<h1 style="text-align:center;">RENEW’s Legal Corner: February 2022</h1>RENEW’s Legal Corner is designed to keep you updated with the regulatory progress and changes&nbsp;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:<figure class="image"><img src="/uploads/097_A9519_bd9d899233.jpg"></figure><hr>ETHIOPIA<h3>The Regulation that Defines the Activities and Structure of the Ethiopian Holding Company Comes into Effect</h3>The Ethiopian Holding Company (EIH) was formed as a sovereign wealth fund by Proclamation No. 1263/2021. On January 31, 2022, the regulation that defines its activities and structure was issued in the Federal Negarit Gazette, which in effect brings the EIH to life. The regulation is cited as “The Definition of Objectives and Function of the Ethiopian Investment Holding Council of Ministers Regulation No. 487/2022.” Below are a few things we learned about the EIH:<ul><li>What is EIH? - EIH is a sovereign wealth fund that holds state-owned enterprises under an umbrella. It is structured as a holding company that holds shares, debentures, bonds and securities in enterprises that are in its ownership. In addition to structuring currently existing state-owned enterprises, EIH will also invest in businesses and investment opportunities as it sees profitable.&nbsp;&nbsp;</li><li>Accountability - The EIH will be accountable to the Prime Minister of the country.</li><li>Legal Status - EIH and its subsidiaries will be considered as private business organizations disregarding the shareholding percentage of the government.</li><li>Objectives - EIH is mainly established for the following reasons:<ul><li>To serve as a strategic investment arm of the government;</li><li>To introduce professional management and best corporate governance practices to maximize the value of government assets; and</li><li>Provide a strategic vehicle to attract foreign investment.</li></ul></li><li>Capital - EIH is established with an authorized capital of 100B ETB (approximately $2B USD).</li><li>Source of Funds - EIH sources its funds from:<ul><li>A pool of state-owned assets administered by EIH;</li><li>Returns and revenues of the investment of its assets;</li><li>Proceeds from the sale of its assets;</li><li>Loans and issuance of transferable securities; and</li><li>Other resources allocated to it and approved by the Board.</li></ul></li><li>Governance - EIH will be managed by a Board of Directors consisting of six members appointed by the Prime Minister of the country. The Prime Minister will chair the Board. Each board member will be appointed for a term of three years, which could be renewed. The Board will have a regular meeting every month.&nbsp; Decisions of the board will be made with a simple majority vote, however, in case of a tie, the chairperson shall have a casting vote. EIH will have a CEO reporting to the Board of Directors, who will have an ex-officio non-voting seat on the Board.&nbsp;</li></ul><h3>AfCFTA Hit an Important Milestone to Enhance Intra-African Free Trade</h3>African intra-regional trade accounted for just 17% of Africa’s exports in 2017 (1). This compares with 59% in Asia and 69% in Europe. However, the African Continental Free Trade Area (AfCFTA), which Ethiopia signed along with 53 other African members and subsequently ratified in April 2019, is projected to increase this figure with a potential to lift 30M people out of extreme poverty (2).&nbsp;The agreement’s purpose is to boost trade, economic growth and integration among African countries. It establishes a free trade area that provides member countries with free access to the markets of other members. For that effect, member states are obliged to progressively eliminate tariffs and similar charges on goods and services originating from member states. This month has seen the member states concluding their negotiation on the ‘rules of origin’. The adopted rules could cover 87.7% of goods on the tariff lines of the AU member states.&nbsp;Although trading under the AfCFTA had started officially on January 1, 2021, the problems regarding rules of origin remained unresolved, making it difficult to identify products that could enjoy the preferential tariff regime under the agreement (3). Now the member states have agreed on 87.7% of rules of origin and once member states publicize these rules at the national level, the free trade area is expected to be active.Once fully implemented, AfCFTA will create the largest free trade area in the world measured by the number of countries participating. The agreement connects 1.3B people across 55 countries with a combined GDP valued at $3.4T (4).&nbsp;<hr>UGANDA<h3 style="text-align:justify;">Uganda and Tanzania Ink Final Oil Drilling and Pipeline Deal</h3>Uganda and Tanzania have agreed on the “final investment decision” in a landmark $10B deal for crude oil production in East Africa. TotalEnergies EP Uganda, CNOOC Uganda Limited, the Uganda National Oil Company (UNOC) and the Tanzania Petroleum Development Corporation (TPDC) will all be working together to develop the East African Crude Oil Pipeline (EACOP) that will cross the ten districts in Uganda. The major oil project that is on Lake Albert is expected to yield significant results that boost the energy and mineral development sector. It will mainly involve setting up oil fields, developing the pipeline network in Uganda and exporting the rest of the oil through Tanzania to the coastal ports. The government has also made several infrastructural improvements to the Albertine region where the oil project is based by constructing an airport in Hoima district and completing more than 700km of the road network. According to an article in FurtherAfrica, government geologists estimate Uganda’s gross reserves at 6B barrels, while recoverable oil is seen at 1.4B barrels (5).<hr>RWANDAIMF says Rwanda’s Economic Outlook is Positive in a January 2022 ReportRwanda entered into a three-year Policy Coordination Instrument (PCI) with the International Monetary Fund (IMF) in June 2019. The PCI is a non-financial instrument that any member of the IMF can utilize. It’s designed to help support member countries implement macroeconomic policies and receive IMF advice and guidance, in an effort to facilitate policy reforms and catalyze financing from other, non-IMF sources. As part of the PCI, the IMF visits Rwanda on an annual basis, holds discussions, collects data and prepares a report on the outlook for Rwanda and progress under the PCI.The IMF released its most recent report in January 2022 following its fifth review of the PCI (6). In the report, the IMF states that Rwanda’s medium-term outlook is positive with GDP growth projected at 10.2% for 2021. The economy had strong improvements in 2021 coming out of the COVID-19 pandemic due in large part to the country’s vaccination efforts, continued government support programs and reopening of economic activities. In the medium term, GDP growth is predicted to gradually slow back to 7.5% (similar to pre-COVID levels). That said, the IMF cautioned that Rwanda must still address several issues stemming from the pandemic - namely protracted unemployment and rising poverty, particularly for women - to ensure the country’s economic recovery continues and that the social and economic progress Rwanda has made over the past twenty years is not lost.&nbsp;Under the PCI, policy recommendations from the IMF included a continued focus on fiscal spending to support social policies and recovery from the pandemic, balanced with advancing growth-friendly policies and safeguarding financial stability. In addition, the IMF noted that continued focus on advancing the Sustainable Development Goals, particularly by supporting human capital and climate change-readiness and adaptation, will be key to enabling a sustainable and inclusive recovery from COVID.&nbsp;&nbsp;<h3 style="text-align:justify;"> Rwanda’s National Budget Increased by 16%</h3>The Government of Rwanda has proposed a 16% increase to the national budget in a revised proposal presented to parliament last week. The approximate $610M increase will be geared towards offering support to public institutions and helping them successfully execute their projects in key sectors such as agriculture, health and education. The government’s expenditure policies in fiscal year 2021/22 are guided by the National Strategy for Transformation priorities and objectives (7) with 58.7% of the resources allocated to economic transformation which includes most of the priority private sector areas such as agriculture, energy, hospitality and financial services.&nbsp; Social transformation takes up 27.2%, catering for access to electricity and clean water. The Minister of Finance and Economic Planning mentioned that he is very confident the increase in national spending from the original $366M to $428M will be beneficial to the economy after carrying out numerous surveys on how Rwanda can mitigate the financial loss suffered during the COVID pandemic. The recovery of the different economic activities across the country will ensure a steady and gradual rise to the country’s domestic revenues.<hr>Footnotes:<ol><li style="text-align:justify;">&nbsp;<a href="https://www.brookings.edu/blog/africa-in-focus/2019/02/22/figures-of-the-week-increasing-intra-regional-trade-in-africa/">https://www.brookings.edu/blog/africa-in-focus/2019/02/22/figures-of-the-week-increasing-intra-regional-trade-in-africa/</a></li><li style="text-align:justify;">&nbsp;<a href="https://www.worldbank.org/en/topic/trade/publication/the-african-continental-free-trade-area">https://www.worldbank.org/en/topic/trade/publication/the-african-continental-free-trade-area</a></li><li style="text-align:justify;"><a href="http://www.xinhuanet.com/english/africa/20220130/fc286d5fb2dd405980a48f06ca489019/c.html">http://www.xinhuanet.com/english/africa/20220130/fc286d5fb2dd405980a48f06ca489019/c.html</a></li><li style="text-align:justify;">&nbsp;<a href="https://www.worldbank.org/en/topic/trade/publication/the-african-continental-free-trade-area">https://www.worldbank.org/en/topic/trade/publication/the-african-continental-free-trade-area</a></li><li style="text-align:justify;"><a href="https://furtherafrica.com/2022/02/02/totalenergies-cnooc-make-final-decision-on-10-bln-uganda-tanzania-oil-project/">https://furtherafrica.com/2022/02/02/totalenergies-cnooc-make-final-decision-on-10-bln-uganda-tanzania-oil-project/</a></li><li style="text-align:justify;"><a href="https://www.imf.org/en/Publications/CR/Issues/2022/01/13/Rwanda-2021-Article-IV-Consultation-and-Fifth-Review-Under-the-Policy-Coordination-511923">https://www.imf.org/en/Publications/CR/Issues/2022/01/13/Rwanda-2021-Article-IV-Consultation-and-Fifth-Review-Under-the-Policy-Coordination-511923</a></li><li style="text-align:justify;">&nbsp;https://www.minecofin.gov.rw/news-detail/government-to-spend-frw-38-trillion-in-2021-22-fiscal-year</li></ol>Photo by Imran Mazar

Updates to regulatory changes in Ethiopia, Uganda and Rwanda: February

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RENEW’s Legal Corner: February 2022

<h1 style="text-align:center;">A Globetrotter Who Found Her Way Back to Uganda</h1>I recently celebrated my one-year anniversary at RENEW. The journey has been a rollercoaster, in a positive way.&nbsp;A few months before joining RENEW, I completed my MBA at Warwick Business School. Going back to business school full-time was challenging initially, as I had spent years working in the SME investing field and developed a passion and increased desire for investing and transforming businesses to achieve their long-time vision, and I took a break to embark on an educational adventure. The reason I say it was an adventure is because for the last thirteen years, my life had been a series of adventures, where I called different places home and had a lot of introspection and exposure to different cultures.&nbsp;<figure class="image"><img src="/uploads/Diana_76e9ca7187.png"></figure>I was born and raised in Kenya, and I would classify myself as someone that is really patriotic and proud of my roots. After seventeen years growing up in Kenya, I moved to Canada for my final year of high school and that is when my journey of being a global citizen began. It was here that I was initially exposed to an environment that was incredibly diverse with students from Canada, Kazakhstan, China, Nigeria, to mention but a few. As a naturally curious person, I was fascinated by the divergence in values, perceptions of the world and desires of different individuals. However, one thing that was clear was despite our differences there was a general understanding as to what makes us human and the priorities of different nations, including economic empowerment. Soon after completing high school, I moved to Rutgers University in New Jersey, U.S.A. to pursue a bachelors of science in finance. While at Rutgers, which again was an incredibly diverse environment, I gained key tools that have formed the foundation of who I am. It was during this adventure that I believe I began to find my purpose. Upon graduating from Rutgers, I was itching to put into practice what I had learned. It was clear to me that my desire was to play a significant role in the development impact and economic empowerment of Kenya. The question was, how could I play a significant role, at the time when there was a wave of economic and social change. It is this passionate desire and indebtedness to my homeland that led me to move back home to Kenya, after living abroad for five years.After a challenging but active job search, the opportunity to join Pearl Capital Partners (PCP) presented itself and it seemed like the perfect fit because it focused on African emerging markets, Kenya included, and they were attracting a great degree of private equity and venture capital funding. Additionally, it tied into my long-term goal as the firm’s investment thesis was to invest in businesses that would generate social and environmental impact alongside a healthy financial return. Thus, getting a foot in the door at my age would open vast opportunities. While at PCP, I was immersed into substantial work from the beginning and was exposed to investment opportunities across eastern and southern Africa. I was fortunate enough to not only be involved on the investment side, but also got to represent the fund on different boards and be part of a team that was driving companies to become robust businesses that could scale.&nbsp;In February 2017, I moved to the Uganda office after being promoted to senior investment analyst and transitioned to the role of investment team lead. The general assumption is that Uganda and Kenya, given that they share a border, have cultures that are more or less similar. However, I was shocked to realize that while our cultures have similarities, there are certain cultural nuances that differentiate Kenyans. I soon realized that I had to tame my initial “aggression” or zeal to close investments in Uganda and had to initially take some time to appreciate and learn the country. As I flashback to July 2018, when I closed my first investment as a deal lead, I recall the feeling of euphoria and sense of self-actualisation that was awakened. The due diligence process and approval process was tough as the fund’s investment committee scrutinized the investment to detail. This accomplishment validated my long-term vision and inspired me to pursue my long-term goal of obtaining my MBA.In 2018, I began the long and grueling process to go back to business school. While it was tough, I was focused on the fact that my long-term career goal was to be a senior leader in the SME investing field and to have the ability to invest in businesses that could catalyze growth in Sub-Saharan Africa. To achieve this goal, it was essential that I develop strong soft skills such as managerial and leadership skills and to widen my network. My MBA experience at Warwick was a transformative and amazing experience. The challenging, yet scintillating, multicultural learning experience, provided the ideal environment to broaden my perspectives, whilst providing the perfect platform to share insights. Further, the expected differences of the students in the cohort were a hallmark of my experience and provided the opportunity (despite the COVID-19 pandemic) to unify the student cohort through thoughtful, honest and genuine intellectual forums.Fast forward to the end of the MBA program, I wasn’t sure where my career would take me - London, Nairobi, Paris or Kampala. As fate would have it, the opportunity to join RENEW presented itself, and it was clear that there was a reason that I needed to move back to Kampala. During the onboarding process in Addis, I felt at home knowing that I was part of a team that shared the same values. That is the desire to address the missing middle and support SMEs in Africa in order to scale and be regional champions. The multi-faceted approach that RENEW takes from the Exchange, to the Asset Management Division and finally the Shared Growth Services team fascinated me and I knew that I was part of a team that had a compelling vision and took a pragmatic approach in investing.&nbsp;People ask me what I’m most proud of on this journey. The answer is simple: my constant evolution and growth as an individual while staying true to my long-term vision and values. While the journey has led me back to Kampala, I can say with confidence that I’m excited about the adventure ahead, wherever it will lead me.&nbsp;&nbsp;

Uganda

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A Globetrotter Who Found Her Way Back to Uganda 

<h1 style="text-align:center;">RENEW’s Legal Corner: January 2022</h1>RENEW’s Legal Corner is designed to keep you updated with the regulatory progress and changes&nbsp;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:<figure class="image"><img src="/uploads/097_A9432_c96da6175e.jpg"></figure><hr>ETHIOPIA<h3>The U.S. Removed Ethiopia from AGOA Effective January 1&nbsp;</h3>The U.S. removed Ethiopia from the African Growth and Opportunity Act (AGOA) for acting against the AGOA statute with the alleged violation of human rights in relation to the war in the northern part of the country (<a href="https://agoa.info/news/article/15941-us-president-terminates-agoa-preferences-for-ethiopia-mali-and-guinea.html">Link</a>). This is following the impending decision passed by the U.S government in November 2021. However, the act has received a lot of criticism from governmental and non-governmental actors. Critics pointed to the adverse effect of the removal including the thousands of jobs created for female workers throughout the country, especially in the garment industry.Following the removal, the Ministry of Trade and Regional Integration is actively working to find alternative markets for Ethiopian products. During the review of the Ministry’s 100 days performance with the Ethiopian Plan Commission, the need to strengthen bilateral and multilateral integrations has been emphasized.<h3>NBE Amends the Forex Retention Directive and Exporters are Not Going to Like it</h3>The National Bank of Ethiopia (NBE) issued a new directive on the retention and utilization of export earnings and inward remittances. The new directive No. FXD/79/2022 has repealed Directive No.FXD/73/2021, which was issued less than five months ago. This is the third amendment to the directive since March 2021. The new directive has made significant changes, which might not be ideal for the retention of account holders in general and exporters in particular. Below are the major changes introduced:<ul><li>Under the new directive, banks are now required to surrender 70% of the foreign currency earnings to the NBE, either from export or remittance. Under the repealed directive, this requirement used to be 50%.</li><li>Similarly, the exporters or the remittance recipients' right of forex retention declined to 20% of the total export earning or remittance. This used to be 40% under the repealed directive.</li><li>The private banks' share of the earnings stood at 10%, which is similar to the repealed directive.</li></ul>This is expected to significantly slow down exports as most exporters are in the export business to generate forex - a scarce resource in the country. It is widely known that most exporters are originally importers who joined the export business to support their import business by using their forex retention rights.<h3>The Government to Approve a Supplementary Budget of 122B ETB due to the War</h3>The Ethiopian Council of Ministers passed a resolution during its regular session held on December 28, 2021. One of the major agenda items at the Council was approving a supplementary budget proposal submitted by the Ministry of Finance for the 2021/2022 fiscal year (running from July 7, 2021, to July 8, 2022). At the beginning of the fiscal year (July 2021), the government approved a 561.7B birr (approximately $12.9B USD) budget. However, as reported by the Ministry of Finance, the war in the northern part of the country demanded additional expenses, which the government couldn’t cover by shifting the budget.&nbsp;As a result, the Ministry of Finance reported that it has readied 122B birr (approximately 2.5B USD at the current exchange rate) as a supplementary budget for the current fiscal year. The budget will be used to rehabilitate conflict-affected communities and finance necessary government functions. This proposal has been presented to the Council of Ministers and received approval, and will now go to the parliament for final ratification.<h3>The Council of Ministers Approved the Formation of Ethiopian Investment Holdings as a Sovereign Wealth Fund</h3>The Council of Ministers approved the formation of Ethiopian Investment Holdings (EIH) as a sovereign wealth fund that holds state-owned enterprises (SOEs) under an umbrella. Part of the government's economic reform program is to increase public sector finance through enhancing the efficiency, transparency and governance of SOEs.&nbsp;&nbsp;EIH, which is currently under formation, will pool the different government resources to one center and will introduce an efficient corporate governance scheme. This, in return, is expected to increase the government’s revenue and serve as a tool which will contribute to the country’s economic growth and enhance the competitiveness of the economy.&nbsp;The Council of Ministers has reviewed the draft regulation, establishing the EIH, and approved its establishment. Consequently, steps are being taken to operationalize EIH but it will not come into existence until the establishment regulation is published in the Federal Negarit Gazette.<hr>RWANDA<h3>AfCFTA; Rwanda’s Performance A Year Later</h3>Trading commenced throughout the African Continental Free Trade Area (AfCFTA) in January 2021. Member states party to the trade agreement have mandatory duties to adhere to the specific responsibilities under the agreement, such as to progressively eliminate tariffs and non-tariff barriers to trade in goods, progressively liberalize trade in services, cooperate on investment, intellectual property rights and competition policy, settle all disputes concerning their rights and obligations, establish an institutional framework for the implementation of AfCFTA and others. Rwanda has made significant strides in implementing AfCFTA thus far, for instance, setting up a dispute settlement body, among others. Rwanda has also set its eyes on diversification by penetrating other African markets. This will be a huge opportunity for the country after registering a whopping $830M of&nbsp; exports within Africa for the greater part of 2021, representing 56% of total exports.&nbsp;Photo by Imran Mazar

Updates to regulatory changes in Ethiopia, Uganda and Rwanda: January 

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RENEW’s Legal Corner: January 2022

<h1 style="text-align:center;">RENEW’s Legal Corner: December 2021</h1>RENEW’s Legal Corner is designed to keep you updated with the regulatory progress and changes&nbsp;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:<figure class="image"><img src="/uploads/097_A9519_bd9d899233.jpg"></figure>&nbsp;<hr>ETHIOPIAThe National Bank of Ethiopia Revised the Directive on the Allocation of Forex&nbsp;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:<ol><li style="text-align:justify;">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.</li><li style="text-align:justify;">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.</li><li style="text-align:justify;">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.&nbsp;</li></ol>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 ServicesThe NBE lifted the restrictions placed on all forms of private loans provided by commercial banks.&nbsp;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 <a href="https://renewcapital.com/resources/blogs/What%E2%80%99s%20Behind%20the%20Soaring%20Inflation%20in%20Ethiopia%3F">“What’s Behind the Soaring Inflation in Ethiopia?”</a>).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.&nbsp;Start-up Businesses Proclamation is on the Verge of Getting EnactedAs 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”).&nbsp;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&nbsp; 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.&nbsp;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 10The 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 <a href="https://renewcapital.com/resources/blogs/The%20Ethiopian%20Business%20Environment%20in%20Light%20of%20the%20Homegrown%20Economic%20Reform%20Program">blog on the reform program</a>). This has seen the number of sectors that require a competence certificate from 1,300 to 52.&nbsp;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.<hr>RWANDAResolution to Address Inequalities Between Men and Women in EAC Services.The women caucus in the East African Community (EAC) regional parliament recently tabled a&nbsp; 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.&nbsp;The six key recommendations include:<ul><li>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.</li><li>A gender audit to be conducted to advance gender mainstreaming.</li><li>Implement regulation 20(12) of the EAC staff rules and regulations and prioritize gender during the recruitment process of professional staff.</li><li>Incorporate affirmative action for women during the recruitment process.</li><li>Emphasis on women applying for the job vacancies advertised.</li><li>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.</li></ul>Senate Summons Prime Minister Over Issues in Agriculture ExportsThe 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.<hr>UGANDAThe 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).&nbsp;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.&nbsp;Photo by Imran Mazar

Updates to regulatory changes in Ethiopia, Uganda and Rwanda: December

RENEW’s Legal Corner: December 2021

<h1 style="text-align:center;">RENEW’s Legal Corner: November 2021</h1>RENEW’s Legal Corner is designed to keep you updated with the regulatory progress and changes&nbsp;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:<figure class="image"><img src="/uploads/team_7fa02694c2.jpg"></figure><hr>ETHIOPIAThe Capital Market Proclamation was Published in the Negarit GazetteAs part of the reform agenda, the Ethiopian Government aims to correct imbalances and safeguard macro-financial stability in the country. This includes making improvements to access to finance and the development of a capital market. Consequently, Parliament enacted the Capital Market Establishment Proclamation No. 1248/2021. After some wait since the enactment, the Proclamation was published in the Negarit Gazette this month. Here is our <a href="https://www.renewcapital.com/resources/blogs/What%20We%20Know%20About%20the%20Establishment%20of%20a%20Capital%20Market%20in%20Ethiopia%20">blog</a> on the last draft proclamation.The English Version of the New Commercial Code was PublishedAfter the new commercial code was enacted by the Parliament in March 2021, everyone has been looking for the final and codified version. However, the new commercial code was only printed in Amharic and the English version was only published this month. Here is our<a href="https://www.renewcapital.com/resources/blogs/The%20Commercial%20Code%20of%20Ethiopia%20is%20Changing%20How%20the%20Country%20Does%20Business"> blog</a> on the changes introduced by the new commercial code.The Council of Ministers Enacted an Amendment to the Income Tax RegulationThe Council of Ministers issued an amendment to the 2017 Income Tax Regulation on September 23, 2021. The amendment aimed to:1. Clarify some of the provisions of the Income Tax Regulation for the purpose of applicability and to change certain provisions which have a negative implication on some economic activities; and&nbsp;&nbsp;2. Reduce some of the hurdles and increase the inflow of investments.The major elements introduced include:<ul><li>Depreciation in relation to capital goods leasing - The amendment allows depreciation for a business asset held under a hire-purchase agreement;</li><li>Depreciation in relation to buildings - There has been a misinterpretation of the income tax regulation on how depreciation is calculated in relation to buildings partially used as a business asset. The amendment clarifies this provision and states that it will not apply to buildings that are not completed.</li><li>Loss carry forward - The amendment also cleared a misunderstanding in the taxpaying community that is associated with loss carry forward. The amendment clarifies that no taxpayer is allowed to carry forward a loss of more than two terms and not beyond five years.</li><li>Foreign exchange loss - The tax regulation only allows deduction of foreign exchange loss from foreign exchange gain. However, most companies, other than banks, which have foreign exchange loss might not have foreign exchange gain. Hence, to rectify this, the revised proclamation divides capital gains loss into two categories:<ul><li>If an entity incurred foreign exchange loss in relation to purchase of capital goods, the loss shall be added to the cost of the capital goods and be subjected to depreciation.</li><li>If the foreign exchange loss is not related to the purchase of capital goods, the loss will be considered as deductible for the tax period.</li></ul></li><li>Calculating capital gains tax - Inflation adjustments are to be made in relation to transfer of shares and bonds while calculating capital gains tax. Under the income tax regulation, capital gains tax is calculated on disposal of either immovable property or shares and bonds. However, only disposal of immovable property was subject to inflation adjustment for the purpose of calculating capital gains tax.&nbsp;</li></ul>Companies are Now Mandated to Prove “Cash on Hand”The Addis Ababa City Revenues Bureau issued a circular mandating companies to present evidence if they record “cash on hand” in their balance sheet. The main purpose of this is for the Revenue Bureau to identify if the cash on hand indicated on companies’ books exist at banks or on hand. The Bureau is ensuring that companies accurately record their financials and if for some reason a company can’t present evidence of a “cash on hand”, the Bureau will presume that the company has used the money off the books for backdoor business activities. In which case, the Bureau might charge a presumptive tax on the revenue that it could have received.<hr>RWANDANew Data Privacy Law EnactedAs of October 2021, companies and individuals in Rwanda have two years to comply with new personal data processing requirements, which protect an individual’s data and privacy. This new regulation requires an individual’s consent in order for their personal data to be collected and stored. It requires all companies and individuals to be able to prove that explicit consent was given when it comes to the collection and processing of personal data, and it requires all individuals whose data is collected to be made aware of how and where their information is being used.&nbsp;A key component of this new law is the ability for an individual to withdraw consent at any time and also for individuals to be able to request access to any personal data that a company may be storing. Once this law is enforced in 2023, there will be penalties for companies and individuals who are accessing, collecting and using personal data without consent. Learn more about these penalties and details about this new regulation<a href="https://www.newtimes.co.rw/news/new-law-outlines-penalties-mishandling-personal-data"> here</a>.<hr>UGANDAImplementation of Tax Compliance by the Uganda Revenue Authority (URA)On November 1, 2019, the URA introduced the Digital Tax Solution/Stamps (DTS), and later introduced the Electronic Fiscal Receipting and Invoicing Solution (EFRIS) on January 1, 2021,&nbsp; both aimed at improving business efficiency. A countrywide enforcement exercise was launched on November 1, 2021 which enforces the issuing of an e-invoice/e-receipt for goods and services provided by VAT-registered taxpayers. In addition, all gazetted products must bear a digital tax stamp.&nbsp; Failure to issue an e-invoice/e-receipt or to use a digital tax stamp are now offenses punishable by law.The Uganda Revenue Authority (URA) has recently been focusing on supermarkets that are not complying with issuing e-invoices and e-receipts. Learn more <a href="https://www.monitor.co.ug/uganda/business/finance/ura-to-penalise-supermarkets-which-don-t-issue-e-invoices-e-receipts-3604452">here</a>.&nbsp;&nbsp;Photo by Imran Mazar

Updates to regulatory changes in Ethiopia, Uganda and Rwanda: November

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RENEW’s Legal Corner: November 2021

<h1 style="text-align:center;">Business Workshops in Kenya, Rwanda and Uganda a Success</h1> Businesses gathered in Nairobi, Kigali and Kampala recently to prepare for U.S. investors. Working with local partners, RENEW successfully launched a new workshop series entitled The Unwritten Rules of U.S. Investment. The three-country pilot attracted more than 30 local businesses looking for information on how to engage investors from the West. The workshop aimed to offer business owners a unique advantage when interacting with American investors. The workshop discussions focused on understanding the expectations of American investors and where African businesses traditionally under perform. Based on interviews with U.S. investors, RENEW presenters offered unique feedback to businesses on a variety of topics including some deemed culturally sensitive. Participants were grateful for the candid perspectives on preparing for U.S. investment.After completion of the workshop, which included a guide for SME’s and one-on-one feedback session, one business owner commented:“RENEW’s guide is really having an impact on the way I approach business and life.”With special thanks to <a href="http://quantumafricaltd.com/default.html">Quantum Africa Ltd of Kenya</a>, <a href="http://www.investorsclub-ug.com/">The Investors Club Ltd of Uganda</a>, and <a href="http://www.finabank.com/">Fina Bank of Rwanda</a> for their support in delivering the workshops. We would also like to thank several of our other local partners, listed alphabetically:<ul><li><a href="http://www.investmentkenya.com/">Kenya Investment Authority</a></li><li><a href="http://www.kam.co.ke/">Kenya Manufacturing Association</a></li><li><a href="http://www.kepsa.or.ke/">Kenya Private Sector Alliance</a></li><li><a href="http://www.ifc.org/ifcext/africa.nsf/Content/SME_Solutions_Centers">IFC SME Solutions Centers</a></li><li><a href="http://www.psfuganda.org/">Private Sector Foundation Uganda</a></li><li><a href="http://www.ugandainvest.com/">Uganda Investment Authority</a></li><li><a href="http://www.rdb.rw/">Rwanda Development Board</a></li></ul>Finally, we want to extend a special thanks to Andrea McDaniel, Bobby Mickler and family, and David Leatherman and the Living Water team in Rwanda for their support and hospitality. Stay tuned for more information about the next round of workshops.

Businesses gathered in Africa recently to prepare for U.S. investors.

Rwanda

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Business Workshops in Kenya, Rwanda and Uganda a Success

<h1 style="text-align:center;">Is the U.S. Really on the Upswing? Just Don’t Compare it to Africa…</h1> While the Economic Times reports a third straight downward revision for the U.S. growth rate, nations across Africa are enjoying strong futures.The U.S. rebound from a soft mid-year still leaves 2011 predictions for real GDP growth rate at 2.5%.Meanwhile, <a href="http://allafrica.com/stories/201007090873.html">Sub-Saharan Africa</a> is predicted to more than double the U.S. The IMF calculates an average growth rate of 6% in 2011 with more than a few countries fueling that explosion. African Development Bank is most bullish on <a href="http://www.sudantribune.com/spip.php?article35599">Ethiopia</a>, who leads the way with 10.9% growth while also projected to hit all Millennium Development goals by 2015. Rwanda and <a href="http://www.africagoodnews.com/business/economy/2121-imf-sees-strong-zambia-economic-growth-in-2011.html">Zambia</a> are also expected to be strong around 6-6.7%. <a href="http://www.timeslive.co.za/business/2010/08/30/imf-botswanas-gdp-seen-at-8.4">Botswana</a> is predicted at 8.3% and <a href="http://www.howwemadeitinafrica.com/ugandas-growth-expected-to-outpace-big-brother-kenya/3698">Uganda</a> recent oil discovery has them hovering around 7% as well. Tanzania exceeds the average as it directly benefits from the regional growth due to strength in food exports.If these numbers seem too uncertain or unpersuasive, simply consider an indicator the U.S. is all too familiar with – <a href="http://www.nytimes.com/2010/09/28/business/28views.html?src=busln">Walmart</a> has made a bid for Massmart, a consumer goods chain with stores throughout the region.

...nations across Africa are enjoying strong futures.

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Is the U.S. Really on the Upswing? Just Don’t Compare it to Africa…

<h1 style="text-align:center;">How Big is the Opportunity in Africa??</h1>While the world continues to circle around the question of sustainable development in Africa, moving from aid to investment, the question of scalability continues to pop up; "really how big is the opportunity in Africa?"Kai Krause used a creative graphic representation, something that would go in the <a href="http://www.amazon.com/Visual-Miscellaneum-Colorful-Worlds-Consequential/dp/0061748366">Visual Miscellaneum</a>, to show that Africa has the whole (investment) world, in its hand.<figure class="image"><img src="/uploads/Africa_True_Size_Krause_5f795f21c4.png"></figure>The factors that allowed these "investing" countries to have their own industrial and agricultural revolutions are rapidly assimilating in Africa, fueled by an increasingly sophisticated working class. Any one of these countries has enjoyed success as a world power, economic leader, or established emergent economy throughout time....and ALL of them fit in this ONE continent?Of course there are countervailing factors, but the data speaks for itself -- Africa is huge. So while each of these countries has had centuries to maximize the land they were given, Africa has just begun...

Kai Krause used a creative graphic representation...

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How Big is the Opportunity in Africa??

<h1 style="text-align:center;">Investing in Unfamiliar Territory</h1>We believe that some of the strongest opportunities for financial growth and social impact currently exist in Africa. Contact us if you would like to define a strategy for investing in emerging African economies. Here are ten reasons to consider investing in Africa:<ul><li>African markets offer among the highest return on investment in the world. Nearly every African stock market index outperformed the S&amp;P 500 over the past three years in U.S. dollar terms—in most cases by a significant margin. A sampling of overall equity market returns in 2006: Botswana +34%, Cote d’Ivoire +17.7%, Ghana +109%, Kenya +18%. (Source: Barron’s</li><li>U.S. investors are behind the curve. According to the World Bank, sub-Saharan Africa’s economic performance over the past five years suggests that it may have achieved a milestone in its quest for sustained growth. Growth averaged 4.0% between 2000 and 2005, compared with less than 1% during the early 1990s. In 2006, GDP expanded by 5.6% in sub-Saharan Africa and is projected to climb to 5.8% through 2008. The Congressional Research Service reports that “the growth seen in the current period is less volatile and more evenly distributed among African countries than in the past.” Yet over half of the $19.6 billion total U.S. investment in this region is in the petroleum sector. Reuters reports that the U.S. is so far behind that it had little presence at a recent meeting of the mobile phone industry group, the GSM Association, to discuss a $50 billion investment in sub-Saharan Africa in the next five years. Many such non-extractive sectors are nearing a tipping point, ready for investment.</li><li>Multinationals are re-assessing Africa. Reuters reports that major U.S. companies watching Africa’s rapidly improving investment climate will be examining ways to increase their activity. Merck &amp; Co, Boeing Co, 3M Co, Cargill, General Motors, Chrysler, Hewlett-Packard and Coca-Cola were among the participants in the 2007 U.S. Africa Business Summit.</li><li>New opportunities are emerging in consumer industries. Brisk demand for the commodities that comprise traditional large-scale foreign investment in Africa—oil, mining, agriculture—is creating secondary opportunities in consumer markets. Banking, telecommunications and tourism are among the sectors receiving a boost; renewable energy has the potential to leapfrog infrastructure obstacles the same way mobile phones have done. (Source: MoneyWeek, Investec Asset Management)</li><li>Information gaps remain, even as investment opportunities multiply. “I think there is a lack of information about the quality of opportunities and potential that continues to exist in Africa within the American business community.” (Robert Mosbacher, President of the U.S. Overseas Private Investment Corporation, speaking to Reuters). Renew aims to bridge those gaps by conducting comprehensive business assessments tailored to the needs of U.S. investors.</li><li>RENEW focuses on areas where experts say African markets can make progress. Experience suggests that fund managers are leery of Africa for two primary reasons: 1) Markets are comparatively very small; 2) Investments are illiquid—it’s too difficult to exit. In their 2007 analysis of African capital markets, experts from the Center for Global Development chart the following path forward:“A long-term strategy for attracting equity investment should concentrate on increasing the supply of available securities—since demand will come naturally through the market. Increasing supply means tackling the barriers of small market and firm size to encourage the growth of more and larger firms on the continent. Solutions to increasing the size and scope of the African private sector must focus on improving the investment climate, reducing the level of risk and uncertainty, and providing greater means for small, indigenous firms to survive and grow.”RENEW mitigates risk, channels needed resources and provides the expertise that will enable promising firms to grow and compete globally.</li><li>The continent is opportunity rich. “Many ideas that have been tested in the developed world, like cell phones, are still novel in Africa. Good business ideas and capable management are [the elements] in short supply. Most institutional investors are still frustrated by the quality of the deals available.” At the same time, few market sectors are saturated with products or teeming with competition, leaving plenty of niches for new ventures. As a result, “differentiated products can command a significant premium.” (Kehinde Oyeleke, executive director of Asset &amp; Resource Management, interviewed by Knowledge@Wharton).</li><li>Africa boasts extraordinary entrepreneurs. Local versions of Apple’s Steve Jobs are changing the playing field throughout Africa by creating enterprises that drive progress. Adenike Ogunlesi built a winning clothing brand by mixing African fabrics with Western styles and fabrics. She’s grown her business to the point where her company, Ruff ‘n’ Tumble, is not only a leader in Nigeria but receives orders from WalMart as well. Ogunlesi managed to scrape together enough capital from friends and family; others like her need access to better options. (Source: Africa Open For Business).</li><li>There is a new generation of African leaders who understand the promise and possibility of business in Africa. Paul Kagame — President of Rwanda and winner of the 2006 and 2007 ICT Africa Award for his innovative use of information and communications technology—has earned the nickname “The Entrepreneur President” for his business and technology-driven plan for Rwanda. Ngozi Okonjo-Iweala, the former Finance Minister of Nigeria and currently a director at the World Bank, emphasizes reform, economic growth and business opportunity. “The best way to serve Africa today is to help Africans stand on their own two feet, to create jobs,” she says. Imagine if Africans did not depend on others to cure their diseases or educate their children. Jobs enable Africans to do these things for themselves. (Source: Forbes, TED Conference)</li><li>The big picture is getting better. Since 2000, more than two-thirds of African countries have had multiparty democratic elections. In the past three years, the average rate of growth on the continent has moved from 2.5% to 5%, better than many of the wealthiest OECD countries. Conflicts in Africa are down from an average of 12 per year a decade ago to three per year today. (Source: World Bank, TED Conference)</li></ul><figure class="image"><img src="/uploads/i_Stock_000005377907_FOR_Proposal_1_38668a1611.jpg"></figure>

We believe that some of the strongest opportunities for financial growth and social impact currently exist in Africa.