Why African Startups Are Embracing DeepSeek

0:01Bloomberg Audio Studios Podcast Radio News. I'm Sarah Holder, host of The Big Take. And I'm Jennifer Zabasaja, host of Bloomberg's Next Africa podcast. Today, we're bringing you a story reported by our colleagues in newsrooms throughout Africa and Asia. It's about how the AI arms race is playing out in Africa as Chinese AI developers try to break into the burgeoning Africa tech scene. Earlier this year, a group of tech executives from all over Africa got together at the headquarters of a Nairobi-based startup to consider a business proposition. So it was an early breakfast meeting and it had a whole lot of African startup founders.

0:50And then there was also a group from Huawei with one of their top execs that sort of runs sub-Saharan Africa's cloud services. Loni Prinsloo is a senior Africa reporter for Bloomberg based in Johannesburg. And she says that Huawei CloudExec was there to talk about one buzzy new company in particular. He came in with quite a strong pitch for DeepSeek saying, you know, DeepSeek is so hot. That was literally his words. DeepSeek is so hot. No one wants to talk about anything else. DeepSeek, the Chinese AI platform that launched a breakthrough reasoning model in January 2025. Shocking, it's competition.

1:31DeepSeek. Where did this one come from? The cheaper AI model from Chinese startup DeepSeek could threaten U.S. big tech. DeepSeek is a Chinese startup that's producing these large language models that offer very high performance at a relatively low cost. That's Helen Nyambora, Bloomberg's East Africa bureau chief. DeepSeek is using Huawei hardware and the ecosystem, both chips and cloud. So from a political perspective, Huawei is promoting domestic AI tools that are running on domestic hardware. Huawei and DeepSeq's parent company, Highflyer, have been collaborating since mid-2023. In addition to hosting DeepSeq on its cloud, Huawei has also started selling its storage and computing services in a bundle, with access to DeepSeq's large language model.

2:21So Huawei's exec wasn't just hyping up how hot DeepSeq is. He was trying to pitch these African startups on using DeepSeek's AI platform and accessing it through Huawei's cloud servers. And he presented a pretty compelling offer. Basically, if you are going onto a Huawei cloud instead of going directly onto DeepSeek, every day you get 2 million tokens free. So that's sort of unheard of and definitely a crowd pleaser. Tokens are the unit that DeepSeek uses to bill for its services. Two million free tokens can get you a lot of DeepSeek computing power. According to the Huawei presentation, they would cover about 3 ,000 pages of new content generated by DeepSeek's model.

3:08Huawei is offering incentives like this to African tech companies because they stand to gain a lot too. They're trying to establish a crucial foothold on the continent early in the AI race. And some critics worry that DeepSeek and Huawei's bet on African AI infrastructure could have complex long-term consequences, including for data privacy.

3:35This is The Big Take from Bloomberg News. I'm Sarah Holder. And this is a special co-production of The Big Take and Bloomberg's Next Africa podcast. I'm Jennifer Zabasaja. Today on the show, DeepSeek and Huawei's push to dominate the artificial intelligence market in Africa. What it could mean for the global AI race, the soft power balance between the U.S. and China, and China's efforts to influence Africa's development, industry, and innovation.

4:12Africa's digital economy is valued at about$180 billion today. But by 2050, it's expected to swell to$712 billion. For the past few years, while American AI companies have experienced record levels of growth, African companies and African users have been largely left behind. One reason for this is that access to computing resources plays a big role in African startups being able to develop their own AI models and attract funding. The bulk of the$800 million African AI startups attracted last year went to places on the continent that have more AI capabilities, like South Africa, Kenya, Tunisia, and Egypt.

4:59And Huawei's pitch for DeepSeek in that Nairobi conference room catered to the broad spectrum of AI use cases that African entities could need. From free options for smaller startups, to private cloud systems for governments, to more compute-intensive options for app developers. Bloomberg's Loni Prinsloo says that in Africa, DeepSeek is trying to position itself as a more flexible option than its Western competitors. When it comes to Google Gemini and Meta, Lama, those Western models, you have quite a lot of restrictions, licensing restrictions and tech restrictions. AI offerings from U.S. companies tend to be harder to customize.

5:42They're largely not open source, but DeepSeek is. That means users can access the underlying code and modify the software to suit their needs for no additional charge. Something like that just suits the African environment much better. You don't always want the large language models. Sometimes you want a small language model for the types of adaptions that you want to do in terms of AI. One reason African startups might want a more customizable model is because many U.S. AI models weren't trained on African dialects, and they often fail to pick up on cultural nuances. Using them on unfamiliar words and situations can be expensive.

6:27They require more tokens to perform those tasks. This all makes DeepSeek's open-source model more appealing. And using the model is also much cheaper. We spoke to one startup in Nigeria called Equalize AI. And so basically what DeepSeek is charging is 27 US cents to process a million words for a query. and then$1.10 for a million words in terms of the response that it generates. That's a lot less than ChatGPT, which costs more like$5 for a million words of processing and$15 for a million words generated. That is$2 ,700 per month if it uses DeepSeq versus$12 ,500 if it uses ChatGPT4 for the same task.

7:16So it's a massive difference. DeepSeek's platform is four and a half times cheaper for Equalize AI to use, which raises the obvious question. What's the financial appeal for DeepSeek? What are they seeing financially when it comes to some of these ROIs? Look, they're still charging. So they must be playing more of a volumes game. And in terms of volumes, that is what Africa can offer. We have a massive amount of young people on the continent. They're all interested in what technology can do for them. There's a lot of restrictions in terms of actual traditional infrastructure. So technology is where everyone's sort of looking towards.

7:59So it's a longer game, I think, for DeepSeek, more than it is for OpenAI, who is running for profits, basically. OpenAI didn't respond to a request for comment on the story. Meanwhile, DeepSeek's numbers game seems to be working. When it comes to startups specifically, every African startup we spoke to prefer DeepSeek at this point when it comes to training their models, adapting their models. So what we are seeing on the ground is that there are definitely numbers in favor for DeepSeek currently. And Huawei isn't just pitching startups on DeepSeek. they're also trying to get African governments to adopt their platform.

8:46Here's Bloomberg's Helen Yambura. We don't have credible evidence that African governments are formally adopting DeepSeek tools for their public service and official use. But Huawei is pushing what it calls its national government cloud solution in southern Africa. So this is platforms to support public services and cloud infrastructure and digitization of government services. If DeepSeq were to expand into the government space, it could be handling more sensitive data. And critics at universities and legal firms have raised concerns about how that data is being gathered and how it could be used.

9:26A Wall Street Journal investigation found that Huawei technicians have provided African governments with information on their political opponents, for example. Huawei and the governments, though, deny the claims. DeepSeq has already been blocked in several European countries over data privacy concerns. And what regulators say is a lack of transparency about the relationship between the Chinese government and companies like Huawei and DeepSeq. One of the central concerns is that the Chinese government could gain access to DeepSeq data stored on Chinese servers. Italy's Data Protection Authority asked for information on DeepSeq's data collection, use, and storage policies, which DeepSeq did not produce.

10:12German regulators asked for evidence that German user data sent to China was protected in line with European standards, which DeepSeq was unable to provide. When asked by Bloomberg about data privacy concerns, DeepSeek and Huawei both declined to comment. Huawei's efforts in Africa are aligned with a similar playbook that the Chinese government has used for over a decade as a means of gaining soft power. After the break, what that approach could mean for China's influence and its position in the global AI race.

10:55For over a decade, the Chinese government has made a concerted effort to invest in foreign infrastructure, increasing its influence in developing countries. It's a strategy known as the Belt and Road Initiative. China is going to the developing world, especially in Africa, and extending soft power through building infrastructure, but using technology. Rather than the hard airports and ports and roads and railways, this now is the software to be ahead of the U.S. This new AI software initiative isn't technically a Belt and Road project, but it takes a similar approach. And it's one the Chinese government has also used in the past to expand the reach of Chinese phone companies like Huawei and ZTE into Africa.

11:49The Chinese companies, Huawei and ZTE, were not the first on the continent. But these companies came with a cheaper, more cost-effective solution. So it's the same thing that we're seeing with DeepSeek. Belt and road projects in Kenya, Ethiopia, and Djibouti gave China economic leverage over these developing countries. Chinese companies and the Chinese government offered cheap loans in order to roll out infrastructure and equipment across the continent to cement their position. Ultimately, those nations had to majorly restructure their debt in order to repay their loans. Other nations who weren't able to pay back their loans, like Sri Lanka, have had to turn over control of their infrastructure to China.

12:35When it comes to Huawei and DeepSeek, the leverage these companies could have is access to information. It's all about capturing the vast amount of data that will shape AI in the future. Some critics are worried that this, you know, will elchow that Belt and Road where we saw China forcing some poor countries to hand over critical infrastructure, you know, to pay for all those projects. So we don't know how this might pan out for African companies and governments in future in terms of cost. And there are other side effects that come from relying too heavily on one country's digital infrastructure.

13:16For example, for the past two years, to prevent cheating during China's national university entrance exams, China has restricted certain technical capabilities of domestic tech companies. Alibaba, ByteDance, Tencent and DeepSeek, whose services are all located in China, then disabled things like their image recognition and their instant Q &A features on sort of consumer-facing products to prevent cheating. But the move didn't just impact Chinese students. We also saw then in Lagos, in Nairobi, who all experienced slowdowns in terms of service interruptions. And you can't do anything about that.

13:56And then there are the privacy concerns. Most big Western AI models are supposed to comply with European laws governing transparency around data collection and processing. But DeepSeek's chatbot does not. Instead, it typically stores user data on servers in China, which under Chinese law could be accessed by the Chinese government. And while several European countries have taken steps to curb deep seek adoption, African countries have not. I think most countries are really, you know, at the starting stage of developing the regulation and so on. So there's a lot of adoption without the legal background, without the regulatory backbone to cover that.

14:44So the technology has sort of front run the regulation, which might be a problem. Then there's the looming geopolitical backdrop to this. Bloomberg's Helen Yambura told me that if African nations and tech companies start relying too heavily on Chinese tech, they could get caught in the crossfires of the U.S.-China trade war. For instance, if the U.S. government tries to disrupt China's AI capabilities by limiting access to chips or ratcheting up tariffs, that could also impact Africa's AI capabilities. The stakes are just really too high for a single country to rely on just one country, whether it's the U.S.

15:27or China. The U.S. has tried to pursue its own tech infrastructure projects in Africa in the past. And we saw big deals being announced in Kenya specifically. There was a big AI data center being announced of more than a billion dollars. But under the Trump administration, those efforts have stalled. And that's opened the way again for China. China, as we said, has been here for a long time. They've been investing for 20 years. So they do own a lot of the equipment in our 5G, in our fiber, in our data centers. In the U.S. companies that are here, a lot of them sort of have set up shop in South Africa and some in Kenya and some in Nigeria, but they don't really advance to other African countries.

16:16And as we know, there's 54 of them. So China has really played the game also in smaller countries. And in part because of that dynamic, the expansion of Chinese AI tools in Africa hasn't been met with the same suspicion as it has in European countries or the United States. Because, Loni says, many people in Africa are just as skeptical of U.S. tech. In Africa, people don't always mistrust the East versus the West. Many also distrust the West in terms of privacy and tech and all of that. So Africa in general has a better relationship with China than I would say Europe, for instance. But I would like to just see whether this adoption of DeepSeek in the startup space continues.

17:12For now, Helen says she's watching to see how Africa's AI industry develops. What will be interesting is to see whether Africa can come up with its own homegrown AI industry. There's very many hurdles to this. It doesn't have the money that China or the U.S. will throw at AI. It also doesn't have the skills, labor, to do this or the infrastructure. But it would be good for Africa to be at least to try for some independence on this front.

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