Fed Courts Big Investors with a Promise to Pay If Things Go Wrong

May 23 , 2026. By NAHOM AYELE ( FORTUNE STAFF WRITER )

The Council of Ministers has approved a regulation establishing a formal legal path to compensation for strategic investors if federal actions deprive them of their assets, contractual rights, or expected returns. The directive transforms prior political guarantees into legally enforceable instruments funded by the federal budget. According to Wasihun Abate, a tax adviser at the Ministry of Finance, the regulation is designed to attract strategic investments and instil confidence among external capital providers.

The federal government has moved to put its balance sheet behind a select group of investments, approving a regulation that gives strategic investors a path to compensation if state action strips them of assets, rights or expected returns.

Cleared by the Council of Ministers, the regulation turns what has been a political assurance into a legally enforceable instrument for investors and their financiers. It creates compensation commitments and structured off-taker arrangements for projects judged vital to national development, infrastructure expansion, connectivity, competitiveness or technology transfer. It authorises the Minister of Finance to negotiate, sign and execute instruments on behalf of the federal government, placing the Ministry at the centre of a new risk-sharing regime for high-capital projects.

The regulation is designed to improve the bankability of investments in sectors where financing needs are large and operational and political risks are hard to price.

The law approved by the council moves the federal government's commitment from broad reform language to a binding process that investors and lenders can rely on. Those close to the evolution of the regulation say it converts political risk into a contingent fiscal obligation.

According to Wasihun Abate, a tax adviser at the Ministry of Finance, the regulation is designed “to attract more investments, especially strategic investments, and to give confidence to investors.”

Compensation may be triggered when strategic investments are expropriated, nationalised, compulsorily transferred, or disrupted by state action that fully or partially deprives investors of their holdings, income streams, or contractual rights.

The protection applies to foreign and domestic investors whose projects are designated strategic by the Council of Ministers or the Ethiopian Investment Board, both chaired by the Prime Minister. According to experts following the case, the Administration of Prime Minister Abiy Ahmed (PhD) is trying to make large projects easier to finance by lowering risk premiums on long-term commitments in sectors where returns depend heavily on public policy and state conduct.

"It reflects strong government commitment to boosting foreign direct investment (FDI) and could provide the comfort and certainty needed for large-scale strategic projects," said Shehir Shemolo, managing partner at RSM Consulting Plc and a certified accountant and investment adviser, depicting the regulation as a clear policy signal.

The policy falls within a broader overhaul of Ethiopia’s investment regime. The country has revised its legal architecture, incentives and facilitation mechanisms to ease investor entry and project execution. Recent shifts have opened immovable property, including residential real estate, to foreign nationals, introduced high-value investment thresholds exceeding five billion dollars and created a “golden visa” pathway linked to capital. Tax and customs changes have been presented as part of the same effort to reduce entry barriers and operational burden.

The new regulation goes further by placing investor protection inside a state liability framework. Official figures show Ethiopia attracted more than 3.19 billion dollars in FDI over the past nine months, revealing momentum but also uncovering the pressure to sustain inflows in a competitive global market.

Under the framework, the Ministry of Finance, led by Ahmed Shide, becomes the negotiating authority for government-approved strategic projects. Compensation Commitments would be set out in legally binding documents that define the scope of liability, the valuation method and the conditions under which the federal government would pay. If triggered, compensation may cover the "fair market value" of the investment before the loss, agreed contractual payments, and direct costs incurred by the investor. Each commitment document is expected to establish in advance how valuation will be calculated, reducing ambiguity once a dispute arises.

The guarantees are paired with fiscal safeguards. The Minister of Finance may set caps, conditions and exposure limits on government liability, while risk assessments are required before any commitment is made. It also requires a dedicated, non-lapsing contingency fund or an equivalent budget allocation to cover potential liabilities from outstanding commitments. According to officials from the Ministry, the policy is meant to expand investor guarantees while keeping exposure within predefined limits and budgetary buffers.

The second pillar is the off-taker arrangement, a mechanism intended to secure demand for strategic projects. An off-taker, defined as a public entity, state-owned enterprise or government-designated body, may sign long-term purchase agreements with investors. These contracts oblige the off-taker to buy specified quantities of goods, works, or services under pre-agreed quality standards, pricing structures, and delivery timelines.

However, compensation is not automatic, as it applies only when the "failure" is not caused by the investor, not the result of force majeure, and not permitted under the commitment document, off-take arrangement, or applicable law. The Minister may also suspend or cancel commitments if investors are found to have engaged in fraud or gross negligence, failed to secure financing within the required timelines, or breached project agreements.

One likely test will be joint ventures linked to Ethiopian Investment Holdings (EIH). Among them is EIH’s 40pc equity stake in Dangote Group’s fertiliser project in Gode, Somali Regional State. It is projected to cost up to 2.5 billion dollars and was initially slated for completion within 40 months. After a site visit with the Prime Minister last week, Aliko Dangote, president of the Group, pledged to cut back completion of the fertiliser plant by 10 months, producing three million tonnes of urea under a broader four-billion-dollar investment plan.

Experts noted that the framework could allow the government, through EIH, to enter into structured off-take arrangements with investors such as Dangote, thereby providing strategic output with long-term procurement guarantees. EIH, Ethiopia's first sovereign investment fund, whose subsidiary companies command a combined equity of 1.2 trillion Br and assets of 3.5 trillion Br, is expected to play a role in applying the regulation. The federal government's sovereign investment arm, led by Brook Taye (PhD), manages 36 active investments through joint ventures with 19 investors across nine sectors, ranging from security printing and tablet assembly to hospitality, agriculture, and animal feed production.

According to Dagmawi Zeleke, EIH's communications director, the new regulation addresses “important policy, legal, and institutional considerations” connected to investor confidence and Ethiopia’s wider reform agenda. He disclosed to Fortune that EIH is still reviewing the framework and has not taken an official position.

"EIH is assessing the regulation’s implications for ongoing economic reforms and changing investment governance structures," said the company in a written response to Fortune, declining further comment until consultations are complete.

The regulation includes reporting obligations, mandating that the Finance Ministry submit annual reports to the Council of Ministers that list issued compensation commitments, potential and realised fiscal liabilities, and payments made. These reports should also be incorporated into submissions to federal lawmakers, bringing the framework within federal legislative oversight. Each commitment document would be signed by the Finance Minister, creating a legally binding obligation of the federal government and specifying governing law and dispute-resolution mechanisms.

Experts see this as granting investors a formal state counterparty while leaving the Ministry responsible for monitoring exposure. The regulation has drawn cautious support from observers who see the value of investor certainty but warn against uneven treatment.

According to Shehir, Ethiopia’s expanding guarantees should remain consistent with international trade frameworks as the country advances toward accession to the World Trade Organisation (WTO) and deeper integration with the African Continental Free Trade Area (AfCFTA). He called for non-discriminatory treatment of investors and stronger harmonisation with WTO principles.

"Targeted incentives may be needed to attract capital," he said. "But, they should not conflict with global trade rules."

He also urged a wider recalibration of the investment climate, arguing that reform should extend beyond strategic investors and help build a more predictable and balanced environment across all investment categories.

PUBLISHED ON May 23,2026 [ VOL 27 , NO 1360]