IFC To Issue Ksh.12 Billion Loan To Safaricom Ethiopia

 

By Kepha Muiruri

The International Finance Corporation (IFC) is expected to loan Ksh.12.2 billion ($100 million) to Safaricom Ethiopia as part of its support for the project.

The debt financing is expected to complement its recently disclosed Ksh.19 billion ($157 million) equity investment which will see the World Bank private sector arm take up a stake in the project.

Following a long-pause to negotiations on the IFC support, Safaricom Chief Finance Officer Dilip Pal says the Ethiopia consortium is now closing in on the deal.

“We resumed discussions with the IFC in February this year. The progress to September has been significant from a pause to the public disclosure,” he said in an interview with Citizen Digital on Friday.

The deal with the IFC which has been pending for more than a  year is set to see impetus from a new true deal between the Ethiopian government and Tigrayan forces, with the start of the conflict having triggered the pause on the financing discussions.

Safaricom Ethiopia consortium partners are nevertheless mulling commercial borrowing including the issuance of a green bond should the IFC financing delay further or fall through.

The partners have nevertheless maintained that the entity remains adequately funded with any shortfalls in financing set to be filled by fresh equity from the consortium.

“The point now is to reduce equity funding and put more debt into the operating company. The aim is to put less money into the business but we would be willing to support any shortfall,” added Mr. Pal.

At the end of September, the Safaricom Ethiopia consortium had invested Ksh.130.7 billion (1.073 billion) into the project with Safaricom Plc sinking Ksh.72.8 billion ($598 million) on its part.

At the end of March, Safaricom Ethiopia held a 55.71 per cent stake in the project dubbed the Global Partnership for Ethiopia (GPE) under the Vodafamily Ethiopia Holding which has the Vodacom Group holding a smaller 6.19 per cent stake.

Japanese Sumitomo Corporation holds a 27.2 per cent stake in the projects with the CDC Group holding the remainder of the 10.9 per cent stake.

The expansion project is being funded from the combination of equity and debt financing and vendor financing with borrowing comprising of both local currency facilities and hard currency financing.

GPE’s shareholding structure is however expected to shift with the inclusion of the IFC’s investment.

The consortium partners are expected to sink in between Ksh.182.7 billion and Ksh.243.6 billion ($1.5 and $2 billion) in the next five years for the expansion project.

Safaricom expects the project to break even in its fourth year with growth enablers being listed as aggressive network expansion, SIM card penetration and mobile financial services.