Author: William Shumate
Originally posted on the TechPolis Blog.
Does Chinese funding encourage state ownership of African telecom enterprises?
We should be taking a closer look at the relationship between Chinese vendor financing and the multitude of state-owned enterprises (SOEs) in African telecommunications. SOEs are attractive to Chinese policy banks because they can offer sovereign guarantees instead of only financial guarantees, therefore linking telecom financing to domestic politics and potentially to concessions in other economic or political areas. However, data is scarce to make sense of this link.
Pundits offer Africa’s large number of telecom SOEs as one of the reasons the continent lags behind Latin America and developing Asia in telecommunications. A study done in 2007 by the ITU found that out of 192 member states, 123 had private fixed-line incumbents. Africa led the way for state-owned fixed-line incumbents with 26 and had the lowest share of private owned operators in landline.
Another 2007 study compared the privatization of fixed-line operators in OECD (Organization for Economic Cooperation and Development) countries, Latin America, Asia, and Africa. The study – Privatization of the Fixed-Line Telecommunications Operator In OECD, Latin America, Asia, and Africa: One Size Does Not Fit All – showed Africa consistently ranked low on privatization, with indicators around twice as low as the OECD countries, and less than all other regions. In particular, resource-scarce landlocked African countries had the lowest rates of privatization—almost six times smaller than the OECD countries.
There has been some progress, however. A Deutsche Welle article states that while in 2000, nearly half of African communications service providers were state-owned, by 2018, only about one-fifth of them were active. However, there still is a disproportionate number of state-owned telecommunications operators in Africa.
As of 2014, there were 31 countries in Africa with state-owned incumbents that were either dominant or had some monopoly privileges. These countries include Algeria, Angola, Benin, Burundi, Cameroon, Central African Republic, Chad, Comoros, Congo-Brazzaville, Congo-Kinshasa, Djibouti, Egypt, Equatorial Guinea, Eritrea, Ethiopia, Gambia, Guinea, Guinea-Bissau, Libya, Mali, Mozambique, Namibia, Niger, São Tome, Sierra Leone, Swaziland, Tanzania, Zambia, and Zimbabwe.
Many of these countries are focal points for Chinese vendor financing in telecoms, raising the question of whether or not there is a link between Chinese banks and the number of state-owned operators.
One concrete example is Zimbabwe, where state-owned operators have large amounts of Chinese loans. For instance, mobile-operator NetOne has $245 million in Chinese funding out of $275 million in total financing. NetOne’s 2018 loans came from China’s Eximbank, and so did an $80 million loan to fixed-line state-owned telco TelOne.
William Shumate is a 2nd year Master of International Affairs student at the School of Global Policy and Strategy. Before starting at GPS, he spent over five years working in politics, international consulting, public health, and nonprofits. His areas of expertise include information and communication technologies, global security, international development, and conflict resolution with a regional focus on China, Africa, and the Middle East.