Ethiopia’s capital market is poised for a significant transformation as the Ethiopian Capital Market Authority (ECMA) gears up to launch the country’s first official securities exchange, the Ethiopian Securities Exchange (ESX), which is slated to begin operations by November or December this year. This initiative marks a critical step forward in the development of the financial landscape in Ethiopia, as it aims to create a regulated environment for trading securities that will benefit both investors and businesses alike.

Despite some public belief that ECMA has not fully commenced operations, the regulatory body has been diligently laying the groundwork for this monumental shift. It has been actively implementing frameworks and guidelines to ensure a robust and transparent market, focusing on creating a reliable platform where investors can engage with confidence. With a commitment to oversight and accountability, ECMA is preparing to foster a capital market that can support sustainable economic growth and attract both local and foreign investments.

The ECMA serves as the regulator, responsible for ensuring transparency, protecting investors, and maintaining the integrity of the financial system. It plays a vital role in establishing the necessary legal and operational frameworks that will govern market activities. By focusing on investor protection and promoting fair trading practices, the ECMA aims to build a trustworthy environment that can encourage participation from a diverse range of investors.

In contrast, the ESX will function as the marketplace where securities—such as shares and bonds—are actively traded. This exchange will serve as the central hub for buyers and sellers to transact, providing a platform for price discovery and liquidity. This dual structure of regulation and marketplace is crucial for fostering investor confidence, as it ensures that all trading activities are conducted under a set of clear rules and guidelines. By establishing this robust framework, both local and international investments can be attracted, ultimately contributing to the growth and stability of Ethiopia’s capital market.

Among the anticipated listings, banks and public companies, including the state-owned EthioTelecom, are expected to be at the forefront. EthioTelecom has spent the last 10 months preparing to meet ECMA’s regulatory requirements, making it one of the first entities ready to offer shares to the public. This move represents a significant step for investors looking to gain a stake in one of Ethiopia’s largest corporations.

As we move toward this new market, the old ways of promising unrealistic returns—like selling shares disguised as a 1.5 million birr house that doesn’t even exist—will be left behind. You know, not mentioning names, but it’s definitely time to bid farewell to such creative storytelling and pave the way for a more structured and credible investment environment.

The capital market will emphasize the primary market, where companies will issue new shares for the first time, enabling businesses to raise capital directly from investors. Following the initial sales, shares will transition to the secondary market, allowing for the buying and selling of existing shares, which adds liquidity and provides opportunities for profit.

A notable advancement accompanying the ESX launch is the introduction of an electronic trading platform, facilitating real-time trading and making the market more accessible and efficient for all investors. Additionally, an Over-the-Counter (OTC) market will be established, providing a flexible trading option outside the formal exchange.

In a significant modernization effort, share certificates will soon be dematerialized as a result of the recent acquisition of a Central Securities Depository (CSD) system. This means that shares will be stored digitally, securely linked to individual investors’ names, eliminating the need for physical certificates and reducing the risk of loss or damage.

As the ESX launch approaches, Ethiopia’s financial landscape is on the brink of a significant makeover. With a shift toward greater transparency and regulation, investors can expect a market that prioritizes credibility and integrity. This evolution not only promises to attract serious players but also aims to instill confidence in investors who have been cautious in the past. With these changes on the horizon, the future of Ethiopia’s capital market looks bright and full of potential, paving the way for informed investing and a more robust economic environment.