Foreigners Are Still Not Allowed To Participate In Ethiopia ’s Financial Services Sector Under New Rules

Ethiopia has a very large population, the second in Africa, just after Nigeria, with over 114 million people — 66% of whom do not have bank accounts —  but the country is not ready to open up parts of its economy to foreign investors yet. Apart from refusing to allow private ownership of telephone communications companies, the country is again shutting its financial services doors against foreign investors in latest rules. In latest investment rules, the country has continued to reserve business opportunities in certain sectors, including financial services, exclusively for local investors.

Ethiopian Prime Minister Abiy Ahmed
Ethiopian Prime Minister Abiy Ahmed

Here Is What You Need To Know

  • Under the new investment rules, banking, insurance, brokerage services, and legal consultancy remain off limits for foreign investors, according to the regulations published on the Ethiopian Investment Commission’s website.
  •  Exports of coffee, and media and security services are also exclusively for local investors.
  • The updated regulations are part of economic reforms by the government of Prime Minister Abiy Ahmed and include the privatization of state-owned enterprises such as sugar and cement companies.
  • The country has also revealed plans to finalise the partial privatisation of its telecommunications sector by February 2021. This new development comes just three weeks after the Ethiopian Communications Authority (ECA) suspended the country’s telecom privatisation plans.

Ethiopia financial services Ethiopia financial services

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  • The ECA had earlier announced plans to sell a 40% minority stake in the state-owned telco, Ethio Telecom. According to the ECA, bids for two mobile network operating licenses had been received from 12 global and African telcos including MTN Group, Orange, Safaricom, Vodacom.
  • Under the new rules also, international air transport services, which is dominated by state-controlled Ethiopian Airlines, public transport, and the import and export of power are among industries reserved for joint ventures with the government. Still, foreign investors working with a domestic partner are restricted to a 49 percent stake, according to the regulations that took effect on Sept. 2.
  • Several foreign banks have representative offices in the country, including Equity Group Holdings of Kenya. Lease companies, such as a unit of New York-based Africa Asset Finance Co., which pledged to bring in equipment worth $600 million after being licensed in August, can also operate there.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer