Asian giant’s local links tell of growth, debt, and suspicion

Transport Principal Secretary Irungu Nyakera and the Chairman of China Road and Bridge Corporation Wen Gang unveil the Standard Gauge Railway Corporate Social Responsibility Report for 2015 at Intercontinental Hotel in Nairobi on March 24, 2016. Last year, KeNHA awarded seven of 11 major road construction contracts to Chinese contractors earning them Sh90.6 billion. PHOTO | EVANS HABIL | NATION MEDIA GROUP

What you need to know:

  • Nairobi’s Hurlingham area is already starting to shape itself up as Kenya’s Chinatown with its array of restaurants, supermarkets and other facilities targeting Chinese people.
  • Kenya’s debt to China stood at Sh262 billion ($2.6 billion) in June last year, up from Sh82.9 billion ($821 million) a year earlier and Sh14.7 billion ($146 million) in 2010.

While some Kenyans have a negative perception about Chinese products for their alleged unreliability, cheapness and for often being counterfeits, Kenya’s ties with China have deepened considerably in recent years.

A Kenyan today is likely to travel on a Chinese constructed road, buy Chinese goods from supermarkets, watch football in a Chinese built stadium, get treated in a Chinese built hospital, use a Chinese mobile phone and will soon travel from Mombasa to Nairobi on the standard gauge railway (SGR) funded and constructed by the Asian giant.

Nairobi’s Hurlingham area is already starting to shape itself up as Kenya’s Chinatown with its array of restaurants, supermarkets and other facilities targeting Chinese people.

And with a majority of companies and brands from the West now preferring to manufacture their products in China, the influence of the World’s second largest economy cannot be ignored as the Asian giant increases its presence in the country.

And the results have been a mixed bag.

Two weeks ago, the government announced it was negotiating a Sh60 billion loan from the Chinese to help fund a 2015/16 budget deficit.

The announcement by Principal Secretary Kamau Thugge came a week after the Chinese government agreed to loan Kenya $5 billion (a half a trillion shillings) to extend the SGR from Naivasha to Malaba.

Another $1.5 billion (Sh150 billion) had been granted last year for the Nairobi–Naivasha section on top of a $4 billion (Sh0.4 trillion) for the Mombasa-Nairobi section, raising concern among observers.

“The Chinese story is about the tale of the camel and the tent. Once you let them in to finance the first phase of a project, they will not stop,” wrote Nation columnist Jaindi Kisero on March 30.

“They will come dangling offers to you, promising to negotiate and arrange an Exim Bank of China loan on your behalf and carry out a feasibility study free of charge. This is the reason our appetite for Chinese contractor-negotiated loans has exploded,” he said.

DEBT BURDEN
According to the Quarterly Economic and Budgetary Review for the second quarter of 2015, Kenya repaid China loans amounting to Sh4.14 billion, comprising a principal amount of Sh3.4 billion and Sh738.22 million in interest.

Kenya’s debt to China stood at Sh262 billion ($2.6 billion) in June last year, up from Sh82.9 billion ($821 million) a year earlier and Sh14.7 billion ($146 million) in 2010.

So huge is our debt burden to China that the World Bank recently warned that Kenya’s huge appetite for Chinese loans risks choking the economy on the huge repayment burden.

A research paper by World Bank economists says Chinese loans to Kenya have been growing at 54 per cent a year between 2010 and 2014, with some of the credit having high interest rates.

“Kenya still has a heavy debt burden and China’s loans can bring debt to unsustainable levels. Some of China’s loans are non-concessional, which can raise debt-to-gross domestic product levels quickly,” says World Bank lead economist for Kenya, Mr Apurva Sangh.

On the flip side, the Chinese relationship with Kenya has resulted in world class infrastructure making them the most preferred by not only government but also the private sector for projects in the transport, energy and real estate sectors.

Thika Road, Kenya- Ethiopia highway, Nairobi Southern Bypass, Eastern Bypass, Northern Bypass, dualing of Lang'ata road and the expansion of Outering Road are some of the mega government projects that have earned them admiration among Kenyans for their workmanship and timely delivery.

Some of the organisations currently using Chinese contractors for projects include National Social Security Fund (NSSF), Kenya Commercial Bank and UAP Insurance and the University of Nairobi.

POACHING
Last year, the Kenya National Highway Authority (KeNHA), awarded seven of 11 major road construction contracts to Chinese contractors earning them Sh90.6 billion.

The authority’s spokesman, Mr Charles Njogu, says, “most local contractors do not have the technical abilities to handle such intensive projects.”

But with this new found influx of Chinese projects and visitors has been an alarming increase of citizens from the Asian economic super power being found on the wrong side of the law or at crosshairs with Kenyans.

On Monday night, a Chinese travelling from the Democratic Republic of Congo was arrested at the JKIA with ivory bangles valued at Sh300,000.

Two days earlier, another one had been nabbed at the airport enroute to Guangzhou from Cameroon with similar items worth Sh60,000.

On April 5, two Chinese nationals were apprehended at the airport for allegedly trafficking illegal wildlife trophies.

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