Africa 89 (1) 2019: 79–99 doi:10.

1017/S0001972018000712

‘The peri-urban space at work’: micro and small

enterprises, collective participation, and the
developmental state in Ethiopia
Davide Chinigò

Introduction
This article explores the politics of job creation in the context of contemporary
state–society relations in Kolfe Keraniyo, a peri-urban sub-city of Addis Ababa,
Ethiopia. Following a period of transition that started with the war with Eritrea
(1998–2000) and concluded with the contested 2005 national elections (Aalen
and Tronvoll 2009; Lefort 2007), the Ethiopian People’s Revolutionary
Democratic Front (EPRDF) embarked on a strategy of rapid economic trans-
formation driven by what has been defined as a ‘developmental state’ (Zenawi
2012), of which the promotion of micro and small enterprises (MSEs) is a prom-
inent aspect. In rapidly expanding urban centres – most notably the capital city
Addis Ababa – addressing unemployment was meant to achieve a number of pol-
itical, economic and social objectives, including fast economic growth and poverty
reduction. The promotion of MSEs reflects central aspects of the negotiation and
institutionalization of public authority – the making and unmaking of the devel-
opmental state – occurring at the interface between the public and the private, the
formal and the informal, and the legal and the illegal (Hagmann and Péclard
2010; Lund 2006).
The purpose of this article is to locate current policies supporting MSEs and
microfinance in peri-urban Ethiopia within the broader domain of state–society
relationships. Echoing Mitchell (1991: 78), rather than focusing on the boundary
between a conceptual realm (the state) and an empirical realm (the society), this
article looks at the detailed political processes in which state–society relationships
are embedded and through which they are constantly reproduced. Following the
framework elaborated by Hagmann and Péclard (2010) state–society relations
have to be located in the dynamic and never conclusive processes negotiating
state authority that are operated by a variety of social actors in competition for
the institutionalization of political power. The politics of job creation is ultimately
intended to reflect the manifestation of multiple and overlapping processes of
constitution and dissolution of public authority (Lund 2006), with state power
regarded as the structural effect – rather than as the actual structure – of
Ethiopian society (Mitchell 1991).
Recent debates about the state in Ethiopia have focused on the extent to which
the model of the ‘developmental state’ – and the doctrine of ‘developmental cap-
italism’ underpinning it – has more prospects in sustaining long-term develop-
ment than the mainstream model supported by Western donors and based on

Davide Chinigò is a research fellow in the Department of Sociology and Social Anthropology,
Stellenbosch University. Email: dchinigo@sun.ac.za

© International African Institute 2019

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 80 Davide Chinigò

the neoliberal concept of a minimal state (Zenawi 2012; De Waal 2013; Lefort
2013; Di Nunzio 2015).
The debate about the ‘developmental state’ in Africa has been quite well articu-
lated. As the model is derived from experiences of socio-economic transformation
in Asia (Hayashi 2010), its applicability to African cases is disputed (Kanyenze
et al. 2016; Mkandawire 2001; Leftwich 2000).1 A key concern is the extent to
which, rather than describing contemporary patterns of political and socio-
economic transformation in Africa, the ‘developmental state’ simply reflects a
wide set of aspirations – often framed through ambitious political agendas – to
find alternatives to neoliberalism (Radice 2008). Studies have engaged with this
question in the cases of South Africa and Ghana (Ayee 2013), Botswana
(Hillbom 2011), Botswana and Zimbabwe (Maundeni 2001), Botswana and
Uganda (Mbabazi and Taylor 2005), Mauritius (Meisenhelder 1997) and
Rwanda (Booth and Golooba-Mutebi 2012).
The peculiarity of Ethiopia compared with other cases in Africa lies in an eco-
nomic model of strong state interventionism in the context of the country’s post-
socialist transition, based on the expansion of public investments in strategic
sectors such as infrastructure, and the selective liberalization of the economy to
national and international private companies. While observers point to the
tension between rapid economic development and a poor human rights record,
in line with Emmenegger (2016) and Di Nunzio (2014a; 2014b), this article
aims to unpack how the developmental state is simultaneously produced and chal-
lenged in the local political arena through the lens of the job creation policy in
peri-urban Addis Ababa.
The main argument of the article is that the promotion of MSEs is a central
aspect of the territorialization of state power in the peri-urban context, a
dynamic that is actively negotiated, challenged and refashioned.2 The analysis
shows that individuals join government-sponsored MSEs not necessarily
because they make economic sense, but because they allow them to ‘keep good
relations with the government’ and facilitate access to (individual) credit and
loans. One paradox of the current policy emphasis on entrepreneurship is that
support is often provided to unsuccessful formal MSEs, which in turn are used
to divert resources to informal businesses outside state-mandated sectors.
By drawing on evidence from Kolfe Keraniyo sub-city, in the first part of the
article I show that MSEs reflect three defining features of the construction of
the developmental state in peri-urban Ethiopia: a policy of regularization and
legalization; the notion of ‘group first’, or collective rather than individual partici-
pation in development activities (Vaughan and Tronvoll 2003; Bach 2011); and the
emphasis on ‘saving first’ to engender micro-dynamics of capital accumulation.
The second part of the article presents evidence of how the normative framework
provided by the developmental state is negotiated, challenged and refashioned by

1
Critical studies also question the applicability of a ‘static’ notion of the developmental state to
contemporary experiences in Asia (see, for instance, Liow 2011; Kim 1999).
2
Territorialization refers to the never conclusive dynamics of negotiating public authority by
acts of claiming, delimiting and asserting control over a geographic area and the relationships gov-
erning it (Sack 1986: 19). As noted by Lund: ‘Territorialization and the spatial ordering of people
combine different political and legal techniques of classification, registration and mapping’ which
together reflect the negotiation of public authority (Lund 2016: 1205).

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 Small enterprises and the state in Ethiopia 81

people involved in the constitution of MSEs. The underlining argument is that the
developmental state is negotiated by means of a clear-cut spatial and temporal
definition of who is entitled to benefit from the economic, social and political
peri-urban space and how. Depending on whether they are registered in the
kebele (sub-district) employment lists or not, are involved in party or other polit-
ical activities, or commit to saving and credit through government microfinance
institutions (MFIs), those living in peri-urban areas are allowed to claim social,
economic and political space in very different ways.
Economic activities are legal and tolerated if they are performed in specific
spaces and at specific times, the very same activity becoming illegal but tolerated
or illegal and not tolerated elsewhere. People constantly challenge these boundar-
ies, and hence they actively redefine the parameters of public authority, by seeking
validation for their claims in multiple ways, or simply by ignoring these rules and
seeking creative ways to maximize their objectives. These dynamics are the empir-
ical object of the article and, I argue, are expressed in the fragmentation of both
space and time in the peri-urban milieu.
The article concludes that while these dynamics do not constitute a coherent
process of structural refashioning, they nonetheless contribute to the destabiliza-
tion of the peri-urban space. A main tension of the developmental state project is
between a totalizing idea of participation formulated as the joint effort of the
country’s entire population – and epitomized in an understanding of democracy
based on the party’s 100 per cent electoral score – and the extent to which practices
to promote inclusion create contingent dynamics of social, political and economic
exclusion. The Ethiopian ‘developmental state’ model is neither inclusive nor par-
ticularly distinct in its effects from neoliberal development strategies. From an
analytical perspective, the article supports the conclusion of an expanding body
of literature showing that the dynamics of the constitution of state authority via
territorialization are never conclusive, since they are constantly both constructed
and reproduced, undermined and dissolved (Lund 2006; Hagmann and Péclard
2010; Lund and Boone 2013; Korf et al. 2015; Emmenegger 2016).
The article draws on fieldwork visits conducted in November 2014, April 2015
and February 2016, including forty-eight semi-structured in-depth interviews and
three focus groups in Kolfe Keraniyo sub-city, on the western edge of Addis
Ababa, and builds on several years of research experience in Ethiopia.3

The policy of job creation in Kolfe Keraniyo

In much of the global South, recent years have witnessed a renewed interest in
entrepreneurship and microfinance to support the formalization and legalization
of the economy, and hence to combat poverty and sustain growth and develop-
ment (Amoros 2009; UN 2013; World Bank 2013). While the impacts of these
initiatives cannot be generalized, critical studies have highlighted that marginality
and destitution should be regarded beyond the framework of economic

3
This article draws primarily on a pilot research project conducted on behalf of Nexus Emilia
Romagna, Confederazione Generale Italiana del Lavoro (CGIL), Italy. Interviews in Kolfe
Keraniyo were conducted in wereda 8, 11 and 14.

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 82 Davide Chinigò

empowerment, as they are entrenched in broader power relations reproducing

dynamics of social, economic and political exclusion and inclusion (Roy 2010;
Bateman 2012). Other studies have noted that the ideas underpinning the
support given to microfinance and small businesses should rather be regarded
as part of wider processes restructuring global capitalism that reflect new strat-
egies of market liberalization (Benerjee and Duflo 2011; Weber 2006).
Recent studies conducted in Ethiopia found that MSEs that were designed to
extend the ruling party’s structures of political mobilization in the urban society
(Di Nunzio 2015) have played an important yet contradictory role in shaping
the future for unemployed youth (Mains 2012), that their success has largely
depended on the closeness of beneficiaries to local administrative structures
(Hundera 2014), and that they have had a limited socio-economic impact on
the majority of beneficiaries (Gebre-Egziabher and Aynew 2010), especially
when businesses were operated by women (Bekele and Worku 2013).
In rapidly transforming Ethiopian peri-urban settings, the promotion of entre-
preneurship initiatives underpin important dynamics of negotiating public author-
ity. Driven by expanding services and the agricultural sector, Ethiopia experienced
a yearly average growth of 10.8 per cent between 2003–04 and 2012–13, compared
with a regional average of 5.3 per cent (World Bank 2015). In the context of the
country’s rapid growth, in recent years peri-urban Addis Ababa has experienced
profound socio-economic transformation mainly driven by large infrastructural
projects, including low-income housing known as condominium, as well as the
rapid expansion of the manufacturing industry.
Kolfe Keraniyo is located on the western edge of Addis Ababa, covering a large
tract of the border with Oromia Regional State. From an administrative perspec-
tive, in 2003 Addis Ababa was restructured into ten sub-cities (Kifle Ketema), with
Kolfe Keraniyo currently being the most densely populated.4 Since at least the
1970s, the area has served as an important business hub, attracting a significant
number of people from different parts of the country, especially from southern
Ethiopia. This reflects the sub-city’s current heterogeneous ethnic and religious
composition.5
Immigration accelerated from the mid-2000s, mirroring broader dynamics of
economic restructuring as well as generating growth in informal business activ-
ities.6 Kolfe Keraniyo is currently characterized by migration to and from both
the inner city and rural areas.7 The former is mainly driven by the rising cost of
living in more central areas, as well as government policies of relocating low-
income people from the inner city (see also Yntiso 2008). The latter is marked
by an increasing trend of rural out-migration of people in search of job opportun-
ities and more reliable public services in the expanding areas of the city (Tadele
2009). This migratory pattern is not always permanent – people often commute
from neighbouring ‘rural’ localities, or take on seasonal and temporary jobs – and

4
According to the Central Statistical Agency (2013), Kolfe Keraniyo had an estimated popula-
tion of 524,729 inhabitants.
5
The four major ethnic groups are Amhara, Gurage, Gamo and Oromo. Religious groups
include Ethiopian Orthodox Christians, Muslims, Protestants and Catholics.
6
Interview with the manager of wereda 8, Kolfe Keraniyo, 11 November 2014.
7
For a broader and more comprehensive discussion of recent migratory patterns in Ethiopia, see
the edited volume from Pankhurst and Piguet (2009).

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 Small enterprises and the state in Ethiopia 83

it does not necessarily involve the relocation of the entire household: often only
one member moves in search of employment. A rapidly increasing informal
economy in the sub-city formed the specific backdrop to the policy of promoting
MSEs against a broader context in which the formalization of informal businesses
became a central priority of the political elite’s developmental agenda.
Physical, social and economic boundaries in Kolfe Keraniyo are by definition
‘unstable’, as they are constantly redefined by increasing rural–urban interactions.
Arguably, in these fluid contexts public authority is constantly redefined along the
lines of access to resources and the construction of multiple identities, as well as
being shaped by policies and development interventions targeting specific indivi-
duals or groups. The political processes underpinning the promotion of MSEs in
Kolfe Keraniyo constitute a privileged entry point – or, to use Hagmann and
Péclard’s (2010) term, ‘negotiation arena’ – where some of the defining features
of the developmental state project are more pronounced, as well as reflecting its
inherent tensions and contradictions.

MSEs and the construction of the developmental state in Kolfe Keraniyo

The emergence of MSEs as an important policy tool to combat unemployment
has to be contextualized within the country’s post-socialist transition since the
1990s, and more specifically in the reformulation of the long-term development
strategy after the mid-2000s (Aalen and Tronvoll 2009; Lefort 2012; Di Nunzio
2014b; Bach 2011). After the war with Eritrea (1998–2000), the purge of the so-
called ‘left wing’ of the inner circle of the EPRDF after 2001, and the outcomes
of the controversial 2005 general elections (Lefort 2007), the long-term strategy
for economic development was reformulated towards what the political elite
termed ‘developmental capitalism’ (Lefort 2012; De Waal 2013; Clapham 2006).
The former leader Meles Zenawi felt that promoting a strategy of rapid eco-
nomic growth through strong state interventionism was the only way for
Ethiopia to achieve broad-based socio-economic development and at the same
time to keep the plurality of ‘people, nations, and nationalities’ together in the
Ethiopian state (Turton 2006: 1). This strategy was conceptually juxtaposed
with experiences of neoliberal market liberalization that were considered to
have performed poorly from an economic and social perspective in much of
Africa and the developing world (De Waal 2013). Among the most tangible trans-
formations, the political reform entailed the expansion of local bureaucratic
structures, as well as a massive campaign of recruitment of EPRDF party
members, which, as noted by Di Nunzio, went from ‘760,000 in 2005 to more
than 4 million in 2008’ (2014b: 420).
In this context of profound transformation, the developmental state had both a
material and an ideological value. From a material perspective, it embodied the
political elite’s attempt to promote a strategy of fast economic growth by means
of the collective mobilization of the plurality of people of Ethiopia. As its ideo-
logue, Meles Zenawi admitted: ‘I am convinced that we will cease to exist as a
nation unless we grow fast and share our growth.’8 The ideological dimension

8
Quoted in De Waal (2013).

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 84 Davide Chinigò

of the developmental state reflected the performativity of the political project

behind it – ‘changing the mind of the people’ – which advocated for the creation
of positive experiences of lasting change. The ideological and material logics of the
developmental state underpinned three important aspects of the promotion of
MSEs in Kolfe Keraniyo.
A first element was a policy of regularization aimed at formalizing existing eco-
nomic activities, creating new job opportunities, and enforcing the local structures
of social and political control (see also Di Nunzio 2014a). The job creation strat-
egy was based on a regularization policy aimed at combating behaviours labelled
‘social evils’, for instance ‘prostitution, illegal street vending, smuggling, and
illegal tree cutting’.9 As argued by one local official, the policy of regularization
was motivated by the current trend of rapid in- and out-migration in the sub-
city and entailed the promotion of MSEs to formalize and regularize a growing
peri-urban population and to complement other government programmes, such
as the resettlement and housing policies.10 The policy can be regarded as both a
strategy for economic development aiming to ‘turn unemployed people into busi-
nessmen’11 and a tool for the social and political control of a rapidly increasing
urban population. An important aspect of the MSE policy in Kolfe Keraniyo
was to provide for the registration of the unemployed in the kebele employment
lists, and hence ‘to keep track of who is moving into the sub-city’.12
A second element was the policy emphasis on ‘group first’. In Kolfe Keraniyo,
paying back a loan in a newly government-sponsored MSE was primarily the
responsibility of the group, which provided a guarantee against individual
members by establishing a kind of moral and political – rather than strictly
legal or financial – sense of accountability.13 The centrality of the group to
drive socio-economic transformation reflected an emphasis on the population’s
collective, rather than individual, participation in the development process. This
emphasis was regarded as a feature of developmental capitalism that distinguished
it from neoliberal strategies.14 The notion of collective participation must be con-
textualized within the historical trajectory of the political elite, who originated
from two distinct revolutionary moments in the 1970s and the 1990s; this trajec-
tory informed an approach to the national question based on the self-determin-
ation of the plurality of groups and people of Ethiopia (Vaughan and Tronvoll
2003: 15; Markakis 2011). MSEs embodied the notion of collective participation
to the extent that the business model underpinning this government strategy was
organized around the work of small groups rather than individuals. This aimed to
pull together the joint efforts of poor people for common business projects and, at
the same time, to facilitate access to financial services, primarily credit, by means
of group collateral (Gebre-Egziabher and Aynew 2010).

9
Interview conducted at the Women and Youth Affairs Office, Kolfe Keraniyo, 11 November
2014.
10
Ibid.
11
Interview conducted at the MSE promotion office, Kolfe Keraniyo, 18 November 2014.
12
Ibid.
13
Focus group discussion conducted in Kolfe Keraniyo, 13 November 2014.
14
Interview conducted at the Labour and Social Affairs Office, Kolfe Keraniyo, 17 February
2016.

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 Small enterprises and the state in Ethiopia 85

A third dimension related to the project for the socio-economic transformation

of individuals’ attitudes towards saving. ‘Saving first’ – which is about instilling an
attitude to saving through training and other activities – was a central element in
the promotion and consolidation of MSEs in Kolfe Keraniyo. As explained by
local officials, the socio-economic transformation of the sub-city is impossible
without ‘a structural change in the way people think about saving and approach
business’.15 A similar concept informing the promotion of MSEs was the notion of
kaisen. Kaisen, derived from Japanese, means quality production in the most
efficient way and at the lowest cost possible.16 In Kolfe Keraniyo, the idea of
kaisen was taught during vocational training before the formation of MSEs,
and particularly at the stage when business plans were being formulated.
The promotion of MSEs in Kolfe Keraniyo reflected key mechanisms in the
construction of the developmental state at the local level. Individual and societal
transformation cannot be separated conceptually from rapid economic growth
and broad-based development (Zenawi 2012). This project underpinned a political
plan for transformation that emanated from a policy of regularization based on
collective participation in the country’s socio-economic development, and, at
the same time, on a change in attitude towards saving, business and development
more broadly among individuals.

Combatting unemployment through small businesses

At the time when my fieldwork was conducted, MSEs were an important pillar of
the Ethiopian government’s poverty reduction strategy, and they complemented
other initiatives, including the Productive Safety Net Programme, the Food
Security Programme, the Household Asset Building Programme and the
Voluntary Resettlement Programme. MSEs also embodied the political priority
of formalization and regularization of both urban and rural economic sectors,
with an emphasis on business development to lay the foundation for medium
and large export-oriented enterprises in the long run.
MSEs were first regulated with the publication of the 1997 National Micro and
Small Enterprises Strategy and the establishment of the Federal Micro and Small
Enterprises Development Agency. However, it was only after the political shift of the
mid-2000s discussed above that a strategy of employment creation that drew heavily
on the promotion of MSEs was put into practice. Informants noted that, in Kolfe
Keraniyo, the aftermath of the 2005 elections was a period of profound transform-
ation in which the presence of party/government structures intensified significantly.
Job creation through MSEs and the political mobilization of the peri-urban popula-
tion – particularly unemployed youth – became overarching government priorities to
prevent and mitigate growing political instability and social unrest. This reflected the
fact that unemployed youth – along with women – were cast as the main priority
group to be targeted by government-sponsored MSEs from the very beginning.
In Kolfe Keraniyo, MSEs were organized by the sub-city MSE office, as well as
by local promotion offices at wereda (district) and kebele levels. Local promotion

15
Interview conducted at the Labour and Social Relations Office, Kolfe Keraniyo, 19 November
2014.
16
Interview conducted at the MSE Promotion Office, Kolfe Keraniyo, 22 April 2015.

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 86 Davide Chinigò

offices functioned as employment agencies, and, coordinating with other offices,

they compiled employment lists and recommended priority areas where potential
new businesses were needed. Another important responsibility of these offices was
to provide technical and vocational training on a wide range of topics. While tech-
nical training sessions essentially comprised workshops teaching specific technical
skills, vocational training reflected the transformational dimension of the political
project behind MSEs. Vocational training was primarily aimed at promoting
changes in individual attitudes towards saving (‘saving first’), as well as inculcating
the primacy of group work over individual work (‘group first’). At the time when
my fieldwork was conducted, a wide range of local institutions were constantly
busy organizing vocational training sessions every few days. One vocational
session I attended went on for several hours, with the convener repeatedly espous-
ing the benefits of working in groups rather than individually – the ‘only way pos-
sible to make it successfully is through mutual help and by pulling together
resources’ – as well as the ethical importance of saving money as ‘the only way
possible to build a future without poverty’.17
Depending on the number of members, MSEs were categorized as individual, as
shared companies, or as small enterprises or cooperatives (more than ten
members). Although in practice it was quite difficult to distinguish between co-
operatives and small enterprises, a main difference in Kolfe Keraniyo was the
requirement that enterprise members had to provide 20 per cent of the initial
capital themselves in order to be eligible for an 80 per cent loan from an MFI.
Another difference was the interest rate applied to the loan, which was sometimes
lower for cooperatives.
Equally important is the concept of ‘graduation’. Promotion offices monitored
existing businesses, and, depending on the enterprise’s capital, ‘graduated’ suc-
cessful enterprises. A business should achieve graduation within five years of its
inception, meaning that it was then expected to be able to handle licensed activ-
ities autonomously. Enterprises are divided into four categories depending on
their capital: micro or start-ups (up to 50,000 ETB); small (50,000–200,000
ETB); medium (200,000–500,000 ETB); and industrial (above 500,000 ETB).
MSEs operate in priority sectors dictated by the Kolfe Keraniyo sub-city promo-
tion office; these include manufacturing, construction, trade, services and urban
agriculture.

Beneficiaries, leaders and groups

As explained by a local official, vocational training was also the main tool through
which promotion offices registered unemployed people and targeted new benefi-
ciaries.18 Registration was carried out through a ‘door-to-door’ model and imple-
mented by both the MSE office and other kebele offices.19 The ‘door-to-door’
model highlighted the extent to which the vocational project of the developmental
state was meant to have universal reach and target the entire peri-urban

17
Excerpts from a vocational training discussion in Kolfe Keraniyo, 23 April 2015.
18
Interview conducted at the MSE Promotion Office, Kolfe Keraniyo, 22 April 2015.
19
Interview conducted at the MSE Promotion Office, Kolfe Keraniyo, 12 November 2014.

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 Small enterprises and the state in Ethiopia 87

population, and the way in which it constituted a main arena within which state–
society relations were negotiated.
Awareness creation was based on what local officials in Kolfe Keraniyo referred
to as the three ‘development alarms’:20 that is, how different institutional levels
engaged the unemployed and involved them in development activities. The
‘people’s community wing’ referred to MSE beneficiaries who performed advo-
cacy activities to raise awareness about the benefits of establishing an MSE.
The ‘government wing’ included all the offices providing training and advice on
how to establish an MSE, including MFIs, technical and vocational schools,
and promotion offices. The ‘political party wing’ covered members of the local
EPRDF branch who recommended people who could establish an MSE, as well
as sectors and specific activities. In practice, the boundaries between the three
wings were much more blurred. As expressed by one local businessman: ‘The
very same people come on behalf of the EPRDF, of the MSE office, or as your
neighbour … depending on what they have to ask you.’21
As noted by one informant, the ‘door-to-door’ model, which entailed the
deployment of all three wings to advocate for the establishment of MSEs,
reflected both continuities and discontinuities with previous job creation strat-
egies. ‘What has not changed is the pressure of the government to control and
promote business … The difference is that now the poor are expected to
become businessmen in a short time.’22 The three wings acted on several institu-
tional levels, starting below the wereda. The organization of these sub-units varied
significantly from context to context, and no official document provided compre-
hensive information about how they interacted with the formal administrative and
party structures. Starting from the lowest level, in Kolfe Keraniyo these included
the block (no more than fifty people), the mender (composed of two or three
blocks), and the katana or sub-wereda. A central characteristic of the Ethiopian
model is that the local institutional structure was conceived to include and mobil-
ize the entire population, although it was not without its contradictions, and thus
to extend the reach of the central state/party structure (Di Nunzio 2015; Chinigò
2015).
Other institutional constellations mediating access to MSEs included the micro-
institutional structures of the ‘one to five’ networks (and le hammest) and devel-
opment groups (ye limat budin). These networks were the basis on which groups
were formed for various purposes and had both political and technical value
(Lefort 2012). The ‘one to five’ was a group of six people where one was the
leader or model and was responsible for passing relevant information from gov-
ernment offices to the other five, coordinating development activities, and collect-
ing taxes. The development groups comprised twenty-five to thirty people and
kept a record of individuals seeking new jobs, drew up unemployment lists, and
identified potential jobs or professions where there was a shortage in a specific
area. Development groups also performed other activities relating to neighbour-
hood security, political advocacy for the ruling party and public works. Both of
these networks had the aim of ‘bringing and sustaining change through good

20
Ibid.
21
Interview with a businessman in Kolfe Keraniyo, 21 April 2015.
22
Interview with a businessman in Kolfe Keraniyo, 23 April 2015.

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 88 Davide Chinigò

governance activities’23 and explained ‘why today Addis is peaceful’.24 More

broadly, these state-controlled networks played an essential role in terms of
surveillance of the peri-urban population. While this reflected an effective ‘out-
sourcing’ of state control to party members and affiliated individuals, they also
played a key role in mediating access to MSEs and service delivery.
In Kolfe Keraniyo, new MSEs were sometimes formed in conjunction with ‘one
to five’ networks. In four cases analysed in wereda 8 and 14, recently graduated
students were first asked to form ‘one to five’ networks, and only then to
submit their application to start an MSE to the promotion office. When an
MSE had fewer than five members, the ‘one to five’ network was formed in con-
junction with a neighbouring business. When an MSE had more than six
members, more networks were formed as a consequence. In some cases, ‘one to
five’ networks formed for MSE purposes did not necessarily require members to
be neighbours. More broadly, these networks operated performance checks on
individual businesses and were meant to be a forum for discussion on saving
and entrepreneurship.
The ‘one to five’ networks and the development groups also performed the very
important role of keeping track of jobless people in each neighbourhood and
recommending new potential beneficiaries to the MSE Promotion Office. As
noted by an informant, ‘Members of the “one to five” networks and development
groups are your witnesses and can recommend you to the promotion office to get
loans and establish MSEs.’25 According to another informant, the role of these
networks was to provide an opportunity for people to support each other, includ-
ing with regard to finances, sharing knowledge and experience about their busi-
nesses, instilling the habit of living together, sharing work responsibilities,
providing security in the neighbourhood and maximizing business profits.26
Central to all these institutional configurations was the role of leaders. Each
network had one leader who bore the moral, practical and political responsibility
for the group members on behalf of higher institutional levels. The leaders of
blocks and menders were individuals with a good reputation in the community
and were elected through internal mechanisms. At the katana level, leaders had
a much more prominent political orientation and were involved in the party organ-
ization. Group leaders within the ‘one to five’ networks and development groups
were usually party members and were socially, economically and politically
responsible for the other members. In the case of MSEs, the key duty of leaders
was to collect money to pay back loans. Leaders were meant to facilitate and
coordinate knowledge sharing and information flows from and to local govern-
ment institutions. And although leaders were normally chosen directly by other
members, the kebele retained the power to dismiss the proposed leaders.
The constitution of groups, networks and associations of various kinds was a
defining feature of the developmental state project for the political mobilization

23
Interview conducted at the Cooperative Promotion Office, Kolfe Keraniyo, 23 April 2015.
24
Interview conducted at the Women and Youth Affairs Office, Kolfe Keraniyo, 11 November
2014.
25
Interview conducted at the Labour and Social Affairs Office, Kolfe Keraniyo, 19 November
2014.
26
Interview with an MSE leader, Kolfe Keraniyo, 17 February 2016.

https://doi.org/10.1017/S0001972018000712 Published online by Cambridge University Press

 Small enterprises and the state in Ethiopia 89

of the peri-urban population. The ‘three wings’, together with other local institu-
tional configurations, constituted important arenas in which state–society rela-
tionships in Kolfe Keraniyo were negotiated.

MSEs and microfinance

The institutional arrangements providing access to credit for MSEs illustrated
further political processes underpinning the negotiation of state–society relation-
ships in Kolfe Keraniyo. The primary channel through which MSEs had access to
credit was through local MFIs (see also Amha and Alemu 2014). MFIs, whose
growth in Ethiopia by the time when my fieldwork was conducted was remarkable,
were de facto public institutions with capital almost exclusively controlled by
central government (Deribie et al. 2013). In Kolfe Keraniyo, the main MFI was
the Addis Saving and Credit Institution (ASCI), with the government holding
98 per cent of the shares. Interest rates offered by ASCI were not significantly dif-
ferent from those offered by banks, and normally ranged between 12 and 15 per
cent. However, banks seldom granted loans to MSEs unless proper guarantees
were in place.
As explained by one branch manager, MFIs evaluated and approved the busi-
ness plans of MSEs in conjunction with the promotion office, normally based
on the criteria of feasibility, skills required and guarantees.27 There were different
types of guarantee an MSE could provide, including private collateral, group
guarantees, a letter of guarantee from a public institution and the provision of
seed money to make up part of the initial capital. The vast majority of newly estab-
lished MSEs obtained credit through the group guarantee system (or group collat-
eral).28 In such a system, the group was liable for the collective amount of credit
provided on behalf of individuals. Group collateral illustrated a key mechanism
operationalizing the notion of ‘group first’. It reflected the ways in which a
wider sense of political and ethical accountability could not be conceptually sepa-
rated from the financial accountability underpinning the individual repayment of
a loan. As noted by one informant: ‘MFIs are state-controlled institutions through
which the government channels credit … to promote a business model based on
political groups … that in one way or another are connected to the EPRDF.’29
Similarly, other aspects of the relationship between MSEs and MFIs reflected
the notion of ‘saving first’. Newly established MSEs were required to contribute
an initial 20 per cent (from savings or seed money) of the capital they intended
to borrow (see also Hundera 2014). In addition, individuals were required to
save a variable amount of money every month – known as compulsory saving –
before and after their MSE was granted a loan. Individual saving was meant to
demonstrate the willingness and ability to save a certain amount of money for
several months consecutively, as well as raising cash to be used as collateral. In
addition, as noted by a local official, saving was meant ‘to change the habits of

27
Interview conducted at the ASCI, Kolfe Keraniyo, 21 April 2015.
28
Interview conducted at the ASCI, Kolfe Keraniyo, 25 November 2014.
29
Interview with a businessman, Kolfe Keraniyo, 19 February 2016.

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 90 Davide Chinigò

people towards their future … Saving is transformative because it changes the

mind of people.’30
The notions of ‘saving first’ and ‘group first’ embodied in the mechanisms of
credit provision in Kolfe Keraniyo played both an economic and a disciplinary
role. The policy emphasis on group saving reflected the political elite’s attempt
to encourage virtuous cycles of micro-capital accumulation in order to achieve
the developmental state project for the socio-economic transformation of
Ethiopia. The disciplinary role reflected the fact that such a project was expected
to promote a change in unemployed people’s attitudes through their participation
in a number of state and party political networks. Ultimately, individual action
was subordinated to the collective effort – directed by the state – at transforming
the Ethiopian nation and sustaining economic growth.

‘Keeping good relations with the government’: individual experiences of

group work in Kolfe Keraniyo
The promotion of MSEs embodied important aspects of the territorialization of
the power of the developmental state in a peri-urban milieu. However, this does
not mean that such a process was always top-down. Experiences of group work
in MSEs highlighted that people and social groups actively contributed to the
making and unmaking of the developmental state by negotiating, refashioning
or challenging the norms and rules with which they were confronted. Far from
constituting a coherent process of structural refashioning, these dynamics took
the form of diverse strategies of coping and subverting the normative framework
of the developmental state. The ultimate effect was that they contributed to
destabilizing the peri-urban space, for instance by promoting the informalization
of business activities. This revealed that state authority in peri-urban settings was
produced and challenged at the same time.
In line with recent studies, many of the MSEs observed in Kolfe Keraniyo were
not successful from an economic perspective (Di Nunzio 2015; Gebre-Egziabher
and Aynew 2010). Through MSEs, members were at best able to obtain basic sub-
sistence, but usually the businesses were not financially sustainable. One of the
main reasons why MSEs often failed to become successful businesses was that
they felt like impositions from above rather than being genuinely demanded by
the people involved. For instance, some respondents contended that they did
not want to get loans because they were afraid of being in debt. In an interview,
one woman articulated the following paradox:

I have to get the loan because I am constantly told that saving is good … However, I am
afraid to spend the money because then I do not know how to return them back … so
when I get the loan I keep the money in a secret spot and then I return it back month
by month … I have to be careful because if my son knows that I have the money he’ll
ask to borrow it.31

30
Interview conducted at the Cooperative Promotion Office, Kolfe Keraniyo, 23 April 2015.
31
Interview with an MSE member, Kolfe Keraniyo, 15 February 2016.

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 Small enterprises and the state in Ethiopia 91

In a focus group discussion about the challenges of group saving, participants

lamented that paying back the money in time was often very difficult. ‘Saving indi-
vidually is much less risky … and what does saving mean in the end?’32 In general,
a large majority of respondents were very sceptical about establishing groups and
expressed their preference for individual businesses. ‘We work in [a] group because
the government wants us to work in groups … but you don’t make money, you
keep good relations with the government.’33 This is further corroborated by
cases in which MSEs were established with initial capital provided by local or
international NGOs, where the formation of groups was a prerequisite to
receive the initial loan. As one woman put it: ‘I did not know the other women
before and I don’t know what kind of business we will do together … the
reason why I joined the micro [i.e. MSE] is that they give us some money and
you can get other loans.’34
From the perspective of local officials, the main challenges of the MSE policy
were ‘changing the mind of people when it comes to saving’ and ‘creating a
saving culture’.35 One official from the Women and Youth Affairs Office con-
tended that loans are often spent first on household consumption, and much
less frequently as investments for productive activities. From the perspective of
the poverty reduction strategy, loans and group businesses in Kolfe Keraniyo
often performed the function of a social protection system – something that
was largely absent in the peri-urban context – rather than creating real opportun-
ities for economic growth.
However, a narrow focus on financial and economic viability obscures the social
and political significance of the emphasis on MSEs. MSEs played a very important
role as they opened up new opportunities for access to credit for individual
members, for the redistribution of resources from participants to party and gov-
ernment networks, and for assistance from government institutions and develop-
ment organizations. Arguably, the shift in the intended objective of the job
creation policy reflected the fact that peri-urban dwellers actively contributed to
the making and unmaking of the developmental state. Many of these issues are
illustrated in the life histories of peri-urban dwellers who have been involved in
the constitution of groups, such as the following.
Z. M. is a member of an MSE for which the initial capital was provided by the
government. The MSE was established some years ago to gather together women
selling tree seedlings and vegetables who had previously been engaged in illegal
tree cutting. Despite being in place for a long time, the association was not very
successful from an economic perspective: with the profits, members were barely
able to cover their current expenses. Nonetheless, Z. M. worked three days a
week from 6 a.m. to 3 p.m. for the association. Ironically, the motto of the asso-
ciation was ‘If we work we will have hope’. But why was she a member of the
MSE? She explained that the association was not for making a living; rather,
through the association she was able to get individual loans for her own ‘real’

32
Focus group discussion conducted in Kolfe Keraniyo, 13 November 2014.
33
Ibid.
34
Interview conducted with an MSE sponsored by a local NGO, Kolfe Keraniyo, 24 November
2014.
35
Interview conducted at the Women and Youth Affairs Office, Kolfe Keraniyo, 23 April 2015.

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 92 Davide Chinigò

business. The association provided the group collateral that each individual
member needed in order to apply for an individual loan at the local MFI. The
MSE was organized in groups of eight women for credit and loans purposes.
Each group had a leader, and she was the leader of her group. To make her
living, Z. M. bought vegetables from the main market in Addis Ababa
(Merkato) and sold them in her local neighbourhood market. She went to
Merkato whenever she was not busy with the association. She worked four days
a week in her own business and said she was able to make a profit of about
25–30 ETB per day.36 An interesting aspect, however, was that she had been
taught to draw up a daily business plan in the training about saving she received
from the kebele. Her profits did not include her daily salary, which she claimed was
15 ETB; as she explained, ‘This is the cost for the labour as if someone else would
do the business on my behalf.’ She therefore was taught to consider herself an
employee in her own business. The other peculiarity was that she claimed she
could not use the current day’s profits, but only the profits she had made the
day before. The reason for this was that she had been taught that the day’s
profits had to be considered as insurance against any inconvenience or problem
happening during the day. ‘I can’t use the profit I made today. I have to use the
profit I made yesterday. The profit of today is the insurance in case I’ll get
sick.’ She was very proud of herself and extremely happy about the training on
saving that she received every few months at the kebele. ‘Saving transformed
me, and it is important because [it] helps you when you are old.’37
The story of Z. M. – which can be seen as a success story – elucidated both the
opportunities and the tensions of the project for economic development based on
the promotion of small businesses and groups in Ethiopia. The main contradiction
of many group initiatives was that they were not productive, with people often
engaging in free labour. Group work, especially in MSEs, was a driver of success-
ful businesses only in a minority of cases. People often complained that they would
prefer to work individually but the only way to get support was by establishing
groups. Complaints included that it was often difficult to ‘put different heads
together’, the free-riding of some group members, the inflexibility of promotion
offices when deciding what businesses to undertake, and the time spent in training
vis-à-vis actual work. However, as there were limited opportunities to succeed in
other ways, participation in MSEs was an entry point to other opportunities pro-
vided by the local state/party structure. Participation in government initiatives
played an important political and social role and was often the only possibility
many peri-urban dwellers had to conduct other economic activities and to make
a living. Even if this came at the cost of working for free for several days every
week, as the case of Z. M. shows, this opened up opportunities for access to
credit, licences and other redistributive mechanisms. Ultimately, efforts at formal-
izing and legalizing the peri-urban economy through the promotion of MSEs had
the paradoxical effect of engendering a tendency towards the informalization of
other productive business activities.
More broadly, the negotiation of the local developmental state operated
through the construction and segmentation of time and space, and hence

36
At the time of the interview, the equivalent of just over US$1.
37
Interview conducted in Kolfe Keraniyo, 13 November 2014.

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 Small enterprises and the state in Ethiopia 93

constantly redefined what was legal and illegal, as well as formal and informal.
The following example of street vending helps elucidate this concept.
F. S. is a street vendor in a very crowded street in Kolfe Keraniyo, selling petty
merchandise that he keeps in a wooden tray with a neck strap. Despite the fact that
he had no licence for his business, he explained that his activity was neither legal
nor illegal; this depended very much on how and where he sold his goods. Selling
to the cars queuing on the street was strictly illegal; he explained that this was
often the most remunerative activity, but if he were caught by the police, they
would normally take away his products and ‘you’ll have a very bad day’.
Conversely, it was not really legal to conduct business on the pavement but it
was tolerated. Sometimes the police or other people controlling street businesses
would say something and he would have to move somewhere else. His activity
was legal just outside the house where he lived, located in a secondary street.
Here, he was allowed to conduct his business through the MSE that he had estab-
lished together with his neighbours. However, spending his entire day there meant
‘gaining nothing at the end of the day’. For this reason, ‘you have to be smart and
find your own way on the street’. By this, F. S. meant that he had to negotiate the
space where he could conduct his business on a daily basis, as being ‘tough’ was
the only way he could make a living and be independent.38
In a similar vein, G. S., another illegal street vendor, contended that he was
allowed to perform his activity only at specific times. He explained that, until a
few years earlier, there had been much more flexibility with regard to street
vendors and, within certain limits, he was allowed to conduct his business at
any time of the day. ‘Today things are different … in very crowded areas, where
vending is more remunerative, you are allowed to sell only at certain times of
the day … After 5 p.m. is always good as the traffic police officers are no
longer around.’ He also mentioned that being ‘tough’ was a central requisite to
navigate street business, because ‘what you can do and what you can’t do
depends very much on who you are and who you know’. He said that he had
enrolled in the kebele employment lists, but that so far he had not been shortlisted
for training or selected to establish a savings group. G. S. also mentioned that
‘MSEs are a good entry point to the system’ and that ‘once you are in it’s
easier to do your own business’.39
In rapidly transforming peri-urban settings, the boundary between formal and
informal, legal and illegal, is constantly shifting, and its redefinition can be ana-
lysed through the lenses of time and space. To get by, people constantly challenged
and negotiated dominant configurations of time and space. From the government
perspective, MSEs were allowed to perform their activities within certain spaces –
in terms of physical location and specific business activities. In an interview,
members of an MSE comprising five recently graduated students in Kolfe
Keraniyo complained that the promotion office suspended their licence for
selling oil and sugar – a business that enabled them to make a good living –
and replaced it with a metalwork licence. While their complaint had little effect,
the outcome was that they continued to conduct the oil and sugar business

38
Interview conducted in Kolfe Keraniyo, 20 April 2016.
39
Interview conducted in Kolfe Keraniyo, 21 April 2016.

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 94 Davide Chinigò

illegally, and, at the same time, they complied with the request of the promotion
office ‘because you can’t break relationships with them’.40
Social rules and boundaries are constantly negotiated and redefined, with pol-
itical priorities sometimes changing to reflect a changing reality. Many of the peri-
urban poor tended to have no licence for their business, did not pay taxes, and
might or might not be enrolled in the kebele employment lists. To some extent,
the employment list embodied the expectations and aspirations of peri-urban
dwellers in their relationship to the developmental state (Mains 2012). The
high-modernist ethos (Scott 1998) of the developmental state provided a very
powerful – and normative – vision of the future, which was embodied in the col-
lective mobilization of the population to achieve broad-based economic growth
and development. In such a context, ‘waiting’ to be selected for an MSE, for train-
ing and more generally for developmental initiatives reflected everyday encounters
with the developmental state, and, more importantly, established its dominant
temporality. Whether or not people were included in the employment lists often
reflected their relative position vis-à-vis local power, as did the length of time
they had to wait before being involved in developmental activities that allowed
them access to socio-economic mechanisms of redistribution. Once an MSE
was established, the dominant temporality became the notion of ‘graduation’ –
the expectation that the business would become self-sustainable within a certain
temporal span, normally five years. However, being enrolled in the employment
lists or being part of government initiatives was very often time-consuming, and
people were expected to perform a number of activities, including working for
free and attending meetings and training sessions, and were also expected to
respect some further rules. It was not uncommon to hear people enrolled on the
waiting lists complaining that they did not benefit from government initiatives
because ‘they were still waiting’. ‘Waiting to be employed’ and ‘waiting to gradu-
ate’ were only two examples of how the negotiation of state authority operated in
the context of the policy of job creation in contemporary Ethiopia.
In the context of all these people living in the limbo of peri-urban Ethiopia, the
MSE policy constituted the normative framework confronting peri-urban dwell-
ers, one that was actively negotiated, challenged and therefore reproduced. The
border between legal and illegal, formal and informal, was constantly redefined –
and reflected the production of state authority – through everyday negotiations
of spatial and temporal boundaries in the context of the job creation policy.
The everyday making and unmaking of the local developmental state project
reflected its central contradiction: that the dynamics of social, economic and pol-
itical exclusion operated simultaneously, despite the claim of the developmental
state to be more inclusive than its neoliberal alternatives.

Conclusions
The importance of peri-urban areas to national-level politics in Ethiopia came to
the forefront during unprecedented anti-government protests that occurred in late

40
Group interview with three MSE members, Kolfe Keraniyo, 14 November 2014.

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 Small enterprises and the state in Ethiopia 95

2015 and throughout 2016. The protests were initially sparked by the contested
Addis Ababa master plan, a project seeking the integration of the metropolitan
area with the surrounding Oromia Regional State as part of an urban development
plan. After violent confrontations between protesters and security forces led to
fatalities, in January 2016 the Ethiopian government announced that it was aban-
doning the contested integrated master plan. Despite this, in the following months
the protests increased in magnitude and catalysed broader anti-government frus-
tration with issues surrounding the democratic representation of ethnic groups
within the Ethiopian federation, particularly the Oromo, youth unemployment,
and corruption scandals at various levels. Increasing instability characterized by
repeated episodes of violence led the government to declare a six-month state of
emergency in October 2016.
The fact that the anti-government protests originated in Addis Ababa’s peri-
urban areas speaks to their key significance in the dynamics of production and
contestation of public authority, as well as in the negotiation of multiple identities,
topics that urgently require further research. In a way, the protests also reinforce
the finding of this article: while the policy of job creation underpinning MSEs was
successful in extending the institutional apparatus of the developmental state, it
was certainly less successful in providing unemployed youths with the prospect
of a better future.
A main conclusion, then, is that the claim that ‘developmental capitalism’ con-
stitutes an effective alternative to ‘neoliberalism’ on the grounds of its supposed
inclusiveness is problematic and faces significant contradictions in reality. A sig-
nificant tension in such a project is the extent to which a universal idea of partici-
pation in the country’s socio-economic development – entailing the collective
effort of a plurality of people and social groups – is at odds with the way in
which the job creation policy engenders dynamics of social, economic and polit-
ical exclusion. Despite the specificities of the Ethiopian case – which stem from the
country’s historical trajectory – this finding is in line with critical studies question-
ing a ready-made application of the developmental state model in the African
context. Consistent with other examples in Africa, this article has highlighted
the fact that Ethiopia is characterized by a lack of an autonomous bureaucracy
(Evans 1995; Booth and Golooba-Mutebi 2012) and of markedly independent
civil society organizations (Ayee 2013), as well as lacking a dynamic and produc-
tion-oriented private sector (Hillbom 2011). However, a major difference from the
rest of the continent is that the formulation of the developmental state in aspir-
ational terms does not stem from a political agenda marking a rupture with an
oppressive past, given the lack of significant colonial experience shaping the tra-
jectory of state building. Rather, the Ethiopian developmental state is formulated
in relation to the notion of revolutionary democracy rooted in the country’s liber-
ation struggle from the Derg regime, and which is currently articulated through an
organization of the state based on the ethnic federalism model (Bach 2011).
More widely, this article provides new empirical evidence to support the litera-
ture arguing that state authority is constantly under formation and, most import-
antly, is co-produced via territorialization from both above and below (Lund 2006;
Hagmann and Péclard 2010; Lund and Boone 2013; Korf et al. 2015;
Emmenegger 2016).

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 96 Davide Chinigò

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Abstract
By discussing details of the current policy emphasis on entrepreneurship and
microfinance, this article explores the dynamic and inconclusive negotiation of
state authority in Kolfe Keraniyo, peri-urban Addis Ababa, Ethiopia. In the
last few years, Ethiopia embarked on a strategy of rapid transformation driven
by what its political elite defined as a ‘developmental state’, which entailed the

https://doi.org/10.1017/S0001972018000712 Published online by Cambridge University Press

 Small enterprises and the state in Ethiopia 99

significant rescaling of the peri-urban space. The promotion of micro and small
enterprises is an important aspect of the territorialization of state power in the
peri-urban space, and is actively negotiated, challenged and refashioned. The
first part of the article presents three central aspects of such projects: the policy
of regularization and legalization; the notion of ‘group first’ or collective partici-
pation in the country’s development; and the emphasis on ‘saving first’ to create
micro-dynamics of capital accumulation. The second part of the article discusses
how the beneficiaries of entrepreneurship initiatives mediate the normative frame-
work provided by the developmental state, and highlights how that framework is
neither inclusive nor particularly distinct in its effects from neoliberal develop-
ment strategies. The article concludes that the making and unmaking of state
authority is not unidirectional from above but operates through the redefinition
of spatial and temporal boundaries from below.

Résumé
En s’intéressant de près à l’accent mis sur l’entreprenariat et la microfinance dans
les politiques actuelles, cet article explore la négociation dynamique et non con-
cluante de l’autorité de l’État à Kolfe Keraniyo, district périurbain d’Addis-
Abeba (Éthiopie). Ces dernières années, l’Éthiopie s’est lancée dans une
stratégie de transformation rapide portée par son élite politique et définie
comme « État développementaliste » et impliquant un rééchelonnement import-
ant de l’espace périurbain. La promotion de micro et petites entreprises est un
aspect important de la territorialisation du pouvoir de l’État dans l’espace
périurbain et elle est activement négociée, contestée et refaçonnée. La première
partie de l’article présente trois aspects centraux de ces projets : la politique de
régularisation et de légalisation ; la notion de « group first » (le groupe avant
tout) ou la participation collective au développement du pays ; et l’accent sur
« saving first » (l’épargne avant tout) pour créer une micro-dynamique d’accumu-
lation du capital. La deuxième partie de l’article examine comment les
bénéficiaires d’initiatives en faveur de l’entreprenariat composent avec le cadre
normatif fourni par l’État développementaliste, et souligne en quoi ce cadre
n’est ni inclusif ni particulièrement distinct dans ses effets des stratégies de
développement néolibérales. L’article conclut en disant que le processus de
construction et de déconstruction de l’autorité de l’État n’est pas unidirectionnel
du haut, mais passe par la redéfinition des limites spatiales et temporelles.

https://doi.org/10.1017/S0001972018000712 Published online by Cambridge University Press