The V-Shaped Growth in the Leather Shoe Industry in Ethiopia

Manufacturing industries in sub-Saharan Africa (SSA) have generally been stagnant or shrinking for the last three decades (Bigsten and Soderbom, 2006). As Collier and Gunning (1999) and Fafchamps (2004) and many others argue, industrial development in Africa has been hindered by a myriad of problems ranging from high transportation costs, high transaction costs due to imperfect information, and imperfect contract enforcement to highly risky business and political environments. Moreover, both the provision of public services and the development of grass-roots institutions and social capital are considered to be insufficient in Africa to cope with such problems. Added to these problems is the “China shock,” a massive and sudden increase in the imports of cheap Chinese products that impacts upon stagnant domestic industries in SSA.