Ethiopia bars diaspora and foreign investors from first-ever IPO

Ethiopia has excluded diaspora citizens and foreign nationals from its initial public offering (IPO) for Ethio Telecom, a state-owned telco with a 95% market share. The country’s first-ever bourse, the Ethiopian Securities Exchange (ESX), is expected to start operations this month.  

The government plans to raise $255 million by selling 10% of the telco giant through Ethiopian Investment Holdings (EIH). However, the decision to restrict diaspora and foreign investors from Ethio Telecom’s IPO could slow the country’s development of open capital markets, which has been part of Prime Minister Abiy Ahmed’s plan to liberalise the financial sector and modernise the economy.

“The offer is being made only to Ethiopian citizens who are physically present in Ethiopia. The offer is not available to any other jurisdiction outside of Ethiopia,” Ethio Telecom said in its investor prospectus.

Ethio Telecom did not immediately respond to a request for comment.

A capital markets expert told TechCabal that Ethiopia could limit foreigners’ involvement in telco, which it still considers critical and strategic, even as it opens for foreign capital.

For decades, Ethio Telecom enjoyed a monopoly in the country’s telco market before the entry of a Safaricom-led consortium that started operations in 2022. The move was meant to open the country’s telecommunication sectors and increase access to services in remote regions.

“Despite the entry of Safaricom, Ethio Telecom remains the dominant player in the Ethiopian telecommunications market, with an estimated market share of subscribers of 94.5% as at 30 June 2024, attributable to the strong customer satisfaction and high-quality services and products offered nationwide,” Ethio Telecom said.

EIH, the Ethiopian sovereign wealth fund, also plans to list 10 of its biggest investments, including the Ethiopian Shipping and Logistics Services and Ethiopian Insurance Corporation.

In April 2024, ESX announced it raised $26.6 million from investors to launch the bourse, which is expected to list over 10 companies by the end of 2025. The bourse is projected to attract foreign investments in sectors controlled by the state, such as insurance, banking, and telecoms.  

The Nigerian Exchange Group (NGX), with a 5% stake, is one of the top institutional investors in the bourse. Others are FSD Africa, a UK-backed non-profit financial institution, and Trade and Development Bank Group (TDB), the financial arm of the COMESA trade bloc.