African Operators, Governments Show Faith in Huawei
Huawei still has a strong relationship with most African governments, which don't seem to be bowing to global pressure to blacklist the Chinese company, according to industry analysts contacted by Connecting Africa.
Politicians in South Africa and Kenya have come out in support of the telecommunications equipment maker and Africa's leaders don’t seem to share the same concerns that are hampering Huawei's opportunities, and the strategic decision-making of its customers, in many Western markets.
"Africa is a Huawei-friendly region -- the continent as a whole depends heavily on Huawei technology. So there is strong support, both economically and politically, for Huawei," says Arthur Goldstuck, analyst and MD at World Wide Worx.
"My understanding is that Huawei has a 70% market share in networking infrastructure across Africa, and that is something you can't dismantle very easily," he added.
Huawei South Africa has been insisting since May that it is "business as usual" for the company and its local customers, despite the recent global fallout linked to a trade restrictions in the US. (See Huawei Commits to 5G in South Africa .)
"Huawei has had a very cordial working relationship with most governments across Africa, especially in advancing digital transformation across the continent," adds Danson Njue, a research analyst in Ovum's Middle East and Africa team.
Njue said Huawei is a very strong brand across Africa both in network and consumer technologies and most mobile operators in Africa have successfully deployed Huawei core, transmission and radio equipment in their networks.
Huawei's name has dominated world news during the past few months. Its CFO was arrested in Canada last December and the US has been pushing for its allies to cut Huawei out of their planned 5G networks, claiming national security threats due to Huawei's alleged close ties to the Chinese government. The most recent crisis came in May when Huawei was added to the US 'Entity List' that has restricted the ability of US companies, including Android parent Google and multiple networking component manufacturers, to trade with the Chinese vendor without a special license: A temporary 90-day license that has allowed some companies to continue trading with Huawei was issued on May 20 but those licenses run out on August 19. (See Huawei Cuts Sales Forecast as US Blacklist Bites .)
That Entity List situation is in flux, as the US continues its trade talks with China and US departments scramble to interpret the unscheduled announcements of President Donald Trump. At the end of June, President Trump stated that US companies could sell their products to Huawei as long as it is "equipment where there is no great national emergency problem with it." (See Trump Offers Hope to Huawei's US Suppliers and Huawei's Fate Up for Debate in a Possible US-China Trade Deal .)
However, a lack of clarity on how that is being interpreted means African operators and consumers remain unsure of Huawei's future on the continent as the August 19 ban deadline creeps closer. (See Talk – but No Greater Clarity – on Huawei Ban .)
"There has been a wait-and-see atmosphere across Africa as governments, mobile operators and users ponder on the next move if the ban comes into effect," explained Njue.
"In the consumer segment, Huawei has achieved a substantial market share in the regional smartphone market by offering a range of affordable smart devices and also partnering with mobile operators to distribute the devices through their retail shops and dealers and agents.
"In addition, there exists active partnerships between Huawei and several other governments in Africa mostly in optical fibre deployment and other infrastructure development, skills exchange etc. I think it’s only fair for these governments to defend Huawei. Overall, China has been a key development partner for most African countries and most governments would defend it," Njue added.
The strongest African support for the Chinese company has come from South African President Cyril Ramaphosa, who earlier this month made some pretty bold statements, calling the US "jealous" of Huawei and calling Huawei a "victim" in the US-China trade war.
"This standoff between China and the US where the technology company Huawei is being used as victim because of its successes is an example of protectionism that will affect our own telecommunications sector, particularly the efforts to roll out the 5G network, causing a setback on other networks as well," Ramaphosa said during a speech at the South African Digital Economy Summit in Johannesburg.
"The United States has been unable to imagine a better future which goes beyond four plus 1G, where they have been unable to imagine what 5G can offer. And where now they are clearly jealous that a Chinese company called Huawei has outstripped them -- and because they have been outstripped, they must now punish that one company and use it as a pawn in the fight that they have with China.” Ramaphosa added.
"We have to say that we support a company that is going to take our country, and indeed the world, to better technologies which is 5G. We cannot afford to have our own economy be held back because there is this fight that the United States is having all out of their own jealousies."
"We want 5G and we know where we can get 5G" he added.
Of course, Huawei South Africa welcomed the president's statement of confidence telling Connecting Africa it "is encouraged to continue with our work and investment in South Africa’s ICT sector as the country is preparing for the fourth industrial revolution".
Huawei said that "more than 10 countries in Sub-Saharan Africa have this year stated their willingness to work with Huawei in strengthening ICT infrastructure and bringing more connectivity to the region,"
In June, Huawei said its equipment was behind two-thirds of the commercially launched 5G networks outside China. This includes South Africa’s mobile data-only network operator, Rain. (See Rain boasts 5G network launch in South Africa.)
Kenya recently joined South Africa saying it would not be influenced by decisions made about Huawei in the US.
According to the South China Morning Post Kenyan information and communications technology minister, Joseph Mucheru, told a press conference in Nairobi last week that the East African country would make its own decisions on the Huawei issue.
“Our policies are not driven by US policies as far as technology is concerned…we pick what is best for us,” he is quoted saying.
“We are not going to be tied to what other people say, but we are going to make sure we get value for money for our citizens,” Mucheru reportedly added.
Njue believes Huawei's involvement in Africa runs deep.
"Across East Africa, Huawei has undertaken the deployment of several government-led national optical fibre projects, for example in Kenya and Uganda, that are in different stages of completion. Some of these optical fibre network projects are funded by the Chinese government, which ensures faster turnaround. Certain governments have collaborated with Huawei in security projects, for example in Kenya, where Huawei was involved in the deployment of police surveillance system across the major cities in the country," he said.
Huawei is also heavily involved in training and skills development in Africa.
Njue said that the majority of African leaders have remained silent on the Huawei matter as a way to appear neutral.
"The US is also a key ally in Africa especially on matters security and the war on terrorism. It’s clear that the [Entity List] ban, if implemented, will have a major impact in Africa and certain operators and governments have come out strongly to support Huawei," he adds.
Most analysts agree that Ramaphosa perhaps overstepped with his bold statements.
"I think he was a little rash -- there was some overexuberance on his part. It was an indication of his desire to stress South Africa's relationship with Huawei. But he is not really in a position to comment on the quality of their technology versus others," said Goldstuck.
There are other considerations, too. "It would be a wrong precedence to support only one vendor for technology, as there are other big mobile telecommunications equipment providers such as Ericsson, Nokia and ZTE, specifically on 4G and 5G technologies," says Sabelo Dlamini, senior research and consulting manager at IDC. "What is required is level playing fields for fair competition between these vendors. The country should go for technology and vendor-neutral solutions," adds Dlamini.
"Government should be calling for the country to start the journey of developing its own technologies compared to just being consumers, and Huawei would be one of the good stories to learn from," adds the IDC man.
CEOs step in
President Ramaphosa also confirmed he had received a letter from South Africa's four major telecoms operators -- MTN, Vodacom, Cell C and Telkom -- which discussed the recent trade ban in the US. The CEOs warned the ban would have "potentially devastating consequences for the telecommunications sector" in South Africa.
In the letter, written on June 7, 2019, a copy of which Connecting Africa has seen, the CEOs say the US government's decision to include Huawei on the Bureau of Industry and Security's Entity List "poses a significant risk to the entire South African telecommunications sector as well as the broader SA economy".
The SA CEOs were seeking urgent intervention from Ramaphosa saying that "any restrictions imposed by the US Government that disrupts the existing supply chain could have serious consequences for our national infrastructure, the provision of critical services to customers and national security."
The CEOs added: "The loss of Huawei capacity will significantly stall South Africa's telecommunication development and will impede the gains the country has made in preparing for the release and use of additional 4G and 5G spectrum."
That impact might take a while, but it could be notable. "I don’t foresee short-term problems for the networks of the mobile operators or for consumers using Huawei handsets. But, in the longer term, if the ban continues, there will be negative impacts on the mobile market and for consumers," said independent analyst Dr. Charley Lewis.
"This is particularly so for the operators that are most dependent on Huawei infrastructure, such as Telkom. So the united approach by the big four to the President is understandable and significant," he added.
Goldstuck agreed that in South Africa Telkom is heavily dependent on Huawei and MTN also makes extensive use of Huawei technology.
According to Njue, Kenya's Safaricom has also acknowledged that the ban would result in very practical difficulties in its operations.
"[Safaricom] stated that it would stand with its partners, including Huawei, as much as it could. According to Safaricom, the interconnectivity business means that tech companies have to use a myriad of resources, both hardware and software, from different companies and the ban would definitely affect business," he said.
This key industry development is far from over. Huawei's suppliers are in no mood to miss out on doing business with the world's largest telecoms equipment manufacturer and Huawei itself is already making moves to become less reliant on external suppliers, especially those from the US. (See Huawei Prepares for Possible Life Without US Suppliers and Why Huawei's Addition to the Entity List Is the Pandora's Box of Telecoms.)
At the same time, Huawei has been well known over the years for flouting international rules and such activities may continue to cause disruption to its business. (See Huawei Breached US Sanctions by Selling Gear to North Korea – Report.)
Africa's operators and governments, like the rest of the world, will have to wait and see how the multiple twists and turns of international trade, political relations, and Huawei's own strategy, impact the Chinese giant's future.
— Paula Gilbert, Editor, Connecting Africa