Addis Ababa, May 18, 2022 – Ethiopia’s Ministry of Finance, the Ethiopian holdings and FSD Africa today signed a cooperation agreement to establish the Ethiopian Securities Exchange (ESX).
A cooperation agreement between the Ministry of Finance of the Federal Democratic Republic of Ethiopia, Ethiopian Investment Holdings and FSD Africa will provide the technical and financial support needed to launch Africa’s newest exchange.
Once established, the ESX will be the 30th exchange on the continent. At least fifty companies, including banks and insurance companies, are expected to be listed at the launch of the exchange.
The exchange aims to provide a fundraising platform for small and medium-sized businesses, which form the backbone of the Ethiopian economy.
The exchange will also provide a platform for the privatization of Ethiopia’s state-owned companies.
Ethiopia has experienced strong economic growth averaging 9-10% over the past two decades.
With strong fundamentals such as a young and educated workforce and improved infrastructure, the economy has the potential to sustain such high growth if structural challenges such as limited access to finance are addressed.
In recent years, the government has implemented several reforms to open up the economy, and the introduction of a stock exchange will be a catalyst for attracting new investment from the private sector.
A fast-growing economy requires a significant amount of capital and more long-term sources of funding for investments.
A capital market is therefore vital to Ethiopia’s economy to connect the financial sector with the real and social sectors.
Through the exchange, the government of Ethiopia will be able to fund its budget deficits by issuing long-term bonds in local currency, thereby reducing reliance on inflationary and foreign sources of budget finance.
An efficient stock exchange will also support the Ethiopian government’s stated policy of privatization by democratizing corporate ownership and giving Ethiopian citizens a direct stake in their country’s economic prospects.
Through the collaboration agreement, FSD Africa will fund technical support, legal advice and the costs associated with the launch of the exchange.
FSD Africa has been a strong partner in Ethiopia’s quest to develop a securities exchange, having funded a 2020 study to identify the structure needed to develop an exchange in the country and ongoing capacity building and regulatory framework development efforts supported for capital markets .
Comment on the signing of the MoU:
HE Ato Ahmed Shide, Minister, Ministry of Finance, said:
“The establishment of a securities exchange, the first in our country’s history, through such a public-private partnership will herald a new era for Ethiopia’s financial industry and economy at large.
Today’s cooperation agreement between the Ministry of Finance, EIH and FSD Africa is a first concrete step towards realizing our vision.”
SE Mamo Mihretu, CEO – Ethiopian Investment Holdings
“The Ethiopian Stock Exchange will offer issuers and investors a unique and invisible access to the capital markets, promoting efficient capital allocation and use.
In support of Ethiopia’s ambitious economic development agenda, the exchange will ensure much-needed capital is made available to businesses, entrepreneurs and young innovators across Ethiopia.
For the first time in our nation’s history, all Ethiopians will have access to long-term finance to build sustainable businesses, create much-needed jobs and participate in the country’s economic prosperity.”
Mark Napier, CEO – FSD Africa
“We are pleased to be working with the Ethiopian government on this historic initiative that will accelerate the development of capital markets in Ethiopia.
Our assistance in establishing the Ethiopian Stock Exchange will leverage FSD Africa’s extensive expertise and experience in developing capital markets infrastructures across Africa.
This support signals our long-term commitment to a thriving capital market that is deep, liquid and efficient.”