Overview of ICT Investment

africa-mapv2.gif
China’s influence in Africa has been expanding dramatically and visibly: new railways, roads, airports, hospitals, schools and stadiums have been built across the continent with help from China. According to government sources in Beijing, bilateral trade with Africa increased by 43.5 per cent in 2010 compared to 2009, to a record US$ 114.8 billion, positioning China as Africa’s biggest trading partner.

Over the past 10 years, the Chinese government has made significant investments in construction of information and communications technology infrastructure (ICT) in Africa through Chinese ICT suppliers. The most popular approach is providing Chinese government concession loans to African government ICT projects.

Any African countries that have established official relations with China can apply for Chinese government concession loans on the condition that they use Chinese ICT suppliers’ equipment for a major portion of the project. Other factors, such as the project's scale, return, time frame and political issues, are also considered. Both Chinese ICT suppliers and a number of African countries have benefited through this kind of cooperation.

There are three major ICT equipment suppliers in China: Huawei Technologies, ZTE, and China Great Wall Industry Corporation. The graph below ("Unequal World") illustrates the global market shares of Huawei Technologies and ZTE compared to other global telecom equipment suppliers. This graph shows that in Europe, Middle East and Africa, Huawei ranked first in sales revenue in 2011. However, Huawei and ZTE had limited sales in North America, due to US government restrictions.

Chinese government concession loans


Since 1995, the Chinese government has provided very low interest rate loans to support development in the other countries, especially in Africa. Zimbabwe was the first country to receive a Chinese government concession loan. Since then, most African countries have gotten development funding from China. The projects have covered almost every aspect of development, including the construction of transportation infrastructure, power stations, ICT infrastructure, education facilities, agriculture, and so on. Up to now, China has provided over US $75 billion in funding for African countries -- rivalling the United States. ICT projects have received over US $3 billion in Chinese funding.

Huawei and ZTE, the top two ICT equipment producers in China, are also among the top ten ICT suppliers in the world. Based on sales revenue, Huawei is the third-largest ICT provider in the world, following CISCO and Ericsson. Both Huawei and ZTE consider Africa to be a very important market. Huawei has already became the top ICT equipment supplier in Africa. In recent years both Huawei and ZTE have actively used Chinese government concession loans to support their market expansion in Africa. Both companies have helped their customers obtain billions of dollars in loans to build ICT infrastructure.

The following is a list of some of the ICT projects funded by Chinese government capital in Africa:

Country
Project
Quantity(million USD)
Supplier
Lesotho
National Telecom Project
66
ZTE
Mozambique
National Broadband Project
40
ZTE,HUAWEI
Angola
National Telecom Project
300
ZTE,HUAWEI
Ethiopia
National Telecom Project
200
ZTE
Nigeria
Satellite System
300
China Great Wall Industry Corporation
Telecom CDMA450 Rural Coverage
200
HUAWEI
Local Government Office Project
100
ZTE
Kenya
National Fiber Backbone
75
HUAWEI
Democratic Republic of the Congo
CCT
50
ZTE
Satellite System

China Great Wall Industry Corporation
Uganda
National Fiber Backbone
120
HUAWEI
Tanzania
ICT broadband infrastructure Backbone Network Project
100
HUAWEI
Zimbabwe
NetOne’s second (2G) and third generation (3G) network rollout project
45
HUAWEI
Senegal
E-government network
55
HUAWEI
Ghana
E-government network
30
HUAWEI
Cote d'Ivoire
National Data Center
30
HUAWEI
South Sudan
National Fiber Backbone
120
HUAWEI
Sierra leone
Telecom Rural Coverage
200
HUAWEI
National Backbone
15
HUAWEI
Chad
Telecom CDMA Rural Coverage
50
ZTE
Niger
International Fiber Backbone
100
HUAWEI
Mali
Algeria
In the map above, the pink area indicates countries that have received Chinese government concession loans to support their ICT projects.



Chinese Telecommunications Companies in Africa


Huawei Technologies
huawei-logo.jpgHuawei Technologies is one of the leading ICT equipment suppliers in the world, based in Shenzhen, China. It is listed among the Global Fortune 500 Companies. Huawei has the most integrated product line in the industry, covering

  • telecom equipment such as fiber transmission, radio base stations, core switches;
  • enterprise equipment such as routers and switches;
  • consumer devices such as cellphones and home gateways;
  • software such as surveillance systems, billing systems, e-government systems, and more.

In 2012, Huawei earned US$ 35.5 billion in revenue. Based on revenue, Huawei is the third-largest supplier in the ICT industry, following Cisco and Ericsson. Huawei now serves 45 of the top 50 operators globally, in over 100 countries. There is a saying that Huawei has more global branches than the Chinese government has embassies.

The US government has charged that Huawei’s equipment could lead to security issues for nations that allow the Chinese government access, pointing out that Huawei founder Ren Zhengfei served in the Chinese People’s Liberation Army. However, the US has not produced substantial evidence of such issues with Huawei equipment. The US government has also used its influence to lead big operators such as AT&T and Sprint to give up Huawei as a potential supplier. The US government stopped Huawei’s expansion in the United States several times, and denied the company's application to merge with 3COM and Motorola. In early 2013, founder Ren Zhengfei announced that Huawei would exit the US market.

Huawei is a privately owned company. Founder Ren Zhengfei owns 1.5% of the company. It is said the rest is owned by more than 60,000 Huawei staff. However, the structure of the internal stock shares is still secret.

Huawei is the biggest ICT supplier in Sub-Saharan Africa. In 2012 Huawei reached US$3.9 billion in sales in the region, 10.98% of its global sales. In most countries in Sub-Saharan Africa, Huawei is the market leader. Many of Huawei's projects in the region have been financially supported by Chinese government concession loans.

In 2013 Microsoft and Huawei cooperated in bringing a $150 dollar smartphone to Africa. The project's key goal was to increase the adoption of smart devices, which Microsoft aimed to do by tapping Chinese vendor Huawei to introduce the 4Afrika full-functionality Windows Phone 8 device.

The device, preloaded with select applications designed for local users, was planned to be initially released in Angola, Egypt, Ivory Coast, Kenya, Morocco, Nigeria and South Africa in late 2013.

Students and small businesses will be targets for the company’s smartphone portfolio, and through an SME Online Hub, African SMEs (small and medium enterprises) will have access to free, relevant products and services from Microsoft and other partners. The hub will aggregate the available services, which can help SMEs expand their businesses locally, find new business opportunities outside their immediate geographies, and help increase their overall competitiveness. The hub opened in April in South Africa and Morocco, and will expand to other African markets over time.

Another pilot project, with the Kenyan Ministry of Information and Communications and Kenyan internet service provider Indigo Telecom, will deliver low-cost, high-speed, wireless broadband, to create opportunities for commerce, education, healthcare and delivery of government services across Kenya. It claims to be the first deployment of solar-powered base stations working together with TV white space spectrum, which Microsoft Research is heavily interested in, to deliver internet access to areas currently lacking even electricity. Microsoft hopes to implement similar pilots in East and Southern Africa in the coming months.
Economist pic.png

ZTE communications

zte-logo.jpg

Zhongxing Telecom, or ZTE, originated in the Number 691 Electronics Factory in Shenzhen, which operating under the China Aerospace Industry Corporation (CAIC). The company develops and manufactures telecommunications equipment for fixed, mobile, data and optical networks, intelligent networks and next generation networks as well as mobile phones. ZTE has grown to become China's second largest listed telecommunications equipment manufacturer and wireless solutions provider. It lists shares in Hong Kong and Shenzhen.

In 2012 ZTE earned US$ 14 billion in revenue globally. However, the profit was negative. In recent years ZTE used a strategy of low pricing in the attempt to seize a larger market share. However, the strategy has been detrimental to corporate profits. Africa is one of ZTE's most important markets. In 2012 ZTE made US$ 1.2 billion in African sales revenue, which is about 9% of the global revenue. The Ethiopian telecom market has been especially important in providing ongoing major revenues for ZTE.

ZTE in Africa (state-owned)

1,000 employees, 63% of whom are Africans (according to ZTE)

Representatives in nearly 50 African countries

1 training center and 15 training bases in Africa,

Training provided for 4500 Africans annually.

(Source: www.ZTE.com.cn)

As of 2013, it is reported that ZTE has provided solar energy telecom solutions to over 15 African nations, including Ethiopia, Zimbabwe, Mozambique and Niger.

The US government has banned major operators and important departments from purchasing ZTE’s network products, citing security issues.

China Great Wall Industry Corporation

the great wall logo.png

China Great Wall Industry Corporation is established in 1980. It is the sole commercial organization authorized by the Chinese government to provide satellites and commercial launch services, and to carry out international space cooperation.

CGWIC has developed into a systems integrator for space products and services. It can meet customers’ multi-directional needs by providing comprehensive solutions for commercial launch services, satellite export, satellite ground-tracking and control station construction, satellite applications, project financing, project insurance and technical training, etc. Through extensive international cooperation, CGWIC enjoys a strong reputation in the international aerospace industry, the financial community and the insurance circle.

In addition, CGWIC is actively involved in the international marketing of civilian products and services utilizing space technology and provides high quality products and specialized services in diversified fields including satellite technology applications, green energy, information & electronic products, petroleum & petrochemical equipment, new materials, consulting services, international trade, international exhibition, international logistics, project contracting, international bidding, etc.

CGWIC has recently expanded its international reach. In Africa, CGWIC provided a satellite to Nigeria in 2007. However, after working for one year, the satellite failed. In 2011, Chinese government provided Nigeria with another satellite. In 2012 the Chinese government and the government of the Republic of Congo agreed that CGWIC would provide a satellite to Democratic Republic of the Congo. The Chinese government has provided a government concession loan to help fund these projects.

Media opinions


The Economist has asked:”The question of whether to trust this new giant divides the world. In Africa Huawei is everywhere, and welcome almost everywhere; in India it has found itself under attack by government and media as both a security threat and an unfair competitor. In Canada and New Zealand it has won meaty contracts for work on big new networks; in Australia in March the government blocked it from taking part in a new national broadband system.”

CNN offered a different viewpoint: In "Congressional report: U.S should 'view with suspicion' two Chinese companies," it stated, "Although the [Congressional] report (investigating the background of Huawei and ZTE) indicates there is no proof of wrongdoing by the companies, their failure to satisfactorily respond to the committee's questions factored into five recommendations":

  • The U.S. government should block any acquisitions, takeovers or mergers involving the two companies as well as ban using any of their equipment in U.S. government systems
  • U.S. companies should consider the long-term security risk with doing business with the Chinese firms
  • Congress and law enforcement agencies should further investigate the companies
  • The Chinese companies should become more transparent and responsive to U.S. obligations
  • Congress should consider legislation to improve information-sharing on the risk posed by suspect telecommunication companies