Africa - network expansion is being bankrolled by China

[cio] African governments are banking on renewed relations with China to spread communication networks into underserved and rural areas, but their use of condition-free Chinese loans for funding has raised concern in a continent rife with corruption and poor governance.

African governments are banking on renewed relations with China to spread communication networks into underserved and rural areas, but their use of condition-free Chinese loans for funding has raised concern in a continent rife with corruption and poor governance.

Chinese network gear vendors Huawei Technologies and ZTE have swept African telecom markets with products priced lower than those of their Western rivals. Their gear has helped expand local mobile and fixed-line networks, but many contracts for the two vendors have been partly or wholly funded by low-interest loans from the Chinese government, analysts say. Those loans are given in Africa largely without conditions such as improved government transparency or protection of human rights, unlike loans from the World Bank or International Monetary Fund that usually have strings attached.

"The fact that a growing number of telecom companies have contracts with Huawei and ZTE is indicative of the fact that the two companies offer good financing arrangements," Mike Theuri, an analyst at Africa Telecoms, said via e-mail. Equipment from the companies is also reliable for its price, said Theuri.
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"When a cost-benefit analysis is performed, the Chinese vendors are likely to top their European counterparts," he said.

But China's use of loans with few strings attached "is a double-edged sword in the sense that in nations where corruption is condoned, it can easily lead to the fostering of greater corruption," Theuri said.

Business by Chinese companies in Africa has ramped up in recent years in sectors like minerals and energy as well as network gear. The increased business has come as China, a rising geopolitical power hoping to win friends abroad, has also started offering major aid and loan packages to African countries. Last month, at a meeting in Cairo, Chinese Premier Wen Jiabao pledged loans worth US$10 billion for African governments over three years.

The telecom industry is among the fastest growing in Africa and most of the funds are committed to expanding mobile infrastructure. Huawei and ZTE have both worked to tap that growth. ZTE, which earned one-fifth of its total revenue in Africa last year, aims to build its market share there to at least 30 percent, a company spokeswoman said.

Huawei and ZTE are supplying network gear and services in most sub-Saharan African countries for providers such as MTN, Safaricom and Orange (FTE). ZTE's deals have included the construction of an EV-DO network in Morocco and a WiMax network in Libya, which was billed as Africa's first and for which Huawei also supplied equipment. ZTE is eyeing populous countries like Nigeria and South Africa for more business, the company spokeswoman said.

Chinese Gear Boosts African Telecom Networks, Draws Fire