I. Scope and Purpose

With the aim of creating a one stop service for investors, the Ethiopian Investment Commission has recently issued a Directive Regulating the Issuance of Work Permit to Expats Employed in Investments and the Implementation of Knowledge and Skill Transfer from Expats to Ethiopians (Directive No. 772/2021 hereinafter ‘the Directive’ ). The Directive seeks to regulate the employment of expats in those investment enterprises that fall within the administrative mandate of the Commission. As such, whilst the Expat Work Permit Directive (Directive No. 23/2018)  that was issued by the Ministry of Labour and Social Affairs will continue to regulate the employment of expats in other sectors of the economy, the Directive seeks to regulate the employment of expats in wholly foreign owned investments,  joint investments that are made between domestic and foreign investors, investments made by foreign nationals who are treated as a domestic investors, and investments made by domestic investors in those areas that are eligible for incentives.

The  Directive also seeks to regulate the employment of refugees who hold a valid identity paper and are seeking to engage in wage employment in Ethiopia. However, the Directive does not regulate the employment of refugees in rural and urban investment projects that have been jointly designed by the Ethiopian government and the international community with the intention of benefiting refugees. 

II. Top Management and Impermanent Non-management Positions

As with the previous directive issued by Ministry of Labor & Social Affairs, the Directive allows an investor to employ foreigners for top management positions in either the construction or implementation phases of a given investment project without any restriction and without the need for complying with preconditions set for other expats - particularly in relation to positions that can be filled by Ethiopians and duties pertaining to knowledge and skill transfer

In relation to impermanent non-management positions, the new Directive has laid out clear instructions that regulate the number of expats that can be employed and the duration of such an employment during the investment project’s construction, installation, commissioning, implementation and maintenance phases.  In this respect, although a company is not expected to explore the availability of Ethiopians before hiring expats for management and impermanent non-management positions, they are expected to set up and provide on-the-job training in order to replace such expats with Ethiopians within a defined period of time.

III. Other Positions within the investment enterprise

In relation to positions that are neither top management nor impermanent non-management positions, the Directive has a separate process for the validity and renewal process of work permits.  In this regard, whilst a work permit to be provided to expats for such positions are valid for only one year and such work permits cannot be renewed for more than three years, the Directive provides an exception for these requirements in compelling or necessary conditions and in cases where a company has invested a capital of at least 40 million USD or hired more than one thousand five hundred employees. 

Furthermore, the Directive barres a company from assigning a new expat employee to such positions on which a foreigner had previously served for three years. However, the Directive provides an exception from this requirement when it is unequivocally demonstrated through evidence that the transfer of knowledge and skill was not properly implemented for reasons not attributable to the company, or because the trained Ethiopians left the company on their own will, or the contract of employment was terminated through the fault of the trainee employee.

Similarly, according to the Directive, the renewal of a work permit may only be approved only if it is proven that the enterprise has executed the training of Ethiopian replacements appropriately. However, a work permit may also be renewed without such requirement when it is proved by the Commission that the expat is relevant for the position and that the particular work is of a continuous nature.

IV. Knowledge and Skill Transfer

A key aspect of the knowledge transfer scheme in the Directive is the obligation of employers to develop a program that clearly outlines not only the timeline for the replacement of expat employees, but also the nature and schedule of such training. In this regard, the employer is mandated to submit quarterly performance reports of trainings that have been offered or due to be offered by the employer. The Directive also requires that the first-round training program that is to be prepared by the employer shall, at the latest, be presented within one week from the date of employment of the expat.

Furthermore, given the importance of knowledge transfer schemes, the Directive also empowers the Commission to conduct field monitoring every three months in order to assess the implementation and effectiveness of those on-the-job trainings that are being offered to Ethiopians. Beyond these obligations, the employer is also expected to notify the Commission in writing, within 5 working days, if the expat either leaves their place of work, if their employment contract is either terminated or has ended, or if the address of the workplace has changed. 

V. Expat Obligations

The Directive also imposes certain obligations on the expats in relation to fulfilling requirements related to their employment.  For example, the Directive states that the employee must appear at a workplace in possession of the issued work permit, must adhere to those procedures that seek to transfer standard knowledge and skill to Ethiopian replacements and comply with the Commission’s request for reporting. Furthermore, the employee is expected to only work for the employer specified in the work permit, refrain from engaging in illegal and immoral activities and only engage in the position/profession registered in the work permit.

Given that failing to comply with the employer and employee obligations that are prescribed under this Directive will result in the revocation of the work permit, it is in the best interest of both parties to not only adhere to their respective obligations, but to also ensure that the particular implementation and supervision criterions listed in articles 5, 6, 9 and 10 of the Directive are understood, respected and observed.