Benefits of Making Business in Djibouti | Buy & Sell Business

1. BENEFITS OF MAKING BUSINESS IN DJIBOUTI WWW.MERGERSCORP.COM

2. At MergersCorp M&A International we help our clients confidentially buy and sell privately held businesses, aligning the interests of all parties for mutual success and satisfaction. It is our goal to make the process of either buying a new business or selling your current business as smooth and efficient as possible. We know how important confidentiality is to our sellers and we treat it with the utmost importance. WWW.MERGERSCORP.COM

3. BENEFITS OF MAKING BUSINESS IN DJIBOUTI WWW.MERGERSCORP.COM

4. Country Overview Djibouti, officially the Republic of Djibouti, a small country on the northeastern coast of Africa to the Red Sea and the Bab-el- Mandeb strait. Djibouti is bordered by Eritrea, Ethiopia, and Somalia, and it shares maritime borders with Yemen. Due to its geographic location at the Gulf of Aden, the barren country is of considerable geopolitical interest, Djibouti controls access and egress to a major waterway, the Red Sea and the Suez Canal, one of the world's busiest shipping routes. Djibouti was controlled by France, especially the French Foreign Legion, until 1977, in 2002, the United States established America's largest military base in Africa here (Camp Lemonnier). The country occupies an area of 23,200 km², compared it is slightly larger than Slovenia, or slightly smaller than New Jersey. Djibouti has a population of 850,000 (in 2016 est.), capital and largest city is Djibouti City, spoken languages are French and Arabic (both official), Somali, and Afar. Main religion is Islam, about 94% of the population are Muslims. Djibouti, on the Horn of Africa, is a mostly French- and Arabic- speaking country of dry shrublands, volcanic formations and Gulf of Aden beaches. It's home to one of the saltiest bodies of water in the world, the low-lying Lake Assal, in the Danakil Desert.

5. Executive Summary Djibouti is a country with few resources and recognizes the crucial need for foreign investment to stimulate economic development. The country’s assets include a strategic geographic location, Free Zones, an open trade regime, and a stable currency. Djibouti has identified a number of priority sectors for investment, including transport/logistics, financial services, energy, and tourism. Lying on the Bab el-Mandeb Strait, the tiny African nation of Djibouti serves as a gateway to the Suez Canal, one of the world's busiest shipping routes. Its port is the lifeblood of its economy, providing the biggest source of income and employment in this otherwise barren country. Djibouti's proximity to restive areas in Africa and the Middle East and its relative stability have made it a prized location for foreign military bases and ensured a steady flow of foreign assistance. Former colonial power France maintains a significant military presence. The country also hosts America's largest military base in Africa, China's first overseas military base and Japan's first military base since the Second World War. Djibouti serves as the main gateway for trade for its giant neighbour, landlocked Ethiopia.

6. Introduction – Doing business in the Djibouti The country is among the 10 economies that improved the most across 3 or more areas measured by Doing Business. Over the past year, the country saw 6 reforms in the areas measured by the report – Starting a Business, Registering Property, Protecting Minority investors, Getting Credit, Enforcing Contracts and Resolving Insolvency: Starting a Business was made easier by the creation of a one stop shop for business startup. Djibouti strengthened access to credit by broadening the scope of assets that can be used as collateral, allowing future assets to be used as collateral, allowing general description of debts and obligations and providing secured creditors with absolute priority outside bankruptcy. Djibouti is ranked 112 among 190 economies in the ease of doing business, according to the latest World Bank annual ratings. The rank of Djibouti deteriorated to 112 in 2019 from 99 in 2018. Ease of Doing Business in Djibouti - data, historical chart, and calendar of releases - was last updated on February of 2020 from its official source.

7. Conducting business in Djibouti Djibouti has made strides in various areas measured in the World Bank’s “Doing Business” reports, moving up 12 spots from its 2013 ranking. Notable improvements include making starting a business easier by simplifying registration formalities and eliminating the minimum capital requirement for limited liability companies. In addition, Djibouti adopted a new commercial code, which broadens the range of movable assets that can be used as collateral to obtain credit. The Djiboutian lawful environment is favorable to the businesses. You can create your company in Djibouti whatever your nationality or your place of residence is. The registration of your company in Djibouti can be done within three days. Foreign investor does not need a Djiboutian partner to start a business in Djibouti. The Ease of doing business index ranks countries against each other based on how the regulatory environment is conducive to business operation stronger protections of property rights. Economies with a high rank (1 to 20) have simpler and more friendly regulations for businesses.

8. Taxation in Djibouti Djibouti’s tax system was based on separate codes that dealt with direct and indirect taxation. In that year, however, value- added tax (VAT) was introduced, and these different codes were bundled in one single document, known as the General Tax Code (GTC). The tax rate is set at a rate of between 2% and 30% of taxable income. Taxable income of less than DJF50,000 ($280) is exempted from this tax. The bundling of different texts into a single code had several objectives, the most important of which was to facilitate access to applicable tax provisions. This modernization process in regards to the country’s tax code was preceded, some years earlier, by institutional reforms that resulted in the creation of the Tax Management Office. In addition to this, through subsequent reforms the Organisation for Tax Administration, which was previously focused solely on tax to be collected, has taken on a new organisation based on functions.

9. Trade Djibouti is the 193rd largest export economy in the world. In 2017, Djibouti exported $56.6M and imported $3.89B, resulting in a negative trade balance of $3.83B. In 2017 the GDP of Djibouti was $1.84B and its GDP per capita was $1.93k. The top exports of Djibouti are Coffee ($18.6M), Wood Charcoal ($4.77M), Dried Legumes($2.34M), Brochures ($2.18M) and Rubber Tires($1.79M), using the 1992 revision of the HS (Harmonized System) classification. Its top imports are Palm Oil ($239M), Delivery Trucks($136M), Rice ($104M), Refined Petroleum($86.8M) and Rubber Footwear ($84.2M). The top export destinations of Djibouti are the United Kingdom ($5.77M), the Netherlands($4.67M), Belarus ($4.49M), Kuwait ($4.25M) and India ($3.79M). The top import origins are China($2.16B), India ($270M), Indonesia ($202M), Malaysia ($143M) and Turkey ($102M).

10. Banking in Djibouti Djibouti's banking sector is liquid, profitable, and generally well capitalized. Bank lending has increased in recent years but still remains fairly limited, with the ratio of bank credit to bank deposits rising from 29.5 percent in 2006 to 37 percent in 2008 and 41.6 percent in 2009. In Djibouti currently a total of 12 banks are operational providing world class financial services, which includes handling international trading, online banking, money transfer and specially designed financial services for individuals ad business with debit and credit cards, which CBE has not been providing to this date.“When we re-opened the Djibouti branch 18 months ago it wasn’t anticipated that getting swift code will take that long time. Now about two weeks ago we have got the swift got. We are preparing to start the missing services,” said Mathewos, indicating the significance of the loss CBE Djibouti branch has been registering over since its opening in the face of shortage of hard currency in Ethiopia. Commercial Bank of Ethiopia struggles to make profit in DjiboutiCBE Djibouti Branch has 17 staff and rented a house in a business district in Djibouti. Reports show that CBE, which used to own several buildings in Djibouti before it was closed eight years ago, was one of the profitable banks in Djibouti.

11. Our M&A Process NEGOTIATION & CLOSE POST MERGER INTEGRATION (PMI) INTEGRATION (PMI) POST MERGER TARGET APPRAISAL APPROACH DUE DILIGENCE Key Areas  Target & market analysis;  Initial assessment of synergies & value drivers;  Indicative valuation;  Go or No-Go decision;  Preparation of transaction documents (NDA – Non- disclosure Agreement/LOI- Letter of Intent);  Select Transaction team;  Appoint advisors;  Consider funding ability.  Initial approach letter;  Signing of NDA;  Prepare & share initial information requests;  Formulation of LOI (Letter of Intent) & possible negotiations;  Initial meeting and Q&A;  Circulate information on the Target to the Transaction team.  Set scope of due diligence;  Set up VDR (virtual data room);  Coordinating of due diligence, further meetings and Q&A sessions;  Consider points relevant to the Post-Merger (PMI) phase;  Revisit indicative valuation & prepare detailed valuation based on due diligence findings;  SPA negotiations with the seller;  Development of final structure (share/asset deal) and final valuation;  Approvals;  Signing of SPA & Close.  Consider the extent of integration;  Development of 100 Day PMI Plan;  Consider short & long term objectives;  Estimate requirements to capture synergies;  Determine resource needs & optimal allocation. Parties Involved  CFO;  Head of M&A;  Accountants;  Corporate finance advisors;  Consultants.  Senior management;  CEO, CFO, CTO;  Strategy director;  Head of M&A;  Head of Business Development;  Consultants.  Company general counsel;  Lawyers;  Senior management.  Company general counsel;  Lawyers;  Senior management/HR. 11 © Midaxo 2018 www.midaxo.com

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