The government has announced plan to launch a formal capital market by 2020, the time in between serving to install the required infrastructure.
Scholars also suggest that the decision is significant to escalate the growing economy of the country while allowing business persons to make secure capital transaction.
A World Bank Overview 2018, states that Ethiopia’s economy experiences fast and holistic speed growing at a rate of 10.3 percent on average a year. Despite this, Ethiopia is among the nations that have no formal capital market.
Last week [March 14/2019] Ethiopian Chamber of Commerce and Sectorial Associations discussed the issue with representatives of public authorities and the business community.
At the event, State Minister of Finance and Economic Cooperation Dr. Eyob Tekalign remarked the commencement of preparation to provide legal framework to regulate stock market. Countries even with less financial infrastructure and economic power than Ethiopia are better positioned in the stock market world.
Zafu Eyesuswork, CEO and founder of United Bank, indicated that stock market is the pre existent tool to exploit the citizen’s economic power for fair engagement in economic ownership. Absence of stock market, therefore, deprives of citizens’ access to the capital market.
“Even with no stock market, stockholders run many companiesin Ethiopia,” he said. As to him, the market that goes without supervision exposed individuals or shareholders to suffer unnecessary cost.
Due to lack of trust in the prevailing market, people would rather prefer to deposit their money at banks. As to Zafu, the absence of capital market causes most individuals to develop little confidence towards share companies.
Banks, Insurances and other business have stirred the public’s interest to involve in the capital market, but few people have already dominated the sector, according to him. “Most of share companies are controlled by small number of tycoons. Hence, the larger public has nothing to do other than depositing their money at banks.”
Shareholders are being exploited by informal agents and cajolers in buying and selling shares, said Tesfaye Hailemichaeal, who presented paper on Stock Market in Ethiopia: Challenges and Prospects. Adding, he also reiterated that the capital market here is maneuvered by few business persons which rather is unhealthy.
He has also rung cautionary call to the government as professional and experienced IT experts, economists and secured administration ought to be considered in the effort of launching the stock market business here.
Herald March 22/2019
BY YESUF ENDRIS
