BY GETACHEW MINAS
Productive entrepreneurs can invigorate the economy by creating jobs and new technologies that increase productivity. According to A. S. Kritikos, entrepreneurs are a “rare” species.
They are vital to the competitiveness of an economy. The gains of entrepreneurship are only realized, however, if the business environment is “receptive” to innovation.
Increased competition from new entrepreneurs challenges “existing” firms to become more competitive. Entrepreneurs provide new job opportunities in the short and long term.
Their activity raises the productivity of firms and economies. They also accelerate structural change by replacing established, sclerotic and sick firms. However, only a few people have the drive to become entrepreneurs.
It is to be noted that entrepreneurship cannot flourish in an “over-regulated” economy. In Ethiopia, for example, small producers work in dilapidated shacks, hidden from the public to avoid regulatory agencies. These producers
either sell or supply their products to vendors on the streets. Their source of investment is a weekly Equib, a kind of traditional financial institution, which collects funds from its members. They rarely go to the bank for borrowing.
These entrepreneurs could develop into big investors provided they are fully supported by the government. Here, it is important to note that benefits of economic development will be greater in economies where entrepreneurs operate flexibly. They can develop their ideas, and reap rewards if they operate freely.
In the absence of a favorable environment, Ethiopian entrepreneurs may turn from productive activities to non-wealth-creating activities. They may engage in illicit business activities, avoiding detection.
To attract productive entrepreneurs, the government need to “cut” red tape, streamline regulations, and prepare for the negative effects of layoffs in existing firms that fail because of the new competition.
Obviously, the Ethiopian government encourages entrepreneurs engaged in various sectors of the economy. Entrepreneurial activities, once viewed as a threat to the established system, are crucial for maintaining economic competitiveness and for achieving long-term success in the country.
Innovations often lead to economic growth and cooperation. Ethiopian entrepreneurs who bring innovations to the production process offer a key value-generating contribution to economic progress. They also cooperate with the government in making contribution toward its innovative developmental activities.
Consumers should have the benefit from the resulting lower prices and greater product variety. However, due to weak competition in Ethiopia, consumers could not enjoy reduction in prices. The high prices charged by businessmen accrue in huge profit for them.
In the past, the intervention of government in the market to control price hikes had resulted in the shortage of consumer goods. Businessmen do not want any reduction in the prices they charge as it affects their ambition to achieve success in the short-run. In this regard, Entrepreneurs increase competition by establishing new businesses.
Overregulation of business prevents entrepreneurship from flourishing because it increases the costs of starting and running a firm. It decreases flexibility and the ability to react quickly to opportunities as they arise, thus reducing experimentation.
Similarly,frequently changing, complex, unclear, or opaque regulations and corruption make it difficult to understand the legal environment for entrepreneurial activity.
The government of Ethiopia, under the leadership of PM Abiy Ahmed has a clear stand on eliminating corruption. It is advisable to create a permanent anti-corruption task force that comprises “mainly” entrepreneurs and competent technocrats who are determined to eradicate poverty from Ethiopia. This encourages entrepreneurship and employment generation in the country.
The Ethiopian herald December 19/2020
