What Didi’s China Crackdown Signals for the African Market
In late March, Chinese rideshare app DiDi expanded into South Africa, its first foray into the African market, But yesterday, the multi-billion-dollar company was forced to remove its software from app stores in China.
According to a statement issued by the company, ‘the app takedown may have an adverse impact on its revenue.” This crackdown comes just days after DiDi’s U.S. IPO, where the company raised $4.4 billion.
92% of the rideshare app’s revenue is made from its China userbase. In order to gain a foothold in the South African rideshare market, the Didi will need to offer discounts and deals to attract new users. The potential loss in revenue from its highest-earning market brought on by Monday’s app store takedown could affect DiDi’s success in South Africa, a market some believe the firm entered to boost valuation ahead of last week’s IPO.
Over the past year, China’s regulators have been on a campaign to crack down on the nation’s (former) tech darlings with major players like Tencent and Bytedance falling victim to tightening restrictions. For years China’s government promoted growth in its domestic tech industry. But as these tech companies expanded to become super apps that threaten to take the place of China’s own government-issued initiatives, its regulators have become more aggressive in regulating the use and collection of user data.
This wave of crackdowns issued by China’s regulators is expressly meant to regulate the use and storage of data obtained in China, but still raises questions as to how the company utilizes the data it collects abroad.
Regulating China’s Tech Darlings
China-made apps are finding new markets in Africa. The increased regulation of China’s tech darlings should be a signal for Africa’s cyberspace regulators to strengthen data protection and data regulation for foreign firms operating in the region.
In March, China’s State Administration for Market Regulation jointly issued new rules to standardize the personal information that apps can forcibly collect from their users. The landmark ruling covers 39 types of apps including navigation apps, online ride-hailing services, instant messaging apps, and online shopping apps.
The day before Didi’s trading debut, it “updated its user information and data privacy policy” according to Reuters. The company also stated in its IPO prospectus that they “follow strict procedures in collecting, transmitting, storing and using user data pursuant to [their] data security and privacy policies”.
At present, Didi’s privacy policy for its user base outside of China states that the company typically holds personal information collected on servers in electronic databases located in the U.S. and managed by their ‘related entities,’ adding that its privacy policy will ‘not apply to the extent that it is inconsistent with any applicable law’.
In an article published in The Global Times, a publication owned by the ruling Communist Party’s official newspaper, “no internet giant is allowed to become a super database that has more personal data about the Chinese people than the country does, not to mention using the data at its own will.”
The Growing Need for Data Regulation in Africa
While fear-mongering about security issues from Chinese apps in foreign markets has been largely unfounded, African user data held in silos by foreign companies do raise questions about development and data sovereignty on the continent.
There’s been increasing interest in African data recently. Amazon’s Cloud computing service Amazon Web Services (AWS) launched data center operations in South Africa in April. Telecommunications giant, Huawei, has also set forth plans to build two data centers in South Africa capable of serving multiple African countries.
In one of my favorite books, AI Superpowers: China, Silicon Valley, And The New World Order, Lee explains just how Chinese tech companies leveraged data and connectivity to pave the way for China as an indispensable fixture in the global tech industry. His rallying cry, “data is the new gold”, has always resonated with me and does, increasingly so, when it comes to Africa.
With a population that is expected to triple by 2050, African nations are home to some of the world’s youngest populations. Despite shockwaves in the economy caused by the COVID-19 pandemic, 2020 was still a record-breaking year for Africa’s tech companies who secured a total of $701.5 million in investment funds. There’s a reason why global tech giants and investors are pouring into the African market.
As China considers the risk that vital user data wielded at the hands of its own tech giants poses to stability and growth, Africa’s internet regulators would be wise to follow suit.
