Development Finance Corporation (DFC), a US government agency has delayed the disbursement of a $500million (Kes 53.97 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.
However, 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 higher cost.
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.”
“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 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 Safaricom consortium had agreed to take the Kes 53.9 billion loan from DFC to help with acquisition and development costs.
This Capital Injection into Ethiopia’s nascent telecoms industry is expected to top the US$1Billion (Kes111 Billion) mark, with the DFC loan deal seen as part of the project’s fundraising efforts.
“The loan to the Safaricom-led Global Partnership for Ethiopia will finance the design, development, and operation of a new private mobile network provider and the acquisition of a mobile network provider licence,” DFC said in a statement.
The project is expected to have a highly developmental impact through the creation of a new private telecommunications network that will increase connectivity in Ethiopia while utilising trusted technology.
Safaricom had earlier said it was ready to take more debt in its role as the majority shareholder of the consortium with a 51 per cent stake.
Vodacom has a five per cent interest in the joint venture, with the rest of the ownership spread among unnamed strategic financial investors.