- Introduction
Ethiopian Investment Board has enacted a new Directive to Regulate Foreign Investors’ Participation in Restricted Export, Import, Wholesale and Retail Trade Investments Number 1082/2025 (the “Directive”) which has repealed and replaced the Ethiopian Investment Board Directive to Regulate Foreign Investors’ Participation in Restricted Export, Import, Wholesale and Retail Trade Investments No. 1001/2024 (the “Repealed Directive”).
In line with Ethiopia’s ongoing efforts to harmonize and simplify its legal and regulatory framework to enhance its attractiveness to foreign investors across all sectors of the economy, the Ethiopian Investment Board has enacted a new Directive. In general terms, this Directive seems to be part of a broader national strategy aimed at creating a more flexible, transparent, and investor-friendly environment, and addresses specific legal and procedural constraints that previously created obstacles foreign participation in key sectors of Ethiopia’s economy.
- Key Reasons for Enacting the Directive
As reflected in the preamble and underlying spirit of the Directive, its enactment was necessitated by the following key considerations:
- The implementation of the Repealed Directive, which permitted qualified foreign investors to engage in export, import, wholesale, and retail trade sectors, has proven to be inadequate in certain areas like addressing practical and systemic challenges for the foreign investors;
- Additionally, the comprehensive re-evaluation of the Repealed Directive’s implementation was deemed necessary to respond to emerging issues time after time and operational bottlenecks encountered during its application;
- Moreover, it believed that there is a recognized need to introduce revised measures aimed at raising investor confidence and encouraging greater inflows of foreign capital. And this includes, to the extent possible, the establishment of protocols that ensure equal treatment of foreign and domestic investors, while also adopting clearer, more streamlined, and predictable procedures for all permit-related processes.
- Main Objective of the Directive
The Directive streamlines the conditions for participating in export, import, wholesale, and retail trade, making them simpler, more transparent, and easier to forecast for investors. This enables greater foreign participation by moving away from varied and often restrictive preconditions like past experience or specific contractual monetary commitments.
The process is simplified by mainly necessitating a due diligence report that confirms the investor’s honesty and capabilities, thereby facilitating a more straightforward entry for both domestic and foreign investors into these formerly restricted sectors.
- Changes Introduced by the New Directive
- On the Export Sector: The Repealed Directive for export investors specified distinct prerequisites such as past experience and financial circumstances, as well as varying future contractual financial obligations for different export goods within the permit timeframe. However, the New Directive has replaced these specific preconditions. Instead, it now requires a due diligence report, which can be prepared either by the investors themselves or by a recognized national or international verification agency.
- Due Diligence Requirement: Under the new Directive, foreign investors who seek to engage in the export, import, wholesale, or retail trade sectors in Ethiopia are required to submit a due diligence verification report as a condition for obtaining an investment permit and this report shall confirm the following:
- The investor is not on sanctions or comparably in restrictive lists accepted by the government of Ethiopia;
- The investor has no known involvement in illicit activities, including but not limited to money laundering, drug trafficking, or the financing of terrorism;
- The investor possesses sound business and economical integrity and demonstrable financial capacity to engage in the respective investment area;
- On the Import Sector: For foreign investors wishing to engage in import and export trade in Ethiopia, the Directive significantly simplifies the requirements. Previous preconditions for engaging in import trade (such as being a manufacturer or an authorized agent of a manufacturer) have been repealed under the new Directive and are no longer in effect. Under the new Directive, the sole general requirement is the submission of a due diligence verification report. This report, which can be prepared by the investor or a recognized national or international verification agency, must detail the investor’s integrity and capacity. The same as export, the new Directive repeals all prior provisions regarding the renewal and revocation of import investment permits.
- Wholesale Trade: The provisions under the repealed Directive that required investors to obtain prior written consent to enter agreements with relevant stakeholders, commit contractually to establish modern marketing infrastructure, and ensure the provision of streamlined logistics services as preconditions for obtaining investment permits in wholesale trade, have been formally repealed. Rather, under the new Directive, the sole requirement for engaging in wholesale trade is the submission of a due diligence verification report, thereby significantly simplifying the permit process.
- Retail Trade: The regulatory approach to foreign investment in the retail sector has faced a significant shift. Under the repealed Directive, obtaining an investment permit for retail trade required foreign investors to commit to large-scale physical developments (such as establishing a minimum number of supermarkets, hypermarkets, or shopping malls of specified sizes), in contrast, the new Directive opts toward a more flexible and qualitative framework. The Directive puts its emphasis on the investor’s financial capacity and compliance with a thorough due diligence process, rather than on rigid infrastructure-related commitments.
- Key Differences between the Previous and the New Directiv
The Repealed Directive had the following features;
- Supermarkets: Previously, investors were required to operate retail outlets covering a minimum of 2,000 square meters under unified ownership, commit to establishing five supermarkets within three years, and open at least two before obtaining a business permit. Additionally, an implementation agreement had to be signed before the investment permit was issued. This requirement has been observed very stringent and the Investment Board has observed the difficulty.
- Hypermarkets (Option 1): Alternatively, investors could choose to operate a minimum of 5,000 square meters, commit to establishing two hypermarkets within three years, and open at least one prior to receiving a business permit. An implementation agreement was likewise required.
- Hypermarkets (Option 2): A third option allowed investors to commit to developing 10,000 square meters under unified ownership, with a focus on completing construction and signing the required agreement before the business license would be issued.
Under the New Directive, the following new features and requirements have been introduced:
- Financial Threshold: As per the new Directive, investors must demonstrate a paid-up capital of at least USD 2.5 million, in the form of cash or assets. Where non-cash contributions are involved, these must be professionally valued by the Ethiopian Investment Commission.
- Due Diligence Requirement: A critical new requirement is the submission of a comprehensive due diligence verification report. This report (prepared by a recognized national or international agency endorsed by the Commission) must assess the investor’s financial capacity, business integrity, and legal standing.
- Regulatory Flexibility: The new Directive introduces discretionary flexibility for specialized retail investors. Specifically, the Ethiopian Investment Board may, on a case-by-case basis, permit foreign investors with capital below the USD 2.5 million threshold to participate in reputable single-brand retail trade, reflecting a more nuanced approach to market entry.
Conclusion
The new Directive is expected to create a pivotal reform in Ethiopia’s approach to foreign investment in the trade sector. By replacing the relatively rigid and infrastructure-heavy requirements of the Repealed Directive with a more streamlined due diligence framework, the new Directive lowers entry barriers for foreign investors in export, import, wholesale, and retail trade. This shift aligns with Ethiopia’s broader plan to create a transparent, predictable, and investor-friendly environment in line with international best practices.
The renewed focus of Ethiopia on investor integrity, financial capacity, and regulatory flexibility is supposed to attract credible and diversified foreign capital, while safeguarding national economic interests and financial security. Investors are encouraged to carefully review the Directive and seek professional legal guidance to ensure full compliance and strategic positioning under the new Directive.
Compiled by Melkamu Destaw (Junior Legal Associate at MAP Legal Services LLP)
Disclaimer: This legal update is for informational purposes only and does not constitute legal advice. Million Alemu and partners Legal Services assumes no responsibility for any actions taken based on the information contained herein.
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