Being there or being square

Absence may make the heart grow fonder, but if companies want to succeed in Africa, they need to be physically present in the continent, experts say

Private companies from China must establish a physical presence in Africa if they want to reap continued, sustained gains, say top officials from the network equipment maker Huawei Technologies.

Direct outreach measures such as physical stores and other community development programs, officials say, go a long way in reaffirming China's commitment to sustain the local economy in Africa.

Huawei, which has a sizable presence in Africa, has already made a beginning by setting up franchise stores in Johannesburg, South Africa, with its local partner Vodacom.

"We also have plans to open similar stores in other parts of South Africa soon. The Johannesburg store is just a precursor of the massive expansion plans that we have in Africa," says Bruce Wong, Huawei's key account general manager for Vodacom. According to Wong, such stores will help reinforce the Huawei brand in Africa and establish closer links in what it considers to be a major growth market.

Starting out as a small workshop in Shenzhen in 1987, Huawei has since grown into a multinational powerhouse with more than 70 percent of its revenue coming from outside China. In 2012, the company posted sales of more than 220 billion yuan ($37 billion) worldwide, with the EMEA region (Europe, Middle East and Africa) accounting for 77 billion yuan of the total.

Last year the company signed a $700 million contract to build phone networks in Ethiopia and also secured major networking deals in Zambia and Nigeria. Huawei says that from 2005 onwards, international operations have consistently outperformed domestic business.

Gabon is another African country that the company is betting big on. Hu Ningning, managing director of Huawei Gabon, who heads a 50-member team, says localization is an important tool for the company. "More than 35 people in my team are from Gabon," he says. Hu, 28, been in Africa for seven years and has also worked in the Democratic Republic of Congo and Cote d'lvoire.

Huawei entered Gabon in 2000 and has developed its business in three main areas: building towers and wireless transmission systems for local mobile operators such as Gabon Telecom and Airtel, providing customized services for local enterprises and governments; and selling phones to customers in Gabon.

"Compared with other sub-Saharan countries, Gabon is stable and has rich natural resources, so it has been developing very quickly," Hu says.

Figures from the World Bank shows the GNI per capita of Gabon in 2012 was $10,040, which puts it in the upper middle-income club.

Nevertheless, the country's infrastructure is still in a very poor condition. The main road in Libreville, along the seaside, is always congested and devoid of any traffic lights.

"That also means Gabon has huge demand in these areas," Hu says. Huawei Gabon has also started to work with the Gabon government on e-education, e-medicine and cloud computing. The company thus expects that people in remote areas of Gabon can get education and expert medical treatment from doctors in Libreville.

Hu estimates that through these projects, Huawei will be able to create at least 1,000 local jobs in Libreville, as most these ventures would be subcontracted to local companies.

As the only middle-income country in West Africa, Gabon's government is eager to upgrade its infrastructure in telecommunications and the Internet. Projects high on its agenda include a national broadband program, an e-education system and a smart city program.

"Currently these are just blueprints from the government and would be partly financed by the World Bank and China Exim Bank," Hu says. He estimates that the complex systems will be finished in the next three to five years.

The government's priority, however, is the smart city project. This involves erecting a sophisticated information network in Libreville, including overhead cameras alongside roads to monitor speeding and emergencies, and various administrative devices for police.

A big advantage for ICT in Gabon is that the country has a long coastline of 800 km and it has already got submarine fiber cables ready to be connected. So connecting it to broadband is easier than doing it in a landlocked country, Hu says.

"If a customer is willing to pay, we can provide door-to-door broadband connectivity. We can even upgrade the same to fiber optics," Hu says.

Gabon has a population of 1.6 million, a relatively small market for many international operators. As in other overseas markets, Huawei faces competition here also from multinationals such as Alcatel-Lucent and Cisco.

"Wherever there is customer demand, we will be there," Hu says, adding that this includes even the medium to small markets. "We are looking for long-term development and not just quick profits."

To reiterate its commitment, Huawei set up a company in Gabon, given the fact that its competitors only maintain offices with some technicians as liaison. The only other overseas telecommunication company present in Gabon is the Chinese equipment maker ZTE.

Huawei says this strategy is not just for Africa, but also for all its overseas markets. The company is currently present in more than 140 countries and serves more than 2 billion customers across the world. It has 20 offices in Africa, and annual sales from the region stood at $3.5 billion last year.

Chris Demchak, co-director of the Center for Cyber Conflict Studies at the US Naval War College, told Foreign Policy magazine in a recent interview that companies like "Huawei are offering exceptionally competitive prices, generous financing, and fully managed systems to governments in Africa that otherwise have grave difficulty expanding into broadband (and the Internet in general)."

Huawei is also betting big on growth in selling mobile phones and has recently launched a budget smartphone along with Microsoft. "We want to be there when the African customers move up to the high-end and modern models," Hu says, adding that finding the right technicians locally is still a big concern for the company.

"Most of our technicians have to be brought in from China. The local workers need extensive training and work experience before they can take up their responsibilities."

Contact the writers at wangchao@chinadaily.com.cn

(China Daily Africa Weekly 03/14/2014 page14)