Local and Foreign Civil Society Organizations Registration and Benefits

By Dagnachew Tesfaye
Civil Society Organizations are administered by the Organizations of Civil Societies Proclamation No.1113/2019 (hereafter the Proclamation) done on March 12/2019 to be effective from the date of publication in the Federal Negarit Gazette.”. This brief article is divided into four parts. Part one shall deal with definitions. Part two shall look upon types of local organization, with emphasis on two of those types. Part three shall deal with the requirements for registration of local and foreign civil society organizations. And part four shall state the effects in terms of rights, responsibilities and income generation benefits to such registered civil organizations. A brief conclusion shall follow.
1. Definitions: The Proclamation defines local and foreign organizations. “Local Organization” are defined as a civil society organization formed under the laws of Ethiopia by Ethiopians, foreigners resident in Ethiopia or both. Here foreigners resident in Ethiopia are granted the right to establish local organizations. On the other hand “Foreign Organization” is defined as a non-governmental organization formed under the laws of foreign countries and registered to operate in Ethiopia;

2. Types of Local Organizations: Two or more persons may establish Local
Organization. Here on the Article 17 of the Proclamation there is a reference to ‘Indigenous Organization’. There is no definition of Indigenous Organization in the Proclamation. However, the Amharic version of Article 17, which is the prevailing one in terms of interpretation, refers to ‘Local Organizations’.
There are five types of Local Organizations. These are a/ An Association; b/ A Board-led Organization; c/ A charitable Endowment; d/ A charitable Trust; or e/ A Charitable Committee. For the purpose of this article, a focus shall be made only on the first two i.e. on association and a board-led organizations.

An Association is an Organization formed by five or more members and governed by a General Assembly as the supreme decision-making body; for the purpose of this Proclamation it shall include professional associations. The organizational chart of an association may have a General Assembly, Executive Committee, Manager, Auditor and other departments as may be necessary. Details regarding the structure and governance of an Association will be determined by its rules.

One the other hand a Board-led Organization means formed by two or more founders, its Board being the supreme organ. The Board shall have a minimum of five and a maximum of thirteen members. The first board members shall be designated by the founders. The term of service and appointment procedures for subsequent board members shall be prescribed by the rules of the Organization. Here the unique nature of Boar-led organizations is that persons who are related by consanguinity or affinity with the officers of the Organization may not be Board members. The organizational chart of A board-led Organization shall have a manager accountable to the Board and necessary staff as may be necessary. The particulars shall be determined by the rules of the Organization.

3. Documents Required for Registration of Local and Foreign Organization: An application for registration by Local Organization shall be signed by the founders and contain the following particulars: a) The minutes of the formative meeting indicating the names, addresses and citizenship of the founders; b) Copy of the identity card or passport of the founders; c) The name of the organization and its logo, if it has one; d) The objectives of the organization and its intended sector of operation; e) The Region where it intends to operate; f) The Rules of the organization approved by the founders; g) The Organization’s address.

On the other hand an application for registration of a Foreign Organization shall, in addition to the conditions mentioned from a-g above, be accompanied with the following documents: a) Duly authenticated certificate of registration showing its establishment from its country of origin; b) Duly authenticated resolution of its competent organ to operate in Ethiopia; c) Duly authenticated power of delegation of the country representative; Letter of recommendation from the embassy in which the charity is incorporated or in the absence of such by a competent authority in the country of Origin from Ministry of Foreign affairs of Federal Democratic Republic of Ethiopia and; d) A Work plan for a minimum period of two years.

4. Effects in Terms of Rights, Responsibilities and Income Generation Benefits of Registration: The Proclamation provides that any Organization which registered upon fulfillment the registration requirements provided in this Proclamation : a/ shall have legal personality; b/ Can sue, be sued and enter into contracts; c/ Without prejudice to laws that require special license, can operate in the sector of its choice; d/ to own, administer and transfer movable and immovable property. However, the proceeds from the disposal of the property may not be transferred as donation for the benefit of members or to another activity which is not its mission; and the Organization which transfer property shall inform to the Agency within 15 days; e/shall have the right to engage in any lawful activity to accomplish its objectives; f/ Local Organizations shall have the right to operate in Ethiopia or abroad, or implement objectives having global, regional or sub regional nature; g/ can implement project activities on its own or to provide financial and technical support to other organizations; h/ may propose Recommendations for the change or amendment of existing laws, policies or practices, or issuance of new laws and policies of those which have relationship with the activities they are performing. However, unless it is permitted with an other law Foreign Organizations and Local Organizations which are established by foreign citizens which are residents of Ethiopia may not engage in lobbying political parties, engage in voters education or election observations; i/ Foreign Organizations may implement project activities or work in partnership with Local Organizations by providing financial, technical or in kind support; j/ to the extent possible, Foreign Organizations by working in partnership with local and Governmental Organizations, can give support to build the capacity of Local Organizations; o) Shall have the right to move its properties from one region to another region or city administration, unless the Project Agreement states that such properties may not be transferred because they are necessary for the sustainability of a specific project it is implementing; p) Have the right to engage in any lawful business and investment activity in accordance with the relevant trade and investment laws in order to raise funds for the fulfillment its objectives. However, the profit to be obtained from such activities may not be transferred for the benefit of members; q) Shall have the right to solicit, receive and utilize funds from any legal source to attain its objective; r/shall get a written approval of the Agency to open a bank account. The Agency shall respond to requests for such approval within five days from receipt of the request; s/ All financial transactions shall be performed through a bank account opened by an Organization in its name; t/ All banks have the obligation to provide the bank statement of accounts held by any Organization to the Agency when requested. w/ The Bank Account transaction can be done in the context of the Organization rules; x/ No Organization may employ a Foreign National who is not given work permit under the relevant laws. Notwithstanding the stipulation above, a Foreign Organization shall not be barred from appointing a Foreign National as its country representative; y/ Foreign Nationals other than the Country representative may only be hired if the office granting work permit verifies that the work cannot be performed by Ethiopians. z/ The provisions of Sub-Article 3 shall not apply to Foreign Nationals who are not salaried employees but come to Ethiopia to professionally contribute by working as volunteers for a period not exceeding one year.

The responsibilities include a/ an Organization shall make the necessary efforts to ensure that its activities help to bring about sustainable development, contribute to the democratization process, promote the rights and interests of its members or enhance the profession they are engaged in; b/ an Organization which is established for the benefit of the general public or third parties shall ensure that its activities take into account the interests of women, Children, persons with disabilities, the elderly and others exposed to threat or vulnerable groups of the society; c/ an Organization cannot engage in sectors which require additional permit by law without getting the necessary permit from the relevant government bodies; d/ In performing their duties all members, officers and employees of the Organization have the responsibility to give primacy to the Organization’s interest and take the necessary precaution to avoid conflict of interest; e/the Administrative cost of an Organization established for the benefit of the general public or that of third Parties may not exceed twenty percent of its total income. For the purpose of this provision, “Administrative Expense” shall mean expenses which are not related to the project activities of an Organization but are necessary to ensure the continuity of an Organization and related to administrative activities, and shall include: salaries and benefits of administrative employees; purchase of consumables and fixed assets and repair and maintenance expenses related to administrative matters; office rent, parking fees, audit fees, advertisement expenses, bank service fees, fees for electricity, fax, water and internet services; postal and printing expenses; tax, purchase and repair of vehicles for administrative purposes, and procurement of oil and lubricants for the same; insurance costs, penalties and attorney fees. However the Agency may issue Directives regarding Organizations exempted from the application of 20% administrative expense rule.

Income generation related benefits include: a/ an Organization which engages in income generating activities in may do so by establishing a separate business Organization (company), acquiring shares in an existing company, Collect Public Collections or operating its business as a sole proprietorship; b/shall open a separate bank account and keep separate books of account for its business in accordance with the relevant commercial and tax laws; c/ the relevant tax, commercial registration and business licensing, and investment laws shall be applicable to income generation activities under this provision; e/ Income that is generated from income generating activities will be used to cover administrative and program costs of the organization; f/ the income and resources that are acquired from income generating activities shall not be transferred or shared for the benefit of members or workers of the organization; g/ when the Organizations Collect Public Collections, they shall inform to the Agency; and h/ An Organizations engaged in income generating activities based on this Article shall inform to the
Agency within fifteen days.

Conclusion: The Civil Society Proclamation has made registration of civil society organizations easier. Foreigners who reside in Ethiopia are allowed to form a local organization. It also included many benefits of registration. One of the important benefits is income generation benefits. Employment of foreigners shall follow work permit procedures. However foreign citizens can occupy the position of country representatives and up to one year non-salaried professional volunteer position.

The New Investment Regulation-Areas of Investment Open for Foreign Investors

By Dagnachew Tesfaye

The Investment Regulation No.474/2020 (hereafter the Regulation) was enacted following the Investment Proclamation No 1180/2020. It was done on the 2nd day of September 2020, to be effective on the date of publication in the Federal Negarit Gazette.

The Regulation is divided into eight parts that cover investment areas, investment permit, acquisition of existing enterprise and transfer of investment projects under implementation, procedure for suspension and revocation of investment permits, registration of technology transfer and collaboration agreements, condition for owning a dwelling house, provision of one-stop service, training and transfer of knowledge and skill to Ethiopian employees and repealed and inapplicable laws.

Any foreign investor can investment in investment areas that are not listed and reserved for a) joint investment with the Government, b)investment areas reserved for domestic investors, and c) investment areas reserved for joint investment with domestic and foreign investors.

This approach is a major shift from the previous investment regulation. The previous investment regulation lists down exhaustively areas of investment open for foreign investors. Foreign investors could not invest outside the listed investment areas. Now foreign investors can invest in all other areas of investment except those reserved for the joint investment with government and joint investment with domestic investors or areas of investment reserved for domestic investors.

“Domestic Investor” has been defined under the Investment Proclamation No 1180/2020 as an Ethiopian National; or an Enterprise incorporated Ethiopia and wholly owned by Ethiopian National; or the Government; or a Public Enterprise; or a cooperative society established as per the relevant law; or a Foreign National or Foreign Enterprise treated as domestic investor as per the relevant law or international treaty ratified by Ethiopia; pr an Enterprise incorporated in Ethiopia jointly between any of the investors specified above; or a Foreign National or Foreign Enterprise accorded a domestic investor investment permit as per laws which were in effect when the permit was issued and continues to operate in Ethiopia, provided that this applies only in respect of investments that are operational at the time of enactment of this Proclamation; or descendant of a foreign national that is accorded investment permit provided that this applies only in respect of investments specified in the same Sub-article;

On the other hand, on the same Investment Proclamation a ”Foreign Investor” has been defined as a Foreign National; or an Enterprise in which a Foreign National has an ownership stake; or an Enterprise incorporated outside of Ethiopia by any investor; or an Enterprise established jointly by any of the investors mentioned above ; or an Ethiopian permanently residing abroad and preferring treatment as a Foreign investor;

Areas of investment open for any investor to invest JOINTLY with the Government are: manufacturing of weapons, ammunition and explosives used as weapons or to make weapons, import and export of electrical energy, international air transport services, bus rapid transit services and postal services excluding courier services.

Investment areas RESERVED for DOMESTIC investors include banking, insurance, microfinance excluding capital goods finance business, transmission and distribution of electrical energy through integrated national grid system, primary and middle level health services, wholesale trade, petroleum, petroleum products, wholesale of own products produced in Ethiopia, excluding wholesale of electronic commerce; retail trade excluding retail of own products produced in Ethiopia, import trade excluding liqudified petroleum gas and bitumen, export trade of raw coffee, khat, oil seeds, pulses, minerals, hides and skins, products of natural forest, chicken and livestock including pack animals brought on the market; construction and drilling services below Grade 1, hotel, lodge, resort, motel, guesthouse, pension services excluding those that are star-designated, restaurant, tearoom, coffee shops, bars, nightclubs and catering services excluding star designated national cuisine restaurant services, travel agency, travel ticket sales and trade auxiliary services, tour operation, operating lease of equipment, machinery and vehicles, excluding industry specific heavy equipment, machinery and specialized vehicles; transport services excluding railway transport, cable-car transport, cold-chain transport, freight transport having a capacity of more than 25 tons and transport services reserved for joint investment with the government or domestic investors; making indigenous traditional medicines, producing bakery products and pastries for domestic market, grinding mills, barbershops and beauty salon services, smithery and tailoring except by garment factories, maintenance and repair services including aircraft maintenance repair and overhaul(MRO), but excluding repair and maintenance of heavy industry machinery and medical equipment, aircraft ground handling and other related services, saw milling, timber manufacturing and assembling of semi-finished wood products; medical services, customs clearance service, brick and block manufacturing, quarrying, lottery and sports betting, laundry services excluding those provided on industrial scale, translation and secretarial services, security services, brokerage services, attorney and legal consultancy services, and private employment agency services excluding such services for employment of seafarers and other similar professionals that require high expertise and international experience and network.

Lastly investment areas reserved for JOINT investment with domestic and foreign investors are feight forwarding and shipping agency services, domestic air transport services, cross country public transport services using buses with a seating capacity of more than 45 passengers, urban mass transport service with large carrying capacity, advertisement and promotion services, audiovisual services such as motion picture and video recording, production and distribution and finally accounting and auditing servises.

However a foreign investor jointly investing with a domestic investor on the above listed businesses cannot own more than 49% of the share capital of the newly formed joint investment company.

Therefore, except areas of investment reserved for joint investment with the Government, or investment areas reserved for domestic investors, or investment areas reserved for joint investment with domestic and foreign investors, the rest are open to foreign investors to invest.

The New Draft Commercial Code of Ethiopia

The Council of Ministers has approved the New Draft Commercial Code of Ethiopia on its Cabinet session on June 13,2020. It passed the draft law for the legislative organ i.e. the House of People’s Representatives. It said on its report that The 1952 E.C(1960 G.C) Commercial Code of Ethiopia has administered the commercial business environment of the country for past 60 years. However new business concepts and technologies that happened after wards that were not anticipated by the earlier law need to be covered now. So Ethiopia need to promulgate a law that can step up to the existing and future business environment and economy of the country. And also anticipate and cover for business and commercial happenings for the coming years.

New Investment Law in Ethiopia

By Dagnachew Tesfaye

Ethiopia has adopted a new investment law. The Proclamation is called the Investment Proclamation No.1180/2020(hereafter the Proclamation). It was done on April 2,2020 to be effective on the date of publication in the Federal Negarit Gazettee.
Purposes of the Proclamation: The major purposes of the proclamation are to increase the role of private sector investment in all sectors of the economy, to create fast track economic framework, to increase export performance, expand employment opportunity, to increase and diversify foreign investment inflow and transfer technology, skill and knowledge, to link foreign and domestic investments in broader areas, to promote equitable distribution of investments among the regions of Ethiopia, to leverage foreign capital to promote the competitiveness of domestic investors, to put in place an efficient system to implement the National Investment Objectives and such system to be transparent, predictable, and efficient for investment attraction, retention and expansion.

In the Proclamation, ‘Investment’ has been defined as expenditure of capital in cash or in kind or in both by an investor to establish a new enterprise or to acquire in part or in all, to expand or upgrade an existing enterprise. ‘Capital’ is also defined as local or foreign currency, negotiable instrument, machinery or equipment, building, working capital, property right, intellectual property right or other tangible or intangible business assets. ‘Investor’ is defined as a domestic or foreign investor who has invested capital in Ethiopia. ‘Domestic investors’ are defined to include among others a foreign national or foreign enterprise treated as domestic investor as pr the Ethiopian law or international treaty Ethiopia has ratified or a foreign national or foreign enterprise accorded a domestic investor investment permit earlier and continues to operate in Ethiopia and descendants of a foreign nationals. ‘Export- oriented non-equity based foreign enterprise collaboration’ is defined as a collaboration formed by a contractual agreement between a domestic investor and foreign enterprise in which the foreign enterprise provides among others guaranteed external market access, know-how of production of products for export, export business management know-how, export marketing know how and strategies for the supply of raw materials and intermediate inputs needed for export products.
Scope of the Investment Proclamation: The scope of application of the investment proclamation is in all investment sectors in Ethiopia except prospecting, exploration and development of minerals and petroleum.
Powers of EIC: The Ethiopian Investment Commission(here after Commission) is assigned the power to issue, renew, amendment, substitution, replacement and cancellation of investment permits, the issuance of investment permits and the expansion or upgrading permits for wholly foreign owned investments or joint investments by domestic and foreign investors, foreign nationals who are treated as domestic investors and investment areas that are eligible for incentives by a domestic investor. Sectors of investment in air transport services, the generation or transmission or distribution of electric power and the provision of communication services shall be carried out by the Ethiopian Civil Aviation Authority, the Ethiopian Energy Authority and the Ethiopian Communication Authority respectively representing the Commission. These later Authorities shall submit to the Ethiopian Investment Commission a quarterly report regarding services they rendered through delegated powers, and further study potential sector specific investment strategies and engage in investment promotion works. Regional investment organs shall administer investments, that are outside the scope of the Commission or Authorities mentioned above.
Areas of Investment: Areas of investment open to an investor as a principle are any area of investment that are not contrary to law, moral, public health or security. Except areas of investment reserved for joint investment with the government or domestic investors and for joint investment with domestic investors, all other areas of investment shall be open to foreign investors. The list of areas of investments by joint investment with the government or domestic investors, or joint investment with domestic investors or areas of investment open for foreign investors may be revised from time to time by the EIC Board.
Joint Investment with the Government or PPP: The government body assigned to receive interested private investors proposals in areas of joint investment with the government, as public-private partnership, shall be the Public Enterprises Holding Administration. The Agency shall follow procedures under the law and upon approval, designate a public enterprise or establish a new project company to invest as partner in the joint investment.
Forms of Enterprises: Investments may be carried out in the form of sole proprietorship, enterprises established in Ethiopia or abroad, public enterprises established with the relevant law and cooperative societies formed in accordance withe the relevant law. Any investment enterprise established abroad and registered in Ethiopia and all other enterprises registered in Ethiopia shall be governed by the Commercial Code of Ethiopia.
Minimum Capital Requirement: A foreign investor to be allowed to invest shall be required to allocate a minimum capital of USD 200,000.00(Two Hundred Thousand USD) for a single investment project. Where the foreign investor jointly invests with a domestic investor, the minimum capital requirement shall be USD 150,000.00(One Hundred Fifty Thousand). However, if the investment areas is in architectural or engineering works or related technical consultancy services, technical testing and analysis or in publishing works, the minimum capital investment shall be USD 100,000.00(One Hundred Thousand) or USD 50,000.00(Fifty Thousand) if the investment is made jointly with a domestic investor. The minimum capital requirement shall not apply to foreign investors re-investing his profits or dividends generated from his existing enterprise in any investment area open for foreign investors or persons elected as members of board of directors following the change of a private limited company to share company or a foreign investor buying the entirety of an existing enterprise owned by a foreign investor or the shares therein. Any foreign investor bringing investment capital into Ethiopia, need to registered it within one year and the obtain a certificate of registration. Such copy of certificate shall be sent to the National Bank of Ethiopia by the appropriate investment organ.
Investment Permit: foreign investors, domestic and foreign investors investing jointly, investors investing as domestic investors, domestic investors who invest in areas eligible for incentives and who seek to be beneficiary of such incentive and an investor seeking to expand or upgrade an existing investment which is eligible for incentives and the investor seeks to be beneficiary of such incentive shall obtain investment permit. However, a foreign national of Ethiopian origin treated as a domestic investor shall have the right to invest without acquiring investment permit in areas not eligible for incentives or in areas eligible for incentives by waiving his right to claim incentives. Also a foreign investor seeking to buy an existing enterprise in order to operate it in its current state or to buy shares of an existing enterprise shall obtain prior approval from the EIC. The Commission shall not deny or delay the approval without sufficient cause. Nevertheless, no investor is allowed to hold domestic and foreign investor permits simultaneously.
An investment permit is subject for renewal annually until the investor commences marketing his products or services. Once a business licence is acquired, the shall be no need to renew investment permit. The renewal request should be sough within one month after the end of a period of one year for which the permit was valid. Unless the investment organ is convinced of a sufficient cause for delay in commencing or completion of the investment project, the investment permit will be revoked within two years.
Transfer of investment project in the implementation phase: an investor wishing to transfer to another investor a project which is under implementation shall submit his request to the investment organ and obtain approval. The investment organ shall not deny or delay the approval without sufficient cause.
Any investor who is issued an investment permit shall submit a quarterly progress report and provide information concerning his investment whenever requested.
Technology Transfer Agreement: Any investor concluding a technology transfer agreement shall register such agreement with the EIC. Unregistered technology transfer agreement shall have no legal recognition with the EIC.
Collaboration Agreement: Any domestic investor who concludes, in respect of export, a collaboration agreement with a foreign enterprise who does not contribute capital shall have the agreement registered with EIC. A collaboration agreement that is not registered shall have no legal recognition with the EIC.
Investment Incentives: areas of investments, types and amount of investment incentives shall be determined by regulation.
Immovable Property Ownership: a foreign investor or a foreign national treated as domestic investor shall have the right to own immovable property necessary for his investment. Whereas, if such an investor who owns large investment may be allowed to own one dwelling house. The details of the later part shall be decided by a regulation. Immovable property as used in this provisions does not include land and the ownership of immovable property shall apply to investors who invested prior to the adoption of this proclamation.
Expropriation: the government may expropriate any investment for public interest, in conformity with requirements of the law, on a non-discriminatory basis, with adequate compensation corresponding to the prevailing market value paid in advance.
Remittance of Funds: a foreign investor shall have the right in respect of his investment to remit in convertible currency at the prevailing exchange rate on the date of transfer profits and dividends, principal and interest payments on external loans, payments related to technology transfer agreements, payments related to collaboration agreements, proceeds from the transfer of shares or conferral of partial or total ownership of an enterprise to another investor, proceeds from sale, capital reduction or liquidation of an enterprise and compensation paid on expropriation. Expats employed for investments carried out pursuant to this Proclamation whose permanent residence is outside of Ethiopia may remit their salaries accruing from their employment. However, a domestic investor investing jointly with foreign investor shall not be allowed to remit funds earned from the investment out of Ethiopia.
External Loan: An investor may acquires a loan from outside of Ethiopia for his investment and operate a foreign currency account in a bank in Ethiopia for the purpose of its investment following the directives of the National Bank of Ethiopia (NBE).
Expat employment : an investor may employ duly qualified foreigners for his investment in positions of higher management positions including chief executive officer, chief operation officer and chief finance officers as necessary, supervision, trainers and other technical professions. However, foreigners may be employed only when it can be ascertained that Ethiopians possessing similar qualification or experience required by the sector are not available.
Work Permits of Expats: The work permit of top management foreign workers shall be renewed without being required to comply with the conditions specified in this article in respect of other foreign workers. A work permit may be issued for a cohabiting spouse of any investor and a foreign worker employed. A work permit for employment in certain positions may be issued for up to three years and renewed every year. However an investor who employs foreigners shall be responsible for replacing within a limited period of time such foreign workers by Ethiopians by arranging and providing the necessary training. Renewal of work permit shall be done after ascertaining the non-availability of Ethiopian workers with similar qualification and of the concrete measure taken by the investor to train Ethiopian replacements. Where it is ascertained that a foreign worker is no longer required for the position he is employed, the EIC may decide not to renew or to cancel the work permit.
Visa Services: EIC or a delegated investment organ may facilitate the processing of visa application of foreigners coming into Ethiopia for investment purposes and that of the families (spouses, children and parents) of investors undertaking investments in Ethiopia. Visa may be issued to an investor intending to enter into Ethiopia, from a country that is not his home country, for investment purposes based on a support letter the EIC may offer. An owner or shareholder of an investment under this proclamation may be issued a five-year multiple visa based on the confirmation by the EIC. The general manager, board member or top management of an investment enterprise in Ethiopia and the Parent or holding company of the Enterprise may be issued a three year multiple entry visa based on confirmation by EIC. No single stay of any foreigner entering Ethiopia using multiple entry visa may exceed 90(Ninety) days.
One Stop Service: EIC or regional investment organs shall provide one-stop services to investors by coordinating relevant agencies and synchronize their daily functions.
Complaint Procedure in EIC: Any grievance shall be resolved using speedy, equitable and efficient procedure. Any investor who has grievance shall have the right to submit it to the appropriate investment organ. Such grievance shall follow the administrative chain and get final administrative decision. A written copy of the administrative decision shall be given to investor within 7(Seven) working days from the date from the date of the decision. If the investor has a grievance against the final administrative decision of EIC, then he can submit a complaint to EIC Board within 30(thirty) working days from the date the investor becomes aware of such decision. Then the Board shall give its decision within 90(Ninety) working days from the date of submission of the Complaint and a written Board decision will be given to the investor within 7(seven) working day.
Complaint procedure against Executive Bodies: An investor shall have the right to submit a complaint to the EIC against final administrative decision of any federal government executive body where such decision significantly affects the investment. The Federal executive body shall give to investor within 7(seven) working days a written copy of the final decision. The investor then has 30(thirty) working days to submit the final administrative decision to EIC. EIC shall engage with the government body and propose a recommended solution in writing within 30(thirty) days from the submission of the complaint. A written copy of the proposed solution shall be given to the investor within 7(seven) working days from the date the recommended solution is tabled. Still the investor may file a complaint to EIC Board against the EIC’s recommended solution, or the the solution is not accepted by the government body. The complaint to the Board should be presented within 30(thirty) working days from the date the investor is notified of the recommended solution or learns that the government body rejected the recommended solution. The Board shall then give its decision within 90(Ninety) working days. Any Federal government body has a duty to comply with and execute in accordance with the decision of the Board.
Dispute Settlement: without prejudice to the right of access to justice through a competent body with judicial power, any dispute between an investor and the Government involving investments effected pursuant to this Proclamation will be resolved through consultation or negotiation. The Federal government may agree to resolve investment disputes involving foreign investments through arbitration. Where a foreign investor chooses to submit an investment dispute to a competent body with judicial powers or arbitration, the choice shall be deemed final to the exclusion of the other.
Investment Administration Organs: The investment administration organs include the Ethiopian Investment Board, the Ethiopian Investment Commission, the Federal Government and Regional sState Administrations Investment Councils and the Investment Administration organs established pursuant to Regional laws.
Members of the Ethiopian Investment Board are 13(thirteen) including the Prime Minister as chairperson, a government official designated by the Prime Minister as Vice Chair person, EIC Commissioner and Secretary, Eight core or investment related government officials, two private sector representatives.
Council: a council for the cooperation and coordinated administration of investment between the Federal government and Regional state administrations is established by this Proclamation. Members of the Council include the Prime Minister or in his absence the Deputy Prime Minister as chairpersons, Presidents of all regions and Mayors of the Addis Ababa and Dire Dawa City Administrations, EIC Commissioner and heads of investment organs of all Regions and Addis Ababa and Dire Dawa City Administrations and other members designated by the Prime Minister as necessary.
Coordination with Regional States: the Commission shall work in close cooperation with Regional Stat Investment Administration organs and other stakeholders with a view to creating a uniform, coordinated and efficient national investment administration system. Standing regional state investment Desks shall be established.
Provision of Land: Regions shall handle land requests for investments in the manufacturing, agriculture and other sectors in an efficient manner and shall establish a transparent and predictable system for the handling of such requests. Regions shall identify and classify land to be used for investment projects, organize such land centrally under one Regional State Administration body and transfer the information to the appropriate investment organs. The EIC shall coordinate the Regional State Administration and appropriate investment organs to facilitate and follow through the efficient handling of such requests. Regions shall respond to land allocation request of an investor for manufacturing within 60(Sixty) days and 90(Ninety) days where the investment is in other sectors.

Transitory Provisions: rights and entitlements bestowed pursuant to Investment Proclamation no 769/2012 as amended and Regulations and Directives issued there under shall remain applicable in respect of investments approved prior to the coming into force of this Proclamation.

Duty to Observe: all investors have a duty to observe laws of the country and shall give due regard to social and environmental values.

18 New Labor Proclamation 1156/2019 Additions

1. Definitions

“Sexual harassment” means to persuade or convince another through utterances, signs or any other manner, to submit for sexual favor without his/her consent.
“Sexual violence” means sexual harassment accompanied by force or an attempt thereof.

2. Scope of Application
3(1). Without prejudice to Sub-Article (2) of this Article, this Proclamation shall be applicable to employment relations based on a contract of employment that exist between a worker and an employer including recruitment process.
3. Probation
11(3). When the parties agree to have a probation period, the agreement shall be made in writing; in such a case, the probation period shall not exceed 60 working days beginning from the first date of employment.
4. Prohibited Acts
14(2)g). Conduct meeting during working hours in disregard to the time assigned by the collective agreement or without obtaining the permission of the employer; h) Commit sexual harassment or sexual violence at workplace;
i) Physically abuse anyone in a work place.
5. Tardiness
27. 1/ Unless otherwise determined by a collective agreement, a contract of employment shall be terminated without prior notice only on the following grounds :
a) Unless the reason for being late is justified by the collective agreement, work rule or contract of employment, being late for duty eight times in six months period while being warned in writing of such a problem;
6. Absence
27/1/b) Absence from duty for a total five days in six months period while being warned in writing of such a problem; and where the absence cannot be classified in any of the leaves provided under the Proclamation;
7. Performance test
28(2) Any loss of capacity of work referred to in SubArticle (1) (a) of this Article shall, unless otherwise provided by a collective agreement, be verified by a periodical job performance evaluation.
8. Termination without prior notice by Employee
32(1) (b) Where the workers has been a victim of sexual harassment or sexual violence by the employer or a managerial employee;
9. Severance payment
39(1)d. Where the worker resigned due to sexual harassment or sexual violence by the employer or managerial employee; or where such act was committed by a coworker and the incident was reported to the employer but the latter failed to take appropriate measure in due time;
10. Compensation
41(2) However, where the termination is based on Article 32 (1) (b) the worker shall, in addition to severance pay, be entitled to compensation of his daily wage multiplied by ninety. This provision shall also apply to a worker covered by the relevant pension law.
11. Employee to pay compensation to Employer
45. 1/ A worker who terminates his contract of employment in disregard of the provisions of Article 31 or 35(2) of this Proclamation shall be liable to pay compensation to the employer.
2/ However, the compensation payable by the worker in accordance with Sub-Article (1) of this Article shall not exceed 30 days’ wages of the worker and be payable from the remaining payment due to the worker.
12. Deduction from Salary more than 1/3
59. 1/ The employer shall not deduct from, attach or set off the wages of the worker except where it is provided otherwise by law or collective agreement or work rules or in accordance with a court order or a written agreement of the worker concerned.
2/ Unless the worker expresses his consent in writing, the amount that may be deducted at any one time, from the worker’s wage shall in no case exceed one-third of his monthly wage.
13. Overtime Payment
68/ 1/ In addition to his normal wage, a worker who works over-time shall be entitled at least on the following rate of payments:

a) In the case of work done between 6:00 a.m. in the morning and l0:00 p.m. in the evening, at the rate of 1.5 multiplied by the ordinary hourly rate;

b) In the case of night time work between 10 p.m. in the evening and 6 a.m. in the morning, at the rate of 1.75 (one and three fourth) multiplied by the ordinary hourly rate;
14. Weekly Rest
69/4/ Notwithstanding the provisions of Sub Article (1) of this Article, where the nature of his task did not enable the worker to make use of his weekly rest day, the employer shall grant 4 working days of rest in a month.
15. Annual Leave
77(1) A worker pursuant to this Article shall be entitled to uninterrupted annual leave with pay. Such leave shall in no case be less than:
a) Sixteen (16) working days for the first year of service;
b) Sixteen (16) working days plus one working day for every additional two years’ service.
16. Paternity Leave
81/2/ A male employee shall be entitled to three consecutive days paternity leave with full pay
17. Leave for events
81/3/ A worker shall be entitled to leave without pay for up to five consecutive days in the case of exceptional and serious events. However, such leave may be granted only twice in a budget year.
18. Maternity Leave
88/3/ A pregnant worker shall be granted a period of 30 consecutive days of leave with pay of pre-natal leave and a period of 90 consecutive days of leave post- natal.

Online Trade Registration and Licensing Services(OTRIS)

The Ministry of Trade and Industry of Ethiopia has commenced an online business registration portal. The online business registration enables interested traders to find a unique name for their company, registration of the same, acquiring commercial registration and business licenses and renewal of various licenses. Physical appearance will be required at the Federal Document Registration and Authentication Agency for Memorandum of Association and Articles of Association authentication for companies, with Tax Authorities for acquiring Tax Identification Number, Value Added Tax or Turn Over Tax certificates and Competency Offices for business that require competency certificates. Such a measure by the Ministry will contribute a lot to ease of doing business in Ethiopia.

Inter-Country Adoption Allowed for Foreign Nationals of Ethiopian Origin

By Dagnachew Tesfaye

The Federal Supreme Court Cassation Bench on Cassation File No 189201 on March 11,2020 Volume 24 made a landmark decision in favor of allowing adoption by foreign nationals of Ethiopian origin.

The Revised Family Code Amendment Proclamation No 1070/2018 on its preamble and to some extent on its content held the idea of prohibition of adoption by foreign nationals. The term ‘foreign nationals’ was not defined. There was a question as to whether ‘foreign nationals’ include foreign nationals of Ethiopian origin that acquire yellow card.

The case decided by the Federal Supreme Court Cassation Bench on File No 189201 gave an interpretation to the question. The Cassation Decision state that Foreign Nationals of Ethiopian Origin are allowed to adopt Ethiopian children. The Revised Family Code Amendment Proclamation No 1070/2018 do not prohibit foreign nationals of Ethiopian origin from adopting Ethiopian children.

To reach the decision the Federal Supreme Court Cassation bench looked closely into the Ethiopian Children Policy document, the Diaspora Policy document, the best interest of the child and especially Article 36(5) of in the FDRE Constitution, Child Right Convention Article 20-21 and African Charter on the Rights and Welfare of the Child Article 24 , the Revised Family Code of Ethiopia Proclamation No 213/2000, Foreign National of Ethiopian Origin Proclamation No 270/2002, and Banking Amendment Proclamation No 1159/2019, that shows the trend of the government of Ethiopia in allowing economic participation of Foreigners of Ethiopian origin in the banking sector.

The Cassation Bench reached to the conclusion that foreign national of Ethiopian origin can adopt an Ethiopian child. The position of the Federal First Instance and Federal High Court, that a foreigner with Ethiopian origin cannot adopt an Ethiopian child is dismissed by the Federal Supreme Court Cassation Bench. The Interpretation of the law by the Federal Supreme Court Cassation Bench, as per Federal Courts Reamendment Proclamation No 454/2005, is binding on federal as well as regional courts of all levels.

To sum up, the Federal Supreme Court Cassation Bench by a legally binding interpretation has filled the legislative gap that happened on Proclamation no 1070/2018 and allowed foreigners of Ethiopian origin who has the valid yellow card, to adopt Ethiopian children.

Movable Property Security Right

By Dagnachew Tesfaye


This article is about movable property security right. The article provides the movable property security right proclamation, the National Bank of Ethiopia directive on operationalization of movable collateral registry and finally the codification, valuation and registration of movable properties as collateral for credit directive of the National Bank of Ethiopia. A brief conclusion will follow.

1. Movable Property Security Right Proclamation

Movable Property Security Right Proclamation No 1147/2019 (hereafter Proclamation) was done on 7 August 2019, to be effective at the expiry of 12 months after publication in the Negarit Gazette or the commencement of operation of the Collateral Registry Office (CRO), whichever comes first.

The Proclamation is divided into eight parts.

Part One of the Proclamation deals with definitions and scope of application of the Proclamation. For example the Proclamation does not apply to movable assets that require registration in a special register under existing law such as securities traded on exchanges, ships or aircrafts.

Part Two of the Proclamation provides the creation of a security right. A security right is created by a written agreement. The most important elements of this agreement are: identifying the secured creditor and the grantor, listing of the secured obligation and description of the collateral.

Part Three states the effectiveness of a security right against third parties. One requirement to ensure effectiveness against third parties is that the security right should be registered in the CRO by the secured creditor.

Part Four declares the establishment of the CRO. CRO shall be established for the purpose of receiving, storing and making information accessible to the public in registered notices with respect to security right and right of non-consensual creditors.

Part Five provides priority rights of the secured creditor. The secured creditor is entitled to have priority rights over other creditors unless otherwise provided to the contrary by insolvency or liquidation laws.

Part Six lists the rights and obligations of the grantor or secured creditor and also third party obligators.

Part Seven is about enforcement of a security right. The secured creditor whose right is affected by the non-compliance of another person is entitled to apply for relief to a court, including relief in the form of expeditious proceedings.

The last part i.e. Part Eight states miscellaneous provisions. The exemption of the movable security agreements from payment of stamp duty is included. Also the rights and obligations of the Ministry of Transport with respect to matters relating to registration of security rights on vehicles shall be transferred to CRO. Ministry of Construction registry with respect to security rights on construction machinery and equipment and Ministry of Trade registry of security rights on business mortgage and hire-purchase are transferred to CRO.

Enforcement of a prior security right commenced before entry into force of this Proclamation shall continue being enforced by the prior law. CRO shall provide for institutions responsible for providing title deeds for corporal or incorporeal assets whether or not an asset has been free from any pledge before effecting title transfer. Property mortgage or pledge with Banks proclamation no 97/1998 and Business Mortgage Proclamation No 98/1998 are repealed. Until an autonomous CRO is established, National Bank of Ethiopia (NBE) is empowered to establish the CRO.

2. NBE Operationalization of Movable Collateral Registry

The NBE has issued a directive namely Directive No MCR/01/2020 that deals with operationalization of movable collateral registry. The Directive established the CRO housed in the NBE and appointed the first Registrar. Access to the collateral registry shall be electronic and automated. The fees and modes of payment have been listed. The Directive shall come into force 26th of February 2020.

3. NBE Codification, Valuation and Registration of Movable Properties

Similarly the NBE has issued its second directive Directive No MCR/02/2020 coming into force as of 15th September 2020 namely Codification, Valuation, and Registration of Movable Properties as Collateral for Credit. As a result, the Directive details livestock, farm products, land use right, financial instruments, intellectual property rights codification, valuation and registration procedures and processes.


The Movable Property Security Right proclamation set out the right to use movable properties as securities, opening up new regime of properties in the economy. To implement the intentions of the Proclamation, the NBE has formally established the CRO housed under it and provided codification and valuation of different movable assets including livestock, farm products, land use rights, financial instruments and intellectual property rights.

Foreign Currency Saving Account in Ethiopia

The National Bank of Ethiopia has issued a directive Directive No FXD/68/2020 effective from November 19,2020 that allows establishment and operation of foreign currency saving account for Residents of Ethiopia, Non-Residents of Ethiopians and Non-Residents of Ethiopian Origin.
You can find the Directive by this link: https://nbebank.com/wp-content/uploads/pdf/directives/forex/fxd-68-2020.pdf

Establishment and Operation of Foreign Currency Saving Account

The Directive maybe sited as “Establishment and Operation of Foreign Currency Saving Account for Residents of Ethiopia, Non-Resident Ethiopian and Non Resident Ethiopian Origin” Directives No. EX1V 68 /2020″.

The National Bank of Ethiopia (NBE) has issued a directive effective from November 19,2020 that allows the establishment and operation of foreign currency saving account for (a)Resident Ethiopians (RE) namely Ethiopian Nationals and Resident Foreigners living and/or working in Ethiopia, (b)Non-Resident Ethiopians (NRE) meaning Ethiopian Nationals living outside Ethiopia; and (c) Non-Resident Ethiopian Origins(NREO) namely yellow card holders who are foreign nationals of Ethiopian Origin.

The preamble of the Directive set out the rational behind allowing foreign currency saving account. One of the reasons for allowing foreign currency saving account is to create incentives and encourage inflow of foreign exchange in the formal channel. It also can support the international foreign exchange reserve in the country, ease the balance of payments problem of the country and in general encourage saving and investment.

The directive details the process of opening the foreign currency saving account. Non Resident Ethiopians and Non Resident Ethiopian origin can open foreign currency saving account in person or by post in his/her name. Opening banks may also establish contact with potential account openers using Ethiopian Embassies, e-mail, fax, telex and/or other electronic media and power of attorney holders authorized by the opening bank. The bank should however, receive authenticated documents afterwards to open the accounts. Resident of Ethiopia can open an account by producing required documents by account opening bank. A request for opening an account for deposit in foreign currency saving account shall be accompanied by a letter of application and a specimen signature. Two or more eligible joint depositors may together open a single account. Power of attorney holders are allowed to open foreign currency accounts but cannot credit the account on behalf of non-residents and/or foreign nationals of Ethiopian origin.

A minimum of USD 50 or equivalent in any other currencies namely
a) The US dollar b) Pound Sterling c) Euro can be deposited to open the foreign currency saving account. However a bank may accept deposits in other convertible currencies that include Canadian Dollar, Chines Yuan, Saudi Riyal, Japanese Yen, Australian Dollar and UAE Dirham. And, these other currencies shall be converted to any of the three currencies enumerated above at spot exchange rate based on the preference of the account opener.

A bank may open interest bearing or interest free foreign currency saving account for depending on the choices of the account holders. The interest rate shall be calculated in foreign currency, but paid in local currency. The minimum interest rate shall be LIBOR plus 4 percent subject to revision from time to time by the NBE.

A foreign currency saving account opened by RE,NRE &NREO shall he credited by:
a) Foreign currency transferred through banking system
b) Deposit of Foreign currency cash notes
c) Foreign currency transferred through International Remittance Service Providers.
d) Transfer from own Non Resident foreign currency account
e) Transfer or cheque drawn or endorsed in favor of Ethiopian National by a Non resident foreign currency account holder from Non-Resident Foreign Currency account.

Usage of the foreign currency account has several benefits and some limitations. The foreign currency saving account holders:
a) Are free to sell all or part of their account balances to deposit opening banks at any time.
b) Can use for his/her self, spouse and children education, medical and travel expenses abroad upon presentation of valid documents to confirm relationship with the account holder. The documentation requirements and maximum amount of utilization should be as per the operation of Foreign Exchange Bureau Directive.
c) Notwithstanding, (b) above, the account holder shall have the right to
withdraw 10% of the foreign currency balance in debit card.
d) can use as cash collateral to get credit in local currency from banks in line with the opening authorized bank’s credit policy.
e) Can use to purchase share from the Financial Institutions
f) Other than for the purpose indicated under article (b) above, withdrawal is permitted only in birr and
g) Other transactions that might be approved by the NBE from time to time.

It is prohibited for Foreign Currency Cash notes deposit originally bought from forex bureaux but not utilized due to cancellation of travel shall not be used to credit and/or open a foreign currency saving account. It is not allowed for Foreign currency cash notes deposit from any illegal sources be used to credit and/or open a foreign currency saving account. It is also not permitted to withdraw in foreign currency except stated under ( b) above. And it is prohibited to over drawing of the account.

The opening bank has the obligations to maintaining confidentiality of the account of the depositor, report the number of accounts opened and the balance in the account every month to NBE.

Any bank that violates any of the provisions of the Directive shall be subject to a penalty of Birr 10,000 (ten thousand) for each violation. Where an account holder violates the provisions of this Directive, the opening
bank may suspend the account and immediately and report the case to NBE.
Moreover, any person who fails to comply with a provisions of this directives shall be punished in accordance with article 26(1 )of the National Bank of Ethiopia Establishments amended ) Proclamation umber 591/2008.

In conclusion the step the NBE has taken in allowing foreign currency saving account opening will encourage savings in foreign currency. However NBE has to expand the reasons of withdrawals from time to time giving the account holders more latitude to benefit from their savings.

Telecommunication Tender Notice

On November 27,2020, The Ethiopian Communication Authority has floated a Tender Notice for THE REQUEST FOR PROPOSALS FOR TWO NEW TELECOMMUNICATIONS LICENSES IN THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA. The ECA has launched the Request For Proposals for the award of these licenses, targeting world class telecommunications operators to become the new license holders within Ethiopia’s rapidly growing economy. All details and instructions pertaining to the submission of proposals, including the qualification criteria and conditions for eligibility to participate, are described in the Request For Proposals. To show interest in receiving the Request For Proposals, please send a written request, before December 10th 2020 to: contact@eca-ethiopia.com or telecomlicensebid@gmail.com. A proposal made in accordance with the guidelines presented within the Request for Proposals documentation must be physically delivered to the address mentioned on the website of the ECA, no later than 10:00 a.m. East Africa Time (GMT+3), on March 5th, 2021. For further information click https://eca.et/wp-content/uploads/2020/11/ECA-RFP-Public-Notice.pdf

Procedure of Approval and Registration of External Loan

The National Bank of Ethiopia(NBE) is vested with legal authority to regulate foreign exchange and registration of external loans. To regulate external loan and supplier’s credit, NBE has issued External Loan and Supplier’s Credit Directive No 47/2017 effective as of October 03/2017.

A borrower should first seek approval from the NBE before entering external loan or agreeing to supplier’s credit agreement with a lender or supplier. Seeking approval will not be applicable to banks. Article 4.2. of NBE Directive No SBB/77/2020 Foreign Currency Intermediation, exempted banks from seeking prior permission for each transaction of external loan.

However, for individuals or companies other than banks, external loan and supplier’s credit are permitted upon prior approval by NBE. The borrower or supplier’s credit seeker should present the necessary documents of the loan agreement or the proforma invoice for NBE. Registration enables the borrower or the supplier’s credit seeker to pay the lender or supplier in convertible foreign currency.

The eligible parties to get approval and registration of external loan or supplier’s credit are exporters, domestic investors and foreign investors. Exporters can request external loan or supplier’s credit if the loan is going to finance their export oriented investment. Domestic investors that engage in projects that generate foreign currency can request external loan or supplier’s credit approval. On the other hand, foreign investors can borrow from external source or request supplier’s credit if the debt to equity ratio do not exceed 60:40 of the foreign capital.

The documents that need to be produced by the exporter or domestic investor or foreign investor include:
-application letter
-valid export license for exporter and domestic investor
-valid investment or other business license for foreign investor
-for external loan, the draft loan agreement
-for supplier’s credit pro forma invoice
-for exporter and domestic investor documents that show capacity to repay the loan and
-for foreign investor foreign capital registration certificate.

Once approval is obtained, NBE will issue approval letter. After approval letter, the borrower or supplier’s credit seeker need to present for registration the following documents:
-an application letter
-a bank advice for cash loan
-customs declaration for loans in kind and
-copy of external loan approval or supplier’s credit letter. Thus the external loan or the supplier’s credit will be registered.

For external loan executed by the Federal Government of Ethiopia, the requirement is only to present for registration the external loan agreement and the guarantee issued by the government.

However, the government or banks are prohibited to be guarantors or enter guarantee agreements for external loans or supplier’s credit for private loans.

Finally for repayment of the external loan or supplier’s credit an application letter, copy of the external loan or supplier’s credit registration letter and loan repayment schedule need to be submitted.

These are rigorous procedures the NBE put in place when it comes to foreign currency administration. The eligible parties are those that can generate foreign currency through their business only.

Foreign Currency Intermediation by Ethiopian Banks

The National Bank of Ethiopia(NBE) issued a directive Directive No SBB/77/2020( the Directive) effective from August 18,2020, that allows Foreign Currency Intermediation(FCI) by Ethiopian banks, as one form of banking business. FCI is defined as an act of borrowing in foreign currency from foreign lenders and granting credit to local borrowers in foreign currency as well as collecting the repayment of the credit in foreign currency.
Foreign currency acquired through borrowing from external source shall be used only for extending credit in foreign currency to foreign currency generating activities in Ethiopia or to deposit at the NBE or at a foreign correspondent bank, in foreign currency.
The Ethiopian bank acquiring an external loan in foreign currency shall register the loan with NBE by submitting a copy of the signed contract and term sheet of the loan within 5 business days of the date on which the loan contract was signed.
The Directive avoided for the Ethiopian banks from requesting and acquiring separate permissions from NBE for transaction to be expressed in foreign currency.
All in all the Directive has put in place terms and conditions to be fulfilled, prudent and reporting requirements to be met. In case of not adhering to such terms and conditions and requirements, penalties in foreign currency shall be levied.