Benefits of Making Business in Ethiopia | Buy & Sell Business

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

4. Country Overview Ethiopia, in the Horn of Africa, is a rugged, landlocked country split by the Great Rift Valley. With archaeological finds dating back more than 3 million years, it’s a place of ancient culture. Among its important sites are Lalibela with its rock-cut Christian churches from the 12th–13th centuries. Aksum is the ruins of an ancient city with obelisks, tombs, castles and Our Lady Mary of Zion church. Geologic processes of the Mesozoic Era contributed sedimentary layers of limestone and sandstone, most of which have been either eroded or covered by volcanic rocks. Younger sedimentary layers are found in northern Ethiopia and on the floors of the Rift Valley. Lava flows from the Cenozoic Era have formed basaltic layers that now cover two-thirds of Ethiopia’s land surface with a thickness ranging from about 1,000 feet to almost 10,000 feet. Ethiopia’s economy enjoyed a modicum of free enterprise. The production and export of cash crops such as coffee were advanced, and import-substituting manufactures such as textiles and footwear were established. Especially after World War II, tourism, banking, insurance, and transport began to contribute more to the national economy.

5. Executive Summary The name "Ethiopia" derives from the Greek ethio , meaning "burned" and pia , meaning "face": the land of burned-faced peoples. Aeschylus described Ethiopia as a "land far off, a nation of black men." Homer depicted Ethiopians as pious and favored by the gods. These conceptions of Ethiopia were geographically vague. In the year 2000, the population was approximately 61 million, with over eighty different ethnic groups. The Oromo, Amhara, and Tigreans account for more than 75 percent of the population, or 35 percent, 30 percent, and 10 percent respectively. Smaller ethnic groups include the Somali, Gurage, Afar, Awi, Welamo, Sidamo, and Beja. The urban population is estimated to be 11 percent of the total population. The rural lowland population is composed of many nomadic and seminomadic peoples. Ethiopia is a multi-cultural and multi-ethnic country. Religion is a major influence in Ethiopian life. Nearly half the population belongs to the Ethiopian Orthodox Church but there is a also large Muslim population. Others adhere to an ancient form of Judaism. Nile River, Arabic Baḥr Al-Nīl or Nahr Al-Nīl, the longest river in the world, called the father of African rivers. It rises south of the Equator and flows northward through northeastern Africa to drain into the Mediterranean Sea.

6. Introduction – Doing business in Ethiopia Ethiopian business opportunities can seem daunting due to the country's expanding economic scene and the fact that the country has many sectors that are largely undeveloped. This opens up an opportunity for individuals that are actively enterprising and hoping to get a bigger piece of the pie that is Ethiopia's growing economy. There are no more excuses for those that want to change theirs and their family's lives through engaging in business. Ethiopian law recognizes six different kinds of business entities. Therefore in Ethiopia business can be carried out in one of the following six different kinds of business forms. These are Sole Proprietorships, Partnership, General Partnerships, Limited Partnerships, Share Companies, Private Limited Companies, and Joint Ventures. Let’s have a brief look at them.

7. Conducting business in Ethiopia A person is only required to have a business license or investment permit to export goods. A person should have a business license or investment permit to engage in export trade. However, there are some goods which require a special permit for exportation. For instance a person who wants to export coffee should have a special permit from the Coffee and Tea Development centre which is under the Ministry of Agriculture and Natural Resource. In order to get a business license, all exporters in Ethiopia should, first, be registered in the commercial registration which is administered by the Ministry of Trade and Industry located near Hilton Hotel or beside Casanchis super market, located in Addis Ababa. Exporters in the regional states may be registered in the respective regional trade bureaus. Foreign investors (and domestic investor who want to benefit from the investment incentives) must be registered in the Ethiopia Investment Commission.

8. Taxation in Ethiopia The Personal Income Tax Rate in Ethiopia stands at 35 percent. Personal Income Tax Rate in Ethiopia averaged 35.00 percent from 2006 until 2016, reaching an all time high of 35.00 percent in 2007 and a record low of 35.00 percent in 2007. The Ethiopian tax system comprises direct and indirect taxes. Direct taxes include personal income tax, rental tax, withholding tax, and corporation tax, among others. The main types of indirect taxes are VAT, customs duty, excise and turn over taxes. The concept of taxation is also important to businesses because governments can fund this money back into the economy in the form of loans or other funding forms. Taxes help raise the standard of living in a country. The higher the standard of living, the stronger and higher the level of consumption most likely is. A turnover tax is levied at a rate of 2% on goods sold locally and contractor services; and 10% in other cases. Find out more about Taxes and Accounting in Ethiopia on GlobalTrade.net, the Directory for International Trade Service Providers.

9. Trade Ethiopia is the 129th largest export economy in the world and the 116th most complex economy according to the Economic Complexity Index (ECI). In 2017, Ethiopia exported $2.2B and imported $8B, resulting in a negative trade balance of $5.8B. In 2017 the GDP of Ethiopia was $80.6B and its GDP per capita was $1.9k. The top exports of Ethiopia are Coffee ($712M), Other Oily Seeds ($348M), Gold ($242M), Cut Flowers ($207M) and Dried Legumes ($116M), using the 1992 revision of the HS (Harmonized System) classification. Its top imports are Planes, Helicopters, and/or Spacecraft ($660M), Gas Turbines ($351M), Packaged Medicaments($322M), Telephones ($235M) and Delivery Trucks($194M). The top export destinations of Ethiopia are China($343M), Switzerland ($287M), the United States($264M), the Netherlands ($245M) and Germany($183M). The top import origins are China($2.65B), France ($938M), India ($691M), Germany($3 69M) and Turkey ($337M).

10. Banking in Ethiopia Dashen Bank Dashen Bank was established in 1995 under the NBE’s National Licensing and Supervision of Banking Business Proclamation 84/1994 and the Commercial Code of Ethiopia 1960. It is the largest of the private banks in Ethiopia. Headquartered in Addis Ababa, the bank oversees 196 branches, 220 ATMs, nine forex bureaus, and 958 POS terminals located throughout the country. Bank of Abyssinia Established in 1996, Bank of Abyssinia offers domestic, international, and specialized banking services to public, private, cooperative, NGOs, UN agencies, and international organizations across Ethiopia. As one of the biggest banks in Ethiopia, it employs about 5,000 individuals and serves 859,000 account holders. Based in Addis Ababa, the bank operates a network of 233 branches and sub-branches, 114 ATMs, and 200 POS terminals. United Bank Incorporated as a share company in 1998, United Bank provides a full range of commercial banking services, including conventional and multi-channel products to customers in Ethiopia. The bank operates a network of 202 branches and 19 sub-branches.

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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