Conditional loans raise China's telecom sales to Africa

In a bid to sell more telecommunications gear to Africa, China has started offering development loans to with conditions that governments buy telecom equipment only from Chinese companies.

China's wave of new telecom loans to Africa comes in the wake of the Indian government's move to provide telecom equipment to Africa for the Pan African e-Network project, expected to link all public administrations on the continent.

The Indian government hopes the e-network project will help the country's manufacturers sell more telecom equipment to Africa. The Indian government is setting up US$125 million communication facilities in African for free for five years. After five years, African governments are expected to be buying telecom equipment from India for maintenance of the facilities and the continued running of the e-Network Project project.

Several African governments including Zambia, Ethiopia, Mauritius and Ghana have already signed agreements with the Indian government for setting up facilities by India and equipment.

Meanwhile, China's increased involvement in the African telecom industry is an attempt to enhance its telecom footprint in the region where governments are pushing for improved telecom services through the deployment of new technologies.

"We expect more fighting in the supply of telecom equipment and services as more African countries move to improve and upgrade their networks," said Edith Mwale, a telecom analyst at African Agency for ICT Development.

China, Mwale said, is likely to win the fight as its strategy involves providing money that has flexible repayment conditions coupled with cheap technologies.

The Zimbabwean government is the latest country in the Southern African region to contract a loan from China whose conditions are that technologies and services must be purchased only from China. The Zimbabwean has contracted a $45 million loan for the rollout of 2G and 3G networks for the country's financially struggling incumbent operator NetOne. The Import Export Bank of China provided the loan that will also be used to connect Zimbwean fiber-optic to the East African Marine cable system under the Indian Ocean in Mozambique.

Zimbabwean Minister of Finance Tendai Biti told the country's lawmakers last week that the loan will enable the country to increase capacity and move to 3G and 4G phone technologies.

Biti said Zimbabwe is ranked 132 out of 135 on the World Economic Forum Global Competitiveness report on technology readiness -- one reason the loan from China to develop the sector was considered. Huawei Technologies of China has already been selected to manage and implement the rollout of the project.

The Indian financed e-network project is, meanwhile, already operational in 33 African countries and is expected to eventually connect all 53 African countries and establish a private communications network for all African heads of state.

While the Indian government is directly involved in the e-network project, the Chinese government is using its telecom companies including Huawei Technologies, Zhongxing Telecom Ltd (ZTE) and China Telecom to push for investment and sales of Chinese telecom equipment in Africa.

Access to cheap and subsidized funding sources provides Chinese telecom companies an important competitive edge not available to other, independent international companies.

"The establishment of Huawei Technologies in Zambia in 2001 has brought the latest technology, which has enriched the lives of many Zambians," according to a statement from Zambian vice president George Kunda in Shenzhen, China, Tuesday. Kunda, who is touring China, said Zambia was looking forward to more investments from Chinese telecom companies.

Three years ago, Zambia also contracted a loan of $48 million from China for the improvement of the country's telecom sector through Zamtel with Huawei Technologies providing equipment and services.

"As a result of the Chinese government support for the telecom companies, Huawei Technologies and ZTE keep their prices extremely low and tailor-make solutions for poor African countries," said Amos Kalunga, a telecom analyst from the Computer Society of Zambia.