For the year 2020, Ethiopia is gearing up to open its first Stock Exchange market in over 45 years. With it, Africa will add one more stock exchange floor under its belt bringing the total number of working bourse on the continent to 30.
Almost half a century ago, back in the 70s, there was vibrant share trading at the National Bank of Ethiopia. That was in fact, one of the first, if not the very first, trading floor on the continent. Well, at least one that was not under colonial rule that is.
Now, some 45 years later after the Derg took down what would have inevitably been Africa’s main stock trading floor, Ethiopia is well on its way to re-establishing the trading floor.
Ethiopia becomes the 30th of Africa’s 51 countries to establish a stock trading institute under the auspices of the government. For one of the continent’s largest and fastest growing economies, many say the Ethiopian authorities have waited way too long to join the capital markets.
All her neighbours have very active stock exchanges, backed with comprehensive regulations and commissions that are governed under capital markets laws. In fact all six countries that make up the East African Community (EAC) have active and strong stock exchanges.
Well, better late than never, even though Ethiopia is late, it is now on the verge of joining Africa’s capital markets. Doing so will open new opportunities for its private sector giving it an unprecedented platform to raise capital on one hand and on the other, creating shared value under local content.
Through the stock exchange, common Ethiopians get the opportunity to own shares in large national and international companies that operate in the country. This allows for new investment options and for the people to rip the benefits that are otherwise enjoyed only by the company owners.
As Ethiopia works the cranks or setting up the stock exchange, the very people it targets are up in arms crying foul play.
Ethiopia’s private sector feels left out. Representatives of various companies and institutions are up in arms. Speaking to local media at a stakeholder event last month in the capital Addis Ababa, private sector stakeholders said the government did not involve them in the initial stages of law formulation.
Africa and 35 countries participate in stock markets. Johannesburg, Egypt, Casablanca, and Nigeria are the major Stock Exchanges in the continent.
Sharing their views on the sidelines of a business forum early in February, stakeholder decried what they described as been ‘left out.’
The forum was dubbed ‘Challenges and Prospects of Establishing Stock Market in Ethiopia’ and was organized by the Addis Ababa Chamber of Commerce and Sectoral Associations. While most of the stakeholders admitted that the stock exchange is long overdue and that it will serve to help them raise much needed capital, they nonetheless expressed discontent. Some said the government simply did not share ‘relevant information’ while others said the government did not consult with the private sector.
Sector pundits also shared concerns as to whether the country is in fact ready for the stock exchange. Some are of the view that the country still lacks or has not exhausted set up of the required regulations and infrastructure necessary to operate the stock exchange.
Other than regulations and a regulatory body for the capital markets, there is also the matter of infrastructure to accommodate a data center, said. Further still, the issue of reliable internet and power supply was also brought up as a huddle to the establishment of the coveted stock exchange in Ethiopia.
“There is also need to establish a securities and exchange commission as the watchdog of the business and trading that will take place in the stock market.” The list goes on and on, a board for accounting oversight and certified auditing firms. Need for investment banks and brokerage firms as well as competent underwriters, all were raised as pre-requisites for the establishment of the bourse.
As a last plea to the government, private sector stakeholders appealed to the government to come for talks ahead of launching the stock exchange. They said it is vital for the National Bank of Ethiopia and as well as the Ministry of Finance to have discussions with the private sector, to collect opinions and to give information on progress and regulation.