Telecoms environment across the Continent of Africa, especially the domain of Terrestrial Fiber Networks is a short-term Goldmine for most stakeholders, but a long-term nightmare for the stakeholders that really matter – the People / Users.
You would think that Telecom Project Costs across Africa should fall each year, as technologies mature, developed market networks reach scale, equipment’s are optimized, rapid obsolescence and large market dynamics of Africa come into play , right ?. Wrong.
It is not a coincidence that the ‘Terrestrial Fiber spread’ Map of Africa is very similar to the ‘Vegetation Land Cover’ Map of Africa. Close to 1.5 Mn Kilometers of fiber cable has been laid across the continent, of which perhaps 1 Mn kilometers are classified as Operational. Like all classifications, this figure is more academic. A number thrown up largely due to world Bank and investor concerns, rather than on technical parameters.
Approximately 300,000 Kilometers of new fiber routes are either under construction or in advanced planning stages. Over 500,000 Kilometers of fiber routes never left the drawing board! There is a scramble for laying fiber, and therein lies the problem.
Bright young analysts, operating from Europe, USA, Singapore and suchlike places, use meaningless but impressive sounding indicators, such as “percentage of people living within 20 Kilometers of an operational fiber network node”, or , another gem “ percentage of people brought within access to high capacity backbone networks”. Etc. to justify massive investments from cash strapped governments.
Meanwhile a different set of dynamics is at play along the vast Coast Line of Africa. Internet bandwidth is building up like never before. Over 8 Tbps of capacity waiting for users! Submarine cable investors are cutting deals with any on land distributor available.
Unregulated vessel traffic, non-enforcement of no-go lanes along cable routes, non-existent patrolling and increasing Natural subsea surface events means - subsea cables are suffering shunts and cuts at a much faster rate! These are causing massive losses to investors.
A monopoly by a handful of companies like ALU, AEI, Corning & (off late) Huawei with a bunch of smaller Chinese companies, control the African subsea cable O&M with great profit margins. However, in 99% of cases action is taken purely in reaction to cable damage incidents.
A normal Terrestrial project would broadly follow the 60:20:20 costing categories [Transmission Construction : Hardware : Operations]. However, In Africa, this principle does not apply. The most common reason given by Bidders for gross deviation from 60:20:20 principle is Geography. Transmission Construction largely depends on Geography and every bidder has taken advantage of a Perceived image of African Geography as being difficult, to escalate the norm of 60% to unreasonable limits.
Every right-thinking Telecom professional should be concerned at the mass scale of Telecom-Techno-Commercial Exploitation, ongoing in Africa
Below is my List of top 7 Concern Areas
- ‘Rip Off’ Levels of Construction Costing: The usual suspects generally bid for African Terrestrial Fiber Projects. Huawei leads the pack with ZTE, Nokia, Ericsson and few other smaller gear manufacturers following. Also joined are a rash of Chinese, North African and European Project companies. Often, such Companies -which are essentially construction companies, and have never laid a meter of fiber cable , snatch away multimillion-dollar terrestrial fiber projects from under the World Banks nose! The average bid price for a 1000 Km, 144 pair OFC, 10G stretch of end-to-end build could vary from $ 25Mn to $ 40 Mn. Almost 60% above rest of the world prices. Why does this happen ? The answer is simple, margins are kept high to cater for several stakeholder interests. Sample such bids, 144 OFC at $4500- $5000 per Km, so called “management costs “at $200,000 per 1000 Km, logistics costs/ consultant costs / miscellaneous costs at $ 3Mn for a 1000 Km stretch, etc. It’s simple to therefore understand why final bids are 60% to 70% above world costs.
2. ‘Rip Off’ Levels of Hardware Costing: Transmission Equipment Gear Manufacturers Greed suddenly comes into play while bidding in Africa. Average cost of Transmission Equipment’s (Only) for a 1000 Km stretch can be anything between $300,000 to $ 500,000. If you add on costs of construction of Nodes, Test , measurements etc., it can go well beyond half a Million USD! If you further add License Fees, O&M costs, Spares – a 1000 Km stretch could be anything between $ 1Mn - $ 3Mn. The same Manufacturers meekly bid in Asia, Europe at less than half the rates.
3. Unrealistic Operations Costing: Across the world Operation cost bids are simple fixed element bids to cover day-to-day costs, maintenance, planning and support. Insensitive to Network Capacity. In Africa it suddenly becomes a free for all crazy bid! Why ? Ridiculous bidding for day to day O&M costs, jacked up spare’s costs, even by 100% at times, expensive expatriate staffing bids ( The Chinese are clear masters at this), the list goes on. The bottom line is – since bidders cannot realistically assess O&M costs 3 to 5 years in the future, they simply bid, assuming the ‘worst case’ scenario!
4. World Bank “Engineer Estimates”: The Rot begins here. For the uninitiated, the World Bank funds a lot of Terrestrial Fiber Projects in Africa, they commission Engineers to Assess likely project costs. The results of the commissioned study is called “engineer estimates”, this is the unofficial benchmark for winning bids. Now consider for a moment, what will happen if the engineer estimates are leaked out……just like insider trading.
5. Unprofessional Conduct: Corruption, Nepotism and Favoritism by Agencies Awarding Projects, plague most Terrestrial Fiber projects in Africa. Rarely does one encounter impartial and technically sound agencies controlling project bidding. World Banks deputed staff are equally to blame. The middle aged, genial (generally white male), turns a blind eye to the proceedings. Dreaming of his next round of golf in bright sunny Africa. By the time bids are opened, the battle lines are clearly drawn. Money is promised, details are added, clauses are cleverly amended and voila! the award is made. Such behavior spreads from top to bottom and emboldens unscrupulous bidders to ‘fix’ bids.
6. Uncertain Network Stability: The Root causes of unstable backbone networks across most of Africa, lies in project planning stage and implementation stage. Unprofessional , shoddy pre-bid surveys leading to hastily put together plans. Final approved Routes often follow the path of least implementation resistance rather than technically sound routes. Faults start even before commissioning. The problem is further compounded by shoddy O&M in the first 2 years Free period. Just as an Infant requires careful care, nutrition and upbringing to create a healthy adult who lives a long life, so do Transmission Routes require care, maintenance, support and permanent rectification in the first 2-3 years after commissioning. Unfortunately, this does not happen in Africa. Result is a series of white elephants, unstable patched up transmission networks which have cost cash strapped governments millions of Dollars to create.
7. The Chinese Funding Trap: Over the past decade - zero interest loan facilities by Chinese Bidders, unbelievably easy re-payment plans and commodity barter agreements have led to the creation of many white elephant transmission networks across Africa. These “too good to believe” proposals have been the fountain head of corruption. They have also helped bad governments to demonstrate National growth and Infrastructure Growth to their impoverished populations.
Below is my list of Top 5 Remedies
1. Joint Review of Existing / Future Projects : A joint review of all projects must be undertaken by Technocrats & economists at Regional fora like ECOWAS, AfTFCA, AFTZ, AU. Unnecessary future projects be scrapped, inflated WIP projects be re-negotiated and independent guidelines be created for future projects.
2. Moratorium on Chinese Funding: Till a pan African mechanism for channelizing Chinese funding while maintaining autonomy, is created, there should be a moratorium on Chinese funding for Transmission network projects funding. This should not however, dissuade Chinese gear makers from bidding.
3. ‘Make in Africa’ Clause: Top priority be given to manufacturers / bidders / suppliers who set up manufacturing plants for OFC, transmission equipment and associated equipment’s in Africa. Bid eligibility be tightened to favor local enterprise.
4. Involve the People: The populations, who are supposed to be the true beneficiaries of Terrestrial Transmission Projects must be involved in projects. Innovative approaches like -Special Taxation, issuing government bonds, citizen oversight, private ownership of routes, etc. must be explored.
5. Scrap Universal Coverage Norms: Universal coverage, which envisages leaving no citizen uncovered by broadband / internet, is a western construct that must be dumped. Fortunately , across most countries -population distribution is not uniform. There is High population concentration along coastlines and in cities with sparse distribution across vast areas. Corrupt authorities are known to sanction ‘vanity projects’ , of huge costs but that serve very few. Intra country connectivity projects are also of little use in many cases.
All right-thinking professionals must ensure that the last telecom frontier is not turned into a monument of collective greed and apathy