Addis Ababa, Ethiopia – Ethiopia has significantly revised its investment regulations, lifting previous stringent conditions for foreign investors seeking to engage in the retail and export sectors. The new directive, issued by the Ethiopian Investment Board, aims to attract more foreign capital and foster a more predictable and competitive investment environment.
The most notable change impacts foreign investors wishing to enter the retail market. The previous prerequisite, which mandated the establishment of five supermarkets or two hypermarkets, has been abolished. It is now replaced with a requirement to register a minimum capital of $2.5 million USD. The new directive specifies that this capital can be paid in both kind and cash.
However, the new regulation also includes a provision for foreign investors seeking to engage in retail with “small capital” but a “good reputation” for selling “single products.” Such investors may obtain a license based on a “case-by-case decision” by the Investment Board.
The directive, titled “Implementation Guideline for Foreign Investor Participation in Reserved Export, Import, Wholesale, and Retail Trade Businesses,” supersedes a similar directive issued just last year in March 2024. The Investment Board stated that while the previous law aimed to open up these sectors to foreign investors, its implementation was deemed “insufficient,” necessitating the new reforms. The stated objectives behind these amendments include ensuring “equal playing field for domestic and foreign investors,” fostering greater “investor confidence,” and establishing a system to attract “additional foreign capital.”
The previous directive, issued under the Ethiopian Investment Board chaired by Prime Minister Abiy Ahmed, had opened up previously reserved sectors—which had been exclusively for domestic investors for decades—to foreign participation. However, it came with a number of specific and demanding conditions.
For retail trade, the former directive imposed detailed requirements on the number and size of commercial establishments. Foreign investors seeking a retail license were required to establish at least one of three types of market spaces, all managed under “a single ownership structure.”
The primary option under the old rule mandated a foreign investor to agree to establish five supermarkets, each covering at least 2,000 square meters, within three years. At least two of these supermarkets had to be established before the license was even granted, with the remaining to be completed within the three-year period.
The second alternative required the establishment of two hypermarkets within three years. At least one hypermarket, each covering 5,000 square meters, had to be established before licensing. The third option was the construction of a single massive market place spanning 10,000 square meters. All these stringent market establishment preconditions have now been revoked by the new directive.
Another significant modification targets foreign investors involved in the export sector. Previously, foreign investors exporting raw coffee, oilseeds, khat, pulses, forest products, hides and skins, chicken, and livestock were required to meet mandatory annual export quotas in their first year of licensing. For instance, raw coffee exporters had to commit to exporting at least $10 million USD worth of product, oilseed exporters $5 million USD, and khat and pulse exporters $1 million USD. Exporters of hides and skins faced a minimum requirement of $500,000 USD worth of exports in their initial year.
The new directive eliminates these mandatory export quotas. Instead, foreign investors are now required to submit a “detailed personal and capacity statement report prepared by themselves or a recognized national or international certifying institution.” This report must verify that the investor is “not included in any sanction list or similar restriction lists acceptable to the Government of Ethiopia.” Furthermore, the report must include “any past investigation related to money laundering, drug trafficking, or financing of terrorism.”
