Ethiopia’s new stock exchange will officially open this Friday (10 Jan), five decades after the previous bourse in the country closed in 1974, when Emperor Haile Selassie was overthrown by the nation’s military and share trading abolished.
Ethiopia Working for More Growth
The East African State has seen its economy expand by an average of over 8% over the past 10-years, way above the 3,5% average growth seen across the continent.
Ongoing conflicts in the country were finally brought under control after a peace accord was signed by Prime Minister Abiy Ahmed’s government in 2022 that has created a more stable environment for economic growth.
The Country has been actively addressing structural issues dampening prospects of further investment, such as the deregulation of its currency controls that was implemented for more than 50 years. A move that brought it in line with international exchange rates and also unlocked a $20 billion financing option from the IMF and World bank last year.
State Enterprises Bolster Launch
State run Ethiopia Investment Holdings, controls 40 state-run companies, and will be selling shares in Ethio Telecom that is expected to raise as much as $234 million in an initial public offering, and will be the first listing on the new bourse.
The company’s debut, will be followed by additional state owned enterprises that the government plans to list, will mark the launch of the new bourse, according to Tilahun Kassahun, chief executive officer of the Ethiopian Securities Exchange.
Developments Aimed to Attract Further Investments
Ethiopia is hoping this new development will also play a role in attracting foreign investors and to create new jobs in a nation where more than 25% of the youth are unemployed.
Africa’s most-populous nation after Nigeria, has also adopted new policy regarding repatriation of funds, which has been a concern for investors. The new regulations will ensure that investors in the capital market are “treated favourably” to allow for easy in moving funds out of the country, according to Tilahun.
Foreign Currency Holding Still Concerns
While this is positive news for potential investors, the foreign funds held in Ethiopia are still reported to be marginal. The last figure released by the Ethiopian Central bank were in March of 2024 and indicated a limited $1.5 billion in reserves. This could well have improved but greater transparency will be critical to potential investors.
While a $3.4 billion bailout deal with the IMF will bolster foreign-exchange levels, “liquidity levels remain far from comfortable,” commented Jacques Nel, an economist at Oxford Economics Africa.
Investors are likely to see similarities with Nigeria, which until recently made transferring dollars overseas difficult to help conserve its reserves. To discourage “hot money” flows, Abiy’s government plans to introduce rules that will mandate a minimum investment period, Tilahun said.
The new institution aims to list as many as 50 companies in the next five years, Tilahun said. Some will join the bourse via a so-called listing by introduction — which does not involve an IPO — though how many is not yet clear.
