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Ethiopia shifts towards innovation-driven economy with passage of Startup Proclamation
After years of discussion and revisions, the Ethiopian Parliament last week unanimously approved the long-awaited Startup Proclamation. Lawyers and observers have welcomed the landmark law which aims to foster an innovation-driven economy, while noting there is still more work to do.
The passing of Ethiopia’s first-ever Startup Proclamation will unlock legal and financial support for innovation, incentivise and stimulate entrepreneurship, attract investment, and foster a more coordinated, innovation-driven economy, says Andifon Ukpanah, a Nigerian lawyer and Specialist Legal Editor at Afriwise.
“The enactment marks a major policy shift and is expected to significantly improve the ease of doing business for tech entrepreneurs, investors, and development partners operating in or entering the Ethiopian market,” says Ukpanah, who has previously been Chief Legal Officer of a Scandinavian technology company.
Ukpanah is among many African lawyers and observers to praise the long-awaited passing of Ethiopia’s Startup Proclamation, which continues the East African nation’s ongoing economic reforms and liberalisation, and its growing focus on innovation.
Last November, Ethiopia’s Parliament approved ratification of the Paris Convention for the Protection of Industrial Property and the Madrid Protocol for the International Registration of Marks, as part of its efforts to join the World Trade Organisation.
At the time, Dawit Kidane and Fitsum Sitotaw of leading Ethiopian firm DABLO Law told Africa Legal that Ethiopia’s dynamic young population coupled with reforms and government initiatives provided a huge opportunity for startups and business to innovate and that Ethiopia could become a hub for technological advancement.
Over the weekend, Innovation and Technology Minister Belete Molla said the Startup Proclamation, unanimously passed by the House of People’s Representatives in a second emergency session on Thursday, aimed to unleash the potential of Ethiopian youth, help tackle longstanding challenges in the startup space, and open new avenues for aspiring entrepreneurs to seize emerging opportunities.
The Proclamation, noted Belete, is a strategic move to support multi-sectoral economic growth by making creativity and innovation central pillars of national development - complementing the country’s traditional economic sectors. “It provides a legal foundation to convert innovative ideas into impactful businesses.”
The Proclamation provides formal legal recognition and classification of startups for the first time, and establishes key mechanisms to improve access to financing, such as the creation of a national fund, dedicated grants, and a credit guarantee scheme.
It is designed to remove significant structural barriers that hindered innovation and investment. Designated startups will be able to benefit from tax exemptions, and access duty-free privileges for the importation of capital goods for up to four years.
After years of advocacy, Parliament’s approval of a framework aimed at empowering startups and sparking innovation is cause for celebration, but it is only the first step and other key things must follow, says business and investment lawyer Tsegamlak Solomon, former General Counsel of the Ethiopian Securities Exchange.
For the Startup Proclamation to make a real difference on the ground, a few key things still need to occur, notes Solomon. It must be published in the Federal Negarit Gazette to achieve force of law, and the Council of Ministers needs to issue regulations to clarify procedures and responsibilities, and activate key programmes such as the National Credit Guarantee Scheme. “Without these regulations, many provisions within the law will remain aspirational rather than actionable.”
Ministry directives will also need to address eligibility criteria, operational frameworks including funding allocation, tax exemption procedures, rules governing regulatory sandboxes, and registration procedures for foreign startups.
Alongside the legislative and regulatory instruments, effective implementation of the Startup Proclamation will also depend on the establishment and successful operation of the Digital Startup Portal, National Designation Committee, Startup Fund of Funds, and National Credit Guarantee Scheme, says Solomon.
“While the enactment of the Proclamation marks a landmark achievement for Ethiopia’s innovation ecosystem, its true impact will be felt when the remaining steps are completed. With continued collaboration, transparency, and momentum, there is real hope that this legal foundation will soon translate into meaningful progress for startups, investors, and ecosystem builders across the country.”