China threatens to withhold SGR funds over 'hostility'

Funding for the next phase of the Standard Gauge Railway could be in jeopardy after China threatened to impose trade sanctions on Kenya in retaliation at a ban on Chinese fish.

Acting ambassador Li Xuhang described the ban as a “trade war”, warning that his country could react in the same way it did to US President Donald Trump’s imposition of tariffs on Chinese goods.

INFLUX

Mr Li was addressing a group of MPs, academics with links to Chinese institutions and others invited for a familiarisation tour of the SGR at the Chinese embassy in Nairobi Tuesday morning.

He revealed that the embassy had a letter from the Fisheries Department cancelling all applications for imports of Chinese fish.

Imposition of the ban on Chinese fish follows President Kenyatta’s remarks recently when he publicly wondered why imported fish should be flooding the Kenyan market at the expense of local produce.

He challenged officials to find ways to curb the influx.

NEGATIVE

At stake will be funding for the Naivasha-Kisumu phase of the SGR, which has already been delayed after China refused to sign an agreement during President Kenyatta’s visit to the Forum for China-Africa Cooperation in Beijing last month.

The refusal to sign the deal was to express displeasure at what China views as an increasingly hostile operating environment, citing negative media reports and public bashing by politicians.

President Kenyatta is also expected to sign an agreement during a return visit to China early November, which would ease exportation of Kenyan food and agricultural products to the vast Chinese market.

'PLASTIC'

The seasoned Kenyan palate rejects the mass farmed Chinese tilapia, whose taste customers describe as “plastic” and lacking in the deep flavour of lake fish. The bones in the Chinese fish are small, which makes it difficult to eat. But Kenyan pockets gravitate towards the “plastic” fish: a kilo of Chinese fish goes for about Sh230. Prime Kenyan tilapia fillet sells for Sh700 and a kilo of whole fish is about Sh400.

On October 24, the acting director-general of the Kenya Fisheries Service Susan Imende wrote to fish importers: “This is to notify you that all fish import applications for Oreochromis niloticus Tilapia will not be approved in the country with effect from January 1, 2019.”

CONCERNS

The grace period, she explained, would allow importers to clear existing orders.

Although the letter was not specific to Chinese fish, it is instructive that it covered only tilapia, a species only China exports to Kenya in appreciable quantities.

It is also notable that the letter came only 10 days after President Kenyatta spoke about Chinese fish imports.

Speaking at the SMEs conference at Strathmore University, the President lamented that the imported fish was strangling local fishermen. Although he did not pronounce a ban, he urged officials to find creative ways around the legal provisions, such as citing heath concerns.

AGREEMENTS

The letter from Fisheries did not give any reasons, but it clearly annoyed the Chinese government.

Mr Li said yesterday that the main concern was not so much the volume of business to be affected, but the principle of free trade, the rule of law, adherence to bilateral trade agreements and WTO rules and due process.

RELATIONS

The Economic and Commercial Counsellor, Dr Guo Ce, said he was shocked by Kenya’s action. Within a short time, he said, the contents of the letter would be all over the media in China, which would affect relations between the two countries.

The ambassador noted that the ban comes just before President Kenyatta travels to Shanghai for the China International Import Expo, where Kenya will be one of the main African countries showcasing her produce for the Chinese market.

MEASURES

During the Expo, the President is expected to meet with his Chinese counterpart. The two countries are also expected to sign an agreement on Sanitary and Phytosanitary Measures that would open the door for Kenyan fruits, beef, lamb, vegetables and other foodstuff into the Chinese market.

The briefing at the Chinese embassy before the SGS tour was attended by Ambassador Chris Chika, director of the Asia Pacific Desk at the Ministry of Foreign Affairs, and Kisumu East MP Shakeel Shabbir, who headed the team of MPs from the Kenya-China Parliamentary Group.

CONTRACTS

Reacting to the sentiments of the Chinese ambassador, Mathira MP Rigathi Gachagua, who has proposed a Bill to cap the value of contracts awarded to foreigners to Sh1 billion and above, accused the Chinese of blackmail and asked the government to call their bluff.

INTIMIDATION

“Protecting our industries and our jobs from unfair competition should be our priority. What is the point of them funding the extension of SGR if our people do not have jobs? We survived for 55 years without [the] SGR and we will survive whether they fund the extension or not,” he said.

The MP, who is also a member of the House infrastructure committee, said any trade relationship with the Chinese should be based on mutual benefit and respect, not threats and intimidation.

EXCLUSIVELY

“What they give us are not favours. It is loans that we repay. We might be poorer than them, but we have our dignity and we will defend it. That is something the British learnt the hard way,” Mr Gachagua said.

The Mathira MP has drafted amendments to the Public Procurement and Asset Disposal Act 2015 so that contracts whose value is less that Sh1 billion are reserved exclusively for Kenyan-owned companies. External contractors will be awarded such contracts in the event that local firms do not qualify.

EXAGGERATION

“We are killing our industries because the Chinese import everything; from cement, ballast and even labour. Where will our people get the jobs? Tukae ngumu,” he said in an interview.

Institute of Economic Affairs chief executive Kwame Owino described the ambassador’s comments of the fish imports row as a “trade war” as “an exaggeration, and an attempt to gloss over questions Kenya has asked.”

CIRCUMSTANCES

“To call what is happening a trade war is most unfortunate, because a trade war is a completely different thing. What I heard the President say is that, “Look, we are having fish from China, its cost is so low, and we are not too sure how it is prepared.’ This is a food item, and its inspection should be firm, and if it is not, then it shouldn’t come,” Mr Owino said.

“Is it a trade war? Definitely not. That cannot qualify as a trade war under any circumstances, and you guys should have called him out.”

Additional reports by Guchu Ndung’u and Patrick Lang’at