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RENEW’s Legal Corner: December 2021

By Tsegamlak Solomon, Mary Adoi, Lincoln Ford | Sun Dec 05 2021
RENEW’s Legal Corner is designed to keep you updated with the regulatory progress and changes happening throughout the different jurisdictions in which RENEW operates. This month has seen several regulatory changes in Ethiopia, Rwanda and Uganda. Below are the highlights:

The National Bank of Ethiopia Revised the Directive on the Allocation of Forex 
The National Bank of Ethiopia (NBE), which is the central bank of the country, issued a new directive on the allocation of foreign exchange. The new directive numbered FXD/77/2021 repealed Directive No. FXD/67/2020, which was issued a year ago. The new directive, similar to its predecessor, has four categories of allocation i.e. ‘1st priority', ‘2nd priority', ‘3rd priority’ and ‘no priority’. Within that framework it has introduced a few major changes:
  1. Removed “input for manufacturing of pharmaceuticals” from the 1st priority category and kept medicine and laboratory agent importing intact. In addition, it introduced in the 1st priority category (1) input for manufacturing edible oil; and (2) liquified petroleum gas (LPG), which was in the 3rd category in the repealed directive.
  2. Similar to the repealed directive, priority categories need to be allocated a minimum of 50% of the total forex allocation by any bank at any point in time. Categorically, this used to be 5% (for 1st priority), 22.5% (for 2nd priority), 22.5% (3rd priority), which now has changed to 7.5%, 22.5%, and 20%, respectively.
  3. Non-priority sectors are now required to deposit 50% of the total proforma value in birr using the prevailing exchange rate at the date of registration. The bank in return is required to pay at least a saving interest rate for the amount in the blocked account, which as we stand is 7% per annum. 
Other than these and other minor changes, the new directive kept most of the provisions of the repealed directive. This included proceeds from the sale of shares, profit and dividend transfer, which remained in the 3rd priority category.
The National Bank of Ethiopia Lifted the Restrictions on Loan Services
The NBE lifted the restrictions placed on all forms of private loans provided by commercial banks. 
Back in August 2021, the NBE took different policy measures to tackle the soaring inflation, which was mainly driven by the increased gap between the official and parallel forex exchange rates. This was reportedly a result of the illicit financial networks that are financing the Tigray People's Liberation Front (TPLF), a rebel group currently fighting the government. To counter that activity, the NBE had taken different monetary policy measures, one of which was freezing all forms of private loans provided by commercial banks (read our blog on “What’s Behind the Soaring Inflation in Ethiopia?”).
Since then, the NBE has issued consecutive circulars at different times revising the restrictions and providing exemptions for different loan categories and strategic sectors. Beneficiaries of this exemption include companies supplying petroleum products, inter-bank loan buyout transactions, sesame producers, importers and producers of edible oil and others. Now, the NBE has lifted all restrictions and allowed all commercial banks to provide loans to their clients without restrictions. The restriction had a significant impact on the economy in general and financial institutions in particular and the lifting of the restrictions is expected to help bring the economy back on track. 
Start-up Businesses Proclamation is on the Verge of Getting Enacted
As part of the reform program introduced in Ethiopia, the government has been working on building a vibrant start-up ecosystem. Part of this initiative was to draft and implement the Start-up Businesses proclamation (the “Start-up Proclamation”). 
Initially, this initiative was being led by the Federal Jobs Creation Commission, which later on shifted to the Ministry of Innovation and Technology (MINT). Per a statement by MINT this month, the Start-up Proclamation is now  near the finish line and is expected to be enacted within the next one hundred days. Once finalized, the law enactment process requires the draft to be presented to the Parliament through the Council of Ministers’, which will then get published in the official Federal Negarit Gazette. 
The Start-up Proclamation has a number of elements aimed at addressing the different issues that start-ups currently face in Ethiopia. These include the establishment of the National Start-up Business Council, with a number of mandates aimed at supporting the start-up ecosystem. In addition, it established an innovation fund organized for the purpose of financing start-ups and innovative businesses. At a macro level it aims to foster innovation and the economy at large and create knowledge-base wealth while at the same time fostering job creation. Specifically, it is expected to be foundational to the country’s potential for entrepreneurship and innovation, and provide tailor-made support for start-ups and innovative businesses.
The Number of Sectors that Require Certificate of Competence for Business License Has Been Reduced to 10
The Ministry of Trade and Regional Cooperation (MTRC) reduced the number of business areas that require competence certificates to 10 from 52. It is in a circular that was circulated to the different trade bureaus that the Ministry announced its decision.
The MTRC is the central commercial registration and business licensing body of the country. However, the service provided by the Ministry used to be backward, time taking and with a number of regulatory checkpoints. This has been one of the reform areas outlined by the government in its recent economic reform program related to ease of starting a business (read our blog on the reform program). This has seen the number of sectors that require a competence certificate from 1,300 to 52. 
Now this again got reduced to 10, which is a positive development in terms of limiting the competence certificate to areas that are necessary for the government to ensure the safety and public health of the general public.

Resolution to Address Inequalities Between Men and Women in EAC Services.
The women caucus in the East African Community (EAC) regional parliament recently tabled a  resolution to check the glaring inequalities between men and women currently serving under the EAC. This came during the annual international campaign against gender-based violence. The resolution implores the EAC Council of Ministers, the central decision-making and governing organ of the EAC, to establish structures to promote gender mainstreaming in the appointment and recruitment for all organs and institutions. 
The six key recommendations include:
  • Gender should be a primary factor to consider by direct partner states while appointing candidates for Secretary General, Deputy Secretaries General, judges and members of Boards.
  • A gender audit to be conducted to advance gender mainstreaming.
  • Implement regulation 20(12) of the EAC staff rules and regulations and prioritize gender during the recruitment process of professional staff.
  • Incorporate affirmative action for women during the recruitment process.
  • Emphasis on women applying for the job vacancies advertised.
  • Create a conducive environment for women working in the EAC, taking into account specific needs for women including breastfeeding facilities, adequate maternity leave, day care centres, affordable education for children, favorable spouse allowance and an environment free from sexual and gender-based violence.
Senate Summons Prime Minister Over Issues in Agriculture Exports
The Prime Minister of the Republic of Rwanda has been summoned to appear before the senate committee on economic development and finance. The main subject of scrutiny will be the state of the agricultural sector, the country’s biggest contributor to the national economy. Hon. Édouard Ngirente will explain the government’s detailed plan to leverage the recent strategic partnerships with the likes of China and UAE with close support from the Ministry of Agriculture and the National Agricultural Export Development Board. Furthermore, there will be an in depth analysis of the recurrent challenges that the agricultural export market is currently facing in Rwanda like the lack of access to capital for farmers to cover the day to day activities and logistical issues among others.

The National Social Security Fund (“NSSF”) is the monopoly in the pension sector in Uganda, with mandatory contributions for employees (if employers employ more than five staff). 
The Parliament of Uganda has passed the National Social Security Fund Amendment Bill 2021, that allows for 20% mid term access for workers who have saved for over 10 years and have reached the age of 45, with persons with disabilities who have saved for more than five years having access to up to 50% of their savings. Furthermore, the bill provides for mandatory registration and contribution to a licensed retirement benefits scheme such as NSSF, for both employers and employees in the formal sector. The Bill also provides for voluntary contributions for employers and employees within the informal sector.
NSSF is a lead investor in the only locally domiciled and registered private equity firm in Uganda. With an increase in contributions from employers and employees in Uganda, there is an opportunity for private equity funds to raise capital from the NSSF.
Photo by Imran Mazar
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