DETERMINANTS OF CHEMICAL MANUFACTURING INDUSTRY GROWTH IN ETHIOPIA

Abstract

This research aims to investigate the growth of chemical manufacturing industries by looking its contribution to the manufacturing sector and to the economy and the factors that affect the performance of CMIs. Its contribution studied based on nearly 20 years of time series data based on major macro economic variables such as gross value of production (GVP), employment, government tax revenue and investment. The factors affecting the performance of chemical manufacturing industries studied based on selecting sample factories comprised paint, soap and detergent, plastic candle and pesticide factories. To achieve the objectives of this study, both primary and secondary data employed. Secondary data collected from different governmental institutions concerning gross value of production (GVP), employment, government revenue through tax and investment and primary data likert scale questionnaires were analyzed using statistical analysis such as descriptive and inferential analyses. The information obtained through questionnaire from a sample of 64 operators and managers, and face-to-face interviews were conducted with 16 managers of CMIs. The respondent operators were selected using stratified sampling technique. Besides, the interview questions were analyzed using descriptive narrations. The empirical study identified eight major challenges which seem to affect performance of CMIs: inadequate finance, lack of working places, marketing problems, inadequate infrastructures, poor management practices, and technological, tools and machineries and politico-legal problems including bureaucratic bottlenecks system. The findings further indicate that, there exists significant relationship between independent variables and dependent variable. Moreover, the selected independent variables significantly explain the variations in the dependent variable at 1% level of significance. Based on findings, financial factor is found to be the major problem faced so that government should provide with foreign currency, affordable alternative sources of finance for CMIs. This can be done by promoting export oriented sector and utilizing each hard currency in a proper way.