In a decisive move aimed at revitalizing its economy and positioning itself more competitively in the global market, Ethiopia has announced a comprehensive plan to open up previously restricted commercial sectors to foreign investors. Spearheaded by Prime Minister Abiy Ahmed, this strategic initiative seeks to address longstanding challenges and unleash the full potential of key industries.
The directive, released by the Ethiopian Investment Board and chaired by Prime Minister Abiy Ahmed, marks a departure from previous policies aimed at shielding specific sectors from foreign competition. This directive, known as the Directive to Regulate Foreign Investors’ Participation in Restricted Export, Import, Wholesale, and Retail Trade Investments №1001/2024, outlines detailed criteria and conditions for foreign investment across multiple sectors.
Retail Sector
Under the new regulations, foreign investors are now permitted to engage in retail trade, a domain previously reserved for domestic players. The directive specifies stringent requirements for foreign investors looking to enter this sector. For instance, investors interested in establishing supermarkets must commit to opening a minimum number of outlets within a defined timeframe. Specifically, within three years, investors must establish five supermarkets with a floor area of at least 2000 square meters, with at least two of them fully operational. Additionally, investors looking to establish hypermarkets must invest in facilities with a minimum floor size of 5,000 square meters, while larger facilities must have a floor area of 10,000 square meters.
Export Sector
Foreign investors are now permitted to oversee the management and export of various commodities, including raw coffee, khat, oilseeds, pulses, hides and skins, forest products, poultry, and livestock. However, entry into this sector is subject to strict contractual commitments and financial thresholds. For example, foreign investors seeking to export raw coffee must commit to exporting at least USD 10 million worth of the commodity within a permit year and demonstrate a track record of sourcing at least USD 10 million worth of raw coffee annually from Ethiopia over the previous three years. Similar financial thresholds apply to other commodities, with minimum contractual commitments ranging from USD 1 million to USD 10 million depending on the product.
Import Sector
The new directive also extends to the import industry, with exceptions for fertilizer and petroleum imports. Foreign investors interested in engaging in import trade must meet specific criteria, including being a manufacturer, an agent of a manufacturer, an existing manufacturing entity in Ethiopia exporting at least 50 percent of its goods, or an investor committed to importing at least USD 10 million worth of commodities annually. Additionally, the directive stipulates that the Ministry of Trade and Regional Integration, along with other relevant government agencies, will form a permanent joint committee to oversee the implementation of these regulations and monitor progress.
Wholesale Trade
Foreign investors are granted permission to participate in wholesale trade activities, with exceptions for fertilizer imports. The directive emphasizes the establishment of a permanent joint committee comprising key government ministries and agencies to ensure effective implementation and oversight of these reforms.
Overall, Ethiopia’s decision to open up previously protected sectors to foreign investment represents a significant shift in policy direction and underscores the government’s commitment to creating a more open and dynamic business environment. By laying out clear guidelines and criteria for foreign investors, Ethiopia aims to attract much-needed capital and expertise while fostering economic growth and development.
