IFC Injects $257 Million Into Safaricom for Ethiopian Expansion

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The International Finance Corporation (IFC) has announced a $257.4 million (Ksh35.86 billion) debt and equity injection in Safaricom Ethiopia to support the building of its communications network in the country.

IFC made the disclosure recently, stating that $157.4 million (Ksh21.93 billion) has been injected as an equity investment while the remaining $100 million (Ksh13.93 billion) is a loan.

“Through this investment, we hope to help the company create a competitive market for mobile connectivity, reflecting our strategy to increase competition in the digital sector globally and reduce costs for consumers,” said Mohamed Gouled, IFC vice-president of industries.

The completion of the deal comes about nine months after the World Bank arm announced plans to purchase a stake in Safaricom Ethiopia.

The size of the stake IFC will be allocated for the equity investment was not immediately clear. IFC said in a statement it was going to hold a “minority position” in Safaricom Ethiopia.

Kenya-based Safaricom, which currently owns a controlling stake (55.7 per cent) had said in May that the IFC stake would be below 10 per cent.

South Africa’s Vodacom Group holds 6.19 per cent in Safaricom Ethiopia, while Japanese Sumitomo Corporation and British International Investment (formerly CDC Group) control 27.2 per cent and 10.9 per cent, respectively.

Multilateral Investment Guarantee Agency (Miga), another arm of the World Bank, will provide 10-year guarantees of $1 billion (Ksh139.3 billion) to cover the equity investments of Safaricom Ethiopia’s shareholders.

‘With this guarantee, Miga hopes to stimulate more foreign direct investment in other sectors of the Ethiopian economy,” said Hiroshi Matano, executive vice-president at Miga.

A portion of the Miga guarantees, $76 million (Ksh10.59 billion), will come from its guarantee facility as a first loss layer.

Safaricom and its partners paid $850 million (Ksh118.41 billion) as telecommunications licence fees and started commercial operations in Ethiopia last year in October.

The telco was also at some point talking to the American sovereign wealth fund, US International Development Finance Corporation (DFC), for up to $500 million (Ksh69.65 billion) loan towards the Ethiopia business.