RENEW Strategies

Having Skin in the Game Can Help with Investment Reform

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Matthew Davis, CFA
| September 27, 2019


In 2012, partners of the RENEW team ventured into a country most said would be one of the most challenging places to invest in all of Africa: Ethiopia. At the time, the investment code was extremely restrictive, few knew about private equity, the government was adversarial (at best) with the private sector, and the largest companies were state-owned. Almost eight years later and having become one of the most active investment firms in the country, we’re pleased to say a lot has changed and even more change is on the horizon. But how did all of this come about – what some are calling a private sector renaissance?

When we arrived in February 2012, the question everyone asked was, “Can you get your money out?” Most companies didn’t know about private equity; they understood debt and grants and a few that did understand it were cautious, always wary of foreigners coming into their country and their companies. But we were committed to learning about Ethiopia and how to tap into its huge potential.

We started by learning the different organizations involved with investing. We interviewed many (many!) lawyers all with different opinions of how something worked – all very confident in their answers. We then started investing and painstakingly mapping out the 100+ steps to investing in a company in Ethiopia. After each deal we’d go back to the file and update the steps. The first few deals were challenging, and then we started to learn the acronyms, learned what to expect when we put forward a document for a stamp at XYZ agency, anticipated the requests, and started to streamline the process. We built systems to collect changes from each government agency on a regular basis and changed our attitudes from frustrated to curious and grateful. Now, in partnership with RENEW’s Impact Angel Network, we have made 13 investments in 11 companies. We recently were invited to weigh-in on the upcoming investment reform agenda and did so in a white paper (LINK). We are pleased to learn that a number of our suggestions, along with many other investment actors’ suggestions, are being considered.

Had we charged in and demanded changes eight years ago, or come in now offering suggestions about how others do it, we might not have seen this level of change. But by actually investing and putting real skin in the game, we got a much deeper and richer view of investing. We applaud the government of Ethiopia for being open to change and for not just having consultants inform their policy reform, but for reaching out to the private sector – those in the trenches – and asking for their input. We are grateful to be operating in a country where the actors are doing their best to do what’s best for the country, the people and the economy.

Here are some of the highlights we have learned are coming with the revised investment law, likely to go in effect later this year:

  • A change from the positive listing of areas open for foreign investors to a negative listing approach, in which only sectors that are not open for foreign investment will be listed. Many sectors are expected to be opened for foreign investors!
  • The minimum capital requirement remained the same but may not apply for institutional investors focusing on SMEs. The definition of institutional investors is not fully clear yet, but be on the lookout for this change.
  • A private sector representative will have a seat on the Ethiopia Investment Board (EIB) which is chaired by the Prime Minister of Ethiopia, Abiy Ahmed.
  • Any grievance between foreign investors and domestic investors can be taken to the arbitration tribunal, a reputable organization with a long history in Ethiopia.
  • The different regulations, directives and even board decisions of the EIB will be made available to the public.
  • The proposed law includes plans to loosen regulation in relation to investment licensing, suspension and revocation.
  • The requirement to have a business proposal for investment registration will no longer apply.
  • The one-stop shop service for foreign investors at the EIC will continue to be available after an investor gets a business license. In the past, oversight was turned over to Ministry of Trade causing some service inconsistencies.

We look forward to the investment law reforms on the horizon, and we encourage practitioner-led private sector development. We hope we can replicate this story in more countries in East Africa and across the continent.


To find out more about RENEW or the IAN, contact us at renew@renewstrategies.com, follow us on Twitter @RENEWLLC or find us on Instagram @impactangelnetwork. Be sure to check out our upcoming events, including our upcoming Econ-Tourism Trip.