What You Should Know About the Establishment of a Capital Market in Ethiopia

 

Introduction

Part of the Ethiopian Government’s recent reform measure aims to correct imbalances and safeguard macro-financial stability in the country, among others. As part of the requirements for macro-economic stability, the reform program provides improvements to access to finance and the development of a capital market, where securities such as shares, bonds and derivatives are bought and sold. As a result, the National Bank of Ethiopia (NBE), which is the central bank of the country, was tasked to prepare the legal framework and came up with a draft capital markets proclamation, which was later approved and enacted by the Federal Parliament in its regular session held on June 10, 2021, as Proclamation No. 1248/2021. Consequently, actions are being taken by the government to operationalize the Ethiopian Capital Market Authority by the end of 2021 and finally the Ethiopian Securities Exchange through public-private partnership arrangements in 2022.

Historical Reference

As share companies started to flourish in Ethiopia in the 1960s, shares were being traded by the NBE. Later on, the Addis Ababa Share Dealing Group was established to trade shares and government bonds in 1965. The Group started with the listing of 15 companies and four government bonds. The number of companies listed reached 17 the next year. The Addis Ababa Bank, Ethiopia Abattoirs, Bottling Company of Ethiopia, Indo Ethiopian Textiles, HVA Ethiopia, and Tendaho Plantation were some of the traded companies. With a socialist government coming to power, led by Derg, which overthrew the imperial regime in 1974, all the traded companies were nationalized, and consequently, the stock market was shattered.

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