Ethiopian Investment Holdings (EIH), Africa’s largest sovereign wealth fund, with over $150 billion in assets under management, represents Ethiopia’s long-term commercial and investment interests. Since joining its African peers in January 2022, EIH has been pivotal in driving the performance of public commercial assets through modern management practices, corporate governance standards, and innovative investment platforms. As a strategic partner of the Ethiopian Securities Exchange (ESX), EIH is set to play a critical role in the establishment and growth of Ethiopia’s upcoming capital market.
Role of EIH in Establishing the Ethiopian Securities Exchange
EIH has worked closely with the Ministry of Finance and FSD Africa to set up the ESX, Ethiopia’s first stock exchange. The institution’s involvement extends beyond financial contributions, as it has been instrumental in developing the business plan, market segments, trading rules, policies, procedures, and ICT infrastructure of the exchange.
EIH is also the largest shareholder of the ESX, holding 25% of the bourse. This significant stake positions EIH as a catalyst for the growth of the exchange, aligning with Ethiopia’s broader objectives of boosting investment, enhancing corporate governance, and driving the privatization of state-owned enterprises (SOEs).
Listing of State-Owned Enterprises on the ESX
The listing of state-owned enterprises is a key component of Ethiopia’s strategy to deepen its capital market. As part of its role, EIH is expected to list minority stakes in its $38 billion portfolio of SOEs, providing a steady pipeline of listings that will enhance the vibrancy and liquidity of the ESX. This move will also accelerate the privatization process, opening up opportunities for local and international investors to participate in Ethiopia’s economic transformation.
Some of the prominent companies expected to be listed on the ESX include:
- Ethiopian Insurance Corporation (EIC): As a leading provider of insurance services, EIC’s listing will diversify the financial services sector on the ESX, offering investors access to the insurance market, which is essential for managing risks in various economic activities.
- Ethiopian Shipping and Logistics Services Enterprise (ESLSE): The listing of ESLSE, which transported over 7.7 million tons of cargo in 2016 EC, generating 57 billion ETB in revenue, will introduce a major player in logistics to the market, enhancing investor options.
- Berhanena Selam Printing Enterprise (BSPE): With its strong performance in commercial and security printing, BSPE’s listing will add depth to the market and showcase Ethiopia’s capabilities in industrial and service sectors.
Anticipated Listings at the Launch of the ESX
Several high-profile companies are expected to be among the first to be listed during the launch of the ESX, setting a strong precedent for the market:
- Ethio Telecom: As Ethiopia’s state-owned telecommunications giant, Ethio Telecom’s listing will be a landmark event for the ESX. Offering 10% of its shares to the public, this move is likely to attract significant investor interest due to the company’s monopoly in the telecommunications sector. With a recent 21.7% growth in top-line revenue and a provisional net profit of 21.8 billion ETB, Ethio Telecom’s inclusion will serve as a major boost for the exchange.
- Ethiopian Insurance Corporation (EIC): EIC’s listing will enhance the ESX’s appeal to investors seeking exposure to the insurance industry. The corporation achieved 124% of planned revenue from underwriting and 122% from investments, reflecting its robust financial performance in 2016 EC.
Performance Highlights of Key State-Owned Enterprises
Ethiopian Investment Holdings manages a diverse portfolio of SOEs that demonstrate strong performance this year. Some notable entities include:
- Ethiopian Airlines: A global leader in aviation, Ethiopian Airlines reported a total revenue of 402 billion Birr and achieved a net profit growth of 1.4%, surpassing its cost-saving goals by 50%. Its potential listing would attract substantial interest due to its international reach and strategic importance.
- Ethiopian Pulp & Paper S.C. (EPPSC): With a profit before tax of 421 million ETB, marking an 11% year-on-year growth, EPPSC’s listing would contribute to diversifying the industrial sector on the ESX.
- Ethiopian Construction Works Corporation (ECWC): ECWC achieved a 66% revenue increase, completing 18 construction projects. The corporation’s average profit before tax growth of 80% over the past three years highlights its strong market position.
- Ethiopian Electric Utility (EEU): With 426,290 new customers and over 42.47 billion ETB in revenue, EEU’s performance reflects the growing demand for utilities in Ethiopia, positioning it as a key player for future listings.
- Ethiopian Sugar Industry Group (ESIG): Producing 124,097 tons of sugar and selling 96,177 tons, ESIG’s listing would introduce the agricultural processing sector to the ESX.
The involvement of Ethiopian Investment Holdings in the establishment of the ESX and its role as a major shareholder and catalyst for the market’s growth demonstrates the government’s commitment to modernizing Ethiopia’s financial landscape.
