Why African Startups Are Embracing DeepSeek

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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 and 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. And then there was also a group from Huawei with one of the top exigs that sort of runs sub foreign Africa's cloud services.

Loney princelu is a senior Africa reporter for Bloomberg based in Johannesburg, and she says that Huawei Cloud Exac was there to talk about one buzzy new company. In particular, he.

Came in with quite a strong pitch for deep Sick, saying, you know, deeptic is so hot. That was literally his words, deeptic is so hot. Now I want to talk about anything else.

Deep Sik the Chinese AI platform that launched a breakthrough reasoning model in January twenty twenty five, shocking its competition.

Deep Seek. Where did this one come from?

The cheaper ALI model from Chinese starts up deep Seek could fraten us big tech. Deep Siki is a Chinese startup that's producing these large language models that offer very high performance at a relatively low cost.

That's Helen Yambura, Bloomberg's East Africa bureau chief.

Deep Siki is using Wawei hardware in the ecosystem, both cheaps and cloud, so from a political perspective, Huawei is promoting domestic AI tools that are running on domestic hardware.

Huawei and deep Seek's parent company, high Flyer have been collaborating since mid twenty twenty three. In addition to hosting deep Seek on its cloud, Huawei has also started selling its storage and computing services in a bundle with access to deep Seek's large language model. So Huawei's exec wasn't

Basically, if you are going onto Huawei Cloud instead of going directly onto deep Seek every day, you get two million tokens free. So that's sort of unheard up and then a crack pleaser.

Tokens are the unit that deep Seek uses to bill for its services. Two million free tokens can get you a lot of deep Seak computing power. According to the Huawei presentation, they would cover about three thousand pages of new content generated by deep Seek's model.

Huawei 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 deep Seek and Huawei's bet on African AI infrastructure could have complex long term consequences, including for data privacy. This 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's Abasaga.

Today on the show, Deep Seek and Huawei's push to dominate the artificial intelligence market in Africa.

What it could mean for the global AI race, the soft power balanced between the US and China, and as efforts to influence Africa's development, industry and innovation. Africa's digital economy is valued at about one hundred and eighty billion dollars today, but by twenty fifty it's expected to swell to seven hundred and twelve billion dollars.

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 Huawei's pitch for deep Seek 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 Lonely Prince Lou 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 Rita Lama, those waste and models, you have quite a lot of restrictions, licensing restrictions and take restrictions.

AI offerings from US companies tend to be harder to customize. They're largely not open source, but deep seek 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. Always wants the large language models, sometimes you want a small language model for the types of adaptations that you want to do.

In terms of AI, one reason African startups might want a more customizable model is because many USAI 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. They require more tokens to perform those tasks. This all makes deep Seek's open source model more appealing, and using the model is also much cheaper.

We spoke to one sort of in Nigeria called Equalize AI, and so basically what deep seek is charging is twenty seven usints to press a million words for a query, and then a dollar a team for a million words. In terms of the response that it generates.

That's a lot less than Chat GPT, which costs more like five dollars for a million words of processing and fifteen dollars for a million words generated.

That is two thousand and seven hundred dollars per month if it us deep seek, vers is twelve thousand, five hundred dollars if it uses chat GPT four for the same toxic So it's a massive difference.

Deep Sex's platform is four and a half times cheaper for Equalized AI to use, which raises the obvious question.

What's the financial appeal for deep sek. 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. So it's a longer game, I think for deep Sick more than it is for open Ai, who is running for profits.

Basically, open Ai didn't respond to a request for comment on the story. Meanwhile, Deep Sik's numbers game seems to be working.

When it comes to startups. Specifically, every African stortup we spoke to prefer Deep Sick at this point when it comes to training their models, adapting their models. So what we're seeing on the ground is that they are definitely numbers in favor for deep sic currently.

And Huawei isn't just pitching startups on deep Sek, they're also trying to get African governments to adopt their platform. Here's Bloomberg Talent Yamburra.

We don't have credible evidence that African governments are formally adopting deep sick tools for their public service and official news, 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 deep seek 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. A 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, Deep.

Seak 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 deep Seek.

One of the central concerns is that the Chinese government could gain access to deep seek data store on Chinese servers. Italy's Data Protection Authority asked for information on deep Seek's data collection, use and storage policies, which deep Seek did not produce. German regulators asked for evidence that German user data sent to China was protected in line with European standards, which Deep Seek was unable to provide.

When asked by Bloomberg about data privacy concerns, Deep Seek 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.

For 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 you know, extending soft power through building infrastructure, but using technology rather than you know, the hard airports and ports and roads, Andre Luise, this now is you know, the software to be ahead of the yules.

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.

The Chinese companies Juawi 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 Deep Seek.

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. When it comes to Huawei and Deep Seek, 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 will elcho that built and road where we saw China forcing some poor countries to handle over critical infrastructure to pay for all those projects. So we don't know how these 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. For 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.

Ali Baba, Black Dance, Taint, Saint and Deepseek, whose service are all located in China. They disabled things like the image recognition and the instant Q and 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.

And 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 deep Seek's Chapot 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, so 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 Yamburra told me that if Africa nations and tech companies start relying too heavily on Chinese tech, they could get caught in the crossfires of the US China trade war.

For instance, if the US government tries to disrupt China's AI capabilities by limiting access to chips or ratcheting up terrace, that could also impact Africa's AI capabilities.

The sticks are just really too high for a single country to rely on just one country, whether it's the US or China.

The US has tried to pursue its own tech infrastructure projects in Africa in the past.

And so big deals being announced in thin 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. That've been in wasting for twenty years, so that they do own a lot of the equipment in our five G in our fiber, in our data centers in the US 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. And as we know, there's fifty

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 US tech.

In Africa, people don't always mistrust the East versus the West. Many also distrust the West in terms of privacy and you know, take and all of that. So African general has a better relationship with China than a europe for instance. But yeah, I would just I would like to just see whether this adoption of deep seek in the sort of space continues.

For now, Alen 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, you know, homegrown AI industry. There's very many hurdles to this. It doesn't have the money that you know, China or the US will throw at AI. It also doesn't have the skilled 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.

This is the Big Take from Bloomberg News.

I'm Sarah Holder and I'm Jennifer's Abisada with Next to Africa.

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