Will Ethiopia pass the proposed Start-up Act in 2021?

The first draft of the Ethiopia startup Act was published in 2020. This was a build-up in intent to have a legal framework for the sector for over a decade. The aims of the policy positions in the draft document look to: Create an innovative ecosystem in Ethiopia,  support the launch of more businesses, promote innovation and job creation, erase entrepreneurship barriers by easing the procedures behind the establishment, running, expansion, and closing of businesses, while Increasing foreign direct investment thus boosting the larger Ethiopian economy.

Structurally the Act proposes the establishment of a National Start-up Council, and an Innovation Fund. Before the final draft is presented to parliament it will have to run through the Ministry of Innovation and Technology, Ministry of Revenue, Job Creation Commission, Ethiopian Ministry of Trade and Industry, Ministry of Finance, among others.

The draft further gives clarity on what constitutes a start-up. The National Start-up Council will be able to determine whether an entity qualifies or disqualifies as a ‘Start-up Business Label’ or an ‘Innovative Business Label’.

The Innovation Fund derived from MinT will be overseen by the council and used to issue Start-up scholarships, replace workers on Start-up leave, cover fees involved in the registration of intellectual property, cover costs of admin support, incentive ecosystem builders, and provide guarantees. The fund will derive its revenues from the government budget, grants, loans, and any other external donations.

It’s worth noting for a company to meet the classification of a “start-up” the entity must be a “small, micro, or medium enterprise” in addition, the organization’s legal existence should not exceed 5 years.

The country of 110 million offers a huge untapped potential for future entrepreneurs. Addis Ababa, the nation’s capital city ranks 692nd of the top 1000 cities globally according to the  StartupBlink Global Ecosystem Ranking Report.

Some of the most prominent startups out of Ethiopia are Gebeya (edtech), Deliver Addis (online delivery service), Arifpay (e-payment platform), and several others.