KEY POINTS
- Ethiopia’s stock exchange opens with Wegagen Bank as its first listing.
- Ethio Telecom’s anticipated IPO highlights potential for broader investor interest.
- Local investors gain access to shares in Ethiopia’s largest companies
Yet another stepping stone in the long journey of Ethiopia toward the liberalization of its economy has been reached with the inauguration of the Ethiopian Securities Exchange (ESX). The exchange is expected to attract private investments and enable local investors to gain ownership in the largest companies in the country.
A new era for Ethiopia’s financial market
Prime Minister Abiy Ahmed officially launched the Ethiopian Securities Exchange on Friday, describing it as a transformative step in the country’s financial history.
The exchange, which initially listed Wegagen Bank, is anticipated to attract up to 90 companies within the next decade, according to ESX Chief Executive Tilahun Kassahun. Among the expected future listings is Ethio Telecom, Ethiopia’s state-owned telecom giant, which is preparing for an initial public offering.
Ethiopia previously operated a securities exchange in the 1960s and 70s before it was abolished during the socialist military regime that followed the 1974 overthrow of the monarchy.
The relaunch of the exchange is part of Prime Minister Abiy’s broader efforts to open up Ethiopia’s tightly controlled economy to private investment and enhance financial inclusivity for its 130 million citizens.
Challenges and investor interest
However, certain analysts or investors seem skeptical, especially with the fact that the launch of the ESX is considered historic.
According to Reuters, Ethiopia’s economic progress has been hampered by armed conflicts, including the devastating Tigray war between 2020 and 2022, which resulted in significant loss of life and disrupted economic growth.
Uncertainties about the government’s firmness on long-term continued liberalization and preparedness of Ethiopian companies to deliver services in line with international financial practices further temper enthusiasm.
Mark Bohlund, a senior credit research analyst at Redd Intelligence, noted that only a few companies, such as Ethio Telecom, might meet the reporting and liquidity requirements to attract foreign investors.
However, local investment advisors like Henok Assefa see the launch as a pivotal moment for Ethiopian investors, enabling them to hold stakes in major domestic companies for the first time.
Economic reform gains momentum
The launch of the ESX follows a series of economic reforms initiated under Prime Minister Abiy.
In 2023, Ethiopia secured an International Monetary Fund support program after floating its currency, the birr, and addressing a liquidity crunch.
The intention is to stabilize the economy and put in place conditions under which Ethiopia can become an attractive destination for foreign direct investment.
Nonetheless, Ethiopia’s stock exchange points to a new era of economic development, an overall focus on increased access to financing for all, and a venue for domestic and foreign investors to engage in the country’s growth.
