@StandardMedia

China dragon likely to clamp Kenya, Africa

3 months ago, 13 Sep 00:11

By: Moses Michira And ...

Last week marked a major milestone, or millstone - depending on where one’s seat at the table is positioned - in the country’s relationship with China’s bank managers.

After the latest round of loan talks held in Beijing, Kenya’s debt stock to China crossed the Sh1 trillion mark.

This could easily grow by another Sh200 billion should Chinese leader Xi Jinping sign off on President Uhuru Kenyatta’s request to finance the Naivasha-Malaba railway line.

But not everything is rosy in this credit-fuelled affair. Kenya is the third biggest borrower from China in Africa and the strain of the mounting debt is showing.

In fact, public outcry is still reverberating following the Jubilee government’s widely unpopular decision to impose a 16 per cent levy on petroleum products to fund the ballooning budget deficit.

China has been on a massive lending spree, gifting it an iron grip on Kenya and other African countries that collectively owe the Asian giant more than Sh20 trillion.

Benefits accrued from the extensive loans are massive, including a guaranteed market of a billion people and huge interest on the debt – which is often extended in kind rather than in cash.

China has ensured jobs for its massive population - often referred to as the world’s factory - who are engaged in manufacturing everything from toothpicks to, lately, aeroplanes.

Through debt, the economic giant has used its soft power to gain unfettered market access and craft predatory trade agreements that have encouraged importation from its factories at the expense of local industries.

And the debt burden lies crushingly heavy on Africa.

Kenya, for instance, will pay Sh122 billion - the equivalent of one-and-a-half-year’s national healthcare spending, in interest between now and 2021.

Over that period, the actual loan repayment is only marginally different at Sh139 billion, confirming that China is assured of reaping big over the long term.

Faced with the reality that debt repayment is becoming unsustainable, Kenya has considered going slow on direct borrowing and opted for private-public partnerships (PPP).

National Treasury Principal Secretary Kamau Thugge told The Standard that the Government would create an enabling environment for private investors to put up mega projects on a build-operate-transfer structure.

Here, the investor will own the assets, including roads, for some years during which time they will charge users to recoup their investment.

“It is the only way we will avoid debt distress,” Mr Thugge said.

Already, major concerns are emerging whether Africa can repay its loans and what would follow in the event of defaulting.

Djibouti, which is already in debt distress, is considering handing over several assets to China for a part waiver of loans that are equal to the tiny country’s gross domestic product (GDP).

Surprisingly, despite the huge profits earned from lending to Africa’s poorer countries, there are hardly any grants and donations from the world’s second largest economy.

The United States remains the biggest donor to the continent, according to the China Africa Research Initiative (Cari), which analyses economic relations.

Cari reports that Angola ...
Read More


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@StandardMedia

China dragon likely to clamp Kenya, Africa

3 months ago, 13 Sep 00:11

By: Moses Michira And ...

Last week marked a major milestone, or millstone - depending on where one’s seat at the table is positioned - in the country’s relationship with China’s bank managers.

After the latest round of loan talks held in Beijing, Kenya’s debt stock to China crossed the Sh1 trillion mark.

This could easily grow by another Sh200 billion should Chinese leader Xi Jinping sign off on President Uhuru Kenyatta’s request to finance the Naivasha-Malaba railway line.

But not everything is rosy in this credit-fuelled affair. Kenya is the third biggest borrower from China in Africa and the strain of the mounting debt is showing.

In fact, public outcry is still reverberating following the Jubilee government’s widely unpopular decision to impose a 16 per cent levy on petroleum products to fund the ballooning budget deficit.

China has been on a massive lending spree, gifting it an iron grip on Kenya and other African countries that collectively owe the Asian giant more than Sh20 trillion.

Benefits accrued from the extensive loans are massive, including a guaranteed market of a billion people and huge interest on the debt – which is often extended in kind rather than in cash.

China has ensured jobs for its massive population - often referred to as the world’s factory - who are engaged in manufacturing everything from toothpicks to, lately, aeroplanes.

Through debt, the economic giant has used its soft power to gain unfettered market access and craft predatory trade agreements that have encouraged importation from its factories at the expense of local industries.

And the debt burden lies crushingly heavy on Africa.

Kenya, for instance, will pay Sh122 billion - the equivalent of one-and-a-half-year’s national healthcare spending, in interest between now and 2021.

Over that period, the actual loan repayment is only marginally different at Sh139 billion, confirming that China is assured of reaping big over the long term.

Faced with the reality that debt repayment is becoming unsustainable, Kenya has considered going slow on direct borrowing and opted for private-public partnerships (PPP).

National Treasury Principal Secretary Kamau Thugge told The Standard that the Government would create an enabling environment for private investors to put up mega projects on a build-operate-transfer structure.

Here, the investor will own the assets, including roads, for some years during which time they will charge users to recoup their investment.

“It is the only way we will avoid debt distress,” Mr Thugge said.

Already, major concerns are emerging whether Africa can repay its loans and what would follow in the event of defaulting.

Djibouti, which is already in debt distress, is considering handing over several assets to China for a part waiver of loans that are equal to the tiny country’s gross domestic product (GDP).

Surprisingly, despite the huge profits earned from lending to Africa’s poorer countries, there are hardly any grants and donations from the world’s second largest economy.

The United States remains the biggest donor to the continent, according to the China Africa Research Initiative (Cari), which analyses economic relations.

Cari reports that Angola ...
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