Abstract
China’s role in the digital development of Ethiopia has been crucial over the last twenty years. Chinese tech giants have been key in building and funding projects becoming an alternative solution for developing countries to pursue their goals. This article examines opportunities and risks of China’s engagement in Ethiopia, one of Africa's most populous and fast-growing, yet underdeveloped economies, which will play an increasingly important role in the continent.
Author
Pietro Damiani - Junior Researcher Mondo Internazionale G.E.O.
Background: China’s investments in information and communication technology in Africa
In January 2022 the Ethiopian ambassador to China Teshome Toga Chanaka participated in a live stream on the e-commerce platform Taobao together with Li Jiaqi, one of China’s top influencers (eWTP, 2022). The event was aimed at promoting Ethiopian coffee brands in the Chinese market and was a huge success, selling 11,000 bags of coffee after the first five seconds after the sales opened, a “miracle”, according to Chanaka, that would have been “unthinkable” in the past (CCG, 2022). The platform, part of Chinese Alibaba Group, gave a huge boost to one of the biggest sectors of the Ethiopian economy by providing Ethiopian coffee farmers with access to new markets and lowering barriers for conducting trade, ultimately generating new sources of revenue for Ethiopian people.
It is the impact of what has come to be known as China’s Digital Silk Road (DSR). This term represents the digital turn of China’s foreign economic policy under the Belt and Road Initiative (BRI), the wider policy to develop and create new trade routes and investment flows between China, Eurasia, and Africa. Discussions about the DSR emerged after the publication of the White Paper by the China’s National Development and Reform Commission in 2015, calling for the creation of an “Information Silk Road” (NDRC 2015). Over the next decade, this has led to the consolidation of a synergy between the Chinese leadership and technology companies.
However, the DSR is still more a slogan than an official policy initiative like the BRI. Unlike the BRI, there is no allocated fund, no public document about what the goals of the DSR are, how they are to be achieved, or who is in charge of what. As a result, it is not clear where the line indicating DSR membership is, nor if there is a necessary overlap between the BRI and DSR. This points to the fact that while Chinese technological companies have achieved a high status in the global economy, there is no sign that unequivocally suggests that DSR investments are driven by state policy more than the mere profit logic of the companies involved.
How does the DSR materialise in Ethiopia?
Although not an institutionalised new policy, the DSR is a growing trend in Chinese economic foreign policy, and as such it does have an impact on the countries involved. In the case of developing countries, one theme of the discussion is the potential of Chinese engagement for developmental and technological ambitions of the recipient countries.
To assess this, it is essential to take into consideration not only plans from Beijing, but most importantly Ethiopia’s current situation in digital development and its ambitions. In 2021, almost half of the population owned a mobile phone,[1] the 3G network covered almost the entire population, and 16% of the people were on the internet (ITU, 2021). The government wishes to become Africa’s next tech hub, but it must first overcome several challenges.The reliability of the internet connection and, more generally, of electricity supply, are major obstacles for the creation of an Ethiopian digital economy. While the network covers almost the entire population, its subscriber capacity is significantly limited and vulnerable to blackouts (FDRE 2020, 50). And this despite long lasting investments from China. Back in 2006, an investment agreement between ZTE and the Ethiopian government financed by China Development Bank marked the “largest agreement in the history of telecommunications in Africa” (Gagliardone, 2016, 1).
Nevertheless, Ethiopian digital development seems to have increased pace recently. Over the last five years, the Ethiopian national digital strategy has been driven by the Digital Ethiopia 2025 (DE25) strategy. This policy started in 2020 and is expected to end this year. It is part of the bigger Ten-Year Development Plan released the same year by the Planning and Development Commission which placed a significant role on innovation and technology development and aims at increasing the access of mobile and internet services to the totality of the population by 2030 (PDC, 2020, 56). Currently, another plan for the next five years is under elaboration (ENA, 2025).
Opportunities: China and the Digital Ethiopia 2025 strategy
Innovation and technology development are a central element of Ethiopia’s national strategy. The DE25 assesses the country’s digital readiness and identifies key challenges across three levels specific to the digital realm: infrastructure, enabling systems, and digitalisation of governance and commerce. This section will unpack the DSR’s contribution in the three sectors considered.
Infrastructure
Infrastructural goals can be divided into two macro categories: those related to the reliability of electric power supply and those aiming at enhancing connectivity. Energy generation in Ethiopia overly relies on hydro power, and enhancing generation capacity and diversifying sources are two of the goals of Ethiopia’s digital strategy. China plays a role in realising both, although to different extents. In the first case, the primary example is the financing (in part) by China’s Exim Bank of the construction of the Great Ethiopian Renaissance Dam (GERD), the world’s fifth biggest dam, and the biggest in Africa (Matthews & Vivoda, 2023). Although not the primary contractors, some Chinese firms also participated in the project’s implementation (GCR, 2019). Chinese banks and contractors were likewise involved in the development of wind and solar energy projects in Ethiopia. Three wind farms provide 500MW (Chen, 2016), the same as one photovoltaic park in Oromia (Power Technology, n.d.). However, compared to the 6,450 MW generated by the GERD alone (international hydropower association, n.d.), these numbers show a much more modest impact in energy supply diversification.
In the area of connectivity, Huawei and ZTE started massive projects in Ethiopia as well. For example, in 2013 they launched two projects centred on the construction of a 4G network and the expansion of the existing telecom network, where over USD 1 billion were financed by China Exim Bank. (Wang et al., 2024). Cooperation of this kind has continued into the DE25 strategy. A notable example is the agreement signed in 2022 between Ethio Telecom — the state-owned network provider with market monopoly until that year — and Huawei to build 5G infrastructure in Addis Ababa (Wang et al., 2024).
During the DE25 strategy, investments in connectivity have also entered a new phase aiming at transforming Ethio Telecom from a traditional telecom network operator into a digital and smart solution provider. In 2024, this phase was labelled by Huawei as the Emerging Market 2.0 (EM 2.0) model. Building upon increasing connectivity and power supply, this model is focused on the implementation of cloud computing to facilitate the development of digital payments as well as industry and governance digitalisation (Huawei 2024, 88-89). To this end, Huawei and ZTE were already involved in the construction of a data centre in 2021 (Swinhoe, 2021). In September 2024 a discussion between Ethio Telecom’s CEO and the general manager of the Chinese state-owned enterprise Shandong Hi-Speed Group led to an agreement whereby the Chinese firm will finance and build a new hyperscale data centre (Bankole, 2024).
Enabling systems
Enabling systems work as an intermediary layer between the infrastructure and the application level. The DE25 strategy highlights three policy areas in this section: digital ID, cybersecurity, and digital payment. Compared to infrastructures, the DSR does not play such a big role here. The Ethiopian government did start a national digital ID programme known as Fayda ID. However, the project is financed by the World Bank (World Bank Group n.d.).
Similarly, not a lot has been done in the realm of cybersecurity. A cybersecurity assessment of Ethiopia identified critical gaps in all areas of national cybersecurity (Cybil, n.d.), which make the country vulnerable to cyberattacks like those which targeted the GERD in 2020 and 2022 (Maslov et al., 2024, 37). However, currently there are initiatives which might indirectly improve the cybersecurity issue. One example is the establishment of Huawei ICT Academies and other forms of collaboration between Huawei and universities in the sphere of information technology, enhancing human capital and increasing awareness (Ye, 2024), two key problems identified in the DE25 strategy (FDRE, 2020, 61).
While the DRS role has been very marginal in digital ID and cybersecurity, China’s experience with digital payments translated into a strong trend of money digitalisation in Ethiopia. In 2021 Ethio Telecom, with the support of Huawei’s products and services, launched telebirr, a mobile money service featuring money transfer, payment services such as utility bills, and access to loan and savings through partnership with other banks or financial institutions. Cooperation with Huawei is not limited to the provision of digital products, but included advising about business strategy and growth as well as integration of telebirr into national plans of digital transformation, leading to reaching 40 million users[2] by the beginning of 2024 (Huawei 2024, 90-92).
E-governance and e-commerce
Instead of defining new focused policies, the DE25 strategy understands improvements in e-governance and e-commerce more as a consequence of better underlying conditions enabling digitalisation. In the realm of e-commerce, however, one big project has been launched, namely Alibaba’s electronic World Trade Platform (eWTP). The eWTP entails the construction of so called “e-hubs”: namely physical locations where traders have access to Alibaba’s e-commerce network. The goal of the eWTP is to digitalise logistics and customs practices, thereby reducing costs and time, and facilitating trade within Africa and abroad. This is especially true for small businesses in developing countries, which are the main targets of the initiative.
In Ethiopia the eWTP has had positive externalities outside the digital realm when the Covid-19 pandemic acted as the “perfect storm” (Johnston 2021, 68). Thanks to Ethiopia’s role in African logistics, the country was the recipient of massive amounts of equipment necessary to face the pandemic, and was also tasked with the redistribution in the wider region. The convenience of the eWTP combined with Ethiopia’s logistic capacity made the country the favourite hub for China, even though the first and only other eWTP was first established in Rwanda. Following the stimulus for the logistic sector, companies in Ethiopia started to realise the potential of this alliance and have become ambitious to expand this collaboration (Johnston 2021).
Risks: Long term implications
Despite Chinese engagement carries a lot of opportunities, there are potential obstacles to a harmonious development. Two major debates have emerged in discussion about China-Africa relationships, and it is worth examining those in the case of Ethiopia.
The first is about democracy and human rights. Research has proven that products by Chinese companies might facilitate control of the Ethiopian government over its citizens, for example by recording phone calls (van der Lugt, 2021). However, it must be also said that the core reason is to be found in the authoritarian nature of Ethiopia itself. First, digital tools are not designed to be used as surveillance tools, and the choice on how to use them is the responsibility of the government. For example, in ZTE’s ZSmart package it is possible to opt out of the surveillance tools, hence whether to use those services is ultimately the buyer’s choice (Meester 2021). Secondly, sometimes Chinese companies sell these tools as part of bigger and indivisible bundles which includes several other digital products, which indicates that surveillance is not the primary goal of these deals. Finally, even overlooking all this, it would be incorrect to assume that removing the DSR from the picture will significantly curb the ability of the government to pursue authoritarian practices, as Italian, German, and English companies sell similar products to Ethiopia (HRW 2014, 71-80).
The second debate of China’s engagement in Africa is about the so-called debt-trap theory. Al-Fadhat and Prasetio (2024) worry about the risk of African countries falling into a situation when the borrower is unable to repay the lender, allowing the latter to implement policies that govern the former. They apply structural power theories to three case studies in Zimbabwe, Cameroon, and Djibouti, concluding that all of them have fallen in the trap. Evidence of this are: the increasing debt in the face of already mounting debt pressure, the adoption of the Chinese Yuan to ease repayment, agreements involving access to strategic sectors in exchange for debt relief.
Ethiopia also faces structural power imbalances with China, so does Ethiopia show any of these signs? Ethiopia’s debt pressure has been mounting and limits its investing abilities. The country’s low export and low level of revenue indicates potential debt distress (Calabrese et al, 2021, 34) and, as of 2014, Ethiopia was the second largest African borrower from China (Bräutigam & Hwang, 2016). Moreover, although Ethiopia has not adopted the renminbi as a currency, in 2024 it has reached an agreement with China about a currency swap, allowing the two countries to bypass the dollar and conduct trade using their respective currencies (Addis Insight, 2024). Finally, episodes of debt relief occurred in 2001 2007, 2018, 2021, when either China agreed to provide debt relief or Ethiopia asked for debt relief and loans restructuring (CARI, 2021; Hurley et al., 2019).
However, there is no clear correlation between these factors and control over strategic sectors. Huawei plays a big role in the telecom industry, but there is no indication that this is primarily due to a political master plan. DSR investments in Ethiopia might be happening just because they make good business sense. In other words, while debates about the government’s role in Chinese big tech are valid, these companies would probably invest in Africa similarly and with comparable influence regardless.
This is confirmed by looking at consequences of Ethiopia-China relations in the broader international community. In the context of the DSR, concerns are centred on whether China’s digital capability will reshape global internet governance. Most notably, Huawei’s “New IP” proposal attracted much criticism about the higher degree of top-down control that it would entail (Yin 2024; Hmaidi & von Carnap 2023). Tugendhat and Voo (2021) put DSR loans received by African countries in relation to public statements in support of the new IP proposal, and showed that Ethiopia, despite being the biggest borrower in the context of the DSR by far, and despite Huawei’s huge involvement in Ethiopia’s telecom sector, has not so far expressed support for the proposal. On the contrary, some African countries who borrowed a lot less did support it. The Ethiopian case shows that there is little correlation about loans and political influence in China-Africa relations.
Conclusion: Risk or opportunity?
Over the last twenty years China has provided a great opportunity for Ethiopia’s to access resources and know-how to pursue its path to digitalisation. The DSR did not carry any peculiar risk for the political or economic future of Ethiopia. Risks associated with the DSR, primarily mounting debt pressure, are also present in Ethiopia’s engagement with other countries. So far, there is no evidence of Beijing deliberately trying to entangle Ethiopia in a web of debt to extract unfair strategic concessions. Rather, Ethiopia’s case confirms that the debt-trap theory is, in the words of Deborah Bräutigam (2020), little more than a “meme”.
Rather, it is inequality and market liberalisation that are likely to be the main obstacles for Ethiopia to overcome. While many projects improve connectivity nationwide, prioritising 5G investments in Addis Ababa amid severe power shortages in rural areas risks deepening existing rural-urban disparities. Lack of inclusion also exacerbates the problem of inequality: as transformative a tool as telebirr might be, it is available in only five languages, and a lot of linguistic minorities are excluded from using it (Shahid et al. 2023, 51). Finally, while improvements have been made, signs of market liberalisation are scarce, with Ethio Telecom de facto preventing competition. In other countries it was exactly liberalisation to drive expansion of coverage and reduction of costs (Gagliardone & Golooba-Mutebi 2016).
The DSR in Ethiopia is there to stay, and Chinese investments in information and communication technology are likely to bring benefits to both parties. The pivotal factor will be the ability of the Ethiopian leadership to shape this relation to achieve sustainable and long-term development.
Footnotes
[1] The share refers to owners with an active mobile subscription. The total number of active and non-active subscription reached 60% already in 2017. See Digital Ethiopia 2025: A Digital Strategy for Ethiopia Inclusive Prosperity, p. 49.
[2] Data about number of people using mobile phones to pay utilities bills suggests that the number of active users might be significantly lower. See Shahid et al. 2024, p. 57.
Bibliography’s entries classification
1 | Confirmed | Confirmed by other independent sources; logical in itself; coherent with other information on the topic |
2 | Presumably true | Not confirmed; logical in itself; coherent with other information on the topic |
3 | Maybe true | Not confirmed; reasonably logical in itself; coherent with some other information on the topic |
4 | Uncertain | Not confirmed; possible but not logical in itself; no other information on the topic |
5 | Improbable | Not confirmed; not logical in itself; contradicts with other information on the topic |
6 | Not able to be evaluated | No basis to evaluate the validity of the information |
Trustworthiness of the source | ||
A | Trustworthy | No doubt about authenticity, reliability or competence; has a history of total trustworthiness |
B | Normally trustworthy | Small doubts about authenticity, reliability or competence, nevertheless has a history of valid information in a majority of cases |
C | Sufficiently trustworthy | Doubts about authenticity, reliability or competence; however, has supplied valid information in the past |
D | Normally not trustworthy | Significant doubt about authenticity, reliability or competence, however has supplied valid information in the past |
E | Not trustworthy | Lack of authenticity, reliability or competence; history of invalid information |
F | Not able to be evaluated | No basis to evaluate the validity of the information |
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