Ethiopia’s now the world’s fastest growing economy
The World Bank’s private investment arm, the International Finance Corporation (IFC), has announced a plan to inject €158 million ($160 million) of equity into telecoms firm Safaricom Ethiopia to help fund its capital expenditure. The Kenya-based parent company Safaricom has ramped up its fundraising since the start of 2022 when plans for data centres in the capital Addis Ababa were first unveiled.
Safaricom Ethiopia, partly owned by Kenyan telecoms operator Safaricom, started phased operations in August in the country’s Dire Dawa city and Haramaya this month. Safaricom led a consortium that also includes South Africa’s Vodacom and Britain’s Vodafone which secured Ethiopia’s second operator licence in May 2021 for $850 million reports Nasdaq.
“The proposed IFC transaction comprises an up to $160 million equity investment in the company to help fund … capex requirement,” IFC said in a statement on its website, adding that: “A separate debt package is also being discussed.”
The Safaricom consortium is financially backed by British development finance agency CDC Group and Japan’s Sumitomo. Safaricom Ethiopia has said it planned to have its network active in 25 cities by April 2023. It will be a competitor to state-owned Ethio Telecom, whose proposed sale of a 40% stake as part of a broader government plan to open up the economy was put on hold in March. In May the national flagship operator EthioTelecom launched a 5G service in Addis Abababa.
With about 115 million people (as of 2020), Ethiopia is the second most populous nation in Africa and still the fastest growing economy in Africa, with 6.3 percent growth in FY2020/21. However, it is also one of the poorest, with a per capita gross national income of $890. Ethiopia aims to reach lower-middle-income status by 2025. In the last 15 years, Ethiopia’s economy has been among the fastest growing in the world, averaging 9.5% per year. Its growth was led by capital accumulation, in particular through public infrastructure investments, says the World Bank.
The government has launched a new 10-Year Development Plan, based on the 2019 Home-Grown Economic Reform Agenda, which will run from 2020/21 to 2029/30. The plan aims to sustain the remarkable growth achieved under the Growth and Transformation Plans of the previous decade, while converting it to a private-sector-driven economy. Central to those plans, says the World Bank, are the energy, logistics and telecoms industries.