Innovate First, Then Regulate: Ethiopia Charts E-commerce Regulatory Sandbox

Ethiopia is seeking to establish an E-commerce Regulatory Sandbox to simplify the registration and licensing of e-commerce platforms, promote e-receipt adoption, and improve tax collection within the sector.

The proposed plan, which is part of Ethiopia’s first Draft National E-commerce Strategy, is expected to be an input for the review of existing regulations for trade registration and operations as well as the development of e-commerce tax regulations.

Developed by the Ministry of Trade & Regional Integration (MoTRI),  the strategy labels the Sandbox as a flagship project with a maximum implementation period of three years.

“E-commerce is nascent in Ethiopia and requires a conducive environment to support innovation and an equal playing field. However, significant challenges persist in trade registration, licensing, fragmented requirements for e-commerce providers by different government agencies, and the lack of policy direction for tax revenue collection from e-commerce platforms,” reads the Draft.

To address these challenges, the regulatory sandbox will be established to test innovative approaches. Led by MoTRI, the Ministry of Innovation & Technology (MInT), the Ministry of Revenue (MoR), the Ethiopian Communications Authority (ECA), eSWP, and the Customs Commission, the regulatory sandbox aims to provide an evidence-based regulatory framework for e-commerce operations.

Additionally, it will introduce measures to reduce entry barriers for Micro, Small, and Medium Enterprises (MSMEs), early-stage startups, female-owned businesses, and other disadvantaged enterprises.

According to the current draft, the sandbox project will be open to selected e-commerce companies, ranging from newcomers to established entities, based on selection criteria.

It plans to support participating e-commerce platforms by offering tax breaks for two years, opportunities to participate in cross-border trade and export promotion events, and business support services to enhance their skills and ensure successful operations.

“While the Regulatory Sandbox provides flexibility, certain areas such as consumer protection, health, and quality assurance should not be compromised. Government bodies will monitor these aspects to ensure compliance,” adds the strategy.

In addition to the regulatory sandbox, the document recognizes three other flagship initiatives, including a domestic e-commerce register, a cross-border marketplace (Global Ethiopia), and a rural e-commerce initiative.

Two weeks ago, a validation workshop for the strategy was held in Addis Ababa. Speaking at the workshop, Deputy Prime Minister Temesgen Tiruneh said the e-commerce strategy aims to bolster economic growth, enhance international competitiveness, and seize new opportunities.

“Ethiopia’s National E-commerce Strategy is close to finalization! A validation workshop gathered key stakeholders—government ministries and private sector leaders—to refine the strategy document. The Deputy Prime Minister, who has opened the validation workshop, emphasized swift government approval,” wrote Abiyot Bayou (PhD), Data & Governance System Advisor to the Minister of Innovation and Technology in Ethiopia, on LinkedIn.

Besides establishing an effective e-commerce policy, increasing consumer awareness, trust, and confidence; encouraging private sector participation; and promoting exports to enhance foreign exchange earnings are some of the major goals of the draft e-commerce strategy.

Regulatory sandboxes are garnering increasing attention from the Ethiopian government. In February of this year, Ethiopia set up its first Sandbox, which is dedicated to accelerating financial innovation.  Hosted by the Innovation Financial Lab and co-owned by the National Bank of Ethiopia (NBE) and the Ethiopian Capital Markets Authority (ECMA), the Sandbox facilitates testing within the live market alongside real consumers.

In addition, the facilitation of policy sandboxes is one of the major policy reforms targeting startups recently announced by the government.