The reentering of Ethiopia to the global stock market holds considerable significance for the country’s economic landscape. This development, not only reflects Ethiopia’s growing integration into the global economy, but also showcases its commitment to attracting foreign investment and augmenting economic Growth.
Access to the global stock market can accelerate economic growth by providing companies with new avenues for capital. This influx of investment can lead to job creation and infrastructure development.
It also creates investment opportunities the return offers both local and international investors a chance to participate in Ethiopia’s burgeoning markets. It highlights the potential for high returns in a rapidly growing economy. Moreover, it increased transparency and broaden the chance to join the global value chain.
Listing on a global platform necessitates adherence to international regulations and standards, promoting greater transparency and corporate governance among Ethiopian companies.
Competing in the global market paves the way for preparing to produce both qualitatively and quantitatively. To that end, using high-tech and diversification is essential. As it is known for the last hundred years, Ethiopia has been exporting its agricultural products to the foreign market with no value addition this again critically affected the products competitiveness. As a result, its garnering capacity of foreign currency has been stagnated. hence, capitalizing on diversifying the export products and broadening export destination is essential.
For investors, the opportunity to invest in Ethiopian firms allows for diversification in their portfolios, as the country presents unique economic opportunities distinct from more established markets. The main stay of the nation’s economy is agriculture and still huge labor force is dwelled in the sector and the emerging manufacturing sector is in its grass root level. This necessitates more investment for expanding manufacturing which can absorb the labor force stranded in the rural part of the country. The ongoing construction of infrastructure including roads, real estates, piped water, hydropower dams and other utilities create conducive environment for investment venture. Investors have a chance to employ both semiskilled and skilled labor in average salary and obtain working place, telecom and electric services in average price.
The availability of abundant agricultural products which can be an input for manufacturing further put them to the advantageous position. As the location of the burgeoning industries nearer to the Ethio-Djibouti rail way line, it makes exporting their products and importing inputs easy.
The recent lunching of financial market brought glimpse of hope for reinvigorating the economy. This move can stimulate the growth of Ethiopia’s financial markets, encouraging the development of related financial services and products, further enhancing the investment climate. The recently introduced flouting exchange rate regime boosted investor’s confidence increased the inflow of foreign investment, sending remittance in the formal channel is also enhanced and export is boosted which in turn makes conducive level playing field to investors.
Overall, Ethiopia’s reentering to the global stock market represents a pivotal moment that could reshape its economic future and elevate its status on the international stage.
According to Brook Taye, CEO of Ethiopia’s Investment Holdings /EIH/, encouraged by the new development, partners and donors showed sympathy to support Ethiopia’s economic endeavor financially.
Currently, the process of joining foreign financial market is in its final stages and acquiring stakes in foreign companies through Euronext Paris, the Paris-based stock exchange. While specific details of the targeted companies and the size of the investments remain undisclosed, the move signals a strategic shift for Ethiopia as it seeks to leverage its growing economic influence on the global stage.
Ethiopian Investment Holdings (EIH), the East African nation’s sovereign wealth fund, is poised to make a historic return to the global stock market with plans to invest in multinational corporations. This move marks Ethiopia’s reentry into international equity markets after more than a century; following Emperor Menelik II’s pioneering investments in New York stocks in the late decades of the 19th century.
That time even though infrastructure and economy that facilitates economic growth were at their infant level expedition had been conducted in that regard was admirable. The announcement underscores Ethiopia’s ambition to diversify its investment portfolio and strengthen its foothold in the global financial system.
Over a century later, EIH’s planned investments represent a renewed effort to integrate Ethiopia into the global economy and capitalize on international market opportunities. There are capitals in the form of immovable properties such as houses, vehicles, lands and others which can be transacted to create wealth and create various opportunities to citizens but due to the absence of capital market they have been wasted therefore, we can be certain that the introduction of capital market creates conducive environment to citizens to transact their capital and contributes to the nation’s economic growth.
In line with these, the incoming of foreign banks and operating here further stimulate the nation’s economy through modernizing the financial sector and reaching the public. Moreover, it paves the way to create competitive environment by making banks their own loan and interest rate based on the market.
The decision to reenter global markets comes as Ethiopia continues to implement sweeping economic reforms aimed at liberalizing its economy and attracting foreign investment. The country, which has been one of the fastest-growing economies in Africa, has been working to open key sectors such as telecommunications, banking, and logistics to private and foreign investors. So far, there are foreign investors already engaged in manufacturing, horticulture and mining.
The companies play pivotal role in boosting export, substitute import, create job opportunity to thousands, link with the agriculture sector, and accelerate innovation and widening the role of private sector in the economy.
EIH, established in 2021, serves as the investment arm of the Ethiopian government and oversees 34 state-owned enterprises (SOEs), including some of the country’s largest and most strategic assets. Among these are Ethiopian Airlines Group, Africa’s most profitable airline; Commercial Bank of Ethiopia, the largest financial institution in the country; Ethio Telecom, the state-owned telecommunications giant; and Ethiopian Shipping and Logistics, a key player in the region’s trade and logistics sector.
These enterprises form the backbone of Ethiopia’s economy and provide EIH with the financial foundation to pursue international investment opportunities. By leveraging the revenue and expertise of these SOEs, EIH aims to build a diversified portfolio that includes both domestic and international assets.
The move to invest in multinational corporations aligns with EIH’s broader strategy to diversify its holdings and reduce reliance on domestic markets. By acquiring stakes in foreign companies, EIH aims to generate higher returns, mitigate risks, and gain exposure to global best practices and technologies.
Euronext Paris, one of Europe’s leading stock exchanges, has been selected as the platform for these investments. The choice of Euronext reflects Ethiopia’s interest in tapping into European markets, which are known for their stability and robust regulatory frameworks.
Analysts suggest that EIH’s investments could focus on sectors such as technology, energy, and infrastructure, which align with Ethiopia’s long-term development goals. The fund’s entry into global markets is also expected to enhance Ethiopia’s credibility among international investors and pave the way for future collaborations.
While EIH’s global aspirations are ambitious, they are not without challenges. The fund will need to navigate complex regulatory environments, currency risks, and geopolitical uncertainties as it expands its international footprint. Additionally, Ethiopia’s domestic economic challenges, including high inflation and foreign exchange shortages, could pose hurdles to its global investment strategy. In addition to these, the pervasive bureaucratic hurdles and corruption in the public institutions hampered the normal economic activities and incurred heavy transaction cost.
However, Taye remains optimistic. “We are committed to building a resilient and diversified portfolio that delivers value for Ethiopia and its people,” he said adding; “This is just the beginning of our journey to becoming a significant player in the global investment landscape.”
BY ABEBE WOLDEGIORGIS
THE ETHIOPIAN HERALD WEDNESDAY 12 FEBRUARY 2025
