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The Orient looks to Africa

NTT's buyout of Dimension Data will give it a strategic edge over its Chinese counterparts to expand in Africa.
NTT's buyout of Dimension Data will give it a strategic edge over its Chinese counterparts to expand in Africa.

The race to gain a foothold in Africa is starting, and Japanese-based Nippon Telegraph and Telephone (NTT) could use its recent acquisition of Dimension Data to fend off Chinese competition.

According to Gartner research, economic growth in Africa will outpace developed economies, such as the US and Europe. The continent has recently been attracting attention from China and US-based retailer Walmart, which wants to buy out Massmart.

ZTE SA executive director Tumi Magasa said Africa offers good growth opportunities, but the landscape is going to increasingly become more competitive as more vendors enter the picture. “Local knowledge is going to be very key.”

Magasa said ZTE SA is a hub for growth into the regional market. ZTE is a China-based global provider of telecommunications equipment and network solutions, and its SA entity was established in 2007.

ZTE's main competitor is fellow Chinese telecoms company Huawei, which has spent over $500 million since 1998 to establish a regional presence in more than 40 countries in the sub-Saharan region. Shalate Portia Davhana, regional public relations manager for Huawei Technologies, said SA is seen as a strategic component for growth.

Davhana said the company would continue to invest in SA as it is “widely acknowledged as the African continent's telecommunications hub”. She said SA is of strategic importance to Huawei.

Heavy competition

However, the Chinese groups will come up against Dimension Data when expanding on the continent. Allan Cawood, CEO of the Dimension Data's Middle East and Africa operations, said: “Africa is extremely important to our strategy. We will continue our African expansion through both direct presence and partnerships.”

[EMBEDDED]NTT president and CEO Satoshi Miura explained, during a conference call at the time its purchase of DiData was announced, that the company wanted to strengthen its presence in Africa.

Before buying out Dimension Data, NTT had not managed to achieve this aim. Its buyout of Dimension Data, which was recently completed, will give NTT a stronger presence in Africa, Miura said.

NTT has been lacking in geographical reach in rapidly growing regions, such as Africa, Miura added. “Indeed, this is where the strength of Dimension Data lies,” he said, as DiData has a strong presence in Africa.

DiData CEO Brett Dawson added that NTT “wishes to expand telecommunications capabilities within Africa”. He expected Internet Solutions to play a large role in this expansion, and said investment into Africa would increase.

Race on

Chris Gilmour, Absa Investments analyst, said: “Africa is the final frontier,” and is one of the last big growth areas available to companies to expand. He added that the Chinese have a large focus on telecoms on the continent.

Gilmour said: “The Chinese are here, because Africa is seen as one big quarry,” and the country needs to feed its steel mills. However, there is also a large potential for fixed-line communications on the continent, he noted.

Africa is a “very fertile ground” for ICT investment, and Gilmour expects a flood of investments into the continent from all the power houses, including Japan, China and the US.

However, he explained that companies that want to expand into Africa need a good regional presence in a hub, such as SA, first. Dimension Data has a strategic advantage because it is already present on the continent, and NTT can use it as a springboard into Africa, Gilmour added.

“While the business world has concentrated its sights on India and China as far as emerging markets have been concerned, in the past couple of decades or so, Africa has been quietly going about its business, getting its collective house in order and generally becoming more attractive to foreign investors.”

Related story:
NTT's buyout of DiData complete

Read time 3min 30sec
Nicola Mawson

Nicola Mawson is a contributor who hates corruption of any sort. She does not drive a million-rand Beemer and would rather walk.

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