After years of legislative limbo, Ethiopia’s Startup Proclamation has officially passed into law — marking the end of a five-year policy odyssey that has tested the patience of founders, investors, and government reformers alike.
In a unanimous vote during its second emergency session this July, Ethiopia’s House of People’s Representatives approved the long-anticipated law, laying down the first legal bedrock for the country’s startup ecosystem. The proclamation was passed five years after it was first proposed and weeks after the Council of Ministers gave it the green light.
The new law, hailed by local outlet StockMarket.et as “a bold step toward empowering Ethiopia’s innovation ecosystem,” aims to transform the country’s fragmented startup sector into a more formalized and supported part of the national economy — assuming, of course, that implementation doesn’t go the way of Nigeria’s once-lauded Startup Act, now more cautionary tale than case study.
A Legal Framework for a Delayed Future
The Ethiopian Startup Proclamation defines a startup as a tech-based company less than three years old with annual gross revenues below 5 million birr (about $38,000 at today’s exchange rate). That threshold, however, was set when the dollar traded at just 57 birr.
But regardless of currency headwinds, the law provides a bouquet of policy incentives:
A five-year corporate tax holiday for certified startups
Exemptions on capital goods imports for three years
Reduced withholding tax on angel investment
Preferential access to public procurement, with 5% of ICT tenders reserved for startups
The creation of an Ethiopian Startup Fund worth 2 billion birr (~$36 million) for grants and soft loans
Even Ethiopia’s notoriously rigid state-owned enterprises (SOEs) aren’t spared — the law mandates that SOEs like Ethio Telecom and Commercial Bank of Ethiopia pilot at least one proof-of-concept with a startup every fiscal year.
Startup Desk
To execute all this, the Ethiopian Investment Commission (EIC) is charged with establishing a one-stop “Startup Desk” — a central authority to issue certificates, coordinate with regional states, and maintain a national startup registry. The law also paves the way for regulatory sandboxes under the National Bank of Ethiopia and the Ethiopian Communications Authority, allowing fintech and telecom startups to test products under relaxed rules for up to 12 months.
Meanwhile, accredited incubators and accelerators are set to receive co-financing of up to 30% of their project costs. Public universities will be required to allocate 2% of research budgets to partnerships with certified startups — a subtle but symbolic nudge toward breaking down Ethiopia’s long-standing disconnect between academia and industry.
The law will be implemented at all levels — federal, regional, and city — according to the parliament’s Standing Committee on Human Resources, Employment, and Technology Affairs. And for existing startups, there’s a 90-day window to register and retroactively claim benefits once the law is published in the Federal Negarit Gazeta.
Timing, Missed Opportunities, and Regional Benchmarks
Since 2020, Ethiopia’s startup landscape has changed dramatically — with or without official backing. Local founders have relied on donor-funded incubators, informal angel networks, and considerable personal grit to survive. The absence of formal support has forced many to either scale prematurely or move abroad.
Other African countries, meanwhile, didn’t wait. Tunisia, Nigeria, Algeria, etc., have already implemented startup-friendly regulatory frameworks that have attracted international capital and talent. Nigeria’s own Startup Act — once positioned as a continental benchmark — has now become a counterexample, offering Ethiopia a warning: passing a law is one thing; making it work is another.
The Road Ahead: Skepticism, Strategy, and Hope
Despite the enthusiasm, the Startup Proclamation will only matter if Ethiopia does what it has historically struggled with: implementation. That means funding the Startup Fund, activating the Startup Desk, aligning federal and regional procedures, and addressing FX and import bottlenecks that choke many tech ventures before they scale.
The Ethiopian government has positioned the law as part of a broader vision to shift the country from a passive consumer of foreign tech to an active producer. That ambition will require more than policy — it demands infrastructure, trust, and capital markets deep enough to support long-term growth.
For now, the law’s passage marks a rare policy win in a country still navigating post-war recovery, macroeconomic instability, and a youth bulge desperate for jobs. Whether the Startup Proclamation catalyzes real change or becomes yet another shelved reform depends on what comes next.
Because in Ethiopia’s startup journey, legislation was the easy part. Execution — coordinated, consistent, and cash-backed — is where the real work begins.