Ethiopia officially launched its bourse last Friday, as Africa’s 30th stock exchange. This historic moment comes after four years of discussions, but tough challenges lie ahead.
The Ethiopian Stock Exchange (ESX) listed only Wegagen Bank, a tier-2 bank with 65.7 million birr ($521,000) in assets, despite initial speculation that suggested more participation. The country’s largest telco, Ethio Telecom, which reportedly planned to sell 100 million shares for 30 billion birr ($238 million) was not mentioned.
This raises fresh questions about African stock markets’ ability to attract big backers and companies. In 2024, South Africa’s resurgent Johannesburg Stock Exchange (JSE), saw only four IPOs. Egypt’s stock market saw one IPO with United Bank after three years. Nigeria’s bourse, although instrumental in helping banks raise money for recapitalisation, saw no IPO. And Kenya’s Nairobi Securities Exchange (NSE) has been starved of an IPO for six years.
Low investor participation, low trading volumes, and limited listings have slowed the growth of African bourses. This has not inspired the confidence of companies operating in the continent, with some of them choosing to cross-list on foreign exchanges instead.
We’ve seen this with Africa-focused e-commerce company, Jumia listing on the New York Stock Exchange. Others have chosen to stay local but opted to hedge their bases. Nation Media Group, a Kenyan media conglomerate, has cross-listed on Rwandan, Tanzanian, and Ugandan bourses. Yet, cross-listing brings with it regulatory complexities, requiring companies to comply with multiple sets of rules.
If anything, there is an opportunity for Ethiopia to attract big foreign players that want to cross-list on its bourse. One of these examples is Safaricom. Ethiopia needs better liquidity and it can do this by building investor confidence.
But the country’s macroeconomic challenges remain a key blocker. If the exchangeprovides a pro-business environment and a clear but compelling regulatory stance for big foreign players to come in, it can help create a ripe market for long-term investors.
As a by-product, it will also attract more local participation from an already educated private sector.
