Transcript: China’s race to tech supremacy — Embracing Africa

This is an audio transcript of the Tech Tonic podcast episode: ‘China’s race to tech supremacy — Embracing Africa’

James Kynge
If you want to see evidence of China’s relentless march to global tech prominence, Africa might be your best bet.

This is Lagos, Nigeria’s biggest city and a frontier for Africa’s brand of go-go capitalism. We’ve come here to look at some of the evidence of China’s emerging presence as a technological superpower. And if you know where to look, it really is almost everywhere in this city.

Adedeji Olowe
So this is like the wild, wild west. Africa is the last frontier. Once Africa becomes important, then we probably have to go to space.

James Kynge
There is no doubt, looking at all of the advertising boardings, as to the number one presence here, and that is Chinese. We’re surrounded by huge signs for the best-selling Chinese smartphone brands.

And not just Chinese smartphones. Chinese-owned apps have brought banking services to a continent where, until recently, many people were still unbanked.

Unnamed person voice clip
The business objective is really getting in on the ground, getting into the hinterland and being able to get into literally even the poorest households.

James Kynge
Chinese innovation has become essential for day-to-day life here. But is China’s embrace of tech in Africa becoming a little, well, uncomfortably tight?

[MUSIC PLAYING]

This is Tech Tonic from the Financial Times. I’m James Kynge, and I’ve been covering China for the FT for more than 20 years. In this season, we’re going to the front lines of China’s rise as a technological superpower and ask whether it might leapfrog the west. Could Chinese technology be the technology of the future? In this episode, how China has come to hold sway over digital technology in Nigeria and much of the rest of Africa. What does it tell us about China’s global tech ambitions?

[MUSIC PLAYING]

It’s a blazing hot day in Lagos, Nigeria and I’m trying to navigate through the city’s famous electronics market. We’re in Computer Village in Ikeja in Lagos. This market is huge. We’re looking at a whole load of sun umbrellas, a massive hubbub of people. There’s a tuk-tuk car coming straight at us now as we walk down the road.

I was surrounded by bundles of dangling wires and display cases stuffed with cheap gadgets. And everywhere I looked, Tecno, Infinix and Itel mobile handsets. Now, outside of Africa, these brands will be unfamiliar. But here these phones dominate. They’re made by a little-known Chinese company called Transsion. And Transsion’s business model started right here in Lagos back in 2006.

We’ve heard that this market is where George Zhu, the founder of Transsion, we heard that this is where he started his career in a stall or maybe a shop in an area that we’re trying to go to right now. It’s an extraordinary story because Transsion now actually has an almost 50 per cent market share across the African continent.

So my producer Josh, and I wanted to find the first place Chinese entrepreneur George Zhu ever sold one of his phones. Because his and Transsion’s story shows why China has been able to embed so deeply into Africa.

We’re trying to find the first store of Tecno, Infinix.

Unnamed person voice clip
In Computer Village.

James Kynge
Yeah in Computer Village. Is it? (inaudible)

Unnamed person voice clip
I can only say SLOT’s.

James Kynge
Who?

Unnamed person voice clip
You know SLOT’s?

James Kynge
No, where is it?

Unnamed person voice clip
Well, the first store (inaudible)

James Kynge
So Josh and I went on the hunt for a shop called SLOT’s.

Where exactly?

Unnamed person voice clip
Red building.

James Kynge
Yeah, red building in SLOT. Oh, OK.

We’re now weaving along the pavement past a kind of hubbub really. A lot of these shops have blaring music. Yellow moto taxis coming past us on the right. And, we’re now walking on top of a storm drain heading, we hope, to this mystical store, that we’ve been told about.

Unnamed person voice clip
This route down here.

James Kynge
What we heard in Nigeria is that Chinese-born Zhu travelled into the markets of Lagos with a backpack full of prototype phones, phones he designed back home in Shenzhen, and he just started hawking them.

There it is. We found the logo SLOT, and it looks like maybe we’ve come to the right place.

It was a shabby building with a big red billboard on a hot and dusty road. It’s a far cry from where George Zhu is now. These days, he works out of a massive skyscraper in Shenzhen. He’s feted at international telecoms’ conferences and his companies are worth more than $10bn. I wanted to ask the salespeople at the shop where it all started for Zhu. What exactly was it that made Transsion so successful in Nigeria?

Unnamed person voice clip
So they meet the needs of the customers, so they target the African customers. Like this phone line . . . 

James Kynge
In Nigeria, the cell network and the supply of electricity is notoriously patchy and intermittent. George Zhu found a way round that poor infrastructure by designing a phone that could hold multiple SIM cards, tapping into different networks. What’s more, the batteries in his phones lasted longer.

Unnamed person voice clip
They carry a battery that would last up to two days.

James Kynge
Another key selling point is price.

Yang Wang
Average selling prices for Transsion smartphones was, if we’re talking about 2023, it comes around $110, $120.

James Kynge
That’s Yang Wang. He’s a senior analyst with Counterpoint Research and he tracks Transsion closely. He says these phones might not have the most advanced tech, but they had the right kinds of tech to cater to local conditions.

Yang Wang
So Transsion really hammered in the message of algorithms around dark-skinned, dark-tone selfie cameras.

James Kynge
That’s another feature specifically designed for African markets. Transsion’s phone camera is fine-tuned for photos of darker-skinned people. There are other features too. An anti-grease screen designed for people in hot and sweaty climates. Not to mention AI voice recognition the company is developing for African languages. But what’s really going on here is something much bigger. When George Zhu came to Nigeria, mobile phone penetration was still very, very low. And what Zhu saw in Africa was China’s own development story reflected back at him.

Yang Wang
So what he sees in China was the massive demographic and socio-economic change and the need for connectivity, a fledgling internet services. And then he looks at Nigeria, which shared some commonalities in terms of demographics, urbanisation, internet. But Africa was sort of a neglected market. And George realised that there’s a gap, cheaper phones that are useful for the local audience and fits the needs of the consumers.

[MUSIC PLAYING]

James Kynge
Zhu saw a young population in Nigeria who would all want phones as the economy developed. From there, Zhu used the Nigerian market as a testing ground, perfecting his business model and technology before taking his phones across the global south to the rest of Africa and India, south-east Asia and Latin America. Here in Nigeria, Chinese tech is the technology people rely on. China’s commercial embrace of Africa only got going in earnest about two decades ago. But over the time I’ve been watching this picture unfold, it’s clear to me that this relationship now runs really deep and Chinese technology is everywhere. Chinese companies have laid telecoms cables under the streets. Lithium being dug out of Nigerian soil is used by Chinese battery giants. A deep seaport and a light rail system in the city are both funded and built by China. And showrooms for Chinese cars are common throughout Lagos. And then there are apps, Chinese-owned payment apps. They’re used every day in Nigeria. Transsion is part owner of a wildly popular payment app called PalmPay. It’s one of many banking and finance apps run by Chinese companies in the country. And again, it capitalises on the poor infrastructure and limitations in Nigeria’s financial system.

Unnamed person voice clip
I use the PalmPay because the network is normally faster. Even when you have the cash on your hand now, it’s useless.

James Kynge
These apps are used to buy stuff in shops, send money to friends and family and even gamble.

Unnamed person voice clip
You can pay bills, electricity bills, water bills. I use it for my everyday daily transaction.

Unnamed person voice clip
I use PalmPay. It’s quick in transferring.

James Kynge
Even larger than PalmPay is an app called OPay owned by a consortium of Chinese investors, including the Chinese-owned Opera internet browser.

Unnamed person voice clip
I use OPay for convenience. A lot of things happen in the world. Somebody can do a fake transfer and they show you evidence and you don’t get your money real-time. But with OPay, once somebody’s sending money to you, you’re seeing it real-time.

James Kynge
Any time you buy or trade anything in Nigeria, whether with a street vendor, a small market trader or a retail shop, there’s a fair chance you’ll be using one of these Chinese-owned payment apps. And here’s the thing, these apps also provide loans. In fact, there’s been an explosion in Chinese-backed loan apps over the last few years. And not everyone is cheering their proliferation.

[UNTOLD: POWER FOR SALE TRAILER PLAYING]

James Kynge
Nigeria is a country where banking limitations mean that the working class, and much of the middle class as well, aren’t able to borrow from traditional banks. That’s where the Chinese loan apps come in. And you don’t have to look very hard to find Nigerians who’ve been stung by them.

Femi
So the whole thing started in 2018, if I’m not wrong.

James Kynge
I met Femi in a hotel room in Lagos. We’ve changed his name because he wants to hide his identity. Femi turned to Chinese-owned loan apps when his poultry business was struggling. It was hit by bird flu. His hens weren’t laying eggs. Money wasn’t coming in.

Femi
So I had to resort to loan. I didn’t do my calculation very well. That’s . . . the interest rate is on the high side. So as high as 30 per cent interest rate.

James Kynge
A month?

Femi
That’s the funny part. Seven days.

James Kynge
Wow! That’s really high.

Femi
Two weeks after, they started calling me that, hey, you have to pay back here. You have to pay back.

James Kynge
Femi struggled to find the money to pay the hefty interest charges. So what did he do? He turned to other lending apps.

Femi
I had to borrow from one loan app to pay another. Before I realised it, I was doing about 30-something, 35 loan apps.

James Kynge
Femi got stuck in a cycle of short-term loan repayments to those 35 loan apps. It wasn’t just the high interest rates that stung, though. Some of those apps lending to him were also exacting another price.

Femi
They were offering loans to almost everybody, as long as you are willing to sacrifice your contacts.

James Kynge
Contacts, you mean on your phone?

Femi
Yes. So you have to grant them permission to have access to your contacts.

James Kynge
And access to his contacts gave these loan apps a lever with which to force repayment.

Femi
People did not understand that, OK, we don’t pay the money on time, they’re going to start sending all sorts of defamatory messages to your contact or your contacts.

James Kynge
So they send messages about you to your contacts?

Femi
Yes, defaming you. They can say all sort of, they say the person is HIV-positive. That is criminal. They stole. They will paint it in such a way that you can easily believe.

James Kynge
If it sounds like extortion, well, that’s because it was. Unable to repay the loans on time, Femi had collections agents sending him threats. The interest rates and the fees were piling up. His whole life was spent warding off the lenders.

Femi
Because of that fear, I was in that bondage for a very long time — for about two years.

James Kynge
For two years, he was constantly struggling to pay the interest on his loans. Until one day, Femi’s poultry business hit its limit.

Femi
I couldn’t pay again because my poultry business just collapsed. And my loan, supposed to be due that very day, but I could not pay because I was unable to raise the money at that time. So the next thing is to send messages to all my contacts.

James Kynge
Some of the lenders did send messages to all the contacts on Femi’s mobile phone, saying he was a criminal and a fraudster and that his contacts should report him to the police. It completely upended his life.

Femi
I was really depressed, really depressed and I could not do anything. Just lie down. I had to sell my poultry business so that I can pay them off and to start afresh.

James Kynge
Femi did end up recovering. He got a job in the city and picked up the pieces of his life. But he’s still angry. And the thing is, many of the companies he borrowed from are Chinese companies. I read a list of companies out to Femi and asked him if he’d borrowed from them.

James Kynge
Easy Credit?

Femi
Yes.

James Kynge
Cash Cash?

Femi
Yes.

James Kynge
Easy and then Moni. M-O-N-I?

Femi
Yes.

James Kynge
That includes a loan he took through the OPay app.

Femi
Yes.

James Kynge
Go Cash?

Femi
Yes.

James Kynge
The reason we know all these loan apps are backed by Chinese-owned companies, well, it’s because they’re being investigated by Nigeria’s consumer protection body.

How big was the scale of the problem? How many Nigerians were running into trouble with these, can we call them loan shark apps?

Babatunde Irukera
I would say millions, but I mean, I would say from an evidentiary standpoint, the scale that was coming back to us, at least verifiably, hundreds of thousands.

James Kynge
This is Babatunde Irukera, the former head of the Nigerian government’s consumer protection commission. During the pandemic, this commission began to receive a lot of complaints about loan apps.

Babatunde Irukera
What it took to start a business and start lending money out was really next to nothing. No requirements to demonstrate the source of funds, the identity of directors or operators. So long as they could develop an app and put it on the app store, the opportunity for money lenders was significant.

James Kynge
Irukera’s team started to investigate. They were concerned about the aggressive recovery methods, reports of hidden interest fees, as well as serious data and privacy violations.

Babatunde Irukera
We had some of our operatives and our field operatives tracking them and their physical locations, and we got some of that information. But as we found them, we would hack and disrupt, you know. We had ethical hacking tools, which we had a licence to use. And so we’ll continue to disrupt their business as much as we could.

James Kynge
And they began to issue warrants. In one day, they went after eight loan apps in Lagos. Irukera himself was out in uniform to inspect the raided offices.

Babatunde Irukera
We found that these were primarily Chinese-operated businesses that were very unknown, in very innocuous locations, where all they needed was broadband and space. And what they did was to employ hundreds, literally hundreds of young people who would sit in cubicles, wooden cubicles with their laptops and headgear, recovering these loans. Calling them, harassing people, sending out all these inappropriate text. I mean, it was their 9-5 jobs.

James Kynge
How many people would you find?

Babatunde Irukera
In one location we found 700 people.

James Kynge
These were massive offices full of staff sending harassing texts to people who’d taken out loans.

Babatunde Irukera
They had the information about the borrowers, including their entire contact list. Sometimes downloaded photos, and they would publish those photos, including inappropriate photos of people and nude photos of people, near-nude photos of people.

James Kynge
Really? In order to shame?

Babatunde Irukera
In order to shame them.

James Kynge
Take a second to think about this. Nigeria’s financial system, at least on the consumer end, was being reshaped by apps that were offering loans to people that had never had access to credit before. And some of the companies running those apps were downloading people’s personal information and in some cases, their intimate photos. All of the companies Irukera’s team raided that day were Chinese-owned.

Babatunde Irukera
Its source money or seed money or origin money comes from China. And they’re not some small, little guy who’s just become a money lender. Ultimately, they have links, perhaps even their origin in really large businesses in China. Because what our investigation showed us in some of them was that this business is a pretty large, essentially multinationals, in a manner of speaking, with big offices in China and operations in different parts of the world, especially in Africa. And even their operatives here were just further down the food chain from an employee standpoint.

James Kynge
Irukera’s team was able to shut down many of these apps. People told us that the consumer protection commission has since changed the way that many of these apps do business, but people worry that the change may only be temporary.

Babatunde Irukera
Chinese backing for payment systems and other financial service products is expanding, and that’s in part because they have significant backing. They are able to roll out infrastructure very quickly with their (inaudible) equipment or their technology that can, you know, literally go anywhere and everywhere.

James Kynge
Irukera no longer works at the consumer protection commission, but the government is still pursuing its criminal investigation. Given that, you may wonder why Chinese-owned apps are so popular in Nigeria. We spoke to Adedeji Olowe. He spent years working in Nigeria’s mobile payments sector. And we should say he works at an American-owned competitor. But even he can’t help but be impressed by these large Chinese-owned apps like OPay and PalmPay.

Adedeji Olowe
So you want to pay? With OPay and PalmPay your money appears instantly. It is ridiculously fast. OPay and PalmPay, they did it well.

James Kynge
They may be fast, but Olowe is frustrated by how they’re regulated. He says their services have been known to be used by fraudsters and criminals because it’s so easy to create an account.

Adedeji Olowe
Every time a fraud happened in Nigeria, your bank gets hacked, your money gets stolen, the money gets wired to an account in OPay or PalmPay. And somehow the central bank has never been able to hold them accountable. Why can’t you hold these guys accountable?

James Kynge
Olowe says the lack of oversight is, well, perplexing. But he thinks that gaps in Nigeria’s regulatory environment don’t help.

Adedeji Olowe
Regulatory barriers are low. The safeguards are non-existent. There are zero consequences for bad behaviour. So this is like the wild, wild west.

James Kynge
We put these allegations to OPay and PalmPay. PalmPay told us that the company rigorously combats fraud and has know-your-customer checks for all new accounts. It said it has a 24/7 customer service system and is regulated by the central bank and relevant agencies in Nigeria. OPay did not reply to our request for comment.

But there’s perhaps a more positive story to tell here. One about Chinese companies bestowing advantages on Nigeria’s tech industry. Transsion’s mobile phone business has helped bring digital connectivity to millions. And mobile phone payment apps have genuinely transformed the way people do business. For all the criticisms of these Chinese companies, some former Nigerian employees have a lot of admiration for the Chinese colleagues they worked with.

Moses Nmor
I was the first salesperson at OPay. We were out, six of us complete the entire staff of OPay at the time, 2018.

James Kynge
Moses Nmor is a former employee of OPay. They’re the ones I mentioned earlier, owned by the Chinese company Opera. He worked at OPay before they offered loans when they were first trying to get a foothold in Nigeria as a payment app, bringing rural Nigerians towards mobile banking.

Moses Nmor
You have to get to the rural areas to see how much of cash transactions happens within those areas.

James Kynge
In order to get people to use the app, Nmor would travel to communities where the nearest bank might be hours and hours away. This is where OPay saw potential. His very first business expedition was to a small border town.

Moses Nmor
It was a road trip basically. So just jump in buses from one city to the other. And we got to that, but that time around, like, 11pm, we couldn’t see the guy we wanted to go meet till, like, 12-ish am. We finished there around like past one in the morning, and then we had to come back because there was no hotel in that entire area.

James Kynge
This is the nitty-gritty of bringing banking services to under-developed areas. And surprisingly, the Chinese OPay executives were right there with him.

Moses Nmor
They were open to going to anywhere.

James Kynge
Wow!

Moses Nmor
They were always on the road, taking roadtrips, lodging in hotels for like months and months. They were always very hand-on. Very, very hands-on.

James Kynge
So you personally used to travel?

These Chinese executives were undaunted by, say, some of the less appealing hotel conditions.

Moses Nmor
In some cases, you take out the bedsheet and sleep on the, like, just arrange your clothes on top of the bed and then you sleep on top of your clothes. I mean, the bed sheets are not in the best state.

James Kynge
Are they dirty?

Moses Nmor
And you see a lot of spots on it. You don’t know what spots those are because those rooms are actually like short-time rooms.

James Kynge
We’re talking very short-term rooms for very specific purposes, if you get my drift. But the OPay executives didn’t mind all that.

Moses Nmor
I mean, if it was probably like a European, he’s trying to look for the safest environments, but not for them. It really didn’t matter.

James Kynge
And importantly, they were also looking to put money into areas that some western investors might think were too risky.

Moses Nmor
The Chinese business formula is pretty good is that they come with the money, invest it, and then begin to grow the business.

James Kynge
Nmor says he took some of that entrepreneurial spirit with him when he left to found his own start-up.

A lot of other OPay employees have gone on to do the same. Chinese entrepreneurs in Nigeria are willing to get their hands dirty and to do it on the cheap. That may well have a lasting impact in Nigeria. On the car ride back, I couldn’t help but think about an old expression I used to hear in Beijing.

In China in the ‘80s, ‘90s, maybe the first decade of this century, you’d often find people using a phrase (speaks Chinese), which really meant sort of finding a way to get things done, finding a different way around the system. It was like if the front door was closed, you went around the back door. It was that kind of a business culture. And I feel like here in Nigeria, a lot of what we’ve heard about the Chinese companies operating here is that they’re willing to be flexible, endlessly flexible, to get the job done. We just heard a Nigerian businessman telling us about Chinese colleagues he worked with. They were willing to travel anywhere. They didn’t need to go to luxury hotels. They would work all hours of the day and find a way to do things the Nigerian way. See what was happening at the grassroots and adapt their business model to make it applicable to this market. That really is (speaks Chinese) transported from China to Nigeria.

[MUSIC PLAYING]

Chinese business sometimes sees Africa as its second continent. The legacy of Chinese companies in Nigeria may be mixed, but for better or for worse, they’re transforming technology here in cities like Lagos. In the next episode of Tech Tonic, China is facing a demographic crisis. Its population is starting to shrink.

Unidentified speaker
That really is fundamentally reshaping not only the Chinese demographics, but also every other aspect of the Chinese society, Chinese economy. And it has ramifications for the world as well.

James Kynge
China faces a world with fewer workers and millions more older people. But could an army of robots be the solution?

Unidentified speaker
We are doing something to help the factory to transform themselves to the total automation, from the warehouse, to the clean room, to the equipment. Everything’s handled by robots.

James Kynge
You’ve been listening to Tech Tonic from the Financial Times with me James Kynge. Our senior producer is Edwin Lane, the producer is Josh Gabert-Doyon, and the executive producer is Manuela Saragosa. Sound design by Breen Turner and Samantha Giovinco. Original music by Metaphor Music. The FT’s head of audio is Cheryl Brumley.