Ethiopia Finally Approves Long-Awaited Startup Law

After nearly five years of deliberation, revisions, and inter-ministerial back-and-forth, Ethiopia’s parliament has unanimously ratified the country’s first Startup Proclamation, marking a significant milestone in the formal recognition and regulation of its fledgling innovation ecosystem.

The landmark bill, which secured approval from the Council of Ministers in June, introduces a comprehensive legal framework designed to support early-stage enterprises. The Human Resource, Employment, and Technology Affairs Standing Committee led an extended series of consultations involving a broad spectrum of stakeholders, including startup founders, investors, and development partners, before the bill reached the floor of the House of People’s Representatives.

The proclamation sets out to define and properly classify startups, offering legal recognition that has long been absent. It also establishes pathways for access to financing, structured incentive schemes, and institutional support mechanisms in an ecosystem that has historically been constrained by regulatory ambiguity, limited capital access, and fragmented oversight.

Key provisions include the establishment of a national fund of funds, startup-focused grant programs, and a long-anticipated credit guarantee scheme, features that had once been sources of contention during the bill’s early drafting phase. The Fund, in particular, is expected to serve as a cornerstone for future public-private collaboration in research, product development, and scale-up financing.

Designated startups under the new law will now be eligible to carry forward losses for up to two years under a new income tax exemption provision. The bill also introduces duty-free privileges for the import of capital goods essential to a startup’s operations, with these benefits extending for as long as four years.

Analysts say the proclamation could catalyze greater foreign investment, improve the ease of doing business, and drive job creation across sectors such as fintech, agritech, and digital health.

In the same session, the House of People’s Representatives ratified a new Income Tax Proclamation and approved amendments to the existing bill governing the registration and ethical conduct of political parties during elections.