ADDIS ABABA– The Commercial Bank of Ethiopia (CBE) has announced plans to establish an investment bank, a groundbreaking move in line with recent regulatory changes aimed at fostering growth in Ethiopia’s financial sector.
The initiative is being undertaken in collaboration with Zemedeneh Nigatu, a seasoned investment consultant and managing director of Fairfax Africa Fund.
This development follows the repeal of a 2017 directive that restricted commercial banks from participating in investment sectors. The directive’s annulment on July 23, 2024, alongside provisions in the Capital Market Proclamation, now allows commercial banks to own full stakes in non-credit institutions such as investment banks. These regulatory reforms are part of Ethiopia’s broader efforts to develop a robust capital market infrastructure.
Investment banks play a vital role in capital markets by offering advisory services to businesses and start-ups seeking to raise funds. They also facilitate the issuance and sale of shares, manage mergers and acquisitions, and provide consulting services. Revenues are generated through fees for these services, positioning investment banks as key players in financial ecosystems.
CBE’s entry into investment banking is viewed as a pivotal step, leveraging its stature as a state-owned institution to instill trust and confidence in the emerging market. The inclusion of Zemedeneh Ngatu in the project aligns with CBE’s strategy to utilize his extensive expertise in investment and fund management. As the managing director of Fairfax Africa Fund, Zemedeneh has a track record of advising and managing investment ventures. His involvement underscores the importance of laying a strong foundation for Ethiopia’s emerging capital markets.
Fairfax Africa Fund specializes in fund management and pools resources from various entities to invest in profitable ventures. While its activities in Ethiopia are not yet widely documented, Zemedeneh’s leadership credentials are notable. He has held senior roles in investment and consulting firms, including Ernst & Young, though his tenure there ended after disagreements. He also played a role in the early stages of establishing Selam Bank, which faced challenges in meeting its capital requirements.
CBE’s move to establish an investment bank is expected to significantly impact Ethiopia’s evolving financial sector. The bank aims to provide advisory services and facilitate access to financing, potentially acting as a catalyst for economic growth. This initiative could attract investors, support businesses in raising capital, and energize the country’s financial ecosystem.
While the success of this venture will depend on effective execution and market reception, CBE’s investment bank project represents a transformative step toward diversifying Ethiopia’s financial landscape. The initiative is poised to play a critical role in shaping the country’s capital market and fostering economic confidence.
BY MENGISTEAB TESHOME
THE ETHIOPIAN HERALD FRIDAY 22 NOVEMBER 2024
