The role and impact of investment incentives on small and medium sized enterprise development in Ethiopia

In 1950 Ethiopia became an African pioneer by introducing an industrial modernisation policy to attract foreign capital and technology transfer. It took further pioneering steps in the early 1960s by using its investment incentives scheme to support indigenisation of industry and SMEs. However, during the 1970s and 1980s while many countries were learning fast from the experiences of others, these early initiatives were suppressed in Ethiopia, and only reintroduced in the early 1990s with a narrow approach to enterprise start up, and few lessons learnt. This thesis examines the role and impact of incentives, constituting exemptions from paying duties on imported capital goods and income taxes, on the choices of industry, location and size of enterprises in Ethiopia. It uses theories predicating the reasons for entrepreneurial motivations to start enterprises, and draws on statistics from 4246 projects licensed for investment incentives over 1992-98, as well as new evidence generated from a follow up in-depth investigation of six SMEs. The thesis concludes that the influence of investment incentives on the industry, location and size of SMEs start ups is limited. Antecedent factors like entrepreneurial experience, level of training and financial resources, alongside market and infrastructure were the triggers and determinants of SMEs start ups. However, the study found that sometimes the value of the licence for investment incentives was superior to the holder when used, not as tax breaks as intended, but as a moderator of access to state controlled resources like enterprise sites. Projects that received licences looked viable for bank credit, and the authorities provided some projects with preferential (and subsidised) access to resources. The study suggests that enterprise support initiatives should focus on key driving forces of enterprise development, such as entrepreneurs' technical and managerial skills, better access to land, infrastructure and streamlined procedures for business legalisation

Ethiopia’s Agricultural Transformation: Agribusiness’ Contribution to Reducing Youth Unemployment

This article explores empirical evidence on the relationship between agricultural transformation, ownership structure of agribusinesses, and employment creation in Ethiopia. It draws on secondary data to present evidence of Ethiopia’s agricultural transformation, employment trends, and the agribusiness sector’s contribution to employment generation. The country’s agricultural sector has shown signs of transformation in the form of both labour movement to the more productive manufacturing and services sectors, and productivity growth through the commercialisation and creation of agribusinesses. The findings suggest that the growing number of agribusinesses are generating more jobs for youth but also reveal a number of challenges to overcome, such as skills gaps, low pay in the private sector, and inflexible land ownership and transfer processes. The study suggests targeted policy reforms to incentivise efficient and competitive private agribusinesses, and to address agribusiness-related constraints, skills and wage gaps, as well as land ownership and rental market constraints.Mastercard Foundatio

Realising the Potential of Agribusiness to Reduce Youth Unemployment in Ethiopia

Agribusiness in Ethiopia has grown significantly in the last 20 years, and this growth is set to continue. This transition presents opportunities to address the country’s high youth unemployment and for agribusinesses to participate in global, regional, and local markets. In Ethiopia, youth (15–29 years old) are four times more likely to be unemployed compared to adults. While there are many jobs being created in the agribusiness sector, there are significant skill and pay gaps. Potential jobs are also being lost because of poor infrastructure and lack of access to suitable land. As Ethiopia moves towards further privatisation, the government needs to launch a strategy to create an efficient and competitive agribusiness sector to fuel ‘decent’ job creation for youth.The MasterCard Foundation

Africa’s Youth Employment Challenge: New Perspectives

Who are the youth and what is the problem? Are entrepreneurship and self-employment the solution? And what about youth aspirations? Such questions are addressed in this issue of the IDS Bulletin, drawing from the literature on how development research affects policy and noting that it says little about how young researchers move into policy engagement. Articles consider the evidence on youth employment policy and interventions, the politics of youth policy, the changing nature of young people’s work, and the promotion of entrepreneurship. They are authored by the ten members of the first cohort of the Matasa Fellows Network (a joint initiative by the MasterCard Foundation and IDS), which has a particular focus on the youth employment challenge in Africa. Youth and employment concepts are not new to development discourse in sub-Saharan Africa but over the last decade interest has increased dramatically, becoming an increasingly important focus for policy, intervention and research throughout the continent (and globally). Fundamental to the Matasa initiative is the proposition tha¬t no matter how innovative or rigorous the research, policy influence will seldom be achieved by adding policy recommendations to a research paper. Rather, influence requires reflection, strategy, planning and tactics, and above all a nuanced understanding of the context and the politics that shape any given policy process. This IDS Bulletin reflects these challenges in Africa and demonstrates how political context shapes youth-related policy. It illustrates the need to critically reflect on the multiple and divergent meanings of work and employment and to re-think interventions that promote entrepreneurship and self-employment. The scope for quality research and effective policy engagement is tremendous

Inclusive Structural Change: Case Studies on Innovations in Breeding Practices in Kenya and Anti-Retroviral Therapy Service Provision in Mozambique

Innovation, accompanied by structural change, is at the heart of economic growth and development. Yet there is limited evidence to understand interactions between innovation, structural change and inclusion in the context of low-income and emerging countries, or how these processes best support sustainable and inclusive societies. Through case studies of innovation pathways in breeding practices in the Kenyan dairy sector and anti-retroviral therapy service provision in Mozambique, we study how innovations in specific contexts lead to adoption, diffusion and upgrading, and further to structural change and inclusion or exclusion of marginalised groups. The case studies unpack the conditions for these outcomes by identifying key variables, actors and interactions that shape the innovation pathways. We find that capabilities is a key variable. In particular, we find that inclusiveness and structural changes impact successive phases of innovations through ‘reinforcing’ or ‘balancing mechanisms’, operationalised by the impact of innovation on capabilities. Other factors include the presence of interrelated innovations, power relations between actors, and the role of institutions (formal and informal). The Kenyan case suggests parallel non-competing innovation pathways, while for Mozambique, we observe competing pathways that remain to be examined further. Findings from the cases provide the basis of future primary research on inclusive structural change.International Development Research Centr

Introduction: New Perspectives on Africa’s Youth Employment Challenge

This article frames and introduces the ten other contributions to this collection. First, the dominant narrative around Africa’s youth employment challenge is set out, as are four key points of debate and discussion that are subsequently addressed by the various contributions. We then draw from the ‘research into policy’ literature and note that it says little about how young researchers move into a policy engagement mode, or how they can be helped to move in this direction. This sets the stage for an introduction to the Matasa Fellows Network, which was established to do just this, with a particular focus on the youth employment challenge in Africa. The articles in this IDS Bulletin are authored by the ten members of the first cohort of Matasa Fellows and are briefly introduced in the last section