A consultant that has wide expertise in coming up with the idea of a startup capital is expected to be hired as the next stepwise procedure for the formation of the securities market.
Melese Minale, Senior Macroeconomic Advisor at the National Bank of Ethiopia (NBE), which is leading the formation process of the Capital Market Authority, a regulatory body for the upcoming security market, said that the next step after the ratification of the proclamation by parliament will be hiring a consultant to determine the formation process of the market and its startup capital.
According to the draft proclamation that is expected to be ratified before the end of the parliament session, the government or public enterprises share would not be higher than a quarter of the total capital of the securities market, also known as the secondary money market. However, it has stated that if there is less interest from the private sector that includes foreign investors, the government shall take more than 25 percent share.
Melese told Capital that so far the establishment capital is not so far known since it needs further studies by hired consultants, “Due to that at the current stage we don’t have a say on how much the startup capital of the securities market is or the 25 percent share of the newly coming secondary market.”
“Currently, we are prioritizing for the ratification of the proclamation and formation of the regulatory body. The other will be followed in like manner,” he explained.
Based on the country law a paid-up capital of the newly formed public enterprise is 25 percent of the total capital and the balance shall be filled in extended period.
“If the government shall manage the upcoming trading platform fully, it shall only pay a quarter of the total formation capital,” Melese explained if in case the government may fully controll the formation process.
However, few weeks ago he told Capital that there are significant interests from the private sector not only from local but well known international investors.
According to the Senior Macroeconomic Advisor, the secondary market establishment capital will be determined by the economic size and future outlook of the sector. Exchange by itself is a business that generates revenue from actors’ fee from different services it provides under its platform.
Studies that should know like how money companies shall be involved on the platform under the criteria of the security market, the economic size and long-term projections shall be undertaken in the process of establishment.
Two discussions including one public hearing has been held on the tabled draft proclamation in the past few weeks, while besides talks at the parliament different seminars and dialogues have been conducted by hosting of private firms and business organizations.
Recently on the discussion with the upcoming market, Melese told the private sectors that the commencement of capital market would have different inputs for the economy starting from the expansion of the liquidity in the economy.
“Based on different surveys of the World Bank, World Economic Forum and other local studies access to finance is indicated as a serious bottleneck for the Ethiopian economy and doing business that shall be mitigated by such kind of secondary market mainly for long term projects is essential,” he said.
Developing an alternative financial market opportunities has also a rational of market foster price discovery and promotes very important efficient allocation resources in the economy.
Mobilizing national saving would create massive liquidity which will benefit the economy. National saving, mainly the financial saving, will narrow the absence of opportunities for long terms saving in the economy.