The Emperor’s New Road: China and the Project of the Century

by Jonathan E. Hillman

  A rift opened between the United States and Ethiopia in 1974, when a military coup replaced Emperor Haile Selassie and installed the Derg, a military junta that embraced Marxist-Leninism and ruled with an iron first.41 The Soviet Union threw its support from Somalia to Ethiopia, and the United States threw its support from Ethiopia to Somalia. During this period, Ethiopia’s development plans were eclipsed by security priorities. Eritrean rebels demanded independence, and a civil war raged in the north for nearly three decades. While Ethiopia’s citizens starved and the railway to Djibouti deteriorated, the country amassed the largest army in sub-Saharan Africa. In return for military assistance, Ethiopia provided access to its airfield and coastline, allowing Soviet forces to establish a naval facility and listening post.42 These arrangements fell away by 1991, when Ethiopia’s government collapsed.

  Ethiopia has enjoyed a special status among China’s partners since 1996, when China’s President Jiang Zemin visited six African countries and delivered a speech at the African Union headquarters in Addis Ababa.43 Jiang, who later encouraged Chinese firms to “go out,” also helped create the Forum on China-Africa Cooperation (FOCAC).44 China hosted the first forum in 2000, and Ethiopia was selected to host the second forum in 2003. While playing host may seem trivial, these forums have become major venues for Chinese investments, which increased from $5 billion at the 2006 forum to $60 billion in 2015 and 2018.45 Countries jockeying for investment shower Beijing with praise. In 2018, the Ghanaian president said the gathering left him “inspired by [China’s] model, and [Ghana is] trying to replicate it.”46

  China’s push into Africa has been closely tied to resources. In the early days of Chinese development assistance, Beijing offered African countries “resource-credit swaps,” loans for access to natural resources. As the scholar Deborah Brautigam writes, African countries’ payment methods matched their natural endowments: “Angola would use oil; Congo would use minerals; Senegal, peanut oil; and Ghana, cocoa, to repay their loans.”47

  But China’s immediate attraction to Ethiopia has more to do with politics and prestige. Ethiopia does not produce the raw materials that China has sourced from other African countries, but its history makes it a powerful symbol of African independence and pan-Africanism. It also hosts several regional institutions, including the African Union headquarters and the United Nations Economic Commission for Africa.

  China’s engagement in Ethiopia may also preview its longer-term ambitions for the continent.48 As the journalist Howard French writes, “When most people think about China’s relationship with Africa they reduce it to a single proposition: securing access to natural resources, of which Africa is the world’s greatest storehouse. . . . But there is a more farsighted motive, one overlooked in almost all the speculation about China’s ambitions in Africa: to cultivate, or perhaps even create, future markets for China’s export-oriented industries, markets that could one day pick up the slack from the aging consumers and debt-ridden economies of the West and of Japan.”49 With the second-largest population in Africa, a strong growth outlook, and improving investment environment, Ethiopia is an increasingly desirable market.50

  Chinese officials also see a kindred spirit. As China’s ambassador to Ethiopia, Tan Jian, said, “Both are age-old civilizations. Yet the sad truth is that we are ‘developing countries.’ But we are catching up.”51 Ethiopia traces its history to biblical times, and like China, its rise is also a return to the past. Ethiopia abandoned its experiment with communism, but the state retains a strong hand in its economy.52 Both governments take pride in deviating from Western policy prescriptions. Responding to criticism from the World Bank and IMF, Ethiopia’s Prime Minister Meles Zenawi said in 2011, “the country’s economic performance is being called into question by the two groups because Ethiopia refuses to let outsiders dictate to them what economic policies should be put in place.”53

  “A License to Print Money”

  Ethiopia’s fierce independence has also created commercial opportunities for China, particularly in its telecommunications sector. Until Prime Minister Abiy Ahmed began privatization efforts in 2019, Ethiopia was among the last countries in the world to maintain a monopoly of its national telecommunications.54

  Before Abiy took office, the government had been reluctant to relinquish this power. As Ethiopia’s previous prime minister Hailemariam Desalegn said in 2013, “This sector is a cash cow, and that’s why the private sector wants to get in there, and they’re trying to tell us all kinds of stories . . . to get the license. . . . We want to use that money for infrastructure development.”55 His predecessor, Meles Zenawi, was even more forthcoming, calling telecommunications privatization “a license to print money.”56 Opponents of privatization have argued that the revenue is not only reinvested into the telecommunications sector but also subsidizes roads, railways, and other infrastructure.

  Ethiopia’s telecom monopoly was also terribly inefficent.57 Despite large investments into the telecom sector, Ethiopia has one of the lowest telephone penetration rates in Africa, with two out of three citizens lacking cell-phone access in 2017.58 The IMF and other international donors were willing to provide loans, but only if Ethiopia liberalized the sector.

  Instead, Ethiopia turned to China for its telecommunications needs. In 2006, it struck a massive deal with China’s ZTE that a World Bank study on corruption calls “highly unusual.”59 In return for $1.5 billion in financing from China Development Bank, Ethiopia granted ZTE an exclusive three-year contract to supply all of Ethiopia telecom’s equipment.60 The award even ignored Ethiopia’s own rulebook for procurement. No competitive bidding process took place, and specifications and price were decided only after the award was announced. ZTE did not try to hide its delight. “This is the world’s only project in which a national telecom network is built by a sole equipment supplier,” Zhang Yanmeng, chief of ZTE’s Ethiopia operations, said in 2009.61

  The Ethiopian government, responding to criticism about its dependence on a single company, decided to work with two Chinese companies in 2012. China’s Export-Import Bank provided the second loan, for $1.6 billion, for work by ZTE and Huawei. Over the course of these two loans, the Chinese firms built a 2G network that was later expanded and upgraded to 3G and 4G. They installed six thousand kilometers of fiber-optic cable, helping to increase Ethiopia’s mobile penetration rate from 1 percent in 2006 to 41 percent in 2018.62 The growth was impressive, but Ethiopia’s network remained woefully inefficient, producing revenue that was two and a half times less per subscriber than networks in Kenya and Nigeria.63

  Through these deals, Ethiopia’s monopoly effectively became China’s monopoly.64 Chinese firms sell fiber-optic cables and other network equipment, they provide installation and maintenance services, and they market phones and other devices.65 As a result, Ethiopia became dependent not only on Chinese hardware but also on the skills and expertise of Chinese technicians. Huawei trains roughly twelve thousand Africans each year, but two Ethiopian economists have found “extremely limited” evidence of Chinese firms providing meaningful skill or technology transfers.66 An Ethiopian technician summarized the situation: “The system is not ours—it’s Chinese. All the nitty-gritty: they know it, we don’t. So we always need their support.”67

  The Ethiopian government was becoming reliant on China, but it had other reasons to feel secure. It not only retained a lucrative revenue source but also enhanced its ability to monitor Ethiopian citizens. Part of ZTE’s package was a system called “ZSmart,” which provided the Ethiopian government with access to customer account details as well as location information and content of text messages. ZTE also provided the ability to intercept emails and chat messages and to monitor web browsing. As Human Rights Watch detailed in 2014, the government faced little judicial or legislative oversight and used these capabilities to block opposition websites, to harass and threaten bloggers, and to cut telephone access during peaceful protests.68

  Of course, the Eth
iopian government could have looked to Western firms for its surveillance needs.69 But China’s telecommunications footprint has expanded, and overlapped with, its deepening security ties across Africa. As Michael Kovrig, an analyst at the International Crisis Group and former Canadian diplomat, wrote in October 2018, “Security sector cooperation risks transferring methods and technologies from Beijing’s authoritarian playbook, in which the law and its enforcers are instruments of party and state power rather than constraints on it. That might help African states impose order and control, but at the cost of progress on accountable governance and human rights.”70 This was Kovrig’s last publication for the International Crisis Group before Chinese security officers detained him in Beijing.

  Kovrig did not mention that China’s partners face another risk: the watchers being watched. In January 2018, the French paper Le Monde reported that the African Union headquarters, located in Addis Ababa, was bugged.71 China provided $200 million to finance the building, which Chinese firms built, including its information technology (IT) system. Every night for five years, data from the building’s servers were transferred to Chinese servers in Shanghai. After the breach was discovered, a sweep of the building reportedly discovered microphones hidden in desks and walls. For spooks, the building is a target-rich environment, hosting twelve thousand to fifteen thousand officials and representatives for meetings every year.72

  Huawei was the African Union’s IT services provider and proudly noted on its website, “The AU needed a robust solution to streamline their conference operations and protect their data from a variety of security threats. They chose Huawei’s FusionCloud Desktop Solution, which offers computing, storage sharing, and resource allocation through cloud data centers.”73 Huawei also trained African Union technical experts and signed a partnership to deepen cooperation on information and communications technology infrastructure in 2015.74

  Huawei’s critics point to the incident as evidence that its systems cannot be trusted, along with other aspects of the firm’s history. Its founder, Ren Zhengfei, was an engineer in China’s PLA, and the company’s relationships with the Chinese military were important for developing its early capabilities. It benefited from partnerships with military-affiliated research institutes, provided equipment for the PLA’s first national communications network, and hosted military researchers.75 Researchers have also questioned whether Huawei is truly owned by its employees and not the state, while others caution that even if Huawei is not currently cooperating with the Chinese government, it could be compelled to in the future.76

  Chinese authorities denied the Le Monde report’s allegations, but more tellingly, so did African officials. In one of the few official statements that hinted at regret, Paul Kagame, Rwanda’s president and chairman of the African Union at the time, admitted, “I would only have wished that in Africa we had got our act together earlier on. We should have been able to build our own building.”77 African Union officials discovered the breach a year before it became public, according to Le Monde. Although they continued to insist that nothing was wrong, the African Union issued a call for new IT equipment. “The African Union’s Data Center is a very critical asset,” it emphasized. “The data stored and systems hosted in this data center need to be protected from any form of internal or external threats and unauthorized access.”78

  If African officials debated how to handle the breach in their home capitals, it is possible that China was listening. China has also helped finance, build, or renovate parliament buildings in Zimbabwe, Congo, Malawi, Guinea-Bissau, Lesotho, Gabon, and Sierra Leone—roughly one in every eight African countries.79 In April 2018, less than three months after the Le Monde story, China announced it was providing the Commission of the Economic Community of West African States (ECOWAS), a regional economic union of fifteen West African countries, with $31 million for a new headquarters building in Nigeria.

  Government buildings have always been attractive targets for espionage.80 After spending $23 million to build an embassy in the Soviet Union during the 1970s and 1980s, the United States spent more than twice that trying to neutralize listening devices, including some that were so deeply planted that they could not be removed from the building’s structure. A U.S. Senate committee in 1987 called it “the most massive and skillfully executed bugging operation in history.”81 Ultimately, the building was scrapped, and a new one was built that finally opened in 2000. Offering extensive financing tied to its firms, China may be taking this game to a new level.

  “As Big Brother Monitors”

  China’s financing and flexibility have won its firms access to vastly different markets.82 While Western firms wait for governments like Ethiopia’s to liberalize their economy, Chinese firms work easily with state-owned monopolies. In countries that have liberalized their telecommunications sector, such as Kenya, Chinese firms undercut their competition on cost. Since 2007, Huawei has been building Kenya’s national fiber-optic system, a deal that China helped secure by offering $60 million in financing.83 With state subsidies and generous financing, Huawei routinely undercuts its Western competitors by offering discounts of 20–30 percent, according to an unpublished study by a European government.84

  On top of these cost advantages, Chinese firms have excelled at connecting remote places. In Kenya and Ghana, Huawei has installed low-cost solar-powered units, called RuralStar, that bring mobile access to small communities with little existing infrastructure.85 Customer service also helped build market share. “We brought a Chinese attitude to both work ethic and relationship building in Africa. The result was that clients soon realized they could rely on Huawei 24 hours a day, seven days a week,” a former head of Huawei’s operations in Africa recounts.86 Ren Zhengfei claims to use military strategy to inform Huawei’s business operations, especially Mao’s focus on seizing the countryside before encircling and conquering cities.87 One of Mao’s ten principles of guerrilla warfare is, “Take small and medium cities and extensive rural areas first; take big cities later.”88

  “First the countryside, then the smart cities” might be Huawei’s new mantra. In Nairobi, Huawei has installed eighteen hundred surveillance cameras that feed into central command centers for the local police. The system includes facial- and movement-recognition analysis and allows police officers to do real-time surveillance and browse recordings.89 Huawei has installed similar systems in Mombasa, and it has highlighted these cases as examples of its “Safe City” technology, a suite of products advertised as reducing crime in urban environments. The smart-city market is projected to grow to nearly $3.5 trillion by 2026 as cities grow and acquire new technologies.90 Smart cities, of course, are surveillance cities. It just depends on who is watching.

  Huawei’s promotional materials can seem oblivious to concerns about technology eroding civil liberties. One video opens like an espionage thriller, using satellite photos to zoom into Nairobi from above. Then footage shows cameras installed in public places. “For some time now, Kenyans have been thinking that these CCTV cameras installed both in Nairobi and Mombasa counties are inactive,” a voice says. “However, this is far from the truth. Unbeknown to Kenyans, security agencies have already activated the new Safaricom security system.” The video claims that crime has been dramatically reduced and that police officers do not need to travel as far. “As big brother monitors, they aren’t going miles away,” it says.91

  Huawei’s drive has occasionally put it at odds with its Chinese competitors, shattering the myth that Beijing carefully coordinates every move of China’s largest companies. After the Kenyan government gave ZTE an award for a national surveillance and police communications system in 2012, it was Huawei that pushed for a review. The Kenyan government subsequently found that ZTE’s prices were inflated to roughly twice the market cost. “It does not require rocket science in view of the evidence before the Board to establish that [ZTE’s] financial proposal was highly exaggerated,” the government explained.92 ZTE’s loss was Huawei’s gain.
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  After the Westgate shopping mall attacks in 2013, the Kenyan government pushed through a similar contract for surveillance and communication equipment, justifying it as a national emergency. It required that the contractor be a national telecom operator, essentially giving the award to Safaricom, which then subcontracted the work to Huawei. Safaricom’s deal with Huawei has also come under fire, with allegations raised that the companies followed improper procurement procedures and committed bribery.93 Meanwhile, Huawei is building Kenya’s national government cloud infrastructure, where government data, applications, and communications will be stored.94

  “Where It Is Going to Nobody Knows”

  In financial terms, Kenya’s biggest and riskiest undertaking with China is its $3.3 billion standard-gauge railway, or SGR, its most expensive project since independence. Before the project was approved, international experts urged the Kenyan government to upgrade the existing meter-gauge railway, which had decayed after years of neglect and could be fixed at one-fifteenth the cost of laying a new railway. “There is no economic or financial case for standard gauge,” a World Bank note concluded in 2013.95

  But politics created the SGR. When President Uhuru Kenyatta took office in 2013, he promised that building the SGR would “greatly enhance [Kenya’s] competitiveness.”96 China Export-Import Bank provided two loans totaling $3.2 billion in financing, over fifteen and twenty years, despite most railways taking longer to become profitable.97 China Road and Bridge Corporation won the contract for building the railway despite a relatively thin track record outside China. The company is a subsidiary of CCCC, the same parent company that landed contracts for Malaysia’s East Coast Rail Link and Sri Lanka’s Hambantota Port after being blacklisted from the World Bank for fraud. Despite these red flags, no independent analysis of the railway’s cost appears to have been undertaken.