Ethiopia’s New Chapter: From Ancient Heritage to the Ethiopian Securities Exchange (ESX)

Photo: Left to Right: Surafell Kebede, Gezahgen Kebede, Robert Scharar, and Ryan Scharar on a trip to Ethiopia in 2017

Ethiopia is home to some of the world’s oldest stories – most notably, Lucy, the 3.2-million-year-old hominid fossil that reshaped our understanding of human evolution. Today, Ethiopia once again marks its place in history – not through its archaeological past, but through the establishment of the Ethiopian Securities Exchange (ESX).

This milestone marks a new era of reform, ambition and opportunity. For FCA Corp and its Africa-focused initiatives – including Africap LLC and Commonwealth International Series Trust – it led to a pivotal conversation between FCA Corp and ESX leadership, including the CEO of ESX, Tilahun Kassahun. ESX’s team shared their remarkable and unique story that deserves global recognition.

Ethiopia’s global presence is championed by advocates who help amplify its story on a global stage. Gezahgen Kebede has been a consistent voice in this effort serving as the Honorary Consul General of Ethiopia in Houston, Texas, and as a member of the Board of Managers for Africap LLC, a Houston based private-equity fund that invests solely in Africa. His most notable accomplishment involved collaborating with the Ethiopian Ministry of Culture and Tourism, the Houston Museum of Natural Science, and the Honorary Consulate General Office. They brought “Lucy’s Legacy: The Hidden Treasures of Ethiopia” to the U.S. (2007 – 2012), offering a glimpse into Ethiopia’s archaeological and cultural contributions to humanity.

Gezahgen’s efforts also encompass his commitment to the country’s economic development. He introduced Robert Scharar, CEO and founder of FCA Corp, to Ethiopia’s opportunities in the mid-1990s. Rob recognized Ethiopia’s investment potential but observed the complex political dynamics that rendered investments unfeasible at the time. Despite these initial barriers, Rob maintained his interest in Ethiopia and monitored the country’s decades long transformation through various political and economic reforms aimed at creating political stability, opening its economy, and promoting sustainable growth. This transformation set the stage for Ethiopia to create its own capital market.

The country’s economic history and evolution involved an active share market in the 1950s and 1960s. In the mid-1970s, Ethiopia’s share market activity abruptly halted due to a change in government that led to the nationalization of many industries. For nearly five decades, Ethiopia’s formal exchange operations remained inactive, but an informal trading system persisted, creating a de facto stock market. Tilahun described the improvised trading mechanism that emerged: shareholders would connect through WhatsApp and then visit the companies to exchange physical share certificates. Some private companies accumulated upwards of 100,000 shareholders, underscoring the demand for equity investments and a formalized exchange.

Tilahun discussed how the current government is transforming the Ethiopian economy. The government’s efforts included passing the Capital Market Proclamation No. 1248/2021. This legislation provided the legal and regulatory framework for a capital market and established the Ethiopian Capital Market Authority, the equivalent to the U.S. Securities Exchange Commission. Additionally, this proclamation authorized the licensing and formation of securities exchanges – enabling the creation of the Ethiopian Securities Exchange in October 2023.

Establishing the legal framework was just the beginning. Building a functioning exchange required comprehensive research and technical infrastructure. Tilahun and Michael Habte, the COO of ESX, described their approach to studying global markets. They analyzed the various exchanges across Africa, examined smaller mid-developed country exchanges in Asia, and studied developed markets like the London Stock Exchange. This research enabled ESX to adopt global best practices and implement a cutting-edge trading platform, a broker back-office system, and mobile trading capabilities that allow for secure, user-friendly access.

The exchange is a public-private partnership. The government holds a mandated 25% public stake through its sovereign fund, Ethiopian Investment Holdings. Private investors, including domestic banks, insurance companies, and foreign institutions, own 75%. This structure balances government oversight with private involvement, reflecting Ethiopia’s commitment to transparency and growth.

Along with creating the proper internal infrastructure, Tilahun and his team recognized the importance of establishing proper external infrastructure. In coordination with the National Bank of Ethiopia, ESX helped establish the Central Securities Depository (CSD), which plays a crucial role in the exchange’s current and future development and operations – particularly in dematerializing companies by converting physical shares to electronic records. This process is especially significant in Ethiopia due to its informal trading history, as companies transition existing shareholders from physical certificates to a formalized electronic share record.

Additionally, ESX is working to establish licensed brokers, asset managers, custodians, and advisors. These licenses ensure that professionals and companies are trained and well positioned to utilize the new capital market. These requirements for participation promote modernization, increase investor confidence, and reduce misconduct of market participants – aspects that aid the exchange’s functionality and longevity.

ESX will facilitate activity in three distinct market segments: the Equity Market, the Money Market, and the Alternative Market. A pilot money market platform launched in October 2024, which enables short-term borrowing and lending by aiding with liquidity and credit flow for commercial banks and financial institutions. Within the first few weeks, the money market transacted 100 billion Ethiopian Birr. In January 2025, ESX achieved another historic milestone: the listing of its first company, Wegagen Bank, followed by Gadda Bank and Ethio Telecoms.

Photo: Ryan Scharar standing next to a coffee grinder on his 2017 trip to Ethiopia