Performance Measurement of Manufacturing industries in Ethiopia- An Analytical Study

Abstract

Manufacturing sector is the heart and soul of many developed and developing country’s economy. However, the growth and contribution of the sector to the Ethiopian Economy is at its infant stage. In this study, using time series data base of the central statistics Agency (CSA), the trend in the performance of the manufacturing sector is investigated taking labor productivity as a dependent performance indicator variable. The study covers 15 manufacturing industrial groups as categorized by the CSA. Based on performance reports and related literature reviews, factors that can affect the performance were identified and their influence was analyzed using fixed effects regression model. The result of the analysis indicated that there is overall improvement in the value added growth performance of machinery and equipment, food and beverages, footwear, luggage and handbags manufacturing categories. However, despite the textile and leather industries of Ethiopia have resource based competitive advantage, their performance growth rate is not promising. The human capital, capital intensity, and the firm size (economies of scale) were found as major determinants of the performance of the sector. The average labor productivity of the sector showed incremental growth because of improvements in the educational and skill level of labor forces which has resulted from the intensive government efforts in addressing technical and vocational educations to all citizens. In Ethiopia, there is huge demand for products of manufacturing sectors, hence industries which are producing at large scale using their maximum capacities have shown improvement in their labor productivity.

Keywords: value added, labor productivity, performance, manufacturing