Africa has long been a battleground for influence between China and the US, and the latest phase in this rivalry is digital.
Huawei — as the largest builder of mobile phone masts in Africa (about 70 per cent of them), the maker of Africa’s most popular handsets and the key player in developing 5G technologies in the region — stands in the way of America’s digital ambitions in Africa. This makes it a natural target for the Trump administration’s ire.
Huawei’s dramatic growth in Africa is not an isolated phenomenon but part of a broader Chinese digital strategy that is only now reaching maturity. China has spent the past decade building the region’s digital infrastructure. Two Chinese companies — Huawei and Transsion — hold nearly half of Africa’s handset market.
Transsion has gone to great lengths to understand African consumers, setting up research centres in Nigeria and Kenya and an assembly plant in Ethiopia. These have enabled it to produce handsets that are adapted to local market demands and income levels.
Transsion’s “smarter phones” (internet-enabled feature phones) cost as little as $20 and their quality is improving with each iteration. They come with dust-resistant screens, long battery life and multiple Sim card slots, which are critical in African markets. Transsion sold more than 10m of its Tecno and Itel handsets in Africa last year, giving it a third of the region’s smarter phone market.
The falling cost and ready availability of Chinese mobile phone technology have been key drivers in boosting mobile connectivity in Africa. The proportion of Africans with mobile phones has surged from about 1 per cent in 2000 to about 50 per cent now, and in many cities it is 100 per cent or greater (as many Africans have multiple Sim cards).
Mobile phones also provide a platform for 10 per cent of Africans to receive financial services, and this proportion is rising every year. This has made Chinese tech a key component in digital and financial inclusion and has bred credibility for Chinese companies in Africa.
The much-trumpeted Belt and Road Initiative (BRI) is also a digital play by China. Each physical hub in the BRI chain is a digital hub, routing data through a vast network feeding back to China. Much of Asia is being integrated into this digital network, with land hubs in Bishkek and Tehran and maritime hubs at Kuala Lumpur, Jakarta, Kolkata and Colombo.
East Africa — focused on Kenya — is the next link in this digital chain. With a trade infrastructure that is well integrated into eastern, central and southern Africa and one of Africa’s most digitised and mobile savvy economies, Kenya’s place in the digital BRI could provide an entry point for China to access all African markets digitally.
With the digital network in place and millions of Africans being connected to it every year, the groundwork has been laid for the next wave of Chinese tech giants waiting in the wings — the BATs. Baidu, Alibaba and Tencent have more than 1.5bn users on their platforms and are the key reason that more than half of all e-commerce in the world takes place in China.
The BATs’ digital offering is unrivalled, combining on a single platform the kinds of services provided by Amazon, eBay, Uber, Google, Airbnb and many others, while providing chat, payments and, more recently, digital banking. All three BATs own their own e-banks — aiBank (Baidu), MYbank (Alibaba) & WeBank (Tencent). Their strength and experience in delivering services in China positions them strongly to serve Africa’s emerging generation of e-consumers.
Alibaba was the first mover, in 2017, setting up an Alipay service for Chinese tourists in South Africa. WeChat was not far behind, last November launching a partnership with Kenya’s ubiquitous payment platform, M-Pesa. The two companies’ combined networks have the potential to capture the lion’s share of the billions of dollars of goods and payments that flow between China and east Africa every year, much of it handled by lone traders and SMEs. In the process, they could help digitalise billions of dollars of informal trade that is currently transacted in cash, by barter or by the hawala system of informal money transfer.
In this context, the efforts of the Trump administration to isolate Huawei could backfire in Africa, where US companies face serious competition. Chinese mobile brands are entrenched and the low cost and ready availability of Chinese handsets have given them a dominating market edge. The BATs are poised to strike and can rely on a network of over 1m Chinese entrepreneurs, who have set up shop in Africa over the past decade, to promote Chinese platforms and connect them to African businesses and consumers.
The US also faces opposition from African governments who are unenthusiastic about winding back their relationship with China. The African Union has shrugged off allegations that China harvested confidential data from its HQ in Addis Ababa and in May signed a three-year agreement with China on ICT co-operation. This programme has a strong focus on bleeding-edge technologies such as 5G, AI and cloud computing, all areas where China will compete with US tech giants in the coming years.
The likely losers In this digital stand-off will be US tech giants. Google has pledged to limit the Android services it offers to Huawei after the executive order issued by President Donald Trump, which will affect millions of African users of Huawei handsets.
Facebook and its wildly popular WhatsApp could also find themselves in the crosshairs. WhatsApp has become the key means of communication for millions of Africans and is the platform over which Facebook plans to roll out chat-based financial and other services (including its own cryptocurrency, the Libra). But WhatsApp’s dominance and Facebook’s ambitions could be thwarted by efforts to block Huawei from using US software or tech.
Such a move would achieve the opposite of curbing Huawei’s influence. Instead, it would remove competitors such as Google, Facebook and WhatsApp from the race to conquer Africa’s e-commerce market. For the first-time African buyer of a mobile phone, the choice between a handset they can afford that doesn’t use WhatsApp and one they can’t afford that does, is the choice between having a phone and not having one.
The BATs stand ready to provide every conceivable data, search, e-commerce or chat service over their own platforms, enabling the next generation of African e-consumers to migrate seamlessly on to China’s digital network. Partnerships like the one between WeChat and M-Pesa enabling African consumers to buy goods directly from China rather than from western companies will further shut out US e-commerce platforms.
Africa’s e-commerce sector is poised for dramatic expansion over the coming decade. No company has the upper hand at the moment. By effectively barring US tech giants from competing just as the battle is about to start, Washington could end up handing it to China on a plate.