Foreign Investors’ Participation in Restricted Trade Sectors: Legal Update on the Ethiopian Investment Board Directive No. 1001/2024
1. Introduction
For long, Ethiopia aimed to build a sustainable national economy anchored in domestic capabilities. Investment Regulation No. 474/2020 initially shielded certain sectors from foreign competition; however, the policy objectives were not fully realized, prompting a shift in approach.
In response, the Ethiopian Investment Board issued Directive No. 1001/2024 (“the Directive”), opening previously restricted export, import, wholesale, and retail trade sectors to eligible foreign investors. The Directive lifts the earlier restrictions and introduces conditions that must be met to obtain investment permits. This legal update highlights the key features of the Directive.
2. Justification for the Directive
Although these sectors were reserved for domestic investors to shield them from foreign competition, the Directive states that the intended policy outcomes were not fully achieved. It further notes that gaps related to unfair competition persisted. Hence, the Directive seeks to introduce a new approach that allows capable foreign investors to participate in these sectors under defined conditions.
3. Scope of Application
The Directive applies to foreign investors seeking to participate in trade sectors traditionally reserved for domestic investors. It covers permit applications, issuance procedures, eligibility conditions, and the regulatory oversight functions of relevant authorities.
4. Conditions for Foreign Investors’ Participation in Restricted Trade Sectors
Participation in Export Trade
The Directive permits foreign investors to engage in export trade of raw coffee, khat, oilseeds, pulses, hides and skins, forest products, poultry, and livestock purchased on the market.
Conditions vary by commodity:
- Raw coffee export: Minimum average procurement of USD 10,000,000 annually for the past 3 years, and contractual export commitment of USD 10,000,000 for the permit year.
- Oilseeds export: Minimum average procurement of USD 5,000,000 annually for the past 3 years, and a contractual commitment of USD 5,000,000 within the permit year.
- Khat and pulses: Minimum average procurement of USD 1,000,000 annually for the past 3 years, and commitment of USD 1,000,000 within the permit year.
- Hides and skins, forest products, poultry: Minimum annual performance of USD 500,000 for the past 3 years, with USD 500,000 contractual commitment within the permit year.
- Livestock export: No prior experience or contractual commitment required.
- Investors with no prior experience: Must demonstrate established markets and submit purchase orders of:
- USD 12,500,000 for raw coffee
- USD 7,500,000 for oilseeds
- USD 1,500,000 for khat and pulses
- USD 750,000 for hides/skins, forest products, poultry
- USD 500,000 for other covered products
- Manufacturing enterprises: May supply product to the market by proving that raw materials are imported or procured locally.
Participation in Import Trade
Foreign investors may participate in all import trade activities reserved for domestic investors under the Regulation, except fertilizer and petroleum.
Conditions:
- Manufacturer of the imported product, with evidence.
- Agent of a manufacturer, with evidence.
- Existing manufacturer exporting 50%+ of production.
- Non-manufacturer investors must submit a plan and agree to import at least USD 10,000,000 worth of goods annually.
Participation in Wholesale Trade
Foreign investors may engage in all wholesale sectors reserved for domestic investors, except fertilizer import.
Participation in Retail Trade
Foreign investors may participate in all retail sectors reserved for domestic investors.
Conditions include:
- Supermarkets: Minimum 2,000 sq.m floor area; build 5 supermarkets in 3 years; open at least 2 before permit issuance; sign an agreement before the permit.
- Hypermarkets: Minimum 5,000 sq.m; build 2 in 3 years; open 1 before permit; agreement required before permit.
- Malls: Minimum 10,000 sq.m; must complete construction and sign required agreements.
Institutional Frameworks
EIC: Receives applications, checks compliance, issues commercial registration and permits, prepares and signs agreements, and monitors implementation jointly with MoTRI.
MoTRI: Issues business licenses and regulates trade practices.
Joint Committee: EIC, MoTRI, Ministry of Industry, Ministry of Revenue, Ministry of Agriculture, Customs Commission, NBE, and others evaluate progress and take corrective action.
Disclaimer: This information is a general overview. Laws may change after publication. This is not legal advice. Please refer to full terms and conditions on our website.