Startup draft proclamation seeks to bolster tech companies

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A new draft Startup Business Proclamation is aiming to bolster technology companies.

The draft proclamation has presented by Ayalneh Lemma, Legal Affairs Director at MInT on Tuesday during the stakeholders meeting on startups and innovation ecosystem at Capital Hotel.

The draft has been going back and forth between MInT, the former Job Creation Commission, Ethiopian Investment Commission, and the Ministry of Justice, among others.

The proclamation was initiated primarily to solve the critical challenges entrepreneurs face in accessing finance. Startups fail to access finance mainly because they lack collateral to borrow from mainstream financial sources such as banks.

“Only 30% of startup businesses can access finances from banks and Micro-Finance Institutions,” Nigussu Tilahun, State Minister of Labor and Skills said while he delivered his speech.

Tilahun added that the effort to back startup businesses in Ethiopia is at its lowest stage.

“Though the new draft proclamation plans to support every start-up it gives a special emphasis of backing to tech startups,” Ayalneh on his part said.

Startups enjoy such privilege once they undergo pre-registration, a stage before registering as a commercial business.

During this period, which lasts for two years, startups are relieved from collecting any government levies such as turnover tax; value added tax (VAT), and income tax. They are also relieved from prior expectations of office rental, which was required for new businesses to get a license, according to Ayalneh.

Regarding the incentives, the draft proclamation dictates start-ups to be entitled to the incentives provided for a period of up to five years.

Furthermore, the proclamation decrees that the entrepreneur could benefit from a start-up scholarship for duration of up to three years, and funds allocated for the startup scholarship shall be drawn from the Innovative Fund.

The meeting was organized by Ethiopian Youth Entrepreneurs Association.

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