By Eskinder Firew
Wednesday October 23, 2024
Ethiopia’s state-owned telecommunications company has started selling shares to the public, in a move aimed at establishing a new national stock market and giving Ethiopians a stake in the company, one of the country's largest and most profitable.
Ethio Telecom will be the first company listed on the new Ethiopian Securities Exchange, or ESX, which is set to begin operating in November. It will be the country’s first stock market since the 1970s.
Ethiopia Prime Minister Abiy Ahmed said last Wednesday that the 130-year-old Ethio Telecom is offering 10% of its shares to the public, 100 million shares in all.
Investors, who must be Ethiopian nationals, can buy up to 3,333 shares of the company at a price of 300 birr, or about $2.50 per share.
CEO Frehiwot Tamiru said the company will now be called Ethio Telecom PLC.
“Today marks a significant milestone as we launch the sale of Ethio Telecom shares, an essential step in our ongoing journey from political revolution to evolution over the past six years,” Abiy said in a post on X.
He said offering the shares lays “the groundwork for Ethiopia’s stock market and expanding access to ownership in one of the nation’s leading state-owned enterprises, which has now evolved into a share company.”
Ethiopia, once a communist country aligned with the Soviet Union, has gradually allowed greater foreign investment and has slowly privatized state companies, though the government still owns and controls key banking, telecom and transportation firms.
Not everyone sees the sale of Ethio Telecom shares as a sure winner for the Ethiopian public. Ethiopian economist and the executive director of Initiative Africa, Kibur Gena, is concerned that only wealthy Ethiopians will be able to invest in the company.
“This raises questions, in my opinion, of fairness and inclusivity,” he said. “Such a move might provide, of course, immediate financial benefits to the government; it could also perpetuate inequalities in wealth distribution and restrict, of course, broader public participation in national assets.”
Kibur argues that this approach to privatization could lead to a “deeper wealth gap” and make it harder for the majority of Ethiopians to gain access to economic opportunities.'
“This would certainly contradict the principles of economic equity, which many argue that, when you sell public assets or public resources, they should be distributed more widely to ensure that economic benefits reach marginalized or less affluent groups.”
Ethio Telecom sees it differently. To help ensure that the share sale is inclusive, investors can buy as few as 33 shares, purchasable for 9,900 birr ($82), according to a company post on Facebook.
However, many Ethiopians don’t even earn $82 in a month, according to World Bank data.
Asked why the privatization of state companies have been slow in Ethiopia, Kibur said it can be seen as a “pragmatic strategy to protect national development goals” and “maintain economic sovereignty.”
“In many ways, privatization may eventually happen and it is happening,’’ he said. ‘’Many economists would argue that it should be done gradually with strong regulatory frameworks in place so that it can ensure that it contributes to long-term development and social stability rather than short-term market efficiency.”
Abiy said Ethio Telecom generated about $829 million in revenue and $239 million in profit during 2023, noting the amount is the most income generated for the state, compared to all other domestic and foreign companies operating in Ethiopia, including commercial banks, combined.
"We are doing this so that people could have confidence in it and join the stock market but it would have continued to be profitable even if we didn't sell shares,” the prime minister said.
Abiy hinted the government may offer more stakes for sale.
"The sale of shares that we started with Ethio Telecom may continue with Ethiopian Airlines, with hotels and other sectors,” he said.
This story originated in VOA's Horn of Africa Service.