Boosting Ethiopian small
and medium-sized companies

Enhancing competitiveness and job creation in Ethiopian SMEs

Ethiopia, one of Africa’s fastest-growing economies, faces significant challenges in transforming its economic structure. Despite a 7.2 per cent GDP growth rate in the 2022/23 fiscal year, the country’s economy is still predominantly rural, with 70 per cent of the population engaged in agriculture. This sector contributes approximately 37 per cent to the GDP, while services and industry account for 36 per cent and 22 per cent, respectively. The Ethiopian government aims to achieve lower-middle-income status by 2025, but obstacles such as limited capital investment, inadequately skilled labour, and insufficient market information impede SMEs growth.

Due to these constraints, SMEs in Ethiopia have not reached their full market and employment potential, operating below capacity. With youth unemployment at 25 per cent and the manufacturing sector struggling to absorb job seekers, enhancing SME productivity and competitiveness is crucial for economic development and job creation​​.

The SME Support Facility addresses these challenges by providing comprehensive support to SMEs. This initiative promotes job creation, advises on improving product quality, and facilitates access to local and international markets. Special attention is given to women-owned SMEs and job creation for women, ensuring inclusivity and broader economic impact.

Empowering SMEs with technical and financial support

Invest for Jobs provides strategic oversight, ensuring alignment with broader development goals, and facilitates collaboration with local and international partners, providing technical expertise to enhance project implementation. It supports SMEs through coaching, training, and financial assistance. The facility offers an innovative, multifaceted approach to improve the competitiveness and productivity of Ethiopian SMEs. It is comprised of five elements which are applied and combined flexibly depending on the potential and need of each SME:

Technical Training: Training programs and expert advice targeted to increase productivity and competitiveness​​, develop new products and services, and improve production processes, and logistics.

Management Training: Comprehensive management training covering strategic planning, marketing and sales, organisational governance and structure, finance, HR management, and implementation of quality standards to ensure sustainable business growth. This includes leadership training and peer-to-peer learning opportunities​​​​.

Access to Financing: The initiative helps SMEs develop feasible business models and plans, elevate financial management, and connect with banks for loans and investors for equity investment. This has led to significant achievements;, so far, over 1 million euros in loans from local banks could be realised​​.

Financial Assistance: To improve production processes and market competitiveness, SMEs can receive machinery and equipment support of up to 12.000 euros, complemented by the SME’s contribution.

Due Diligence and Compliance: Support includes obtaining necessary certifications, health and safety training, and promoting ecological sustainability. This ensures that SMEs meet international standards and can compete effectively in global markets​​​​.

The SME Support Facility is implemented by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH and sequa gGmbH within the framework of the Special Initiative “Decent Work for a Just Transition” on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ).