Ethiopia Restricts Initial Public Offering Participation to Domestic Entities Only, Excluding Diaspora and Foreign Investors

The East African nation of Ethiopia is making strides in its financial sector with the commencement of its first-ever public offering (IPO) of Ethio Telecom, the state-owned telecom company that holds a dominant 95% market share. This move comes as the Ethiopian Securities Exchange (ESX), the country's first bourse, prepares to begin operations this month.

The ESX secured $26.6 million in funding from investors in April 2024, with a goal to list more than 10 companies by the end of 2025. Leading institutional investors in the ESX include the Nigerian Exchange Group, domestic banks, insurance companies, and foreign institutions, with the Ethiopian government holding a 25% stake through Ethiopian Investment Holdings as part of a public-private partnership.

Besides Ethio Telecom, the ESX aims to list more companies, with the Ethiopian Shipping and Logistics Services and the Ethiopian Insurance Corporation among the ten largest investments planned for listing by the Ethiopian sovereign wealth fund, EIH.

The government aims to generate $255 million by selling a 10% stake in Ethio Telecom through Ethiopian Investment Holdings (EIH). However, it's worth noting that diaspora citizens and foreign nationals are excluded from participating in the IPO of Ethio Telecom.

Ethio Telecom has been the sole provider in the country's telecommunications market for many years until a Safaricom-led consortium began operations in 2022, intended to liberalize the telecom sector and enhance service access in remote areas. Despite this, a capital markets expert shared that Ethiopia might restrict the participation of foreign investors in the telecom sector, despite opening up for foreign capital. This could potentially hinder Ethiopia's efforts to develop open capital markets.

As the ESX bourse is expected to support the launch of more than 10 companies, it is anticipated to draw foreign investments in sectors such as insurance, banking, and telecommunications, which are currently under state control. Notable investors in the ESX include the Trade and Development Bank Group (TDB), the financial branch of the COMESA trade bloc, and FSD Africa, a UK-based non-profit financial institution.

However, Ethio Telecom did not immediately provide a response to a request for comment regarding the IPO. As the story unfolds, we will continue to monitor developments and bring you updates on this significant step in Ethiopia's economic journey.

Ethiopia Restricts Initial Public Offering Participation to Domestic Entities Only, Excluding Diaspora and Foreign Investors