Date: Friday, 12 July 2019
China has been hitting global news in the recent months as President Trump of the USA engages that country on import/export trade imbalances, a subject that will definitely force a re-assessment by China on how they transact business not only with USA but with all countries including Kenya. For China, it cannot be business as usual.
China is a relatively newcomer to Africa and Kenya having been blocked out of the continent by the West during the cold war — with the exception of Tanzania where the Chinese had significant influence. In the late 1980s, China appears to have an entry strategy into Africa when China constructed and gifted stadiums to many African nations including our Kasarani Stadium.
It was however in the 1990s, when Kenya liberalised its economy, that the Chinese impact was felt as cheap Chinese consumer goods filled a vacuum created by Kenya’s collapsing industries. China has never let go of this export market as Kenya has been slow in re-creating its manufacturing capacity.
In the 2000s, prompted by an overheated industrial economy, China came out to Africa securing energy and raw material inputs for their industries, and as they scoured the continent for the resources, the Chinese came across governments that were badly in need of infrastructure which they could not afford.
This is how China packaged infrastructure projects for Africa by providing debt financing, technology and construction capacity to deliver ready projects on a negotiated single sourcing basis. On their part African nations granted China, preferential access to its natural resources and a near monopoly on infrastructure project development.
During this period the US and the EU were mostly pre-occupied with global war on terrorism with little focus on Africa. But now the West appears ready and determined to engage Africa in trade and infrastructure development investments, and they want African governments to play it fair and open.
China has no option but to rethink its preferential arrangements with Africa, which should now be opened for competition. The US in particular is offering private sector participation, very different from the state-packaged deals by China.
This contrast was at play in Uganda recently during the selection of a consortium to develop the new refinery. Nearly every government official expected the refinery project to be awarded to the Chinese. It was a surprise when tables turned and a USA/Italian supported consortium, with a private sector capital structure, was awarded the project. The Chinese had as usual crafted an opaque offer that involved debt financing and guaranteed jobs for Chinese workers.
However it is in the area of import/export trade that China needs to urgently restructure their approach and adopt an attitude for mutual benefit through reciprocal trade. Lessons learned from the US/China trade negotiations should guide Chinese trade engagement with Africa. There has to be a deliberate action by the Chinese to increase their imports from Africa, not merely in areas of commodities and critical raw materials, but also value added produce and goods.
In respect of Kenya we have noted a recent positive shift as China is now visibly working with Kenya to develop export capacity for agricultural produce (avocados, flowers, pork, among others) to China. This effort should be sustained and expanded to cover many more products.
It would also be helpful if the Chinese provide their technologies and involvement to boost Kenya’s value adding manufacturing to reduce imports into Kenya while increasing the latter’s export capacity. However, it is for the Kenyan government, counties and private sector to take the initiative to propose and conclude export and local manufacturing deals with the Chinese.
After nearly 30 years of links with Africa, it is now time for China to improve the quality of engagement and participation, so that it becomes mutually beneficial, two-way, give-and-take relationship.
And potential areas of co-operation are numerous. For a start, the Chinese should seriously consider establishing a development agency on the ground —such as GIZ, Jica and USAid—to engage Kenyan stakeholders. This would be a good public relations vehicle and a real sign that times and approach by China have changed.