Ethiopia's Century-long Journey of Participation in Stock Exchanges
January 10th, 2025, a day to remember. This piece is meant to shed light on some common assumptions surrounding the history of capital markets in Ethiopia.
With the relaunch of the Ethiopian Capital Market after five decades in a regulated, organized manner and the highly anticipated opening of the Ethiopian Securities Exchange tomorrow, there exists an assumption that the capital market is a recent phenomenon. However, this couldn’t be further from the truth. In fact, Ethiopia is one of the earliest countries in Africa to establish a stock exchange, following countries such as Egypt, with its own exchange established in the 1960s.
Although the Ethiopian economy was primarily agrarian and under a feudalistic regime at the time, the ownership of stocks and the raising of capital were not new concepts. The first instance of stock ownership occurred in 1897 when Emperor Menelik II sold shares in France to raise part of the 40 million francs needed to construct the Ethio-Djibouti railway line.
By 1905, Ethiopia’s first bank, the Bank of Abyssinia, offered shares in London and other European markets, successfully attracting international capital. This was more than just a financial transaction, it was a clear signal that Ethiopia was ready to engage with the global economy.
One of the most fascinating chapters in this story involves Emperor Menelik II's personal investments. In an interview conducted on November 7, 1909, between Baron de Claris Jarisburg, a Belgian explorer, and Emperor Menelik for The New York Times, it was revealed that the Emperor had engaged in successful stock speculation on the Paris Bourse and had extended his financial operations to the United States by investing in American railroads. At the time, Menelik’s private fortune, gained from American securities and French and Belgian mining investments, was estimated at twenty-five million dollars.
With further developments in the Ethiopian financial sector and increasing emphasis on the importance of this sector, the first institutional arrangement for share dealing was established in the 1960s. The State Bank of Ethiopia formed a Share Exchange Department to stimulate the trading and holding of shares. The bank’s portfolio was robust enough to support over-the-counter operations in several issues through this department. Share prices were posted in the Bank’s main office in Piazza, and clients and depositors were invited to participate in the ownership of several listed companies. One of the first publicly offered shares that played a key role in developing the bank's interest in forming an organized share market was HVA – Ethiopia (the producer of Wonji Sugar).
By 1965, the share market had expanded to the point where it, in a certain sense, had outgrown the facilities provided by the share-dealing department of the national bank (the successor to the State Bank). Around the same time, on February 9, 1965, after private discussions with other financial leaders, the then Governor of the National Bank of Ethiopia called together representatives of the principal modern financial institutions in Addis Ababa to discuss the state of the share market and the prospects for its future development.
His Excellency noted that the anticipated expansion in the number of new share issues on the market created an opportunity for the establishment of an active market, making orderly development essential to maintaining public confidence. Consequently, the outcome of the meeting was the decision to establish a share-dealing group composed of those who had attended the session. The seven founding members of the group at the first meeting were: the National Bank of Ethiopia, Mr. Alfred Abel, Addis Ababa Bank, Commercial Bank of Ethiopia, Development Bank of Ethiopia, Investment Bank of Ethiopia (Ethiopia Investment Corporation), and Sabean Utility Corporation, which further enhanced Ethiopia’s engagement with capital markets.
Unfortunately, these advancements were brought to a halt when the military government came to power, leading to the nationalization of all private assets and effectively stalling the modernization of Ethiopia’s financial sector.
Now, after decades, the organized reestablishment of the Ethiopian capital market is within reach, carrying high hopes and great potential. As we prepare for this milestone, it is vital to remember that Ethiopia is not new to these developments. This legacy should inspire us to take bold steps toward building a strong, inclusive, and vibrant capital market that fits Ethiopia.
Finally, for anyone interested in understanding more about the history of share trading in Addis Ababa, I would highly recommend reading the book by J.D.Von Pischke cited in the reference.
References:
New York Times Article (November 7, 1909, Section PART, Page 4)
Shares and Share Trading In Addis Ababa by J.D.Von Pischke (College of Business Administration Haile Sellassie I University, February 1968)
