BY HIZKEL HAILU
Over the past three years, the government of Ethiopia has been making a number of policy reforms to diversify the country’s economic sectors. The efforts have yielded significant results besides the telecom sector that has been able to attract private investment to Ethiopia.
In his first parliamentary address three years back, Prime Minister Abiy Ahmed (PhD) announced government’s commitment to make different reform activities. As a part of the different activities he had announced, the government was ready to open its state-run telecoms monopoly and state-owned Ethiopian Airlines to private domestic and foreign investment- a major policy shift in Ethiopia.
Keeping the promise, the Council of Ministers has unanimously made a historic decision recently allowing Ethiopian Communications Authority to grant a new nationwide telecom license to the Global Partnership for Ethiopia which offered the highest licensing fee and a very solid investment case.
And it is to be recalled that Safaricom-led consortium has won a license to nationwide telecom service. Accordingly, the group has paid 850 million USD for the ten-year permit. Kenyan Global Partnership for Ethiopia is a consortium of Safaricom accompanied by Vodafone of UK, Vodacom of South Africa, Sumitomo of Japan and CDC–UK’s development finance institution.
Cognizant of its rich knowledge and technology packages, officials and experts agreed that the involvement of the Global Partnership for Ethiopia in the emerging telecom industry would have immense role in helping the country’s vision to build digital economy.
Attending the signing ceremony, Prime Minister Dr. Abiy Ahmed said the government has been implementing several policy reforms over the past three years to privatize various sectors of the economy. The signing of an agreement by Global Alliance for Ethiopia to launch a telecom sector in Ethiopia is a turning point in the Ethiopian economy, premier added.
He further said that the efforts have yielded successful results, so that the telecom sector has been able to attract private investment to Ethiopia. The day is a historic event as Ethiopia’s economy enters a new phase, he applauded.
Kenyan President Uhuru Kenyatta, for his part, recalled that his country has embarked on a digital economic journey and commended Ethiopia’s decision.
He said Ethiopia and Kenya have long-standing cultural and historical ties and the partnership launched by the telecom sector is conducive to further cooperation between the two countries. He also said that such cooperation will create greater potential for regional interaction.
He said the agreement will bring many opportunities for Ethiopia. “The expected digital transformation and investment will change history in all aspects of Ethiopia’s economy, from government services to marketing and information access,” he added.
Ahmed Shide, Minister of Finance of Ethiopia also marked the day as an important day for the citizens and businesses of Ethiopia. «This is but an early step — we will continue to work collaboratively with partners and investors to build a modem and open telecommunications sector to improve connectivity, productivity and economic growth in Ethiopia, » he remarked.
Shameel Joosub, Vodacom Group CEO, for his part said: “I would like to congratulate the Government of Ethiopia for the rigorous and competitive process that got us here today. All the individual organizations Ethiopia, global partnership sign telecom licensing agreement represented in our consortium are united in our commitment to effect positive social change in Ethiopia through the technology we provide. Across the world we are long-term investors with a clear purpose to support countries to digitalize and grow their economies, to benefit people in all parts of society and in all regions.”
Speaking with the Ethiopian Press Agency (EPA), Ethiopian Communication Authority (ECA) Director- General Balcha Reba (Eng.) stated that the consortium would play a significant role in advancing Ethiopia’s digital economy apart from its engagement in providing world-class telecom services.
He further stated that the consortium’s arrival would bring new and efficient telecom services and its rich knowledge and expertise also contribute to Ethiopia build a competitive telecom industry and enhance its revenues from the sector.
“The consortium has great financial potential,” Balcha said, adding that member companies have a total annual turnover of more than 100 billion USD. The investment is also expected to provide 1.5 million jobs to citizens in the next decade. The consortium will start providing telecommunications services by 2022.
“Since the investment license has been issued for 15 years, annual revenue and spectrum usage fee collected from the consortium will contribute to the country’s economic growth,” he explained.
Besides, the consortium would conduct research on technology that is less common in companies in Ethiopia and establish a foundation to train university graduates and make them productive.
As to the director-general, the licensing process was credible and it was conducted in internationally recognized procedures with the commitment and cooperation of the Ethiopian government.
“We have begun license execution on May 31st and on June 2nd it has paid 850 million USD to the government through the National Bank of Ethiopia. This money has already been paid to Ethiopia without any pressure under the signature of the provider and license winner,” the Director General explained.
The partnership has obtained 500 million USD loan from financial institutions in the UK and US, Balcha stated, and adding he said that the recent US visa sanction on Ethiopia officials has no impact on the contract agreement as the license is awarded to a consortium of companies.
Furthermore, he pointed out that there are international agreements to safeguard and protect cross boundary investments.
A minimum of 30 million subscribers, business engagement including in developing countries, managing telecom infrastructure capacity, and market share were among the technical criteria set for the selection of the companies, it was indicated.
Digital economy is among the priorities of the Homegrown Economic Reform being implemented by the government of Ethiopia and is expected to contribute about 6.6 percent to GDP by 2030.
Making partnership with foreign company has economic, technological and political advantages for a given nation. More importantly, it is of paramount importance for transferring technology and booming the national economy, Hailemeskel Gazu, an economist said.
For him, such kind of market will have a competitive nature that will help both the clients and providers at the same time. The recently signed agreement between Global Alliance for Ethiopia and the government of Ethiopia helps to alleviate foreign exchange problems. As Ethio-telecome is a highly profitable company by itself, it should add remarkable effort for a better change and international competitiveness.
But the amount of dollar earned from the new telecom operator in Ethiopia, Global Partnership for Ethiopia should be injected to the economy rather than allocating it to fulfill temporary problems like covering some other loans. Of course, the government can even allocate the amount for executing different projects that have been operating across the nation, he explained.
According to Hailemeskel, the licensing fee will stimulate the economy if and only if the government is committed to use the amount appropriately. Furthermore, the new partnership formation is vital to encourage the country’s export potential.
Above all, the arrival of the companies in Ethiopia will have a great potential to modernize Ethiopia’s overall economic activities. It will help Ethiopia to renovate and improve access to Ethiopia’s agricultural, financial and education services, which are the backbone of the republic, he noted.
Apart from its economic advantages, the market competitiveness will enable the nation to get high speed internet access with quality voice communication. There will be also low price beneficiaries of new technologies, he pointed out.
Likewise, when the alliance injects the promised 8 billion US dollars over the next 10 years, it will come up with the highest economic advantages of the telecom sector. In addition to the economic benefits, the companies’ involvements have essential roles in enhancing the bilateral relations with the nations they represent.
With over USD 8 billion total investment, this will be the single largest FDI into Ethiopia to date. It was learned that a nationwide telecom license would be awarded to another telecom giant in the coming months.
The Ethiopian Herald June 16/2021
