The Ministry of Trade (MoT) has started to attempt revising the Ethiopian Standard Industrial Classification (ESIC), a system used for classifying industries by a five-digit code. It has formed a technical committee to conduct a preliminary assessment that will be used for the revision.
The committee, which is composed of the staffs of the Ministry and led by the legal department director, will work on the preliminary assessment and revision of the classification, which was last revised half a decade ago.
The classification is mainly used to trace businesses, for better regulation and to do away with general licensing. It is also used to avoid overlapping of responsibilities and devise ways in which each governmental agency carries out its duties in the process of registering business activities and issuing certificates of competence.
Just like the ESIC, the country uses different kinds of classifications such as Control Product Classification (CPC), Standard International Trade Classification (SITC), and Harmonized Commodity Description & Coding System (HS Code).
Rearrangement of professional competency certifying bodies, newly added codes, lack of uniformity and overlaps in coding and classification, changes in assigning names and designations and struck off or deleted codes are the significant reasons for the revision of the classification for the second time.
“Our experts travelled to South Africa and Botswana to sample the experiences of these countries,” said Hagos Aregay, team leader of pre-licensing and verification at the Ministry and member of the technical committee.
The original version of the classification was first published in January 2010 with 982 categories. But it was revised in 2013 and referred to as the First Revised Ethiopian Standard Industrial Classification. It took effect as of July 2013; the revision had 1,342 business divisions fall under 10 significant business licensing categories.
“After the assessment, the revision may take three to four months,” said Hagos.
“As it was drafted with over control mind, it was too specific and restrictive,” comments Eyob Tekalegne, an economist and former manager of the Public Private Consultative Forum and a current director of an American Investment Firm, Schulze Global Investments Limited. “Therefore, it has created bureaucratic hassles.”
Endalkachew Sime, secretary general of the Ethiopian Chamber of Commerce & Sectoral Association (ECCSA), which has eighteen members including nine regional and, two city chambers, a National Chamber of Sectoral Associations and six Sectoral Associations, shares Eyob’s view.
“The business community has been challenged, as the classification requires them to have three to four licenses for a single business,” Endalkachew told Fortune.
Ethiopia is known for being a country with difficulties in doing business. The World Bank’s doing business index 2018 ranks Ethiopia 161st out of the 190 economies. In the index, the World Bank compared the business regulations of Ethiopia with other countries in the economy or region.
Considering the recommendations from the World Bank and the business community, the MoT has been conducting different assessments and amendments. One of them being the reduction of business activities which require a certificate of competence.
The Ministry has eliminated businesses which do not require certificate after filtering out their relationship with the environment, public, animal and plant health. The new procedure reduced the number of business activities from 1,352 to 429. These certificates are issued by 37 public institutions which are delegated by the Ministry.
“The recent revision will be integrated to the classification rearrangement as an annexe,” said Hagos.
However, another senior expert recommends that it could have been good if the technical committee was comprised of experts from the Ethiopian Customs & Revenues Authority, Ministry of Finance & Economic Cooperation and the Ethiopian Standard Agency.
“These authorities have experience in having and utilising similar specifications,” he comments.
Before it is approved, the revision will be availed for public discussion especially with the national Chamber, according to Hagos.
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