Safaricom Plc, a leading telecommunications firm, has sealed a $138m funding deal with South Africa’s Standard Bank, to assist the operator’s drive to rollout digital infrastructure and its services in Ethiopia, one of East Africa’s fastest-growing economies.
Safaricom has secured the funding from Standard Bank, Africa’s largest bank by assets, which also acted as the sole arranger, lender and facility agent on the term facility to Safaricom.
Safaricom expects its Ethiopian business to break even in 2027
This new funding following one last week where South Africa’s Vodacom pumped R36bn (KSh 273.6 Billion) to acquire a further 20% in Safaricom, a transaction that if successfully concluded will see Vodacom take a controlling stake in Safaricom.
The funding boost for the Ethiopian subsidiary comes when Safaricom is still absorbing start-up losses and turbulence occasioned by currency reforms that took place in that country during the year.
Despite teething problems, Safaricom Ethiopian business is gathered momentum, and contributed 9.3% to the Group’s revenue growth.
“We are honoured to have partnered with Safaricom again in enabling and supporting their ongoing vision to drive digital transformation and inclusion in Ethiopia,” said Anthony Ndegwa, an executive at Stanbic Kenya’s corporate and investment banking business.
The Kenyan telco giant acquired a licence to operate in Ethiopia in 2021, as the country moved to liberalise its telecom market.
The expansion followed years of success in its home market of Kenya, success that attracted Vodacom to invest billions of rand in the group.
Peter Ndegwa, CEO of Safaricom, said Standard Bank and the group worked side by side in the development of financial solutions that are beneficial to the business while responsive to the market’s needs.
“As a business, we are guided by innovation and strategic partnerships. We aim to transform lives at scale, empowering youth, entrepreneurs and underserved communities to fully participate in Ethiopia’s digital economy and realise the promise of shared prosperity by 2030,” Ndegwa said.
“Through this partnership we are given the opportunity to pursue this goal and grow further to digitally enable Africa.”
The deal cements Standard Bank’s reputation as the go-to lender for facilitating big-ticket items in Africa through its corporate and investment banking division, which accounts for nearly half of the group’s earnings.
Safaricom recently announced 10.1-million three-month active customers after being in the Ethiopian market for only four years, with the group seeing further growth in Africa’s second most populous country.
“As a bank we are dedicated to partnering with relevant parties to drive infrastructure development that will help accelerate the growth of the continent’s economy,” said Taitu Wondwosen, head of Standard Bank in Ethiopia.
“Digital and financial inclusion in the African market has been one of the key objectives to break barriers and enable individuals, communities and businesses to access affordable financial products and services that meet their needs.”
Safaricom, which expects its Ethiopian subsidiary to break even in 2027, has already made significant strides in the new frontier.
With over 3,100 sites, the Kenyan telco now covers 50% of the Ethiopian population, of whom almost 9 million are actively using its services. The firm expects to ride on steps taken by the Ethiopian authorities, including regulator licensing of the first two investment banks and the Ethiopian Securities Exchange launch in January 2025.
.These reforms bode well for Safaricom’s strategic approach by boosting investor confidence, enhancing liquidity, and creating value for issuers and investors.
Safaricom has had to manage the impact of Birr, local Ethiopian currency, depreciation in the year and have taken measures to mitigate the short- and medium-term impact of the foreign exchange reforms.
Other challenges include ongoing increases in fuel prices as the government reduces subsidies, and continuing security concerns in some parts of the country affecting sites and access to power connections.
Nevertheless, Safaricom has kept its eyes on the ball by remaining focused on sustainable growth in Ethiopia, leveraging the country’s youthful population and the opportunities represented by low penetration of connectivity and fintech.
To this end, Safaricom is expected to use its new funding to build stronger relationships across industry and micro, MSMEs sectors with the view of coming together to provide value to Ethiopians.
The telcos aims to improve financial inclusion amongst various communities in Ethiopia through its active engagements in agriculture and health sectors.
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