Ethiopian Securities Exchange Receives Strong Investor Interest, Doubles Initial Target

Ethiopian Securities Exchange garners bids over double its target, signaling strong investor confidence in Ethiopia's first stock market.

By Athena Xu

4/4, 08:38 EDT

Key Takeaway

  • Ethiopian Securities Exchange (ESX) received bids worth $26.6 million, doubling its initial target in a strong show of investor confidence.
  • Strategic foreign investments and local financial institutions' participation underscore the ESX's foundational role in Ethiopia's economic reform agenda.
  • Amidst navigating sovereign default, the ESX launch marks a significant move towards diversifying Ethiopia's funding sources and attracting foreign investment.

Overwhelming Investor Interest

The Ethiopian Securities Exchange (ESX) has witnessed a significant surge in investor interest, receiving bids totaling more than 1.51 billion birr ($26.6 million), which is over double its initial target of 631 million birr. This development was shared by the Chief Executive Officer, Tilahun Kassahun, during a press briefing in Addis Ababa. The enthusiastic response from investors underscores the high level of confidence and anticipation surrounding the establishment of Ethiopia's first stock exchange. Among the bidders were FSD Africa, the Trade and Development Bank, Nigerian Exchange Group, 16 domestic commercial banks, 12 insurance companies, and 17 local investors. The ESX is currently in the process of share allotment, indicating a crucial step forward in its operational setup.

Strategic Foreign Investment

Tilahun Kassahun highlighted the importance of strategic foreign investment in the ESX, noting its role in facilitating the transfer of technical know-how and best practices. This approach is aimed at ensuring the long-term strategic value of the exchange, not just for Ethiopia but for the broader region. The establishment of the ESX is a key component of Prime Minister Abiy Ahmed's broader economic reform agenda, which seeks to open up the country to more foreign investment and aid in the reconstruction efforts following a two-year conflict. The government's initiative reflects a strategic move to diversify Ethiopia's funding sources and reduce reliance on traditional borrowing from multilateral and bilateral creditors.

Economic Context and Challenges

Ethiopia's venture into establishing its own stock exchange comes at a time when the country is navigating through economic challenges, including becoming Africa's latest sovereign defaulter alongside Zambia and Ghana. The nation is actively seeking to restructure billions of dollars in external debt under the Group of 20’s Common Framework mechanism. The ESX, established in October with the state-owned Ethiopian Investment Holdings as the founding shareholder, represents a pivotal shift towards diversifying Ethiopia's funding mechanisms. The public sector, including entities like Ethiotelecom and Commercial Bank of Ethiopia, will own 25% of the bourse, with the remaining shares held by private entities.

Management Quotes

  • Tilahun Kassahun, CEO of Ethiopian Securities Exchange:

    "Investors bid for more than 1.51 billion birr ($26.6 million) of shares, surpassing the firm’s target of raising 631 million birr." "Strategic foreign investment is particularly important in allowing the transfer of technical knowhow and best practices as well as other areas of long-term strategic value that we will explore."