H.E. Prime Minister Dr. Abiy’s national initiative to improve Ethiopia’s business climate is a timely one

Job Creation

The Ethiopian population is overwhelmingly young.  Upto 70% of the population maybe under the age of 30; close to 50% under the age of 15.  Currently, there are more than 28 million students at various levels of the education system.  Thus, over the coming few years, the Ethiopian economy will need to create millions of jobs.  If Ethiopia does create these jobs, it is likely that it will maintain its fast growth for the many years to come.  If it does not, the social, economic, and political costs will be unbearable.

The biggest job creators in any economy are private sector firms in the small and medium sized range.  Unfortunately, the growth of SMEs in Ethiopian has not been enough to create the necessary jobs.  One major reason has been the fact that Doing business in Ethiopia is not simple.  It requires compliance to a multitude of requirements.  Some of these are clearly needed. Most are not.  The cost and time required to comply with these many rules are high and increases the entry barrier to many young entrepreneurs attempting to start new ventures.  By reducing these barriers to a bare minimum, Ethiopia can hope to create many new jobs.  This is exactly what Rwanda did a few years back.  By improving its rankings from 143rd to 56th in the world, it was able to create 72,000 new ventures, almost entirely consisting of two and three-person operations, which in a decade tripled exports and reduced poverty by 25%. Rwanda has since improved further to rank 29th in the world.

A major thrust of job creation in Ethiopia should be over how to create hundreds of thousands of SMEs through the simplification of the regulatory process.  Given the urgent nature of the challenge, we are happy to see the Prime Minister’s Office isolate job creation as a separate and important issue in its own right.  In the coming months and years, we hope to continue to be a part of an unambiguous national effort to build a culture of entrepreneurship, the Ethiopian way!

The Precise Team