China take-over worries Kenyans

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President Uhuru Kenyatta, Zhang Dejiang, the Chairman of the Standing Committee of the National People's Congress of China and Speaker of the National Assembly, Justin Muturi, converse after bilateral talks between Kenya and China at State House, Nairobi. The Star, Kenya

China has overtaken the World Bank to become Kenya’s single largest creditor, accounting for 72 per cent of the total debt owed to foreign lenders.

In just over ten years since Kenya turned from West to East, the government has borrowed Sh534 billion from China, slightly more than Sh508 billion owed to the World Bank, hitherto the leading lender.

Kenya owes a whopping Sh5.011 trillion to local and international creditors, banks and countries and will spend 54 per cent of revenue collected in the current financial year to pay debts.

Kenya is extremely disadvantaged in the expanding economic relationship with China.

Behind the imposing multi-billion shilling infrastructure projects and imports once considered luxuries by ordinary Kenyans are tales of failing industries supplanted by cheap imports and mistreated, underpaid workers.

Read:Your work ethic is to blame, Kiraithe tells SGR workers on mistreatment claim

The debt to China is also burgeoning and repayment terms are breathtakingly steep.

But yesterday, China’s ambassasdor Baohong Sun defended its business in Kenya saying there is no looming debt trap.

She said reports of SGR workers undergoing humiliating treatment arose from a language and culture barriers.

Sun insisted that the acts depicted in photos published by a local daily were part of a team building process, which is part and parcel of Chinese culture.

Every Kenyan man, woman and child owes China Sh10,647, and counting. The debt is likely to shoot up with more bilateral agreements expected to be signed when President Uhuru Kenyatta visits China next month.

The most controversial of Kenya’s dizzying borrowing spree in the last ten years remains the Sh332 billion from China’s Ex-Im Bank for the SGR in 2014.

Of the amount, Sh164 billion is a concessional loan, which is more flexible, having a seven-year grace period. It will be repaid over 20 years. The government has been spending Sh1.6 billion every six months since 2014 to pay the interest. Repayment of the principal starts in 2021. Kenya will part with Sh14 billion annually for 13 years.

The remaining Sh167.9 billion borrowed from China is a commercial loan repayable in five years starting 2019. Experts estimate that Kenya will spend over Sh20 billion annually to honour payments for this section of SGR borrowings.

Kenya will pay at least Sh120 billion to China by the time the country will be recovering from the 2022 General Election. This would go a long way in funding the Big Four.

When President Uhuru Kenyatta visits Beijing next week for the China-Africa Summit, a major opportunity to sign deals, the unequal aspects of the relationship is unlikely to come up.

Once mighty companies like Sameer, Longyun Garments, Eveready, Civicon, H Young and hundreds others that commanded a large chunk of the Kenyan market are threatened by the entry of Chinese firms.

The Chinese embassy confirmed to the Star that 400 Chinese firms operate in Kenya.

Sameer’s efforts to survive have seen it offer a cheaper tyre brand, Summit, imported from China to compete with its own Yana.

Sameer closed its factory in 2016. Last year it made a Sh13 million profit after suffering a Sh652 million loss the previous year.

The Sameer plant shutdown, plus cost-cutting measures, have put more than 600 employees out of work in an unforgiving economy.

Eveready too, unable to compete with cheap imports and smuggled batteries, closed its plant in 2014 and is now just a distributor.

Data from the Kenya National Bureau of Statistics shows China is benefiting far more from the relationship than Kenya.

Read:Atwoli demands deployment of SGR workers after expose’ on ‘mistreatment’

Last year, Chinese imports hit a record Sh390 billion, while Kenyan exports amounted to only Sh10 billion. A year earlier, Chinese imports stood at Sh337 billion.

Some experts attribute the rising trade imbalance to imported equipment for the standard gauge railway which a Chinese firm is building and operating.

But the same statistics show that Chinese imports only slowed down in January and February 2018.

Kenya imported goods worth Sh27.4 billion and Sh25.2 billion in January and February 2018 compared to Sh43.3 billion and Sh36.3 billion respectively the previous year.

The imports for March, April and May 2018 have risen compared to the same period in 2017. Kenya imported Sh113.7 billion goods in that period, compared to Sh95.4 billion in the same three months last year.

How much Kenya has paid and will pay to China

Financial year

Amount

2017-2018

Sh26.61 billion

2018-2019

Sh32.24 billion

2019-2020

Sh82.85 billion

2020-2021

Sh95.2 billion

2021-2022

Sh120.12 billion