The Ethiopian Investment Commission is under intense scrutiny after the Federal Auditor General's findings revealed years of alleged oversight failures.

The report shows that, over the past 26 years, the Commission issued 18,559 licenses, yet only 4,490 of those projects, about 24pc, actually began operations. Another 9,061 licenses were revoked, often without clear explanations. The findings triggered a strong response in the federal Parliament last week, where the Public Expenditure Administration & Control Affairs Standing Committee gave Commission officials three months to submit a detailed action plan addressing investor facilitation and regulatory shortcomings.

The audit also uncovered a serious lapse in enforcing initial capital requirements. Of the 153 sampled projects, foreign investors were meant to deposit 200,000 dollars in a closed account for licensing, while joint ventures were required to deposit half that amount. Yet, the Commission did not follow up on bank deposit slips. The consequences of such failures become even more apparent in places like the Eastern Industrial Park, where 20 companies have shut down entirely, nine suspended operations over tax disputes, seven began operations well behind schedule, and two have disappeared.

These revelations sparked fierce debate among federal legislators, with members of the Public Expenditure Administration & Control Affairs Standing Committee questioning the Commission’s senior officials. Commissioner Zeleke Temesgen (PhD) appeared alongside other executives but faced pointed probes from committee members, including Chairwoman Yeshiemebet Demisse. Recently appointed following the arrest of her predecessor, Christian Tadele, the Chairwoman insisted on direct answers to legislators' questions. She pressed Zeleke and his aides to offer specifics, repeatedly interrupting when they seemed avoiding direct responses.

Auditors reported to Parliament a finding of mismanagement in cases such as Emirates Steel Plc, which leased 4.8hct of plot in Oromia Regional State yet failed to begin construction four years later. The Commission was criticised for lacking a comprehensive system to track and monitor licensed investments. Auditors said they saw virtually no sign of record-keeping or regulatory controls that would allow officials to gauge whether companies are meeting their commitments.

Foreign investors were also blamed for inadequate job creation and technology transfer. According to the audit, many bring equipment that local workers lack the skills to operate, leaving the domestic workforce with limited benefits.

“There needs to be a skill development plan,” said Habtamu Simachew (PhD), a senior advisor at the Commission.

He argued that the absence of a national workforce training program has limited the country’s ability to capitalise on advanced machinery and processes introduced by foreign companies.

Additional concerns were voiced by legislators over the Commission’s use of duty-free privileges, which allow investment license holders to import capital goods, construction materials, and vehicles without paying customs duties. Auditors reported widespread gaps in documentation and oversight. Of the 153 sampled companies, no proper records verified that duty-free imports were used for the intended purposes. In 2023, the Commission found that 61 out of 1,316 companies had been subject to administrative action for alleged abuse of these privileges.

Despite these figures, Commission officials insisted they have operated within the law and granted no unlawful privileges. However, disputes with the Ministry of Finance remain, after the Ministry rejected 45 approvals the Investment Board had previously granted.

The Commissioner acknowledged the difficulties of coordinating policy across federal agencies, particularly when granting duty-free privileges.

“The process of granting duty-free privileges has been difficult,” he said.

In the two years beginning in 2021, the Commission facilitated only half of the 40 targeted investors. The following year, investment revenues were 3.3 billion dollars, falling short by 1.8 billion dollars.

The audit further revealed that the Commission failed to secure bilateral agreements with international partners that might expand and protect investment inflows. According to the Auditor General, no audited reports have been produced to demonstrate results from existing agreements. Investors also wrestled with obstacles such as weak infrastructure and land lease delays. The findings disclosed that some companies, including Sudan-Saudi Agricultural, Beti Ornamental Plants Plc, and the Pharo Foundation, have sought land expansions for over a decade without resolution.

According to Abera Tadesse, deputy federal auditor general, seven investors have not yet received land, even though they have fulfilled payment obligations. In another blow, three investors were operating under severe power shortages, a recurring problem in many parts of the country. Habtamu, the Commission's senior advisor, argued that regional states are responsible for facilitating land and infrastructure such as electricity.

Zeleke observed the need for coordinated regulation among different federal agencies to oversee the granting of duty-free privileges.