New Directive on Foreign Investors in Trade Sectors in Ethiopia
Foreign investors involvement in various trade sectors in Ethiopia is now regulated by the newly issued Ethiopian Investment Board Directive No. 1001/2024. From export to retail trade, this directive sets guidelines to ensure fair participation of foreign investors while promoting economic growth.The Ethiopian Investment Board has introduced Directive No. 1001/2024 in March 2024, to regulate the involvement of foreign investors in restricted sectors of export, import, wholesale, and retail trade. This directive aims to delineate the areas within these sectors reserved for domestic investors and specify the conditions under which foreign investors may participate. Additionally, it outlines the roles and responsibilities of governmental bodies in facilitating and regulating foreign investors investment activities.
Scope of Application: Directive No. 1001/2024 applies to the participation of foreign investors in trade sectors designated for domestic investors by the Ethiopian Investment Board. It governs the application and issuance of permits for foreign investors in these sectors, as well as any related procedures and regulatory functions carried out by relevant governmental bodies.
CONDITIONS FOR FOREIGN INVESTOR PARTICIPATION IN RESTRICTED TRADE SECTORS
EXPORT TRADE
Foreign investors are permitted to engage in the export trade of various commodities, including raw coffee, khat, oilseeds, pulses, hides and skins, forest products, poultry, and livestock sourced from the local market. However, their eligibility for investment and business permits is contingent upon possessing relevant experience, capacity, or market linkage in the sector, as determined by the appropriate regulatory body.
This directive sets the stage for understanding the regulatory framework governing foreign investment in Ethiopia’s trade sectors. By outlining permissible activities and conditions for participation, it provides clarity and guidance for both investors and regulatory authorities alike.
Export Trade Investment Permit Conditions: To obtain an investment permit for engaging in export trade activities in Ethiopia, foreign investors must adhere to specific conditions outlined in this directive. These conditions vary depending on the type of commodity involved. Here are the key provisions:
Raw Coffee Export: Foreign investors seeking to export raw coffee must have procured an average of at least 10,000,000 US Dollars annually from Ethiopia over the past three years. Additionally, they must contractually agree to export at least 10,000,000 US Dollar worth of raw coffee within the permit year.
Oilseeds Export: For export trade of oilseeds, foreign investors must have procured an average of at least 5,000,000 US Dollars annually from Ethiopia over the past three years. They must also agree to export at least 5,000,000 US Dollar worth of oilseeds within the permit year.
Khat and Pulses Export: Foreign investors engaged in exporting khat and pulses must have procured an average of at least 1,000,000 US Dollars annually from Ethiopia over the past three years for each commodity. They must also agree to export at least 1,000,000 US Dollar worth of each commodity within the permit year.
Hides and Skins, Forest Products, and Poultry Export: Investors dealing with these commodities must demonstrate an annual performance of at least 500,000 US Dollars over the past three years for each commodity. They must contractually agree to export at least 500,000 US Dollar worth of each commodity within the permit year.
Livestock Export: No prior experience or permit-linked contractual commitments are required for foreign investors engaging in the export trade of livestock.
New Investors: Foreign investors with no prior history of procuring from Ethiopia must demonstrate an established market and submit purchase order contracts for various commodities.
Manufacturing Enterprises: Foreign manufacturing enterprises using raw materials imported from Ethiopia or sourced domestically must provide sufficient proof of their process.
Export Trade Investment Permit Renewal and Revocation: Foreign investors must comply with all conditions stipulated under the agreement for the renewal of their investment permits or business licenses. Non-compliance may lead to suspension or revocation of permits.
PARTICIPATION IN IMPORT TRADE
Foreign investors, except for fertilizer and petroleum import trade, can engage in all import trade investments reserved for domestic investors. Issuance of investment permits is guided by the applicant’s relevant experience, capacity, or market linkage in the sector.
Import Trade Investment Permit Conditions: Applicants for import trade permits must fulfill specific conditions or demonstrate standing before receiving an investment permit. These include being a manufacturer, an agent of a manufacturer, or committing to import commodities worth at least 10,000,000 US Dollars annually.
Wholesale Trade and Investment Permit Conditions: Foreign investors can engage in wholesale trade investments reserved for domestic investors. They must commit to building modern marketing infrastructure and providing streamlined logistics services.
Retail Trade: Foreign investors can engage in retail trade investments reserved for domestic investors. Specific conditions regarding floor area and establishment numbers are outlined for supermarkets, hypermarkets, and malls.
This directive outlines the conditions and procedures for foreign investors to engage in export, import, wholesale, and retail trade activities in Ethiopia. Compliance with these regulations is essential for obtaining and renewing investment permits and business licenses.
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