Despite increasing criticism of Chinese investment in Africa's telecom sector, China has provided over US$40 million in loans to Rwanda and Zimbabwe for investment in the telecom sector.
The loans have been provided through the Import and Export Bank of China (EXIM) to improve Rwanda and Zimbabwe's communication infrastructure. The Zimbabwean loan will be used to develop incumbent operator NetOne's broadband infrastructure in a bid to enable the company to compete with private telecom operators. The company wants to connect to the East Africa Submarine Cable System (EASSY) cable to boost its broadband capacity.
"Through the loan, NetOne is looking to increase internet access to its customers throughout the country," said NetOne managing director Reward Kangai at a media briefing last week.
A June/July 2011 State of Mobile report by Opera ranked Zimbabwe as Africa's fastest growing mobile market. China is the largest single investor in Africa's telecom sector with Chinese companies including Huawei Technologies and Zhongxing Technologies (ZTE) being awarded more telecom and networking contracts than any other renowned telecom companies in the world. Chinese companies have also been involved in mineral extraction sector as well as telecom. In 2009 alone, China pumped $10 billion in investment and development into Africa's telecom and extractive industries.
Chinese loans, however, go hand in hand with contracts. China has been providing telecom loans to African countries with the condition that supply and installation contracts go only to Chinese companies.
Mobile operator Econet of Zimbabwe got a loan recently from China and the contract to upgrade its network was given to ZTE, which edged out Ericsson.
About three years ago, Zambia also contracted a loan of $48 million for improvement of the country's telecom sector through the then incumbent operator Zambia Telecommunication Company (Zamtel) with Huawei Technologies providing equipment and services. Zamtel has now being sold the LAP Green Networks of Libya.
"African governments are rushing to China for financial assistance because Chinese loans are easy to get in addition to flexible payment conditions," said Edith Mwale, a telecom analyst at Africa Center for ICT Development.
The contract conditions are the down side of the loans, Mwale said. As a result of such conditions, there have been numerous allegations of corruption by Chinese companies, which have a recent history of being charged with corruption in telecom bids taking place in countries in Zambia, Kenya, Sierra Leon and Uganda.
Last month, the Ugandan government blocked a loan from China meant for digital migration following allegations of procurement flaws and overpricing. Huawei Technologies is accused of inflating the cost of the contract in addition to flouting procurement procedures for the supply and installation of digital equipment for the Uganda Broadcasting Corp. The contract was awarded through a private negotiation, meaning without advertising to allow other companies to bid for the tender. After pressure from opposition lawmakers, the Ugandan government decided to block the loan.
Last year, Huawei Technologies was also embroiled in a controversy over a tender to lay fiber-optic cable in Uganda. The national transmission backbone and e-governance infrastructure initiative was a $106 million project, funded by a loan from EXIM bank. The project was temporarily halted over controversy involving allegations of inflated costs and the use of incorrect cabling.
China is additionally facing criticism over a controversial tender that was won by a Chinese company, the Pan African Group of China (PAGC) for Kenya's digital TV signal distribution. The two local stations that lost the bid, the National Media Group and Loyal Media Service allege that corruption was involved in the awarding of the tender because the Kenyan government is setting up mechanisms to interfere with media freedom ahead of next year's general elections. Concerns stem from the fact that PAGC can decide to sabotage the elections by switching off the signal distribution when the votes are being counted.
In June this year, U.S. Secretary of State Hillary Clinton while attending the African Growth Opportunity Act (AGOA) forum in Zambia said the U.S. was concerned that China's quick economic push into Africa risks disturbing efforts to help the region develop a more mature and transparent economy.
Access to cheap subsidized sources of funding provides Chinese telecom companies an important competitive edge not available to other international companies operating in the region. Huawei Technologies and ZTE also keep their prices extremely low and provide tailor-made products to poor African countries.