Ethiopia recently announced the sale of 10.7 million shares in its state-owned telecom company, Ethio Telecom, priced at 300 birr each. This move, revealed in a statement on Friday, is part of a broader strategy by Ethiopia Investment Holdings, which oversees 40 state-owned enterprises, to raise a significant 30 billion birr through the sale of 100 million shares. However, the IPO did not meet its financial targets, primarily due to restrictions that prevented participation from the Ethiopian diaspora and institutional investors.

Challenges in the IPO Process

According to Frehiwot Tamru, the CEO of Ethio Telecom, the limited participation in the IPO hindered its success. Despite this setback, the sale is a pivotal step toward launching the Ethiopian Securities Exchange, an initiative aimed at liberalizing the economy.

• Key Objectives:
  • Operationalize the Ethiopian Securities Exchange.
  • Attract foreign and local investments.
  • Modernize the business environment.

Economic Reforms and Future Plans

Prime Minister Abiy Ahmed’s administration has been actively working to reform the economy, having lifted decades of currency control last year and implementing measures to simplify business regulations. This IPO was seen as a vital part of these reforms.

In response to the shares that went unsubscribed, Tamru indicated that plans for a second round of the IPO would be announced soon, providing another opportunity for investment.

Ethio Telecom’s Market Position

As of January, Ethio Telecom boasted an impressive 81 million users and generated a revenue of 61.9 billion birr in the six months leading up to January 7. It’s worth noting that Ethiopia had a stock market for 14 years until 1974, when the military regime abolished share trading after overthrowing Emperor Haile Selassie.

Future of the Ethiopian Stock Market

The new securities market aims to list up to 50 companies over the next five years, with some listings planned through a method called listing by introduction, which does not require an IPO. This development signifies Ethiopia’s commitment to revitalizing its financial landscape and attracting investment.

As the nation navigates these changes, its focus remains on creating a robust and competitive market that can foster growth and innovation.