Africa: Miscommunciation With China

Courtesy of Africa-Asia Confidential, a reporton how Chinese communications projects are encountering legal problems from East Africa down to southern Africa:

Uganda may miss the East African Community’s deadline of December 2012 for all member states to switch from analogue to digital television. In early August, Uganda’s communications regulator sounded the alarm, saying that the state-run broadcaster, the Uganda Broadcasting Corporation, may fail to deliver Uganda from analogue to digital technology by the 2012 deadline. The migration project has also raised concerns because rival companies in Europe had offered better deals before UBC chose China’s Huawei Technologies, according to sources close to the situation. The regulator is now considering stripping UBC of its monopoly as sole digital provider.

In late July, Ugandan parliamentarians halted the lucrative telecoms deal awarded to Huawei in August 2010 over concerns about the awarding procedure. Huawei had signed a US$74 million deal with UBC for the supply of digital migration equipment. The Ugandan authorities froze the deal and sacked UBC’s management while the Inspector General of Government conducts an investigation.

‘The contract was not awarded in accordance with the procurement laws so we were forced to halt it,’ Keith Muhakanizi, Deputy Secretary to the Ugandan Treasury and the Ministry of Finance and Planning, told Africa-Asia Confidential. The Ministry accused UBC of not opening the deal up for competitive bidding before awarding the contract. UBC, however, said that it followed the specifications of China’s Export-Import Bank grant which is funding part of the migration project.

Nandala Mafabi, a member of parliament from the opposition Force for Democratic Change, contacted the Finance Ministry about the ‘non-transparent’ nature of the digital television contract on 15 July. The project, he wrote, was overpriced and did not respect government procurement procedures. In recent years, Chinese-funded projects in Uganda have been exempt from public procurement procedures. China’s Exim Bank insisted it would only finance Huawei, compelling UBC to abandon the earlier advertised bidding process. The Finance Ministry initially guaranteed the loan, but after questions from the opposition and activists about the pricing, the Ministry turned around and described the loan as overpriced.

According to Kasian Wadri, head of the Parliamentary Public Accounts Committee, China’s Star Times and Sweden’s Next Generation Broadcasting Group had been willing to provide the digital infrastructure at almost half of the cost quoted by Huawei. Government has since dissolved the UBC board in an anti-graft crackdown initiated by President Yoweri Kaguta Museveni. Most of the former board members who negotiated the deal are now on suspension pending an investigation into the deal.

Backbone out of whack

Other Huawei projects in Uganda have run into problems. Uganda’s Auditor General found fault with the management of the $106-mn. national fibre-optic backbone roll-out, citing cost overruns, inferior equipment and sloppily-installed infrastructure. The 2,100-km. project is now three years behind schedule. The government, including Parliament and the Information and Communications Technology (ICT) Ministry, asked Huawei to stop work in April 2010 so that a forensic audit of the $30-mn. first phase could be completed after it was revealed that the fibre being installed would struggle even to meet current usage needs. The audit report also says that Huawei laid cables in swampland and buried lines in shallow trenches, so they are subject to damage when roadworks are carried out.

Huawei blamed local utility companies for digging up the lines and said that the delays were due to the government’s tardiness in setting up the National Information Technology Authority. Only the first phase of the three-phase project – to link Kampala to Bombo, Entebbe, Jinja and Mukono – has been finished. The first phase was implemented without a supervisory authority from the government to ensure the quality of the work.

In late July, State Minister for ICT Thembo Nyombi said the government had hired an independent auditor to probe the Huawei backbone deal to see if the government had got value for money on the stalled project. Completion of the second and third phases, which will link 28 districts to the backbone, is expected to take about two years. The lack of planning is evident in the fact that northern Uganda was excluded from the three phases of the project, according to the Parliamentary ICT Committee, which noted that the project cost two to three times more than similar projects carried out in Uganda and Rwanda. Despite Huawei’s problems in Uganda, Warid Telecom hired the company for the installation of its third-generation network in June.

Rwanda: the libya connection

In Rwanda, Huawei’s $35-mn. network upgrade deal with Rwandatel hit a snag in April after the Rwanda Utilities Regulatory Agency withdrew its mobile phone licence, accusing the company of non-performance and infringements of licence terms and conditions. The regulator warned the company several times before taking action following complaints from more than 500,000 subscribers about dropped calls and the poor service quality of locally-sold modems. Rwandatel had signed a partnership deal with Huawei to revamp its landline network and replace its Public Switched Telephone Network with a New Generation Network.

The deal involved a nationwide roll-out of new infrastructure to support Rwandatel’s Global System for Mobile Communications (GSM) and 3G Universal Mobile Telecommunications System (UMTS). Huawei signed the deal just two months after the acquisition of Rwandatel by LAP Green Networks, a subsidiary of the Libyan African Portfolio (LAP), an arm of the Libyan government. Rwandatel will continue operating fixed lines, which are mainly used in offices. Government officials say the cancellation of the licence had nothing to do with the United Nations-initiated sanctions against Libyan companies this year.

Kenya: Locals need not qualify

In Kenya, Chinese companies have landed a couple of deals but not without riling the local private sector and attracting criticism around issues of national security issues. Pan African Network Group, a Chinese company, won a lucrative bid to distribute digital TV signals across Kenya last month. Of at least six bidders, only Pan African Network Group qualified, according to Francis Wangusi, the head of broadcasting at the state-run Communications Commission of Kenya. James Rege, Chairman of the House Committee on Energy, Communications and Information, said that he would launch an investigation to determine why local companies did not qualify for the bid. Rege said that the awarding of the licence to a foreign company, one from a country prone to censorship, had opened Kenya to sabotage. The Nation Media Group and Royal Media Services lost an appeal on the contract to the Communications Commission of Kenya.

The Kenyan controversy followed the accusations in mid-June of pro-democracy Ethiopian Satellite Television.The company accused Beijing of supplying technology, training and technical assistance to allow the authorities in Addis Ababa to block short-wave radio and satellite transmissions.

Telecoms in the region continue to diversify from voice business to the internet market under tough conditions including stiff competition and falling revenue. ZTE, a Chinese telecommunications equipment manufacturer, recently reached a network upgrade deal with Telkom Kenya. The entry of ZTE gives Chinese companies including Huawei an edge over their European counterparts like Alcatel, Ericsson and Nokia, which previously dominated the market. Huawei is involved in an upgrade with Kenya’s Safaricom worth at least $130 million.

In Congo-Kinshasa, ZTE is also negotiating an exit from Congo Chine Télécoms, a move that has been in the works since 2008, ten years after the joint venture with the Congolese government was launched. CCT is in exclusive talks with France Telecom to buy its 51% stake in the company, in the hopes that the government will sell its share too, for a total investment of around $425 mn. CCT is the smallest of Congo-Kinshasa’s telecoms providers and has about 120,000 subscribers across five provinces and the capital of Kinshasa. South Africa’s MTN and Maroc Telecom have been involved in earlier sales discussions.

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