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Ethiopia: Horizon Scanning 2022

Africa Connected: Issue 7

By Mehrteab Leul Kokeb

What is the single biggest legislative change on the horizon in the next 18 months?

Ethiopia has undergone major legislative changes in the past few years, such as:

  • the ratification of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, commonly known as the New York Convention;
  • the subsequent introduction of legislation to regulate dispute settlement such as arbitration and conciliation;
  • the amendment of the Commercial Code, which has been in effect since 1960;
  • the amendment of the investment law;
  • the enactment of the movable property security rights proclamation; and
  • legislation establishing capital markets in Ethiopia.

The Ethiopian government is actively engaging in the privatisation of major sectors, including telecommunications.

In the next 18 months there will be subsequent implementing regulations and initial implementations of the various laws that have been passed. A law regulating real estate development, marketing and valuation in Ethiopia is also expected to pass, as the country has not yet consolidated legislation in the sector.

What impact will this legislative change have?

The various laws that have been passed aim to ease doing business in Ethiopia by providing comprehensive, modern frameworks for investment. The real estate proclamation currently in draft form provides for a much higher capital requirement for foreign investors looking to engage in the sector. It also deals with many issues that in the past led to disputes between developers and buyers, such as pre-sale, marketing and clear guidelines on a valuation system to be used by developers.

In which sectors do you expect to see increased investment and / or financial movement in the next 18 months?

Besides the changes in the agriculture sector and the expected privatisation of state-owned companies, investments and capital inflows are set to increase in the energy sector, spurring the country’s overall economic growth in the coming 18 months. Energy is one of the most significant sectors for Ethiopia’s development, and power generation in particular is expected to increase in the near future. Ethiopia has abundant renewable energy resources and has the potential to generate massive amounts of power from hydroelectric, wind, solar and geothermal sources.

The government has opened up the renewable energy sector to private sector involvement. In addition, the government has been undertaking small projects aimed at exporting hydropower to neighbouring countries as it is a readily available market in the region. The country has the potential to be a major power supplier in the region and earn revenue from power exports.

In terms of the legal services market, what growth are you seeing on the horizon in the next 18 months?

There has been an increase in requests for legal services from clients in the telecom and logistics sectors.

The telecom sector was liberalised in Ethiopia, allowing for two telecom operators to enter the market and operate alongside the state-owned Ethio Telecom. The government has also announced its decision to sell a minority stake in Ethio Telecom to private parties. Because of this, there is an influx of requests for legal services in the telecom sector, which will continue in the next 18 months as the privatisation process is still ongoing.

Similarly, the logistics sector was recently liberalised, allowing for the creation of joint ventures between domestic logistics companies and foreign investors, with the latter allowed to hold a stake of up to 49%. This has created huge interest from foreign logistics services providers entering the market which, in turn, has made legal services invaluable to investors. Growth in this sector will continue in the next 18 months as it remains attractive to foreign investors.

What do you expect the general business mood to be in your country in the next 18 months?

The general business mood in Ethiopia in the near future will be a mix of caution and hope.

On the one hand, foreign investors will take a cautious approach when it comes to new investments in the country until – at least – the conflict in the northern part of the country and ethnic unrest is settled. On the other hand, with the newly elected government and the decline of the COVID-19 pandemic, expected investments by Ethiopians and existing foreign investors will continue moving forward.