The Ethiopian Council of Ministers has passed a bill that would repeal the state's long-standing ban on foreigners or businesses that own “unmoving property.”
Non-Ethiopian individuals and businesses have been prohibited from owning property, whether for personal or commercial purposes, since the country's Communist Revolution in 1974. Since then, property rights have been a sensitive political issue in Ethiopia, with many voters viewing the country's sovereignty as bound by land ownership.
Nevertheless, since Prime Minister Abiy Ahmed's election in 2018, the Ethiopian government has pursued a wide range of measures designed to open the economy to foreign investment and promote stronger growth. Currently, land and property reforms are the latest liberalization measures subject to parliamentary approval.
The council argues that if the law is passed, it will help stimulate increased foreign capital investment, increase affordable housing developments, and increase employment opportunities for Ethiopians in real estate and related sectors.
At least in theory, the higher the capital inflow from opening sectors such as real estate, the more it will help boost Ethiopia's access to hard foreign currency, promote foreign currency reserves, and stabilize the currency.
The move reflects several other reforms that the Ethiopian government has undertaken in recent years. The government has allowed foreign companies to compete in previously dominant strategic industries such as banks and telecommunications, indicating that Ethiopia's retail sector will soon be opened up. The recent launch of the Ethiopian Stock Exchange and the floating of Ethiopian Birr are considered as further steps in this direction.
Reform takes time
Addis Ababa-based asset manager Mirkarim Yakubov tells African businesses that the laws will be finalized and it will take time for foreign investors to actually understand the meaning of the new law.
“The impact will depend on what this law will ultimately entail and how it will be implemented, which is definitely a very interesting move,” he says.
“They have recently expanded the process to implement important laws, but it will take time for the government to resolve the details,” adds Yakubov.
“Foreign investors should check whether they are permitted to own any type of property, residential or commercial, and transparency about how the land and property are priced is also an important consideration.”
Yakubov is optimistic that the move represents another step towards Abiy's “opening” due to the demands of the International Monetary Fund (IMF), which has supported the country financially in return for economic liberalization.
“The Ethiopian government is trying to mobilize various means of attracting foreign investment despite the various ongoing economic and security challenges,” he says.
“This may be attractive to foreign investors and businesses looking to expand into Ethiopia, but of course we need to be aware of that. Everyone knows the risk of real estate bubbles with sudden capital inflows.”
