In the US and Europe the Chinese telecoms giant Huawei is coming under pressure over security concerns, but for many African countries the firm remains a critical partner.
As mobile and internet usage has exploded across Africa in the last decade, China’s Huawei, the world’s largest supplier of telecoms equipment, has emerged as a near-ubiquitous presence for consumers and industry professionals on the continent.
Whether shifting millions of branded smartphones per year, upgrading undersea cables off the coast of West Africa, providing technical infrastructure for the continent’s biggest mobile service and internet providers, or planning the rollout of cloud data centres in South Africa, Huawei’s diverse activities, aggressive pricing and ceaseless expansion have created the backbone for a communications revolution.
Backed by over $108bn in annual global revenues in 2018, the firm has found willing partners in governments and businesses across the continent, allowing it to steal a march on established Western rivals.
Yet as Huawei’s influence has expanded exponentially in Africa, the business model and future of China’s most significant overseas player is increasingly threatened by legal and political jeopardy abroad.
Long under the microscope in the United States, the firm is coming under sustained political pressure by the Trump administration as its trade war with China simmers.
At the heart of the dispute are long-standing suspicions that Huawei enjoys close links with the Chinese state and military intelligence.
After years of allegations, the mud is beginning to stick – in Australia, Huawei has been banned from providing 5G technology for wireless networks on national security grounds.
And in Europe, governments closely monitor the firm’s activities amid fears that Huawei technology could offer the Chinese government a backdoor to snoop on citizens and governments.
As countries weigh the credibility of security concerns against Huawei’s offer of next generation internet infrastructure, African policymakers have largely kept quiet.
Yet they may soon be forced to wade into a debate with significant geopolitical, security, economic and technological implications.
“I would suspect they are at an early stage where they are looking and thinking, what will happen next?” says Dobek Pater, director of business development at telecoms consultancy Africa Analysis.
“At this point African governments are probably thinking this is more a trade war issue than an actual security issue.
They probably should spend more time and resources investigating the reality versus taking things at face value from the United States and Chinese governments at this point.”
For a company embedded in much of Africa’s technological infrastructure, Huawei’s origins remain shrouded in myth and contention.
Formed in 1987 by Ren Zhengfei, a former engineer with the People’s Liberation Army, the firm made early inroads into the telecommunications equipment market by reverse engineering foreign technology at a time when China was largely isolated from the global economy.
After a period of rapid technological progress, helped along by investments in R&D and the gradual opening of the Chinese economy, the firm set its sights on foreign markets.
Huawei made inroads into Africa with the opening of a Pretoria office in 1998, sparking a rapid expansion on a continent crying out for telecoms infrastructure but largely left unexplored by Western competitors.
Since the early days in Africa, Huawei has transitioned from a supplier of cheap equipment to an integral technical partner on complex national infrastructure projects.
“Huawei started out targeting predominantly mobile operators in radio access networks and mobile networks, then began to expand more into providing transmission equipment, building the backbone infrastructure both for mobile operators and is starting to target incumbent fixed line operators,” says Pater.
“More recently they have started in the data centre market. They’ve been progressing over the past 15 years and increasingly expanding into different segments of the telecommunications market and more recently into the IP services environment. So they’re everywhere.”
A key enabler of the rapid African expansion was an aggressive pricing strategy that allowed the firm to offer its equipment and services at attractive rates.
Western competitors saddled by higher labour costs and sales strategies based around mature markets have struggled to keep up, even as Huawei has gradually moved from the lowest price point to position itself as a source of technical expertise and supplier of high-end technology.
Nevertheless, the firm’s reputation for competitive pricing has persisted.
“Given the restraints on African countries, when a company shows that their technology is as good as what you’ve used and at a cheaper price, most will go for the cheaper option,” says Seyram Avle, assistant professor in global digital media at the University of Massachusetts, Amherst, and a researcher into Chinese technology in Africa.
“People tell me they’re happy with the engagement with China because it gives them access to things that they didn’t have access to or were priced out of, and they find that the relationship with Chinese technologists and engineers is easy.”
The firm’s aggressive pricing strategy, allied with its growing reputation as a supplier and technical partner on next-generation technology, has led it to engage with some of the biggest corporate names on the continent on a diverse range of projects.
Kenyan mobile payment provider M-Pesa migrated all 12.8m of its Kenyan subscribers to Huawei’s mobile money platform overnight in 2015.
In South Africa, where Huawei has helped to build MTN’s mobile network infrastructure, the firms are working together to roll out low-cost rural networks.
In the consumer market, Huawei is targeting the top spot across all pricing segments in the South African smartphone market.
While quantifying the overall influence of Huawei remains challenging, a McKinsey report asserts that Huawei and ZTE, another major Chinese firm, have built “most” of Africa’s telecoms infrastructure.
The future, at what cost?
And yet global security concerns have been growing in parallel with the firm’s meteoric African rise.
In 2012, the US Permanent Select Committee on Intelligence labelled Huawei a potential security threat, expressing concern over pressure from the Chinese government while arguing that the firm had not satisfactorily explained its founder’s links to the Chinese military.
Under the Trump administration, even more pressure has been brought to bear.
While Huawei has not formally been banned from the United States market, the Trump administration has launched a concerted attempt to dissuade its allies from dealing with the firm.
In December, Canada arrested Huawei chief financial officer Meng Wanzhou, daughter of Ren Zhengfei, on a US-warrant relating to sanctions-busting charges.
Tensions have come to a head as wealthy Western nations mull contractors for the rollout of 5G internet infrastructure.
Amid the noise of an acrimonious trade war between the United States and China, sorting out genuine accusation from geopolitical mudslinging is a challenge for African policymakers.
Nevertheless, some independent academics give credence to certain accusations against the firm.
Christopher Balding, a prominent China commentator and associate professor at the Fulbright University Vietnam, used Twitter to argue for the likelihood of strong links between Huawei and the government.
“Is Huawei a private company free from CCP [Chinese Communist Party] influence? Well, to date, they say publicly they are employee owned.
“Could be. They refuse to release records that would prove or disprove this assertion to any satisfaction… In China every company from big to small in this narrow and more broadly defined [telecommunications] industry is a ward of the state, from the service providers like China Mobile/Telecom/Unicom (explicitly state owned) to the hardware providers like ZTE (implicitly state owned)… To even propose that Huawei is somehow uniquely different requires such tortuous and astounding leaps of logic as to defy explanation.”
Given such views, should African policymakers be worried about the extent to which they have allowed Huawei to become intimately embedded in their telecommunications infrastructure?
In the worse-case scenario, are African citizens at risk of being snooped on by the Chinese government?
“In general, yes African states need to be concerned, but not just because of the Chinese. There should be more concern about citizen data and the way technology firms from outside are brought in.
“It’s important for consumer protection in the future – why wait until there’s a problem before you solve it?” says Seyram Avle.
According to a 2017 report by Deloitte, only 17 African countries have adopted comprehensive personal data protection legislation, while 16 have enacted cross-border data transfer restrictions.
Avle argues that researchers require more data to correctly diagnose threats to the security architecture of African states and citizens’ privacy.
“Because a lot is hidden… it’s hard to know at this point what the harm or damage is because we can’t really assess that given the information out there.
“There are a lot of researchers trying to get data from the Chinese end. At this point it’s difficult to get Chinese firms or African governments to give you the data… Part of the issue is that African states don’t have the kind of complex surveillance and security infrastructure that the US and Europe have, so for them a lot of these things are not quite as important.”
Nevertheless, Africa’s relatively young stage of telecommunications development could shelter it from the most serious security concerns.
While the introduction of 5G technology has become a major flashpoint for Huawei as it pursues European expansion, the technology is a long way from having an impact in Africa.
South Africa is not expected to deploy 5G on a significant scale until 2021-22, according to Pater.
In any case, Huawei repeatedly denies that its technology offers a backdoor for espionage.
And yet policymakers would be wise not to entirely dismiss privacy concerns in relation to Chinese technology in Africa.
In January 2018, the African Union accused China of hacking the computer systems of its $200m Chinese-built and fitted headquarters in Addis Ababa, Ethiopia.
AU technicians found that secrets were being copied to a Shanghai-based server during night hours.
Given that the hack was not revealed until a year after it was discovered, it further raises the question of whether African countries believe that challenging China is worth the geopolitical risk.
Riding the tiger
At September’s Forum on China-Africa Cooperation, the flagship multilateral event that has become a bellwether for Beijing’s engagement with the continent, President Xi Jinping announced that China will provide $60bn in financial support for the continent, including $20bn in credit lines, $15bn in grants, interest-free loans and concessional loans, and $10bn in investment financing.
Few African governments are willing to put that level of investment at risk by placing limitations on a Chinese overseas corporate champion like Huawei.
“From an ideological perspective, it’s difficult to start ostracising a large Chinese company,” says Pater.
But even if governments were willing to reassess their relations with the company, the extent to which Huawei is already embedded in many African networks raises significant questions as to whether limiting the firm’s operations is financially desirable or technically feasible.
“It has become a critical partner. If you wanted to take Huawei out of your network it would be quite expensive and quite complicated,” says Pater.
“From an operator perspective, they are not going to go out and stop buying Huawei, just because it is so ingrained in South Africa and most other operators in Africa.
Unless you’re really concerned that the Chinese could shut down the network with the flick of a switch, you will probably try to work with them.”
Few doubt the positive impact of the firm’s extraordinary infrastructure and equipment investments on the continent, which have played their part in connecting millions of Africans.
And for now, it seems likely that the continent’s policymakers will continue to give the firm the benefit of the doubt even as concerns reach a peak elsewhere.
As pressure builds on Huawei and its leadership, Africa may come to loom larger in the firm’s plans as it seeks shelter in welcoming markets.
“If the US does succeed in blocking this particular market [5G] for Huawei and others, they will really have no choice but to push full force into other markets,” says Avle.
“I think they will find a willing market place because the price point is important and there’s no real tension at the moment.”