Overview and Purpose of Directive Number 772/2021
Directive Number 772/2021, which is also cited as Directive Number 772/2013 in the Ethiopian Calendar, was issued by the Ethiopian Investment Commission in collaboration with the Ministry of Trade and Industry and the Ministry of Labor and Social Affairs. The primary objective of this directive is to regulate the issuance of work permits to expatriates employed in investment projects and to ensure the systematic transfer of knowledge and skills from these foreign experts to Ethiopian employees. It recognizes the need for a one-stop service for investors and aims to establish a robust procedure for monitoring whether expatriate employees are serving in authorized positions while narrowing previous administrative gaps.
Scope and Applicability
The directive applies to several categories of investments under the mandate of the Commission, including those wholly owned by foreign investors, joint ventures between domestic and foreign investors, and investments by foreign nationals who are treated as domestic investors under the law. It also covers domestic investors in sectors eligible for incentives who must obtain federal business licenses. Furthermore, the directive extends to recognized refugees holding valid identity papers who are engaged in waged employment, although they are exempt from certain requirements like providing a passport or entry visa. However, the Ministry of Labor and Social Affairs retains authority over work permits for expatriates in specific sectors like air transport, communication services, and electric power generation.
Work Permits for Top Management
Investors are permitted to employ foreigners for top management roles, which specifically include positions such as Chief Executive Officer, Chief Operation Officer, Chief Finance Officer, and Board Chairman. During the project construction phase, this category is limited to the Project Manager and their deputy, while the implementation phase includes the broader list of executive and marketing roles. Work permits for these high-level positions are issued and renewed annually upon the employer’s request without the need to comply with standard preconditions related to knowledge transfer or the preference for Ethiopian candidates. If an enterprise ensures that at least one-third of its management members are Ethiopians, the Commission may grant expatriate management members work permits valid for two years at a time.
Non-Management Positions and Workforce Thresholds
For positions outside of top management, such as supervisors, trainers, and technical roles, the directive establishes specific limits on the number of expatriate workers. During the project construction phase, expatriate employees generally cannot exceed ten percent of the total number of permanent Ethiopian project employees, though this may be increased to fifteen percent for expansion projects. In the operational phase, the number of expatriates is also typically capped at ten percent of the Ethiopian workforce, although the Commission may raise this to twelve percent for labor-intensive sectors. Certain specialized fields, such as high-tech investments, consultancy, and high-skill agriculture, may be exempted from these percentage restrictions based on study.
Procedures for Installation, Commissioning, and Temporary Work
The directive provides specific rules for expatriates hired for temporary technical tasks. Work permits for machinery installation and commissioning are generally valid for only one year and are not renewable, unless delays were caused by factors beyond the enterprise’s control or involve highly complex technology. For temporary roles such as machinery repair, auditing, or short-term training, permits are valid for only three months. While these short-term permits are typically non-renewable, an exception exists if force majeure prevents the completion of the work.
Knowledge Transfer and Training Obligations
A core requirement of the directive is the obligation of employers to facilitate the transfer of skills from expatriates to Ethiopian replacement employees. Except for management and strictly temporary technical roles, enterprises must make a best effort to find qualified Ethiopians before hiring a foreigner and must provide on-the-job training so that Ethiopians can eventually take over the expatriate’s position. Employers are required to submit a training program and quarterly performance reports detailing the types of training offered and the progress of the Ethiopian trainees. The Commission conducts field monitoring every three months to assess the effectiveness of these training programs.
Validity, Renewal, and Service Fees
Standard work permits are issued for one year and can be renewed annually for a maximum of three years, provided the enterprise demonstrates concrete steps toward training Ethiopian replacements. This three-year limit is generally strict, though exemptions may be granted for major investments exceeding forty million dollars or those employing more than one thousand five hundred people. Renewal applications must be submitted one month before the permit expires and require documents such as the employee’s passport, employment contract, and an annual performance report on knowledge transfer. The service charges are set at 2,000 ETB for a new permit, 1,500 ETB for renewal, and 1,200 ETB for a replacement book.
Obligations and Grounds for Revocation
Both employers and expatriate employees have specific duties under the directive, such as ensuring the employee works only in the authorized position for the specified employer. Employers must notify the Commission within five working days if an expatriate disappears from the workplace or if their employment contract is terminated. A work permit can be revoked if the permit expires without renewal, if the expat is no longer required, if they are found working for a different employer, or if their presence is deemed a threat to national security. Additionally, if a permit was obtained using false information or if the parties fail to comply with the obligations set forth in the directive, the permit may be cancelled.