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Why It’s Going to be Difficult to Roll Out 5G in Africa

VALERY HACHE / AFP

This article was collectively written by China House Fellows Ye Hongbo 叶宏波, 22, from Jiangxi University of Finance and Economics; Zhao Yi 赵诣, 20, from Nankai University; Wu Weiyang 武未央 from Tianjin University of Finance and Economics; Wang Zhi 王植, 20, from South China Normal University and Deng Wenjing 邓雯菁, 20, from Sun Yatsen University.

The coming of 5G to the African continent is the general trend. Most consumers of telecommunication services have generally enjoyed the convenience brought by 3G and 4G technologies. Policymakers recognize that 5G communication technology can bring economic growth, and hope to promote the internationalization of 5G technology as soon as possible and apply it to other industries to further cultivate benefits.

To date, almost all African countries have not really promoted commercial 5G, but some countries have stepped into the 5G arena to test the water. In 2017, MTN, the largest telecom operator in South Africa, cooperated with Ericsson to complete the first 5G technology application test in Africa. MTN has conducted a series of tests in South Africa and has invested more than 800 billion naira in infrastructure construction in Nigeria. In March 2019, Moroccan telecom operator Inwi announced that it was ready to open 5G services. Inwi is the first operator in Africa to cooperate with Huawei. A Huawei spokesperson said that it hopes that Morocco will become the first country to implement 5G.

Although the development of telecommunications in Africa is not partially behind, the future of communications construction in Africa seems to be full of challenges. At present, Africa lacks the infrastructure to build 5G. Few countries have made large investments in traditional networks, and energy facilities have also lacked the capital investment of local governments. Most countries need to introduce energy technology from foreign countries, and the cost is high. The investment conflicts in infrastructure and services have hampered the development of the communications industry.

In addition, internet usage is relatively small. Internet users in Africa account for only one-fifth of the population. Compared to the Asia-Europe or Australia market, 5G suppliers face more restrictions in Africa because they have to select African countries that have demonstrated enough demand.

Dilemmas Inhibiting Communications Development: The Case of Rwanda

The process of building 4G networks in African countries was not all satisfactory. The lack of strong financial support from the government was a major reason. The following will be further explained through the example of Rwanda.

From the announcement of investment to completed construction, it took Rwanda four years. Ranking first in East Africa and third in East Africa in terms of economic competitiveness, Rwanda’s performance in communication construction was not too outstanding. According to a report by the African Business Network on June 14, 2013, the Rwandan government and South Korea Telecom, the largest telecommunications company in South Korea, signed an agreement to establish a joint venture company to build the first 4G network in Africa. On March 14, 2017, 4 years after the signing of the contract, Rwanda’s 4G high-speed broadband network was finally in full operation.

Although the information and communication industry is the mainstay of Rwanda’s 2020 national development vision, indicated by the government’s heavy investment in ICT (Information and Communication Technology) infrastructure construction, the level of priority in communications development is still relatively lower than that of other industries.

The key promotion projects listed by the Rwanda Development Bureau show that the 11 major investment projects of the government are irrigation, avocado export, energy (methane gas power generation project), fertilizer sales, soy products processing, tourist culture village, private equity fund, hydropower generation, geothermal power, the Kali Sinker Volcano Tourist Cable Car, the five-star golf resort and residential villas in Caronki. This demonstrates the government’s development and investment focus on tourism, energy and other industries.

In recent years, the investment focus of infrastructure construction on the entire African continent has been placed in the energy and power industry as well as the transportation industry and the real estate industry, both in terms of the number of projects and the amount of investments. In the past three years, the TMT industry in which 4G construction belongs has accounted for less than 1% of the projects in the infrastructure construction market in Africa.

The government is not only the main owner of the project but also the largest funder. According to data from 2018, governments fund 118 projects out of 482 projects, most of which are transportation projects. In the future, to develop 5G in Africa, the first condition is that the national government recognizes the importance of the information and communication industry, acknowledges the boundless potential of the digital dividend, and investment in human, material, and financial resources to avoid falling behind the world trend.

Chinese Communications Companies Seek Opportunities to Develop 5G in the African Market

Huawei is now considered by the world to be the core of Sino-US trade conflicts. On May 15, 2019, US President Trump signed an executive order announcing a state of emergency and allowing the United States to ban the provision of telecom equipment and services by companies owned or controlled by “foreign rivals.” On the same day, the US Department of Commerce announced that it would include Huawei and its subsidiaries in the “list of entities” for export control. So far, the United States and Australia still prohibit Huawei from providing 5G network equipment, and some European telecom operators are also considering replacing Huawei’s communication equipment.

Given of the military background of Huawei President Mr. Ren Zhengfei, some believe that the use of Huawei’s communication equipment will allow the Chinese government to manipulate user information. Especially when using 5G, 5G design and operation methods further challenge data security. Huawei also affirmed that the US has no evidence that Huawei provides detective services to the Chinese government, and that Huawei is a privately-owned company established by law, with shares wholly owned by the company’s employees.

The Role of Chinese Communications Companies in the ICT Industry in Africa

With the expansion of China-Africa engagement, economic and trade exchanges, as well as mutually beneficial cooperation between the two sides, should be further deepened and added. Chinese telecommunications companies have been rooted in Africa for many years, extending to 60 countries in Africa. They have played an important role in promoting and promoting Africa’s informatization and technological advancement. Utilizing its own technological advantages, Chinese telecom companies are actively cooperating with African ICT companies, and have been adhering to the concept of cooperation and win-win. This is especially prominent in areas such as communication services, the digital transformation of enterprises/governments, training of local technical personnel, and employment.

At the same time, in light of the realistic circumstances of African countries, Chinese telecom companies make rational use of local resources and actively fulfill their social responsibilities. The local community has made its own contribution by carrying out local technology transfer and empowerment, as well as establishing a joint factory to train technical talents. For example, China telecom giant Huawei will be introducing the 5G mobile network for the first time in the African Nations Cup in Egypt this summer. Huawei is a leading manufacturer of next-generation 5G mobile networks.

Potential Bottlenecks of 5G in the African Market

From the perspective of supply and consumption, the 5G commercial environment in most African countries has not yet mature. From the supply side, the construction of 5G sites faces special challenges. At the same time, foreign communication companies face competition from local enterprises and infrastructure frameworks, such as energy, are relatively underdeveloped. From the demand side, African countries have a relatively limited demand of 5G in comparison to that of developed countries, as a result of the feeble mobile communication industries as well as the low penetration rate of smartphones and home computers.

Bottleneck 1: Special Challenges in Constructing of 5G Sites Inland

Power challenge

From 4G to 5G, the power consumption per unit of traffic (Watt/Bit) is greatly reduced, but the 5G power consumption is significantly higher than that of 4G. It is expected that in the 5G era, the maximum power consumption of the BBU will reach 2000W. In the 5G era, multi-frequency stations will be typical configurations. It is predicted that the proportion of sites above 5 frequency will increase from 3% in 2016 to 45% in 2023. Multi-frequency stations will result in the maximum power consumption of the entire station to exceed 10 kW, and the power consumption of the 10-frequency and 10-frequency stations will exceed 20 kW. In the multi-operator sharing scenario, the power consumption will double. Therefore, the development of the 5G industry puts higher demands on energy supply.

Due to the significant increase in power consumption of 5G sites, the existing commercial capacity of some sites does not meet the 5G deployment and is facing expansion. The high cost and long cycle of power expansion will seriously drag down the pace of 5G deployment and significantly increase investment. For example, the proportion of power-conversion sites in China is over 30%; the expansion cycle of power-conditioning in South Africa is about 12 months, approximately 10 months in Germany; and the cost of renovation in the Philippines is about 3,000 US dollars per station. Capacitor expansion in Africa is a long time.

Temperature control challenge

The doubling of power consumption of the 5G sites brings about a significant increase in heat consumption, which exceeds the cooling capacity of some existing sites, and the cost of the site temperature control is high and the cycle is long. The average annual temperature in the African region is higher than in other regions. Most of the countries are located in the tropics and subtropics. Therefore, building 5G on the African continent will be a difficult problem.

Facilities challenge

Construction and development of the mobile communications industry requires an essential condition of stable energy supply. However, there are still some countries in Africa that cannot provide sufficient electricity. For example, in Nigeria, the lack of electricity supply is a problem that everybody, every family, and every company needs to face every day. According to PricewaterhouseCoopers, only 40% of Nigerian populations have access to electricity networks, but they still experience unstable power supplies 60% of the time. Therefore, before the establishment of large-scale 5G commercialization inland, it is necessary to improve infrastructure construction such as energy supply.

Bottleneck 2: Competition Between Local African Companies

Foreign 5G commercial enterprises entering Africa will encounter competition from local competitors, affecting Chinese communication companies’ promotion of commercial 5G in Africa. In 2018, Africa’s leading South African telecommunications operator Vodacom Group launched 5G commercial services (5G) in the Kingdom of Lesotho, Africa. It is understood that because Lesotho has 3.5GHz band available,  5G services were soon promoted nationwide. It is expected that Lesotho will make a huge leap in the “digitization” transformation, matching the rapid development of other vertical industries.

The company said it is very optimistic about the possibility of “promoting 5G services to more African countries.” Therefore, as African 5G companies continue to rise and develop, Chinese telecom companies are facing resistance as a foreign entities trying to expand in the African market.

Bottleneck 3: Weak Industry Foundation Limits the Market Demand

Huawei launched the Global Connectivity Index (GCI), which includes 40 indicators through four major economic factors and five enabling technologies. The assessment, analysis, and prediction of the economies studied are aimed at comprehensively and objectively quantifying of digital economic transformation. According to the research report, South Africa ranked 46th in the 2018 GCI rankings, with the highest score among African countries. South Africa’s mobile communications technology receives the highest investment, and its investment technologies, including cloud computing, big data, and social technologies, are expected to lead the development of mobile communication technologies in the region. A good industrial base is one of the reasons why South Africa can take the lead in reaching 5G with Huawei.

2018 Huawei Full Connection Index Report

In other countries and regions in Africa, the development of the 5G commercial market is limited by economic development and household consumption levels. The Internet penetration rate in Africa is quite low compared to other parts of the world. In the 2016 edition of the Broadband Status Report, ITU noted that by the end of 2016, countries with the lowest Internet usage rates were located in sub-Saharan Africa. Notably, Chad, Sierra Leone, Niger, Somalia, and Eritrea had internet users less than 3% of the total national population. Therefore, overall, African residents have restricted demand for 5G.

How Should Chinese Communications Companies Develop in the African Market?

On the one hand, the information should be collected from all directions. Africa is a continent of more than 50 countries. National conditions between countries

differ from each other; this is reflected in aspects such as culture, resource endowment, and level of political and economic development. As former Nigerian President Obasanjo once said, the basic characteristics of human beings are the same, but each country has its own characteristics. Their culture, history, challenges, and resources are different.

Therefore, we must not solely pay attention to the good investment environment and investment policies of the target countries highlighted by the media, but also information regarding the environment, institutions, and policies that are not conducive to investment, especially information on security. Countries should strive to be prepared for potential advancement and pushback.

On the other hand, efforts should be made to adapt to local conditions. Chinese communication companies attempting to expand in African markets should develop specific and practical projects based on the economic and social development status and needs of specific target countries. In particular, China’s investment cannot first supplant the space reserved for the survival and development of local companies. Lastly, Chinese companies must abide by the laws and regulations of the countries they invest in, respect local customs and religious beliefs, and focus on incorporating public welfare and environmental protection into their investment decisions and project implementation processes.

China House is a social enterprise that brings young Chinese to the global south for research, conservation activities and development projects.

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