Tilahun noted EIC's progress in adhering to financial reporting standards and governance structures under the National Bank's regulatory purview. He anticipates these improvements will positively impact the entities' strategic business models and financial transparency. He further highlighted the foundational role of state-owned enterprises in African stock exchanges, referencing Safaricom's substantial equity market capitalization and its active participation in debt instrument markets.

According to a recent study, both state-owned enterprises (SOEs) and the private sector are expected to contribute to the growth of debt and equity markets, thereby potentially expanding investment opportunities and fostering economic development.

The projection suggests a disparity in contributions to the capital market, with SOEs expected to outpace the private sector. The analysis indicates that the SOE equity market, supported by heightened expenditure and deeper financial markets, could reach 31 billion Br, while the debt market could burgeon to 338 billion Br by 2028.

Ethio-telecom became the first state-owned company to publicly issue its shares on the primary market. The Initial Public Offering (IPO) sought to raise 30 billion Br, valuing the company at an estimated 300 billion Br.

The private sector equity market is anticipated to reach 15 billion Br within the same timeframe. The study predicts that financial savings could increase significantly, assuming the execution of planned reforms and political stability, potentially reaching 1.5 trillion Br by 2028. This considerable increase, representing an average annual growth rate of 29 pc, would enhance market liquidity, lower capital costs, and attract diverse investors reliant on the monetisation of the economy and a shift towards formal savings.

ESX began its capital-raising activities last year, generating interest from the private sector, including commercial banks and insurance firms. It has surpassed its initial capital requirement, achieving a subscribed capital of 1.51 billion Br and a paid-up capital of 800 million Br.

Tilahun stressed the importance of total market capitalisation, a robust financial ecosystem, and accurate company valuations in propelling the growth of the capital market.

Mukemil Bedru, a financial and investment advisor, underscored the necessity for companies to comply with regulatory requirements for initial public offerings, which mandate a minimum of 15pc of shares offered and at least 300 million shares. He observed that state-owned enterprises have made substantial advancements in governance and oversight under sovereign fund management in the past four years, increasing transparency and accountability.

Mukemil noted that EIC will be subject to heightened public scrutiny and rigorous financial standards, requiring enhanced transparency and accountability, likely prompting significant adjustments to its corporate governance structure. He advocated for comprehensive financial restructuring, where investors will thoroughly evaluate the financial strength of enterprises, including their debt-to-equity ratios.

He also highlighted the critical importance of accurate valuation assessments for state-owned companies. He stated that some have expressed concern over the potential overvaluation of Ethio-telecom during its listing. He referenced a similar valuation dispute during the 2019 public listing of a Saudi Arabian oil company, where a government valuation of two trillion Br was revised to 1.7 trillion Br, leading to a high subscription rate.

"Proper valuation will be crucial for EIC," he said.

Mukemil further noted that public companies, particularly state-owned enterprises, must address the perception of inefficiency by improving operational and financial efficiencies, including return-on-assets and administrative efficiency, due to heightened public scrutiny.

Effective February 24, 2025, Abel succeeded Netsanet Lemessa as CEO, following his resignation after over two decades of service. Netsanet's career at EIC began as a clerk after obtaining an accounting diploma from Kotebe Metropolitan University, and he steadily advanced through the ranks, serving as branch and district manager, then deputy CEO, before assuming the chief executive role in 2016, a position he held for nearly a decade; he also holds degrees in accounting and a Master's of Business Administration in financial services from Addis Abeba University.

Abel's appointment signifies a turning point for the state-owned insurance corporation. His leadership will be instrumental in driving the necessary reforms. The convergence of internal modernisation efforts with the broader national push for capital market expansion positions EIC to play a crucial role in Ethiopia's economic future. The success of this transition will determine the Corporation's trajectory and also serves as a barometer for the efficacy of state-owned enterprise reforms.

PUBLISHED ON Mar 14,2025 [ VOL 25 , NO 1298]