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History of Stock Market in Ethiopia
Ethiopia had a securities market in the 1960s and 70s. Some of the Share Companies, Addis Ababa Bank, Ethiopia abattoirs, Bottling Company of Ethiopia, Indo Ethiopian Textiles, HVA Ethiopia, and Tendaho plantations were some of the share companies whose share were publicly traded during that time. All the companies were nationalized in the 1974/75 socialist revolution that shattered the private sector led economy. The country does not have securities market currently. It has created only an agricultural commodity market which is owned fully by the government and operated outside the financial market. For more than forty years, Ethiopia has been trying to have its own financial market but didn‟t succeed. The need for stock exchange market development has, however, been continually discussed by various groups/stakeholders and academics.
Currently Ethiopia does not have official Stock Market Trading platform. There are works being done which could bear fruit some time in 2022. Lets see the historical past of Stock Market in Ethiopia.
In Ethiopia, a commercial law that governed share companies was formulated around 1960. Then after, sugar factories introduced stock market and sold their shares. But the initiative was short-lived as the Dergue, the communist military government, dismantled it as soon as it came to power. Since then Ethiopians has been waiting for a Financial and Capital Market Establishment.
The increment of country‟s access to every financial service with boundary less over the world facilitates the development of strong and excellent socio-economic and political maintenance of the country and hence it has able to contribute to growth and poverty reduction. Hence, the development of stock market if implemented effectively becomes the back-bone of economic growth and national development. It is widely believed that the development of stock markets would enable local companies to raise investment capital, make huge investments and create job opportunities in developing nations such as Ethiopia.
Ethiopia had a securities market in the 1960s and 70s. For example, in 1897 Emperor Menelik II sold share in France to raise part of the 40 million francs needed to build the Ethio – Djibouti railways line. In 1906 the first bank in Ethiopia, Abyssinia Bank, floated its share in Addis Ababa, New York, Paris, London and Vienna. From 1960 to 1974 share companies were flourishing and share were traded by the National Bank of Ethiopia through the Addis Ababa share Dealing Group.
Some of the Share Companies
Addis Ababa Bank, Ethiopia abattoirs, Bottling Company of Ethiopia, Indo Ethiopian Textiles, HVA Ethiopia, and Tendaho plantations were some of the share companies whose share were publicly traded during that time. All the companies were nationalized in the 1974/75 socialist revolution that shattered the private sector led economy. The country does not have securities market currently. It has created only an agricultural commodity market which is owned fully by the government and operated outside the financial market. For more than forty years, Ethiopia has been trying to have its own financial market but didn‟t succeed. The need for stock exchange market development has, however, been continually discussed by various groups/stakeholders and academics.
Initiatives to Establish Capital Market
Accordingly, various studies have been carried out by these groups to initiate the establishment of capital market in the country. For example, Professor Asrat Tessema conducted a research entitled “Prospects and Challenges for Developing Securities Markets in Ethiopia: An Analytical Review” in 2003. In his study he tries to points out from the literature the benefits which can get from well functioning securities markets; costs and environmental requirements for securities markets development and environment for developing securities markets in Ethiopia which includes the challenges and prospects for the development of securities market in Ethiopia. Additionally, Abebe (2006) also conducts a research by focusing in stock exchanges role in relation to an alternate to term-loan financing and its development dubious.
And in that specific article, entitled “An alternate to term-loan financing on the horizon, its development dubious: securities market, the missing link”, Abebe tried to cover the benefits, the history of stock exchange in our country, its role in economic growth and the environment at that time. Likewise, the other researchers Ruecker (2011) also showed National Bank of Ethiopia under took a study on the “Feasibility of Establishing Securities Exchange Market in Ethiopia” and prepared a draft Securities and Exchange proclamation which is awaiting endorsement. Furthermore, the Addis Ababa Chamber of Commerce and Sectoral Association (AACCSA) had produced a research on the stock Market and recommend for establishing and still awaiting approval of the government.
