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Kenya Turns to Ethiopia for Power Boost: Could Regional Energy Trade Be the Future of East Africa?
Posted: May 9, 2025
In a move that underscores the growing interdependence of East African nations, Kenya has officially begun formal negotiations to increase its electricity imports from neighboring Ethiopia. The talks are aimed at securing an additional 50 to 100 megawatts (MW) of power to meet Kenya’s surging energy demands—marking yet another step toward deeper regional energy cooperation.
Kenya Power and Lighting Company (KPLC) Managing Director Joseph Siror confirmed that discussions are currently underway with Ethiopia Electric Power (EEP). The proposed expansion builds on a landmark 25-year electricity deal signed in 2022, under which Kenya agreed to import up to 200 MW of Ethiopian electricity annually. That agreement already includes provisions to double the capacity to 400 MW in the near future.
But this is not just a numbers game—it is a geopolitical shift.
A Power Highway Between Ethiopia and Kenya
At the heart of this energy cooperation lies the 1,045-kilometer high-voltage direct current (HVDC) transmission line connecting Wolayta-Sodo in Ethiopia to Suswa in Kenya. This mega-infrastructure project, one of the largest of its kind in the region, is engineered to transmit massive volumes of electricity over long distances with minimal losses—delivering clean, reliable energy where it is needed most.
This corridor of power has already transformed the energy landscape in East Africa. Thanks to Ethiopia’s hydropower dominance, the electricity Kenya imports is not just abundant—it is cheap.
Hydropower and Economic Logic
Ethiopia’s electricity, primarily generated from hydroelectric dams, is sold to Kenya at 6.50 US cents per kilowatt-hour (kWh)—a rate significantly lower than what Kenyan independent power producers charge. With Kenya battling rising energy needs and an over-reliance on expensive thermal power, this pricing structure makes Ethiopian imports a logical choice.
Today, around 10% of Kenya’s national grid is powered by Ethiopian electricity—a figure that could rise sharply if the current negotiations succeed.
According to Siror, increasing the electricity flow from Ethiopia will help stabilize Kenya’s grid, lower consumer costs, and reduce dependence on polluting and volatile thermal sources, especially during drought seasons when local hydroelectric output drops.
The Bigger Picture: East Africa Integration
This development is not just about Kenya and Ethiopia—it signals a major win for East African cooperation.
Energy is one of the most tangible areas where regional integration offers clear and immediate benefits. As climate change, population growth, and urbanization intensify pressure on power systems, no country in the region can afford to operate in isolation.
Ethiopia has already overtaken Sudan and Djibouti as its top electricity buyer, positioning itself as the region’s main power exporter. With Ethiopia at the center of the Eastern Africa Power Pool (EAPP), and infrastructure projects like the HVDC line laying the groundwork for interconnectivity, this model could soon be replicated across the region.
Djibouti, Somalia, South Sudan, and even Uganda may look to Ethiopia next.
What This Means for the Future
The success of this deal could unlock a new era of resource-sharing and energy diplomacy in East Africa—one where countries capitalize on their strengths, export their surpluses, and build mutual prosperity.
For Kenya, this is about stabilizing its grid and controlling electricity costs.
For Ethiopia, it is about monetizing its hydro potential and solidifying its influence as a regional power hub.
For East Africa as a whole, it is a glimpse of what is possible when political will meets infrastructure and economic pragmatism.
But perhaps the biggest question now is:
Can other nations in the region follow suit?
Economy
Safaricom’s Ethiopian Gamble: $42 Billion in Losses, But a Digital Empire in the Making
How Kenya’s telecom titan is betting big on Ethiopia’s future—despite a currency crash and massive red ink.
Imagine spending billions to enter a new market—only to watch the local currency collapse, your losses skyrocket, and the competition cling to over a century of monopoly dominance. Most companies would run. But Kenya’s telecom giant Safaricom? They’re just getting started.
Safaricom, the Nairobi-based mobile operator best known for pioneering the mobile money revolution in Kenya through M-PESA, has become a household name across East Africa. With deep market penetration and innovation-led growth, it helped make Kenya a global case study in digital finance. Now, it wants to do the same in Ethiopia—Africa’s second most populous nation, long seen as the final frontier for telecom.
After four years in the Ethiopian market, Safaricom has posted a jaw-dropping 42 billion birr (over $720 million) in operating losses. But rather than scaling back, the company is pumping in even more cash, expanding its network, launching new services, and announcing a bold timeline: profitability by 2027.
So what’s really going on? Is this a massive corporate misstep—or a long-term masterstroke?
From Nairobi to Addis: A Telecom Titan Expands Its Reach
Safaricom PLC is not just any telecom company. Backed by major players like Vodafone, Vodacom, and the Kenyan government, Safaricom revolutionized access to mobile services and finance in Kenya. Its flagship product, M-PESA, turned millions of unbanked Kenyans into participants in the formal economy and inspired copycat models across Africa.
The company’s entry into Ethiopia in 2021 was historic. After the government liberalized the telecom sector—ending Ethio Telecom’s 130-year-old monopoly—Safaricom paid a hefty $850 million license fee to enter. Commercial operations kicked off in October 2022, with a promise to invest billions in digital infrastructure.
And Safaricom delivered. As of March 2025:
It has deployed 3,141 active 4G sites across Ethiopia.
Its network now covers nearly 50% of the population.
Its active mobile user base has surged to 8.8 million, a 103% year-on-year growth.
Yet the road has been anything but smooth.
The Currency Collapse That Shook the Strategy
In July 2024, Ethiopia shifted from a managed currency regime to a market-based forex system, causing the birr to plummet. The exchange rate against the dollar sank from 57 to 134 birr in just eight months—a brutal 134% depreciation that sent shockwaves through every sector.
For Safaricom, the impact was immediate and painful. It collects revenue in local currency but pays for infrastructure, licenses, and technology in hard currency. The forex reforms alone account for a significant chunk of the 42 billion birr loss reported this year.
“This loss is largely in line with our expectations at this heavy investment stage of the company’s growth, but it also includes the impact of foreign exchange reforms,” the company stated. “We expect this to normalize going forward.”
Still Growing Fast—and Now Launching Fuliza
Far from retreating, Safaricom is ramping up operations. The company just announced it will launch Fuliza, its mobile overdraft facility, in Ethiopia next week. The product has already transformed small lending in Kenya—over Sh981 billion was disbursed via Fuliza last year alone.
Also growing is M-PESA, which now boasts 2.4 million active Ethiopian users. In the past year, users conducted 164 million transactions, worth Sh20.6 billion (~$158 million). For a country where formal banking penetration is low, these are not just big numbers—they’re signs of a coming financial revolution.
Safaricom’s 2026 capital expenditure (Capex) for Ethiopia is forecast at Sh18 billion to Sh21 billion, with group Capex projected at up to Sh78 billion. The company is clearly playing the long game.
The Monopoly Cracks—But Ethio Telecom Isn’t Done Yet
Safaricom’s entry broke the monopoly grip of Ethio Telecom, the 130-year-old state-run operator. But the old giant still looms large. Ethio Telecom earned over 61 billion birr in the first half of 2025 alone, dwarfing Safaricom’s local revenue of 7.2 billion birr for the full fiscal year.
Still, Ethio Telecom’s first IPO was a letdown—only 10.77 million of 100 million shares were sold—highlighting a potential crisis of confidence.
The youth-driven, mobile-first population is increasingly choosing Safaricom. With 70% of Ethiopians under the age of 30, and mobile penetration still underdeveloped compared to Kenya, the company sees a massive untapped market ahead.
Why Ethiopia? Why Now?
The real question is: Why bet so big on Ethiopia? The answer lies in the demographics and the digital vacuum.
With 120 million people, Ethiopia is the second-largest country in Africa, after Nigeria. But its digital ecosystem is still in its infancy. Internet penetration remains below 30%. Banking infrastructure is limited. And until recently, telecom was entirely state-controlled.
Safaricom believes that by moving early and investing hard, it can replicate what it achieved in Kenya—but at an even larger scale.
“If we go to 17 million customers, that’s about half of what we have in Kenya in just a couple of years,” said Safaricom CEO Peter Ndegwa. “So it shows our franchise in both Kenya and Ethiopia is very healthy, strong, and growing.”
A Vision Beyond Borders: Can the Horn of Africa Go Digital Together?
Safaricom’s Ethiopian strategy is more than just telecom—it’s a geoeconomic signal. This is Kenya’s corporate soft power reaching into the Horn of Africa. And if M-PESA and Fuliza become as indispensable in Ethiopia as they are in Kenya, it could spark a digital domino effect across the region.
A digitally connected Horn of Africa—with cross-border payments, unified services, and regional telecom infrastructure—could finally break the cycle of fragmentation that has long held the region back.
Even as the financials remain in the red, the vision is bold, the momentum is real, and the stakes are continental.
Safaricom may be bleeding billions. But what it’s building could be priceless.
