1. Investment in Ethiopia

The highlights of investment proclamation and guideline bellows are compiled from investment proclamation no. 769/2012 and amended proclamation No. 849/2014 A reader should refer the document for a comprehensive understanding of the investment regime of Ethiopia.

Before planning to invest in Ethiopia and begin the investment procedure, it is advisable to consider the following:

•     familiarize with the  investment laws and regulation

•     decide on the areas of investment interest;

•     calculate the investment capital required;

•     have an idea of labor requirement;

  • have an idea of investment incentives and customs procedures;
  • have an idea of environmental situation;
  • have an idea of markets to focus on.

2. Investment areas exclusively reserved for the government

  • Transmission and distribution of electrical energy through the integrated national grid system;
  • Postal services with the exception of courier services;
  • Air transport services using aircraft with a seating capacity of more than fifty passengers.

3. Investment areas reserved to invest jointly with the government

  • Manufacturing of weapons and ammunition;
  • Telecommunication service;
  • Any private investor intending to invest jointly with the government shall submit its proposals to Privatization and Public Enterprise Supervising Agency and Ministry of Industry for approval.

4. Investment areas reserved for domestic investors

  • banking, insurance and micro credit and saving services;
  • packing, forwarding and shipping agency services;
  • broadcasting services;
  • mass media services;
  • attorney and legal consultancy services;
  • preparation of indigenous traditional medicines;
  • advertisement, promotion and translation works;
  • air transport services using aircraft with a seating capacity of up to 50 passengers.

5. Investment areas allowed for foreign investors

  • A foreign investor shall be allowed to invest in areas of investment specified in the Schedule attached hereto, except those areas provided for in number 1.3.3, 1.4.2, 1.7, 1.11.3, 1.11.4, 5.3, 6.2, 8.2, 9.2, 9.3 and 12 of the Schedule;

6. Forms of Investments

The investment may be carried out the following forms

  • Sole proprietorship;
  • Business organization incorporated in Ethiopia or abroad;
  • Public enterprise established in accordance with the relevant law;
  • Cooperative society established in accordance with the relevant law;
  • Any investment made in the forms of above shall be registered in accordance with commercial code or any relevant law;

Any investment made in the above forms should be register in accordance with the Commercial Code of the other applicable law.

7. Minimum Capital Requirement for Foreign Investors

  • Any foreign investor to be allowed to invest according to the proclamation, is required to allocate a minimum of US Dollar 200,000 for a single investment project;
  • The minimum capital requirement for a foreign investor investing jointly with domestic investors shall be US Dollar 150,000;
  • The minimum capital required of a foreign investor investing in architecture or engineering works or related technical consultancy services, technical testing and analysis or in publishing shall be
  • USD 100,000 if the investment is made on his own
  • USD 50,000 if the investment is made jointly with a domestic investor
  • A foreign investor re- investing his profit or dividends generated from his existing enterprise may not be required to allocate a minimum capital;
  • A foreign investor having brought investment capital into country should registered the capital & obtain a capital registration certificate;
  • The certificate shall be send to National Bank of Ethiopia by the Investment Agency

8. Remittance of funds

Any foreign investor shall have the right, in respect of his approved investment, to make the following remittances out of Ethiopia in convertible foreign currency at the prevailing rate of exchange on the date of remittance;

  • Profits and dividends accruing from the investment;
  • Principal and interest payments on external loans;
  • Payment related to technology transfer agreement;
  • Payment related to a collaboration agreement related to export oriented non-equity based foreign enterprise collaboration agreement;
  • Proceeds from the transfer of shares of parties ownership of the enterprise to domestic investor;
  • Proceeds from the sale or liquidation of the enterprise; and
  • Compensation payment

9. Investment Permit Application Procedure

A foreign investor, domestic investor or a partnership of foreign and domestic investor plans to invest in Ethiopia are expected to follow the investment procedures to obtain investment permit in Ethiopia

The following investors are required to obtain investment permit

  • domestic investors
  • foreign investors;
  • domestic and foreign investors investing in partnership;
  • foreign nationals not Ethiopian treated as domestic investors;
  • domestic investors investing in areas eligible for incentives and who are seeking to be beneficiaries of such incentives.

10. Application for Investment Permit by a Domestic Investor

An application for investement permit by a domestic investor shall be made in a form designed for such purpose and submitted to the appropriate investment organ together with the following document in one copy.

  • Every investor has a tax obligation and is required to obtain a tax payer identification number

(TIN) from Ethiopian Revenues and Customs Authority;

  • Where the application is signed by an agent a photocopy of his power of attorney;
  • Where the investement is to be made by an individual person, a photocopy of his identity card or  identifying his domestic investor status and  his recent two passport size photographs;
  • Where the investement is to be made by a business organization, a photocopy of its memeorandoum of articles of association;
  • Where the business organization is to be newly established, it shall submit a photocopy of the sharholders identity cards or a photocopy of identity cards evidencing their domestic investor status;
  • Where the investement is to be made by a public enterprise, a photocopy of the regulation under

Which it is established or a photocopy of its memeorandoum and articles of association;

  • Where the investement is to be made by a cooperative socitety, a photocopy of its articles of association and

11. Application for Investment Permit by a Foreign Investor

 

Application for investement permit by a foreign investor shall be made in a form designed for such purpose and submitted to the Agency together with the following document in one copy

  • Every investor has a tax obligation and is required to obtain a tax payer identification number

(TIN) from Ethiopian Revenues and Customs Authority;

  • Where the application is signed by an agent, a photocopy of his power of attorney;
  • Where the investement is to be made by an individual person, a photocopy of the relevant pages of a valid passport showing his identity and his recent two passport size photographs;
  • An Ethiopian permanently residing abroad, prefering tretement as a foreign investor, a  photocopy of a document evidencing that he is residing abroad;
  • Where the investement is to be made by a business organization incorporated in Ethiopia;
  • A photocopy of its memorandum and articles of association or where it is to be made established;
  • It shall submit a photocopy of the relevant pages of a valid passport of each sharholders showing his identity and recent two passport size photographs of the general managers;
  • Where there is a foreign national treated as a domestic investor in the business organization, a photocopy of the identity card evidencing the domestic investor status;
  • Where there is a juridical person or a branch of a foreign juridical person in the business organization, a photocopy of its memorandum of association and articles of association or similar documents of the parent company.

 

 

  • Where the investment is to be made by an Ethiopian branch of a foreign business organization incorporated abroad;
  • a photocopy of its memorandum and articles of associations or  a similar document of the parent company ;
  • a photocopy of a document attesting  the appointment of the branch manager, a photocopy of his valid passport, his two recent passport size photographs and commercial registration certificate of the business organization;
  • a photocopy of the minutes of resolution of the authorizing organ of the parent company authorizing the establishment of a branch company in Ethiopia;
  • Where it is a joint investment by domestic and foreign investors, in addition to the documents provided under bullet there above, photocopies of identity cards or photocopies evidencing the domestic investor’s statues, as the case may be;
  • A document evidencing the financial position or, identity or profile of the investor, as deemed appropriate by the Agency.
  • If all documents source are outside Ethiopia, it shall be authenticated by a foreign and domestic notary;
  • Where the permit is required by a person whose permit was cancelled sue to deliance of project, the Agency shall ascertain that the causes of the deliance and cancellation are rectified.
  • The Ethiopian Investment Agency (EIA) approves the submitted documents and issues an investment permit in 2-3 hours’ time if the above documents are received in full.

12. Application for Investment Permit for Expansion or Upgrading

An application for investement permit to expand on upgrade an existing enterprise shall be made in a form designed for such purpose and  submitted to the Agency together with the following documents in one copy;

  • Where the applicationis signed by an agent a photocopy of his power of attorney;
  • Where the investement is made by a sole propriete, a photocopy of the relevant identity or pass port copy, his domestic status and two passport size photograph;
  • Where the investement is made by a business organization, a photocopy of the company’s articles of association and two passport size photocopy of the general manager;
  • A photocopy of a valid business licence of the existing enterprise;
  • A photocopy of project feasibility study.

 

13. Issuance of Investment Permit

  • The appropriate investment organ shall  after examining the investment activity issue investment permit upon receipt of the appropriate fee, where the application if found acceptable; or
  • Notify the investor of its decision and the reason thereof in writing, where the application if found unacceptable;
  • Notify the investor of its decision and the reason thereof in writing, where the application is found unacceptable;
  • An investor may not be required to obtain a business license until the commencement of production or rendering of service upon completion of his project;
  • No investor may, at any time, be allowed to invest by holding both a domestic and a foreign permit.

14. Renewal of Investment Permit

  • An investment permit shall be renewed every year until the investor commences the marketing of his products or services;
  • An application shall be submitted and renewed with in one month
  • The appropriate investment organ shall renew the investment permit, where satisfied, as to the existence of sufficient cause for the delay in the commencement of completion of his project implementation;
  • Any investor, who has not commenced implementing his project within two years since the issuance of the investment permit, shall have his permit cancelled without any precondition.

15. Transfer of an investment project under implementation phase

Any investor wishing to transfer his project, which is under implementation phase and for which a business license is not yet issued, to another investor shall submit his request, by filling an application form together with the following documents

  • A photocopy of renewed investment permit;
  • A photocopy of the sales agreement authenticated by a notary;
  • A photocopy of land lease agreement transferred to the buyer as the case may be

 

16. Suspension of investment permit

 

If the investor violates the provisions of proclamation and regulation or directives issued to implement the proclamation, appropriate investment organ may suspend the investment permit until the investor takes due corrective measure

17. Revocation of the investment permit

The appropriate investment organ may revoke an investment permit where it ascertains that;

  • if the permit obtain with fraudulently or by submitting false information or statement;
  • misuse or illegal transfer of investment inventive;
  • failed to renew the investment permit without good cause;
  • failed to submit progress report of his project for two consecutive periods;
  • if the project cannot commence operation with in the period and the Agency believes the project will not be operational.

Upon revocation of an investment permit, the investor shall immediately lose entitlement to all benefits and required to return his incentives to concerned government organs.

18. Duty to report and cooperate

Any investor with investment permit shall submit progress reports on implementation of his project to the appropriate investment organ at the end of every three months and provide information about his investment activities whenever it required by appropriate investment organ.

19. Residence Permit

Head quarter of Department for Immigration and Nationality Affairs in Addis Ababa issues a residence permit to a foreign investor based on submission of;

  • investment permit,
  • passport;
  • a foreign investor, a shareholder of a company or a branch company and an expatriate staff who has a work permit, are also entitled to a residence permit.

20. Land Acquisition

  • In Ethiopia, land is public property. Individuals, companies and other organizations have only use right of land.
  • There are two broad classifications of land for rent or lease purposes for rural land and urban lands.
  • Application for land acquisition can be made during a field visit of an investor and after taking out an investment license.
  • The Ethiopian Investment Agency (EIA) has the mandate to facilitate the allocation of land for FDI projects throughout the country.
  • Urban land for other activities is available on an auction basis. The auction prices vary, depending on demand.
  • The lease and rental prices of urban and rural land vary according to location, type of investment and class of land. The land cannot be mortgaged or sold,
  • The lease or rental value of land and the fixed assets thereon may be mortgaged or transferred to a third party.

21. Urban land Acquisition

 

  • The regional administrative units are in charge of allocating urban land for investors;
  • Urban land is divided into land for industrial use and land for other activities.

22. Rural land Acquisition

  • Rural land is rented mainly for agriculture. The Ministry of Agriculture and Rural Development allocates farm land to foreign investors;
  • The ministry provides supports ranges from providing information, technical support, and facilitation of other public services to private investors investing in agriculture and
  • The rental price of rural land is generally low. There is strong commitment from the government to avail the country’s fertile land for investment.

23. Industrial land Acquisition

 

  • A number of industrial zones with the necessary infrastructural facilities (roads, electricity, water, telephone) are established in the major cities and towns in order to support the country’s drive for rapid industrialization.
  • Industrial land in industrial zones is allocated to investors at fixed prices. Land for export-oriented industries is generally available at concessionary rate.

 

Leave a Reply