I.              Introduction

Ethiopia has introduced a new Directive to Regulate Foreign Investors’ Participation in Restricted Export, Import, Wholesale and Retail Trade Investments,Directive No. 1001/2024 aimed at gradually liberalizing the import and export sectors to facilitate foreign investment and enhance market openness. The directive addresses both legal and practical gaps in the existing investment regulations, introducing specific provisions governing the import, export, wholesale, and retail trade activities of foreign investors.

II. Implications of the Directive

The Directive introduces significant changes for both investors and consumers in Ethiopia’s trade sector. For investors, it creates new opportunities in import, export, wholesale, and retail trade while imposing strict capital requirements, export obligations, and sectoral restrictions, shaping the investment landscape. Consumers stand to benefit from greater product availability, competitive pricing, and improved service quality due to increased foreign market participation. However, local businesses may face heightened competition, which could impact market stability and product diversity.

From a regulatory standpoint, the Directive reinforces the Ethiopian Investment Commission’s (EIC) authority in ensuring compliance, requiring investors to navigate evolving approval processes and enforcement mechanisms.

III.          Foreign Investment in Export Trade

Under the new directive, foreign investors are allowed to engage in export trade by purchasing and exporting designated commodities, including raw coffee, khat, oilseeds, pulses, hides and skins, forest products, poultry, and livestock. However, their participation is contingent upon demonstrating relevant experience, operational capability, or established market linkages within the sector.

Export Trade Requirements

To qualify for export trade participation, foreign investors must meet the following financial thresholds:[1]

    • Raw Coffee: Must have purchased at least USD 10 million worth of Ethiopian products over the past three consecutive years and commit to an annual purchase of USD 10 million.
    • Oilseeds: A minimum purchase of USD 5 million over the past three years, with an annual commitment of USD 5 million.
    • Khat and Spices: A minimum purchase of USD 1 million over the past three years, with an annual commitment of USD 1 million.
    • Hides, Skins, Leather, and Poultry: A minimum purchase of USD 500,000 over the past three years, with an annual commitment of USD 500,000.
    • Live Animals: No prior purchase history or contractual obligation is required.

For new foreign investors without a prior purchase history, the directive sets the following minimum investment requirements to ensure substantial financial commitment and sectoral engagement:

    • Raw Coffee: A minimum investment of USD 12.5 million is required.
    • Oilseeds: Investors must commit at least USD 7.5 million.
    • Khat and Spices: A minimum investment of USD 1.5 million is mandated.
    • Hides, Skins, Leather, and Poultry: Investors must allocate at least USD 750,000.

Investment or business licenses are subject to renewal only upon confirmation that the investor has met their obligations.[2] Failure to comply may result in suspension or cancellation of the license, leading to the loss of associated rights and benefits.

IV.          Foreign Investment in Import Trade

Foreign investors may engage in all income-generating import sectors, except for the fuel and fertilizer trade, provided they demonstrate the necessary expertise, capacity, or market linkages.[3] Ethiopia restricts fuel and fertilizer trade to safeguard foreign exchange reserves, regulate prices, stabilize markets, and protect local industries. To maintain economic stability and support domestic production, the government prioritizes foreign currency allocation for essential sectors such as energy and agriculture while implementing targeted subsidies to ensure affordability. State-owned enterprises, including the Ethiopian Petroleum Supply Enterprise (EPSE) for fuel and the Ethiopian Industrial Inputs and Production Supply Enterprise (EIIPSE) for fertilizer, oversee distribution to regulate supply and mitigate global price fluctuations.

To qualify for participation in the import sector, foreign investors must meet at least one of the following conditions:[4]

    1. Manufacturing Requirement: Provide evidence that the product they intend to introduce into the market is self-manufactured.
    2. Authorized Agency: Present proof of agency authorization for the imported product.
    3. Export Participation: Demonstrate prior involvement in the Ethiopian investment sector and provide proof of exporting at least 50% of their product or service to foreign markets.
    4. Investment Threshold: If not a manufacturer or authorized agent, commit to importing goods valued at a minimum of USD 10 million annually, submit a detailed business plan, and enter into a formal agreement with the relevant licensing authority.

Additionally, the directive also applies to the renewal, suspension, and cancellation of import licenses, ensuring consistency in regulatory oversight.[5]

V.            Foreign Investment in Wholesale and Retail Trade

Wholesale Trade Participation

Except for the wholesale trade of fertilizer, foreign investors are allowed to sell both locally sourced and imported products within Ethiopia’s domestic wholesale market. To obtain an investment permit, they must meet the following requirements:[6]

    • Contract Commitment: Provide written evidence of their willingness to enter into a contractual agreement.
    • Commercial and Logistics Infrastructure: Establish modern commercial networks and logistics services to ensure efficient business operations.
    • Regulatory Compliance: Meet the minimum commercial and logistical standards set by the relevant ministry.

Retail Trade Participation

Investment permits for foreign investors in the retail sector are granted based on land or retail space occupation and investment commitments, as follows:[7]

    • Supermarkets: The investor must operate within a minimum retail space of 2,000 square meters and commit to establishing at least five supermarkets within three years.
    • Hypermarkets: The investor must operate within a minimum retail space of 5,000 square meters and establish at least two hypermarkets within three years.
    • Malls: The investor must operate within a minimum retail space of 10,000 square meters and demonstrate the capacity to develop a shopping mall.

Before obtaining an investment permit, investors must first meet all preconditions for securing a trade permit. The Ministry of Trade is responsible for overseeing the registration and licensing process for supermarkets, hypermarkets, and malls in accordance with the applicable regulatory framework.

For foreign investors with minimal capital and qualifications, the regulatory board will assess applications based on specific conditions applicable to small-scale trade operations.[8]

Conclusion

The newly enacted directive represents a significant step toward opening Ethiopia’s market to foreign investors while ensuring compliance with sector-specific requirements. By introducing clear financial thresholds, operational criteria, and licensing conditions, the government aims to attract strategic investments while maintaining regulatory oversight. Investors looking to enter the Ethiopian market should carefully assess these requirements to ensure compliance and optimize their investment strategies.

Footnotes

[1] Article 6, Ethiopian Investment Board Directive to Regulate Foreign Investors’ Participation in Restricted Export, Import, Wholesale and Retail Trade Investments No.1001/2024.

[2] Article 7, Id.

[3] Article 8, Id.

[4] Article 9, Id.

[5] Article 10, Id.

[6] Article 11, Id.

[7] Article 13, Id.

[8] Ibid.

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