By Sinishaw Hailu, Associate at DMR Law Firm
The Investment Board of Ethiopia issued a Directive no 1082/2025, here in after the Directive. This Directive repealed Directive No 1001/2024. The Directive allows foreign investors to participate in various trade sectors which were reserved for domestic investors only. Currently foreigners may engage in export trade involving raw coffee, khat, oilseeds, pulses, hides and skins, forest products, as well as poultry and livestock purchased on the market. In terms of import trade, foreign investors are allowed to operate in all sectors reserved for domestic investors except for the importation of fertilizers and petroleum products, which remain restricted. Similarly, participation in wholesale trade is open to foreign investors across all sectors reserved for domestic investors, with the exception of fertilizer wholesale. Additionally, foreign investors may also take part in retail trade that is otherwise reserved for domestic investors under the applicable regulations (Regulation No. 474/2020).
Permit Conditions
Provided they meet the requirements of other applicable laws regarding capital, competence, and standards, foreign investors can participate in allowed areas under this directive by fulfilling the following additional requirements.
For foreign investors seeking to to participate in the export trade, the foreign investor must submit a comprehensive due diligence report. This report, prepared either by the investor itself or a recognized national or international verification agency, must detail the investor’s integrity and capacity. The due diligence report is required to include at least three key assessments: first, it must screen information from appropriate national or international databases or other procedures to confirm that the investor is not listed on any sanctions or similarly restrictive lists accepted by the Government of Ethiopia; second, it must evaluate any involvement by the investor in illicit activities that violate internationally accepted standards, with particular attention to experiences related to money laundering, drug trafficking, and terrorism financing; and third, it must assess the investor’s business integrity and financial standing.
When we came to import trade, foreign investors are similarly allowed to engage in all import trade investments reserved for domestic investors under the Regulation (Regulation No. 474/2020), with the exception of fertilizer and petroleum imports. Participation in import trade is also contingent upon the submission of a due diligence verification report that confirms the investor’s integrity and capacity, consistent with the requirements outlined for export trade investors.
Under the Wholesale Trade Investment Permit conditions, investors seeking to obtain a permit must meet specific criteria. To qualify, they must first present a comprehensive due diligence verification report that attests to their integrity, competence, and capacity, as outlined for export trade investors. Once an investment permit is secured under the directive, the investor is authorized to conduct wholesale trade using products they have either imported from abroad with an import trade permit or acquired directly from domestic producers.
Regarding retail trade, foreign investors are equally allowed to engage in retail trade sectors that are otherwise reserved for domestic investors, subject again to applicable requirements on minimum capital, competence, or standards. To obtain an investment permit for retail trade, the foreign investor must raise a paid-up capital of at least USD 2,500,000, which may comprise both cash and non-cash assets. Additionally, the investor must provide a comprehensive due diligence report, prepared by a recognized national or international verification agency recommended by the Commission, which verifies the investor’s integrity and capacity. Any non-cash contributions to the paid-up capital must be professionally valued by an appraiser appointed by the Commission. It is also noteworthy that notwithstanding these capital requirements, the governing Board holds the discretionary authority to approve the participation of foreign investors in reputable single-brand retail operations on a case-by-case basis, particularly where the required capital might be lower.
Conclusion
In conclusion, the Directive is instrumental in promoting both transparency and accountability, there by encouraging strategic foreign investment within Ethiopia’s crucial export and import sectors. Such comprehensive measures unequivocally underscore the Ethiopian government’s commitment to ensuring that foreign investment strictly adheres to national standards concerning financial probity, legal compliance, and ethical business practices.
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