Africa’s demand for greater telecommunications infrastructure has attracted unprecedented levels of investment from China, but what are the implications to this?
With the announcement of China’s Belt and Road Initiative (BRI) in 2013, infrastructure development has become a linchpin in Beijing’s soft power offensive. Across the developing world, Chinese-backed infrastructure schemes have proliferated, attracting both praise and concern. But beyond recent public discourses on the threats posed by Chinese debt-trap diplomacy, these popular narratives are so far based more on anecdotal accounts than concrete empirical evidence.
This is especially true in Africa, where news headlines warn of neo-colonialism with Chinese characteristics. While there is some truth to depictions of Chinese companies as having flooded the continent with cheap consumer goods and as heavily invested in natural resource exploitation, Sino-African interactions are marked by a much more complex interplay of interests which is, in turn, driven by a diverse cast of actors.
Consider Africa’s telecommunications sector. With state attention and resources being increasingly directed to building a “digital Silk Road,” Beijing has sought to integrate network technologies into the BRI for innovation-driven development. At the 2018 Forum on China-Africa Cooperation (FOCAC) Beijing Summit, President Xi Jinping announced eight major initiatives to be rolled out in collaboration with African countries, including one that focuses specifically on enhancing physical and digital infrastructure connectivity. Likewise, in the resulting FOCAC Beijing Action Plan (2019-2021), development of the continent’s information and communication technology (ICT) sector was highlighted as a priority, in view of its strategic and far-reaching implications for Africa’s socio-economic progress. Surveying government statements, as well as those from Chinese companies active in the region, references to strengthening research cooperation on technology development and narrowing the digital divide abound.
Although recent controversy over the involvement of Chinese companies like Huawei in constructing 5G networks focused on the cybersecurity risks, debates in Africa—much like those in other developing countries with a large Chinese corporate presence—have centred more on the implications of Chinese telecommunications engagement. Indeed, despite the rapid growth of the continent’s telecoms sector, challenges of affordability and connectivity persist, with the level of mobile and internet market penetration also remaining relatively low.
For African countries, the development of telecommunications infrastructure is thus of great importance, as evidence has shown its contribution to economic productivity by facilitating knowledge transfer and cross-border business operations. It can also have an important multiplier effect on other service sectors such as telemedicine, e-learning, and mobile banking. It also helps to reduce African countries’ resource dependency, especially on oil. In fact, it is estimated that technology-related productivity gains in these sectors could reach between US $148 billion and US $318 billion by 2025.
China’s telecommunications presence in Africa
Ever since the 1990s “Going Out” period, Chinese equipment-supplying companies such as Huawei and ZTE have rapidly grown their presence on the continent. As such, despite being the latecomers to the African telecoms market, Chinese companies have managed to catch up with their peers, leapfrogging to be among the market leaders. Their success is underpinned by many factors. Economic and political support from the Chinese state has facilitated Chinese telecommunications companies to establish their market dominance in Africa. Here, Chinese companies are able to leverage political capital through Beijing’s diplomatic ties with governments in the region to establish networks of cooperation with African stakeholders. It was reported, for instance, that during Chinese government visits to Africa, the delegations were often accompanied by the senior management team of Huawei or ZTE—the two leading Chinese telecom companies in Africa. Cooperation has also been furthered by strategic lines of credit from the Chinese government in terms of concessional loans and preferential buyer’s credit. The financial support has allowed both ZTE and Huawei to offer low-interest loans to clients and bid for projects at a price that is around 15-20 percent lower than its competitors.
That said, it is worth noting that the use of export credit is not a Chinese invention, but is a common practice among international telecom vendors (although the scale may not be comparable to that of their Chinese counterparts). And while financial leverage does provide Chinese companies with a competitive edge, the level of reliance on credits, as driven by policy and the market, does vary across companies. Not only does the use of credit involve risks from a corporate management standpoint, but its association with the Chinese state can also result in certain drawbacks vis-à-vis corporate development. Indeed, when Huawei was facing intense pressure from critics over spying allegations, it had sought to financially distance itself from the Chinese government by diversifying its financial portfolio into more international sources.
In addition to support from the Chinese government, Chinese companies have moreover benefitted from African governments’ preference for working with Chinese partners. This has been largely attributed to Africa’s colonial history, which renders Chinese “non-interventionist and non-conditionality” attitudes more appealing. Even so, reports of “back-door” deals being struck between African governments and Chinese telecom companies have given rise to a raft of bad governance allegations, particularly in relation to both petty and institutionalised corruption.
A Chinese development model?
Although Chinese private and state-owned companies are by no means the sole actors in Africa’s telecommunications market, they have nonetheless played a significant role in its development. They have contributed to addressing the region’s infrastructure “bottleneck” and facilitating Africa’s structural transformation. Chinese business practices in Africa are usually characterised by low pricing arrangements, partnerships with local operators, and a willingness to invest in low-profit and riskier locations, such as rural areas that are often neglected by Western companies. Combined with the greater availability of low-cost equipment enabled by Chinese investment, Chinese-backed telecoms infrastructure development has effectively connected millions of underserviced people in Africa to the global information society.
But while Chinese-backed telecoms development in Africa may have contributed to accelerating development, as some would contend, to an otherwise impossible degree, telecommunications is also one of the more controversial areas of Chinese overseas investments.
As hinted at previously, Chinese telecom companies have frequently been criticised for their low service and product quality. Reports have similarly raised anxieties over whether Chinese involvement in the African telecommunications sector could potentially facilitate digital authoritarianism by impeding accountability and governance in Africa. Huawei and ZTE, for example, have both been accused of providing the Ethiopian government with technologies for surveillance and censorship. Moreover, as is also the case for other sectors, these companies are often labelled as following the Chinese model of development. In debates over how Chinese telecommunications companies have forayed into Africa, they are often depicted as having been supported by unfair advantages from the aforementioned government-backed lines of credit. Additionally, they are engaged in unethical business practices of price-cutting and colluding with (corrupt) government elites.
Crucially, despite these issues, and even spying allegations of China hacking into the African Union (AU) headquarters’ computer system in 2018, African countries remain eager to attract more Chinese investment in the telecoms sector as well as deepen their partnerships with China. Notably, earlier this year, Huawei and the AU had signed a Memorandum of Understanding to provide hardware and services to the AU’s headquarters.
While African governments’ penchant for partnering up with Chinese companies is not one necessarily shared by the wider public due to governance-related concerns, corporate social responsibility (CSR) initiatives by Chinese companies, including ICT training and equipment donations to educational institutions, appear to have been well-received among local populations. This is true for Huawei and ZTE. Given that each is also the other’s biggest rival in the region, they have both invested considerably in “internationalising” their CSR engagement so as to gain the social license to operate, which has become increasingly central to a firm’s bottom-line.
In Huawei’s case, the company released its inaugural Africa-focused CSR report in 2008, and over time, has sharpened its CSR outreach to focus less on one-off, charitable acts and more on projects that involve longer-term, local stakeholder engagement, such as the “1000 Girls ICT” training project in Nigeria.
To state the obvious, the expansion of Chinese telecommunication companies across the African continent holds profound implications—whether for better or worse—for Africa’s development and its pursuit of a “knowledge society.” The question that remains is how their presence can be best regulated for the sake of equitable development. The answer, however, can only be truly answered by Africans themselves.
Pichamon Yeophantong is an ARC DECRA fellow and senior lecturer at UNSW Canberra at the Australian Defence Force Academy.
Sandy Wang is a graduate of the University of New South Wales (UNSW).