How to Access Incentives for Agribusiness Investment in Ethiopia

Last updated March 14, 2015

Are you planning to invest an agribusiness project in Ethiopia or operating one already? For any serious investor like you considering entry into a new country including Ethiopia, the availability and accessibility of incentives can be one key reason. In this regard, deciding whether or not to invest, where, in what sector or location can all be daunting. Neither will these decisions come easy even for a new domestic country nor existing ones who wish continue investing or reinvesting.

This article contains a checklist of standard steps and requirements intended to provide quick guides for entrepreneurs like you on how to gain the benefits. For further details, read guides on specific types of incentives.

 

1

Visualize what your establishment would look like if you wish to invest in integrated agroindustry parks (IAIPs)

image1

2

Come up with a feasibility study and action plan

You may, and you should, have an investment project plan to engage in industry zone. However, unless your agribusiness project for investment in this area is feasible, you will never qualify to run a zone. Therefore, you should commission an independent consultant to study whether or not the project is viable. Make sure you find a licensed consultant to get this done.

3

Prepare adequate feasibility study report

Take note that conducting feasibility is one thing while writing a good study report is another. Therefore, you should make sure the report is prepared in an acceptable format particularly in accordance with guidelines for the intended investment areas. According to a guide by EIA and EKN, the feasibility study should in general contain the following: 

  1. Project summary
  2. Background information: brief history and details of the enterprise/promoter, type of project, scope and objective, legal form of business
  3. Numbers and certificates, including registration number and date, license number and date, tax payer identification number (TIN), value added tax (VAT) registration certificate
  4. Updated market study and marketing arrangements
  5. Technical study: location, project design and engineering
  6. Organization and management study
  7. Financial statements (balance sheet, income statement, cash flow)
  8. Financial analysis
  9. Social and economic aspects of the project
  10. Conclusions and recommendations
  11. Implementation program
4

Submit the feasibility study and action plan for approval and follow up

According to a senior expert of Ministry of Industry (Hunegnaw 2014), you should submit the feasibility study and action plan to the concerned institutions for approval and follow up. The institutions include: 

  • Ministry of Industry (MoI)
  • Food, Beverage & Pharmaceuticals Industry Development Institute (FBPIDI)
  • Ethiopian Investment Commission (EIC)
  • Banks
5

Follow up the process

You need to follow up the approval process by the concerned bodies for the administration of industry zone development investment. This may require frequent contacts with the concerned body, particularly in the Ministry of Industry and FBPIDI. In case of delays, you may need to contact EIC that provides overall facilitation and assistance to investors.

6

Establish and run the industrial zone

Upon approval of the investment project, you need to start implementing the action plan according to the timeframe. Delays in project implementation may lead to cancellation of your investment permit and business license.

7

Know the applicable investment regime

The investment regime of Ethiopia with regards to industrial zone development provides for three forms (Investment Proclamation (amendment) N. 849/2014). These include: 

  1. Investment by the Government
  2. Joint Investment of the government and a private investor
  3. Investment by private investors

To that effect, a new item has been added in the list of investment areas specified in the Schedule attached with the regulation. That is:

“Industrial development zone (including private industrial development zone investment, the establishment of which is agreed with the government prior to the issuance of the Proclamation)”

You need to note that the entitlement to the tax incentive for industrial zone development is very generous. The income tax exemption period is:

  • 10 years in Addis Ababa and Special Zone of Oromia surrounding Addis Ababa
  • 15 years in other areas
Notes
Take note that this article was prepared by Amare Molla, Information Hub Coordinator for ABSF, and as such does not reflect the views and opinions of the institutions involved in funding or managing the AGRIbiz.et website. The article is written with utmost care by referring available and reliable information sources on the agribusiness and investment situation of Ethiopia. It is also thoroughly reviewed by Gertjan Becx, the ABSF project coordinator, and other experts of the project. Despite that, you are advised to check the accuracy of the information as investment incentive offers and procedures or other related conditions in Ethiopia may change over time with, for instance, changes in related policies and regulations.
Tips
  • Please consult institutions that can assist you with access to incentives. For instance, the Ethiopian Investment Commission can provide you with adequate and reliable information regarding high priority areas of the government that are more eligible for incentives.
  • The Development Bank of Ethiopia also has a special loan fund for high priority export sectors such as flower (US Department of State 2013). The incentives include land lease at low price and loan with equity contribution of 70% by the bank.
Warnings
US Department of State. 2013 Investment Climate Statement: Ethiopia. http://www.state.gov/e/eb/rls//othr/ics/2013/204639.htm. Accessed December 26, 2014. Ethiopian Chamber of Commerce and Sectoral Associations (ECCSA). 2013. Investment Guide of Ethiopia. ECCSA, Addis Ababa, Ethiopia. Ethiopian Investment Agency (EIA) and Embassy of the Kingdom of the Royal Netherlands. 2008. Agricultural Investment in Ethiopia: a Guide for New Investors. EIA, Addis Ababa. Ethiopian Investment Commission (EIC). 2014. Invest in Ethiopia. EIC, Addis Ababa. http://ethioinvest.net/images/pdf/Investment_Brochure_to_Ethiopia.pdf Accessed on November 27, 2014. Ethiopian Investment Commission website. www.ethioinvest.net. Accessed November 4, 2014.. Investment incentives and areas reserved for domestic investors proclamation No. 769/2012. Investment incentives and areas reserved for domestic investors regulation No. 370/2012. Investment incentives and areas reserved for domestic investors proclamation (amendment) No. 849//2014. Investment incentives and areas reserved for domestic investors regulation (amendment) No. 312/2014.

2 responses to “How to Access Agribusiness Development Credit in Ethiopia”

  1. abooook says:

    It is a very good explanation, but the reference is outdated. Proclamation No 249/2001 is repealed by Proclamation No 543/2007 and the repealing law itself i.e. p543/2007 is also repealed by Proclamation No. 768/2012 Export Trade Duty Incentive Schemes Proclamation before THREE YEARS AGO. It need to be re-written based on the new law i.e. Proclamation No. 768/2012