A 20-year-old man has been arrested for allegedly assaulting an Ethiopian businessman with a hammer and killing him in Mpetsheni village outside Bizana, Eastern Cape police said on Friday.

Inspector Mlungisi Matidane said the man was arrested on Thursday following the Wednesday incident.

"The 26-year-old Ethiopian was selling handbags and carpets around the village on Wednesday morning... he then left some of the stuff outside a certain homestead while he went inside either to sell more stuff or collect his money," said Matidane.

When the man came out of the house, he realised that his things were missing and he allegedly started to "curse those who took his things, saying they were going to die".

"There were two men standing not far from him at the time and they approached and started to attack him," said Matidane.

The men are alleged to have assaulted the Ethiopian and when he fled, one of them chased him on horseback and assaulted him with a hammer and "a sharp object" when he caught up with him.

"They assaulted him until he died and left him naked near a river," he said.

The arrested man was expected to appear in the Bizana Magistrate's Court on Monday.

Police are still searching for his accomplice.