SUPPORT TO MSMES (INFORMAL SECTOR)

Most of the MSMEs in the footwear sector are organized under a cluster cooperative named as ‘Ethio-International Footwear Cluster Cooperative Society (EIFCCOS) 13. EIFCCOS has about 1000 members who are producers, traders, retailers and other related commercial merchandisers. The aim of the cluster company is to overcome the problem of the MSMEs and direct their efforts towards a meaningful development and participation in domestic and export market.

EIFCCOS was established and based in ‘Merkato’ area of Addis Ababa where almost all MSMEs in the footwear sector are found. In order to overcome the serious problem of production site faced by MSMEs, the City Administration built G+4 working and selling premises for the MSMEs. About 160 operators who are members of EIFCCOS have now moved to the premise though some are still left in their original location. UNIDO in the past has assisted MSMEs who are mostly cluster members. Its assistance to the MSMEs is part of the broader Integrated Program for Ethiopia (IPE)14. Between 2005 and 2009, UNIDO implemented a project on “Unleashing the Potential of MSMEs in Ethiopia’ in which four clusters namely the ‘Merkato’ Footwear Cluster, the Gullele Handloom Cluster, the Addis Abeba Ready-made Garment Cluster and the Mekelle Metal and Wood Works Cluster were selected out of the 14 clusters initially mapped15 on the basis of the clusters’ potential for pro-poor growth, intervention feasibility and diffusion prospect (UNIDO, 2010). UNIDO believes that clustering is the right approach to industrial and MSME promotion in Ethiopia (Pietrobelli et al (2009). Some of the achievements of the cluster approach in the footwear sector include:

• Establishing two networks (TESFA and REDET) to engage in joint activities like joint purchase of raw material;

• Customized training for 75 enterprise owners and workers through LLPTI in three areas of shoe making namely a)design and pattern making, b) cutting – preparation-stitching c)Lasting-making-finishing-packing ;

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It should be noted that there are some MSME operators who are not members of EIFCCOS 14

The initial involvement of UNIDO in MSMEs is in 2001 with a project ‘Promotion and Development of MSMEs in Ethiopia” which run for three years

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The 14 clusters identified were Mekelle metal and wood works cluster, Adigrat metal and wood works cluster, Wokru Bee keeping cluster, Mekelle handloom weaving cluster, Bahir Dar metal & wood works cluster, Bahir Dar garments cluster, Awassa metal & wood works cluster, Awassa garment cluster, Nazareth edible oil processing cluster, Nazareth flourmills cluster, Nazareth construction materials cluster, Addis Ababa (Merkato) leather footwear cluster, Addis Ababa readymade garments cluster, Addis Ababa (Guleli) handloom weaving cluster.

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• Sensitizing small entrepreneurs to the use of better technology in shoe production and linking some operators with machine importers who import small new and second hand machines. This has resulted in small producers changing from their old machineries to semi-mechanized machineries;

• Participating in international trade fairs and bazaars with the purpose of creating market linkage and promotion. About 50 enterprises of the clusters participated in the event by passing wholesalers who were the usual customers for producers;

• Sensitizing cluster members about the workings of Micro Finance Institutions (MFIs) and assisting MFIs to customize their products to the needs of the MSMEs; and

• Strengthening inter-firm collaboration

Though the above are indications of some positive results, the MSMEs in the cluster still need support in different areas of technical and skill upgrading, finance, marketing etc. Cluster development is a long process and needs to be continued.

In light of the above, the present project document specifies the MSMEs as one component. The aim, according to the document, is to contrast competing cheap foreign products sold on the local market; pilot local new production to international market; and work on sub-contract arrangement to export-oriented mechanized firms. The Project thus envisaged developing technical and managerial skills within the informal sector; providing design training, facilitating the creation of Italian style industrial cluster; and encouraging the informal sector companies to update their production and establishing mutual guarantee fund.

The MSME component, however, was kept on hold at large except UNIDO’s assistance extended to MSMEs to participate in the third All African Leather Fair (AALF) held in January 2010. Some intervention work particularly marketing activities in the form of the definition of a brand strategy and product development began only at the time of evaluation. The evaluation mission observed the marketing expert holding a meeting with the EIFCCOS executives to select logos for different products lines, in accordance to the new marketing strategy oriented towards a branding. The mission has also observed an expert fielded at EIFCCOS providing training for some workshop owners on different designs of men’s, ladies and children shoes. The evaluation mission also learned that EIFCCOS approached LIDI only recently to express its demands. According to the Head of the EIFCCOS, the organization was not ready to seek assistance and it is only three months ago (i.e. 7 December 2011) that a letter was written to UNIDO specifying their needs of assistance in marketing, business plan preparation and ERP implementation as well as product development. The letter received a positive feedback from the Project Manager on the 12 December 2011.

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Most recently, EIFCCOS, has hired through the Ethiopian Competitive Fund nine Italian footwear experts to design the production setup for the targeted 3 million pairs per year. On this occasion, EIFCCOS reconfirmed the brand strategy and the brands developed in cooperation with the UNIDO marketing expert.

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