Ethiopian Capital Market Authority (ECMA) has taken its final step in establishing the foundation for the country's nascent capital market as it granted two operational licences to the first security exchange.

The two licenses granted to the Ethiopian Securities Exchange (ESX) are categorised into securities exchange and over-the-counter (OTC) market trading. The exchange will list companies meeting stringent public listing requirements, valued at over 500 million Br post-initial public offering (IPO) or other capital-raising activities. High-growth companies with a market capitalization of at least 50 million Br and strong performance metrics will be eligible for the growth market segment.

On the other hand, the over-the-counter platform will serve companies that cannot be listed or don't want to be listed.

Hanna Tehleku, director general of ECMA, expresses confidence stating the crucial step toward establishing a vibrant capital market. She stated that the new direction is a momentous step towards modernizing Ethiopia's financial ecosystem.

Estifanos Melkamu, head of the licensing and registration directorate at ECMA states that the licensing comes following the completion of a yearlong preparation of the ESX to commence operation as the first securities exchange in the country.

He noted that all the laws pertaining to licensing and operation have been ratified, while the Exchange has fully completed preparations for capital requirements, deploying technology, infrastructure, and human resources.

"It shows that the exchange has finally completed preparation," he said. ECMA has already licensed three investment advisors, including the global consulting firm Deloitte which recently reopened its Addis Abeba office after a years-long hiatus. Estifanos states more players are needed to enhance the market.

The ESX began its capital-raising activities last year, attracting interest from the private sector, including commercial banks and insurance companies. The seven-member board of directors, chaired by Hilaway Tadesse, now senior advisor to Central Bank Governor Mamo Mihretu, includes Eleni Gebremedhin (PhD), a founding and former CEO of Ethiopian Commodities Exchange (ECX), as well as Zemedeneh Negatu and Fikadu Petros.

The ESX exceeded its initial capital requirement, raising a subscribed capital of 1.51 billion Br and a paid-up capital of 800 million Br, from financial institutions and public enterprises.

The Exchange comprises 17 institutional investors with the federal government claiming a major role, holding a 25pc stake, through the Ethiopian Investment Holdings (EIH), a sovereign fund managing a portfolio of state-owned companies. State-owned enterprises under EIH have chipped in with 275 million Br subscription, with additional investments from FSD Africa, the Trade & Development Bank Group, and the Nigerian Exchange Group as foreign investors.

Ethiopian Securities Exchange (ESX) is on track to launch its real-time trading platform in the coming weeks, marking a momentous milestone for the country’s capital market. A critical component of this development was a partnership with Infotech Private Limited, a global leader in capital markets technology. It involves an electronic trading platform and a broker back office and order management system.

State-owned enterprises including Ethio telecom, Ethiopian Shipping & Logistics (ESL), and Ethiopian Insurance Corporation (EIC), as well as Birhanena Selam Printing Enterprise (ESPE), are expected to list. Tilahun Kassahun (PhD), CEO of the Exchange, pointed to the robust preparation undertaken to establish the market, rule books, deployment of human resources, technology and governance which have all gone towards fulfilling regulatory requirements to receive the operational licence.

"We are left with nothing but to launch," he told Fortune, revealing he expects the launch in a few weeks. "We will announce the exact date soon," he added.

Ethiopia's capital market history dates back to the 1960s, when the State Bank of Ethiopia (SBE) initiated share trading. The early initiates were cut short in the aftermath of the 1974 revolution with the military-Marxist regime nationalizing private properties. The current form of the ECMA began to take shape in 2021, with a team of 14 experts developing a 10-year implementation plan, outlining a roadmap, including policy reviews, market infrastructure, and capacity building.