Ethiopia Ratified a Startup Law, Now Comes the Hard Part

Ethiopia’s first Startup Proclamation, ratified last month, has been welcomed by most as a watershed legislation for a private sector that has long operated in a legal gray zone. The law promises, for the first time, to recognize startups as a distinct class of enterprise and to back that recognition with financing tools, tax relief, and regulatory sandboxes. Yet even its champions concede that the hard part lies ahead: turning legislation into working programs. 

That tension animated a panel last week at the Hyatt Regency organized by the Center for Accelerated Women's Economic Empowerment (CAWEE) and the Konrad-Adenauer-Stiftung (KAS) Ethiopia Country Office. Under the theme “Seeds of Growth: The Role of Start-Up Legislation in Ethiopia’s Private Sector Development,” policymakers and practitioners traced the law’s long gestation and aired doubts about implementation. Speakers included Samiya Abdulkadir, president of the Ethiopian Youth Entrepreneurship Association; Tsegamlak Solomon, founder of Tsegamlak & Associates and previously General Counsel of the Ethiopian Securities Exchange (ESX); former state minister of labor and skills Nigussu Tilahun; and Tunisian impact entrepreneur Saoussen Ben Cheikh, with moderation by Gebeya’s chief impact officer, Mena Tafesse. 

The journey from concept to codified legislation has been long and cumbersome. A drafting team was formed in 2020 under the then Job Creation Commission, working with the Ministry of Innovation and Technology, and aligning with Ethiopia’s 10-year development plan. It would take years for the draft to be open for public comment in October 2024, as it bounced around from one government agency to another. The Council of Ministers endorsed the bill in June 2025, and Parliament ratified it unanimously on July 17. The proclamation has not yet been published in the Federal Negarit Gazette, which means it is not in force. 

Once effective, the law would lay the groundwork for a National Startup Council to coordinate policy, give startups legal standing, and open pathways to finance through a fund of funds, grants, and credit guarantees. It is expected to offer income-tax holidays, loss carryforwards, and duty-free import of capital goods.  

“For the first time, startups will be recognized as a distinct entity in the Ethiopian legal framework,”  Tsegamlak said. “Recognition is the foundation for everything else.” 

Definitions may prove tricky. The latest draft seen by panelists limits eligibility largely to tech-enabled firms under three years old with annual revenue below five million birr, alongside expectations of economic contribution through exports or import substitution. Tsegamlak questioned whether such thresholds would date quickly in a volatile economy and criticized a five-year age cap for companies to qualify. The panelists pointed to several risks. First, the law’s working definition of a “startup” appears narrow and brittle: the draft speaks of tech-enabled firms and sets revenue thresholds that may be quickly outpaced by inflation and currency swings. Concerns were also voiced that age and revenue caps could arbitrarily exclude firms that contribute real economic value. 

For Samiya, the bottleneck is institutional. The proclamation assigns responsibilities across roughly eleven agencies from the Investment Commission to Customs and the National Bank of Ethiopia. “Startups are inherently fast and disruptive,” she said. “Systems that serve them must be equally agile.” Her association she says is pushing for a dedicated Startup Authority to decentralize services, echoing models in Tunisia, Saudi Arabia, and India. Relying on a single ministry, she warned, could stretch mandates and slow delivery. 

The proclamation also laid a legal framework to establishes a two-billion-birr Startup Fund of Funds, to be managed by a private fund manager under Ethiopian Investment Holdings. It would provide grants, soft loans, and co-financing for accelerators and investors, aiming to fill the credit gap left by risk-averse banks.  

Saoussen cautioned that governance, not headline size, determines impact. “Capital without accountability becomes wasted potential,” she said. “Speed, transparency, and digital tracking are what build trust.”   

Tunisia’s experience loomed large. Its Startup Act, crafted by a 70-member task force of founders, investors, bankers and officials, created a flexible “toolbox”: a national startup label for innovative, scalable ventures under eight years old; fully digital applications; and safeguards such as yearlong employee leave with job security and stipends, plus foreign-exchange access and tax exemptions. More than 1,000 startups have been certified, with a strong showing from women-led and regionally diverse firms. Ethiopia’s more sprawling governance map, participants said, risks fragmentation unless coordination is built in from the start. 

Monitoring and enforcement will matter as much as money. Nigusu argued that grants and tax breaks should be tied to measurable outcomes, including both the number and quality of jobs created. He called for independent verification, digital dashboards, and feedback loops to catch misuse and policy gaps early. Tsegamlak added that investors will only commit if rules are applied consistently and contracts are enforceable. 

Skills and competitiveness were recurring themes. The former state minister urged tighter links among the labor and skills ministry, universities, and industry to expand apprenticeships and track training outcomes. While Tsegamlak warned that regulatory uncertainty and shallow capital markets continue to push advanced startups and investors toward Kenya and Nigeria.  

For Ethiopia, the stakes are clear. The proclamation gives startups moral and legal legitimacy after years in the margins. But turning recognition into resilience will demand streamlined institutions, ironclad accountability, and a practical eye for the small print: definitions that move with markets, funds that reach founders quickly, and coordination that does not suffocate experimentation. Until those tests are passed, the law will be a foundation rather than a finish line.