Technical Efficiency of Ethiopian Reinforcement Bar Manufacturing Firms

Abstract

In this study, the technical effectiveness of rebar production companies in Ethiopia's basic metal industry is investigated. In the fiscal year 2021/22, it used the Data Envelopment Analysis (DEA) method. The study employed an output-oriented model with a constant return scale (CRS) assumption. Based on the study, 54.6% of the firms manufacturing reinforcement bars are operating with technical inefficiency. The findings illustrated that firms are in a vicious cycle because of the severe iron deficiency in the country, given that iron or steel as a raw material has a significant contribution to firms’ technical efficiency compared to other production factors considered in this study. Extreme deficiency of iron and steel and foreign currency, lack of quality scrap metal and price fluctuation, constant electric power interruption, shipment delay, and a lack of genuine spare parts were identified as external challenges. While poor work culture and discipline, inadequate and poor technological updates and transformation, and a high knowledge and skill gap were internal challenges, Therefore, to effectively utilize the potential of the industry, efforts are required to improve institutional strength, infrastructural development, and the availability of foreign currency and raw materials.