Ethiopia - Distribution and Sales Channels

Distribution and Sales Channels

Last published date: 2024-01-18

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 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.

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.

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. Some sectors are fully reserved for Ethiopians, making a local partner essential. Areas where local agents can assist include:

Collecting documents and liaising with local agencies
Conducting market research
Providing customer support services and obtaining customer feedback
Facilitating purchase of tender bid documents and providing payments for bid security and performance bonds
Representing U.S. companies in government tender openings and in courts during litigation.

Establishing an Office

According to Ethiopian legislation, foreign businesses planning to open offices here must register under the country’s commercial code. The first stop for foreign companies looking to register their businesses is the EIC. The EIC, acting on behalf of the Ministry of Trade and Regional Integration (MoTRI), provides one-stop services for comprehensive registration. EIC recently digitalized the business registration procedure through the new eInvest system, providing all services relating to business registration.

A foreign company seeking to open an office in Ethiopia must go through the following procedures:

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
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 $9,140- 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 Ethiopia - United States Department of State

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, Pizza Hut, Cold Stone Creamery, and hotels such as Sheraton, Hilton, Marriott, Radisson Blu, Ramada, and Hyatt Regency hotels.

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 GOE, are encouraged. 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, the GOE 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 link for more information on these services:

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

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.