China's Belt and Road Initiative in Kenya

20.500.12592/67p4fj

China's Belt and Road Initiative in Kenya

18 May 2022

Through trade, investment, and strategic diplomacy, China is re-shaping sub-Saharan Africa. Beijing has growing economic ties with Africa’s largest economies and Chinese firms dominate infrastructure construction projects. In 2020, nearly one-third of infrastructure projects in Africa worth at least $50 million were built by Chinese companies. In addition, China is, in many areas, replacing the United States and Europe as trade partners with Africa. Beijing has translated China’s growing economic footprint in Africa into geopolitical influence.   Some Western commentators have observed China’s growing economic footprint in Africa — especially its Belt and Road Initiative (BRI)—with skepticism and concern. They argue that Chinese investments are debt traps that will eventually lead to neo-colonialism. Despite this criticism, China’s influence on the continent continues to rise. Is it true that Chinese infrastructure projects malicious are debt traps? Or is the BRI merely an extension of a partnership where China supports the economic development of African countries? Or is it some combination of both? While African elites are supportive of the BRI, the allegations of its use by China as a debt trap and the failure to communicate its benefits to the average African citizen continue to raise concerns about China’s true motives. China’s relations with Kenya are a good case study in how the BRI can function in Africa and offer some answers to these thorny questions. Kenya, a gateway to East Africa and one of the continent’s largest economies, is an excellent platform for China to broaden its reach into the rest of the continent. As one of the first major economic powers to invest significantly in Africa instead of just focusing on extracting resources, China has stolen a march on the rest of the world and gained advantages in Africa that will take patience, creativity, and political will to match. The United States has a lot at stake in Africa. The continent is home to fast-growing economies, and Africa’s 54 countries make up the largest single voting bloc in the U.N. General Assembly. Taking stock of how China is engaging with Africa can inform and improve American strategy in the region. While there are serious issues with Chinese business practices in Africa, much of the concern about Chinese influence on the continent is overblown. Rather than lament China’s presence in Africa, American and European policymakers need to take a sober look at what the country is doing, how it’s going about advancing its interests, and how Africans are responding. There is also a need to accept that African countries are independent players—not pawns of Beijing—that act in what they see as their self-interest. Is the Belt and Road a Debt Trap? China’s engagement with Kenya is a good example of how Beijing approaches economic diplomacy in Africa. Moreover, it’s a revealing case study of how BRI works on the continent. Kenya needs better infrastructure to meet its development needs, and China has been willing to help. The project to upgrade the Standard Gauge Railway (SGR) is China’s flagship investment project in Kenya. The SGR connects Mombasa, the largest port city in Kenya, to its capital, Nairobi. The Export-Import Bank of China financed 90 percent of the SGR project, while the Kenyan Government contributed the other 10 percent. The China Road and Bridge Corporation led the SGR installation process. This was supposed to signal a contribution to Kenya's developmental goals and directly spur growth in the construction sector. The SGR created around 30,000 new jobs for locals and, in the first year, transported 5.4 million passengers and 1.3 million twenty-foot equivalent units (known as TEUs) of shipments across Kenya. If this performance had continued African exports would have increased significantly. The chief economist in the State Department of Infrastructure in the Kenyan Ministry of Transportation and Infrastructure claimed that the SGR would increase trade and investment and further employment opportunities to enhance the people's livelihoods in the East African Community. But almost from the beginning, the project has been beset with problems. Despite the jobs created for locals during the project's first year, and the fact that from 2015 to 2016 wages of SGR employees more than doubled, many young Kenyans complained that most of the jobs created were unskilled and low-paying. The SGR operated at a loss from the beginning and has hemorrhaged more than $200 million over the last three years. Deficiencies in initial planning, including an overly optimistic prediction of profitably and inflated construction costs, combined with the economic disruptions of the COVID-19 pandemic, have all contributed to the problem, and have raised the prospect of Kenya suffering a major debt burden. A May 2019 article in the Kenya Star reported that Kenya’s public debt was 55.5 percent of gross domestic product. SGR has also been unable to compete with truck transport, which allows point-to-point delivery and less handling of cargo. This is a shortcoming that should have been noted in the project’s early stages. Because of all this, there seems to be minimal potential for the SGR to ever recover its losses or become profitable, forcing Kenyan taxpayers to bridge the gap in order to sustain its operations. African Countries Have Agency Some critics of China’s lending practices in Africa seem to view countries like Kenya as passive actors who are susceptible to possible debt default. Kenya, however, has been a willing participant in Chinese financing of its infrastructure projects and is reportedly at a lower risk of credit fault than many other African countries, despite its heavy borrowing from China. There were unsubstantiated claims, for instance, that Kenya was at risk of losing Mombasa Port to China over the huge debt from the SGR project loans. An April 2022 study issued by the China Africa Research Initiative at Johns Hopkins University School of Advanced International Studies, however, showed that the previous reports concluding that Mombasa Port was collateral for the SGR loan were wrong. In fact, the SGR loan contains a waiver of sovereign immunity which protects Kenya’s national assets, a standard feature in international commercial project financing. Kenya has already taken steps to protect its sovereign interests in commercial dealing with China. The Kenyan government, in 2008, promulgated an ambitious infrastructure development plan, Vision 2030, which is the long-term development blueprint for the country that was, according to the description, the product of participatory consultations among national and international stakeholders as well as ordinary Kenyans from across the country.

Authors

Phebe Wilson-Andoh

Published in
United States of America