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Business community in limbo regarding stock exchange
Tesfaye Hailemichael, Senior Vice President Cerberus Frontier

Business community in limbo regarding stock exchange

Members of the Addis Ababa business community have disclosed that they have been left out by the government in establishing the Addis Ababa Stock Exchange.

At a business forum organized by the Addis Ababa Chamber of Commerce and Sectoral Associations at the Hilton Addis Ababa on Thursday, members of the business community said that though they are excited about the government’s plan to establish the Addis Ababa Stock Exchange by 2020 the government officials are not providing relevant information about the establishment of the stock exchange. “Apart from the news we read on local newspapers the concerned authorities are not telling us what they are doing,” a businessman said. “The government was supposed to consult with the private sector and provide progress update on the establishment of the stock exchange. However, sadly we are left in the dark we do not know what the government is doing. They are working behind the curtain,” he added.

A lady, who is a business consultant, stated that the business community does not have a clue weather the required regulations and infrastructure are in place or not. “Kenya has established a stock exchange many years ago but it is not running efficiently. If we are establishing the stock exchange for the sake of having one it would be meaningless,” she added.

At the business forum with the theme “Challenges and Prospects of Establishing Stock Market in Ethiopia” Tesfaye Hailemichael, Senior VP at Cerberus Frontier, guest speaker, highlighted the benefits of having a stock market and the list of regulations and infrastructure that need to be fulfilled to establish a stock market.

Tesfaye said a stock market is a useful platform to raise capital for businesses. He said that companies can raise capital from foreign and local sources using electronic trading mechanism. “Companies may sell stocks to expand or introduce new products,” he said. “There is high risk and reward in stock exchange,” he added.

There are 29 stock exchanges in Africa and 35 countries participate in stock markets. Johannesburg, Egypt, Casablanca, and Nigeria are the major Stock Exchanges in the continent.   

Tesfaye stressed the list of things that are required to establish a well-functioning stock market. Strong stock market regulation and regulatory organ is the primary prerequisite for the establishment of a stock market. “Without a rule you cannot have a football match. Likewise you cannot have a stock exchange without a regulation that can be enforced,” Tesfaye said.

Location, infrastructure, data center, reliable internet and power supply are some of the utilities that must be put in place to have an effective stock exchange. “We need to have professional IT experts,” Tesfaye said.

According to him, a securities and exchange commission that regulates the stock market should be established. Accounting oversight board, investment banks, certified auditing firms, brokerage firms and underwriters are some of the institutions that should be in place.

Tesfaye said that the legislative body, the House of People’s Representatives, and the Office of the Attorney General should have a good knowledge of stock exchange. “They should have advisers that consult them on this matter,” he said. “Is it possible to have a stock exchange in Ethiopia by 2020?” he asked the audience.

Members of the business community reflected optimistically about the planned Addis Ababa Stock Exchange. “It is a big business opportunity. It is useful for the development of the country and we should start it,” a businessman said.

Representatives of IT companies said that the local IT companies can provide the required technology for the planned stock exchange. “Two foreign telecom operators will join the market this year so there will a better internet service,” they said.

Hailu Gebrehiwot, an exporter, said that Ethiopia used to have a share dealing group during the imperial regime until the military government banned it 45 years ago. “Every Tuesday we used to trade 21 share companies at the National Bank of Ethiopia. Had it not been disbanded by the Derg we would have a vibrant stock exchange,” Hailu said. “Without a stock market we could not grow the economy at the pace that we want. So it is time to launch the stock market. At the beginning everything cannot be there. But we can improve and develop it through time,” he added.

Tesfaye said that it is good to be optimistic but there should be proper planning and execution. “It is a universal exercise. You need to have all the required regulation and infrastructure as well as qualified and certified professionals. I do not recommend establishing a stock market without having the required instruments. My professional ethics does not allow me to do so,” Tesfaye said.

Member of the business community suggested that the Chamber should invite the concerned government officials who can give a briefing to the business community. Zekarias Assefa, Deputy Secretary General of the AACCSA, said that the Chamber has invited the National Bank of Ethiopia and the Ministry of Finance to the business forum. “Unfortunately, they did not participate in the meeting but we hope that they would be able to attend a similar forum that we would organize some other time,” Zekarias said.

The Prime Minister Abiy Ahmed’s (PhD) administration has outlined a plan to set up the Addis Ababa Stock Exchange by 2020.