ESX equity proves lucrative as authorities prepare for late 2024 launch

Authorities working to establish the country’s maiden stock exchange inch closer to raising one billion birr in initial capital as domestic firms rush to acquire stakes in the Ethiopian Securities Exchange (ESX).

The management of ESX has managed to raise 90 percent of the targeted capital from banks, state-owned enterprises (SOEs), and other businesses operating in Ethiopia.

This week saw Siinqee Bank, one of the industry’s newer entrants, announce a 50-million-birr equity investment in ESX, granting the former microfinance institution a five percent stake in the Exchange.

It is the second financial institution to make the leap, following Zemen Bank’s announcement of a 47.5-million-birr investment in ESX last month.

In October 2023, the Ethiopian Investment Holdings (EIH) and four SOEs under its wing made public the acquisition of a 25 percent stake in ESX. The SOEs include Ethio telecom, the Ethiopian Shipping and Logistics Services Enterprise (ESLSE), the Ethiopian Insurance Corporation (EIC), and Berhanena Selam Printing Enterprise.

YoditKassa, chief business development officer at ESX, says raising the targeted 75 percent of capital from the private sector has been relatively straightforward.

“I think we’ll be oversubscribed,” Yodit told The Reporter.

Her team wants to see the remaining 10 percent of initial capital raised before the deadline on March 29, 2024.

No foreign businesses or entities have thus far invested in ESX equity, barring Financial Sector Deepening (FSD) Africa, which has been playing a leading role in the formation of the stock exchange. FSD’s support will be repaid with a stake in ESX.

“FSD Africa’s stake is yet to be converted,” she said.

Yodit disclosed there has been increased interest from foreign companies eyeing a piece of the Exchange. However, there are questions that will have to be addressed, according to her.

“They are typical questions that any foreign investor would ask: like foreign currency repatriation. We are working with EIH on that,” Yodit told The Reporter.

The Exchange has yet to disclose a full list of its equity holders. The names on the list so far are the two commercial banks, five government-owned entities, and FSD Africa.

“We have a non-disclosure agreement when we sign contracts with the companies, so we can’t identify them. But we’ve finalized subscriptions of about 90 percent,” said Yodit. “We will disclose who all of our shareholders are after the allotment.”

Shareholders have to pay at least half the subscribed equity up front.

Heads of the Exchange are eyeing October 2024 for the ESX debut. This leaves a little over seven months to finalize procedures such as license acquisition, gathering public consensus on ESX rules, and the establishment of the Central Securities Depository (CSD) by the central bank, as well as the launch of the trading platform.

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