The transparency, legal frameworks and technical expertise in Ethiopia's budding capital markets are sparking discussions between investors and industry players. They focus on navigating this uncharted territory and unlocking new avenues for investment, empowering businesses, and boosting economic growth.

A cornerstone of any thriving capital market is transparency as investors rely on accurate and readily available information to make informed decisions. A lack of clarity, observed in some companies that sell shares, breeds distrust and ultimately hinders market vibrancy.

Mehrteab Leul, managing partner of pioneering law firm Mehrteab & Getu Advocates LLP, emphasises the need to revise Ethiopia's tax clearance procedures, capital accounts regulations, and foreign company registration processes. These revisions will bolster confidence and entice investors to participate in the market.

"Lack of transparency will be penalised by the market," he said.

While embarking on this new adventure, a crucial consideration lies in establishing a healthy balance between debt and equity markets. Recognising Ethiopia's existing treasury bill auctions conducted by the central bank, Lutz Hartzman, a lawyer and co-founder of Axis Capital, recommends prioritising debt markets as a launchpad. He cautions the government to tread carefully and avoid crowding out equity markets with overly attractive debt offerings.

He said: "No company can beat 18pc returns offered by debt instruments."

While a 10pc stake in the state-owned Ethotelecom is the first to be offered, at least four more companies within the country's sovereign wealth fund Ethiopian Investment Holding are poised for listing. With experience in European capital markets writing multiple prospectus documents for companies, Lutz recommends prudent interest rate management, especially given plans to list several state-owned enterprises on the exchange.

"They would be shooting themselves in the foot with too high interest rates on the debt side," he told Fortune.

Ethiopia has a distinct advantage in its foray into capital markets: the opportunity to learn from the experiences of others. However, maintaining a sustainable equilibrium is essential.

Mark Duffy, a seasoned banker with over 17 years at the helm of the Bank of Scotland and co-founder of Axis Capital, emphasises the importance of lessening reliance on solely foreign expertise. He advocates for a nuanced understanding of local challenges.

"Measured adoption of international practices is crucial," he said.

The burgeoning ecosystem is attracting attention from international players. Kenyan Capital Bank (KCB), represented by its President Paul Russo, expresses a keen interest in entering the market through acquisitions, subject to legal frameworks. Paul emphasises that commercial banks will need to adapt to the new reality of capital markets. Embracing robust investor relations, strategic thinking, and a focus on delivering returns will be paramount for their success.