Made In Ethiopia: Unresolved Troubles Dull Manufacturing Gains

Opening the third manufacturing expo under the government’s Ethiopia Tamrit campaign this week, Prime Minister Abiy Ahmed (PhD) made bold claims outlining unprecedented levels of growth in the country’s manufacturing sector.

The PM told his audience, which included representatives from the 288 factories who participated in the five-day expo, that average production capacity among manufacturers had risen 20 percentage points to 61 percent over the three years since his administration’s campaign to boost domestic production kicked off.

He claimed that domestic manufacturers’ share of the local market had grown from 31 to 41 percent over the same period, and asserted import substitution efforts had saved USD 3.1 billion since 2022.

“Three years ago, we had a shortage of cement but now we are preparing to export,” said the Prime Minister.

He stated the sector is projected to grow 13 percent this fiscal year, up from 10 percent in 2023/4.

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While it is true that the Ethiopian manufacturing sector has enjoyed steady growth over the last decade, it accounted for less than five percent of GDP in 2023, according to the World Bank, and continues to face a host of challenges.

Among them are unfavorable global economic conditions, rising commodity prices, forex shortages, high taxation, infrastructural shortcomings, bureaucracy, and, perhaps most pressingly, armed conflict.

The PM’s speech glosses over these issues, but people in manufacturing say they struggle with them on a daily basis.

Voices from the Expo

Tosa Engineering, a medical equipment manufacturer based in Addis Ababa, was among the businesses participating in the expo. After a decade in the trade, the company is in dire need of space to accommodate its growth, according to Biniam Tesfaye, manager at Tosa.

However, efforts to acquire land adjacent to the 1,000 square meter plot the company holds in Yeka Sub-city (near the French embassy), have yielded nothing.

“We requested additional space to improve our production capacity, but we haven’t received a response from the government,” Biniam said. “The Addis Ababa City Administration has made repeated promises, but there’s been no follow-through.”

Tosa Engineering produces hospital beds and medical equipment, which it offers to local buyers at lower prices than those charged by importers.

“Market demand isn’t an issue. We can’t meet that demand due to space and resource limitations,” Biniam told The Reporter.

Another challenge, he noted, is access to finance.

“Our annual financing needs are over 50 million birr, but banks offer us less than 10 million birr, which limits our production capacity,” said the Manager.

A construction materials manufacturer taking part in the expo spoke anonymously about the other challenges facing his business.

“Frequent power outages hinder our production. The gradual withdrawal of private construction companies, driven by security concerns and economic slowdown, has also disrupted the market. Currently, the government is the primary buyer of construction materials. However, the procurement process lacks transparency, and the same companies win bids repeatedly, blocking market access for others,” he told The Reporter.

Yostina Amlaku, marketing director at Adama-based EZ Trade and Investment, pointed to financial and bureaucratic hurdles.

“We produce construction materials. Two years ago, we transitioned from imports to local production, but we can’t get foreign currency from banks to import essential inputs. Excessive taxes, inefficient customs procedures, and poor public service remain major barriers,” said Yostina.

Government Response and Trade Outlook

In an interview with The ReporterGirma Birru, economic advisor to the Prime Minister, acknowledged that although production at factories is on the rise, challenges remain.

“Many factories rely on imported raw materials, but they struggle to access foreign currency. However, importing raw materials is not a problem in itself. If they enhance their competitiveness through imported inputs, it’s acceptable. Still, the long-term goal is to produce these materials locally,” he said.

He stressed that production capacity is the most critical factor in global trade, and brushed aside concerns related to the tariffs imposed by Wahsington.

“Ethiopia views the tariffs in two ways: First, through its direct trade with the US; second, relative to peer countries who face similar tariffs. Therefore, these new US measures won’t significantly affect our competitiveness,” said Girma. “Other countries have outperformed us despite our preferential treatment from the US, but Ethiopia is steadily improving.”

The Advisor also spoke about Ethiopia’s efforts to join the World Trade Organization (WTO).

“The global trade system is under strain, but retreating is not the answer. Ethiopia must engage with the system to benefit from it. We were admitted to negotiations in 2003. Although delayed, we are now better prepared than ever and expect to join the WTO within two years,” he said.

Expert Insights: The Reality behind the Rhetoric

A manufacturing consultant, who requested anonymity, argued that Ethiopia’s factories still operate at just 40 percent capacity. With over 30 years of experience in the sector and 10 years as a consultant, he cited electricity, input shortages, financing difficulties, and management challenges as the key constraints.

“While the sector receives a lot of policy-level attention and media coverage, the reality on the ground is different. Rising costs, security problems, inconsistent power supply, and inefficient infrastructure make it hard for manufacturers to remain competitive,” he said.

He stressed the need for consistent access to raw materials, skilled labor, manufacturing sites, and market opportunities.

“These issues remain unresolved, pushing many to either specialize in limited production lines, switch sectors, or revert to importing goods,” the Consultant told The Reporter.

Though the government has introduced tax incentives, manufacturing sites, and financial support, the most pressing problems remain unsolved.

Although the northern war ended in late 2022, armed conflict continues to rage in both of Ethiopia’s two most populous regions, disrupting supply chains and cutting off transport routes. In some areas, factories face power outages lasting up to three days a week. While industrial parks offer better services, most factories are scattered throughout urban areas and do not benefit from these amenities.

“There’s a lot of effort to attract new foreign manufacturers, but existing factories are struggling. We must investigate why these businesses are going out of production. While it’s good to focus on industrial development, many unresolved issues remain,” the Consultant concluded.