Ethiopia Launches First IPO: A Step Toward Economic Revival

Ethiopia takes a major step in economic revival with its first IPO of Ethio Telecom, aiming to attract foreign investment and establish a stock exchange.

By Charles Wachira

Ethiopia, a nation in the Horn of Africa, is taking significant steps toward economic revival after a period marked by brutal internal conflict.

 On October 16, 2024 , it achieved a notable milestone with its first-ever initial public offering (IPO) of 10% of Ethio Telecom, the state-owned telecommunications company. 

While the shares are initially available to local retail investors, this move sets the stage for the long-anticipated establishment of a stock exchange, aimed at attracting foreign investment.

 Ethiopia is currently the only one of Africa’s five largest economies without a stock market.

This IPO is the largest on the continent this year, with Ethio Telecom, which serves nearly 80 million customers, aiming to raise $255 million.

 The offering follows a pivotal decision made in August to end decades of state control over the currency, along with initiatives to simplify business operations.

 The Ethiopian government hopes that allowing the birr to trade more freely will unlock over $20 billion in financing, including a $3.4 billion loan from the International Monetary Fund, with the first review of this bailout imminent.

Earlier in April, Ethiopia extended shares in the Ethiopian Securities Exchange to institutional investors, attracting bids from prominent entities like FSD Africa, the Trade and Development Bank, and the Nigerian Exchange Group.

 Additionally, 16 domestic commercial banks, 12 insurance companies, and 17 local investors participated in the bidding process.

These recent developments have sparked renewed interest in Ethiopia’s economy, particularly following a ceasefire agreement signed between the federal government and the Tigray fighters that brought an end to the civil war in late 2022.

 However, previous attempts at economic transformation through privatization have struggled to gain traction, and regional violence remains a concern.

 There are also growing apprehensions among Ethiopia’s landlocked neighbors regarding Prime Minister Abiy Ahmed’s ambitions for direct access to the ocean, alongside tensions surrounding the giant dam built on a tributary of the Nile, which has drawn ire from upstream nations, particularly Egypt and Sudan.

Moreover, Ethiopia is currently in default on its $1 billion eurobond, with creditors hesitant to accept the proposed restructuring terms.

Despite these challenges, the planned stock exchange represents a tangible step forward and could pave the way for Ethiopia’s reintegration into the global economic mainstream.

Keywords:Ethiopia:IPO: Ethio Telecom: Economic revival: Stock exchange