alexa Populism aside, China-funded SGR a key legacy investment - Daily Nation

Populism aside, China-funded SGR a key legacy investment

Sunday April 28 2019

Uhuru Kenyatta, Xi Jinping

President Uhuru Kenyatta (left) greets Chinese President Xi Jinping at the Great Hall of the People in Beijing on April 25, 2019 ahead of the second Belt and Road Forum for International Cooperation. PHOTO | PSCU 

PETER KAGWANJA
By PETER KAGWANJA
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A brutal wave of anti-debt populism is sweeping across Africa. Debt-based populism reached fever-pitch this week in the run-up to the second Belt and Road Forum in Beijing, China, on April 26-27, 2018.

President Uhuru Kenyatta is one of the 40 heads of state attending the meeting.

Anti-debt populists posit that the China-built iconic Mombasa-Busia Standard Gauge Railway is a Maxwell pond, an inter-generational debt trap.

DEBT TRAP

Intellectually, debt-based populism is unfolding as a distant cousin of the new world-wide wave of populism that swept Donald Trump in the United States, and which has washed over Europe.

In Kenya, as elsewhere, four ideo-political factors have set the contours of the largely social media-based anti-debt populism.

First is the post-truth politics—where facts no long matter, and lies and falsehoods are the preferred currencies of trade—in which Kenya is portrayed as one of “the countries hurtling senselessly into a “debt trap”, burdening the current and future generations with huge debts.

A recent headline in one of Kenya’s dailies captures this mood: ‘Shock report on the debt even as Uhuru goes for more’.

However, from a recent report on ‘Percentage of Public Debt to GDP Around the World 2018, published by Global Finance (April 25, 2019), Kenya is nowhere near the most indebted nations on planet earth.

True, Kenya’s public debt has increased by 12 per cent from 43.9 per cent in 2012 to 56.1 per cent by 2018. But so have infrastructure, energy, health, security and other public goods and services.

The public image emerging from this campaign is that Kenya is hurtling down the way of Greece, which famously defaulted on its external sovereign debt obligations and had to be bailed out through rescue loans and debt relief.

PROPAGANDA

But cutting through myths, propaganda and post-truth politics, Kenya’s public debt has not reached the danger-point.

It reflects a country on an urgent mission to transform itself from a basically agrarian non-mineral economy to an industrial one supported by modern infrastructure in a situation where tax revenues and other government surpluses are less predictable.

Further, Kenya’s debt is not exceptional. Countries across the world borrowed approximately $10.5 trillion from the markets in 2018. Overall, their total debt increased from $43.6 trillion in 2017 to around $45.0 trillion in 2018.

Leading economies in the G7 club have the highest debt. The United States, the world’s leading economy, has the largest external debt in the world, estimated at 106 per cent in 2018, and projected to jump to 116 per cent in 2023. Much of this is owed to China.

Similarly, Japan’s public debt, one of Kenya’s leading creditors, stood at 238.2 per cent of GDP in 2018.

Even China, the world’s second and fastest growing economy, also crossed the 50.1 per cent threshold in 2018, up from 34.3 per cent in 2012.

2022 ELECTIONS

Debts are as old as human civilisation. The challenge—which eludes the post-truth activists—is managing it. Interestingly, low public debt can also be an indicator of lack of creditworthiness.

The second factor propelling anti-debt populism is the highly combustive Kenyatta succession politics ahead of the 2022 elections.

While the “handshake” in March 2018 has its naysayers, the détente returned the country’s ability to borrow and service its debts to meets its obligation to provide public goods and services.

By bringing on board opposition figures during his trips abroad, the President has managed to project Kenya as a stable and, therefore, creditworthy nation. Opposition leader, Raila Odinga accompanied Kenyatta to the recent Forum in Beijing. Raila’s running mate, Kalonzo Musyoka, also accompanied Kenyatta to the Forum for China Africa Cooperation (FOCAC) summit in September 2018.

Despite this, campaigns of leading candidates in the 2022 race are tapping into the debt debate to gain political mileage, injecting into public debate ‘data’ on the SGR not supported by scientific research.

Third is the anti-debt populism is riding on the myth of the ‘debt trap’, whose aim appears to be to prevent Africa from taking advantage of China’s $4-$8 trillion Belt and Road Initiative to fund Africa’s Agenda 2063 and national plans such as Kenya Vision 2030.

SINO-PHOBIA

China-bashing increased after it put on the table $60 billion in September last year.

Kenya is one of the only three African countries—including Djibouti and Egypt— enlisted in the BRI.

Anti-debt populism has a powerful thrust of Sino-phobia, preferring an Africa that deals exclusively with its traditional partners in the West.

China is projected as ensnaring Africa in a giant “debt trap”, saddling it with unsustainable debts.

Yet, only 20 per cent of Africa’s external debt is owed to China.

More than 67 per cent of the continent’s debt is owed to bilateral donors and institutions in the West.

Kenya was reportedly going to sign a Ksh368 billion loan for the construction of the Naivasha-Kisumu Railway leg of the SGR, which would bring the total debt to 845 billion. Even without comparative research, it was tweeted widely that: “This (SGR) is “one of the most expensive of its kind in the world.” Even more worrying are messages on social media such as: “Confirmed, Kisumu Port to be used as security for SGR loan.”

LAME DUCK

Populism is thriving on President Kenyatta’s failure to adopt a perpetual campaign model to defend his legacy. “Essentially,” wrote Patrick Caddell, a young political adviser to President Jimmy Carter, “It is my thesis governing with public approval requires a continuing political campaign.” In the absence of a well-organised and robust permanent campaign to stem ant-debt populists and their ilk, the Kenyatta presidency will quickly fade into an early lame duck phase, losing his ‘development legacy’, including the SGR Railway. Even more ominous, it risks losing control of the crucial 2022 transition.

Beyond populism, perhaps anti-debt activists should train their guns on ensuring Parliament sets a debt ceiling to limit the gross amount that Kenya can borrow.

Professor Peter Kagwanja is former Government Adviser and Currently Chief Executive of Africa Policy Institute, Nairobi.

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