribution, mobile contests, videos and other interesting things for your clients and customers and in turn be paid generously for these services.

21. Freelance Writing

You can decide to become a full time freelance writer to earn income or a part time freelance writer to support a regular income. Also, you can do it for fun or to build your portfolio/skill list. You can get clients to give you jobs and write properly for them to get money for your needs. Writing can be a great business option.

22. Creating Music Videos

Good music sells. This is the reason why the music industry is always booming. If you are a creative person, you can go into music related business by creating music videos for artiste promotion or brand building. This is an industry that is always sure to give high returns as long as you do good work.

23. Child care centers

Child care centers are a viable business opportunity in Ethiopia. Due to the increasing rate of insecurity as a result of abusive house helps or baby peddlers, more parents are deciding to go with taking their children to child care centers. Also, the busy and hectic daily schedules of many parents have made this business even more profitable.

24. Selling snacks and Drinks

Snacks are convenient in-between meals. They can be consumed anywhere whether at the office, in school, at special events, even during meetings, seminars, conferences, etc. The demand for snacks is never low. Also, snacks are usually served with soft drinks to accompany them. You can sell these soft drinks too. You can go into this business as a source of income generation for you.

25. Start a driving school

Yearly, there are more and more people who desire to know how to drive. Eager teenagers, young adults and even matured men and women who do not know how to drive look for ways to learn. You can establish a place for people to learn how to drive for a token or a fee, hereby providing for yourself a stable source of income. You have to be registered to issue valid certificates.

26. Private security firm

Setup your own security firm. You can do this by hiring and training able bodied men and women, then deploying them to companies that need them for protection of important infrastructure. Although this business has to be licensed by the stipulated authority, it is a great way to make cool cash.

27. Mobile Store/Office supply

For office workers, it is difficult to go out and get certain things like shirts, wristwatches, perfumes, ties, etc. You can use this as a business opportunity by helping them do their shopping. You can also buy goods and take it to these people in their offices for them to buy from you at a rate set by you. So you can decide what your own service charge will be. This will ensure that you make good profit.

28. Computer sales and repairs

Due to the increase in sales of computers and laptops, there is also an increase in the need for computer repair technicians. This sector is a great business to go into in Ethiopia. You can also offer computer cleaning services too.

29. Appliance repairing

This industry is also lucrative. You can learn how to fix electronics and appliances, get certified and start fixing for people to get paid. It is a great business idea for idle youths in the country.

30. Laundry service

We have already established the fact that a lot of people in Ethiopia are very busy and do not have the time for some basic things. This includes time for laundry too. This business will do well whether the economy is bad or not. It is quite easy to start up but yet extremely profitable. You only need a washing machine , dryer, pressing irons and some other little items.

31. Brick Moulding business

As stated earlier, the real estate industry is growing very fast. The demand for homes is on the increase in Ethiopia and homes are made with brick. This therefore leads to an increase in demand for bricks. One can go into this to generate steady and good income regularly. Getting trained in brick making will however make things easier for you if you are considering this option.

32. E-Book writing

For people that enjoy writing and know the process of making e-books, then E-book writing is an excellent business idea for you. You can write different e-books and then sell them online from your website or on sites like Amazon, Blogger, etc.

33. Employee training and Professional Certification

There is high demand for specialized employee training in the country. A lot of employees require training on various aspects like money handling, customer service, stress management, etc. You can get trained in these aspects and in turn train employees for a fee set by you. This is a great way to make money.

34. Internet Cafe Business

In Ethiopia, people always want to browse the net. You can start an internet cafe business with other added services like online research, printing, photocopy and another computer services. You can even do better by positioning your cafe in a busy area to get more customers.

35. Disc Jockey

Popularly called DJ, this is one profitable business opportunity. Your diverse music compilation can serve as a source of income for you. This job is especially for music lovers and energetic personalities. You can make yourself more valuable by being a DJ and also a wedding planner.

36. Pest Control Business

If you need a steady flow of income, then you should think of starting a pest control business. This business involves the removal or eradication of potentially harmful insects, reptile and rodents from farms, residential and commercial properties.

All over the world, and especially in this part of the world, people are becoming more and more aware of removing things that may be injurious to the health. This makes the pest control business very viable.

37. Vehicle Towing

Before going into this business, you have to first of all get a license to operate a mobile towing business. From then on it is game on for you. Although this license is not easy to get, it can help you get the chance to work well with car dealers and property managers to move their business cars, buses or trucks.

38. Cooling Van Business

Ethiopia is a hot country. This makes warm or hot drinks not really in demand, but there is a high want for cold drinks all around the country. You can tap into this to create a business opportunity for yourself. Start a cooling van business. With a cooling van, you can supply cold or even ice drinks to events and parties. This can fetch you good money every week and even every day.

39. Tricycle Transportation

There is a great opportunity for tricycle operators in the country. This is as a result of the special features of tricycles; features like its portability, convenience for hire service, flexibility, efficiency of maintenance, life span and durability, etc. This business opportunity has been widely accepted in the country and it is actually quite viable.

40. Car Hiring

This sector is a very lucrative business opportunity. It is even more profitable when it is situated in a strategic location where there is high population of people with numerous commercial and entertainment centers. This business however is quite capital intensive and requires close management. Your vehicles must be up to the required safety standards for you to get good customers and clients.

41. Car washing

It is a normal thing for cars to get dirty but most people do not have the spare time to wash their cars. Providing a professional car cleaning and washing service is a sure way to get steady and regular income in the country. This business requires an open space and the right equipment for a successful startup. You can also hire boys to help you with the washing if you want to start on a large scale. It is not very expensive to set up.

42. Auto Mechanic

This is an important business all over the world. This is due to the fact that cars that break down must get fixed or repaired.

But before you can go into this business, you should know all that pertains to auto repair and its applications. You can do this by getting trained in auto repair or hiring trained hands to work in your auto repair shop or garage. This business is even more lucrative in Ethiopia due to the state of imported cars in the country.

43. Travel agency

Travelling and tourism is a big deal for a lot of people. The industry is a major industry in the country. The main stakeholders in this industry are the transport companies including airline, shipping and cruise companies, and also a particular group of people that work in the background to make sure that the travels are comfortable and hitch free. With the current economic boom, it would be a wise move to start a travel and tourism agency.

44. New and second hand cloth business

The clothing business is an industry that is open for exploration. It is made up of small retail stores that sell a wide variety of clothing items. You can go into this industry to make money for yourself. By buying new or second hand clothes from wholesalers and selling in the retail market, you can make profit for yourself and by doing this also give yourself a brand name.

45. Cement Manufacturing

This is another viable business idea that should be looked into in Ethiopia. Although it may be quite expensive to start up, but there is no shortage of demand for your product as it is needed everywhere, especially if you put the price of your product at a reasonable rate.

If you have an abundant source of capital, then do not hesitate to go into this business and open your very own cement manufacturing plant.

46. Soap Making

There is without doubt a very large and expanding market for soaps. Soaps are products manufactured from chemicals and are used for either bathing or washing of clothes, plates, cars and even glass windows. This industry is still expanding and there is more than enough room for new soap makers to come in and market their stuff.

So if what you see is a simple business in the chemical industry that can fetch you steady income, then you should think of going into the business of soap making.

47. Chemical Merchant

The demand for some chemical products has not been met by the supply rate in the Ethiopian local market. This can become a profitable business for you.

All you need to do is to find out about the product that is needed, link up with foreign manufacturers to supply you, seal the deal and sell locally. You can also produce and export chemical products to other countries with great demand for these products.

48. Selling Insurance policies

This isn’t a new idea but it is most certainly a profitable one. You can get information from insurance agents and sell policies to clients thereby attracting a commission fee for yourself.

49. Sell recharge vouchers

This business idea is almost costless to start up, yet it is profitable. You can sell the recharge cards to the public, friends, family members and even colleagues. You can get the vouchers at a cheaper rate from the service providers and sell them to people at the standard rate, thereby making profit for yourself.

50. Start an Entertainment Lounge

There is a high number of foreigners and foreign workers in Ethiopia, especially in Addis Ababa. Most of these people and even locals would need places to relax and unwind after a hard day’s work and on weekends.

You can meet the needs of these fun lovers by starting up an entertainment lounge such as a bar, hotel, casino, restaurant, cinema, night club and so on. There is an infinite number of possibilities here so pick one and set up the business.

These are the top 50 business ideas and opportunities that are quite lucrative and open to you in Ethiopia. Do not hesitate to choose any one you like and start making good money for yourself. Cheers!

DEVELOP BUSINESS PLAN FOR SMALL BUSINESS: ENTREPRENEURSHIP PERSPECTIVE

• August 2021
• Proceedings on Engineering Sciences 3(3):365-372
• 3(3):365-372

• Ambo University

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COURSE: ENTERPRENEURSHIP BUSINESS PLAN FOR BULEN GOLG MINING COMPANY Prepared by ARSI , Ethiopia Content

Related Papers

DESCRIPTION Paper presented at the International Conference on Global Land Grabbing 6-8 April 2011, Brighten: UK

Louis Toupin

SUMMARY The mining sector is the third priority in the national GTP. The expectations about the potential contribution of the mining sector to growth, foreign exchange and government revenues are high. Ethiopia's mining policies are more and more positioning to be attractive for foreign investors. If Ethiopia presents a great potential concerning the development of the mining sector, this sector is still at an early stage of exploration. The Ministry of Mines has attributed 300 licenses and around 25-30% of these licenses were attributed to international firms. But three technical factors that are slowing down the expansion of exploration in Ethiopia: o The lack of local experienced exploration geologists; o The lack of diamond drill rigs and skilled workers in diamond drilling; o The lack of laboratory facilities. The mining operations concern only two large-scale mines in operation in Ethiopia: one gold mine with 1300 employees and one tantalum mine with 600 employees and there is no second transformation of ore concentrates. Also the artisanal and small-scale sector represents half a million of direct jobs and it is estimated that more than 5 million Ethiopians live from the revenues generated by this economic activity. The artisanal workers are poorly trained, poorly skilled and poorly equipped. Among the large scale mines and the explorations companies the presence of women is very low. But, in the artisanal sector, they represent around 30% of the work force. In the next years it can be estimated between 7 000 and 10 000 employees in the large-scale mining sector in the next few years. This workforce projection shouldn’t be higher because large-scale mining activities are capital-intensive activities. But large-scale mines have an important impact on downstream and upstream activities in the local and national economy, especially maintenance, maintenance, construction, transportation and procurement activities. With the opening of new mines the next shortage will concern the mining engineers and technicians. To obviate these shortages observed in the workforce the Ethiopians universities and TVETs are on the first line. The Higher Education level is in a phase of expansion in Ethiopia. Many new universities appear, the enrolment rate is increasing and the variety of programs offer to the student is expanding. However, this tendency has reached weakly the training offer for the mining sector. The offer is almost limited to Geology. However, two universities have implemented a new program to train Mining Engineers. With one exception all the higher institutions that train students in fields related to the mining sector are public institutions. The new programs that universities are opening for the mining sector are harmonized and based on international standards. However, they generally face problems of laboratory, staffing, coordination and logistic. And also the present perception of the Ethiopians graduates by the employers is not favourable because they lack of practical skills. So the challenge over the next years will be more on the side of quality issues for the training instead of quantity issues. There is a big gender disparity at the Higher Education level. This gender disparity affect also the Departments linked to the mining sector. A huge under representation of female student can be observed in all Departments linked with the mining sector. On the side of the TVETs, the new TVETs strategy is based on a demand driven approach to fill the gap between market demand and training provision. One of the requirements of the new strategy is to develop an integrated Framework of Qualifications and Training Based on Competency Standards, with a curricular structure, aligned with the needs of the labour market. Even if the mining sector is among the first development priority in the GTP the TEVETs level haven’t begin the design and the development of a specific training offer for the mining sector. However, the government has a plan to expand the operation of TVETs institutions in areas including the mining sector. The TVETs offer training possibilities for the occupations that support the mining sector, such as: driver, automotive body repair, metal engineering, plumbing, driller, surveyor, and machine operators. But they are not designed to meet the need of the mining sector. They are rather meant to meet the needs of the industrial and agricultural sector that received priority by the government. The demands and the expectations of the mining sector and the capacity of the Ethiopian institutions to fill these demands create gaps. This study identifies three gaps that correspond to the present situation: • Gap 1: the lack of legitimacy, responsibility and accountability This first gap is more than a “governance gap” because both parties, the government and the mining companies, are trapped in the constraints created by this gap. On the one hand a weak state can’t use the investment make in the mining sector as a catalyst to boost the activities in other sector of the economy, and on the other hand the mining companies are facing responsibilities that are usually taken more efficiently and equitably by the state (security, education, health, etc.). Consequently mining companies are facing disputes that affect business through expensive project delays, damaged reputations, high conflict management costs, investor uncertainty, increasing of the risks for the company. • Gap 2: the shortage of a local skill force This gap, at first, concerns the undergraduate and postgraduate levels. It is due to an inadequacy between, on one side, the requirements of the employers and, on the other side, the curriculum content and the pedagogical method and facilities offered by the universities. At the technical training level it must be noted that the TVETs didn’t offer yet programs related specifically to the technical occupations related to the mining sector. Also, for the artisanal minors, there is no specific training for these workers. • Gap 3: the institutional and community building challenge The large-scale mines possess financial, material and human resources that are far away from what they encounter in the host country. They offer good jobs and high salary but, at first, the local workforce couldn’t comply with the requisites of the “mine”. Also the regulation of the mining sector is weak in Ethiopia. It is reported a lack of skilled professionals at the MoM and the capacity in regional governments is even weaker. The fact that there is not a lot of expertise within the government to proper monitor and regulate the sector has many consequences among, for examples, license attribution, environmental management and transparency issues. The conclusion of this Background study proposes to implement a mining development strategy that can contribute to the maximisation of economic and social benefit . The nature of the 3 identifying gaps positions the strategy on the ground of an intervention on the “regulatory and social processes”. This strategy should be based on three pillars: 1. Reinforce the human capital: o By supporting technical training; o By developing critical skills among stakeholders; o By supporting the sharing of knowledge and best practices; o By offering tailored training to the artisanal miners. 2. Reinforce the info capital: o By reinforcing the mechanism of accountability and transparency; o By supporting the implementation of database, network, infrastructure and application; o By reinforcing the diversification potential of the mining sector; o By supporting the creation of links and networks with foreign expertise. 3. Reinforce the organisational capital: o By reinforcing and supporting the federal, regional and local institutions; o By upgrading the facilities and installations in higher education institution; o By developing a culture of value and ethics among stakeholders.

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This study was aimed at providing an overview and assessment of the current seed systems and performance of Community Based Seed Multiplication Scheme (CBSMS) as well as reviewing challenges and ways for sustainability in Metekel Zone. CBSMS came in to existence in Metekel Zone of Benishangul Gumuz region seed systems in 2008 to narrow the gap between the galloping demand and stagnant supply of improved and quality seed. Pawe Agricultural Research Center (PARC) and its partners have come up with CBSMS with multidimensional support from the former to produce in 2013/14 3279 quintal and in 2014/15 1275 quintal of quality seed. Seed systems in Metekel Zone were observed to be complex and the role of PARC is observed to be vital. The study suggests strengthening the CBSMS as they are the main source of improved seed in the zone. Moreover, proper training of farmers, market information network, incentive mechanism, and controlling the quality of seed should be given emphasis. To make CBSMS sustainable coordination among key partners and proper institutional arrangements is of paramount importance. Strengthening farmers’ association/ union through institutional support should be given priority for sustainability of the scheme.

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Sarita Ranchod

This report investigates the participation of women in mining in southern Africa. It formed part of the Mining and Minerals for Sustainable Development Research Programme and is one of the earliest studies exploring gender issues in mining in southern Africa.

nomsa ngono

Disclaimer The content of this publication is the sole responsibility of WLSA Zimbabwe and should in no way be taken to reflect the views of the Gender Support Programme or its financial contributors

International Journal of Mining and Mineral Engineering

Hilmi S. Salem (Prof. Dr.)

FOR CITATION: Yihdego, Y., Salem, H.S., Ayongaba, B., and Veljkovic, Z. (2018). Mining sector challenges in developing countries, Tigray, Ethiopia and inspirational success stories from Australia. International Journal of Mining and Mineral Engineering, 9(4): 321–367. URL: https://www.researchgate.net/publication/328730745_Mining_Sector_Challenges_in_Developing_Countries_Tigray_Ethiopia_and_Inspirational_Success_Stories_from_Australia_Seehttpwwwindersciencecominfoingeneralforthcomingphpjcodeijmme AND http://www.inderscience.com/info/ingeneral/forthcoming.php?jcode=ijmme ABSTRACT: The urge to make wealth, reduce unemployment, and improve the living conditions of its people pushes the Ethiopian Government to regulate the mining legislation to favour investment in the sector. The external perception is that some aspects of doing business in Ethiopia are too difficult, and they increase stakeholders’ investment’s risk and undermine potential benefits. Changes allow for business incentives that include security of tenure, the right to sell minerals, equipment and machinery’s preferential duty and tax provisions, a 2%–8% production royalty, a 25% mining corporate tax, custom/duties exemptions, carry forward of losses up to 10 years, and profits repatriation’s structuring. This paper highlights the Ethiopian mining industry status, strategy, and challenges, including ‘wirehousing and hotelling’, in relation to withdrawal of international companies without completing the mining projects. This paper brings up untold embedded issues, which can be an inordinate input to diverse background of all concerned with the mining industry.

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