The launch of the Ethiopian Securities Exchange (ESX) marks a significant milestone for Ethiopia, Africa’s second most populous nation. For over five decades, this country has been without a stock market, despite its rapid economic growth. On January 10, the ESX officially opened, symbolizing Prime Minister Abiy Ahmed's commitment to economic liberalization. This new financial platform aims to facilitate capital raising and privatization of state-owned enterprises, with plans to list at least 100 companies within the next decade. The government is also offering tax incentives and easing regulatory requirements to encourage more listings.
A New Era for Ethiopia's Financial Sector
In the heart of Addis Ababa, on a historic day in early January, the Ethiopian Securities Exchange was reborn. After more than half a century without a formal stock market, Ethiopia finally joined the ranks of other African nations with a fully operational securities exchange. Prime Minister Abiy Ahmed personally inaugurated the ESX, ringing the opening bell—a moment that underscored his administration's dedication to modernizing the economy.
The first company to list on the ESX was Wegagen Bank, signaling the start of what officials hope will be a wave of future listings. The exchange is optimistic about attracting at least 100 firms over the coming decade. One of the primary goals is to provide a platform for privatizing state-owned enterprises, beginning with Ethio Telecom. Additionally, the ESX will serve as a vital channel for businesses to raise capital, both from local and international investors.
To promote participation, the government has introduced several measures, including tax breaks and streamlined regulations. These incentives aim to make it easier for companies to go public, fostering a more dynamic and competitive business environment. The ESX launch follows critical reforms such as opening the banking sector to foreign investment and implementing a floating exchange rate system.
Experts like Mered Fikireyohannes, CEO of Pragma Investment Advisory, have praised the ESX for providing the private sector with an efficient way to access capital at lower costs. Previously, Ethiopia lacked a robust mechanism for equitable access to capital and liquidity, leading to inefficiencies in lending and high borrowing costs, especially for small and medium-sized enterprises (SMEs). The introduction of the ESX addresses these challenges by creating a platform for various financial instruments, including initial public offerings, corporate bonds, and private placements.
This development is expected to transform Ethiopia's financial landscape, reducing reliance on domestic debt and enabling businesses to attract capital from a broader pool of investors. With a current domestic debt of $40 billion—59% of total public debt—the government's dominance in the credit market has historically crowded out private sector access to affordable financing. The ESX promises to change this by injecting dynamism into the debt market and lowering interest rates for borrowers.
From a journalist's perspective, the launch of the ESX represents a pivotal shift in Ethiopia's economic trajectory. It not only opens up new avenues for capital formation but also signals the country's readiness to embrace global financial standards. As more companies join the exchange, Ethiopia could see a surge in investment, innovation, and economic growth. The success of the ESX will be crucial in determining whether the country can sustain its impressive economic momentum in the years to come.