Ethiopia Primes Exchange Market for Foreign Investors Capped at 30%

Ethiopia’s central bank and its nascent capital market authority are preparing tools to allow foreign investment into the country’s exchange, says Brook Taye (PhD), CEO of Ethiopian Investment Holding (EIH). The former Director General of the capital market authority disclosed the development during a networking event organized by the European Chamber in Ethiopia.

Brook, who now heads one of Africa's largest sovereign wealth funds, indicated that foreign investors will be permitted to participate in the exchange market, with a quota of up to 30%.

“We aim to be a reliable de-risking partner for investors entering the Ethiopian market. This involves taking full responsibility for managing the regulatory aspects of business operations, including land-related matters. Our goal is to allow investors to focus entirely on the business side of their ventures,” the CEO said of EIH’s strategy.

EIH has 40 state-owned enterprises under its portfolio, including Africa’s biggest national carrier, Ethiopian Airlines, and one of the continent’s largest telecom operators in the form of Ethio Telecom. According to the CEO, in the first half of the Ethiopian fiscal year, EIH’s portfolio of companies generated around 901 billion birr.

State-owned enterprise reform is a critical pillar of the Homegrown Economic Reform Agenda 2.0, being carried out with support from international creditors like the International Monetary Fund (IMF). Ethiopia’s SOEs had borrowed billions from the Commercial Bank of Ethiopia(CBE) which necessitated the issuance of 845-billion-birr bonds to settle years of non-performing loans. In December, the World Bank approved a 700 million dollar credit line to strengthen Ethiopia’s financial sector, with CBE poised to access nearly 90% of the funds. CBE, alongside the Ethiopian Insurance Corporation and the Development Bank of Ethiopia, constitutes three of EIH’s major companies in the financial sector

Under EIH’s divestment strategy, Ethiopia will fully privatize its sugar estates a sector producing significant domestic supply while insurance, shipping, and printing firms may list on the forthcoming Ethiopian Securities Exchange. “Privatization isn’t our focus, reform is,” Said Brook, noting that the government seeks investors for sugar assets and aims to “de-risk” ventures by managing regulatory hurdles, including land acquisition.

EIH’s extensive land portfolio, comparable in size to the world’s 30th smallest country, could enable it to simplify site selection for investors while favoring equity investments over debt financing.

The sovereign wealth fund is preparing consolidated financial statements for FY2022/23; audited statements are expected to be completed by February 2025

Under Brook’s stewardship, EIH is working on addressing legacy issues while focusing on the future. The five-year strategy, centered on diversification, innovation, and public value, has driven performance. SOEs under its umbrella will be expected to meet sector-specific KPIs, with quarterly reviews to ensure accountability. “Revenue remains the critical metric,” Brook stated, citing proactive leadership changes and management overhauls for underperformers.

Upcoming initiatives include a logistics optimization plan via Ethiopian Shipping and Logistics and the Industrial Parks Development Corporation (IPDC), targeting “binding constraints” in special economic zones within six months.

The CEO believes that EIH’s equity-driven model and SOE reforms reflect a balancing act between state control and market openness. With the sugar estates set for a 100% divestment and capital markets underway, Ethiopia’s investment landscape appears to be poised for transformation if global partners take a bite. Nonetheless, the transaction period for the country’s inaugural IPO in the form of a 10% stake in  Ethio Tel has been pushed back by two weeks.