The Assessment of Micro and Small Enterprises Performance and Challenges in Addis Ababa, Ethiopia

Abstract

A growing urban population due to migration and natural population growth resulted in unemployment and poverty in most urban centres in Ethiopia. Prompted by these challenges, the government has taken initiatives to mitigate the problems. One of these initiatives is the MSE development strategy adopted in 1997. The policy envisages not only reducing poverty in urban areas but also nurturing entrepreneurship and laying the foundation for industrial development. The strategy was revised in 2011 with renewed interests and more ambitious targets on employment and number of entrepreneurs transiting to a medium level. The purpose of this study is to assess the implementation of the strategy and the challenges encountered in Addis Ababa with particular reference to Lideta sub-city. Data were collected from both primary and secondary sources. The primary sources were collected from the MSE operators in the sub-city, while secondary data were collected from Lideta sub-city MSEs Development Agency’s annual reports and the performance report of the Growth and Transformation Plan. The study shows that positive results were achieved in terms of employment creation, savings, enterprise growth, and business ownership. The survey reveals that government support has been provided in different forms to help MSEs grow. However, a range of problems persist, including poor management skills of MSE operators, lack of capital, lack of land, and high competition due to an overcrowded market. When seen in terms of business types, trade dominates the MSE with little involvement in the manufacturing sector, which is the priority area of the national MSE development strategy. The researcher observed that the growth of the MSE requires a concerted effort of the stakeholders, mainly the government and MSE owners and operators. The city government should identify growth-oriented MSEs based on their potential for job creation, poverty reduction, local raw material utilization and ease of transformation to medium and large-scale businesses in a short period. Then relevant training must be provided and to this effect, TVET colleges need to be enhanced to play the role.