Ethiopia is reintroducing a stock exchange after a five-decade absence, a move intended to attract both domestic and international investment.
Officials hope the initiative will breathe new life into the country’s financial system and provide a much-needed economic boost.
The country faced tough economic conditions in 2023, with inflation exceeding 30%. By 2024, however, inflation had eased to 23.95%, despite ongoing conflict with Amhara militias.
To stimulate growth, the government is preparing to launch a stock market, with the initial step being the sale of shares in Ethio Telecom.
Ethiopia Investment Holdings, which manages 40 state-owned firms, plans to generate as much as 30 billion birr (about $234 million) through the telecom giant’s initial public offering (IPO).
Tilahun Kassahun, CEO of the Ethiopian Securities Exchange, described the launch as a critical milestone. The exchange is set to officially begin operations this Friday.
Ethiopia last had a stock market between 1960 and 1974, before it was disbanded following the fall of Emperor Haile Selassie. Looking ahead, Kassahun hopes to list up to 50 companies within five years. Some of these will join through a listing-by-introduction process, which bypasses the need for an IPO.
Economic Challenges and Growth Trends
Ethiopia’s economy has experienced sharp ups and downs over the last decade. Growth reached a high of 10.4% in 2014 but fell to 8% in 2015, driven in part by rising inflation, which reached 9.4%, largely due to soaring food prices. By 2019, GDP had dropped further to 6.1%, largely due to civil unrest that disrupted economic activity.
Since then, gradual improvements have been noted, with GDP expected to recover to 8% by 2024. While inflation and political unrest remain significant challenges, these numbers reflect cautious optimism about the country’s ability to regain economic stability.
Experts Assess the Stock Exchange’s Potential
James Johnstone, who co-heads emerging and frontier markets at Redwheel, sees the stock market as a game-changer. “The opening of a domestic stock exchange is a key part of the economic and political transition of a frontier market,” he explained, emphasizing the opportunities for investment. Redwheel, which manages $8 billion in assets, is among those eyeing Ethiopia’s potential.
In contrast, Mark Bohlund, a senior credit research analyst, expressed concern over ongoing unrest and governance issues. “It is hard to see how the current government will be able to reestablish a centralization of political power and effective governance,” he said, warning that such instability could deter foreign investors who prioritize predictability.
Kassahun also highlighted major obstacles, noting that Ethiopia’s volatile foreign exchange system and unstable macroeconomic conditions are significant barriers. “The major roadblock is the foreign exchange environment and the unstable macroeconomic situation in the country,” he explained, adding that these factors make planning difficult for businesses and discourage investment in the nascent market.
