Investors from Kenya and other East African countries have been banned from participating in the ongoing initial public offering of state-owned Ethio Telecom in Ethiopia. This comes after a decision to restrict sales to Ethiopian citizens.
Kenyans have been able to participate in other regional IPOs, including telecom companies in Uganda and Tanzania, giving them an opportunity to diversify their revenues away from the Nairobi Stock Exchange (NSE).
“The offering is being made only to Ethiopian nationals physically present in Ethiopia,” said the prospectus for the IPO, which opened on October 17 and runs until January 3, 2025.
This situation contrasts with recent IPOs of telecom companies in the region. In Uganda, Kenyans participated in the IPO of MTN Uganda in 2021, as well as the secondary sale of the company’s shares that took place between May and June this year.
Likewise, Airtel Uganda’s IPO was opened in November 2023 to regional participants.
In Tanzania, foreign investors were allowed to actively underwrite Vodacom Tanzania’s IPO in 2017, after they were initially closed. The rule change allowed the initial public offering to reach its target of $213 million, with foreigners representing 40% of the subscription.
In contrast, Ethiopia’s financial sector has remained largely closed to foreign investors for years, but it has recently taken steps toward liberalization by submitting legislative proposals to open its banking sector to foreign investment beyond establishing representative offices.
The country also operated without an official stock exchange until October 2023, when it established the Ethiopian Stock Exchange (ESX) through a partnership between the Ministry of Finance, the government’s strategic investment arm Ethiopian Investment Holding (EIH) and Nairobi-based FSD Africa.
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Until last year, Ethiopia was the largest African economy without a stock exchange, but it now sees the new stock exchange as a key component of its efforts to open its economy to foreign investment and a platform for the privatization of state-owned enterprises.
Ethio telecom’s IPO is the first listing on the new market. The offer will see the company in which EIH holds shares, Sell a 10 percent stake to the public It is seeking to raise $255 million (Sh33 billion).
The stock exchange obtained capital from 48 local and foreign business investors for a 75% stake, after organizing promotional campaigns in Addis Ababa, Nairobi and London to market the cash increase.
These investors include FSD Africa, Trade and Development Bank (TDB) and Nigeria Stock Exchange (NGX) Group. Others include 16 local private commercial banks, 12 private insurance companies, and 17 other local private investors.
Setting up an exchange requires significant preparatory work on the underlying market support structures, including trading infrastructure, trading rules, and intermediaries such as stockbrokers, investment banks, custodians, a central securities repository, and fund managers.