The Ethiopian government is making a significant change that will allow foreigners to own properties in the country. This move is part of a broader effort to attract foreign direct investment (FDI) and strengthen property rights. Since Prime Minister Abiy Ahmed took office in 2018, his administration has been implementing various liberalizing measures to open up the economy to foreign investment and drive sustained economic growth.
The proposed reform, which is pending parliamentary approval, is set to be the latest addition to these initiatives. Ethiopia’s long-standing ban on foreign ownership of land and property has been identified as a major barrier deterring foreign investors. Other obstacles include high levels of state interference in the economy, inadequate infrastructure, strict foreign exchange controls, high transaction costs, and institutional weaknesses.
The new legislation represents a significant departure from policies dating back to the 1974 communist revolution, which established a system of state ownership of land and tightly restricted private property rights. Currently, non-Ethiopian individuals and businesses are prohibited from owning immovable property for personal or commercial use.
If the new law is passed, it could open up Ethiopia’s growing economy to a wider range of international investors and signal a deeper shift toward market-oriented reforms. Ethiopia has seen improvements in FDI, placing it among the top five FDI destinations on the African continent. In 2023, FDI inflows reached USD 3.26 billion, slightly down from the previous year but still above pre-pandemic levels.
The decision to lift the ban on property ownership by foreigners is expected to support Ethiopia’s development policies aimed at increasing revenue inflows and accelerating economic growth. However, according to asset manager and investment expert Mirkarim Yakubov, it will take time for foreign investors to fully understand the implications of the new legislation. Therefore, an immediate surge in capital inflows is unlikely.
Yakubov emphasized the importance of the details of the law and its implementation, stating that it will be a gradual process for the government to iron out the specifics. While the government has expedited the process of implementing critical laws, it will still take time for the full impact of the property ownership reform to be realized.
