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China’s suspicious interest in Africa’s internet networks

By Paul Adepoju
17 September 2018   |   2:25 am
Early September 2018, over 50 African presidents and heads of state were in Beijing for the Forum on China-Africa Cooperation (FOCAC). In addition to getting its share of the new US$60 billion for development projects in Africa that President Xi Jinping.....

[FILE] Chinese President Xi Jinping delivers a speech during the closing session of the National People’s Congress at the Great Hall of the People in Beijing on March 20, 2018. / AFP PHOTO / NICOLAS ASFOURI

Early September 2018, over 50 African presidents and heads of state were in Beijing for the Forum on China-Africa Cooperation (FOCAC). In addition to getting its share of the new US$60 billion for development projects in Africa that President Xi Jinping of China announced at the forum, Nigeria also got a fresh $328 million loan from China to boost its ICT sector.

This is the latest public demonstration of China’s direct interest in the tech ecosystem of Nigeria and several other African countries with particular and meticulous focus on the continent’s numerous internet connection projects. Late July 2018, Jinping personally visited four African countries – Senegal, Rwanda, South Africa and Mauritius. While this was just the second time he would be touring Africa as president, the Chinese government has regularly visited Africa to build on the Sino-Africa relations which in recent times have extended to communication infrastructures including optic fiber, raising concerns regarding China’s real motives beyond helping African countries to get high speed internet connection at cheaper costs.

Between 2007 and 2017, topmost Chinese government officials – President, Prime Minister and Foreign Minister cumulatively visited Africa a total of 79 times. Even though Sino-Africa trade relations date back to 202 BC and AD 220, it has grown exponentially, hitting a peak of $214 billion in 2014.In 2016, South Africa was the largest buyer of Chinese goods, followed by Egypt and Nigeria. In addition to trade, the continent is also attracting loans from China.

From 2000 to 2015, the Chinese government, banks and contractors extended US $94.4 billion in loans to African governments in forms of official development aid, export and suppliers’ credits.In return for China’s trade and loans, Chinese firms are increasingly securing contracts in Africa especially in Nigeria, Algeria, Ethiopia, Kenya, and Angola – the top 5 countries that accounted for 49% of all Chinese companies’ 2016 construction project gross annual revenues in Africa.

In Nigeria, Chinese firms grossed over $4.5 billion in 2014 alone after a consistently increasing trend dating back to 2000 when Chinese firms only raised a total sum of $55 million. Except for a slowdown in 2011, gross annual revenue earnings of Chinese construction companies in Africa had been on a meteoric rise since 2000.
Africa has also been welcoming increasingly more Chinese workers. According to official Chinese sources, the number of Chinese workers in Africa by the end of 2016 was 227,407. A review of data gathered showed Nigeria, Algeria, Angola, Ethiopia, and Kenya accounted for about 65% of Chinese workers in Africa during this period.
In Nigeria for instance, the number of Chinese workers that were captured in the Chinese government database rose from about 6,000 in 2009 to almost 10,000 in 2016.

US versus China over Africa
With Africa cozying up to China, and vice versa, the US government has expressed concerns over the motives of China which overtook it as Africa’s biggest trading partner. Former US secretary of State Rex Tillerson asserted that China was miring Africa in debt. US House Intelligence Committee chairman Devin Nunes also announced that his committee will investigate China’s spreading influence in Africa.A 2014 tweet by US President Donald Trump suggested his perception of China’s relationship with Africa. He accused China of exploiting Africa and refusing to help the continent in times of crisis such Ebola outbreaks.“China is ripping wealth out Africa and yet, as usual, refuses to put anything back to help with Ebola. Let the stupid Americans do it,” Trump tweeted.

But China had pushed back on the claims. Chinese diplomats and spokespeople, said in Africa, China is pursuing shared interests, and that its engagements on the continent are based on the vision of sincerity, real results, affinity, and good faith. China’s foreign ministry spokeswoman Hua Chunying said: “There is a Chinese saying which goes “one’s mentality will determine how he perceives the world.” There is also another proverb that “if one suspects his neighbor of stealing his ax, all the behaviors of that innocent neighbor appear suspicious to him,” it refers to someone that harbors groundless suspicions in disregard of facts. We hope that relevant people in the United States can be more open-minded, and aboveboard and refrain from viewing normal cooperation with tinted glasses or interpreting other countries’ goodwill to pursue win-win outcomes with a hegemonic mindset.”Experts in Beijing linked US government’s concerns about China’s fraternization with Africa to the Asian powerhouse’s long history of spying on Americans and intellectual properties the Chinese have gotten from the U.S.

China’s interest in Africa’s tech space
Sub-Saharan Africa is home to some of the world’s fastest growing telecoms sectors even though several reports had recommended that the continent should quickly close internet penetration gap to ensure maximization of the benefits of internet access to improve the quality of life in Africa.Identifying this enormous market, China is increasingly becoming actively involved in Africa’s tech ecosystem and its investments in this sector have been on a steady rise.

In Africa, China is investing in information transmission, computer services and software. Chinese companies are also recording successes in the tech sector. China’s Transsion is dominating Africa’s mobile phone market. According to available reports, the company which owns Tecno, Itel and Infinix is selling more phones in Africa than any other brand.

Experts attributed the Chinese firm’s success to its products’ solid design and low prices. In the first half of 2017 alone, the company sold over 50 million devices in Africa. Sales reportedly topped 100 million units in 2017, helping the company generate more than $3 billion in revenue. “I don’t target the highest-income consumers who would buy Apple or Samsung,” said founder and chief executive Zhu Zhaojiang. Globally, Transsion is ranked fourth, at the second position is Huawei which shipped more than 95 million smartphones in the first six months of 2018. The company is also aiming to become the world’s number one player in the fourth quarter of 2019.

According to Huawei’s 2017 Annual Report, the region where Africa belongs to brought in the second highest revenue for the company – only surpassed by China.But Huawei is not only selling phones, its telecommunication infrastructure technologies are being used in over 40 African countries. The company is also directly engaging with African governments who are choosing the Chinese firm to rollout national optic fiber initiatives and submarine cable projects with funds provided by the Chinese government.

Cyril Liang Xu, Director of Government Affairs and Public Communications for Huawei Kenya, credited the company’s peculiar approaches in Africa as the reasons behind its success on the continent.But Wadeisor Rukato, a Zimbabwean Yenching Scholar who lived in Beijing, saw Huawei’s rise in Africa differently. Rukato recounted a 2016 personal experience of Huawei’s strategy for Africa.Rukato traced the rise of Huawei in Africa to 1998 when the company established operations in Kenya where it presented itself as a preferred low-cost, yet high-quality mobile network builder.

The company’s reputation is indicative of its effectiveness in shaking off the longstanding negative perceptions of Chinese business in Africa, Rukato said. In the early days of its operations, Huawei specifically targeted developing countries whose GDP per capita was either the same as China or lower than China’s.Describing Huawei’s success in Africa, Huawei’s former head of operations in West Africa, Wilson Yang, said the company manages to achieve tremendous margins while still pricing itself only 5 to 15 per cent lower than its major international competitors, Ericsson and Nokia.

While Nokia and Ericsson are also operating in Africa’s telecoms infrastructure space, Chinese firms, notably Huawei and ZTE, are also directly engaging the government of African countries and are getting more deals than vendors from Europe, US or Japan. Industry experts noted that by throwing itself into the development of the local ecosystem, the firm is able to pitch projects to the government of African states, arrange financing from China and carry out the project.Tech analyst, Chris Chidioke said: “I do not think individual African governments are the ones thinking about national optic fiber projects. I see the hands of China all over. They are pitching, financing and carrying out the projects. This is much easier for African leaders who will get the infrastructure without any making any down payment in return for low interest loans.”

China’s bigger picture
In June 2018, Huawei and the Chinese Embassy in Nigeria organized a conference on Africa-China Cooperation in Information Technology and Digital Economy: Prospects and Challenges. At the event, Nigeria’s Communications Minister, Adebayo Shittu revealed that between 2003 and 2018, Nigeria’s telecoms sector has attracted a total of $32 billion as foreign investment out of which half is from China.Chinese companies have invested over $16 billion to date in fixed assets and facilities nationwide to build and support most network operators in the country, Shittu said.

This is similar to what Huawei and ZTE are doing in other African countries. While African governments are attracted to the lower immediate costs they are incurring by engaging the Chinese firms in their telecoms infrastructure projects, the Chinese companies have a bigger picture in mind as described by Mark Natkin, managing director of Beijing-based IT and telecom consultancy firm Marbridge.

“Chinese telecom vendors are taking a much longer-term approach that better integrates business and political objectives. If you’re the company that gets in there and builds the core network, you have a good shot at winning all upgrade contracts to follow. It’s like betting on a portfolio of high-risk stocks. Many will be losing propositions, but those will be outweighed by the few that take off,” he said.

Shifted goal post
At the heart of the success stories of Huawei and other Chinese firms getting optic fiber contracts in Africa is the Export-Import Bank of China. The bank is owned and funded by the Chinese government which is also serving the “Going Global” agenda of the State even though it is an independent legal entity. It is a bank directly under the leadership of the State Council and is dedicated to supporting China’s foreign trade, investment and international economic cooperation.

A review of the terms of Africa’s optic fiber deals with Huawei showed the involvement of inter-governmental financing tied to the purchase of Chinese equipment. State-owned Chinese banks led by the Export-Import Bank of China provide loans on condition that African governments buy equipment and services only from Chinese companies. This is not the case for Nokia and Ericsson.

A model of the bank’s impact in Africa’s emerging fiber optic projects was the Exim Bank of China’s $70 million soft loan offered for Tanzania to improve its telecommunications industry. The loan was used to build the first phase of the country’s National ICT Fiber Backbone project. According to the terms of the deal, the China International Telecommunication Construction Corporation (CITCC) (a subsidiary of China Telecom) was required to carry out the project with Huawei. The backbone covers 10,674 km and also extends to Rwanda, Dar es Salaam, Tanga, Moshi, Arusha, Singida, Dodoma, Iringa, and Morogoro and Burundi, Uganda, and Kenya.

Furthermore, government officials that are aware of the national fiber optic deal in Burkina Faso said the offer from Chinese firms were too good to be ignored.Experts agreed that without the involvement of the Chinese government which made it easier for Chinese firms to access financing and be able to offer services at lower costs to customers, Huawei and ZTE would not be able to dominate Africa’s broadband space.Ericsson could have achieved the same thing if it enjoyed the full backing of the Swedish government which would provide low interest loans to any African country that will award contracts to the company. Instead, Ericsson is on its own, it wants to get paid and will not be able to help pay for the services it is performing, tech expert Kayode Ibikunle said.

Chinese tech’s bad press
Among Africa’s tech experts, the major subject of concern regarding China’s increasing influence in the continent’s tech space is the country’s tech spying tendences and capabilities.The Chinese government was accused of spying on the African Union for 5 years. While Beijing denied it spied on the servers at the African Union’s Chinese-built headquarters by allegedly inserting a backdoor that allowed it to transfer data, AU’s technicians noticed that between midnight and 2 am every night, there was a peak in data usage even though the building was empty. Investigation revealed the continental organization’s confidential data was being copied on to servers in Shanghai although China’s ambassador to the AU Kuang Weilin, dismissed the reports as “absurd” and “preposterous.”

Chinese tech firms’ spying tendencies also got public attention recently with the alarm by the US government to discourage citizens from using phones made by Huawei because of the company’s close ties to the Chinese government. Huawei has also been blacklisted by the US Democratic National Committee (DNC). This was similar to a February 2018 testimony by the CIA, NSA, and FBI chiefs before a Senate committee that Huawei and ZTE were beholden to the Chinese government and their devices could become tools for undetected espionage – an allegation both Huawei and ZTE have denied.

Should Africa be worried?
Japan External Trade Organization’s Institute of Developing Economies noted that China’s increased involvement in the African telecommunications industry is part of a multidimensional engagement in the continent to serve its broader strategy to enhance its global standing, counter Western influence and to obtain resources and new export markets to feed its rapidly expanding economy.

“Importantly, Chinese telecom companies do not operate in isolation but operate in tandem with Chinese geo-strategic objectives. This makes the need for effective countervailing strategies all the more important in dealing with Chinese telecommunications challenge in Africa,” the Institute said.Eric Olander, founder of the China-Africa project on the other hand believes there is no difference in China’s telecoms strategies in Africa to its approach in other sectors.

“The Chinese are looking to establish their telecom majors as global powerhouses and the opportunity to build these networks is critical to achieving that objective. The government’s financing and support of its state-owned enterprises/private enterprises is all designed to promote its own industries,” he said.He added that the adoption of Chinese standards in Africa could be critical to helping Chinese technology gain the necessary global momentum for Chinese technology to dominate elsewhere.

Is China recolonizing Africa via tech?
The concept of China recolonizing Africa has been used severally by those opposed to China’s increasing influence in Africa. However, Olander noted that unlike the tenets of colonialism, African governments can decide to stop doing business with China.If at any time the Nigerian government does not want to deal with China or its companies, it can walk away at any time, he said.While admitting that Chinese companies have unfair advantage over their competitors from US, Europe and Japan, Olander blamed the Western companies’ inability to flip Africa as an attestation to their companies’ prioritization.

“Western technology companies have long ignored low-margin developing countries and often could not compete in these markets, so in many ways the Chinese deserve an enormous amount of credit for their willingness to finance significantly higher-risk ventures in frontier markets like Africa, South Asia and the Americas that other companies were reluctant to do or just outright refused to engage,” Olander said.

Can Africans trust internet networks built by China?
Inasmuch as the Chinese tech companies assured that their projects are safe and secure, experts raised concerns. Feyi Fawehinmi noted that while it is expected to have concerns regarding telecoms infrastructures built by China for African countries, government officials entering the deals for their countries don’t have much to bargain with in the first place.

“They are beggars in the equation as the Chinese have the money and technology so not much African countries can do,” he said.Olander added that privacy concerns is a risk that is taken regardless of who is building the network. He however added that China has more to lose if it is caught while attempting to hack a network it built.

He said: “The bottom line: is it possible the Chinese would hack a network they build in Africa? Yes. Is it likely? Probably not. Why? Because the reputational damage it would do to its telecom majors would be catastrophic and the risk/reward equation just doesn’t add up. Never forget that Nigeria is not a core national interest for China so it just doesn’t make a whole lot of sense for them to expend a lot of risk and energy on a secondary national security interest whereas they would probably be more willing to assume such a risk in their dealings with the United States or Japan which do represent tier 1 national security concerns.”

Going forward
As African countries continue to turn to China to build their telecoms infrastructures, Fawehinmi enjoined government officials representing African to be concerned about quality and potential for them to control what people can see or read on the internet, effectively censorship.Olander on the other hand believe Africa has a lot to gain than lose by warming up to China’s tech overtures.

He said: “African countries are desperately far behind when it comes to reliable, stable telecoms infrastructure and they need to move as quickly as possible to close the gap. Affordably-priced Chinese technology is a great way to do that and something that they could not do with much more expensive European, Japanese and American telecom solutions. He stressed that the focus should be on getting Africa wired and getting countries like Nigeria to wean off the current dependency on oil as the primary economic driver.

“China, like every country, is looking to advance its own national interests. Period. End of story. In Africa, China wants to open new markets for its tech companies, build a new generation of consumers to buy the products its companies make and to enhance the government’s geopolitical agenda by strengthening its relationships with African governments along the way. I don’t think what China is pursuing in Africa is really any different than what the Americans, French and British are also doing,” Olander said.This work was produced as a result of a grant provided to the writer by the Africa-China Reporting Project managed by the Journalism Department of the University of the Witwatersrand, South Africa.

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