9 December 2012

Ethiopia: An Uphill Battle to Millionairship Through the Enterprise Road

Flamingo Garage, a small enterprise formerly known as Fikir Garage, was established and registered as a micro enterprise in 2008. It was established by 10 members with a capital of 25,000 Br, contributing 2,500 Br each.

It got the name Fikir - Love, because the founders believed that their love and harmony would carry them forward in their quest for success, which they were sure of.

They started out on a 100sqm plot which they had rented for a monthly fee of 1,000 Br near Lancha in Kirkos District, Wereda 3. When they went for official registration in 2010, they had to change the name since Fikir was already registered under another business.

Habtamu Tilahun, 37, got the group together to work with his own grinder and welding machine, with which he had been working alone. The friends promised each other to work day and night and pass the 1.5 million Br capital mark in a year and half, which would enable them to be classified as a medium enterprise.

Looking that the future would be better, being as Micro and small enterprises they are struggling, while they are too late to graduate in to middle enterprises.

They based their dream on the assistance they could have obtained from the District, such as a work area, loans and market. Habtamu says, though, that their repeated attempts to get assistance from the District failed. Two weeks ago, when the Addis Abeba City Administration Micro and Small Enterprises Development Bureau graduated 113 small enterprises into middle enterprise, Flamingo was not one of them.

The 113 enterprises are from 17,904 small enterprises, which employ 149,711 people. There were only 250 graduates in the last eight years Addis Abeba noEnterpriseis graduated still in regional state to the middleEnterprise.

According to the MSE bureau, these enterprises in total had five to six million Br, when they were established seven to eight years ago; their cumulative capital was 193 million Br. Flamingo's capital stood at a miserly 80,000 Br, compared to those that graduated to middle class.

The partners in Flamingo regularly share their profits instead of working to build up their capital. In this way they have spent the 500,000 Br they made in the last two years.

The numerous promises they heard from wereda and district officials when they formed the enterprise did not come to fruition.

"Our question is now about how to survive as a small enterprise rather than struggling for middle enterprise status," Habtamu said.

According to the Ethiopian Small and Micro Enterprises Agency, one enterprise is said to be a small enterprise if it employs between six to 30 persons, with a capital of 100,000 Br to 1.5 million Br for industry sectors. If it is in the service sector 50,000 Br to 500,000 Br is the minimum requirement.

For micro-enterprises the maximum number of employees, which may include family members, is five with the maximum capital of 100,000 Br and 50,000 Br respectively for industry and service sectors.

The government launched the policy for enterprises 10 years ago, based on experiences of such countries asJapan,India,Malaysia,South Africaand European Union. The hope was that the same level of success could be achieved here.

"Our journey clearly shows we could have been successful," Haymanot Amare, who manages the finances of Flamingo, said. "We were able to win awards three times for our work in 2001 and 2002."

Habtamu says their problems began when their machines broke down about three years ago and left them unable to pay their rent. The group moved to the compound of Habtamu's house, which is located 200m away from a prime location by the road side.

They then raised 18,000Br and bought a grinder, cutter and high and middle welding machines to save their enterprise.

They accuse the wereda of failing them by not providing adequate training and financial assistance.

They are in field work day and night to be fruitful, by collecting on the umbrella of enterprise, while they are not good as they expect and work

Many businesses continue to struggle in their area. Two of the 38 enterprises registered in Wereda 3 have already closed down, according to wereda officials. Only two others were able to get promoted to middle enterprise level.

One of such company is Andinet Construction Enterprise which, operated only for three months in 2010.

"We could not overcome the bureaucracy, corruption and dictatorship of the officials to get any kind of service," said theEnterprise's coordinator.

Part of the promise made to enterprises was that market facilitation would be available for them, but this business was unable to benefit from that.

A master's paper conducted at Addis Abeba Unviersity by Endalkachew Mulugeta lists a number of problems that are affecting the development of enterprises, including high taxation; lack of capital, land, office buildings, market information, and business support services; negative cash flow; flawed pricing and problems among partners.

Tamirat Fikadu, micro and small enterprises co-coordinator at Wereda 3 of Kirkos District does not entirely agree with the complaint. In regards to claims of the shortage of working places, he states, manufacturers get priority over service enterprises because services do not need as much permanent space. He also denies the accusation that the wereda had anything to do with the failure of enterprises.

"They kill themselves by their own problem and they take us as a reason for their failure," he said.

However, Flamingo Garage is not dealing with the wereda anymore; refusing to await any assistance promised to enterprises, according to Habtamu. He considers the whole thing merely ceremonial and a drama that people participate in.

"We do not want to be a reason for officials to be awarded, as if they had done anything to help," he said.

According to a study, enterprises are currently the second most important employers inEthiopia, following agriculture. A study conducted in February, 2012, by Tommin John, fromBahrDarUniversity, and Sintayehu Hailemariam atHaromayaUniversity, indicates that the number of enterprises is growing by 0.8pc annually.

Workineh Wendimu, senior officer at the Addis Abeba MSE Bureau, admits that there is corruption as well as bureaucratic and other problems. But he says that measures are being taken to have many of these problems administratively corrected.

"We have fired an official from the Addis Ketema District for illegal acts this year," he said.

He agrees that graduating just 113 enterprises to middle level in one year is not enough, but adds that it is a big improvement when compared to 250 in all of the earlier eight years.

Asefa Ferede, Public Relations Director of the MSE Bureau, commented that the country is doing well with its enterprises which are mitigating unemployment and contributing to economic development.

Dissatisfied with the current working environment, Habtamu and his friends are focusing on a new business in aluminum works.

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