Africa Banking Capital Markets Ethiopia Finance Securities

Stock Exchange and its benefits to Ethiopia

A stock exchange is a facility where stockbrokers and traders can buy and sell shares of stocks, bonds and other financial instruments. Stock exchanges allow investors to buy and sell shares of a company among each other in a regulated and legitimate space.

However, we should note the difference between stock exchange and stock market. That is, stock market represents the companies that list equity shares for public investors to buy and sell.  On the other hand, Stock exchanges are the infrastructure that facilitates the trading of stocks. Without a stock exchange, companies would have no formal mechanism on which to list share, and without stock market, exchange would have no reason to exist.

Generally, there are 29 stock exchanges in Africa, representing 38 nations’ capital markets. Africa has two regional stock exchanges. These are the Bourse Regionale des Valeurs Mobilieres (BRVM), located in Abidjan, Cote d’lvoire and the Bourse Regionale des Valeurs Mobileres d’Afrique Centralle, Gabon.

The idea of establishing a stock exchange in Ethiopia was under a lot of debate among business leaders, scholars, consultants and government officials for many years. However, after the new Prime Minister Dr. Abiy Ahmed came to power, he gave the green light to the possibility of establishing the stock exchange named as ADDIS ABABA STOCK EXCHANGE (AASE). In this regard, on December 2018, a one-page template was issued from the office of the prime minister and indicated that the government was planning to establish a stock exchange by 2020.

It is my personal opinion that establishing a stock exchange in Ethiopia will benefit the country enormously. Among the main beneficiaries are companies which may use an exchange to raise capital through an Initial Public Offering (IPO), create employment opportunity, expand the tax horizon, give the general people a chance to make investments in their corporation, enhance branding and corporate value.

Article by Girmay Woldu

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