In the first half of 2024, Ethiopia has seen a series of regulatory changes as the government takes proactive steps to address challenges in various sectors. These wide-ranging reforms cover areas including trade, finance, investment, justice, taxation, and data protection. Here are the major regulatory changes during this period. 

1. Flaws in international trade policy prompt export incentive scheme revisit

Ethiopia introduced a newly amended export incentive policy to mitigate the impacts of international trade fluctuations. The ‘Export Trade Duty Incentive Schemes Amendment Proclamation’ was tabled in the Parliament to replace the 2012 legislation.

The government provided at least six tax-related incentives for exporters, including refundable tax systems, vouchers, bonded export factory and manufacturing warehouse systems, bonded input supply warehouse systems, and industry cluster incentives. Exporters benefited from duty-free imports of inputs, tax holidays, and other packages.

The new policy sought to enhance these incentives, focusing on value addition in export commodities to boost the country’s export performance and economic resilience.

2. Ethiopia’s parliament established an 18-member think tank to tackle the construction industry’s challenges.

Led by Hiyaw Terefe (PhD), the team is tasked with identifying key issues and devising practical solutions. This initiative followed research papers highlighting problems such as unqualified professionals, lack of bridge financing, dependence on imported raw materials, and inadequate laws.
Despite nearly two decades of growth, with the construction sector contributing a quarter of the GDP and relying on imports for a third of its inputs, the industry has been hit hard by double-digit inflation and strict monetary policies that reduce capital expenditures. 

3. The Ministry of Justice announced that a roadmap for the implementation of the recently approved transitional justice policy is underway.

Expected to be completed within three weeks, the roadmap will detail the processes, timelines, stakeholder roles, and budgetary requirements for implementing the policy’s directives.

The Ministry aims to ensure “lasting peace, rule of law, justice, and human rights” through this policy. Senior experts from the Ministry, the Ethiopian Human Rights Commission, and civil society organisations are involved in preparing the roadmap.

State media reported that the implementation phase has begun, with consultations to determine the next steps. During a recent consultation forum, Tewodros Mihret, President of the Supreme Court, emphasised that the policy seeks to bring justice and reconciliation for past abuses and ensure lasting peace. The Council of Ministers unanimously approved the transitional justice policy on April 17, 2024. The policy addresses human rights violations and conflicts from different periods in the country, aiming to provide a comprehensive and flexible response to past injustices.

Ethiopia’s Justice Minister, Gedion Timotheos, reported progress on implementing the Transitional Justice Policy, focusing on preparing key legal and procedural documents to establish outlined institutions. This update was given during a 100-day performance evaluation meeting attended by Prime Minister Abiy Ahmed. The Ministry of Justice also completed a draft implementation roadmap for the policy, which aims to address human rights violations and conflicts from various eras in Ethiopia.

4. Ethiopia’s House of FDRE Approves Key Loan Agreements

In its 17th regular session, Ethiopia’s House of FDRE examined and approved several loan agreements. Chief Whip Minister Tesfaye Beljige emphasised the importance of these loans for Ethiopia’s development. Some of those pointes are:

• National Digital Identity Card Service
• Education and Training Projects
• Trade Logistics Project
• Lake Boye Sustainable Development

Members of the House stressed that these funds should be used for their intended purposes to accelerate the country’s development. Finance Minister Eyob Tekalegn (PhD) highlighted the significant benefits of these loans for completing development projects.

5. Ethiopian Personal Data Protection Proclamation Approved

The House of Representatives has approved the Ethiopian Personal Data Protection Proclamation, a key part of the Digital Ethiopia 2025 strategy. This follows three years of collaborative drafting.

Approved on April 4, 2024, the bill outlines data subject rights, and principles for data processing, and sets up an independent supervisory authority. It defines physical identity data (e.g., facial images, fingerprints) and data subjects (identifiable individuals by name, ID, etc.).

The proclamation applies to data controllers, and processors using devices in Ethiopia. It also includes specific obligations for processing the data of minors. The Ministry of Innovation and Technology confirmed the approval of the proclamation, the approval of this bill as Proclamation No. 1321/2016.

7. Ethiopia’s New Directive on Foreign Investment in Trade

Ethiopia has introduced a new directive allowing foreign investors to engage in export trade for various commodities, including raw coffee, oilseeds, pulses, hides, skins, and livestock. The directive also permits foreign investors to participate in import trade, except for fertiliser and petroleum, under certain conditions related to experience and market linkages.

This directive represents a significant policy shift, opening previously protected commercial sectors to foreign investment. The aim is to enhance productivity and competitiveness in the global market. The directive acknowledges that the previous policy of protecting specific trading sectors from foreign competition did not fully achieve its intended objectives. It cites challenges such as service reach, quality, efficiency, and illegal practices in the protected sectors.

To address these challenges, the new approach aims to gradually open up the export, import, wholesale, and retail trade sectors to willing and capable foreign investors. The Directive to Regulate Foreign Investors’ Participation in Restricted Export, Import, Wholesale, and Retail Trade Investments No. 1001/2024 outlines this new policy direction. While the government’s ultimate goal is to join the World Trade Organisation, the timeline for fully opening up the trade sector remains uncertain.

8. The National Bank of Ethiopia Introduces Strong Reform Measures to Strengthen the Framework for Financial Sector Oversight

The Board of National Bank of Ethiopia (NBE) has issued five revised Directives governing banking business in line with its mandates to uphold financial sector soundness and stability. The directives have been revised to align with international best practices such as the Basel Core Principles for Banking Supervision and to accommodate new developments in the sector, thereby building the foundation for strong and inclusive growth.

The revised regulatory standards fall into two broad groups:

Risk Management Directives:

• Large Exposure Limit: Limits losses from a single counterparty or group of connected counterparties.
• Related Party Exposure: Minimises conflicts of interest and ensures transactions with related parties are fair.
• Asset Classification and Provisioning: Ensures loans are reviewed and classified per international accounting standards.

Corporate Governance Directives:

• Fit and Proper Test: Ensures owners, directors, and managers are suitable to maintain public confidence and sector stability.
• Corporate Governance: Enhances governance measures to balance risk-taking, business prudence, and accountability, aiming for long-term shareholder value and stakeholder interests.

9. The House Approves Land Release, Compensation and Resettlement of the Settlers Proclamation

The Ethiopian House of People’s Representatives approved a revised proclamation aimed at improving land owner compensation, squatter resettlement, and project efficiency. The new system clarifies responsible bodies for resettlement, ensures timely project completion, and prevents inappropriate compensation claims. While some objections and abstentions were raised, the proclamation was passed with the aim of ensuring fair compensation and project progress.

The scope of applicability of the revised proclamation is for compensation estimates and payments made after the proclamation is approved; It has been stated that the started projects estimated before and have not been paid yet will be dealt with by the previous proclamation. Finally, the draft was approved as Proclamation No.1336/2016 by majority vote with 4 objections and 6 abstentions.1.

10. Parliament approves rent control legislation

Parliament has ratified the ‘Rent Control and Administration Proclamation,’ prohibiting landlords from increasing rent more than once a year. The nearly unanimous vote by MPs establishes regulatory bodies within regional and city administrations to set and enforce annual rent caps, effective every June, under the oversight of the Ministry of Urban and Infrastructure. Homeowners are required to notify both the regulatory body and tenants in writing about any rental price increase based on the annual adjustment. The legislation also limits advance rent payments to a maximum of two months and exempts newly-built housing from the rent increase cap for up to four years.

11. The Council of Ministers decided to implement a draft cybersecurity policy
 The council of ministers in Ethiopia has discussed a draft cybersecurity policy to provide policy direction in the ever-evolving landscape of global, regional, and national cybersecurity. The existing policy has been in place for several years, and the emerging challenges have highlighted the need for an updated and comprehensive policy framework. The draft policy aims to address efficiency issues within the sector and includes clear implementation, monitoring, and evaluation methods. It also emphasises the importance of private and government coordination and cooperation. 

12. The Council of Ministers discussed the implementation of a National AI policy
Ethiopia’s Council of Ministers discussed and passed a draft national AI policy. The policy aims to harness the potential of AI technology and promote its responsible and sustainable implementation nationwide. The policy addresses crucial policy issues, encompassing areas such as data management, human resource development, research and development, infrastructure, law and ethics, and cooperation and coordination.

13. The 2nd Report of Ethiopian Media Authority on Hate Speech and Disinformation (published by EMA)
The Ethiopian Media Authority’s latest report, following Article 8 of the Ethiopian Hate Speech and Disinformation Prevention and Suppression Proclamation, addresses the rising issue of hate speech and misinformation on social media. With Ethiopia’s internet users reaching 20.86 million, Facebook is the dominant platform, holding 90.71% of active social media users. The report evaluates social media providers’ performance and suggests solutions to tackle these challenges. Data was collected from complaints, random page checks on Facebook, TikTok, Telegram, YouTube, and X, and surveys from users in Amhara, South, Somali, Oromia, and Harari regions.

Hate speech, primarily disseminated through writings on Facebook (63%), often comes from individuals, activists, content creators, politicians, and religious leaders. The report indicates that 45% of hate speech is spread by individuals, 55% involves discriminatory labeling, and 50% targets political beliefs, with 38% targeting the public based on ethnicity, religion, language, and other identities.

Disinformation on social media is mostly factually incorrect or contextually false. Public concern is high, with 67% worried about hate speech and 88% not reporting encounters with hate speech and disinformation. Of the reported cases, 70% were not removed within 24 hours. The report highlights ongoing challenges in managing hate speech on Facebook and Telegram, urging more effective measures from social media providers.

14. Implementation of VAT Exemption on Agricultural Products

The directive exempting value-added tax (VAT) on various agricultural input products, including teff, has commenced implementation.

The Ministry of Finance has confirmed that both domestically produced and imported goods, as well as locally provided services, are exempt from VAT. This guideline, effective since June 13, 2016, includes grains and raw materials, agricultural products, and cooked or prepared foods/beverages.

The VAT exemption aims to make basic food supplies more affordable for low-income segments of society, thereby reducing their cost burden. Among the items exempted from VAT are teff, wheat, barley, fertilizers, veterinary drugs, and capital goods provided under capital lease agreements.

15. Ethiopia Implements Excise Stamps to Combat Illegal Beverage Trade

The Ethiopian Ministry of Finance (MoF) is set to implement excise stamps to combat illegal activities in the beverage sector, particularly targeting products like bottled water and alcohol. This move, rooted in the Excise Tax Proclamation 1186/2020, aims to safeguard public health, ensure tax integrity, and prevent illicit trade. The directive mandates excise stamps on alcoholic beverages, tobacco products, and various non-alcoholic drinks. The stamps will include detailed information about the product, such as the manufacturer’s name, origin, transportation details, and retail destination, aligning with WHO protocols to prevent counterfeiting and monitor the supply chain. Implementation is scheduled for this month.