The Rules Multiply. So Does the Confusion, and Uncertainty

Oct 25 , 2025.

The regulatory machinery is on overdrive. In only two years, no fewer than 35 new proclamations and directives have been issued from the Parliament, federal ministries, and regulatory agencies. Whether it is community insurance or capital market thresholds, lease agreements or informal burial clubs, few areas of public or private life have gone untouched.

It would be tempting to interpret this hyperactivity as a long-overdue modernisation drive. After all, Ethiopia has committed itself to a raft of reforms under an IMF staff-monitored programme, with ambitious targets to broaden the tax base, deepen capital markets, and prepare the economy for foreign investment. But behind the bureaucratic velocity lies a more sobering truth of institutional incapacity, legal incoherence, and a public trust struggling to keep pace.

Take the Ministry of Labour & Skills' draft directive that sorts foreign-employment agencies into three tiers. Offices should meet size standards, file quarterly digital reports, and obey caps on the number of workers they may place abroad. Its officials, commanded by Muferihat Kamil, insist they are safeguarding migrants, but operators mutter about compliance costs. The Addis Abeba Revenue Bureau, meanwhile, ordered property owners to register leases and collect rents only through banks or electronic channels. After a flat 35pc deduction, tax rates climb from 10pc to 35pc, and inspectors may audit ledgers or impose surcharges on empty flats left off the books.

Regulators of Ethiopia’s fledgling capital market joined the fray. The Ethiopian Capital Market Authority (ECMA), under Hanna Tehelku, raised the minimum paid-up capital for transaction advisers to eight million Birr for those whose clients hold more than 250 million Br, and five million Birr for the rest. Public companies should file detailed share registers. They face penalties for late filing. Critics grouse that the Authority relied on a 2021 law that has yet to be amended, breeding doubt and uncertainty.

Laws governing the use of land, the country’s most emotive asset, are also being rewritten. A bill before Parliament would phase out urban freehold in five years, shifting all plots to leasehold and linking cadastral records to a digital registry. The plan is clear titles; the fear is displacement. Low-income residents and peri-urban farmers ask who would set compensation and how often lease rates would be reviewed.

The Ministry of Finance has broadened the tax net, demanding that every professional, lawyer, consultant or otherwise, register for value-added tax (VAT), regardless of turnover. The Federal Bar Association retorts that legal services are not mere commerce and vows to sue. A separate directive scrapped the turnover tax for firms earning more than two million Birr, giving them only 30 days to embrace VAT. Small businesses complain of crushed cash flow and hurried paperwork.

In Addis Abeba, community-based health insurance shifted from a flat 1,500 Br annual fee to income-linked premiums. Most households now pay 2,000 Br, while middle-income families pay 6,900 Br, and the well-off pay up to 10,500 Br. Subsidies cushion the poorest, but many families baulk at the jump.

The financial system is reforming at speed, with the National Bank of Ethiopia (NBE) ditching its fixed weekly forex rate, letting banks quote freely, and requiring exporters to repatriate half their earnings within 30 days. After 90 days, any spare hard currency should be sold back to the market, a rule coffee and flower exporters say ignores their long production cycles.

Ownership, too, is under new scrutiny. A draft directive forces NBE approval for any share transfer above two percent of a bank’s equity. Foreign buyers need “no-objection” letters from their home regulators. Aspiring foreign banks would pony up five billion Birr in paid-up capital and produce a recent credit rating. Existing lenders have eight months to file self-rescue blueprints for future crises, classify every loan into five buckets and provision accordingly. Bankers warn that the timetable alone could inflate non-performing-loan ratios.

Insurers have their own headaches, too. A risk-based capital regime, issued in April last year, sets fresh thresholds and demands that firms adopt IFRS-17 by 2027. Executives grumble about shortages of actuaries to crunch the numbers.

Tariff policy is no calmer, either. Import duty on peanuts fell from 35pc to 15pc, but cartons and plastics jumped from 15pc to 25pc. Fridge assemblers saw duties on semi-knocked-down kits rise, while completely knocked-down refrigerators and EV batteries became duty-free. Officials say they are nudging local manufacturing, but domestic manufacturers say costs are rising unpredictably.

Utilities have not escaped. Since September 2024, the Ethiopian Electric Utility (EEU) has levied 15pc VAT on monthly electricity usage above 200kWh, as well as on water usage above 15 cubic metres. In July, the tax was back-dated for prepaid customers, sparking fury. A 0.5pc regulatory levy and strict monthly transfers to the Ministry of Revenues heap yet more paperwork on power and water suppliers.

The Ethiopian Investment Board has opened most wholesale trades, except fertiliser, to outsiders, provided they modernise logistics. Yet, approval procedures remain hazy, leaving applicants in limbo. Fresh directives on tax penalties offer waivers of up to 90pc if offenders pay quickly, but firms still complain of heavy-handed audits and capricious fines. A procurement order clumps more than 40 state-owned enterprises into a central purchasing pool using electronic platforms. Managers worry about a clunky system and new layers of sign-off.

Even Ethiopia’s informal safety nets are being penned into law. Edirs now enjoy legal personality and may pool funds for investment on the forthcoming Ethiopian Securities Exchange (ESX).

Much of the rush in the barrage of laws and directives comes down to money. Federal government officials pledged to the International Monetary Fund (IMF) that they will widen the tax base and shore up the banking system. But their zeal appears to bring tight deadlines, retroactive levies and hardly any public engagement before enforcing these laws. Banks, SMEs and households all grumble about ambiguous wording and abrupt roll-outs.

They have reason. Studies across rich and poor countries alike show that excessive red tape can swallow up to one-fifth of labour input in some industries. Cutting it could lift productivity by eight percent. A World Bank survey finds that every 10pc rise in regulatory burdens trims GDP-per-capita growth by 0.5 points annually, while cumulative rules can knock two points off national GDP growth each year. In countries where small and medium firms generate 35pc of output, such burdens shave half a point off annual GDP.

Digital compliance tools, by contrast, can cut costs 20pc to 25pc without dulling oversight.

Beyond the spreadsheets lurks a subtler danger of unpredictability. Addis Abebans tell tales of traffic violators (drivers with government, military, police, or diplomatic plates) or dark-tinted SUVs cruising past red lights unhindered and committing blatant acts on the roads. They seem protected by invisible shields of influence, causing cynicism to spread the belief that rules apply only to the rule-bound.

The Ministry of Education set standards for class size and teacher training, yet many schools flout them and still pass inspection. Directives barring bars and gambling dens near schools vanished after a burst of headlines. Road projects uproot some homes while sparing others touched by unseen patrons. The sense that enforcement is negotiable corrodes trust faster than any new proclamation can restore it.

None of this is meant to discount the ambition behind the reforms. Undoubtedly, liberalising forex, opening wholesale trade and imposing risk-based capital on insurers could all boost investment and stability. The challenge remains to moderate velocity with capacity. Rules should be clear, timelines realistic, and data systems functional. Officials need training, while courts should review litigations arising from discontent and offer those disgruntled a recourse to challenge errors.

Where compliance costs threaten to kill the patient, proportional regulation and digital portals can ease the pain.

For now, the rule book grows thicker by the month. Each directive carries hope of a tidier economy and dread of a larger bill. Writing new laws is easy, but applying them evenly is hard. Success will depend on whether regulators can match their appetite for reform with the transparency and predictability that businesses, and citizens, need to thrive.

PUBLISHED ON Oct 25,2025 [ VOL 26 , NO 1330]