<h1 style="text-align:center;">CBDC: the Next Big Disruption&nbsp;</h1>&nbsp;Digital currencies generally refer to acceptable means of payment completed through electronic forms. The last couple of years have seen a record number of entrants into the digital currency space, which has largely been dominated by cryptocurrencies, whose value seems to keep rising with every bout of human acceptance. In Africa, monthly <a href="https://www.investopedia.com/terms/c/cryptocurrency.asp">cryptocurrency</a> transfers to and from Africa under $10,000 increased 55% over the past year, reaching a peak of $316M in June (1). Also, according to the 2020 Global Crypto Adoption Index from blockchain analytics firm Chainalysis, South Africa, Kenya and Nigeria are among the world leaders in peer-to-peer cryptocurrency trading (2). Accordingly, Nigeria recorded weekly peer-to-peer volumes between $5M and $10M. Kenya and South Africa followed with an average of between $1M and $2M per week (3).<figure class="image image_resized" style="width:100%;"><img src="/uploads/CBDC_de233e6c9b.jpg"></figure>The statistics above solidifies one thing – <a href="https://www.investopedia.com/terms/b/blockchain.asp">blockchain</a> technology is here to stay! And the reality of this statement begs the question of how we can fully maximize the benefits that blockchain technology brings. Over the last couple of years, the biggest issues on acceptance have centered on two main factors. Firstly, the erratic nature of these cryptocurrencies being mined, and secondly, the unregulated nature of these cryptocurrencies, which is where the Central Bank Digital Currency comes in.The Central Bank Digital Currency (CBDC) is a form of blockchain technology that assumes the benefits of having a digital payment system but is particularly used as a virtual form of a country’s fiat currency. Simply put, it is an electronic record or digital token of a country's official currency. The major difference between this and the regular cryptocurrency is that the CBDC is typically heavily regulated by an individual country’s central bank, given it closely represents the country’s fiat currency. The reality is, central banks across the world now face stiff competition with their country’s currency due to the increasingly rapid nature of acceptance of cryptocurrencies. Currently, there are more than 87 countries exploring the possibilities of having their own CBDC (4).&nbsp;African countries are currently closely monitoring the global trends, with Nigeria now leading the pack to become the first African country to create its own CBDC, effectively becoming only the 7th country in the world to develop its own crypto asset, with the U.S. still in the research stage and China currently in its pilot phase.The importance of these digital currencies in Africa cannot be over emphasized, largely due to some of its benefits, the first of which is its ability to facilitate financial inclusion. For example, according to a report by Enhancing Financial Innovation and Access (EFInA), only 64% of Nigerian adults were financially included, while 36% of Nigerian adults (which translates to 38 million) were completely financially excluded as of 2020 (5). An individual country’s digital currency would typically allow rolling out of the USSD (Unstructured Supplementary Service Data) version of the e-currency as an alternative to downloading the digital wallet for people who do not have access to the internet. This would allow for people without any level of sophistication whatsoever to still be able to use the e-payment system.Secondly, and perhaps most importantly, the CBDC helps to create a relatively easier system of payment. In essence, the CBDC is expected to create a more secure, faster and cheaper means of carrying out financial transactions and currency exchange. This could be a major game changer for cross border trade as it could drastically reduce the cost of doing business with other countries as there are typically no middlemen with blockchain technology. An exciting possibility is the creation of one unique digital currency which can be used for cross-border trade in Africa, with acceptance by other African countries. For years the dream has remained elusive for East and West African regional blocs to create common currencies that will improve trade among member states. This could finally start looking like a not too far reality for the region as a lot of African countries have started showing some genuine interest in blockchain technology, and a willingness to explore its potential benefits. For example, in April, the Ethiopian government confirmed that it had signed a deal to create a national database of student and teacher IDs using a decentralized digital identity solution (6). The deal involves providing IDs for 5M students across 3,500 schools which will be used to store educational records. This deal is perhaps the largest deal to be signed by a government and has been making waves in the crypto-asset industry. Akin to this, Ethiopia has also adopted a Digital Transformation Strategy, where the government explicitly underscored the willingness to adopt a decentralized ledger technology that underpins cryptocurrencies. This is specific to the agricultural sector with the aim of benefiting farmers who are currently getting minimal amounts for the hardest work they put in the value chain. The adoption of the technology will allow traceability of transactions and is expected to force companies to ensure that their farmers adhere to Fairtrade Standards. In addition to the agricultural sector, the country’s Digital Transformation Strategy also incorporates the use of this technology in the tourism sector.In conclusion, Africa may become the next big digital currency market – leapfrogging the migration from cash to credit cards, and moving directly into digital currencies. While the emergence of digital currencies presents several challenges in regards to global adoption, due to its privacy and security concerns, it clearly has benefits that cannot be completely overlooked, especially for Africa. We at RENEW are closely monitoring developments, to ensure we can take advantage of opportunities that these developments may create for the IAN in the not-too-distant future. &nbsp;Reference;<ol><li><a href="https://www.dw.com/en/africas-quiet-cryptocurrency-revolution/a-55199637">https://www.dw.com/en/africas-quiet-cryptocurrency-revolution/a-55199637</a></li><li><a href="https://news.bitcoin.com/ukraine-russia-south-africa-nigeria-cryptocurrency-adoption/">https://news.bitcoin.com/ukraine-russia-south-africa-nigeria-cryptocurrency-adoption/</a></li><li><a href="https://blog.chainalysis.com/reports/2020-global-cryptocurrency-adoption-index-2020">https://blog.chainalysis.com/reports/2020-global-cryptocurrency-adoption-index-2020</a></li><li><a href="https://www.atlanticcouncil.org/cbdctracker/">https://www.atlanticcouncil.org/cbdctracker/</a></li><li><a href="https://efina.org.ng/our-work/research/access/">https://efina.org.ng/our-work/research/access/</a></li><li><a href="https://www.appsafrica.com/cardano-launches-blockchain-deployment-in-ethiopia-with-5m-students/">https://www.appsafrica.com/cardano-launches-blockchain-deployment-in-ethiopia-with-5m-students/</a></li></ol>

The Central Bank Digital Currency (CBDC) in Africa and why we are watching closely 

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CBDC: the Next Big Disruption 

<h1 style="text-align:center;">ANDE Helps RENEW-Backed Company Become Gender-Smart</h1>&nbsp;On December 15, 2021, ANDE announced the winners of the Gender-Smart Investing Capacity Building Facility funds, an activity under the ANDE Gender Equality Initiative (AGEI). RENEW, along with four other organizations, were picked to advance their gender lens investing strategies. The funds, provided by the United States Agency for International Development (USAID), targets investors who are committed to advancing gender equality through investments into SGBs. Each of the five organizations are slated to receive up to $30,000 and support SGBs operating in India, Brazil or the East and Southeast Asia, Andean or Eastern African regions.&nbsp;Learn more about this announcement in ANDE’s recent press release: <a href="https://www.aspeninstitute.org/news/press-release/ande-gender-smart-investing/">ANDE Announces Winners of the Gender-Smart Investing Capacity Building Facility</a>.<figure class="image image_resized" style="width:100%;"><img src="/uploads/desta_713214ebe3.jpeg"></figure>

On December 15, 2021, ANDE announced the winners of the Gender-Smart Investing Capacity Building Facility

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ANDE Helps RENEW-Backed Company Become Gender-Smart

<h1 style="text-align:center;">Ethiopia is Moving Towards Data Protection</h1>&nbsp;Ethiopia lacks a unified and comprehensive legal framework that governs privacy and data protection. However, there are protections scattered throughout different legislations, including the Constitution, the Criminal Code, the Civil Code, the Computer Crime Proclamation, and the Freedom of the Mass Media and Access to Information Proclamation. Even though the country doesn’t have a comprehensive data protection regulation nor a national data protection body, the regulatory bodies under these sector-specific legislations have the power to regulate data protection issues within their regulatory scope.However, the protections provided throughout these scattered legislations are not comprehensive. Specifically, considering the current digital world, a country typically has a comprehensive data protection system.&nbsp;In this context, the government of Ethiopia, through the Ministry of Innovation and Technology, recently took the initiative to draft a personal data protection proclamation. This draft personal data protection proclamation, which is the first by its nature in Ethiopia, is expected to be approved by the Council of Ministers this year (1). The proclamation, once enacted, will be vital in regulating the use and protection of personal data. In this blog, we summarize what this draft proclamation will cover.<figure class="image image_resized" style="width:100%;"><img src="/uploads/ethipia1_778f456404.jpg"></figure><h3>The Regulator&nbsp;</h3>The Ethiopian Data Protection Commission (the “Commision”) is envisioned under the draft proclamation as a national data protection institution. The Commission is proposed as a self-governing body accountable to the House of People's Representatives (HPR). The HPR also appoints the Commission's commissioner and deputy commissioners. The draft proclamation emphasizes the Commission's institutional independence, requiring commissioners to act with total independence and impartiality, neither seeking nor accepting orders.The Commission is charged with a wide variety of regulatory responsibilities. These include overseeing the implementation of the data protection law, keeping a register of data controllers and processors and undertaking audits of practices and policies of data controllers and processors, investigating complaints, and conducting search and seizure, among others. Furthermore, the draft proclamation also envisions the possibility that the Commission may be entrusted with additional roles in sector-specific data protection schemes.<h3>Rights of Data Subjects</h3>The draft proclamation contains fundamental data subject rights including the right to be informed, right of access, right to rectification, right to erasure, right to object to processing, right not to be subject to automated decision making, restriction right and right to data portability.<h3>Data Processing Requirements</h3>The draft proclamation envisages two levels of criteria for the authorized handling of personal data. First, it specifies the broad parameters for legitimate processing. Any processing will be lawful if it is based on the data subject's consent, which must be free, informed, explicit, unambiguous, and capable of withdrawal and granted before the start of the processing. It also provides other grounds for authorized processing, such as the fulfillment of contractual commitments, vital interests of the data subject, and public interest. Secondly, it defines the circumstances under which sensitive personal data, as well as data belonging to children, may be treated, setting of organizational and technical security measures, data protection impact assessments, prior authorization and data protection by design. Though the requirements may apply for various circumstances, failures to meet these requirements would make the processing unlawful. There will also be general requirements for personal data processing to be lawful including prior registration of data controllers and processors and appointments of data protection officers.&nbsp;<h3>Exemptions for Certain Categories of Data Processing</h3>An exemption for certain categories of data processing is provided in the draft proclamation. All of the exemptions concern the processing of personal data undertaken in the public interest. These are:&nbsp;<ul><li>When the processing is done for national security, defense, or public security purposes, including when the Prime Minister grants or certifies an exemption thereof;&nbsp;</li><li>When the processing is to prevent, investigate, and prosecute crimes, as well as the execution of penalties;&nbsp;</li><li>Processing to safeguard the general public interest, including the state's economic interests;&nbsp;</li><li>Processing to uphold judicial independence and judicial proceedings;&nbsp;</li><li>Processing for purposes of protecting data subjects or the rights and freedoms of others; and</li><li>Processing for purposes of historical, statistical or scientific research.</li></ul><h3>Data Breach Notification Requirements</h3>When a data breach occurs, the draft proclamation specifies two levels of notification: notification to the Commission where the breach is likely to constitute a "risk" to an “individual’s" rights and freedoms and notification to the data subject (the individual whose personal data is breached) when it’s likely to pose a high risk to the rights and freedoms of the individual. In principle, notification of the data breach should be provided to the Commission and data subjects within 72 hours unless the data controller has a reason for the delay.<h3>Transborder Data Transfer&nbsp;</h3>The provisions of the draft proclamation are the direct reflection of the General Data Protection Regulation (GDPR). The GDPR is the comprehensive data protection regulation of the European Union (EU) but applies to data controllers and processors in jurisdictions outside the EU provided they handle the personal data of EU citizens. When considering adopting personal data protection laws, many countries are considering laws in line with the GDPR for a variety of reasons. One of the reasons is to enable transborder personal data flow while avoiding statutory inconsistencies.&nbsp;The draft proclamation stipulates possible grounds by which the transborder transmission of personal data is allowed. Accordingly, the transmission of personal data from Ethiopia is permitted only if the third-party jurisdiction (any country other than Ethiopia, international organizations, and its subordinate bodies) provides an adequate level of data protection. The Commission will decide whether a third-party jurisdiction has an adequate degree of protection by taking into account two layers of considerations: general and specific.&nbsp;The general consideration encompasses all factors relating to a specific or group of data transfer procedures. The type of the data, the purpose and length of the intended transfer, and the state of the rule of law in the third-party jurisdiction are all vital particular concerns. It is worth noting that the Commission may restrict, suspend, or impose limits on transfers to third-party jurisdictions judged to have adequate levels of protection to preserve the data subject's rights and freedoms.&nbsp;There are, however, exceptions where personal data can be transferred to a third-party jurisdiction without meeting the adequate standard assessment by the Commission. These are: (i) when the data subject gives explicit consent to the proposed transfer after being informed of the lack of appropriate protection in the third-party jurisdiction; (ii) when the transfer is required to achieve certain legitimate aims of the data subject, data controller, or both, as well as for matters of public interest; and (iii) when the transfer is from a public register.The draft proclamation further provides the possibility of limited transfer of personal data to the third party jurisdiction, when the data subject gives his or her agreement to the transfer and elements of the data are omitted or reduced. However, authorization by the Commission may be required.&nbsp;<h3>What Happens if the Data Protection Laws are Breached?</h3>Under the draft proclamation, data subjects can file a complaint with the Commission if they believe their rights have been violated. In addition to the data subjects, if the Commission has any doubt about the contravention of the proclamation or any subsidiary laws, it can launch an investigation or cause an investigation to be initiated. Unless the Commission has reason to suspect or doubt the complaint (i.e. the existence of bad faith), it is required to investigate the case. Furthermore, the Commission is obligated to come up with a solution within a reasonable time frame, giving the data subject the option of going to court if the data subject is dissatisfied with the decisions of the Commission.&nbsp;The data subjects have the right to file an appeal to the Commission when they are unsatisfied with the decision rendered by a data controller. However, the time to appeal is limited and the Commission may dismiss the case for various reasons. Moreover, if the parties are not satisfied by the decision rendered by the Commission they can appeal to the Federal High Court.&nbsp;There are scenarios under which a third party (mediator) engaged on behalf of the Commission may investigate the appeal of the data subject. If the Commission does not authorize a mediator to investigate and settle the parties’ disagreement, it will conduct its investigation and render a decision. Even though filing a complaint is personal, the draft proclamation allows for a proxy. Hence, an agent can convey a client's case on her/his behalf in a written form unless the Commission requires other forms of presentation. The draft proclamation imposes a duty on the Commission to provide adequate assistance to complaints in putting their grievances in writing.<h3>What is Next?&nbsp;</h3>The draft proclamation has been completed by the Ministry of Innovation and Technology and is expected to be presented to the Council of Ministers this year. Once approved by the Council, it will pass to the House of People’s Representatives for final ratification. It will then be published in the Federal Negarit Gazette, marking its coming into force. A number of steps are expected to be taken before and after the enactment in order to operationalize the regulatory body. Creating awareness and building a legal infrastructure suitable for data protection are expected to be the biggest assignments for the government, post enactment. (1) <a href="https://www.capitalethiopia.com/news-news/first-structured-personal-data-protection-proclamation-in-the-making/">https://www.capitalethiopia.com/news-news/first-structured-personal-data-protection-proclamation-in-the-making/</a>.

Ethiopia is in the Process of Enacting a Data Protection Act 

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Ethiopia is Moving Towards Data Protection 

<h1 style="text-align:center;">RENEW’s Legal Corner: January 2022</h1>RENEW’s Legal Corner is designed to keep you updated with the regulatory progress and changes&nbsp;happening throughout the different jurisdictions in which RENEW operates. This month has seen several regulatory changes in Ethiopia, Rwanda and Uganda. Below are the highlights:<figure class="image"><img src="/uploads/097_A9432_c96da6175e.jpg"></figure><hr>ETHIOPIA<h3>The U.S. Removed Ethiopia from AGOA Effective January 1&nbsp;</h3>The U.S. removed Ethiopia from the African Growth and Opportunity Act (AGOA) for acting against the AGOA statute with the alleged violation of human rights in relation to the war in the northern part of the country (<a href="https://agoa.info/news/article/15941-us-president-terminates-agoa-preferences-for-ethiopia-mali-and-guinea.html">Link</a>). This is following the impending decision passed by the U.S government in November 2021. However, the act has received a lot of criticism from governmental and non-governmental actors. Critics pointed to the adverse effect of the removal including the thousands of jobs created for female workers throughout the country, especially in the garment industry.Following the removal, the Ministry of Trade and Regional Integration is actively working to find alternative markets for Ethiopian products. During the review of the Ministry’s 100 days performance with the Ethiopian Plan Commission, the need to strengthen bilateral and multilateral integrations has been emphasized.<h3>NBE Amends the Forex Retention Directive and Exporters are Not Going to Like it</h3>The National Bank of Ethiopia (NBE) issued a new directive on the retention and utilization of export earnings and inward remittances. The new directive No. FXD/79/2022 has repealed Directive No.FXD/73/2021, which was issued less than five months ago. This is the third amendment to the directive since March 2021. The new directive has made significant changes, which might not be ideal for the retention of account holders in general and exporters in particular. Below are the major changes introduced:<ul><li>Under the new directive, banks are now required to surrender 70% of the foreign currency earnings to the NBE, either from export or remittance. Under the repealed directive, this requirement used to be 50%.</li><li>Similarly, the exporters or the remittance recipients' right of forex retention declined to 20% of the total export earning or remittance. This used to be 40% under the repealed directive.</li><li>The private banks' share of the earnings stood at 10%, which is similar to the repealed directive.</li></ul>This is expected to significantly slow down exports as most exporters are in the export business to generate forex - a scarce resource in the country. It is widely known that most exporters are originally importers who joined the export business to support their import business by using their forex retention rights.<h3>The Government to Approve a Supplementary Budget of 122B ETB due to the War</h3>The Ethiopian Council of Ministers passed a resolution during its regular session held on December 28, 2021. One of the major agenda items at the Council was approving a supplementary budget proposal submitted by the Ministry of Finance for the 2021/2022 fiscal year (running from July 7, 2021, to July 8, 2022). At the beginning of the fiscal year (July 2021), the government approved a 561.7B birr (approximately $12.9B USD) budget. However, as reported by the Ministry of Finance, the war in the northern part of the country demanded additional expenses, which the government couldn’t cover by shifting the budget.&nbsp;As a result, the Ministry of Finance reported that it has readied 122B birr (approximately 2.5B USD at the current exchange rate) as a supplementary budget for the current fiscal year. The budget will be used to rehabilitate conflict-affected communities and finance necessary government functions. This proposal has been presented to the Council of Ministers and received approval, and will now go to the parliament for final ratification.<h3>The Council of Ministers Approved the Formation of Ethiopian Investment Holdings as a Sovereign Wealth Fund</h3>The Council of Ministers approved the formation of Ethiopian Investment Holdings (EIH) as a sovereign wealth fund that holds state-owned enterprises (SOEs) under an umbrella. Part of the government's economic reform program is to increase public sector finance through enhancing the efficiency, transparency and governance of SOEs.&nbsp;&nbsp;EIH, which is currently under formation, will pool the different government resources to one center and will introduce an efficient corporate governance scheme. This, in return, is expected to increase the government’s revenue and serve as a tool which will contribute to the country’s economic growth and enhance the competitiveness of the economy.&nbsp;The Council of Ministers has reviewed the draft regulation, establishing the EIH, and approved its establishment. Consequently, steps are being taken to operationalize EIH but it will not come into existence until the establishment regulation is published in the Federal Negarit Gazette.<hr>RWANDA<h3>AfCFTA; Rwanda’s Performance A Year Later</h3>Trading commenced throughout the African Continental Free Trade Area (AfCFTA) in January 2021. Member states party to the trade agreement have mandatory duties to adhere to the specific responsibilities under the agreement, such as to progressively eliminate tariffs and non-tariff barriers to trade in goods, progressively liberalize trade in services, cooperate on investment, intellectual property rights and competition policy, settle all disputes concerning their rights and obligations, establish an institutional framework for the implementation of AfCFTA and others. Rwanda has made significant strides in implementing AfCFTA thus far, for instance, setting up a dispute settlement body, among others. Rwanda has also set its eyes on diversification by penetrating other African markets. This will be a huge opportunity for the country after registering a whopping $830M of&nbsp; exports within Africa for the greater part of 2021, representing 56% of total exports.&nbsp;Photo by Imran Mazar

Updates to regulatory changes in Ethiopia, Uganda and Rwanda: January 

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RENEW’s Legal Corner: January 2022

<h1 style="text-align:justify;">Ethiopia: IFRS Status and Tips for Businesses</h1>As Ethiopia continues to integrate with global markets, financial standards become more significant. One accounting standard that is often recognized as the global gold standard is the International Financial Reporting Standards (IFRS). IFRS refers to a single set of globally recognized standards and interpretations applicable to general purpose financial statements and other financial reporting of all profit oriented entities.IFRS standards prescribe:<ul><li>The items that should be recognized as assets, liabilities, income and expenses;</li><li>How to measure those items;</li><li>How to present them in a set of financial statements and the related disclosures about those items.</li></ul><figure class="image"><img src="/uploads/097_A2818_bb9f03054e.jpg" alt="A team of professionals in an office, engaged in discussions about IFRS implementation and financial reporting standards."></figure>The adoption of IFRS will result in financial reports for stakeholders that are understandable, reliable and relevant to users and transparent and comparable to other companies. IFRS will also increase the efficiency of contracting with other firms and lenders, and in the long term, such standards make for a more efficient capital market.&nbsp;&nbsp;&nbsp;Around the globe, 120 nations permit or require IFRS for domestic listed companies, while close to 90 countries have fully conformed with IFRS as proclaimed by the IASB (International Accounting Standard Board). The main objective of IFRS is to make the diverse business language used around the world consistent. However, its adoption and implementation bring opportunities and challenges to both businesses and governments.&nbsp;<h2 style="text-align:justify;">IFRS Status in Ethiopia</h2>Previously in Ethiopia, there was not a single accounting standard in use. Businesses had to rely on different regulations and their own internal accounting policies for the preparation of financial reporting. This impacted comparability and reliability of the reporting used by various stakeholders. The government of Ethiopia issued a proclamation called “Financial Report Proclamation of Ethiopia: 847/2014” and Council of Ministers Regulation 332/2014 instructing adoption of IFRS and establishing AABE (Accounting and Audit Board of Ethiopia).&nbsp;AABE is responsible for guiding and dictating the implementation of IFRS as of December 2014.The IFRS implementation roadmap has three phases which started in 2018. Since then, a number of large companies have adopted IFRS in their reporting process while the majority of SMEs and some public interest entities have not been able to adopt the standard. As a result, the government has delayed the implementation enforceability schedule and recently announced a new threshold for the adoption of the full IFRS (listing all applicable rulings or codification to be strictly followed by adopters) and also sectioning out IFRS rules for SMEs, which meet the definition below:Threshold 1: Minimum criteria to adopt Full IFRS: Entities that meet two of the below four criteria should start adopting the standard by 2023:<ul><li>Annual turnover exceeding 300M ETB</li><li>&nbsp;Total employees exceeding 200</li><li>Total asset exceeding 200M ETB</li><li>Total liability exceeding 200M ETB</li></ul>Threshold 2: Minimum criteria to adopt IFRS for SMEs: Entities that meet two of the below four criteria should start adopting the standards by 2024:<ul><li>Annual turnover exceeding 20M ETB</li><li>Total employees exceeding 20</li><li>Total asset exceeding 20M ETB</li><li>Total liability exceeding 20M ETB</li></ul><h2 style="text-align:justify;">Tips for IFRS Implementation</h2>Here are a few tips to get started and advance IFRS implementation in your company:<ul><li>Dedicate an expert or team who will be leading IFRS research or engagement.</li><li>Determine if your country’s IFRS rulings apply to your company or not.</li><li>If it applies, come up with an IFRS implementation plan, including making a decision on in house adoption or seeking assistance from an external party or consultant.</li><li>Identify the list of all relevant IFRS and IAS standards for effective transition to IFRS.</li><li>Develop the relevant accounting policy for your company.&nbsp;</li><li>Choose an appropriate costing model: Costing model or revaluation model.</li><li>Analyze your existing accounting process and identify deviations with IFRS rulings.</li></ul>Conversely, in Uganda and Rwanda, IFRS is much more widely adopted. Below is the IFRS status of both countries.&nbsp;<h2 style="text-align:justify;">Some Regional Comparisons</h2>Uganda has been using IFRS for more than 20 years. In 1998, the Council of the ICPAU (Institute of Certified Public Accountants of Uganda) adopted IFRS (then known as International Accounting&nbsp; Standards (IAS)). The ICPAU is mandated by the Accountants Act, 2013, to regulate and maintain the standards of accountancy in Uganda.&nbsp; In Uganda:<ul><li>IFRS standards are required for listed companies, financial institutions and government-invested companies.</li><li>IFRS standards are required for listings by foreign companies.</li><li>Uganda has adopted the IFRS for SMEs standard without any modifications.</li><li>IFRS for SMEs standards are permitted, although some private companies with state investments are required to use full IFRS standards.</li><li>The IFRS for SMEs was implemented for financial statements covering periods beginning on or after January 1, 2010.&nbsp;</li></ul>For nearly 15 years, Rwanda has shown a public commitment to move towards a single set of high quality accounting standards by issuing a law requiring all companies to use International Accounting Standards (IAS). Law number 11/2008 of 06/05/2008 established the Institute of Certified Public Accountants of Rwanda (the ICPAR Law) on August 1, 2008. To summarize:<ul><li>Rwanda has adopted both full IFRS and the IFRS for SMEs.&nbsp;</li><li>Domestic companies whose securities trade in a public market are required to use IFRS in their consolidated financial statements.</li><li>Foreign companies whose securities trade in a public market are required to use IFRS in their consolidated financial statements.</li><li>IFRS for SMEs is required for all SMEs.</li><li>IFRS for SMEs is permitted for SMEs that are not companies (such as proprietorships and partnerships).</li><li>There are no other local accounting standards.</li></ul><h2 style="text-align:justify;">Questions to Help you Plan</h2>Below are some common questions others have faced when implementing IFRS. These have been shared by early adopters and are listed below. Be sure to review these challenges before you develop your IFRS transition plan:&nbsp;<ul><li>Should we make the transition to IFRS in house or or hire a professional? Who should I hire? Do the necessary research before deciding and take into account the cost, size, complexity, talent gap of the business.</li><li>Is the IFRS implementation a finance role only? Many believe so, but don’t undermine the significance of engineering, HR, legal, marketing, procurement and leadership on key deliverables like estimates, valuation, severance, legal claim, inventory impairment and others.</li><li>Do we keep all original receipts for purchase of assets? Yes. These are needed&nbsp; for valuation purposes.</li><li>Do we have all HR related documents like leave, severance properly accounted for, documented or updated in a timely manner?</li><li>Are your key finance team members well trained or informed in the IFRS rulings or modifications?</li><li>Do I need to re-evaluate all assets to be IFRS compliant? There is a tendency to have everything re-evaluated but you should consult an expert as this might not be the case depending on the circumstances of your business.</li><li>Beware of unrealistic valuation reports as many have reported that inaccurate valuation has led to reporting huge profit with its own tax implications.</li><li>Some IFRS standards are hard to implement in some contexts and a thorough review is needed. For instance, IFRS 9 – Financial Instrument. Hence take time to understand details as relates to your business.</li></ul>Sources:<ul><li style="text-align:justify;">AABE - Accounting and Audit Board of Ethiopia (<a href="http://www.aabe.gov.et/">http://www.aabe.gov.et/</a>) - The information about IFRS standards in Ethiopia was derived from interviews with AABE staff members.&nbsp;</li><li style="text-align:justify;"><a href="https://cdn.ifrs.org/content/dam/ifrs/around-the-world/jurisdiction-profiles/uganda-ifrs-profile.pdf">https://cdn.ifrs.org/content/dam/ifrs/around-the-world/jurisdiction-profiles/uganda-ifrs-profile.pdf</a></li><li style="text-align:justify;"><a href="https://cdn.ifrs.org/content/dam/ifrs/around-the-world/jurisdiction-profiles/rwanda-ifrs-profile.pdf">https://cdn.ifrs.org/content/dam/ifrs/around-the-world/jurisdiction-profiles/rwanda-ifrs-profile.pdf</a></li></ul>Disclaimer:&nbsp; This blog article is strictly for informational purposes only and does not constitute accounting, tax or legal advice. Readers of this blog should consult their professional advisors to obtain advice with respect to IFRS implementation and any particular accounting or tax matter discussed herein. The information in this blog is provided “as-is” and no representation is made that the information is accurate or complete, nor should it be relied upon as such. Information in this blog may not constitute the most up-to-date accounting or other information. All liability with respect to actions taken or not taken based on the contents of this blog are hereby expressly disclaimed.

Here’s what you need to know if you are a business in Ethiopia and implementing IFRS. Explore the significance of IFRS adoption in Ethiopia for transparent financial reporting. 


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Ethiopia: IFRS Status and Tips for Businesses

<h1 style="text-align:center;">RENEW’s Legal Corner: December 2021</h1>RENEW’s Legal Corner is designed to keep you updated with the regulatory progress and changes&nbsp;happening throughout the different jurisdictions in which RENEW operates. This month has seen several regulatory changes in Ethiopia, Rwanda and Uganda. Below are the highlights:<figure class="image"><img src="/uploads/097_A9519_bd9d899233.jpg"></figure>&nbsp;<hr>ETHIOPIAThe National Bank of Ethiopia Revised the Directive on the Allocation of Forex&nbsp;The National Bank of Ethiopia (NBE), which is the central bank of the country, issued a new directive on the allocation of foreign exchange. The new directive numbered FXD/77/2021 repealed Directive No. FXD/67/2020, which was issued a year ago. The new directive, similar to its predecessor, has four categories of allocation i.e. ‘1st priority', ‘2nd priority', ‘3rd priority’ and ‘no priority’. Within that framework it has introduced a few major changes:<ol><li style="text-align:justify;">Removed “input for manufacturing of pharmaceuticals” from the 1st priority category and kept medicine and laboratory agent importing intact. In addition, it introduced in the 1st priority category (1) input for manufacturing edible oil; and (2) liquified petroleum gas (LPG), which was in the 3rd category in the repealed directive.</li><li style="text-align:justify;">Similar to the repealed directive, priority categories need to be allocated a minimum of 50% of the total forex allocation by any bank at any point in time. Categorically, this used to be 5% (for 1st priority), 22.5% (for 2nd priority), 22.5% (3rd priority), which now has changed to 7.5%, 22.5%, and 20%, respectively.</li><li style="text-align:justify;">Non-priority sectors are now required to deposit 50% of the total proforma value in birr using the prevailing exchange rate at the date of registration. The bank in return is required to pay at least a saving interest rate for the amount in the blocked account, which as we stand is 7% per annum.&nbsp;</li></ol>Other than these and other minor changes, the new directive kept most of the provisions of the repealed directive. This included proceeds from the sale of shares, profit and dividend transfer, which remained in the 3rd priority category.The National Bank of Ethiopia Lifted the Restrictions on Loan ServicesThe NBE lifted the restrictions placed on all forms of private loans provided by commercial banks.&nbsp;Back in August 2021, the NBE took different policy measures to tackle the soaring inflation, which was mainly driven by the increased gap between the official and parallel forex exchange rates. This was reportedly a result of the illicit financial networks that are financing the Tigray People's Liberation Front (TPLF), a rebel group currently fighting the government. To counter that activity, the NBE had taken different monetary policy measures, one of which was freezing all forms of private loans provided by commercial banks (read our blog on <a href="https://renewcapital.com/resources/blogs/What%E2%80%99s%20Behind%20the%20Soaring%20Inflation%20in%20Ethiopia%3F">“What’s Behind the Soaring Inflation in Ethiopia?”</a>).Since then, the NBE has issued consecutive circulars at different times revising the restrictions and providing exemptions for different loan categories and strategic sectors. Beneficiaries of this exemption include companies supplying petroleum products, inter-bank loan buyout transactions, sesame producers, importers and producers of edible oil and others. Now, the NBE has lifted all restrictions and allowed all commercial banks to provide loans to their clients without restrictions. The restriction had a significant impact on the economy in general and financial institutions in particular and the lifting of the restrictions is expected to help bring the economy back on track.&nbsp;Start-up Businesses Proclamation is on the Verge of Getting EnactedAs part of the reform program introduced in Ethiopia, the government has been working on building a vibrant start-up ecosystem. Part of this initiative was to draft and implement the Start-up Businesses proclamation (the “Start-up Proclamation”).&nbsp;Initially, this initiative was being led by the Federal Jobs Creation Commission, which later on shifted to the Ministry of Innovation and Technology (MINT). Per a statement by MINT this month, the Start-up Proclamation is now&nbsp; near the finish line and is expected to be enacted within the next one hundred days. Once finalized, the law enactment process requires the draft to be presented to the Parliament through the Council of Ministers’, which will then get published in the official Federal Negarit Gazette.&nbsp;The Start-up Proclamation has a number of elements aimed at addressing the different issues that start-ups currently face in Ethiopia. These include the establishment of the National Start-up Business Council, with a number of mandates aimed at supporting the start-up ecosystem. In addition, it established an innovation fund organized for the purpose of financing start-ups and innovative businesses. At a macro level it aims to foster innovation and the economy at large and create knowledge-base wealth while at the same time fostering job creation. Specifically, it is expected to be foundational to the country’s potential for entrepreneurship and innovation, and provide tailor-made support for start-ups and innovative businesses.The Number of Sectors that Require Certificate of Competence for Business License Has Been Reduced to 10The Ministry of Trade and Regional Cooperation (MTRC) reduced the number of business areas that require competence certificates to 10 from 52. It is in a circular that was circulated to the different trade bureaus that the Ministry announced its decision.The MTRC is the central commercial registration and business licensing body of the country. However, the service provided by the Ministry used to be backward, time taking and with a number of regulatory checkpoints. This has been one of the reform areas outlined by the government in its recent economic reform program related to ease of starting a business (read our <a href="https://renewcapital.com/resources/blogs/The%20Ethiopian%20Business%20Environment%20in%20Light%20of%20the%20Homegrown%20Economic%20Reform%20Program">blog on the reform program</a>). This has seen the number of sectors that require a competence certificate from 1,300 to 52.&nbsp;Now this again got reduced to 10, which is a positive development in terms of limiting the competence certificate to areas that are necessary for the government to ensure the safety and public health of the general public.<hr>RWANDAResolution to Address Inequalities Between Men and Women in EAC Services.The women caucus in the East African Community (EAC) regional parliament recently tabled a&nbsp; resolution to check the glaring inequalities between men and women currently serving under the EAC. This came during the annual international campaign against gender-based violence. The resolution implores the EAC Council of Ministers, the central decision-making and governing organ of the EAC, to establish structures to promote gender mainstreaming in the appointment and recruitment for all organs and institutions.&nbsp;The six key recommendations include:<ul><li>Gender should be a primary factor to consider by direct partner states while appointing candidates for Secretary General, Deputy Secretaries General, judges and members of Boards.</li><li>A gender audit to be conducted to advance gender mainstreaming.</li><li>Implement regulation 20(12) of the EAC staff rules and regulations and prioritize gender during the recruitment process of professional staff.</li><li>Incorporate affirmative action for women during the recruitment process.</li><li>Emphasis on women applying for the job vacancies advertised.</li><li>Create a conducive environment for women working in the EAC, taking into account specific needs for women including breastfeeding facilities, adequate maternity leave, day care centres, affordable education for children, favorable spouse allowance and an environment free from sexual and gender-based violence.</li></ul>Senate Summons Prime Minister Over Issues in Agriculture ExportsThe Prime Minister of the Republic of Rwanda has been summoned to appear before the senate committee on economic development and finance. The main subject of scrutiny will be the state of the agricultural sector, the country’s biggest contributor to the national economy. Hon. Édouard Ngirente will explain the government’s detailed plan to leverage the recent strategic partnerships with the likes of China and UAE with close support from the Ministry of Agriculture and the National Agricultural Export Development Board. Furthermore, there will be an in depth analysis of the recurrent challenges that the agricultural export market is currently facing in Rwanda like the lack of access to capital for farmers to cover the day to day activities and logistical issues among others.<hr>UGANDAThe National Social Security Fund (“NSSF”) is the monopoly in the pension sector in Uganda, with mandatory contributions for employees (if employers employ more than five staff).&nbsp;The Parliament of Uganda has passed the National Social Security Fund Amendment Bill 2021, that allows for 20% mid term access for workers who have saved for over 10 years and have reached the age of 45, with persons with disabilities who have saved for more than five years having access to up to 50% of their savings. Furthermore, the bill provides for mandatory registration and contribution to a licensed retirement benefits scheme such as NSSF, for both employers and employees in the formal sector. The Bill also provides for voluntary contributions for employers and employees within the informal sector.NSSF is a lead investor in the only locally domiciled and registered private equity firm in Uganda. With an increase in contributions from employers and employees in Uganda, there is an opportunity for private equity funds to raise capital from the NSSF.&nbsp;Photo by Imran Mazar

Updates to regulatory changes in Ethiopia, Uganda and Rwanda: December

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RENEW’s Legal Corner: December 2021

<h1 style="text-align:center;">RENEW’s Legal Corner: November 2021</h1>RENEW’s Legal Corner is designed to keep you updated with the regulatory progress and changes&nbsp;happening throughout the different jurisdictions in which RENEW operates. This month has seen several regulatory changes in Ethiopia, Rwanda and Uganda. Below are the highlights:<figure class="image"><img src="/uploads/team_7fa02694c2.jpg"></figure><hr>ETHIOPIAThe Capital Market Proclamation was Published in the Negarit GazetteAs part of the reform agenda, the Ethiopian Government aims to correct imbalances and safeguard macro-financial stability in the country. This includes making improvements to access to finance and the development of a capital market. Consequently, Parliament enacted the Capital Market Establishment Proclamation No. 1248/2021. After some wait since the enactment, the Proclamation was published in the Negarit Gazette this month. Here is our <a href="https://www.renewcapital.com/resources/blogs/What%20We%20Know%20About%20the%20Establishment%20of%20a%20Capital%20Market%20in%20Ethiopia%20">blog</a> on the last draft proclamation.The English Version of the New Commercial Code was PublishedAfter the new commercial code was enacted by the Parliament in March 2021, everyone has been looking for the final and codified version. However, the new commercial code was only printed in Amharic and the English version was only published this month. Here is our<a href="https://www.renewcapital.com/resources/blogs/The%20Commercial%20Code%20of%20Ethiopia%20is%20Changing%20How%20the%20Country%20Does%20Business"> blog</a> on the changes introduced by the new commercial code.The Council of Ministers Enacted an Amendment to the Income Tax RegulationThe Council of Ministers issued an amendment to the 2017 Income Tax Regulation on September 23, 2021. The amendment aimed to:1. Clarify some of the provisions of the Income Tax Regulation for the purpose of applicability and to change certain provisions which have a negative implication on some economic activities; and&nbsp;&nbsp;2. Reduce some of the hurdles and increase the inflow of investments.The major elements introduced include:<ul><li>Depreciation in relation to capital goods leasing - The amendment allows depreciation for a business asset held under a hire-purchase agreement;</li><li>Depreciation in relation to buildings - There has been a misinterpretation of the income tax regulation on how depreciation is calculated in relation to buildings partially used as a business asset. The amendment clarifies this provision and states that it will not apply to buildings that are not completed.</li><li>Loss carry forward - The amendment also cleared a misunderstanding in the taxpaying community that is associated with loss carry forward. The amendment clarifies that no taxpayer is allowed to carry forward a loss of more than two terms and not beyond five years.</li><li>Foreign exchange loss - The tax regulation only allows deduction of foreign exchange loss from foreign exchange gain. However, most companies, other than banks, which have foreign exchange loss might not have foreign exchange gain. Hence, to rectify this, the revised proclamation divides capital gains loss into two categories:<ul><li>If an entity incurred foreign exchange loss in relation to purchase of capital goods, the loss shall be added to the cost of the capital goods and be subjected to depreciation.</li><li>If the foreign exchange loss is not related to the purchase of capital goods, the loss will be considered as deductible for the tax period.</li></ul></li><li>Calculating capital gains tax - Inflation adjustments are to be made in relation to transfer of shares and bonds while calculating capital gains tax. Under the income tax regulation, capital gains tax is calculated on disposal of either immovable property or shares and bonds. However, only disposal of immovable property was subject to inflation adjustment for the purpose of calculating capital gains tax.&nbsp;</li></ul>Companies are Now Mandated to Prove “Cash on Hand”The Addis Ababa City Revenues Bureau issued a circular mandating companies to present evidence if they record “cash on hand” in their balance sheet. The main purpose of this is for the Revenue Bureau to identify if the cash on hand indicated on companies’ books exist at banks or on hand. The Bureau is ensuring that companies accurately record their financials and if for some reason a company can’t present evidence of a “cash on hand”, the Bureau will presume that the company has used the money off the books for backdoor business activities. In which case, the Bureau might charge a presumptive tax on the revenue that it could have received.<hr>RWANDANew Data Privacy Law EnactedAs of October 2021, companies and individuals in Rwanda have two years to comply with new personal data processing requirements, which protect an individual’s data and privacy. This new regulation requires an individual’s consent in order for their personal data to be collected and stored. It requires all companies and individuals to be able to prove that explicit consent was given when it comes to the collection and processing of personal data, and it requires all individuals whose data is collected to be made aware of how and where their information is being used.&nbsp;A key component of this new law is the ability for an individual to withdraw consent at any time and also for individuals to be able to request access to any personal data that a company may be storing. Once this law is enforced in 2023, there will be penalties for companies and individuals who are accessing, collecting and using personal data without consent. Learn more about these penalties and details about this new regulation<a href="https://www.newtimes.co.rw/news/new-law-outlines-penalties-mishandling-personal-data"> here</a>.<hr>UGANDAImplementation of Tax Compliance by the Uganda Revenue Authority (URA)On November 1, 2019, the URA introduced the Digital Tax Solution/Stamps (DTS), and later introduced the Electronic Fiscal Receipting and Invoicing Solution (EFRIS) on January 1, 2021,&nbsp; both aimed at improving business efficiency. A countrywide enforcement exercise was launched on November 1, 2021 which enforces the issuing of an e-invoice/e-receipt for goods and services provided by VAT-registered taxpayers. In addition, all gazetted products must bear a digital tax stamp.&nbsp; Failure to issue an e-invoice/e-receipt or to use a digital tax stamp are now offenses punishable by law.The Uganda Revenue Authority (URA) has recently been focusing on supermarkets that are not complying with issuing e-invoices and e-receipts. Learn more <a href="https://www.monitor.co.ug/uganda/business/finance/ura-to-penalise-supermarkets-which-don-t-issue-e-invoices-e-receipts-3604452">here</a>.&nbsp;&nbsp;Photo by Imran Mazar

Updates to regulatory changes in Ethiopia, Uganda and Rwanda: November

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RENEW’s Legal Corner: November 2021

<h1 style="text-align:center;">The Rise of "Re-Pats" -- African Talent Returns Home</h1> The financial crisis is not all bad news. One interesting repercussion is the effect on decades of immigration into the United States for a “better opportunity.” While immigration overall has slowed down, there is new phenomenon which is uniquely affecting Africa: people leaving America for greater opportunity in their home country. <a href="http://news.bbc.co.uk/2/hi/business/8370765.stm">Caroline Duffield’s BBC article</a> tracks the influence of this dynamic in Nigeria.The trend follows high quality business talent in the U.S. leaving either by choice or via a lay off, back to their home country where they had been watching growth and opportunity soar from afar. Now is the time to return ‘home’, bringing a wealth of business acumen to countless endeavors. One such individual quoted in the article said, “I came back to Nigeria after 10 years. I realized this place was calling for young entrepreneurs - to breathe new life into the system.”This shift has gained enough momentum to earn a catchy name, “re-pats”, taking cue from the original expatriate movement that marked last century. The success of a recruitment agency that specializes in bringing Nigerian talent back to Africa truly underscores the process, “In 2003, we thought around 5,000 people a month were coming in," says Funto Akinkugbe from Find A Job In Africa. "That's multiplied by three now. We're looking at the best part of 15,000 people on a monthly basis."While the challenges facing business in Africa still exist, this influx of new and experienced talent is better equipped to overcome barriers and continue to post strong growth in the region. One entrepreneur simply sums up the opportunity to become a re-pat, “It's changing fast - and you're either part of it, or not."Stories like this and many others focused on the growing business opportunities in Africa can be found on the new BBC program, <a href="http://news.bbc.co.uk/2/hi/in_depth/business/africa_business/default.stm">Africa Business Report</a> on BBC World News.

The financial crisis is not all bad news.

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The Rise of "Re-Pats" -- African Talent Returns Home

<h1 style="text-align:center;">Want Encouraging News? Look to Africa.</h1>According to a recent article published in The Economist, Africa is expected to withstand the current economic decline better than many other parts of the world. Entitled “Opportunity Knocks,” the article appeared in the magazine’s October 9, 2008 print edition.The author comments that “Despite the litany of problems, the 48 countries of sub-Saharan Africa are, by several measures, enjoying a period of unparalleled economic success. And despite the turmoil in the world’s financial markets, international investors still think they can make money there.”“In 1990-94 annual GDP growth was a weak 0.9%; since then, growth has averaged closer to 5%. Before this autumn’s financial meltdown, the IMF was predicting GDP growth of 6.6% this year; now it is predicting only a slightly lower rate,” the article continues.