China's heavy investment in the African telecommunications sector has unsettled the American government, judging from U.S. Secretary of State Hillary Clinton's visit and remarks last week.
Clinton's remarks on her swing through the region are the first time that the American government has come out so openly to criticize China's investments, business interests and foreign assistance to Africa and to call on African governments to shun, as she put it, "easy-to-access Chinese money."
Chinese companies including Huawei Technologies and Zhongxing Technology (ZTE) have been awarded more telecom and networking contracts in the region than any other renowned telecom companies in the world. Chinese companies have also been involved in the mineral extraction sector, as well as telecom.
In Lusaka, Zambia, last week Clinton said the U.S. is concerned that China's foreign assistance and investment in Africa have not been consistent with generally accepted international norms of transparency and good governance.
"China has not always utilized the talents of the African people in pursuing its business interests," Clinton told reporters in Lusaka during a joint media briefing. She stressed, however, "the United States does not see these Chinese interests as inherently incompatible with our own."
Nevertheless, Clinton's remarks highlighted recent history in which Chinese companies have been charged with corruption in bids taking place in countries including Zambia, Uganda and Sierra Leone. In Uganda the government reached the point of suspending the laying of fiber optics by Huawei Technologies because of corruption allegations.
Clinton, who was in Zambia attending a two-day Africa Growth Opportunity Act (AGOA) forum, highlighted the American government's drive to help Africa accelerate impressive economic development. AGOA was signed into law by U.S. President Bill Clinton in 2000, and gives trade preferences to some 37 eligible African countries including Zambia, South Africa, Sudan and Ethiopia in terms of exporting their products into American markets. After Zambia, Clinton also visited Ethiopia and Tanzania.
On the other hand, in 2009 alone, China pumped US$10 billion in investment and development into Africa's telecom sector and extractive industry, making China the largest single investor in Africa.
The U.S. is concerned that China's quick economic push into Africa risks disturbing efforts to help the region to develop a more mature and transparent economy, Clinton said.
In a seeming showdown with Clinton at a joint press conference however, Zambian President Rupiah Banda said, "Africa's ties with China were healthy and long-standing."
Banda said Zambia has been in a close relationship with China since before the country's independence almost 48 years ago, adding that China helped many African countries to weather the recent global financial crisis.
Chinese loans go hand in hand with contracts. Econet got a loan from China recently 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 US$48 million from China for the improvement of the country's telecom sector through Zamtel with Huawei providing equipment and services. Last month, Zambia attracted US$180 million from China for road upgrades.
ZTE officials in Zambia declined to comment on the matter. But Xinhua, the official Chinese News Agency, this week quoted Chinese Foreign Ministry spokesman Hong Lei as saying, "China hopes related parties will treat China-Africa cooperation in an objective and fair way."
Lei said China fully respects African countries' right to choose their development path, adding that China never imposes its will on African countries, nor adds political conditions to its aid to Africa.
The Zimbabwean government, however, contracted a loan from China last year whose conditions were that technologies and services must be purchased only from China. The Import and Export Bank of China provided the loan, which will be used, among other things, to connect the Zimbabwean fiber-optic network to the East African Submarine Cable System under the Indian Ocean in Mozambique.
Access to cheap and subsidized funding sources 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 tailor-make solutions for poor African countries.
"As China continues its push for investment in Africa especially in the telecom and extractive sector, the fight will rage on but China will prove difficult to uproot because of its financial flexibility," said Edith Mwale, a telecom analyst at Africa Agency for ICT Development.
Sign up for CIO Asia eNewsletters.