Ethiopia is experiencing unprecedented economic growth over the past few years with the expectation to further accelerate. Hundreds of thousands of companies in Ethiopia have been creating jobs by developing the potential of many different sectors. It is also Ethiopian businesses that train and use local talent and a growing number of small and medium-sized enterprises (SMEs) in the nation in a sustainable manner by considerably using natural resources, local assets and economic local labor force.
Having this in mind, The Ethiopian Herald conducted a short interview with Mohammed Abdella, an economist graduated from Civil Service University and working for a company as an economic consultant and offering trainings regarding entrepreneurship.
He said, “There is a fundamental change of Ethiopians and/or Africans’ thinking in recent years. The future of economic growth, particularly in sub-Saharan Africa, is closely associated with the private sector. Governments outside and on the continent understand the crucial role of private companies in generating more business and creating thousands of millions of bob opportunities.”
According to Mohammed, the role of entrepreneurship in economic development is substantial. After all, entrepreneurs do not just build businesses and grow their personal wealth; they also impact the economy by creating new jobs and opportunities, driving innovation, and developing new markets, products, and services.
Obviously, entrepreneurship refers to the process of starting and launching a business and includes the willingness and ability to take on that business risk. As a reward for taking on the risk, the entrepreneur gets to enjoy the majority of profits generated from the enterprise, he added.
As far as the significance of entrepreneurship is concerned, it drives the growth and diversification of the economy and contributes to the creation of wealth. Before getting into the specifics of the role of entrepreneurship in economic development, it is quite advisable to briefly encapsulate its significance. “Entrepreneurship drives economic growth and creates new job, encourages innovation by bringing new ideas, products, and services to the market, contributes to social change by developing products or services that reduce people’s dependence on outdated technologies, addresses social and economic problems by creating solutions that meet the needs of society and enables competition which improves business efficiency and lowers prices for consumers,” he elaborates.
It is recurrently heralded that entrepreneurship is a key driver for prosperity and economic growth as it is of paramount importance in increasing the market value of goods and services creates jobs, and balanced economic development diminishes poverty and boosts state revenues.
Yes, said Mohammed, multinational companies are often global leaders only in selected industries; innovative small and medium-sized enterprises are an important success factor in both industrialized and developing economies. SMEs often represent the vast majority of businesses and produce substantial taxable turnover.
“Producing modern technologies such as renewable energies, electrical engineering or precision engineered components, SMEs are main drivers for successful economies. In many countries, innovative small and medium-sized companies engaged in the export economy have a higher growth rate or are even at the heart of the social market economy’s growth model. Here, Ethiopia had better draw important lessons from such a telling stride,” he underscored.
Unambiguously, entrepreneurship is also driven by foreign trade activity. Opening up to trade impacts long-run growth through several channels, in particular, by affecting the return to capital accumulation, and through its effects on the incentive to innovate as well as the institutional frameworks in a globalized world, Mohammed stated.
What matters is the effect of trade on market size, competition and knowledge spillovers. In addition, trade liberalization often goes hand in hand with the adoption of external commitments. Many countries have prospered by establishing competitive export industries, and Gross Domestic Product (GDP) growth helped to generate economic resources needed to improve people’s living conditions such as access to healthcare, education and housing, he added.
“A significant role of entrepreneurship in economic development is that it can greatly enhance the standard of living for individuals and communities by setting up industries and creating wealth and new positions. Entrepreneurship not only provides large-scale employment and ways to generate income, it also has the potential to improve the quality of individual life by developing products and services that are affordable, safe to use, and add value to their lives. It also introduces new products and services that remove the scarcity of essential commodities,” said Mohammed.
As to him, entrepreneurship can be a path to economic independence for both the country and the entrepreneur. It reduces the nation’s dependence on imported goods and services and promotes self-reliance. The manufactured goods and services can also be exported to foreign markets, leading to expansion, self-reliance, currency inflow, and economic independence. Similarly, entrepreneurs get complete control over their financial future. Through their hard work and innovation, they generate income and create wealth, allowing them to achieve economic independence and financial security.
According to Mohammed, entrepreneurs identify market needs and develop solutions through their products and services to begin their business venture. By starting new firms and businesses, entrepreneurs play a key role in shaping the economy and creating a more dynamic and diverse business landscape. They also promote innovation and competition, leading to new and improved products and services that contribute to economic growth and development.
Equally importantly, entrepreneurship is, Mohammed stated, a pivotal driver of job creation. Running the operations of new businesses and meeting the requirements of customers’ results in new work opportunities. Entrepreneurship also drives innovation and competition that encourages other entrepreneurs and investments, creating new jobs in a wide range of industries, from manufacturing and construction to service and technology sectors.
Capital formation is also the process of accumulating resources, such as savings and investments, to fund new business ventures and support economic growth. Entrepreneurship can encourage capital formation by attracting investment. In addition, the creation of new businesses and the growth of existing firms can also contribute to the development of a more diverse and dynamic economy that encourages capital formation and opens the door to a wide range of investment opportunities, he added.
Not only is entrepreneurship significantly useful in providing citizens and the country with the aforesaid benefits but it is also a potential tool to lift people out of poverty by generating employment and stimulating economic activity. It also contributes a lot to the development of local economies and helps improve the overall standard of living, he underscores.
“Entrepreneurship promotes economic growth, provides access to goods and services, and improves the overall standard of living, too. Many entrepreneurs also make a positive impact on their communities and improve their well-being by catering to underserved areas and developing environment-friendly products. Their work can help build stronger, more vibrant communities and promote social and economic development,” he added.
As to Mohammed, the other use of entrepreneurship is it can help identify market opportunities and allocate resources in the most effective way possible. Entrepreneurs also play a key role in developing innovative products and services that meet the needs of customers while optimizing the use of available resources.
In sum, the dynamic growth of world trade over the past decades was only made possible by a rapid expansion in trade finance. Hence, the government of Ethiopia needs to give due emphasis to entrepreneurship and entrepreneurs as this move helps the nation achieve a range of targets in relation to economic, social, business, trade and even other related aspects. Besides, as entrepreneurship is the process of creating, launching, and running new businesses that offer innovative products or services to the market, the sub-sector has to be well focused on. Entrepreneurship is vital for economic growth, job creation, innovation, and social change. However, entrepreneurship also faces many challenges and barriers, such as access to finance, skills, markets, regulations, and infrastructure. Therefore, the federal government, state administrators, policymakers, educators, and other stakeholders are expected to support and encourage entrepreneurship across the nation via devising all possible lucrative strategies for promoting entrepreneurship in Ethiopia.
BY MENGESHA AMARE
THE ETHIOPIAN HERALD THURSDAY 26 DECEMBER 2024
