China’s growing influence in the telecoms sector appears to be part of a government strategy to win bilateral financial support, confidential documents released this week by the whistleblower website Wikileaks suggest.
The influence has caused jitters in Western capitals whose vendors have lost ground to their Chinese counterparts as politicians put pressure on local operators — Safaricom and Telkom Kenya — to curry favour with the dragon.
The leaked cables describe Chinese firms as using bribes, cut-throat pricing strategies and coercion through senior government officials to win lucrative deals in the sector, a trend that US government officials in Nairobi saw as detrimental to the industry’s growth prospects.
“Chinese influence is so great that it is actually distorting critical investment decisions in Kenya’s all-important ICT sector. For further investigation is the role of the Chinese government,” said Mr Michael Ranneberger, US ambassador to Kenya. in a cable dated October 2007.
Cables from the Nairobi embassy detail how two major players in the telecoms sector, Telkom Kenya and Safaricom, separately voiced their concerns about being cajoled into using Chinese contractors for their network needs.
In his typical caustic style, former Safaricom CEO is said to have used a monosyllabic expletive beginning with “s” to describe the after-sales service of Chinese firms.
In the cables, Mr Joseph was said to have cited incidents of harassment from non-telecoms related ministers who urged him to use Chinese contractors to ensure continued Chinese foreign assistance.
The executive is said to have sought audience with the Huawei CEO in China to cancel a contract Safaricom entered into in 2006 after the Chinese firm supplied only half the goods promised.
When he returned from China after cancelling the Huawei contract, say the leaked documents, Mr Joseph was summoned to the office of Mr Mutahi Kagwe, the then minister of Information and Communication, and told the cancellation put all Chinese foreign assistance to Kenya at risk.
“The Chinese are re-colonising Africa for natural resources... the Chinese are driving the ICT agenda in Kenya,” Mr Joseph is reported to have said. But yesterday Mr Joseph was surprised by the Wikileaks account of events.
“I have heard about it but have no idea where this comes from,” he told Business Daily.
“It (the cable) is not a reflection of the truth as evidenced by Safaricom being a major purchaser of Huawei products including all 3G, switching and the recent OCS billing system upgraded over the weekend,” Mr Joseph said.
Telkom Kenya hoped to circumvent growing pressure to buy Chinese after its privatisation in 2008.
The firm came under scrutiny when it awarded the second phase of its CDMA project to Huawei without a public tender, a move that is said to have “raised eyebrows” in the sector.
Meanwhile, Dr Bitange Ndemo, the Information PS, is described as having employed “creative” means to get products from US companies to be used for government projects.
“Ndemo regularly expresses concern about the influence of China in the ICT sector. Without providing details, he has told Econ/C many times that he and other senior technocrats are under constant pressure from their own ministers and the country’s senior political leadership to buy Chinese,” say the cables.
It is telling that the leaked document relates to a period during which two Chinese firms operating in Kenya started to increase their footprint, establishing regional offices locally and winning lucrative deals that had until then been the preserve of European firms.
In the past five years, Huawei and ZTE Technologies have entrenched themselves as pivotal telecommunications equipment and IT service providers, and now command around 80 per cent of the business regionally.
Their competitors in the field - namely Nokia, Siemens, Alcatel-Lucent and Ericsson have battled to maintain their market share in the face of the rock bottom pricing the Chinese are known for.