PREVIEW
A new bill paves the way for overseas banks to acquire stakes in domestic lenders, after the civil war in Tigray stymied a previous attempt
Abiy Ahmed’s government appears to be attempting to breathe new life into liberalising Ethiopia’s economy. The Council of Ministers in Addis Ababa has approved a bill that would pave the way for overseas banks to acquire stakes in domestic lenders.
Opening up the country’s telecoms and banking sectors, which have been closed to foreign firms for over 30 years, had been one of Prime Minister Abiy's priorities.
The bill limits direct shareholding by a strategic foreign investor to 30% and the total holdings by non-citizens and foreign-owned companies to 40%. The bill also states that investment can only be in foreign currency, itself an acknowledgement of the dollar shortages that the Treasury is facing.
It would also allow foreign banks to acquire local lenders in financial difficulties on an exceptional basis to preserve financial stability.
Back in 2021, the government awarded a 15-year licence and the right to apply for an additional 15 years to Safaricom Telecommunications Ethiopia, ending the monopoly of the state-owned Ethio Telecom. Abiy’s government allowed Safaricom a licence to operate mobile money services in May 2023 and launched Mpesa in August. That will enable Safaricom which runs Mpesa service used by millions of Kenyans, to develop a similar market in Ethiopia (Dispatches, 14/5/21, Abiy_Ahmed's government may rethink its telecoms reforms amid market jitters on security & 15/9/21, Safaricom and Vodafone get EU's green light for mammoth telecoms investment with Addis Ababa).
This points to a revival of the liberalisation measures that were halted by the start of civil war in Tigray. But concerns about the economic effects of the multiple insurgencies in the country continue: the escalation of fighting in Amhara, which came within a short distance of Addis Ababa resulted in many foreign businesses and employees leaving Ethiopia (AC Vol 63 No 6, How war sank the development plan).
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