The World Bank’s private sector lending arm International Finance Corporation (IFC) and MIGA have secured a stake in Safaricom Ethiopia.
The deal, which will be in the form of equity, loan, and guarantees is tailored to support the ongoing setup of Safaricom Ethiopia’s greenfield telco network.
IFC will make a $157.4 million equity investment in Global Partnership for Ethiopia BV and a $100 million A-loan to its wholly-owned subsidiary, Safaricom Ethiopia. Following the transaction, IFC will hold a minority position in Safaricom Ethiopia.
“IFC is delighted to announce its support to Safaricom Ethiopia, the first private sector-led telecoms operator in the country, and its parent company the Global Partnership for Ethiopia,” said Mohamed Gouled, IFC Vice President of Industries.
“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. Young people, small businesses, and entrepreneurs will particularly benefit from improved access to high-quality digital services such as mobile financial services,” explained Gouled.
The Multilateral Investment Guarantee Agency (MIGA) will offer 10-year guarantees of $1 billion to cover the equity investments of Safaricom Ethiopia’s shareholders: Vodafone Group, Vodacom, Safaricom, and British International Investment.
Part of the MIGA guarantees or $76 million will come from the MIGA Guarantee Facility, which is part of the International Development Association’s Private Sector Window, in the form of a first loss layer.
“With this guarantee, MIGA hopes to stimulate more foreign direct investment in other sectors of the Ethiopian economy,” said Hiroshi Matano, Executive Vice President, MIGA.
Currently, Safaricom Ethiopia is deploying network infrastructure to guaranteemore affordable internet, reliable mobile connectivity, and technology access for people and businesses in the country.
This first partnership between IFC, MIGA, Vodafone, Vodacom, Safaricom, Sumitomo Corporation, and British International Investment in Ethiopia addresses the World Bank Group’s core mandate to help countries end poverty and meet their citizens’ demands for services including digital connectivity.
Ethiopia is Africa’s second most populous country, with a population of about 120 million. The investment and guarantees will help Safaricom Ethiopia roll out and operate 4G and 5G mobile networks across the country.
“Ethiopia has a large, young and entrepreneurial population that can unlock the country’s economic potential as we advance digitalisation. It is great to have the World Bank units with us as part of the international funding coalition behind Safaricom Ethiopia,” said Michael Joseph, Chairman of Safaricom Ethiopia.
Further, under a license granted in May 2023 by the Central Bank of Ethiopia, Safaricom Ethiopia also plans to launch financial services M-PESA this year.
When it launched services in October 2022, Safaricom Ethiopia became the first private telecom operator in Ethiopia, one of the world’s last telecom monopoly markets.
Telecoms market liberalisation is a key part of the Ethiopian government’s Digital Ethiopia 2025 plan to help the country realise its digital potential, leverage technology to build a more prosperous society and help meet the country’s United Nations Sustainable Development Goal commitments.
“Vodafone is pleased to partner with the World Bank Group in Ethiopia to help the country digitalise for the benefit of their citizens, their society, and their economy. By working together, we can deliver the connectivity, products and services relied upon by our customers,”said Joakim Reiter, Vodafone Group External Affairs Director.
By increasing access to digital services, the project has the potential to help create up to 1.5 million direct and indirect jobs in Ethiopia, contribute to the country’s sustainable future growth, and increase both financial and social inclusion for Ethiopians.
The project follows more than four years of World Bank Group engagements in Ethiopia aimed at opening the telecommunications sector to private sector investment and supporting market liberalization.
In 2020, IFC advised Ethiopia’s Ministry of Finance and the Ethiopian Communications Authority in designing and tendering the nation’s first full-service telecom licenses and associated spectrum.
The license was awarded in May 2021. The successful IFC advisory mandate resulted in a $850 million license fee payment and will generate as much as $8 billion in new investments over the next decade, making it one of the largest foreign direct investments in the country.
IFC’s investments and MIGA’s guarantees in the digital infrastructure sector are helping to connect the unconnected and to create opportunities, particularly in Africa and in fragile and conflict-affected countries.
In the last 10 years, IFC committed and raised over $7 billion in digital infrastructure and services, with more than $2.5 billion committed between July 2020 and June 2022.
With this project, MIGA’s contribution to the enhancement of the digital infrastructure reached $1.87 billion over the last decade, mainly in fragile and conflict-affected countries.