Huawei also involved in unfair business practices in South Africa

The report by global news agency, Reuters

* As it dodges from paying Malawian ICT support services firms it subcontracted to build telecommunications towers

* Whose contract was awarded to the Chinese company by Malawi Government

* SA labour department’s 2020 audit indicated that approximately 90% of the company’s employees were foreign nationals

* Violating ‘employment equity’ regulations which impose a limit of 40%”

* A statement from Huawei South Africa was quoted as saying it was committed to complying with local laws and regulations

By Duncan Mlanjira

Chinese company, Huawei Technologies — which Malawian ICT support service firms have jointly accused of indulging in unfavorable trade practices by dodging contractual payments — also courts controversy in South Africa.

Global news agency, Reuters, filed a report from Johannesburg in February this year, saying South Africa’s labour department had asked a court to fine the local unit of Huawei Technologies “for breaking rules on hiring locals and to order the company to amend its practices”.

The report quoted the labour department that a 2020 audit indicated that “approximately 90% of the company’s employees were foreign nationals, violating ‘employment equity’ regulations which impose a limit of 40%”.

The department was further quoted as saying it had filed court papers seeking a fine of 1.5 million rand (US$99,151) or 2% of the local firm’s annual 2020 turnover for the alleged rule breaches.

Reuters quoted the labour department advocate Fikiswa Mncanca-Bede as saying: “We are requesting the honourable court to grant them an order that says they must implement an employment equity plan that will redress the status quo.”

In its response, Huawei South Africa was quoted as saying in a statement that it was “committed to continue engaging further with the Department on our equity plan. Huawei is committed to complying with local laws and regulations.”

In Malawi, Huawei is dodging from paying ICT support services firms it subcontracted to build telecommunications towers — whose contract was awarded to the Chinese company by Malawi Government.

The contract from the Government in 2018 was to construct 200 telecommunication towers to be rent out to private companies in order to reach out to every corner of the country in providing equal access to information and technology.

While the subcontractors met their end of the bargain for the success of the government project, Huawei suspended their contracts without any explanation and never honoured any compensation payment.

After we exposed this unfair business practice, a source shared the South African saga and went further to say the treatment by Huawei is to cripple the Malawian ICT support service firms in order to be deemed as if they are incompetent so that the Chinese company can offer the jobs to foreign firms.

Our source said Huawei was given another contract by the government — the Malawi Backbone Phase II but the Chinese have subcontracted a foreign company, which it has already been paid 70% of the contract and in US dollars and euros, whilst the Malawian firms are yet to be paid.

In inaugurating the Malawi Backbone Phase II project, President Lazarus Chakwera reiterated that government projects should be prioritized for local firms and that foreign contractors should only engage Malawian companies to empower them and protect the forex.

“What Huawei is doing is against the State President’s directive but these Chinese are deliberately frustrating Malawian firms so that they be seen as incompetent in order to engage foreign firms of their choice,” he said.

Our source added credence that the Malawi National Fiber Backbone Project Phase II for optical fibre installation is indeed marred with so many issues including unfavorable payment terms for the local subcontractors compared to the payment terms given to foreign subcontractors and also stringent and prohibitive processes to claim payments.

A few weeks earlier, Centre for Democracy and Economic Development Initiatives (CDEDI) also echoed President Chakwera’s call for the development of deliberate policies to protect the local players in the construction industry, observing that the local players are at the mercy of foreign firms.

Addressing the media in Lilongwe, CDEDI Executive Director, Sylvester Namiwa claimed that from Marka in Nsanje to Meru in Chitipa, everything is in the hands of Chinese firms.

“The Chinese government sponsored companies are creating advantage and, in the process, killing the competition by quoting prices that are lower than the engineers’ estimates.

“Our prediction is that in five years’ time after successfully killing the local contractors, the Chinese are likely to raise the prices to recoup all they invested in this scheme.

“The Chinese, unlike their European counterparts, use the cheapest bids as a strategy to enter the African market, while companies such as Starbag use high quality strategy,” he had said.

Namiwa also echoed what President Chakwera ordered — that foreign companies awarded construction contracts in Malawi should award 30% of the projects to the local contractors and also ordered that all international bidders should allocate 30% to local contractors when accorded an opportunity to manage projects through a thorough process.

Namiwa maintained that the President had said he had taken this step to protect exploitation of the local players by foreign contractors.

Namiwa contended that there is rampant financial discrimination in the construction industry in Malawi, with foreigner-owned companies enjoying the biggest share in contract awards.

A survey by CDEDI has established that Roads Authority (RA) awarded ‘almost all the contracts’ to Chinese Government-sponsored companies — thereby putting local companies at a disadvantage.

According to a communication we have in possession addressed to Huawei’s managing director in Malawi, dated May 8, 2019 signed by all subcontractors under the subject ‘Subcontractors’ Concerns Regarding the UAP Service Project’, it details Huawei’s unfair trade practices.

The letter in 2019 was pleading for professional response from the Chinese firm contractual agreement of the UAP Service Project, which was suspended but they still haven’t received any response up to now.

Huawei awarded them as subcontractors to build the towers in 2018 and were given some prerequisites, which included dictated number of skilled personnel to hire.

The personnel included engineers, riggers, supervisors, project coordinators and others — went on special training course, whose high expenses were borne by the Malawian firms whilst waiting for Huawei to refund them, which they haven’t done up to now.

Huawei also listed equipment and tools which the Malawian subcontractors were to buy for the project execution before any agreed upfront payment.

The Malawian firms then mobilized to their awarded sites with all personnel, equipment and tools, materials, warehousing, staff accommodation, allowances amongst others.

The letter to the MD, which haven’t been responded to till now, as according to our source, asked for an update of the UAP TK Service project; when they expected its resumption and what was Huawei’s plan “to bail out its subcontractors who are passing through unanticipated financial hiccups due to the involvement in a project that has been on hold for 7 months”.

The letter reminds the MD that on September 26, 2018 — a week after the contracts by the four had duly been signed for by Huawei on September 17 — the subcontractors mobilized to the sites but on October 6, they received “a phone call followed by email communication from the Project Manager that we should put on hold all activities in our respective sites”.

“It was said in the email that further information would be provided in a week’s time as to which sites were to proceed.”

The letter goes on to remind Huawei MD that on October 8, the subcontractors were called for a meeting where they were told of the cancellation of some sites and also the introduction of some new sites and it was agreed that they should start on October 9, of which they did.

“Barely one week after returning to construction sites on the 16th October, we received email communication from the Project Manager that he received instruction from management for us to put on HOLD the site works till further notice.

“Since this HOLD on, there has not been proper communication regarding the project status apart from being given the hope verbally that the project might resume in January, 2019. We then heard that it might start in February 2019, then mid-March and finally April 2019.

“It was this hope that was keeping us going on but now we have been over-stretched beyond our capacity.”

The letter mentioned all the investment the four Malawian firms injected into the project as per requirements that included employment of new additional staff; training of staff; acquiring new vehicles; acquiring new equipment and more tools, work suits, boots, helmets and new belts.

“We had to put everything on our disposal in order to make that project a SUCCESS,” says the letter. “It was our wish to be given Site Construction Duration for every given site.”

The letter also indicates that they approached banks for loans “in order to smoothly execute the project without any financial hiccups [but] when the Purchase Orders were raised for us, they did not include everything for the total site”.

“This meant that the 30% advance payment that was given to us was not enough for a subcontractor who mobilized for the total site works,” said the letter to Huawei Malawi MD.

The February report by Reuters, quotes the South African labour department as saying Huawei was granted a permit in accordance with provisions of the Immigration Regulations requiring it to employ 60% South Africans and 40% foreign nationals.

The labour department discovered that Huawei instead had been employing far above that number of foreign workers and had plans to hire more, thus the department deemed that “all transgressions have been committed”.

Reuters also revealed that “the Chinese tech giant is dealing with US sanctions over allegations the company’s equipment could be used by the Chinese government for espionage” — but “Huawei and Beijing have repeatedly denied the allegations”.

“The move is the first time the South African government has made a legal challenge against the Chinese tech giant. However, the labour department has cracked down on a smaller Chinese firm over charges of poor working conditions and human trafficking at its factory in Johannesburg. That case is still in court.”

According to Reuters, Huawei is one of the major information and communications technology players in South Africa, selling a wide range of products from mobile phones, smart devices, television sets and telecom equipment to solutions in cloud computing and data storage.

“It has not publicly stated the number of people it employs in South Africa,” said the report.