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US delays Sh54bn loan for Safaricom Ethiopia entry

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US delays Sh54bn loan for Safaricom Ethiopia entry


Safaricom PLC CEO Peter Ndegwa during an interview at Nation Center in this photo taken on September 22, 2021. PHOTO | JEFF ANGOTE | NMG

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Summary

  • The US International Development Finance Corporation (DFC) said it was still weighing the escalation of armed conflict in the horn of Africa nation before it could release the loan.
  • The deepening conflict in Ethiopia could force DFC to pause the investment and push the telecoms companies to source the cash elsewhere and at a greater cost.
  • An executive order signed last month by US President Joe Biden seeks to slap harsh sanctions on all sides involved in the war in the Tigray region — including the governments of Ethiopia and Eritrea.

A US government agency has delayed the disbursement of a $500million (Sh53.97 billion) loan to finance the entry of a Safaricom-led consortium into the Ethiopian telecoms market, citing uncertainty over the ongoing unrest in the country’s Tigray region.

The US International Development Finance Corporation (DFC) said it was still weighing the escalation of armed conflict in the horn of Africa nation before it could release the loan.

The financing had earlier been thrown into doubt after the US State financier threatened to recall the loan following allegations of acts of violence against civilians in Tigray.

“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,” the US State agency told the Business Daily in an e-mail response.

US Secretary of State Antony Blinken, who is the DFC Board chair, has said 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.”

“The Secretary of State has made a legal determination that the Government of Ethiopia has engaged in a pattern of gross violations of human rights and the [US] President has issued an executive order imposing sanctions on persons with respect to the humanitarian and human rights crisis in Ethiopia,” DFC said.

The deepening conflict in Ethiopia could force 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.

An air and ground offensive by Ethiopian troops and their allies against rebellious forces from the northern Tigray region is intensifying, reports said.

An executive order signed last month by US President Joe Biden seeks to slap harsh sanctions on all sides involved in the war in the Tigray region — including the governments of Ethiopia and Eritrea.

The sweeping order prompted swift pushback from Ethiopian Prime Minister Abiy Ahmed, who accused the United States of putting on “unwarranted pressure, characterized by double standards”

“As a long-time friend, strategically and partner in security, the United States’ recent policy against my country comes not only as a surprise to our proud nation but evidently surpasses humanitarian concerns,” wrote Mr Ahmed in an open letter to Mr Biden.

The war is threatening the stability of Ethiopia, Africa’s second-most populous country seen by Kenyan major companies, including Safaricom, as a promising frontier for investment. The conflict has kept investors on edge, even as it triggered a hunger crisis, leaving millions of people in need of humanitarian aid.

The previous US attempts to pressure the warring factions, including visa restrictions against Ethiopian and Eritrean officials, have not been successful. The Biden order allows the US Treasury Department to impose sanctions if steps are not taken soon to end 10 months of fighting.

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, setting the stage for Kenya’s largest telco to start operations in the market of over 100 million people.

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