1. Ministry of Industry
National policy perspectives on building MSME
resilience and formalization
Mr. Getachew Andualem
Industrial cluster development desk head
Ministry of Industry
Addis Ababa, Ethiopia
3. Introduction
The Ministry of Industry and other institution's established based on Proclamation No. 1263/2021
Definition of Powers and Duties of the Executive Organs. MoI has the following structure
Ministry of Industry
Manufacturing industry
Development Institutes
Ethiopian Enterprise
Development
Textile and garment research center
Leather and leather products research
center
Metal and engineering research center
Construction and chemical research
center
Agro processing and pharmaceutical research
center
4. Definition of MSMEs
Category/level Total assets(ETB) Number of employees
Micro <600,000 <10
small 600, -
001 10,000,000 11-50
medium 10,000, -
001 90,000,000 51-100
large >90,000,000 >100
6. Formalization of SMEs/manufacturing industries/ and contributions
KPI 2013/2020 2014/2021 2015/202022 2016/2023
Manufacturing GDP contribution 6.8 6.7 6.7 6.9
Average manufacturing growth
rate 5.1 4.8 7 10.01
Average production capacity of
manufacturing industries
46 52.65 55.79 59.39
Job creation in manufacturing
sector 171,373 255,068 254,885 272,034
7. Supporting MSMEs affected by multiple crises in Ethiopia and recovery of the private sector
The government, especially the Ministry of Industry, has done various programs to support manufacturing
enterprises(MSMEs) whose business activity has slowed down due to the Covid-19 pandemic. In this way, it was
possible to save many enterprises from closed by involving various development partners to further strengthen the
support. Therefore, together with development partners, the following supports have been made;
1. Ensure continuity of critical support functions and businesses at risk of collapse in crisis-affected
262 Businesses at risk of collapse were supported.
• Women account for 27.8%of the total beneficiaries while14% are youth.
• These businesses employ a total of 1,148 people, of whom793 (69%) are youth
• Identify/incubate 30 digital entrepreneurs and start-ups that can contribute for the response
2. Business recovery and resilience building through pre-and post-investment support impacted MSMEs
-Business development service(BDS)skill enhancement is provided to a total of 121businessadvisoryfirms,professional
trainers, coaches, advisors, and consultants
-500 SMEs, of which 225(45%) female-led and 150(30%)youth-led, in crisis-affected areas, have implemented measures to
improve their business recovery and resilience
-Provision of grant/subsidy for selected 30 high potential growth SMEs
8. 3. Direct support to crises-affected entrepreneurs/start-ups
-Non-financial entrepreneurship development skill enhanced for 632 enterprises
-Grant support is provided to 999 at-risk informal businesses (607 female and 392male
-Provision of requested machinery and equipment
-Providing technical support in various areas (such as finance, marketing & sales, production and others) Conducting
executive coaching (providing training and coaching on key strategic business areas
-Peer to peer learning between businesses (including with successful businesses of similar sectors
-
9. After the pandemic the government had done reforms in different sectors through home grown economic reform;
-Ministry of industry prepared 10 years perspective plan and revised it industry policy to boost industrialization and to be
competitive in the global market.
Policies and government approaches
This revised policy is designed to drive both near- and long-term growth in Ethiopia’s manufacturing sector, focusing on
four key result areas. The policy emphasizes a market-driven led by the private sector with public sector support,
adopting industry strategies, balancing export promotion , import substitution and inclusive development.
The four key result areas identified in the policy include:
1.Increasing production and productivity
2.Enhancing technology utilization and innovation
3.Boosting the share of the manufacturing industry in exports and import substitution/localization/
4.Establishing an inclusive and sustainable manufacturing system.
10. Policies and government approaches
To support this policy, the Ministry of Industry initiated the Ethiopia Tamiret Movement (ETM), a flagship initiative to
revitalize industry awareness, strengthen coordination across agencies, and implement key strategies to enhance
manufacturing sector productivity. The ETM has established six specialized cluster structures and committees that bring
together public institutions and private sector representatives to collaborate on various topics to boost the manufacturing
industry. The six clusters are
1.Finance and custom cluster
2.Input supply cluster
3.Infrastructure development cluster
4.Investment promotion cluster
5.Capacity building and R& D cluster
6.Regional government cluster
11. New initiative ; rural industrialization
Rationality for Implementing Rural Industrialization in Ethiopia
1. Economic Diversification
Reduced Dependence on Agriculture: Ethiopia's economy heavily depends on agriculture, which is vulnerable to climate
change and other external factors like global market fluctuations. Industrialization in rural areas would diversify the economy,
providing alternative sources of income and creating jobs in non-agricultural sectors.
Increased Value Addition: Rural industrialization can help transform raw agricultural products into value-added
goods, creating local industries such as food processing, textiles, leather, and handicrafts. This would raise the agricultural
sector's overall productivity and reduce the need to export raw materials at low prices.
2. Job Creation and Poverty Alleviation
Creating Employment Opportunities: Rural industrialization generates jobs in manufacturing, processing, and distribution.
This can directly alleviate poverty by providing more employment options for the rural population, who are often limited to
subsistence farming.
Boosting Incomes and Standards of Living: By moving beyond traditional agriculture and creating industrial jobs, rural
industrialization helps raise the income levels of rural households, thus improving their overall standard of living.
12. New initiative ; rural industrialization
Rationality for Implementing Rural Industrialization in Ethiopia
3. Reducing Rural-Urban Migration
Decreasing Rural-to-Urban Migration: Many young people in rural Ethiopia migrate to urban centers for better job
opportunities. However, urban areas are often overburdened and lack sufficient infrastructure to accommodate this influx.
Rural industrialization creates economic opportunities within rural areas, reducing the pressure on urban infrastructure and
mitigating issues like urban unemployment and slums.
Encouraging Youth to Stay: With the creation of local industrial hubs in rural areas, young people are more likely to
remain in their home regions rather than seek opportunities in overcrowded urban areas. This helps maintain social structures
and prevents the depopulation of rural communities.
4. Enhancing Agricultural Productivity
Linking Agriculture to Industry: Rural industrialization can create synergies with agriculture by fostering agribusinesses,
such as agro-processing factories and organic fertilizer production plants. This adds value to agricultural output and
encourages more sustainable agricultural practices.
Promoting Sustainable Development: As industries develop, there can be a greater focus on sustainable agricultural
practices (e.g., agroecology, organic farming) that complement industrial growth while preserving the environment.
13. challenges
Access to finance
Access to market(UNDESA support us on digital marketing and e commerce training for SMEs)
Lack of skills(industrial management and technical skills)
Poor linkage (foreword and backward linages) or supply chain problems
Adoption of technology
Infrastructure supply
Lack Collaboration and coordination of different stakeholders' to support MSMEs
Etc
14. 14
19
The way forward
Need to address systemic challenges that hinder the growth of MSMEs in Ethiopia
Creating an enabling environment for MSMEs and informal businesses: This includes policies that support access to
finance, markets, and skills development.
Supporting the development of sustainable financing mechanisms: This could include micro finance, guarantee
schemes, and venture capital funds.
Promoting public-private partnerships: This could involve partnerships with banks, businesses, and NGOs.
15. The way forward
Technical support (regional & individualized)
▪ Executive coaching (incentive, consistent, ..)
▪ Peer to peer learning
providing appropriate machinery can change the growth trajectory of the business
Access to Digital economy
- In a rapidly expanding global market, many promising local businesses are restricted to specific local
markets. As a result, increasing enterprise knowledge of the digital economy and market will help
businesses reach new markets, remain competitive, increase their income, and learn new ways to do
business.
- etc
