The head of Ethiopia’s new stock exchange said the bourse plans to diversify its offerings to avoid the challenge of low trading volumes seen in other African countries as it vies to attract more private investment.
Ethiopia this month launched its first securities exchange in five decades to revive an economy grappling with double-digit inflation, conflict, and growing external debt. So far only one company, Wegagen Bank, a mid-sized lender based in Addis Ababa, has listed. The state-owned telecom Ethio Telecom, which is preparing for an initial public offering, is expected to join suit in coming months.
African stock exchanges typically suffer from lower liquidity than their peers beyond the continent, which has prompted some local companies seeking equity capital to list in London or New York where they have access to a larger pool of investors. The UK and US markets in particular offer deeper capital pools and higher trading volumes.
This trend has stymied the development of African stock markets outside the Johannesburg Stock Exchange, the continent’s biggest bourse.
Already anticipating the challenge of getting firms on board, Tilahun Kassahun, CEO of the Ethiopian Securities Exchange, told Semafor the exchange was working to “diversify products and services” across money, debt, and equity markets, as well as introduce options such as Islamic bonds, to attract companies.
“We expect private companies, including those that are operating as large share companies as well [as] those [that are] privately owned to come to the market,” Kassahun said, adding that the exchange aims to list at least 90 companies in the next 10 years.
Many of Ethiopia’s roughly 30 local banks are expected to be listed as they prepare for competition from foreign banks that are being allowed to enter the local banking sector for the first time in 50 years. The move comes as the Ethiopian government accelerates its hunt for foreign investment and has mused about offering Ethiopian Airlines to private investment.
