US delays 54 billion shillings loan for Safaricom entry into Ethiopia

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US delays 54 billion shillings loan for Safaricom entry into Ethiopia


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

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Summary

  • The American International Development Finance Corporation (DFC) said it was still weighing the escalation of armed conflict in the Horn of Africa country before it could release the loan.
  • The deepening conflict in Ethiopia could force DFC to suspend investment and push telecom companies to source elsewhere and at a higher cost.
  • An executive order signed last month by US President Joe Biden seeks to impose severe sanctions on all parties involved in the war in the Tigray region, including the governments of Ethiopia and Eritrea.

A US government agency has delayed disbursement of a $ 500 million (53.97 billion shillings) loan to finance the entry of a Safaricom-led consortium into the Ethiopian telecommunications market, citing uncertainty surrounding the unrest in the Tigray region.

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

The funding had already been questioned after the US state financier threatened to recall the loan following allegations of violence against civilians in Tigray.

“DFC is working closely with its US government partner agencies to monitor the situation in Tigray and will carefully consider its impact on any potential funding from the Vodafone consortium,” the US state agency told Business Daily in a response by e -mail.

US Secretary of State Antony Blinken, who is the chairman of the DFC board, said the current environment in Ethiopia is marked by “credible reports of the armed forces…. “

“The Secretary of State has legally determined that the Ethiopian government has engaged in a series of gross violations of human rights and [US] The president issued a decree imposing sanctions on people due to the humanitarian and human rights crisis in Ethiopia, ”DFC said.

The deepening conflict in Ethiopia could force DFC to suspend investment and push telecom companies to source elsewhere and at a higher cost. The Safaricom consortium had agreed to take out a 53.9 billion shillings loan from DFC to help cover acquisition and development costs.

An air and ground offensive by Ethiopian troops and their allies against rebel forces in the northern Tigray region is intensifying, according to reports.

An executive order signed last month by US President Joe Biden seeks to impose severe sanctions on all parties involved in the war in the Tigray region, including the governments of Ethiopia and Eritrea.

The radical order prompted a rapid retreat from Ethiopian Prime Minister Abiy Ahmed, who accused the United States of exerting “unjustified pressure characterized by double standards”.

“As a longtime friend, strategically and security partner, the recent US policy against my country is not only a surprise to our proud nation, but obviously goes beyond humanitarian concerns,” Mr. Ahmed in an open letter to Mr. Biden. .

The war threatens the stability of Ethiopia, Africa’s second most populous country seen by large Kenyan companies, including Safaricom, as a promising frontier for investment. The conflict has kept investors on the alert, even as it sparked a food crisis, leaving millions in need of humanitarian assistance.

Previous US attempts to pressure warring factions, including visa restrictions against Ethiopian and Eritrean officials, have failed. The Biden order allows the US Treasury Department to impose sanctions if action is not taken soon to end 10 months of fighting.

The Safaricom-led consortium, which also includes UK development finance agency CDC Group and Japanese company Sumitomo, received a telecommunications operator license in Ethiopia in July this year after forming a local company, opening the way for Kenya’s largest telecommunications company to start operating in the market. of more than 100 million people.

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