Kenyan telcos and lenders are expected to be key winners in the ongoing liberalisation of the Ethiopian economy after Prime Minister Ahmed Abiy’s government last week announced it was opening up the economy to foreign banks.

The move also comes three months after the country announced it was in the process of establishing a stock market signalling a window of opportunity for cross-listing. “Opening up banking to foreign banks would transform the economy by boosting it to have a link with the international economy,” Office of the Prime Minister of Ethiopia said in a Facebook post.

Stock market

In the latest Capital Markets Soundness Report, the Capital Markets Authority (CMA) observed that with Ethiopia working towards setting up a stock market, this move could give Kenyan companies room to raise funds for expansion.

It is important to note that Kenyan banks have managed to open branches in almost all countries in Eastern Africa with the latest being DRC. Ethiopia represents a major opportunity given it has more than 100 million population and a shared border with complete road infrastructure. “The Council of Ministers, during its 13th ordinary session, has passed a resolution on a draft policy to open up the banking sector for foreign investors,” state-affiliated Fana Broadcasting Corporation said in a tweet on Saturday.

With a physical border shared with Ethiopia, opening up the banking sector to foreigners further could boost trade for goods and services between the two countries.

Equity Bank, KCB and Safaricom are among the frontrunners with respect to expansion into these new markets with the banks having completed acquisitions in DRC in the recent past.

Last year Abiy’s government gave a licence to Safaricom to break the monopoly of Ethio Telcom opening a door into the lucrative market with the largest population in the horn Africa.

Other companies that entered Ethiopia with Safaricom are Vodafone, South Africa’s Vodacom and Japan’s Sumitomo paying $850m for the licence. In May 2022 the Ethiopian Investment Holdings, Ministry of Finance and Financial Sector Deepening Africa signed an agreement to establish the Ethiopian Security Exchange (ESX), the first in the horn region.