A draft regulation proposing a complete overhaul of Ethiopia’s investment incentive system—with a shift to performance-based tax reductions for companies using at least 50% renewable energy—has sparked debate among key industry players. While the government’s move toward green development and targeted incentives is broadly welcomed, capital-intensive sectors such as cement contend that the 50% renewable energy requirement is not currently feasible for their operations.

The Ministry of Finance convened a stakeholder forum to discuss feedback on the draft regulation governing investment incentives. Article 12, sub-article 2, stipulates that investors using a minimum of 50% renewable energy in production or operations will qualify for a reduced business profits tax rate of 15% on taxable income for five consecutive years from the start of operation.

A representative from Pan African Green Energy (PAGE) PLC, a subsidiary of East African Holdings, explained the difficulties cement plants face in meeting this target. Two of their cement plants, “Lemi” and “National,” primarily use coal—a fossil fuel with significant environmental impacts—with energy costs comprising 60% of total production expenses.

Despite considerable investment over the past decade to substitute charcoal with ‘Pressus juliflora’ biomass, their fuel replacement has reached only 10-15%. The PAGE spokesperson stressed that the 50% renewable energy threshold demands substantial investment and would disrupt existing production systems.

In response, the draft has been amended to introduce a phased incentive structure. Investors achieving a 20% renewable energy substitution could qualify for incentives, with benefits increasing at higher substitution rates, including 50% and 100%.

The cement sector also urged that the definition of “energy sources” explicitly include thermal energy types. The company highlighted plans to produce biomass from urban waste (RDF), tyre-derived fuel (TDF), and hydrogen-based fuels, calling for these to be explicitly recognized within the incentives framework. Additionally, they requested a full incentive package for biofuel projects rather than the limited customs duty and tax exemptions currently proposed.

Other sectors voiced concerns at the forum. Dawit Fiseha of Sefaricom Ethiopia called for the clear inclusion of telecommunications within the Information Technology Development and Service Incentive Program, noting its absence conflicts with international standards and national investment policies. He raised the issue of competitive fairness in mobile financial services (MFS), warning that Sefaricom’s M-Pesa, structured as a separate branch due to legal requirements, risks losing benefits available to other telecom players.

Dawit also advocated removing the Loss Carry Forward provision from the bill, citing telecom’s capital-intensive nature and early years of expected losses, and urged inclusion of telecom in the Capital Allowance section to better encourage long-term investment.

Representatives from the beverage industry, including Dawit Sahle of East Africa Bottling/Coca-Cola and Tirualem Mela of Heineken Ethiopia, expressed disappointment that the food and beverage sector was excluded from income tax incentives. They emphasized the sector’s vital role in the economy and called for meaningful tax relief, particularly amid rising living costs.

Tirualem additionally voiced concern that abolishing the bankruptcy transfer ordinance could undermine Ethiopian producers’ competitiveness within the African Continental Free Trade Area (AfCFTA).

Responding to these issues, Mulay Weldu, head of the Ministry of Finance’s tax policy department, detailed the reform’s six-to-seven-year process, grounded in thorough research. He highlighted efforts to centralize investment incentive approvals under the Ministry of Finance, reducing approval times from 15-30 days to about 24 hours through a new electronic system—an important step in cutting bureaucracy.

Mulay defended the shift away from blanket tax holidays, saying the previous system encouraged unsustainable profit-chasing. While income tax relief remains, it has evolved into purpose-driven incentives. He pointed to the new Investment Capital Allowance (ICA) and reduced income tax rates as improved tools to support capital-intensive investors in achieving earlier profitability.

Acknowledging the importance of macroeconomic and political stability, Mulay stressed that a well-designed incentive framework remains key and is aligned with international practices and domestic research to promote sustainable investment.

The Ethiopian Railways Corporation (ERC) is finalizing a new, comprehensive investment strategy that will involve partnering with private and foreign investors to fund a diverse portfolio of real estate and infrastructure projects, signaling a significant shift towards a commercial and partnership-driven model.

The state-owned corporation, primarily responsible for national railway development, has announced that its new strategic framework is in the final approval stage. This new direction will see future projects advanced through Public-Private Partnerships (PPPs), joint ventures, and other collaborative business models.

“This marks a strategic pivot for the corporation towards a more business-oriented and partnership-driven approach,” a source familiar with the strategy stated.

The flagship project will be the redevelopment of the ERC’s existing headquarters on the prime Lagar site in the heart of Addis Ababa. The ambitious plan for the area includes a new 35-story corporate headquarters, a 21-story hotel, and twenty-seven residential towers comprising eight 36-story and nineteen 25-story buildings. It will also feature five retail centers, including four three-story and one four-story complex.

The investment portfolio extends beyond the capital, encompassing several strategic logistics hubs. Planned developments include a logistics port at Indode, a small-scale port city at Mojo, and port logistics infrastructure at the Dire Dawa Melkajebdu station.

These new initiatives will run alongside the ERC’s ongoing core railway operations. The corporation is currently progressing with the 392-kilometer Awash-Hara Gebeya railway project, which had faced delays due to the conflict in northern Ethiopia. Additional projects include a 3.2 km rail line at the Sof Umar Tourist Lodge and a strategic link connecting the Awash Oil Depot to the main Addis-Djibouti railway line.

In a related development, the ERC has been newly designated as a multimodal transport operator, a role that aligns with its expanded focus on integrated logistics and infrastructure development.