Business

How To Start a Business In Ethiopia

Ethiopia is strategically located in the horn of Africa with a population of about 57 million. Its proximity to the middle East and Europe, together with its access to the major ports of the region, enhance its international trade. Covering an area of approximately 1.14 million square kilometers (444 square miles) Ethiopia is bordered by the Sudan on the west, Somalia and Djibouti on the the east, Eritrea on the north and Kenya and on the south.

Addis Ababa International Airport
Addis Ababa International Airport | Photo credit: Travelvisia
The Ethiopia economy is dominated by agriculture which accounts for about fifty percent of the the Gross Domestic Product (GDP), 65 percent of total export and 85 percent of employment. Coffee alone accounts for over 85 percent of total agricultural product. Agriculture is supplemented by manufacturing, mining, trade tourism. construction, services e.t.c. Which account for about 50 percent of GDP.

The industrial sector which contribute about 11 percent to GDP, supplies  important  consumer goods both to the domestic and international market. The main manufacturing are textiles, tobacco, foodstuffs, cement, leather, leather product, wood, metal and non-metalic product, paper, plastic and tiles. The main manufacturing exports product include leather and leather product, canned and frozen meat , sugar and molasses, oil and petroleum products.

Here are some of the opportunities to consider when thinking of investment in Ethiopia 

Telecommunication in Ethiopia

The telephone density in Ethiopia per head of the population is among the lowest in the world, with less than 1 percent of the population having access to a telephone. Recognizing that the development of an extensive network of telecommunication services is imperative, the government has now liberalized the sector, allowing foreign investors to participate in telecom activities jointly with the government. The Ethiopian Telecommunication Agency is entrusted with the task of regulating the sector.

Manufacturing in Ethiopia

The country has a large domestic market potential. And there are many opportunities for labor intensive and resource based industries because of the availability of cheap and trainable labor. Major opportunities in the manufacturing sector offer attractive potential benefit to prospective investors in food and beverage, leather, electronics, building materials and non-metallic mineral and metallic industrial sub-sector.

Tourism in Ethiopia

Tourism in Ethiopia is picking up slowly. There are a lot of things to be offered to the tourists. The visitors would find mesmerizing landscapes and awe -inspiring historical sites and monuments. The highlights of Ethiopia also have an attractive landscape, scenery and wildlife. The Africa rift valley which had a wild variety of wildlife and numerous bird species both endemic and common, are found in Ethiopia. The available tourist potential creates great opportunities for private investment in hotels, and international restaurants.

Banking and Insurance

Other efficient financial services are available in Ethiopia  while the National bank of Ethiopia (NBE) serves as the central bank, commercial banking functions are performed by the Commercial Bank of Ethiopia (CBE) and by a number of  newly emerging private commercial banks. The CBE has 164 branches including one in Djibouti. The CBE and private commercial banks offer savings and checking accounts, extend short term loans, deal with foreign exchange transactions, provide mail and cable money transfer services, participate in equity investment,provide guarantee services and perform all other banking activities.

State of Power in Ethiopia

The potential of Ethiopia's renewable and non-renewable energy resources is vast. Currently, less than 4 percent of the population is supplied with electricity, from this low base, domestic demand for electricity is growing on average of 10 percent per year. With a view to expand energy supply, the government has recently revised the legal and regulatory framework for power generation, transmission, distribution, and foreign investors are now particularly sought to set up hydro electric power plant.

Transport System

The road transport system is the most important means of transport in Ethiopia, providing over 90 percent passengers and freight transport in the country. Both asphalt and gravel roads radiate from Addis Ababa to important cities, town, and commercial centers. International highways link Addis Ababa to neighboring countries: Djibouti, Eritrea, Kenya.

Excellent passenger and cargo air transport service are operated by Ethiopian Airlines, which is one the world's best carriers, its international flights links the country with 41 cities in three continents; 26 in Africa, 11 in Asia and 4 in Europe.

Labor

Ethiopia has an abundant, hard-working, inexpensive and discipline workforce. Private investors can easily find and recruit young and energetic workforce. The cost of labor in this country is very low in any standards.

Procedures For Starters

Submit Documents And Obtain a Letter From The Commercial Registry To Open a Bank Account

The applicant should submit the memorandum and articles of association, relevant IDs and power of attorney in order to obtain a letter from the commercial registry address to a chosen commercial bank so that an account may be opened  under the new company's name.

Open a Bank Account

A Bank Account has to be opened and  a minimum capital requirement has to be deposited. Upon presentation of the letter from the commercial registry, the applicant opens a bank account under the new company's name and deposits the capital. This provides the applicant with a confirmation letter  stating that the deposit has been effected.

Obtain a Business License

The applicant presents principal registration, proof of the new Tax Identification Number obtained, a certificate of competence in the field of commercial activity in which the applicant is seeking a business license and pay the relevant fees. The business is usually issued on the same day these documents are submitted.

Install a Cash Registration Machine

All businesses must purchase and install a sales register machine in order to comply with VAT tax obligations. The machines are available at certified supplier locations around Addis Ababa . Once the machine is brought to the company's offices, it must be properly installed and set up so that it is linked to the Tax Administration system.

Register With Ethiopian Revenue and Customs Authority For Income Tax and Vat

A newly established firm must register for income tax, payable at the end of the company's fiscal year, and pay a municipal and license renewal fees and withholding taxes on their employee. Once registered the Tax Identification Number(TIN) is provided along with the VAT certificate.
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