Field and river

20th International Conference of Ethiopian Studies (ICES20)
Mekelle University, Ethiopia

"Regional and Global Ethiopia - Interconnections and Identities"
1-5 October, 2018

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RAHWA Gebre Tesfahuney, Asst. Professor in Mekelle University and PhD Candidate in Development Studies (Environment and Development) in AAU, Ethiopia

In Ethiopia, Micro, Small and Medium Enterprises (MSMEs) are among the priorities on the government’s agenda. MSMEs are seen as a vehicle to transform Ethiopia from an agri-dependent to a semi-industrial economy, in its quest to become a middle income country. The purpose of this study was to assess the value chain for MSMEs by exploring the integration of existing value chain activities into the value chain system of the selected sector. The study used both primary data based on face-to-face structured questionnaires and secondary data from the literature. The sample size was 80, i.e. respectively 60, 17 and 3 from the Micro, Small and Medium category. The sector chosen was textiles, which is one of the seven different MSME sectors, which was selected because of its contribution to one of the basic necessities of life (clothing) and because it is well known source of income in the region. The companies were selected using stratified random sampling. The data collected were analysed using Spearman’s correlation and OLS Mode. Most of the firms in the sector are micro and small. The existing value chain activities include both primary activities and support activities with their sub-activities. The relations between value chain activities include relations among primary value chain activities themselves and with the support activities. The calculations per unit indicate that all except the input providers make a loss. Thus, the total profit margin is earned when sales volume increases, which benefits the wholesaler. Inbound logistics (a primary value chain activity); firm infrastructure (a support value chain activity); and socioeconomic factors – business capital, employee numbers, annual income, owner’s level of education – significantly contribute to increasing the profit margin in the sector. The sector’s value chain system has components which each have their own subcomponents. It would be wise if MSMEs paid attention to both primary and support value chain activities, as all the activities contribute to the integration of the existing value chain. The firms should focus more on how to increase sales volumes in order to increase profit margins, as the sales price per unit calculation indicates a loss while the total calculation shows a profit.