Ethiopia set to roll out new SME law to spur enterprises
Ethiopia’s economy is projected to grow by 8.4 per cent this year with services industry turbo-charging growth. The country which has been on an aggressive privatization drive is now working to roll out a new start-up act to drive small businesses and enterprise growth CNBC Africa’s Aby Agina spoke to Mered Fikireyohannes, Founder & CEO, Pragma Investment Advisory for more on what this move means for the country’s capital markets.
Mon, 04 Nov 2024 14:47:01 GMT
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AI Generated Summary
- The new start-up act in Ethiopia aims to provide formal recognition, tax incentives, and a conducive environment for start-ups to thrive and accelerate their growth.
- Initiatives such as grant schemes, credit guarantee schemes, and a fund-of-fund scheme will address the financial gap for start-ups and mobilize capital to support their development.
- The introduction of a mobile money platform by the National Bank of Ethiopia and the digitalization of the interbank money market on the Ethiopian Securities Exchange platform will further support the private sector, streamline operations, and improve liquidity management in the financial system.
Ethiopia's economy is projected to grow by 8.4 per cent this year, with the services industry turbo-charging growth. The country has been on an aggressive privatization drive and is now working to roll out a new start-up act to drive small businesses and enterprise growth. The move is aimed at boosting the country's capital markets and accelerating private sector investment. The new start-up act is a drafted proclamation that has been eagerly awaited by the ecosystem for the past six years. The Ministry of Innovation and Technology recently drafted the start-up proclamation, inviting public consultation. The goal of the proclamation is to give recognition to the start-up ecosystem in Ethiopia, which has not had formal recognition until now. This step will put Ethiopia in line with other African countries like Tunisia and Nigeria that have implemented start-up acts. The proclamation will provide tax incentives, exemptions, and a conducive environment for start-ups to thrive for a period of five years. It also addresses the financial gap for start-ups through grant schemes, credit guarantee schemes, and a fund-of-fund scheme to mobilize capital. These initiatives will be supported by the government's budget and overseen by the Ethiopian Investment Holding. The aim is to create a conducive environment for start-ups to accelerate their growth and attract venture capital firms and angel investors to the ecosystem. The move is expected to streamline operations and make it easier for private businesses to raise funding. The National Bank of Ethiopia has also unveiled a mobile money platform, along with the introduction of the Sandbox Regulation by the Capital Market Authority, to further support the private sector and encourage innovation and investment. Additionally, the launch of the interbank money market on the Ethiopian Securities Exchange platform has digitalized liquidity management for banks, easing the liquidity problem in the financial system. This initiative has been well-received by major banks, with billions of funds being transferred digitally among them. The digitalization of the interbank money market is expected to improve the speed and efficiency of financial transactions in Ethiopia, further supporting economic growth and development.