Determinants of Investment activities in SEBETA Town

A Research paper Submitted TO The department of Management

IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR BA Degree in
MANAGEMENT

By: TeshomeGezu

Advisor: FillmonTerefe (MA)

Jimma University

College of Business and Economics

Department of Management

JUNE, 2013

JIMMA ETHIOPIA

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 Acknowledgment
First of all, thanks to my God the most gracious and the most mercifully for
nothing I have done without his help. Also I would like to express my deepest
appreciation and gratitude to my advisor FillmonTerefe (MA) who gave me a
good advice in constructive comments that he has been given. Furthermore I
would like to acknowledge my Secretary W/roBehabtwaWondimu as well as all
my friends for this an uncountable support either orally or technically.

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Abstract

The study assessed the determinants of investment activities in Sebeta town

which is found in Oromia region with 18 km away from Addis Ababa. The
research was investigated the major determinants of investment movement in
the town and put the direction for investors how to deal with those
determinants. For this study both an open and closed ended questionnaire
were used and data from primary sources had analyzed through qualitative
descriptionwhereas secondary data had obtained from documents, magazine
and internet. The sampling technique for the study was simple random method
and the sample size of the study was 56 out of 358 populations. After data
were collected, the collect data were analyzed by using descriptive statistics like
percentage and tabulation. The finding of the study shows the investors face
difficulties of finance and lack of credits when they started their business, high
tax levied on their income generate and due to low encouragement from the
investment offices push them to not continue their investment activities.
Finally, investment related problem is not the responsibility of the government
alone, but all investors, the local community, the private business man of the
town will get by work together with the government so as to attain the desired
objectives.

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Table of Content

Content Page

Acknowledgement………………………………………………………………………I

Abstract .................................................................................................. II

Table of Contents .................................................................................... III

Chapter One
1. Introduction .........................................................................1
1.1 Background of the study ................................................................... 1
1.2 Statement of the problem .................................................................. 3
1.3 Objectives of the study ...................................................................... 4
1.3.1 General Objective .................................................................. 4
1.3.2 Specific Objective .................................................................. 4

1.4 Significance of the study ................................................................... 5

1.5 Scope of the study ............................................................................. 6

1.6 Limitation of the study..................................................................6

1,7 Organization of the paper..............................................................7

Chapter Two
2.Literature Review .........................................................................8

2.1 Definition .......................................................................................... 8

2.2 Types of Investment .......................................................................... 10

2.3 Methods of evaluating investment ..................................................... 13

Chapter Three
3. Methodology...................................................................................................15

3.1 Data...............................................................................................................15

3.2 Source of Data ............................................................................................. .15

3.3 Data Collection methods .............................................................................. .15

3.4 Sampling technique and simple size determination.........................................16

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3.5 Data processing and analysis ...................................................................... .17

Chapter Four
4. Data Analysis and Interpretation....................................................................18

Chapter Five
5. Conclusion and Recommendation...................................................................27

5.1 Conclusion.......................................................................................................27

5.2 Recommendation..............................................................................................29

REFERENCE.................................................................................................31

APPENDIX....................................................................................................32

LIST OF TABLES

Table 4.1 personal characteristics and basic information.........................................18

Table 4.2 Investors response to the problem they faced............................................20

Table 4.3 Sources of funds and accessibility of financial sources..............................22

Table 4.4 Investors future review.............................................................................24

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CHAPTER ONE

Introduction

1.1 Background of the study

Globally poverty constitutes the deepest and most dangerous in the world
economy. The elimination of this worst economy requires sustained economic
growth and development in the poorest area of the world. The right condition
should be created to encourage the private owners of capital, to invest in the
area where such macro conditions exist especially the poor countries found in
Sub-Saharan country (for tune vol 5, No 193 Dec, 11, 2005).

Investment promotion agencies need a careful and detailed approach that

addresses the specific circum stances of the country, such as geography,
targeted sectors, sectors development, lower labor cost, quality of mineral
deposits, the access to international markets, reliable power, local supply of
qualified human power and low cost of communication (world Investment
prospects special edition No 78).

On other hand Ethiopia is a country found in Sub-Saharan and ranked 9th in

terms geographical area in terms African continent. Ethiopia is known with
ancient civilization, historical culture, a proud of tradition and on the top of all
a land with immense potential for economic development of a country. The
country is rich in natural and human resources. The climate and fertile soil are
suitable for the cultivation of wide ranges of crops and live stocks. But this
land of plenty is also suffering from poverty, lack of infrastructure, under
development health center and fundamental ills of the economy system and
reacts up on to keep the country under development (CSA 2008, Tessykurian
2004).

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Oromia is the largest state in Ethiopia, which almost reflects the real situation
of a country. The region has abundant natural and human resources. It is the
habitat of various species of endemic wild life, birds, forest and location of best
kept secret of tourism sites. It is natural resources such as mineral, forests,
water, energy and diversities climatic conditions, geographical areas of the
region hold the interest of investors. Despites of these opportunities investment
activates in the region are far from being sufficient. (Oromia investment
commission, April 2008).

So this title was focused on determinants of investment activates in Sebeta

Town. SebetaHawas is one of Woreda’s in the Oromia region of Ethiopia, part of
the Oromia special Zone surrounding Finfinne. Sebeta town is found to the
south west of Adis Ababa at 18 km for from the capital city. The total
population for SebetaHawasWoreda is 132, 294 of whom 68,133 were men and
64,161 were women (CSA 2005, physical and social economic profile district of
Oromia region, 2010). So the researcher was investigated the major variables
determining investment activates in the town and examined how this factors
affecting investment.

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 1.2 Statement of the problem
Investment is the most important in process of bringing rapid economic
development of a nation. Smooth investment activities can be involved in the
country in which rapid economic policies are correctly formulated resources are
well managed /allocated/ distributed as well as implemented. But the facts
proved that many of Ethiopian people are lived under poverty line due to lack
of natural resources management of the country. About 87% of the people of
Ethiopia live under poverty line and 12.5% they are at risk of starvation
(UNHRF, UNICEF, ECHO, CSA, 2008).

Here if seems reasonable to undertake detailed study of the variables

determining investment activities in specific places throughout the country in
case of Sebeta town to understand the nature and types of such variables so as
to lay a base on which economic policy reforms and necessary action to be
taken to enhance investment activities and calls farther researcher and thereby
find feasible solution for the problem in Sebeta town in particular and in the
country in general,

The main reason that initiate the researcher to conduct this research is to
increase the investment activates and minimized the problem discourage the
investment activities and eliminate the problem obstacle the growth of
investment activates in the town as possible. Indeed Sebeta town is rich in
natural and human resources and near to capital city, but the town is not used
it’s advantageous in attracting more investors.

So the study assessed

 What major variables determining investment activities?
 How much the investment activities opportunity is there in the town?
 What types of investment activates involved mostly in the town and why?
 What mechanism to enhance the investment activities in the town?

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1.3 Objectives of the study

1.3.1 General Objectives

The general objectives of the study was found in the determinants of

investment activities in Sebeta town and related variables, level of investment
activaties such as individual income, political relationship between society and
government and types of investment activities in the town.

1.3.2 Specific Objectives

Specific objectives found on the following

 To identify the major variable investment activates in the town and to

examine how this factors affects investment.
 To describe the direction and the types of investment activates involved
mostly in the town and to reason out why investors mostly involved in
such areas.
 To identify investment opportunities in the town
 To suggest solution and mechanism to enhance the investment activates
of the town.

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1.4 Significance of the Study

This study helps to know about the importance of investment activates in

Sebeta town. The main objectives of this study would be to acquire
knowledge by investigation the most important variables affecting
investment activates in the town. Furthermore, it invites other
researchers in order to develop comprehensive work in this area with a
long period of time. And it gives a feasible solution for the investors as
well as for the organization. The researcher will get a good experience
and help him/her to do good works in the future. This study enables the
researcher in acquiring academic fulfillment for graduation. The study
will serve as reference and documents for related works of others.

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1.5 Scope of the Study

The scope of this was focused on the main determinants of investment in

Sebeta town. Even though will happy to do this research in the country at all,
but due to shortage of time and financial resources the study was limited to the
specified town of investment activities. The expected respondent of the town is
considered through use of self administered questionnaire and personal
interview in order to get the needed information from the investors of the town.

1.6 Limitation of the study

It is obvious that every research study may have drawbacks in one way or the
other. In the same way, there are some factors that hinder the effectiveness of
this research.

These include the inconsistence nature of the data, lack of efficient and
sufficient data in desired way. This is further complicated with shortage of time
budget and financial, as well as the reluctance of some investors and official to
provide flexible information.

1.7 Organization of the paper

This study was focused on the major determinants of investment activities in

Sebeta town which is found in Oromia region Finfinne distinctive zone, 18KM
away from the capital city Addis Ababa. Also this research is organized in such
way that the first chapter consists of background of study, statement of the
problem, general and specific objectives, significance of the study, as well as
scope of the study. The second chapter deals with the review of the review of
literature and the third chapter deals with methodologies which have key
elements for this study. The major findings and discussion part of this was
undertaken in chapter forth, whereas conclusions and recommendation are
included in the last chapter so as, to bea meaningful and a well designed
research.

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 CHAPTER TWO
REVIEW OF RELATED LITERATURE
2.1 Definitions

Investment has been viewed and defined by different ways. It has different
meanings in finance and economics. In economics investment is related to
saving and deferring consumption it involved in many areas of the economy,
such as business management and finance whether for households, firms or
government. In finance investment is putting money in to something with the
expectation of gain, usually over a longer term.
(WikipediaOrg/wiki/,Investment,July 2011).

Investment is the current commitment of dollar (birr) for period of time in order
to drive future payments that will compensate the investor.

 The time the funds are committed

 The expected rate of inflation and
 The uncertainty of the future payments

Form this we can answer the question about why people invest and what they
want form their investments. They invest to earn a return either income or
capital appreciation from savings due to their deferred consumption.
(Encyclopedia, Britan+nica,1998).

Investment is an asset or item that is purchased with the hope that will
generate income or appreciate in the future in economic sense, an investment
is the purchase of goods that are not consumed today but are used in the
future to create wealth. In finance, an investment is a monetary asset
purchased with the idea that the asset will provide income in the future or
appreciated and be sold at higher price (INVESTOPEDIA Vol. I).

Investment emphasis to the capital to be used for investment as well as the

risk associated with investment in two ways.

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 1. Investment is the commitment of funds with the view to minimize risk
and safe guarding capital while earning return (investment constructed
with speculation).
2. The commitment of something other than money to a long or term
interest or project “(Dr. Caves 1993).

In modern changing economic nature and scope it is defined by the

agreement of the association of south. East Asian nation (ASENS) given due
emphasis to its scope as the term investment every find of asset and in
particulate shall includes though of exclusively.

In other words investment can be showed as

a. Movable and immovable property and any other property right such
mortgages liens and pledges.
b. Shares, stocks and debentures of companies or interest in the property
in such companies.
c. Claim to money or to any performance under contract having a financial
value and intellectual property right and good will.
d. Business concession conferred by law or under contract including
concession to reach for, cultivate extract or exploit natural resources
(UNCTAD, Vol. 11.1999. P.19).

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 2.2 Types of investment

Before starting an investment activity one investor must know and analyze in
which area he is going to invest, the available fund he/she has for investment,
the economic and political situations of the country, availability of raw
materials for running its activates and finally he must put a standard of
evaluating the profitability of the investment.

According to Hel Fert (1997) the analysis decision about new investment
involves a particular complexes of issues and choices that must be resolved by
management, Effective analysis of business investment require both the
analysis and decision maker be very conscious and specific about the many
dimension involved.

The complexity and difficulties of choices in the process of analysis and

evaluating investment that treat the ability of manager and decision maker
arise much due to the existence of different kinds of investment with different
nature (characteristics) (Alexander, 1993) distinguishes in to.

1. Real investment generally involves some kinds of tangible asset such as

land, machinery or factories.
2. Financial investment involves contracts written on pieces of paper, such
as common stocks, and bonds. In primitive economies most investment
is the real variety however, in a modern economy much investment of the
financial variety. By and large, the two forms of investment are
complementary not completive.

The two general kinds of investment further classified in to the following

major kinds of investment (world book, 1992 Vol. I)

Such as:

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 i) Business investment
The purchase of small business may be the most demanding kinds of
investment. Investors may find that they must work full time for make
profit. They should be sure his business will provide both as
satisfactory income and areas able to return on their investment.

ii) Real state

People invest in real estate when they buy home, land or rental
produce. Real state may have considerable resale value. It also may predict in
come directly in the form rent or in directly in the form of crops minerals
resources or timber.

Real state can often bring a higher return than any other form of investment. It
is considered, especially good investment during inflation period when the
value of a property tends to rise. On the other hand real estate’s values can fall
sharply during recession or depression.

iii) Saving accounts (Time deposit) Are a common finds of investment money
placed in a saving account at bank, credit union or saving and loan association
earns interest at certain annual rate. Many banks offer such a special saving
instruments as money market account and certificates of deposit (CDs). Money
market accounts and certificates of deposits pay higher rate of interest than do
regular saving accounts funds placed in CDs cannot be removed until the end
of a certain period such as one or two year.

A money market account earns interest based on conditions in the money

market which deals in corporate and government short term securities.

iv) Insurance

Particularly life insurance serves as a form of investment for many people. A

person may be buy life insurance provide financial protection for family
members in case the person die or disable. In addition to furnishing this

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protection many types of life insurance includes some kinds of saving of each
premium paid after a policy has been in force for certain period of time. The
sum called the cash value of the policy, accumulated and special field rate of
interest as does a saving deposit.

v. Bonds: - Includes governmentsecurities and corporate bonds the federal or

state governments issue government securities. The saving bonds issued by
united state government are widely popular among small investors because of
their law purchase price and react of safety USA treasury bill is one type of
treasury bonds traded interest rate than do saving bonds because their many
banks offer such as special saving instruments as money market account and
certificates of deposits. Money market accounted and certificates deposits pay
higher rate of interest than do regular saving accounts.

Funds placed in certificates Deposits cannot be removed until the end of a

certain period, such as one or two year. A money market account earns in
bored on conditions in the money market which dared on corruptions in the
money market which deals in corruptions and government short term
securities.

Price may change in current interest rates corporate bonds are loans made by
investors to business firms. A corporation pays cash bond hold interest every
year until the bond matures. It the company default (fails to meet obligation),
the bond holder have the legal right to take over the business and sell assets
pledge a security on the bond.

VI stock: - represent share of owner ship in a company. The stock holders of

firm share in the profits and losses of the company. It the companies have a
year of high earnings, the stock holders receives either dividends or uses it to
expand their business. It the company suffers loses during the year it may not
have to pass on its stock holders.

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These all types of investment involves different attributes such as such as rate
of return, risk maturity period, liquidity etc for judging the attractiveness of
one investment an investor should first consider the amount to be spender on
the investment, the potential benefits of the invest the time period and any
financial recovery of capital.

2.3 Methods of Evaluating Investment

The existence of different kinds of investment with varying attributes

necessities, the need for evaluating investment projects (shamus, 1998), had
generally set five methods of nods evaluating investment projects.

a. Payback period: - Means the length of time required to recover the

amount of initial investment according to the rule choose the investment
activity with shorter payback period.
b. Accounting rate of return (ARR):- Measures the profit ability of
investment by relating the required investment future annual net
income. According to this rate, the investor has to choose the project
with high rate of return.
c. Net present value (NPV) methods: - Is the excess of the present value of
cash informs generated from the investment and the rule says, accept
investment activity with the positive wet present value.
d. Internal Rate of Return (IRR):- Is defined as the rate that equates interest
with the present value of future cash inflows. In this method the
investment decisions are accepted as internal rate of return exceeds the
cost of the total investment.
e. Profitability index (PI) methods: - It is the ratio of the total present value
of cash inflows to the initial investment i.e. the rule says accept the
investment if the profitability is greater than one.

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 CHAPTER THREE

RESEARCH METHODOLOGY

The study was undertaken on determinants of investment activity in Sebeta

town. As investment activities affected by various variables in dynamic
environment in which its activity takes place the researcher gave more
emphasis to the relevant variables determining the investment activity of the
town. Since different investors are there in terms of their experience, duration
of engagement, and knowledge are not homogenous, simple random sampling
techniques was used for the selection of typical sample out of population of
investors who would be represented the other else. And the study and the
researcher used the present situation of the investment in the area and
identifying the major problem that affect the investment activates in the town.

3.2 Sources of data

The data were both quantitative and qualitative in nature depending on its and
the researcher was gathered from both primary and secondary sources of data
by using different methods. The primary data was gathered directly from the
investors in the town and secondary data was gathered from documents,
reports, books, magazines, internet, and manuals to obtain his topical and
other types of information.

3.3 Data collection methods

To obtain the reliable data the researcher was used both primary and
secondary sources of data. To get data from primary sources both open ended
and close ended question were prepared in the form of questionnaire and
distributed to investors of the town to reply their ideas and experiences about

18
the question for open ended questions. The closed ended questions were
selected for the reason that it provides uniform responses and also easy to
process and relevant to the most of respondents.

3.4 Sampling Technique and Sample Size Determination

The study was conducted in Sebeta town which is found in Finfinne distinctive
zone of Oromia regional state.

The target population for this study was individual investor’s or government
organization of the town who give important information about the investment.
Hence, the sampling technique which was used would be judgmental sampling.
The reason for selecting this method is it enables the researcher to freely select
any respondents who can reply for the question and it is not time consuming
for the respondents.

The town has 358 investors who are investing permanently in the town and out
of these investoml.rs the researcher was selected 56 investors who represent
the other else and to fill the questionnaires for data collection purposes by
using the following formula.

n =Z2. p.q.N
E2 (N-1) +Z2.P.q

= (1.64)2X 0.5 0.5x358

(0.1)2 (358-1)+ (1.64)2. 0.5 X 0.5

= 240.726368=240.73

(3.57+0.724) 4.294

= 56

Therefore 56 investors were selected

Where N= Total population (Investors) =358

n = the required sample size

Z = Confidence level at 90% (1.64 on the table)

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 E = Margin Error (100% -90%) =0.1

So the designed questionnaire 56 distributed to the computed sample size in

order to gather the need information and since investors of the town are not
homogenous, simple random sampling techniques was used for the selection of
typical sample out of the total population of investors.

3.5 Data processing and analysis

After the necessary data are collected they were summarized and analyzed,
then editing as well as classifying the data in order to give meaning fall results.
The data analysis method used was descriptive analysis because of its
simplicity and clarity for drawing inferences. Average and percentage
computation will be employed for analysis.

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 CHAPTER FOUR
DATA ANALYSIS AND INTERPRETATION

This study deals with the analysis and discussion of data collected from
individual investors in Sebeta town. Regarding questionnaires, student
researcher designed 56 questionnaires and distributed them the total sample
size of 56 who are fund at different age, educational level and marital status
and student researcher collected all of them what the researcher distributed to
the respondents and all 56 questionnaires were properly filled as well as give
the necessary information for the researcher.

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 Table 4.1 Personal characteristics and basic information

No Question Alternative offered No of Parentage

raised respondents
1 Sex Male 46 82.14%
Female 10 17.86%
Total 56 100%
2 Age 20-30 Yrs 13 23.21%
31-40 Yrs 25 44.64%
41-50 Yrs 12 21.43%
Above 50 Years 6 10.71%
Total 56 100%
3 Educational Illiterate 3 5.35%
status Primary School 2 3.57
Secondary School 10 17.86%
College and University gradate 34
60.71%
7
Vocational training 12.5%
56
Total 100%
Source: Self survey, 2013

The above table 4.1 indicates that 82.114% (46) of the respondents are male
and the rest 17.86% (10) of them are females. There is no person under the age
of 20 years who were participate in the investment activities in the town and 13
(23.21%) of the respondents are between the age of 20 and 30 years,
25(44.64%) of the respondents are between the age of 31 and 40 years, 12
(21.43%) of the respondents are between the age of 40 and 50 years and 6
(10.71%) of the respondents are above 50 years. Regarding the educational
status 3 (5.36%) of investors are illiterate, 2 (3.57%) of them are attended
primary school, 10 (17.86%) of them are attended secondary school, 34
(60.71%) of respondents have graduated from College and University and the
remaining 7 (12.5%) of respondents have a certificate from vocational training.

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We conclude from these information is that the women participation in
investment activities are very low because of culture and traditional beloved
particular in the town and generally in the country as a whole. Many of
investors in the town found between 30-40 years and most of them are
graduated from college and University. We conclude from this information how
education creates some value in participating in investment activities of the
town.

Table 4.2 Investors response to the problem they faced

No Question raised Alternative offered No of Parentage

respondents
4 In which types of Manufacturing 11 19.64%
investment are you Agriculture 13 23.21%
engaged currently Financial 10 17.86%
Services 22 39.29%
Total 56 100%
5 Does your educational Yes 45 80.36%
status hespisitive on No 11 18.64%
your activity? Total 56 100%
6 Have you ever faced Yes 36 69.52%
problem during your No 20 30.46%
engagement in the Total 56 100%
town?
7 If yes, what type of Social 4 7.14%
problems? Political 7 12.5%
Economic 20 35.71%
Raw material 5 13.9%
Total 36 69.54%
Sources: Self survey, 2013.

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The above table 4.2 shows that 11 (19.64%) engaged in manufacturing, 13
23.21%) investors were engaged in agriculture, 10 (17.86%) investors were
engaged in financial investment 22 (17.86%) investors were engaged in
services. We concluded from the above information most of of investors
engaged in service sector. As we seen from table 4.2 45 180.36% of
respondents are replied yes and 11 (19.64%) in respondent are replied no on t
he question does your educational status has positive impact on your activity.
Many of the investors said that their educational status has positive impact or
their engaging and participating in investment activates of the town.

As shown in the above table 4.2 36(69.54%) of the respondent replied that
there were a problem during their engagement in investment activities.

20 (30.46%) of them said that they didn’t face a problem because of the and
enough capital, but bore since the most investors answered yes, there were an
investment problem because of lack of capital, infrastructure, political and
lack of saving habit and lack of good governance. On other hand investors have
faced social political, economic, raw material and other problems during t heir
engagement in the town. This depicts that, there is strong concern regarding
the economic that is 20 (35.71%) of the respondents had economic problem 7
(12.5%) of the respondents had political problem, 5 (13.9%) of them had raw
material and 4 (7.14%) of them are social problems.

24
Table 4.3 Sources of fund and accessibility of financial sources

No Question raised Alternative offered No of Parentage

respondents
8 What are your sources Government bank 13 23.21%
of fund to invest? private banks 13 23.21%
credit and loan 44.64%
association 25 8.93%
other 5 100%
Total 56
9 How do you rank the Medium 8 14.29%
accessibility of their Difficult 28 50%
financial soundness to Total 20 35.71%
investors? 56 100%

10 If your choice for Lack of infrastructure 13 23.21%

question “No” 11 is absence of financial 3.57%
difficult is it because of intermediary 12 3.57%
high interest rate 2 3.57%
lack of long term loan 2 1.79%
other 1 35.71%
Total 20
11 Do you have problems Telephone 2 3.57%
regarding Electric Power 4 7.14%
infrastructure Road 4 7.14%
facilities? Water 3 5.36%
Total 13 23.21%
Sources: Self survey, 2013.

As the above table 4.3 shows show most of the respondents 25 (44.64%) used
credit and loan association, 13 (23.21%) used government bank 13 (23.21%)

25
used private bank and the remaining 5 (8.93%) used their own capital and
borrowed from their families and friends, With regarding to accessibility
conditions of the financial sources to investors from the financial instructions,
8 (1429%) of the respondents easy as easy, 28 (58%) of investors rank as
medium and 20 (35.71%) of respondents rank as difficult to get financial
sources (fund) from financial institution.

According to the views of investors responded to the difficulties in using

financial sources, the in ability to meet collateral requirements, high interest
rate, lack of long term and absence of financial intermediary are the most
frequent reason for not king able to obtain financial sources.

As we concludes from this table the majority of investors 7.14 (4) of the
respondents have a problem of electric power and road, pipe water fane place
3rd 3 (5.36%) and the remaining the Telephone problem 2 (3.57%) the
respondent threading from the above problem. Financial problem as well as
infrastructure problem is the most serious problem that encounter the
investors when they participating in investment activities of the town.

26
 Table 4.4Investors future review

No Question raised Alternative No of Parentage

offered respondents

12 How tax levied on your Very high 21 37.5%

income Fair 33 58.93%
Low 2 3.57%
Total 56 100%
13 Have you got any skill Yes 36 64.29
training about investment No 20 35.71
since you have started it? Total 56 100%
14 Do you have a plan to Yes 42 75%
continue your investment No 14 25%
activity? Total 56 100%
15 What is your attitude Bad 12 21.43%
toward the current Encourage 44 78.57%
investment police of the Total 56 100%
town?
Sources: Self survey, 2013.

As you see from the table 4.4 the major percentage i.e. 33 (58.93%) of the
respondents replied that there is a medium tax levied on their income, 21
(37.5%) of them are answered there is avery high tax and small number of
respondents means 2 (3.57%) of the respondents replied that low tax levied on
their income.

According to many investors ideas, most of them 36 (64.29%) skill development

training about investment movement and how to manage their resources and
ho to minimize risks i.e. risk diversification in order to achieve their objective
goals and 20 (35.71%) of the respondents didn’t get skill development training
about investment before they had started the investment activates in the town

27
because of the haven’t enough time to get skill development and nobody initiate
them participate on skill development training program.

As the table 4.4 shows 42 (75%) of the respondents have been planned to
continue in investment activates of the town while only 14 (25%) of the
respondents have no planned to continue in the investment activates of the
town. This implies that the most of the investors have plan to continue their
business which seems to have positive relationship with capacity.

According to many investors ideas the current investment policy of the town is
encouraging 44 (78.57%) of the respondents said that current investment
policy of the town is encouraging if they compare with the previous investment
policy of the town end 12 (21.43%) of the respondents said that the current
investment policy of the town is bad because of there is adiscrimination and
corruption is more involved in the investment activates of the town. As the view
of the investors for encouraging nature of current investment policy, they
agued that the policy had made efforts to improve the operating environments
thorough serious problems of implementations limits the benefits of the policy.
However, other considered if as discover aging because of the enormous
practical problems of the policy rather than the theoretical attractiveness of the
policy. One can see from the study that most investors have good attitude to
the theoretical design of the policy than what practically have been done in
implementing if. In other word the current investment policy have got
theoretical acceptance by most of investors, though it has serious problems of
implementation that discouraged investors. This lead us to the conclusion that
the current investment policy would be more import and through giving
emphasis is to the implementation of the policy from work. As investors
suggested the government and investors should express their interest to jointly
work together to identify constraints and examine solutions for lack of properly
implementing policy.

28
As conclusion, mist investors have many problems regarding source of fund to
invest, political instability, corruption, accessibility of financial resources,
economic, lack of infrastructure and tax levied on the investors of the town.

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 CHAPTER FIVE

5. Conclusion and Recommendation

5.1 Conclusions

Based on the findings stated above the following conclusions are drawn by
researcher on the determinants of investments movement and this research set
forth with an attempt to the extent of factors that determine investment
activities in Sebeta town.

The study indentified and concluded the factors that are important in
determining investment movement and performance in the town. They include
most of the factors on which traditional theory has focused such as investment
opportunities and resources potential, efficiency of workers, conditions of
socio-political and economic environment, access to market, provision of basic
infrastructure and the institutional performance in investment policy.

Sebeta town had many areas that are unemployed to a maximum possible that
open for potential investors and the majority of investors that are found in the
town is engaged in commercial activities private investors who want to engaged
in investment activities in the town, face difficulties of finance and lack of
credits when they started their business.

The investment bureau of the town also did not give much concern to provide
receive for the potential investors in the town with in short period of time.

The private investors of the town are affected by many factors to continue their
investment activities, they are affected by high tax levied on their income
generate and due to low encouragement from the investment offices push them
to not continue their investment activities.

Similarly as compared to existing appropriate investment policy opportunities

and advantages, the participation of investors in the town speciallyforeign

30
investors are low. The reason for such poor performance may be due to low
capacity of investment in attracting new foreign investors and poor
infrastructural such as road, pure water, electric power supply, health center,
modern school and building as supply basic necessities.

In additions to the investors listed problems investment officers listed

additional investment related constraints are to access finance from the bank,
bureaucratic procedures, infrastructure problems and investment awareness
problems are additional factors that determine investment activities.

In addition to the above investment activities constraints, there is a few

number female investors because of back ward cultural female biased in the
past and the females are not voluntary to participate on investment activities of
the town. This also makes the stable investment activities in the town.

In other words the capacity and skill of government institution in mobilizing

both human and natural resources for the growth and developing activates are
poor. Since the performance of the government of facials was not satisfactory
because of inadequacy of man power, lack of essential materials, skilled labor
man and lack of experience in working with private investors especially foreign
investors and the society. However, currently some improvement are observed
and there is a potential survey being conducted by the office of such as how to
initiate foreign investor and women on investors in the investment activities of
the town.

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 5.2 Recommendation

Many measure need to be take to stimulate to the determinants or

improvements of investment activities and to solve factors that affect
investment activates in Sebeta town. Depending on the above findings the
researcher would like to forward the following recommendation to both private
investors and for investment office of the town.

Investment has come to be widely recognized as a major potential contributor

to growth and development for any countries and town. However, investment
movements in the town were very low because of lack of infrastructure which
contributes significantly to economic development.

 Because of infrastructural problem are there (i.e. pure water, inactivity,

road hospital telephone) are not available well and it’s difficult to
investors to invest more in the town. So it is better if the government of
the town provide the facility of infrastructure, which contributes
significantly to economic development both by increasing the productivity
of one’s country economy and enhance the quality of standard living of
the individual and also the government must initiate the women
investors participation and facilitate the smooth police of investment for
both domestic and foreign investors by adjusting fair tax and facilitating
equally treatments of the town investors.
 On the other hand it is fruit able for the government to negotiate with the
society to peacefully resolves that problem and its is more advantage for
investors to cooperate with the government by increasing the culture of
participation in community developments especially infrastructural and
human rights.
 It is beneficiary for the community of the town if efficiently utilizes the
existing resources both natural and human resources to bring a smooth

32
 invest climate especially by decreasing the tax levied on the existing
investors.
 Generally investment related problem is not the responsibility of the
government alone, but all investors, the local community, the private
business man of the town will get by work together with the government
so as to attain the desired objectives.

33
 References

 Addis AlemBalem. (2003),Economic development and democracy in

Ethiopia, Addis Ababa press
 Barro, Robert and Jong, Whalee. (1994), “Losers and winners in
economic growth “ /in proceedings of the annual World Bank
Conference on Development Economics
 Baro, Robert (1998) “Economic growth in access section of countries
quarterly journal of economics,(pp407-443)
 BerhanuNega and SeidNuru (1998) “Macro economics performance
of Ethiopia 1991-1998 paper presented at 8th annual conference
of Addis Ababa.
 Investment guide,(2004),Ethiopia opportunities and conditions New York
and Geneva,
 Makiw, (2002).Macroeconomics, fourth edition worth publisher, New
York.
 Ethiopia investment authority document (2001/2002/2003).
 Oromia investment commission (April 2005).

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 Appendix

Jimma University
Collage of Business and Economics
Department of Management
Questionnaires

The following are intended to collect data from investors of the town that
engaged in investment activities of Sebeta town. This questionnaire is prepared
to assess the major factors determining investment activates in the town.
Please encircle and write the answer on the provide answer sheet.

1. Sex A. Male  B. Female 

2. Age ______________________
3. Educational status
A. Illiterate  B. Primary School  C. Secondary School 

D. College and University graduate  E. Vocational training 

4. In which types of investment are you engaged currently.

A. Manufacturing (Industry)  B. Agriculture 

C. Financial Investment  D. Services  E. Other specify _______

5. Does your educational status have positive impact on your activity?

A. Yes  B. No 

6. If your response for question No 5 is yes please justify

_______________________________________________________________________,

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If no again justify

____________________________________________________________

7. Have you ever faced problems during your engagement in the town?

A. Yes  B. No 

8. If yes, A. Social  B. Political  C. Economic  D. Raw material 

9. What do you suggest to solve their problem?

________________________________________________________________

10. What is your source of funds to invest?

A. Government Banks  B. Private Banks 

C. Credit and loan association  D. Other specify ___________

11. How do you rank the accessibility of their financial sources to investors?

A. Easy  B. Difficult  C. Medium 

12. If your choice for question No 11 is difficult is it because of

A. Lack of infrastructure 
B. Absence of financial intermediaries near to your area 
C. High interest rate  D. Lack of long term loan 
E. Other Specify _____________________________

13. If your choice for question No12 is infrastructure what types of

Problems regarding infrastructure faultier?

A. Telephone  B. Electric power 

C. Road  D. Water  E. Other Specify ____________

36
 14. What on the major problems of investment in the town?

________________________________________________________________

15. How tax levied on you income? A. Very high  B. Fair  C. Low 
16. Have you got any skill development (training) about investment before
the time you have started it? If no why? _______________________________

17. Do you have any plan to continue your investment activity?

__________________

18. What is your attitude toward the current investment police of the
government oftown?

A. Encouraging  B. Bad 

19. Give the reason for No 18 question, form your choice either of the two

________________________________________________________________

20. Give any suggestion that you think can contribute to initiate potential

Investors and activate she level of investment activities of thetown?

______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
____________________________________________________________________________

__________________
__________________
_____________Tha
nk you

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