While manufacturing has grown in importance for Ethiopia’s economy since the 1990s, the sector has faced difficulties in recent years. Manufacturing’s share of GDP declined from 5.9% in 2019 to 4.4% in 2022 due to macroeconomic pressures, security issues, and external shocks exacerbated by the pandemic. However, with the right policy reforms and investments, manufacturing can play a larger role in Ethiopia’s development.
Currently valued at around 4.4% of GDP, the manufacturing industry has untapped potential for driving economic growth and job creation. Textiles have emerged as a leading sub-sector thanks to Ethiopia’s competitive labor costs. The country exported over $100 million worth of textiles such as garments in 2021. Other promising areas include food processing capitalizing on agricultural raw materials, and leather goods leveraging Ethiopia’s livestock industry.
To realize manufacturing’s potential, challenges around infrastructure, access to financing, and policy instability must be addressed. While industrial parks have attracted some investors, unreliable power and transport links continue hampering operations and competitiveness. The government is working to expand electricity generation but progress is slow. On the policy front, foreign exchange shortages and changing regulations have created uncertainties for businesses.
As a management consulting firm, Ruskin Felix Consulting can play an advisory role to help strengthen Ethiopia’s manufacturing industry. RFC’s expertise in strategic planning, process improvement, and policy analysis can help identify practical reforms. For example, RFC could evaluate opportunities to promote value addition in key agricultural sectors through agro-processing. Advisory services on improving access to financing for small and medium enterprises could also unlock growth. With targeted support, Ethiopia’s manufacturing industry is well-positioned to rebound from recent difficulties and serve as a driver of sustainable economic development.
