History of Stock Market in Ethiopia
Introduction: Pioneering Efforts
Amidst Historical Challenges
Ethiopia's economic landscape has
long been characterized by its rich history of trade and commerce. However, the
formal establishment of a stock exchange has been a journey fraught with
challenges and interruptions. This article explores the evolution of the
Ethiopian stock exchange from its inception during the Imperial period to its
current status, reflecting on the aspirations, hindrances, and ongoing
endeavors towards modernization in the financial sector.
1. Stock Exchange during the Imperial Period: Seeds of Formalization
During the Imperial period, signs
of a nascent stock exchange began to emerge. In 1956, Ethiopian Abattoirs
issued the first shares for public subscription, marking a significant
milestone in the country's financial history. However, these early endeavors
were characterized by a lack of formalization, with transactions conducted
over-the-counter and facilitated by the state bank of Ethiopia. Despite the
absence of comprehensive legislation and regulatory frameworks, the issuance of
shares signaled the potential for the development of a formal stock exchange.
By 1965, amidst economic growth and
the proliferation of share companies, the Share Dealing Group was established.
Comprising key institutions such as the National Bank of Ethiopia and
individuals like Mr. Alfred Abel, this group aimed to self-regulate the
security market. However, despite these pioneering efforts, the absence of
robust legal frameworks and regulatory authorities hindered the formalization
of an organized stock exchange during this period.
2. Stock Exchange during the Derg Period: Disruption and Regression
The Derg regime, known for its
nationalization policies and centralized control, posed significant challenges
to the development of a formal stock exchange. The dissolution of the Share
Dealing Group in 1975 marked a setback in the progress towards formalization.
With the nationalization of financial institutions and large companies, the
regime disrupted existing institutional structures and regulatory frameworks,
undermining efforts towards establishing a formal stock exchange.
The commercial code, a fundamental
legal instrument governing business operations, suffered under the Derg
regime's policies. The lack of institutional support and regulatory clarity
further exacerbated the regression in the development of the stock exchange
during this period. Consequently, the promising institutional and legal
advancements witnessed during the Imperial period were stifled, hindering the
evolution of Ethiopia's financial sector.
3. Stock Exchange during the EPRDF Government Period: Slow Progress and Persistent Challenge
In the era under the Ethiopian
People’s Revolutionary Democratic Front (EPRDF) government, the absence of a
formal stock market persists. While share companies utilize equity finance
through Initial Public Offerings (IPOs), a comprehensive stock exchange remains
elusive. The primary capital market comprises Treasury bills and government
bonds, with limited secondary market activity.
Efforts towards establishing a
stock exchange have been sporadic. Studies conducted by the National Bank of
Ethiopia in 1995 explored the feasibility of a securities exchange market.
Organizations like the Ethiopian Share Dealing Group initiated the development
of stock exchange rules and regulations. However, a lack of legislative support
from the government has impeded progress.
4. Towards a New Era: The Emergence of the Ethiopian Securities Exchange
Amidst the historical challenges,
Ethiopia is poised to enter a new era in its financial sector with the
formation of the Ethiopian Securities Exchange. Set to go live this year, the
Ethiopian Securities Exchange represents a significant milestone in the
country's journey towards a formalized stock market. This development
underscores a renewed commitment to modernizing Ethiopia's financial
infrastructure and unlocking opportunities for investment and economic growth.
Conclusion: Navigating the Path
Forward
In conclusion, Ethiopia's journey
towards a formal stock exchange reflects a complex interplay of historical,
political, and economic factors. While aspirations for modernization persist,
the path forward necessitates concerted efforts from both the government and
stakeholders to overcome existing challenges and realize the vision of a
vibrant and regulated stock market. Despite the historical hurdles, the
emergence of the Ethiopian Securities Exchange signals a new chapter in
Ethiopia's financial evolution, promising increased transparency, liquidity,
and opportunities for investors. As Ethiopia embraces this transformative
initiative, it is essential to remain vigilant in addressing regulatory gaps
and fostering an enabling environment for the sustainable growth of the stock
exchange and the broader economy.
Share this post:
Share on Facebook Share on Telegram Share on LinkedInRelated Posts
- History of Stock Market in Ethiopia
- Ethiopian Capital Market Authority
- ESX Trading Rules: Fair & Transparent Market Guidelines
- Market Segments in Ethiopian Securities Exchange
- Listing Requirements: Ethiopian Securities Exchange