Ethiopia to establish its own stock exchange as the nation’s economy opens up

At least 50 companies are expected to list on the Ethiopian Stock Exchange (ESX), set to launch in two years, which will provide a platform for the privatization of the country’s state-owned enterprises.
Three months ago, Ethiopia announced it was in the process of establishing a stock market signaling a window of opportunity for cross-listing. “Opening up banking to foreign banks would transform the economy by boosting it to have a link with the international economy,” Office of the Prime Minister of Ethiopia said in a Facebook post. Another move came last week when Prime Minister Ahmed Abiy’s government announced it was opening up the economy to foreign banks. The Ethiopian Securities Exchange (ESX) is a joint project between the country’s giant new sovereign wealth fund, Ethiopia Investment Holdings (EIH), Ministry of Finance and Nairobi-based Financial Sector Deepening Africa (FSDA). Between 25% and 55% of the ownership of the ESX will be for corporations, capital market intermediaries and operators of international securities exchanges, while government will not own more than 25%.
According to FSDA, “At least 50 companies, including banks and insurance companies, are expected to list at the launch of the exchange. The exchange is designed to provide a fundraising platform for small and medium-size enterprises, which are the backbone of the Ethiopian economy. The exchange will also offer a platform for the privatization of Ethiopia’s state-owned enterprises.” Meanwhile, the establishment of EIH, one of Africa’s biggest sovereign wealth funds, could be the start of a massive turnaround in Ethiopia’s long-established economic heterodoxy. It was set up in late 2021 and will control assets worth some $38bn, or 34% of Ethiopia’s GDP, generating annual revenues of $6.2bn. It has some of Ethiopia’s largest and most productive state-owned enterprises in its portfolio, such as Ethiopian Airlines, the Commercial Bank of Ethiopia or Ethio Telecom, and with its active participation in the establishment of the country’s first securities exchange, is likely to pave the way for the liberalization of the economy and increase the pace of privatization.