The Dawn of Share Trading (1957-1960)
Share trading in Ethiopia began in 1957, marking the start of a new era in the country’s financial landscape. By the early 1960s, the budding market had seen nearly 61 million Birr invested in shares, with a significant 41 million Birr flowing into foreign companies. This initial wave of investment hinted at the potential for a thriving capital market.
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In 1960, the National Bank of Ethiopia took a pivotal step by establishing a Share Exchange Department. Acting as an underwriter, the department offered over-the-counter services, where shares were traded without a centralized exchange. Prices were determined by a trial-and-error method, with buyers and sellers encouraged to set their own bids and ask prices. This informal system marked the first attempt to create order in Ethiopia’s share market.
The Rise of the Share Dealing Group (1963-1975)
As the number of companies grew, the Share Exchange Department struggled to keep pace. In response, the National Bank of Ethiopia formed the Share Dealing Group, consisting of six key institutions. This group met frequently, providing a platform for market participants to trade shares and gain confidence in the market’s potential. The Share Dealing Group played a crucial role in educating the public about investing in shares and laid the groundwork for a more structured market.
Operating as an over-the-counter market, the Share Dealing Group relied on a network of dealers who facilitated buy-and-sell orders through their own inventories of securities, differing from the specialist exchanges of today. The group’s 12 articles of rules and regulations covered various aspects, including listing requirements, trading methods, and member responsibilities. Founding members like Addis Ababa Bank, Ethiopian Abattoirs, and Bottling Company of Ethiopia were among the companies whose shares were actively traded during this period.
However, the Share Dealing Group’s momentum was abruptly halted in 1975 when financial institutions were nationalized, bringing the promising journey of Ethiopia’s early share market to an end.
The Long Wait for a Capital Market (1975-2021)
The nationalization of major financial institutions stifled Ethiopia’s share trading activities for decades. However, the vision of a formal capital market never entirely faded. Fast forward to 2021, when the Ethiopian Capital Market Proclamation No. 1248/2021 was enacted, reigniting hopes for a regulated and vibrant capital market. This landmark legislation sets the stage for a new chapter, aiming to mobilize domestic and foreign investment, foster economic growth, and expand financial inclusion.
