In another controversy over China's influence in the African ICT sector, the Ethiopian government has allowed Huawei Technologies to take back $13 million of telecom equipment that was being held while the country's tax agency looked into charges that the goods were illegally imported.
Despite the incident, Huawei has been picked by Ethio Telecom, a state-owned telecom company, to roll out a high-speed 4G network across the country's capital, Addis Ababa, as part of a $1.6 billion deal signed earlier this year with Huawei Technologies and ZTE.
In October this year, Ethiopian tax authority ERCA said it would confiscate the equipment and slap the company with a tax avoidance charge, after the equipment had been held in a warehouse for almost a year. The equipment was imported into the country toward the end of 2012 after Ethio Telecom made known plans to expand its network in the East African country.
Ethio Telecom is the sole telecommunication services provider in Ethiopia and the only operator in the East Africa region that is still under tight state control. The Ethiopian government has refused to open up its telecom sector to private investors.
According to a Ethiopian government official, Ethiopia and China became involved in diplomatic talks over seizure of the equipment. The two countries are said to have agreed that it was important to maintain good bilateral relations by allowing Huawei to take back the equipment.
However, the Chinese company has also been ordered by ERCA to pay five percent of the total tax due on the equipment as well as warehouse charges incurred over the past one year.
"We had planned to slap the company with tax avoidance charge and confiscate the equipment. But the two countries got involved in the issue and it was agreed that it was important to maintain cordial bilateral relations," an ERCA source said on condition of anonymity. He said China has been a major funder of several ICT projects in Ethiopia, including the $1.5 billion Millennium project aimed at creating a fiber-optic network across the country.
Huawei's spokesperson in Ethiopia, Celia Huang, has denied in an interview with local media that the company was taking back its equipment under any sort of order or constraint from ERCA.
Huawei imported a total of 235 items including energy storage units, various types of batteries and microwave telecommunication products. Questions are however, being still being asked regarding the timing of the imports. Industry insiders asked how Huawei knew it should start importing the equipment several months before the Ethio Telecom tender was actually awarded to the company.
Huawei told ERCA that it imported the equipment on behalf of Ethio Telecom. Ethio Telecom, however, denied it had authorized Huawei to import the equipment on its behalf. It even refused to accept an offer by Huawei to buy the equipment after it was seized, claiming it had no legal obligation to buy it.
But Edith Mwale, telecom analyst at Africa Center for ICT Development said, "most ICT projects in Africa are funded by China, making it impossible by African governments to punish Chinese companies even when the wrongdoings are visibly clear and undisputable."
Chinese telecom companies have been facing corruption allegations around Africa because of the manner in which telecom contracts are awarded to them. In Kenya, Algeria, Zambia, Uganda and Nigeria, Chinese companies have faced investigations over corruption related to telecom tenders and inflation of costs.