Government Responds Loud, Clear to Startup Policy Reform Skepticism

It’s been two weeks since the recent policy reforms targeting startups were announced in the presence of Prime Minister Abiy Ahmed (PhD) himself. Unveiled at the launch of the Startup Ethiopia Grand National Event, the reforms mark the federal government’s strongest commitment to nurturing the nation’s emerging startup ecosystem.

“If we support young people with innovative ideas, with some policy and administrative framework, it means we facilitate the success of at least a few startups,” stated Abiy. “These successful startups can become major players in the economy, and we might even create a unicorn someday,” the Prime Minister added.

Minister of Labor & Skills, Muferihat Kamil, took to the stage to unveil the broad set of nine policy changes aimed at fostering Ethiopia’s startup ecosystem. These changes seek to address longstanding challenges faced by the nation’s innovative businesses, ranging from simple office requirements to access to foreign exchange.

The reforms have inspired critical discussion in the startup ecosystem, where stakeholders and startup founders took their views to social media to share both their support and doubts. Moreover, many were concerned about its implementation.

“Authorities cannot provide benefits if a startup isn’t clearly defined,” wrote Bernard Laurendeau, CEO of Arifpay, on LinkedIn. “Without a competent public-private committee to identify startups, they won’t obtain benefits like access to the sandbox environment.”

Kidist Tesfaye, Founder and CEO of Yene Health, echoed the cautious optimism stating “let’s celebrate when we move from planning to action.”

On Thursday, April 11, 2024, a follow-up panel discussion was held to dig deeper into these reforms. While many in attendance were expecting an explanation of the timeline and how the proposed reforms would be applied, they got a different response but a much stronger one.

The discussion brought in high government officials, Muferihat Kamil and Eyob Tekalegn, State Minister of Ethiopia’s Ministry of Finance, accompanied by other guests, to reflect on the changes.

Muferihat set the tone of the discussion by stating that “the government too is operating with an entrepreneurial mindset.” “We are deploying and testing new disruptive approaches. The policy reforms are a testament to this,” she added.

“There is a conventional approach that we are used to. Whenever the government wants to do something, there is an extensive study that is followed by other lengthy procedures to implement it.”

When many heard the announcements, their minds were pinned to Ethiopia’s startup act, which has been in the draft stage for close to five years. One such person was Daniel Getachew, founder and CEO of Guzo Technologies. “When I first heard the announcements, I was really hoping that the startup act was being passed into law,” he stated during the discussion that was held at the newly opened Adewa Museum.

Ayalneh Lemma, Legal Affairs Head at the Ministry of Innovation & Technology, told Shega that the draft Startup and Innovative Businesses Proclamation has been submitted to the Prime Minister’s Office, and the Ministry is waiting for responses.

But Muferihat has made it clear that the proposed changes are beyond the draft law and bring together various government agencies. She added that the implementation of the reforms would not follow conventional methods. “We are working without waiting for the law,” Muferihat told the crowd.

Eyob further cemented this notion, saying the reforms would progress without a regulatory requirement. “Let’s see this as a sandbox and see what works. The laws can follow once we get a clearer picture,” said Eyob.

The state minister added that the federal government has made a political statement to startups, and the commitment comes from the highest level of government with the direction set by the Prime Minister’s Office.

The recently established National Digital Transformation Council, led by Deputy Prime Minister Temesgen Tiruneh, has been mandated to follow up on the policy reforms. The council held its first meeting this week.

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Beyond the digital transformation agenda, the government is also betting on local startups to address Ethiopia’s economic woes. “How much have we invested in METEC [a now-defunct state-owned enterprise]?” asked Eyob, comparing it to the potential benefits of fostering a thriving startup ecosystem.

This shift in focus aligns with Prime Minister Abiy Ahmed’s remarks from two weeks ago.

“Ethiopia faces a high unemployment rate. Startups can be a powerful tool for job creation. While our tax collection rate is low, startups in other countries are known for making significant tax contributions. We also have a challenge attracting foreign direct investment. However, successful startups can be very attractive to investors,” stated Abiy.

Eyob sees the reforms as a clear message to the global community: “Ethiopia is open for business.” The government has shifted back the focus to the startups themselves, essentially asking, “Are you ready for the changes?”

Etenat Awol contributed to this article.