ESX: All Talk, No Tickers

Welcome to the latest edition of ፍራንክ Digest!

Your weekly brief on all things Finance and Investing. Quick, enjoyable reads for busy professionals in 5 minutes or less.

Here’s what’s coming your way:

• 🦗 ESX is Live. But It’s a Bit… Quiet.

• 💼 A Tale of Two Capitals: Addis vs. Nairobi

• 🗝️ The Key Takeaways

Thanks for reading!

From Launch to Liquidity: Let’s Get the Party Started

Investing

Alright, grab your አምቦ or your favorite fizzy drink because we need to talk about stock exchanges. Yep, those magical places where fortunes are made, hearts are broken, and people pretend to understand derivatives. Specifically, we’re diving into the latest on the Ethiopian Stock Exchange (ESX)—which, if we’re being honest, feels like it launched with all the excitement but so far fell flat.

Now, we were all hyped when Wegagen Bank cheerfully announced plans to list on the ESX. We imagined thrilling ticker symbols, dramatic price swings, and investors glued to their screens like it’s the World Cup final. But… crickets. Wegagen is still keeping us waiting for those share prices. And here we thought launching a stock exchange was the hard part!

According to a recent series in The Economist titled The Africa Gap, stock exchanges across Africa are struggling with liquidity issues. In plain English? The markets aren’t exactly overflowing with action.

So, while setting up a stock exchange might sound like the big achievement, the real challenge is getting people to actually, you know, trade on it.

Let’s check in on Africa’s stock exchange heavyweights.

Nairobi NSE (Kenya)

What better place to start than East Africa’s OG exchange?

• Founded: 1951—yeah, it’s been around a good while!

• What’s on Offer? Equities, Debt, and Derivatives (because who doesn’t love fancy financial jargon?).

• Market Stats: 65 companies listed with a market capitalization of KES 2,018 Billion (about $15.5 billion for those of us not fluent in shillings).

• Safaricom (SCOM) is the Beyoncé of the NSE, making up 35% of the total market cap with KES 709 Billion. Telecom giant or not, surely other sectors could give it a run for its money?

• Liquidity: Only about 0.02% of shares are traded daily. Yep, that’s like hosting a concert and only two people show up.

Johannesburg JSE (South Africa)

• Year: 1887 during the gold rush. This one’s a veteran, founded way back.

• What’s on Offer? Equities, Debt, and Derivatives (because South Africa doesn’t mess around).

• Market Stats: 228 companies listed, with a staggering market cap of Rand 19,465 Billion—that’s about $1 trillion. Yes, with a T.

• Naspers (NPN), a tech and online retail giant, is the big fish here, accounting for 3.36% of the market cap at Rand 656 Billion.

• Liquidity: A healthier 1.72% of shares are traded daily. Not exactly a stampede, but at least people showed up to the party and danced a little.

So, hold on, what can you do to improve activity in stock exchanges? Because it’s not just about getting these exchanges off the ground.

Short Term Fixes

If you live in a country where the government likes to dip its fingers into the market (and let’s be real, that’s quite a few of us), sometimes a little nudge 👉 is needed to get things moving.

For example, Ethiopian authorities are likely to make it mandatory for big Share Companies—banks and insurance firms, in particular—to list on the stock exchange. It’s part of a larger push to make sure shareholders are playing by the rules (like the new mandatory Fayda I.D. requirement) to capture all those capital gains tax. Think of it as a "no listing, no party" rule.

In China, they’ve got a different approach: authorities are pushing insurance companies to buy more local stocks to prop up activity and keep prices stable. Kind of like giving the stock market a little caffeine shot to wake it up.

So, what’s the long term solution to all this?

Simple: attract global finance.

The idea is to create an environment where African companies can grow large enough to catch the attention of global investors. But this takes time and a lot of work—think stronger trade finance, integrating regional capital markets, and making the African Continental Free Trade Area (AfCTA) a reality. That’s the golden ticket to boosting liquidity and getting these exchanges buzzing.

After all, it’s clear that while setting up a stock exchange is one thing, making it a thriving, liquid market is the real challenge. But hey, if anyone can crack it, it’s Ethiopia. We’ve got the ideas, the energy, and (let’s be honest) a fair amount of hustle. Keep an eye on this space—it’s bound to get interesting!

What does this mean to you?

If you’re an investor or looking to list your company on African stock exchanges, understanding these liquidity issues is key. It’s not just about jumping in with your money or business—it’s about playing the long game and keeping an eye on the evolving market conditions.

It’s good to evaluate how quickly you can dispose of your shares when you need cash or assess the loan-to-value ratio when taking loans backed by your shares. Because while the stock exchange might be up and running, the real work has only just begun.

Key Takeaways

1. ESX launched: We’re not sure what’s going on with Wegagen Bank’s supposed share offerings 

2. Takes Alot More To Run: Making sure you have a dynamic stock exchange means listing attractive companies that grab the attention of global finance with deep pockets 

3. Companies Need Enabling Environments: Allowing integrated markets for greater economies of scale. Trade finance and continental free trade incentives. 

ፍራንክ Picks 

🚶🏽 Event: Future Tech Expo [ Skylight, Feb 21 - 23 ]

🗞️ In the news: EIH Makes ETB 900 Billion in 6-Months’ Revenues

♟️ Innovation: Content Creators’ Monetization Platform

The Business Rivalry in East Africa

Investing

East Africa’s two powerhouse cities, Addis Ababa and Nairobi, are like siblings constantly competing for their parents’ attention. In this case, the attention of investors, entrepreneurs, and global markets.

Addis Ababa, the political capital of Africa, is the serious, ambitious older sibling. Nairobi, the Silicon Savannah, is the flashy, tech-savvy younger sibling with lofty ambitions of its own.

But when it comes to business, who’s really winning? Let’s break it down, numbers, quirks, and all.

Round 1: Fight!