Ethiopian Prime Minister Abiy's administration has approved a new policy that is set to do away with cash transactions in a move intended to stem underground illegal currency transactions.
In a special meeting on improving the ease of doing business and investment climate in Ethiopia, the Prime Minister stated that the National Bank of Ethiopia would stop cash transactions at the earliest time possible.
The Prime Minister further stated that the cashless transactions would be first applicable in government offices and then in private institutions although the latter would be permitted to still conduct cash transactions albeit in small and predetermined amounts.
Consequently, the government has revised eight commercial laws in an effort to attract investment and generate more job opportunities for young people. The Prime Minister has set his sights on creating at least three million jobs to lower the unemployment rate. According to the Premier, the overall unemployment rate in Ethiopia stands at approximately 11 million, an increasing trend which he seeks to curtail by next year. Whether or not he will achieve his goal remains to be seen.
The meeting highlighted the need to digitalise the country’s power and customs service sectors and establish oversight institutions whose responsibility will be implementing the new laws that are intended to attract Foreign Direct Investment (FDI) and improve the ease of doing business.
Attorney General Berhanu Tsegaye reiterated the Prime Minister's sentiments and confirmed that all laws which were peculiar to Ethiopia had been incorporated in the revised laws.
Prime Minister Abiy envisions that the new commercial code will not only allow small investors or shareholders to join big investments but will also protect their rights and interests. "By doing so the stock market experience will expand in the country," he said.
The key highlights of the meeting were:
- All prerequisites necessary to start a business, acquire trade license and registration certificates would be done online and within the time frame of 7 days.
- Revenue and Customs Authority would collect annual payment online and do away with using cash register machines to collect taxes. Furthermore, any extra Value Added Tax (VAT) payments are to be refunded within 7 days seven days.
- Revenue and Customs Authority are to reduce the lengthy time it takes them to scrutinise business documents, especially for prospective investors.
- The National Bank of Ethiopia is required to accept movable goods as collateral for loans.
Despite concerns raised regarding power cuts, security, and corruption within the telecom sector that could hamper the government's automation plans, the Premier was quick to reassure everyone that he is open to working with private investors in those sectors to ensure that the government's plans materialises.
For over three decades, starting and running a business in Ethiopia has always been a herculean task. A few years ago, one would not be permitted to start a business without proof of a degree. While we do understand the reasoning behind one having a degree, it can be argued that the lack of one should not have been used as a ground to bar people from pursuing their dreams. Education is more than just a piece of paper whose main goal is to tell others that you are knowledgeable. Some of the most innovative businesspeople never set foot in a school, had no degree and still went ahead to set up thriving business empires.
With endless regulatory hurdles, too much bureaucracy coupled with corruption and other requirements that are borderline ludicrous, Ethiopia's new commercial laws are indeed a breathe of fresh air to many in the business sector. Even then, we jubilate cautiously as we wait to see whether or not they will be fully implemented.
Header Image Credit: Warand Haab