Debt doubts cloud Uhuru's China visit as State House quells fears - Daily Nation
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Debt doubts cloud Uhuru's China visit as State House quells fears

Monday September 3 2018

President Uhuru Kenyatta

President Uhuru Kenyatta receives a bouquet from Talia Njoki, 6, upon arrival at his hotel in Beijing, China. Also present is First Lady Margaret Kenyatta and the Ambassador to China Michael Kinyanjui (left). PHOTO | PSCU 

By AGGREY MUTAMBO
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In 1978, China and Kenya entered the first trade agreement between them. At the time, both countries were transiting to a new leadership.

Beijing, the capital of China, was then known as Peking and its new leader Deng Xiaoping was trying to break away from the disastrous economic administration of Mao Zedong by opening up his country to the outside world.

In Nairobi, Daniel Moi had just become President after the death of Jomo Kenyatta; even though he had promised to follow in the ‘footsteps’ of Mzee.

On his third visit to Beijing, President Uhuru Kenyatta will, by the time he sits in the Great Hall of the People to attend the China-Africa summit today, be aware of China’s meteoric rise to global economic power.

FOCAC, as the conference is known for short, reflects China’s rise globally and expanding interests into Africa and Kenya.

TRADE COOPERATION

“In recent years, the level of economic and trade co-operation between our two countries has kept increasing. Now, Kenya is China's strategic partner in pushing forward the Belt and Road Initiative and China-Africa industrial capacity co-operation,” Sun Baohong, China’s Ambassador to Kenya told journalists last week.

President Xi Jingping invited all members of the African Union, except Swaziland which still recognises Taiwan, and the topics will range from economic ties to trade to cultural exchanges.

Ahead of the trip, State House had indicated that the President is returning to China to strengthen Nairobi’s position in the Belt and Road Initiative; Mr Xi’s policy to expand influence using trade and infrastructure connections between Asia, Africa, Europe and the Americas.

“The latest visit by President Kenyatta to Beijing will not only help secure more Chinese funding for key infrastructure projects but also cement Kenya's position as the focal point of the One Belt One Road Initiative (BRI) in Africa,” State House said in a statement.

RISING DEBT

As part of the BRI in Africa, Kenya’s ports of Lamu and Mombasa, have been identified as key gates into Africa’s hinterland, alongside Djibouti, Egypt and South Africa.

But the President is returning to Beijing amid criticism of mounting debt. Today, the Chinese are the second biggest creditors to Kenya, after the World Bank. In the first two visits to Beijing, President Kenyatta secured loans that have built the Standard Gauge Railway from Mombasa to Naivasha.

In 2013, he got Sh500 billion, a huge portion of which was used to build the SGR from Mombasa to Nairobi (Sh327 billion). In the second visit in 2017, he got Sh150 billion to extend the line to Naivasha.

A diplomatic brief seen by the Nation indicates the President’s focus, besides BRI and dealing with trade imbalance, is to “secure funding for key infrastructure projects,” a sign of the determination to extend the railroad to Kisumu and on to Malaba.

The Chinese hope to tie down Kenya, Uganda and Rwanda to complete the line to Kigali, as part of the BRI. Sources said a joint agreement for the remaining portion of the line could be signed in Beijing.

RECURRENT EXPENDITURE

Yet the briefing admits that concerns about mounting debt may be valid, but argues that Nairobi cannot raise enough funds from tax payers. “Unlike under previous regimes, the Uhuru administration has not taken on debt to finance recurrent expenditure. All new borrowings have been directed at specific programmes and projects.”

Yet the Chinese have been planting their footprint on most of the economic spheres in the country. From 1978, it was only at the turn of 2000 when the infrastructure firms descended on Nairobi.

Under President Mwai Kibaki, the Chinese became sources of loans for the 2003-2007 Economic Recovery Strategy for Wealth and Employment Creation (ERSP), the Narc government’s policy to revive key economic sectors.

DEMAND FOR MORE MONEY

The ERSP led to Vision 2030, meaning there was demand for more money to finance flagship projects like the Thika Super Highway increasing participation for Chinese companies.

These projects thrust the country “at the core of the ambitious Chinese Africa growth plan under the One Belt One Road Initiative (BRI),” State House says.

With Kenya importing Sh390 billion worth of goods and selling Sh10 billion to Beijing, officials say the reason behind the imbalance is due to the heavy machinery imported to build the railway and other infrastructure projects. When the question of debt was put to Ms Sun, she argued it is necessary for now, since Kenya requires urgent infrastructure, to support planned Industrialisation.