African countries move to require inclusion of local suppliers in big telecom projects

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With foreign telecommunications companies making billions of dollars from projects in Africa, governments on the continent are implementing regulations that require contractors to source 30 percent of labor or supplies from local companies.

What this means is that foreign telecom companies will not be able to bid for telecom contracts without partnering with local telecom companies. Kenya and Zambia are the first to implement such regulations. The rules are expected to affect Chinese companies, including Huawei Technologies and ZTE, which have been winning most of the big telecom contracts in Africa.

Both the Zambian and Kenyan governments say the regulations are aimed at boosting local capacity and encouraging knowledge transfer to local contractors that have been fighting for a share of the booming telecom sector in the region.

Over the past few years, local telecom companies in Africa have been squeezed by increasing competition from foreign rivals. The problem has been lack of skilled manpower by local firms and lack of financial muscle, in the face of foreign companies that have plenty of cash and employ highly skilled workers.

Corruption is also an issue. Well-funded foreign telecom companies including Huawei, ZTE and Siemens have been charged and in some cases convicted on corruption charges in African courts.

The new regulations in Zambia and Kenya require that telecom contract-award procedures include a weighting methodology that gives preference to local contractors and those partly owned by Kenyans.

However, the majority of the big government telecom projects in Africa are financed by China through loans whose conditions are that supply and installation contracts are given to Chinese companies. It is not clear how the new regulations will affect these loans from China.

The Zambian government has already enforced the regulations while in Kenya the regulations are expected to be enforced shortly.

The Kenyan government is in the process of awarding multi-million dollar tenders for Biometric Identification Cards and the construction of a 4G telecom network in the country. The new regulations are expected to ensure that local companies benefit from these two tenders.

Edith Mwale, a telecom analyst at Africa Center for ICT Development said the regulations in Kenya and Zambia will spur confidence and skills in the local companies in executing telecom tenders.

“It was becoming increasing difficult for local contractors to win government tenders because of stiff competition from foreign companies,” Mwale said, noting that the corruption cases indicate that foreign companies often use cash to influence government officials. “But the partnering of local companies with foreign firms will surely result in capacity-building for local companies.”

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