Driving inclusive SME growth and innovation 
to create jobs

In Ethiopia, small and medium enterprises (SMEs) located in remote areas face a significant challenge that hinders their business growth and impact on the local economy: often isolated and unevenly distributed across various locations, they struggle to connect with potential markets and supporting institutions. Key issues include inadequate finance, technology gaps, poor business skills, lack of skilled labour, and insufficient resources like machinery and raw materials. The remote location presents certain challenges in industry hiring, including a limited understanding of job security, low wages, lack of benefits, and poor working conditions. 

Herein lies the role of the project SME cluster support implemented by South Nation Nationalities Peoples Regional State Industrial Park Development Corporation (SNNPRS IPDC) with the support of Invest for Jobs. This collaboration with SNNPRS IPDC, a government-operated industrial park operator, is a strategic effort to support companies operating within the park located in Hawassa, Dilla, Arba Minch and Hossana, in central and southern Ethiopia. It aims to tackle the challenges faced by SMEs through comprehensive customised cluster support, bringing companies together in a “cluster site” of several warehouses to provide more effective support and encourage the pooling of resources.

The goal of the project is to improve business ecosystems and the productivity of SMEs in rural areas, ultimately enhancing the contribution of the private sector in economic development and job creation.

Overall, SNNPRS IPDC manages about 225 cluster sites in 17 Ethiopian towns consisting of more than 82,000 Micro Small and Medium Enterprises (MSMEs). Since December 2023, Invest for Jobs has been supporting the industrial park operator in restructuring its cluster approach: It helped the partner to rearrange SMEs in the same sector and set up 10 new cluster sites made up of complementary companies. For example, Tamerat, a flour production company, has been set up in the same cluster site as Asham Bakery, a bread production company, to ensure direct access to raw materials. Strengthening the cluster structure facilitates joint market intelligence, raw material procurement, technology sharing, and resource pooling, enabling SMEs to tackle shared challenges.

The cluster sites also provide infrastructure for the SMEs (electricity, clean water, etc.), as well as a range of services, such as workshops on marketing or new products development, courses on health and safety at work or vocational and soft skills development training. Market linkage is a key intervention of the project, providing SMEs access to new opportunities through B2B meetings, trade shows or marketing campaigns to connect them with target markets. Inter- and intra-SME linkages are also crucial, fostering collaboration within and between cluster sites and with supporting institutions. Additionally, the project partners with financial institutions to ease access to finance by providing performance certificates and guarantee letters as collateral alternatives. 

By combining individual support with a collective cluster strategy, the SME cluster support project aims to unlock 90 SMEs business challenges in order to create 300 good jobs and improve the working conditions of 400 employees.  

Invest for Jobs directly supports 20 selected SMEs by providing small machinery, management training, and other assistance. The remaining 70 SMEs receive support from the broader ecosystem enhancements and benefit from the various training courses offered by SNNPRS IPDC, whose employees have been trained with the support of Invest for Jobs, based on the principle of "training the trainers".

The project has provided SMEs with the right tools, training, and resources to scale up their business, access new markets, and foster job creation. As of January 2025, over 90 companies across 10 cluster sites have received support, resulting in significant growth and innovation. For example, SIZ Agro, a company processing avocado products, started exporting to Gulf countries after the cluster support approach. New market linkages led to the conclusion of contracts with a general value of 20 million Ethiopian Birr (ETB) (132,000 euros). In total, the project has created 250 good jobs and improved the working conditions of 100 employees.

The project has developed 68 company profiles (brochures with business plans), provided machinery support to 20 companies, supported 15 SMEs in local trade fair and networking event participation, trained 20 company heads and 10 cluster coordinators in entrepreneurship skills and bankable business plans, and developed two websites to promote SMEs in the target market. 

In February 2025 SNNPRS IPDC and Invest for Jobs initiated a follow-up phase, which incorporates social protection measures and circular economy principles. The project will focus on the implementation of social protection measures, such as the organisation of transport services for employees or on-site childcare services. It will also provide specific support to SMEs whose activities are based on the reuse of materials or products. Examples include Sewase, a SME which produces paper handbags from a biodegradable paper product made from leftover bananas, or the plastic recycling company AGG, which collects plastic bottles to produce brooms.

South Nation Nationalities Peoples Regional State Industrial Park Development Corporation is supported by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH within the framework of the Special Initiative “Decent work for a Just Transition” on behalf of the German Federal Ministry for Economic Cooperattion and Development (BMZ).