Safaricom’s Plans in Ethiopia Hit Snag Due to Possible US Payment Ban

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Safaricom’s plans to expand into Ethiopia have hit a complication as a US State financier is threatening to recall its loans to a Safaricom-led consortium following an escalation of armed conflict in the horn of Africa.

The US International Development Finance Corporation (DFC) says that acts of violence against civilians in Ethiopia’s Tigray region could affect the release of $500-million in loans to the consortium. If the conflict deepens, it could push the DFC to forgo the investments altogether and pressure the telecoms in the consortium to seek finances from elsewhere.

War in Tigray

DFC’s financing of the consortium had previously been thrown into doubt over US economic sanctions against Ethiopia related to the ongoing conflict in Tigray, which has killed thousands of people and displaced even more.

The current conflict is between the Ethiopian military, its allies from Amhara and neighbouring Eritrea against armed forces from Tigray.

Joe Biden’s administration has issued economic sanctions against Ethiopia to try to pressure the country to end the violence in Tigray. Recent reports of mass killings of civilians and mounted gang rapes have raised concerns over the war and suspended some budget support to the government of the recently re-elected Prime Minister Abiy Ahmed.

“Select Investments”

Business Daily reports that last month Safaricom disclosed that the US development financier was granted approval to make select investments in the country, including funding the consortium and its plans in the country. Led by Safaricom, the group also includes UK’s Vodafone and South Africa’s Vodacom Group, among others.

“The board approval signified initial DFC willingness to consider a loan to the consortium in the event it wins a licence but does not obligate DFC to move forward with the transaction,” the US State development agency said, quoted by Business Daily.

“DFC is working closely with its partner agencies in the US government to monitor the situation in Tigray and will carefully consider its impact on any potential financing of the Vodafone consortium.”

“As DFC considers next steps, a critical part of its assessment is evaluating the current environment in Ethiopia, which the Secretary of State and DFC board chair has said is marked by credible reports of armed forces…committing acts of violence against civilians, including gender-based violence and other human rights abuses and atrocities,” the US State financier said.

The Safaricom consortium, which also includes British CDC Group and Japan’s Sumitomo Corporation, had agreed to take the $500-million from the DFC to aid with acquisition and development expenses.

After winning the license to operate with a bid of $850-million, the group is aiming to start operations in Ethiopia next year.

By Luis Monzon
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