Africa/China. Chinese Investments in African High Technology.

Chinese high-tech companies are banking on Africa, especially on the ‘Silicon Savannah’ of Nairobi, to develop strategies aimed at satisfying emerging markets. The unknown factor is the collection and management of mega-data

Of all the roughly 200 technological hubs in the emerging African market, the Nairobi cluster stands out, so much so that it has earned the nickname of the Silicon Savannah. While Silicon Valley itself seems to be losing ground to the competition based in Guangzhou and Shenzhen, China is pouring huge amounts of capital into the African high technology sector: the dragon is diversifying its portfolio and does not seem to want to follow the same story of the trap of infrastructure debts.

This phenomenon regards not only Kenya but all of Sub-Saharan Africa. For example, having completed many Information and Communications Technology (ICT) projects, Huawei has recently announced the opening of a new data centre in South Africa, in the wake of Google and Amazon. Jack Ma, the founder of Alibaba, a Chinese multinational conglomerate specializing in e-commerce, retail, internet and technology, has expressed interest in the African market, visiting Rwanda and putting together a deal mainly focussed on a network of e-services capable of facilitating interaction with the Chinese market. Transsion, the Chinese low-cost smart-phone giant, is instead getting ready to launch Boom Play, a new music-streaming service, in a joint venture with the Chinese internet provider Netease.
Lastly, an investment of high strategic and symbolic value has been made by  CloudWalk, a Chinese start up based in Guangzhou which has signed an agreement with Zimbabwe to install new generation facial recognition software, following the massive domestic filing carried out by the Chinese government for the implementation of its controversial system of social credit.

The Nairobi case

Chinese investment in African technology is therefore taking place over a broad spectrum and extends well beyond the examples mentioned. The Nairobi Silicon Savannah provides excellent examples both of top-down classical investments of the Chinese giants and of a flourishing panorama of domestic innovation: an ideal overview for understanding how Africa, young and full of potential, interacts with the Chinese market which is already consolidated and maturing.

Nairobi is today entirely covered by 4G (Huawei is the prominent contractor for the telephone towers) and, in the past, 3G was offered at a relatively low price, permitting easy access to the internet, often with low-cost hardware brought in by the Chinese. With its pioneering approach to the internet, Nairobi has become the embryo of African technology, the epicentre of platforms to bring together technology and investors. Of these, as many as four of the largest African accelerators are based in Nairobi (88Mph, Savannah Fund, Sinopsis Group and The Growth Hub), together with two important incubators (iLab Africa and mLab). The model is Silicon Valley, with some extra attention given by the institutions: entire structures are dedicated to co-working spaces often supported by the local government, either directly or through policies that foster the establishment of new businesses and new brains.

The foresight of the Kenyan government should be noted because, by the careful use of public politics, it has been able to create a fiscal environment favourable both to investment and to the survival of micro-companies hunting for the ‘killer app’. One exemplary Kenyan product is the micro-payment service M-Pesa, the p2p platform launched by Safaricom in 2007. The success of M-Pesa is due to a design that is tailor-made for the local market, taking into account the payment and remuneration habits of many Africans, according to which the frequency reference if not the month but the single day. In practice, M-Pesa is a service that has become localised and exemplifies the typology and targeting of technologies developed in Kenya in the past fifteen years: from Africa to Africa by nature and design, with the potential to take hold also in some Asian markets with particular exigencies and characteristics.

Nairobi is, then, leading Africa into the fourth industrial revolution, destined to unhinge the current rules of manufacturing industry and to bring about historical changes in the most disparate sectors (from finance to agriculture) with the development of highly disruptive technologies such as big data, the block chain, 3D printing and artificial intelligence (AI). In the coming decades, Beijing aims to gain a position of absolute leadership in the new technologies, especially artificial intelligence (AI).
It is not therefore unusual for the Chinese government to point private companies towards the African market by means of instruments of policy and financing, taking advantage of a very active and receptive emerging market that presents rural and urban trends in many ways similar to those applicable to the Chinese market. In this way, besides filling the infrastructure gap, Beijing sustains the view according to which Africa has ceased to be an aid-driven economy and is about to reach maturity in a strategic market characterised by the convergence of the interests of Chinese investors with those of local governments and local companies. With less aversion to risk-taking than their western counterparts, the Chinses are fully engaging with Silicon Savannah, aware of the greater financial risk but also of the possibility of major gains, both in terms of sales and of innovation aimed at solving specific African interests of a kind potentially similar to those of China.

The problem of Data Harvesting

There is no doubt that China has contributed much to the African information technology from infrastructure for telephonic and telematics coverage to undersea cables with hubs in Djibouti and the Kenyan port of Mombasa, from the training of African technicians in China to the export of low-cost hardware. The other side of the coin, however, is that of data harvesting which explains the distribution of hardware and software with low profit margins: African data are essential if Chinese companies are to achieve domination in future artificial intelligence (AI) markets. The monetisation of user data is already present in Facebook, Google and Amazon. Nevertheless, in the case of such Chinese companies as Tencent or Alibaba, there is even less clarity as to norms. Some may find some meagre consolation in the Facebook defeat by Cambridge Analytica; the Chinese system offers even less transparency regarding the collection and use of data.

The problem is, first of all, normative and can largely be traced to differences in the Chinese concept of ‘privacy’ and the Chinese concept of society which is based on Confucian values that allow for a greater role for authority. Again, Kenya provides a useful example since it is one of the few African countries where discussions are taking place regarding collection policies involving private individuals and institutions, especially after the adoption of the General Data Protection Regulation (GDPR) by the EU. Despite this, national institutions are moving in a vast system of actors and pressures where Chinese interest is strong: from this perspective it is necessary to consider the distinction between public and private which in China is mostly formal, as is shown by the transverse presence of people enrolled in the Communist Party in all posts of real responsibility. In the ITC sector, there is an opportunity of having a level playing field, as long as this does not upset Beijing which possesses important means of political and economic leverage. Among these, we find in the case of Kenya, considerable outstanding debts for the port of Mombasa and the Nairobi Standard Gauge Railway.
Federico Zamparelli/CgP


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