Unlike its neighbouring country of Kenya, the Ethiopian internet startup space is still in its infancy and there are a couple of hurdles, one of which is a form of restriction on foreign investments.
This will soon change as the government is currently working on a policy document that will allow more participation from foreign investors in various sectors of the economy, one of which is the internet startup space.
Apparently, the Ethiopian government recently invited stakeholders in every segment of the private sector in the country for their input in the policy document. According to one of the invited stakeholders, one of the interesting parts of the document has to do with startups.
Before now, the minimum that foreign fund providers can put in an Ethiopian company (not startup) is $200k (ETB 5.8 million) and $150k (ETB 4.37 million) for a joint venture.
Apparently, there is a special provision for startups in the policy document which will allow foreign fund providers to invest in Ethiopian startups.
Beyond that, investors will be able to invest less than $100k in Ethiopian startups. This is considering that entrepreneurship in the internet space is still in its infancy in the East African country, with not many success stories yet.
Obviously, the Ethiopian government is cognisant of the fact that the bulk of foreign investments coming into Africa internet space is going to Nigeria, Kenya, South Africa, Egypt among others.
For Ethiopia, is a case of “we want a piece of that pie.”
Interestingly, the likes of MTN and Orange have already indicated interest in launching in Ethiopia very soon. This is after the Ethiopian government decided to open up the telecommunications market to foreign players.
At the moment, there’s only one telecom operator in the country — Ethio Telecom — and it is state-owned. Beyond the new players that will be coming into the market, the government is also selling part of its stake in Ethio Telecom.
It appears the Ethiopian government is going all out in opening its doors to foreign investors in some sectors of the economy.
Irrespective of this move, there are still concerns about internet connectivity in the country. The Ethiopian government has in the last six weeks shut down the internet twice — during a national examination and after some government officials were assassinated.
Nigerian startups raised $377m in 2019, more than twice what they did in 2018. Find out more when you download the full report.