This archive report was first published on 28 October 2021.
October 28, 2021, marked a significant development in the Safaricom-led consortium's plans to enter the Ethiopian telecoms market. The US International Development Finance Corporation (DFC) announced that it would delay the disbursement of a $500million (Sh53.97 billion) loan, citing uncertainty over the ongoing unrest in the country’s Tigray region.
The DFC stated that it was still weighing the escalation of armed conflict in the horn of Africa nation before it could release the loan. This decision comes as a result of the deepening conflict in Ethiopia, which could force the DFC to pause the investment and push the telecoms companies to source the cash elsewhere and at a greater cost.
The Safaricom consortium had agreed to take the Sh53.9 billion loan from DFC to help with acquisition and development costs. However, the ongoing conflict in Ethiopia has raised concerns about the stability of the country, making it challenging for investors to proceed with their plans.
US Secretary of State Antony Blinken has stated that the current environment in Ethiopia 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.”
As a result, the US government has imposed sanctions on all sides involved in the war in the Tigray region, including the governments of Ethiopia and Eritrea. The sanctions aim to put pressure on the warring factions to end the conflict and address the humanitarian crisis.
The war in Ethiopia has had far-reaching consequences, including a hunger crisis that has left millions of people in need of humanitarian aid. The conflict has also kept investors on edge, making it challenging for companies like Safaricom to proceed with their plans.
The Safaricom-led consortium, which also includes British development finance agency CDC Group and Japan’s Sumitomo Corporation, received a telecommunications operator licence in Ethiopia in July this year after incorporating a local company. However, the delay in the loan disbursement has put their plans to start operations in the market of over 100 million people on hold.
