Ethiopia requires that all imports be channeled through Ethiopian nationals registered with the Ministry of Trade and Industry (MOTI) as official importers or distribution agents. The importer or agent is required to apply for an import license, and register with the MOTI as well as the National Bank of Ethiopia (NBE) for a foreign exchange permit. Access to foreign exchange is the leading obstacle faced by Ethiopian importers seeking to source goods and services from the international market. Importers often wait for months to open a letter of credit for imports and receive an allocation of U.S. dollars due to an acute scarcity of foreign exchange.  Companies working in “prioritized” sectors, including manufacturing, agro-processing, and pharmaceuticals, may receive preferential access to foreign currency. 

Most distribution in Ethiopia, particularly to regional towns, is conducted through informal business arrangements. For example, after being cleared through customs, many goods will be sold to wholesalers in Addis Ababa’s (and Africa’s) largest open market (Merkato) and then distributed to retailers and small vendors. 

As a landlocked country, Ethiopia relies heavily on the port of neighboring Djibouti for the import and export of goods. Port Sudan in neighboring Sudan and Berbera in neighboring Somalia are used to a far lesser degree. In March 2018 Ethiopia concluded an agreement with the Somaliland Ports Authority and DP World to acquire a 19 % stake in a joint venture developing the Port of Berbera, which may result in expanded shipping routes to Ethiopia via Berbera. In recent days, Somaliland Minister of Finance said that Ethiopia lost its stake on Berbera port for failing to fulfill its commitment before the deadline. Part of the requirement was a financial contribution towards the development of the port which Ethiopia has failed to pay.  In July 2018, Prime Minister Abiy Ahmed signed an agreement with President Isayas Afeworki to restore diplomatic and trade relations, which also signals the potential for Ethiopia-bound shipping to transit via ports at Assab and Massawa in Eritrea. Ethiopia aspires to use the Eritrean ports of Assab and Massawa by 2022. 

Ethiopia has built seven inland ports in Modjo, Kallity, Semera, Mekelle, Dire Dawa, Gelan, and Kombolcha with an installed handling capacity of 22,000 containers. The dry ports, notably Modjo, approximately 70 kilometers from Addis Ababa, serve as intermediate logistics destinations for cargo. Most goods are transported by trucks from the ports to Addis Ababa and other parts of Ethiopia. Ethiopia’s state-owned companies dominate the truck transportation market. The overall number of trucks is presently insufficient to meet demand. 

A Chinese-led infrastructure project to revamp Ethiopia’s rail system, which connects Djibouti port to Addis Ababa began operations in 2018. This rail system has a capacity to move 3,500 tons of cargo on a single trip. The Ethiopian Shipping and Logistics Service Enterprise (ESLSE) claimed the new rail system has significantly enhanced its logistics capacity by reducing freight costs as well as shortening cargo delivery delays from more than three days to just 10 hours.  ESLSE promotes the use of newly operational rail cargo transport system claiming that it will reduce cargo transportation cost by 20%.  Contacts on the ground, however, report that, due to myriad and ongoing implementation issues associated with the new railway, the vast majority of goods continued to be transported by truck. Logistics costs constitute 30% of Gross Domestic Product (GDP) and the Government of Ethiopia (GOE’s) goal has sought to reduce these costs to less than 22% by close of 2021 and to reduce port dwell time from 40 days to 3 days. Ethiopia recently signed a memorandum of understanding with Somalia that will enable it to use the Berbera port for shipment of goods.  

The construction of the Lamu-Garissa-Iolo road linking Kenya to Ethiopia now provides significantly improved access for landlocked Ethiopia to the Port of Mombasa. The road corridor will also be key in supporting the Lamu Port-South Sudan-Ethiopia-Transport (LAPSSET) corridor. 

Ethiopian Airlines is the leading airline in Africa with 127 international destinations and 135 aircraft. Ethiopian Airlines operates a state of the art cargo facility with a capacity to handle one million tons of goods. It operates direct flights to major destinations in the United States, namely Washington D.C., New York and a flight to Chicago that commenced in June 2018. Flights to Houston, with a refueling stop in West Africa, also commenced in 2020. The Addis Ababa Bole International Airport is the major gateway for air shipments and the airport has cold storage houses that facilitate shipment of perishable goods such as cut flowers, fruit, and vegetables. 

Using an Agent to Sell U.S. Products and Services 

U.S. companies are best positioned in Ethiopia when appointing a local agent to represent their products and services in the country It is much easier when a U.S. company is represented by a local agent to coordinate agency questions and collect documents, market intelligence, and follow-up activities. Local partners help U.S. companies by providing customer support service, undertaking local market research, and obtaining customers feedback. Agents also facilitate the purchase of tender bid documents and provide payments for bid security and performance bonds. Local agents represent U.S. companies in government tender openings and in courts during litigation. Having a local partner is essential, as conducting business in some sectors is fully reserved for Ethiopians. 

Ethiopia has a fully registered American Chamber of Commerce (AmCham) as the AmCham Steering Committee signed a cooperative agreement with the Ethiopian Investment Commission in 2016. This agreement allowed the AmCham to formally form a registered AmCham in Ethiopia. As of mid-2020, the AmCham consists of 50 active members. The AmCham serves as an effective resource for U.S. companies wishing to do business in Ethiopia. In addition, local chambers of commerce and the U.S. Foreign Commercial Service are initial points of contact for U.S. companies wishing to partner with a local agent and do business in Ethiopia. 

Establishing an Office 

The Ethiopian Investment Commission (EIC), which reports to the Office of the Prime Minister, is one of the first stops for an investor wishing to apply for an Ethiopian business and investment license. EIC provides detailed information on investment promotion incentives. All business entities operating in Ethiopia must first be registered with the Ministry of Trade and Industry and obtain a tax identification number (TIN) from the Ethiopian Customs Commission, under the Ministry of Revenue. 

According to the World Bank’s Doing Business 2020 report, starting a new business in Ethiopia takes 32 days, one day less than in 2018 and three days less than in 2017. A foreign company seeking to open an office in Ethiopia must go through the following procedures: one procedure fewer than the 12 procedures required in 2018 and three procedures fewer than the 14 procedures required in 2017. 

• Reserve a unique company name or authenticate a company’s international name. 

• Authenticate the company documents and the office lease agreement at the Documents Authentication and Registration Office (DARO) under the Ministry of Justice: http://www.dara.gov.et/index.php/en/home/. 

• Obtain a Tax Identification Number (TIN). 

• Register and obtain the commercial registration certificate from the Ministry of Trade and Industry. 

• Make a company seal. 

• Register the company and employees with the Private Organization Employees’ Pension Fund. 

• Register with the Ethiopian Revenue Authority for Value Added Tax (VAT). 

• Publish the trade name in a nationwide newspaper. 

• Reserve a unique trade name. 

• Obtain a business license from the Ministry of Trade and Industry. 

• Install a cash registration machine (if you generate over 500,000 birr – roughly $18,350 - in annual revenue). 

A U.S. firm wishing to establish a branch, representation or project office in Ethiopia must also submit the following documents for registration: 

• A notarized copy of the registration of a parent company in the United States. 

• A copy of the U.S. Memorandum and Articles of Association. 

• An authenticated decision of the parent company’s board of directors or a similarly authorized body for the establishment of a branch in Ethiopia. The decision should indicate the types of activities of the branch, the individuals appointed by the parent company to act on its behalf, and the capital allocated for its operation. 

• An authenticated power of attorney issued by an authorized organ of a company for the permanent representative in Ethiopia. 

• A letter of financial reference from the company’s bank. 

• A notice published in a local newspaper announcing the establishment of a branch company in Ethiopia. 

For the latest Investment Climate Statement (ICS) which includes information on investment and business environments in foreign economies pertinent to establishing and operating an office and to hiring employees, visit the U.S. Department of Department of State’s Investment Climate Statements website.

Franchising 

The Ethiopian Parliament approved a Commercial Registration and Business License Proclamation in 2016 which allowed registration of franchises. However, difficulties in enforcing intellectual property rights, product quality control, cumbersome banking regulations, and continuing foreign exchange convertibility issues make franchising difficult. 

Despite the challenges, several U.S. branded companies have franchise operations in Ethiopia, including Pepsi-Cola and hotels such as Sheraton, Hilton, Marriott, Radisson Blu, Ramada and Hyatt Regency hotels. In April 2018, Belayab Food and Franchise Plc opened the first Pizza Hut in Addis Ababa and quickly increased its outlets in Addis Ababa to five. KFC and Subway are currently exploring the market for potential opening of their first stores soon.  A Cold Stone Creamery franchise opened in early 2020. 

Direct Marketing 

Direct marketing of U.S. products in Ethiopia is limited as the use of local agents is required for most types of businesses. Nevertheless, U.S. companies can open a representation or project office in Ethiopia to promote and support sales of their products through their local agents or distributors. 

Joint Ventures/Licensing 

Foreign investment inflows through joint ventures especially with the Government of Ethiopia (GOE) are encouraged by the Government of Ethiopia. The following are the major criteria for GOE approval of joint venture proposals:  

• Transfer and adaptation of needed technology into the country. 

• Improvement of the country’s foreign exchange position via exports. 

• Enhanced import substitution for local industries that reduce the pressure on foreign exchange demand. 

• Utilization and development of the country’s resources, mainly the generation of local employment opportunities. 

• Development of forward and backward linkages, and increased added value in various economic sectors. 

Many Ethiopian private sector companies welcome joint venture opportunities with U.S. companies as they seek western technologies and equity investment. In June 2018, PM Abiy announced that formerly closed sectors such as Ethiopian Airlines, Ethio Telecom, Ethiopian Shipping and Logistics Enterprise, Ethiopian Electric Power, Ethiopian Sugar Factories, Ethiopian Railways and Industrial Parks will all be floating shares to both local and foreign investors, with the government maintaining majority shares. 

Express Delivery  

The state-owned Ethiopian Postal Service Enterprise is the only indigenous courier service in Ethiopia. The Ethiopian Postal Service Enterprise provides both international as well as domestic express delivery services under its program called Express Mail Service (EMS). Other international courier service providers such as UPS, FedEx and DHL have offices in Ethiopia and provide express delivery services. A typical express delivery from a major U.S. city to Ethiopia takes approximately 3 to 10 days. 

Due Diligence 

Due diligence and project analysis are highly recommended for every sector and level of engagement. U.S. companies interested in securing land and investing in Ethiopia are encouraged to conduct due diligence as land use and allocation has become an extraordinarily sensitive and political issue. U.S. companies interested in partnership, hiring a local agent or forming any form of business partnership are advised to check the background of the companies they are dealing with by running a thorough due diligence on their potential partners. The U.S Foreign Commercial Service office, offers the following fee-based services to assist in these efforts:  

• International Company Profile (due diligence report on an individual company) 

• Gold Key Service (arranging appointment schedule with relevant parties) 

• International Partners Search (compiling information on potential strategic partners) 

Please note the following links  

http://ethiopia.usembassy.gov/commercial_office.html and https://www.trade.gov/ethiopia 

for more information on these services. 

If U.S. firms require extensive and detailed market research or project analysis, the Foreign Commercial Service office in Addis Ababa can provide a list of local consultancy firms. However, the Foreign Commercial Service office does not endorse any particular company.