China bets big on Africa’s fu­ture eco­nomic suc­cess

China Daily (Canada) - - PEOPLE - By LU­CIE MORANGI lucy­morangi@chi­nadaily.com.cn

Projects that were writ­ten off as un­ten­able by Kenya’s tra­di­tional part­ners but snapped up by China have re­ceived a new lease of life, ac­cord­ing to Ger­ris­hon Ikiara, a for­mer se­nior gov­ern­ment of­fi­cial who served for five years in Kenya’s Min­istry of Trans­port and Com­mu­ni­ca­tions.

The move gave the Asian gi­ant a path into Kenya’s lu­cra­tive in­fra­struc­ture sec­tor and cat­alyzed China’s deep­en­ing of re­la­tions with other coun­tries in the re­gion.

China’s dom­i­nance of East Africa’s trans­porta­tion in­fra­struc­ture has steadily in­creased over the years. Ac­cord­ing to a global con­sul­tancy firm Deloitte East Africa’s re­cent con­struc­tion trends re­port, China has funded 13 projects and has a heavy con­struc­tion pres­ence in 42 oth­ers.

Ikiara said China wisely iden­ti­fied a gap that had been over­looked by oth­ers:

“Kenya hinges its eco­nomic growth on mod­ern in­fra­struc­ture. Our part­ners, such as Ja­pan, gave the pro­pos­als a wide berth, say­ing they were be­yond our reach,” said Ikiara, who is cur­rently a scholar at the In­sti­tute of Diplo­macy and In­ter­na­tional Stud­ies at the Univer­sity of Nairobi.

An econ­o­mist by pro­fes­sion, he was fished out of the univer­sity in 2003 and ap­pointed as a per­ma­nent sec­re­tary in Pres­i­dent Mwai Kibaki’s cab­i­net. That ti­tle changed to prin­ci­pal sec­re­tary when Kenya adopted its new Con­sti­tu­tion in Au­gust 2010. Ikiara was re­spon­si­ble for the im­ple­men­ta­tion of the coun­try’s strate­gic plans.

He said the part­ners re­lied on a ma­jor re­port car­ried out by in­ter­na­tional con­sul­tants that looked into the vi­a­bil­ity of de­vel­op­ing mega projects among them a stan­dard-gauge rail­way and ex­pan­sion of the port. The con­clu­sion was that the coun­try lacked the ca­pac­ity, in terms of freight trans­port vol­ume — thereby mak­ing such an in­stal­la­tion un­fea­si­ble for the next 30 years.

Fund­ing part­ners shied away from the projects, ar­gu­ing that they would tip the coun­try’s debt ceil­ing to un­sus­tain­able lev­els. The pro­pos­als were shelved, ex­cept for the de­vel­op­ment of the se­cond con­tainer ter­mi­nal in Mom­basa port, which in­cluded a $300 mil­lion loan from Ja­pan.

Seven years since Ikiara left of­fice, China has trans­formed Kenya’s in­fra­struc­ture land­scape. He reck­oned China un­der­stood the need for mod­ern in­fra­struc­ture to spur the nec­es­sary rapid eco­nomic de­vel­op­ment.

“China rec­og­nized the chal­lenges faced by its African friends, such as a lack of fi­nan­cial mus­cle and poor tech­ni­cal ca­pac­ity that were cut­ting into our growth tra­jec­tory,” he said. “It could see the po­ten­tial the projects had in un­lock­ing in­dus­tri­al­iza­tion in the next 30 to 40 years that would sub­se­quently en­able Kenya re­pay the loan.”

What made China’s loans even more at­trac­tive was the ab­sence of con­di­tions.

“I think this is one of China’s strong­est sell­ing points, which has also en­deared other African gov­ern­ments. China has in­deed stead­fastly up­held its pol­icy of non­in­ter­fer­ence and re­spected African coun­tries’ dig­nity while part­ner­ing with them as a mu­tual friend. Since I left the min­istry, it is no longer a ques­tion of whether it is pos­si­ble, it is fait ac­com­pli.”

The chang­ing land­scape has pol­ished the con­ti­nent’s sheen for other global play­ers. Just this year, Kenya played host to Is­rael’s Prime Min­is­ter Ben­jamin Ne­tanyahu, In­dia’s Naren­dra Modi, and Ja­pan’s Shinzo Abe, as well to South Korean Pres­i­dent Park Geun-hye and her coun­ter­part from Tur­key, Re­cep Tayyip Er­do­gan. They have all vis­ited Nairobi to pur­sue deeper trade re­la­tions.

“China has en­abled Africa to dream big,” Ikiara said, strongly po­si­tion­ing it­self as a trans­for­ma­tive part­ner by fund­ing and con­struct­ing the $3.3 bil­lion SGR, to­gether with other ma­jor trans­porta­tion in­fra­struc­ture such as the $328 mil­lion eight-lane Thika High­way, which was com­pleted in 2012, and four by­passes in Nairobi with a to­tal value of $433 mil­lion.

“It has made it pos­si­ble for us to be­lieve in our am­bi­tions. China has raised the bar,” he said.

The 472-kilo­me­ter Mom­basaNairobi project prom­ises to de­liver faster, safer and more re­li­able pas­sen­ger and freight trans­port ser­vices.

De­spite the ex­pected ben­e­fits, it is not im­mune to crit­i­cisms, which Ikiara said are po­lit­i­cally mo­ti­vated.

“Pol­i­tics should never in­ter­fere with de­vel­op­ment. Re­cent in­ci­dents have caused de­lays in project de­vel­op­ment and di­verted the gov­ern­ment’s at­ten­tion to­ward cool­ing off fires,” he said. “Land prices have also tripled, mak­ing ac­qui­si­tion dif­fi­cult, thus de­lay­ing progress while bal­loon­ing the bud­get.”

As for con­cerns over qual­ity, he said that’s above board. “I know very many peo­ple who are ex­cited when they learn that a Chi­nese firm has won a bid to con­struct a road. They know it will be done faster and with high qual­ity.” Ger­ris­hon Ikiara,

More­over, the ma­jor­ity of the projects are funded by in­ter­na­tional donor or­ga­ni­za­tions, such as the African De­vel­op­ment Bank and World Bank. This is in­dica­tive, he said of the level of con­fi­dence multi­na­tional firms have in Chi­nese firms han­dling ma­jor in­fra­struc­ture projects in Africa.

“We no longer talk about Chi­nese qual­ity,” he said.

The stan­dard-gauge rail­road slated to be com­mis­sioned in June 2017 will be a game changer: “It prom­ises to have a mul­ti­plier eco­nomic ef­fect,” he said. Al­ready, it is con­tribut­ing 1.5 per­cent to GDP growth, “which is vis­i­bly seen along the route where res­i­dents have gained di­rect em­ploy­ment” and in ca­pac­ity build­ing through rail­way man­age­ment and tech­ni­cal train­ing, Ikiara says. “In a few years, Kenya will be ex­port­ing rail­way tech­ni­cians to other parts of the world.”

With freight mov­ing at 80 kilo­me­ters per hour, ship­ments from Mom­basa to Nairobi will be faster. This is sig­nif­i­cant, as Nairobi is the most ad­vanced in­dus­trial hub in the East­ern Africa re­gion.

“It will re­model roat trans­port that is cur­rently mired by conges­tion, un­nec­es­sary de­lays and ac­ci­dents to a rail­way that is ef­fi­cient, thereby re­duc­ing lo­gis­tics costs by 40 per­cent. It will drive the de­vel­op­ment of re­lated in­dus­tries and pro­mote Kenya’s for­eign trade,” Ikiara said.

Trucks that drove to Mom­basa will in­stead pick up their cargo from newly mod­ern­ized and ex­panded Nairobi’s in­land con­tainer de­pot that is ex­pected to pro­vide an ad­di­tional ca­pac­ity of 450,000 con­tain­ers, thereby be­com­ing a pre­ferred point of ship­ment for ex­porters and im­porters us­ing SGR. It will thus halve the freight costs for een­trepreneurs tak­ing goods to the hin­ter­lands such as Uganda and Tan­za­nia.

Ad­di­tion­ally, trucks will be avail­able to serve lo­cal re­mote ar­eas, fur­ther open­ing up the coun­try. This will cre­ate an ef­fi­cient and cost-friendly in­fra­struc­ture net­work.

“You know the pres­i­dent of Uganda has al­ways com­plained that his im­ports in­cur high costs on the roads,” Ikiara said. “With the SGR, this will be sig­nif­i­cantly re­duced, mak­ing the re­gions prod­ucts much more com­pet­i­tive.”

With com­pe­ti­tion heat­ing up in the re­gion as Tan­za­nia ex­pands and mod­ern­izes its ports, Ikiara says, ef­fi­ciency will be the de­ter­min­ing fac­tor of which route a coun­try chooses.

“Hin­ter­lands such as Uganda, Rwanda and Bu­rundi will choose the most ef­fi­cient route avail­able to en­able them to save on costs. But all these ports are a huge plus to the re­gion.”

He firmly be­lieves that these in­stal­la­tions au­gur well for China’s Belt and Road Ini­tia­tive. He said China’s move to pro­mote con­nec­tiv­ity and co­op­er­a­tion will boost Africa’s global trade par­tic­i­pa­tion. And he be­lieves it is com­ple­ment­ing the con­ti­nent’s goals pre­scribed in the African Union’s Agenda 2063 plan.

But while the re­gion strives to meet its in­fra­struc­ture de­mands, con­cerns about debt sus­tain­abil­ity have arisen and es­ca­lated with the tum­bling of com­mod­ity prices such as oil.

“Con­cerns that we are in a debt cri­sis be­cause of bor­row­ing heav­ily from China to fund our in­fra­struc­ture are un­founded,” Ikiara said. “These projects are long-term and will drive eco­nomic ex­pan­sion that will en­able us pay back our debts..”

for­mer se­nior gov­ern­ment of­fi­cial of Kenya.

MORANGI / CHINA DAILY LU­CIE

Ger­ris­hon Ikiara, for­mer se­nior gov­ern­ment of­fi­cial says Chi­nese firms have raised the bar in in­fra­struc­ture con­struc­tion.

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